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The Duty to Defend: Causation Ambiguity Leads to Admission of Extrinsic Evidence

car wreck front.jpgThe Facts:  Eddie Siegmund was injured in an automobile collision caused by the negligence Mariana Esquivel. Siegmund subsequently filed suit. Star-Tex Resources and Esquivel sought a defense from Granite State Insurance Company under a CGL policy.  Granite State denied a defense based on the policy's auto use exclusion. Star-Tex and Esquivel then filed a declaratory action seeking a defense and indemnity from Granite State. Both sides moved for summary judgment on defense and indemnity. 

The Western District's Analysis:

The court began its analysis by referring to the eight corners rule and citing to the allegations in Siegmund's petition that stated that he was "seriously injured in an automobile collision caused by the negligence of Defendant Esquivel, an employee of Star-Tex Resources." The court then cited to the relevant coverage and auto exclusion language in the CGL policy and stated that there was no ambiguity in the auto use exclusion.

The court next considered what reasonable inferences it could draw from the pleadings that would lead to a finding of coverage. Gore Design Completions, Ltd. v. Hartford Ins. Co., 538 F.3d 365, 369 (5th Cir. 2008). The court noted that, although the inference that Esquivel was driving at the time of the collision could be made, other reasonable inferences could easily be made as well, such as Esquivel could have been a passenger in a car and distracted the driver. Because multiple reasonable inferences could be made, the court could not determine coverage based on the pleadings. Ooida Risk Ret. Group Inc. v. Williams, 579 F.3d 469, 475 (5th Cir. 2009).

Finally, based on its finding that the pleadings did not permit a determination of coverage, the court considered extrinsic evidence to determine the issue. Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 531 (5th Cir. 2004). The court noted that the Fifth Circuit has suggested that extrinsic evidence is more likely admissible to determine coverage where policy exclusions are at issue. Lib. Mut. Ins. Co. v. Graham, 473 F.3d 596, 603 (5th Cir. 2006). The court held that, because the underlying petition did not state how the collision was "caused" by Esquivel's negligence, it could consider extrinsic evidence that Esquivel was driving the car. W. Heritage Ins. Co. v. River Entm't, 998 F.2d 311, 315 (5th Cir. 1993). The court also asserted that the evidence that Esquivel was driving did not overlap with the merits of the underlying claim. The court held that Granite State had no duty to defend or indemnify Star-Tex and Esquivel.

What to Take Away:

If a pleading potentially triggers an exclusion in a policy, but does not provide enough information to determine if the exclusion is actually applicable, such as causation, Federal Courts will look to extrinsic evidence to make a coverage determination in a duty to defend and indemnify case.

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