Recently, the United States District Court for the Southern District of Texas concluded that insurer had no duty to defend or indemnify its insured, a bus company operating in the United States, against claim of failure to render aid to bus passenger injured in Mexico, because the insurance policy’s territory-coverage provision and definition of “accident” excluded coverage. In Nat’l Liability & Fire Ins. Co. v. Los Chavez Autobuses Inc. et. al., No. 4:20-CV-01302, 2021 WL 920138 (S.D. Texas [Houston Division], March 10, 2021), Antonia Compean boarded a bus in Matehuala, Mexico destined for Houston, Texas. The bus was owned and operated in Mexico by Autobuses El Refugio, and in the United States by Los Chavez Autobuses Inc. (“Los Chavez”).  In Mexico, the bus passed over a speed bump at an excessive rate of speed, causing Compean to hit her head on the ceiling. Nonetheless, the bus continued on to the United States, where a driver for Los Chavez replaced the driver for El Refugio. Then, the bus continued on to Houston.   

Compean initiated an action in Texas state court against Los Chavez (and El Refugio) (the “underlying action”).  As against Los Chavez, Compean contended that she should have been given medical treatment in Laredo (rather than Houston) and that the delay in treatment proximately caused her injuries.

Los Chavez had a business auto insurance policy with National Liability. The policy expressly excluded coverage for accidents occurring in Mexico. The policy defined “accident” as a “continuous or repeated exposure to the same conditions resulting in bodily injury.” As such, National Liability sought a declaratory judgment that it had no duty to defend or indemnify Los Chavez.  Compean challenged such a declaration. 

The court held that National Liability had no duty to defend Los Chavez.  The court concluded that it was “initially impossible to discern whether coverage [was] potentially implicated” based on the eight-corners doctrine (as the underlying action did not expressly state where the injury-causing accident occurred).  And whether the accident occurred in Mexico was a question that went “solely to a fundamental issue of coverage and [did not] overlap with the merits of or engage the truth or falsity of any facts alleged in the underlying case.” Thus, extrinsic evidence was permitted, which indisputably established that Compean was initially injured in Mexico.   

The court further concluded that even if Compean was injured because of the failure to render aid, such failure did not meet the definition of “accident” under the policy because the bus was merely the “locational setting” of Compean’s injury.  

The Court also concluded that National Liability had no duty to indemnify, even though the underlying action had not been resolved. The court reasoned that “no facts could possibly be developed in the underlying action that would transform an ‘accident’ in Mexico into one within the United States.” Further, “no facts could be developed that could transform the alleged failure to render aid in the United States into an ‘accident’ within the meaning of the policy.” Thus, the same facts that negated the duty to defend equally negated any duty to indemnify. 

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