Fifth Circuit Court Cases - Case Law and Opinions from the 5th Circuit Federal Court - Court of Appeals

	ROMINGER LEGAL
		Fifth Circuit Court of Appeals Opinions - 5th Circuit
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case is from the Fifth Circuit Court or Appeals. Search our site for more cases - CLICK HERE

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 01-20235
_______________
TIG INSURANCE COMPANY AND SAFETY LIGHTS SALES & LEASING, INC.,
Plaintiffs-Appellants,
VERSUS
SEDGWICK JAMES OF WASHINGTON AND LUMBERMENS MUTUAL CASUALTY CO.,
Defendants-Appellees.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
January 9, 2002
Before SMITH and EMILIO M. GARZA, Circuit
the insurance seller's certificate of insurance
Judges, and CUMMINGS,* District Judge.
added Safety Lights as an additional insured
but disclaimed the power to alter an underlying
JERRY E. SMITH, Circuit Judge:
insurance policy. The parties agree that the
certificate of insurance's express limitations
The district court dismissed TIG Insurance
combine with the policy's terms to bar
Co. ("TIG") and Safety Lights Sales &
coverage contractually. Agreeing with the
Leasing Co.'s ("Safety Lights") claims to
district court that TIG and Safety Lights also
recover for the costs of defending a lawsuit;
failed to provide summary judgment evidence
sufficient to support claims for estoppel,
mutual mistake, fraudulent misrepresentation,
*
or negligent misrepresentation, we affirm.
District Judge of the Northern District of
Texas, sitting by designation.

I.
requesting, within fifteen days, a certificate of
Lumbermens Mutual Casualty Insurance
insurance ("COI") that should evidence "waiv-
Company ("Lumbermens") issued two general
er of subrogation and additional insured in
liability insurance policies to Corporate
favor of Safety Lights."
Express, Inc. ("Corporate Express").
Sedgwick James of Washington ("Sedgwick")
In February 1997, Sedgwick issued a COI
brokered the general liability contracts among
to Safety Lights. The top of the certificate
Corporate Express, its subsidiaries, and
stated, "This certificate is issued as a matter of
Lumbermens.
information only and confers no rights upon
the certificate holder. This certificate does not
Corporate Express is the parent corporation
amend, extend, or alter the coverage afforded
of Corporate Express Delivery Systems, Inc.
by the policies below." The certificate
("Corporate Express Delivery"), which owns
erroneously listed Safety Lights as an
several delivery companies, including U.S. De-
additional insured under Policy 362.1
livery Systems ("U.S. Delivery"), Vianet, Inc.
("Vianet"), and United Transnet, Inc. ("United
In June 1997, U.S. Delivery hired Guy
Transnet"). Sedgwick issued two insurance
Wright, an independent contractor, to deliver
policies to Corporate Express and its
a steel plate to Safety Lights's premises.
subsidiaries. Policy No. 5AA 038 362-00
Wright was injured when the plate was
("Policy 362") originally covered United
dropped on his hand during unloading. Wright
Transnet. An endorsement added Corporate
sued Safety Lights. TIG, as Safety Lights's
Express Delivery, U.S. Delivery, and Vianet as
insurer, defended, incurring defense costs of
named insureds. Policy 362 is the only
$38,650.02, and settled for $235,000.
Lumbermens policy that covers U.S. Delivery
for general liability; that policy does not pro-
vide any additional insured coverage.
Corporate Express and its non-delivery,
1 On appeal, Safety Lights argues that
service companies were covered under Policy
Sedgwick issued a confirmation of placement (an
No. 5AA 038 300-01 ("Policy 300"), which
insurance binder) for policies 300 and 362 that
excluded Corporate Express Delivery from
stated the general liability policy would be "subject
coverage but did provide additional insured
to the policy terms, conditions, limitations, and
coverage "where required by written or oral
exclusions" of specified Corporate Express
contract" with respect to "liability arising out
policies, each of which included an additional
of your [the named insured's] operations on
insured clause. Safety Lights, however, failed to
premises owned or rented by or to you [the
raise this point in the cross-motions for summary
named insured]."
judgment, so we do not consider it. See Estate of
Martineau v. ARCO Chem. Co., 203 F.3d 904,
913 (5th Cir. 2000) (refusing to consider
U.S. Delivery is a subsidiary of Corporate
limitations argument that party failed to raise at
Express Delivery and insured only under Poli-
summary judgment); Hinsley v. Boudloche (In re
cy 362. One of U.S. Delivery's subsidiaries,
Hinsley), 201 F.3d 638, 645 (5th Cir. 2000)
Vianet, did business with Safety Lights, which,
(refusing to consider plaintiff's arguments for
in March 1996, sent a letter to Vianet,
tolling limitations where she had not raised it at
summary judgment).
2

II.
(1986), the non-movant must come forward
TIG and Safety Lights sued Sedgwick and
with "specific facts" showing a genuine factual
Lumbermens in state court, and Lumbermens
issue for trial. FED. R. CIV. P. 56(e); Mat-
removed to federal court. In the amended
sushita Elec. Indus. Corp. v. Zenith Radio,
complaint, plaintiffs sought a declaration that
475 U.S. 574, 587 (1986). Conclusional alle-
defendants were obligated to defend and in-
gations and denials, speculation, improbable
demnify the Wright suit. In the alternative,
inferences, unsubstantiated assertions, and le-
plaintiffs sought reformation of Policy 362 to
galistic argumentation do not adequately sub-
conform to the "intent of the parties" and pro-
stitute for specific facts showing a genuine is-
vide coverage for Safety Lights. Plaintiffs also
sue for trial. SEC v. Recile, 10 F.3d 1093,
alleged violations of the Texas Insurance
1097 (5th Cir. 1993).
Code, Texas Deceptive Trade Practices Act,
breach of contract, fraudulent and negligent
III.
misrepresentation, breach of the duty of good
TIG asserts that Sedgwick's COI should
faith and fair dealing, and fraud. The parties
obligate Lumbermens because Sedgwick acted
moved for summary judgment on all claims.
as Lumbermens's agent. Although laying out
the agency relationship will aid us in resolving
The court granted summary judgment for
other matters, TIG mistakenly assumes that
Sedgwick and Lumbermens on the agency
merely establishing an agency relationship will
claims, plea for reformation, and claims of mis-
create liability for Lumbermens. Lumbermens
representation. TIG and Safety Lights appeal
delegated the power to issue COI's to
that judgment.
Sedgwick, but those COI's could not alter the
underlying policy's terms or create liability.
The same standards for summary judgment
Because the COI expressly disclaims any
bind us and the district court. McDaniel v.
power to alter the underlying policy, and the
Anheuser-Busch, Inc., 987 F.2d 298, 301 (5th
parties agree that Lumbermens withheld from
Cir. 1993). Summary judgment is appropriate
Sedgwick the power to alter policies,
only if "the pleadings, depositions, answers to
Sedgwick's issuance of the COI did not create
interrogatories, and admissions on file, togeth-
coverage.
er with the affidavits, if any," when viewed in
the light most favorable to the non-movant,
A.
"show that there is no genuine issue as to any
Texas law classifies insurance sellers into
material fact." Anderson v. Liberty Lobby,
three categoriesSSbrokers, soliciting agents,
Inc., 477 U.S. 242, 249-50 (1986). A dispute
and recording agents. A seller can have an
about a material fact is "genuine" if the
agency relationship with both the insurer and
evidence is such t hat a reasonable jury could
insured. McKillip v. Employers Fire Ins. Co.,
return a verdict for the non-moving party. Id.
932 S.W.2d 268, 270 (Tex. App.SSTexarkana
at 248. The court must draw all justifiable
1996, no writ). Regardless of the agency re-
inferences in favor of the non-moving party.
lationship, the agent's actual or apparent au-
Id. at 255. Once the moving party has initially
thority to perform a task can create vicarious
shown "that there is an absence of evidence to
liability. Duzich v. Marine Office of Am.
support the non-moving party's cause," Celo-
Corp., 980 S.W.2d 857, 865 (Tex.
tex Corp. v. Catrett, 477 U.S. 317, 325
App.SSCorpus Christi 1998, writ denied).
3

An insurance seller acts as a broker when a
waiver, or change a term or condition of an
potential insured approaches the insurance
insurance policy . . .").
seller and the insurance seller only submits an
application to the insurance agency. McKillip,
The district court correctly categorized
932 S.W.2d at 270. If the insurance seller has
Sedgwick as a soliciting agent, relying on the
contact only with the buyer, the seller is a
agency agreement between Sedgwick and
broker. Id.; Employers Cas. Co. v. Mireles,
Lumbermens to reach this conclusion. The
520 S.W.2d 516, 520 (Tex. Civ. App.SSSan
agency agreement authorized Sedgwick to so-
Antonio 1975, writ ref'd n.r.e.).
licit insurance on behalf of Lumbermens but
permitted Sedgwick to bind Lumbermens only
An insurance seller acts as a soliciting agent
"to the extent specific authority [was] granted
when the seller contacts the insured but the
in the schedule(s) attached." Under Policy
seller lacks the power to modify, change, or
362, Sedgwick had the authority to issue
waive the terms of the policy. TEX. INS. CODE
COI's and binders but lacked the authority to
ANN. art. 21.04 (Vernon Supp. 2001); Macca-
modify the policy itself.
bees Mut. Life Ins. Co. v. McNiel, 836 S.W.2d
299, 231-32 (Tex. App.SSDallas 1992, writ
On appeal, TIG argues that Lumbermens
denied). The soliciting agent has limited actual
granted Sedgwick the power to issue COI's.
authority to make representations on behalf of
The certificates of insurance, however, ex-
the insurance company. Maccabees, 836
pressly state that they do not modify the un-
S.W.2d at 231-32.
derlying insurance policy. The COI's comport
with the agency agreement; Lumbermens
A recording agent solicits insurance, has the
granted Sedgwick the power to solicit and ne-
power to write policies of insurance, binds the
gotiate but not to bind. The district court
insurer on risks, and collects premiums on be-
properly categorized Sedgwick as a soliciting
half of the insurer. TEX. INS. CODE ANN. art
agent.
21.14 (Vernon Supp. 2001); Maccabbees, 836
S.W.2d at 231-32. The recording agent is
B.
closest to the principal, and his actions will al-
TIG contends that, regardless of the
ways bind the principal. Lexington Ins. Co. v.
statutory category in which Sedgwick falls,
Buckingham Gate, Ltd., 993 S.W.2d 185, 198
Lumbermens granted Sedgwick the actual
(Tex. App.SSCorpus Christi 1999, pet.
authority to bind the principal. A soliciting
denied).
agent's misrepresentations can create liability
for the principal if the agent acts with actual or
If the insurance seller is not a broker,
apparent authority. Celtic Life Ins. Co. v.
soliciting agent, or recording agent, the seller
Coats, 885 S.W.2d 96, 98 (Tex. 1994). To
falls into the catch-all category of the insurer's
confer actual authority, the principal must
agent. TEX. INS. CODE. ANN. art. 21.02 (Ver-
intentionally confer the authority, explicitly
non Supp. 2001); Maccabees, 836 S.W.2d at
allow the agent to believe that it has the
232. Sellers in this category lack the power to
authority, or carelessly permit the agent to
modify the terms of a policy. TEX. INS. CODE
believe it has the authority. Spring Garden
art. 21.02 (stating that this article "does not
79U, Inc. v. Stewart Title Co., 874 S.W.2d
authorize an agent to . . . alter, amend, modify,
945, 948 (Tex. App.SSHouston [1st Dist.]
4

1994, no writ).
Sedgwick's power to do so. Sedgwick did not
have the power to obligate Lumbermens con-
Lumbermens did not do any of those things.
tractually. We must still consider, however,
The agency agreement prohibits Sedgwick
whether the Sedgwick's actions in issuing the
from modifying the policy. Although Lumber-
COI, pursuant to delegated authority, support
mens permitted Sedgwick to issue COI's, the
TIG's disguised estoppel or straightforward
COI's state that they will not alter the terms of
mutual mistake arguments.
the underlying policy. The terms of the agency
agreement and COI make plain that Sedgwick
IV.
lacked the actual power to modify Policy 362.
TIG makes two possible claims against
Lumbermens: (1) The COI should obligate
C.
Lumbermens to pay for the Wright litigation;
TIG contends that even if Sedgwick acted
and (2) the COI proves that Policy 362
as a soliciting agent without actual authority,
included a mutual mistake and the court
Sedgwick had the apparent authority to modify
should reform Policy 362. Both theories seek
Policy 362. A person who seeks to bind a
to establish Lumbermens's liability despite the
principal based on the agent's apparent
express terms of Policy 362 and the COI.
authority must show that the principal acted in
such a way that a reasonably prudent person
A.
would believe the agent could bind the
Estoppel cannot modify the express terms
principal. Biggs v. United States Fire Ins. Co.,
of an insurance policy. Tex. Farmers Ins. Co.
611 S.W.2d 624, 629 (Tex. 1981). The
v. McGuire, 744 S.W.2d 601, 602-03 (Tex.
principal must visibly confer authority for the
1988). When a COI expressly incorporates
agent to perform a range of tasks that include
the terms of a policy, the policy trumps the
the disputed action. Ames v. Great S. Bank,
terms of the COI.3 TIG cites cases from
672 S.W.2d 447, 450 (Tex. 1984). If the
Alaska, Illinois, Massachusetts, New York,
agent acts with apparent authority, it will bind
and Ohio that permitted insureds to recover
the principal, regardless of the agent's actual
under the terms of the COI. Most of these
authority. Biggs, 611 S.W.2d at 629.
jurisdictions do not read COI's as modifying
Misrepresentations made when negotiating the
the underlying insurance policy but, instead,
terms of a policy can fall within the scope of
enforce the COI's under an estoppel theory.
the agent's apparent authority.2
3
TIG, however, did not present any evidence
Wann v. Metropolitan Life Ins. Co., 41
that Lumbermens visibly had granted
S.W.2d 50, 51-52 (Tex. Comm'n App. 1931);
Sedgwick the power to add additional in-
Granite Constr. Co. v. Bituminous Ins. Co., 832
sureds. The only visible sign identified by
S.W.2d 427, 429 (Tex. App.SSAmarillo 1992, no
writ). Similarly, when determining whether an in-
either partySSthe COISSexpressly disclaimed
surer has a duty to defend the insured, Texas
courts will look only to the policy and to the
allegations of the complaint. McCarthy Bros. Co.
2 Celtic, 885 S.W.2d at 98-99 (finding that
v. Continental Lloyds Ins. Co., 7 S.W.3d 725, 728
agent's actions bound insurer because reasonable
(Tex. App.--Austin 2000, no writ); Katerndahl v.
third person would have believed that agent had
State Farm Fire and Cas. Co., 961 S.W.2d 518,
power to explain policy during negotiations).
522 (Tex. App.SSSan Antonio 1998, no writ).
5

E.g., Dumenric v. Union Oil Co., 606 N.E.2d
Second, Carly List, an account manager for
230, 233-34 (Ill. Ct. App. 1992). The Texas
Sedgwick, stated that, after the Wright
Supreme Court has foreclosed us from
litigation, some Lumbermens employees
following them, so we now must consider
worried that Policy 362 might contain an
whether Texas courts can extend coverage
additional insured clause. This does not speak
beyond the terms of the policy indirectly,
to whether, before issuing the policy, Lumber-
through the doctrine of mutual mistake,
mens intended for Policy 362 to include an
despite the Texas Supreme Court's prohibition
additional insured clause. Secondhand
of directly extending coverage.
speculation after the fact does not create a fact
question regarding the actual content of the
B.
insurance contract ; nor should such
TIG argues that the absence of a blanket
speculation create a fact question about
additional insured provision in Policy 362 was
Lumbermens's beliefs when it issued Policy
the result of a mutual mistake among Lumber-
362.
mens, Sedgwick, and Corporate Express. To
prevail in this claim, TIG must prove (1) the
Finally, List testified that the terms and
content of the antecedent agreement and
conditions for United Transnet's policy
(2) the subsequent mutual mistake when
("Policy 362") were intended to be identical to
reducing it to writing. Cherokee Water Co. v.
those of Policy 300 (which contained an addi-
Forderhause, 741 S.W.2d 377, 379 (Tex.
tional insured clause). Lumbermens responds
1987). TIG failed to prove the content or ex-
by pointing out ambiguities in List's affidavit
istence of an antecedent agreement.
that suggest she might have been describing
ongoing negotiations rather than a final
TIG must provide summary judgment evi-
agreement. Although these ambiguities might
dence that the parties "reached a definite and
reduce the credibility of her testimony, List's
explicit agreement understood in the same
affidavit, on the whole, suggests a fact issue as
sense by both." Zurich Ins. Co. v. Bass, 443
to whether Sedgwick intended for Policy 362
S.W.2d 371, 374 (Tex. App.SSDallas 1969, no
to include an additional insured clause. TIG
writ). TIG had to prove that all of the parties
offered some evidence that Sedgwick believed
intended to include an additional insured
that Policy 362 would contain an additional
clause in Policy 362. TIG points to three
insured provision.
pieces of evidence to prove Sedgwick's intent.
TIG, however, failed to offer any summary
First, TIG directs us to correspondence be-
judgment evidence about Lumbermens's be-
tween Sedgwick and Lumbermens regarding
liefs when Sedgwick issued Policy 362. TIG
the Corporate Express account. The district
argues that the doctrine of mutual mistake jus-
court correctly noted, however, that this cor-
tifies reforming its policy or contract with
respondence does not specifically refer to Poli-
Lumbermens. Although TIG presented
cy 300 or Policy 362. It is impossible to know
evidence of Sedgwick's mistaken beliefs about
whether the letters are probative of the parties'
the contract, TIG did not provide a shred of
intent to include an additional insured clause in
evidence that Lumbermens shared those be-
Policy 362.
liefs. Nor did TIG present any evidence that
Sedgwick had the statutory, actual, or
6

apparent authority to change the terms of the
underlying policy for Lumbermens.
B.
The elements of negligent misrepresentation
We will not reform the terms of the
are (1) a representation made by the defendant
insurance policy without some proof that the
in course of the defendant's business, or in a
party with the power to do so shared an
transaction in which the defendant has a
antecedent understanding. Because TIG failed
proprietary interest; (2) the defendant supplied
to provide proof that the relevant parties
false information for the guidance of others in
shared an antecedent agreement, its plea for
their business; (3) the defendant did not
reformation must fail under Texas law.
exercise reasonable care or competence in
obtaining or communication the opinion; and
V.
(4) the plaintiff suffered pecuniary loss by
TIG argues that Sedgwick's erroneous COI
justifiably relying on the representation.
is a fraudulent or negligent misrepresentation.
Federal Land Bank Ass'n v. Sloane, 825
The district court found that Safety Lights and
S.W.2d 439, 442 (Tex. 1991). TIG did not
Corporate Express did not reasonably rely on
offer any summary judgment proof that
the COI with disclaimer, and TIG failed to
Sedgwick negligently or carelessly issued the
present any evidence on several crucial
COI. TIG did not advance a theory about the
elements of both claims. We affirm on the
relevant standard of care; it does not cite omit-
latter grounds.
ted precautions or any other indicia of
negligence; it did not explain why Sedgwick,
A.
rather than Corporate Express, bore the
The elements of common law fraud are
burden of reading the incorporated policy.
(1) a material misrepresentation; (2) the
Absent a coherent legal theory and summary
defendant knew the statement was false or
judgment evidence, the district court properly
made the statement with reckless disregard for
dismissed the claim.
the truth; (3) the defendant intended for the
plaintiff to rely upon the statement; and (4) the
AFFIRMED.
plaintiff relied upon the statement (5) to his
detriment. DeSantis v. Wackenhut Corp., 793
S.W.2d 670, 688 (Tex. 1990). The district
court observed the absence of Sedgwick's
fraudulent intent or reckless disregard as an al-
ternate ground of decision. TIG has never
presented any evidence that Sedgwick intend-
ed to defraud Corporate Express.
TIG presented evidence from List that
Sedgwick may have misunderstood Policy 362
to include an additional insured clause. TIG
never presented evidence that Sedgwick had
the intent to defraud. We do not need to reach
the question of reasonable reliance.
7