EDWARD CHARLES LISTER v. THE STATE OF TEXAS--Appeal from 36th District Court of San Patricio County

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State: Texas

Court: Texas Northern District Court

Docket No: 13-04-00576-CR

Case Date: 12/09/2004

Plaintiff: EDWARD CHARLES LISTER

Defendant: THE STATE OF TEXAS--Appeal from 36th District Court of San Patricio County

Preview:Commercial Union Assurance Company PLC; Sirius
Insurance Company (U.K.) PLC; Northern Assurance
Company Limited; The Indemnity Marine Assurance
Company Limited and The Ocean Marine Assurance
Company Limited v. Francisca Silva, Individually and
as Legal Heir for the Use and Benefit of All Persons
Entitled to Recover for the Wrongful Death of Arnulfo
Flores Silva; and Maria Calzoncin Cervantes and
Gregorio Cervantes, Individually, et al.--Appeal from
365th Judicial District Court of Dimmit County
No. 04-00-00536-CV
COMMERCIAL UNION ASSURANCE COMPANY PLC, Sirius Insurance Company (U.K.) PLC, Northern
Assurance Company Limited, The Indemnity Marine Assurance Company Limited, and The Ocean Marine Assurance
Company Limited,
Appellants
v.
Arnulfo Flores SILVA, and Maria Calzoncin Cervantes and Gregorio Cervantes, Individually and as Legal Heir for the
Use and Benefit of All Persons Entitled to Recover for the Wrongful Death of Humberto Javier Cervantes Calzoncin,
Appellees
From the 365th Judicial District Court, Dimmit County, Texas
Trial Court No. 97-12-14855-CV
Honorable Amado J. Abascal, III, Judge Presiding
Opinion by: Tom Rickhoff, Justice
Sitting: Phil Hardberger, Chief Justice
Tom Rickhoff, Justice
Catherine Stone, Justice
Delivered and Filed: May 30, 2001
REVERSED AND RENDERED
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This appeal, which involves the interpretation of an insurance policy, is brought by Commercial Union Assurance
Company PLC, Sirius Insurance Company (U.K.) PLC, Northern Assurance Company Limited, The Indemnity Marine
Assurance Company Limited, and The Ocean Marine Assurance Company Limited (collectively, the defendants) from
a bench trial verdict in favor of Francisca Silva, individually and as legal heir for the use and benefit of all persons
entitled to recover for the wrongful death of Arnulfo Flores Silva, and Maria Calzoncin Cervantes and Gregorio
Cervantes, individually and as legal heir for the use and benefit of all persons entitled to recover for the wrongful death
of Humberto Javier Cervantes Calzoncin (collectively, the plaintiffs).
Defendants bring three issues on appeal: the trial court erred in (1) holding the policy provided coverage, (2) allowing
plaintiffs' expert to testify about the meaning of the policy, and (3) refusing to apply res judicata to bar plaintiffs'
claims. We agree that the policy does not provide coverage for the plaintiffs' claims; therefore, we reverse and render
judgment in favor of the defendants.
BACKGROUND
Non-party Texas Recreation Corporation ("TRC") is a Texas company that manufactures pool equipment. TRC
contracted with TRC International to manufacture certain products in Mexico, and TRC provided equipment to TRC
International, including heaters with open flames. The defendants were TRC's insurers. During the pendency of the
insurance policy, a fire at the Mexico plant killed a number of employees, including plaintiffs' decedents. TRC made a
demand on the defendants for defense and indemnity, and defendants denied coverage.
In 1992, plaintiffs filed a wrongful death action against TRC and TRC International in Maverick County, Texas
district court. In May 1993, defendants sued TRC and plaintiffs in federal court, seeking a declaration of non-coverage
in the wrongful death suit. Service was attempted on plaintiffs' lawyer, who refused service. In September 1993, TRC
filed for bankruptcy protection. In January 1995, plaintiffs obtained a judgment against TRC. In September 1995, the
federal court ruled that defendants had no duty to defend or indemnify TRC. This judgment was later affirmed by the
Fifth Circuit. In January 1996, TRC assigned to plaintiffs "any and all claims, demands, and causes of action they have
against Defendants." In December 1997, plaintiffs sued the defendants in Maverick County district court to collect on
the wrongful death judgment. After a bench trial, the court found in favor of plaintiffs and awarded judgment for the
full amount of the insurance policy, plus prejudgment interest.
"POLICY TERRITORY" In their first issue on appeal, defendants assert the trial court erred in concluding that
plaintiffs' claims in the wrongful death action arose within the "policy territory" as that phrase is used in the policy.
The Policy
The policy applies "only to bodily injury or property damage which occurs within the policy territory." "Policy
territory" is defined as "(1) the United States of America, its territories or possessions, or Canada, or (2) international
waters or air space, provided the bodily injury or property damage does not occur in the course of travel or
transportation to or from any other country, state, or nation, or (3) anywhere in the world with respect to damages
because of bodily injury or property damage arising out of a product which was sold for use or consumption within the
territory described in paragraph (1) provided the original suit for damages is brought within such territory . . . ."
(Emphasis added.)
The trial court found that a "reasonable construction of the definition of 'policy territory' is that both prepositional
phrases modify the verb 'sold' such that worldwide coverage applies if the product was (1) sold for use or consumption
and (2) sold within the territory described in paragraph (1)." The court also found that "[c]onstruing the definition of
'policy territory' to require that the use or consumption of the product occur within the United States would be contrary
to the clear intent of the policy to expand coverage for bodily injury claims arising from a products hazard."
Defendants contend this interpretation is incorrect. Defendants assert the policy covers only products intended for use
or consumption in the United States. Therefore, defendants conclude, an accident occurring in Mexico arising out of a
product intended for use in Mexico is not within the "policy territory," and thus not covered.
Rules of construction
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Insurance contracts are subject to the same rules of construction as other contracts. State Farm Life Ins. Co. v. Beaston,
907 S.W.2d 430, 433 (Tex. 1995); National Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995);
Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994). Our primary goal, therefore, is to give effect to the
written expression of the parties' intent. Beaston, 907 S.W.2d at 433; Forbau, 876 S.W.2d at 133. We must read all
parts of the contract together, Beaston, 907 S.W.2d at 433, striving to give meaning to every sentence, clause, and
word to avoid rendering any portion inoperative. United Serv. Auto. Ass'n v. Miles, 139 Tex. 138, 161 S.W.2d 1048,
1050 (1942).
Whether an insurance policy is ambiguous is a legal question decided by examining the entire contract in light of the
circumstances present when the parties entered into the contract. State Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d
931, 933 (Tex. 1998). A policy is not ambiguous, as a matter of law, if the court can give it a definite legal meaning.
Id. An ambiguity does not arise simply because the parties advance conflicting interpretations. Forbau, 876 S.W.2d at
134. A contract is ambiguous if, after applying these rules, it is subject to two or more reasonable interpretations.
National Union, 907 S.W.2d at 520. If the policy is subject to more than one reasonable interpretation, we must adopt
the construction most favorable to the insured when we resolve the uncertainty. Vaughan, 968 S.W.2d at 933. Where
an ambiguity involves an exclusionary provision of an insurance policy, we "must adopt the construction . . . urged by
the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be
more reasonable or a more accurate reflection of the parties' intent." National Union Fire Ins. Co. v. Hudson Energy
Co., 811 S.W.2d 552, 555 (Tex. 1991). An insurer who relies on an exclusion carries the burden to prove that it
applies. Tex. Ins. Code Ann. art. 21.58(b) (Vernon Supp. 2001).
Analysis
Plaintiffs argue that the definition of "policy territory" places two limitations upon the insured's actions in selling its
product in order for coverage to exist for product claims arising outside the country. The first limitation, on the nature
of the sale, requires that the product must be "sold for use or consumption." The second limitation, on the location of
the sale, requires that the sale occur within the United States, its territories or possessions, or Canada. Plaintiffs
conclude that "within the territory described" modifies both "sold" and "for use and consumption." We disagree.
Plaintiffs' reading grammatically strains the language, because it reads the adverbial phrase as modifying the distant
verb "sold" rather than the prepositional phrase "for use or consumption" immediately preceding it. Moreover, this
reading renders "for use or consumption" as surplusage, as there would be coverage for any sale in the United States or
Canada, regardless of where the product sold was used or consumed. Therefore, we hold that the policy is not
ambiguous and the phrase "within the territory described" modifies "for use or consumption" and not "sold." See
generally Atlantic Mutual Ins. Co. v. Truck Ins. Exch., 797 F.2d 1288 (5th Cir. 1986); Vinocur's Inc. v. CNA Ins. Co.,
517 N.Y.S.2d 277 (N.Y. App. Div. 1987). (1) Here, the products were sold for use in the manufacturing plant operated
by T.R.C. International S.A. de C.V. in Mexico; thus, the policy does not provide coverage for plaintiffs' claims.
CONCLUSION
Because we hold that the policy does not provide coverage for the plaintiffs' claims, we do not address defendants'
second and third issues on appeal. We reverse the trial court's judgement and render a take-nothing judgment in favor
of the defendants.
Tom Rickhoff, Justice
PUBLISH
1. The common thread running through these cases is that the court focused on where the product was intended to be
used: in Atlantic Mutual, the product (although ultimately shipped abroad) was intended to be used in the U.S.; in
Vinocur's, the product (although ultimately shipped abroad) was sold for use in the United States.
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