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holding court may look to the third-party petition and underlying plaintiff's petition
Summary of this case from Tejas Specialty Grp., Inc. v. United Specialty Ins. Co.Opinion
CIVIL ACTION NO. 1:18-CV-526
2019-12-16
BITCO GENERAL INSURANCE CORPORATION f/k/a Bituminous Casualty Corporation, Plaintiff, v. ACADIA INSURANCE COMPANY, Defendant.
William David Farmer, Curney Garcia Farmer Pickering & House, San Antonio, TX, for Plaintiff. James Price Collins, Ashley F. Gilmore, Wilson Elser Moskowitz Edelman & Dicker LLP, Dallas, TX, Ross Holiday Jones, Clark Hill Strasburger, Beaumont, TX, for Defendant.
William David Farmer, Curney Garcia Farmer Pickering & House, San Antonio, TX, for Plaintiff.
James Price Collins, Ashley F. Gilmore, Wilson Elser Moskowitz Edelman & Dicker LLP, Dallas, TX, Ross Holiday Jones, Clark Hill Strasburger, Beaumont, TX, for Defendant.
MEMORANDUM AND ORDER
MARCIA A. CRONE, UNITED STATES DISTRICT JUDGE
Pending before the court are Plaintiff Bitco General Insurance Corporation's ("BITCO") Motion for Summary Judgment (#16) and Defendant Acadia Insurance Company's ("Acadia") Cross-Motion for Summary Judgment (#17) wherein the parties seek a declaratory judgment on whether Acadia owes a duty to defend and to pay attorney's fees for breach of contract to Brickfield Builders, Inc. ("BBI") with respect to the following state court proceeding: Cause No. CV1510024, City of Liberty v. GTT, Inc., and Edwards Associates, PLLC , and Third-Party Defendants ; in the 75th Judicial District Court of Liberty County, Texas. Having considered the pending motions, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that BITCO's Motion for Summary Judgment should be DENIED and Acadia's Cross-Motion for Summary Judgment should be GRANTED.
The Third-Party Defendants are Brickfield Builders, Inc.; Fireproof Contractors, Inc.; Iron Boss, Inc.; Lakewood Mechanical, Inc.; J.M. Maly, Inc.; Michael Gilmore d/b/a Mag Development; R.A. Howell Corporation d/b/a City Glass Home Center, Inc.; R.W. Cooper Enterprise, Inc. d/b/a New Dawn Enterprises; and Wheatley Plumping, Inc. d/b/a Wheatley Plumbing & Mechanical.
I. Background
This insurance coverage dispute arises from a state court proceeding in which the City of Liberty ("the City") alleged faulty construction and design of additions to the Liberty Municipal Library ("the Library") located in downtown Liberty, Texas. The City contracted with Edwards Associates, PLLC ("Edwards"), to provide architectural services and G.T.T., Inc. ("GTT"), to manage the construction. GTT, as the general contractor, subcontracted with BBI to provide a complete masonry system. In the Original Petition filed in the underlying litigation, the City alleged that the Library was not constructed as designed, which led to water infiltration, serviceability, and aesthetic issues. The City asserted that it has experienced severe problems with the Library that caused the City "to suffer significant past and future economic harm and damages."
The City further alleged that it gave Edwards and GTT notice of defects in a demand letter dated December 17, 2014. The City maintained that it allowed Edwards and GTT the opportunity to assist the City in resolving these problems; however, all attempts failed. On October 9, 2015, the City filed suit asserting the following seven causes of action against Edwards and GTT: Breach of Contract, Negligence, Professional Negligence, Breach of Express Warranty, Breach of Implied Warranty of Fitness for a Particular Purpose, Breach of Implied Warranty of Merchantability, and Texas Deceptive Trade Practices-Consumer Protection Act Violation. On February 9, 2016, four months later, GTT filed a Third-Party Petition against all of its subcontractors, which included BBI.
BITCO and Acadia issued commercial general liability ("CGL") policies to BBI. BITCO issued two, one-year CGL policies to BBI, CLP 3 544 712 (10/31/10 to 10/31/11) and CLP 3 561 754 (10/31/11 to 10/31/12), and Acadia issued a one-year CGL policy, CPA 4704107 (10/31/15 to 10/31/16). On June 22, 2016, BBI tendered requests for defense to BITCO and Acadia. On July 29, 2016, Acadia undertook a formal review of BBI's tender of defense. On October 24, 2016, Acadia formally denied coverage because: (1) the Original Petition's allegations did not state a claim within Acadia's policy period; (2) the Original Petition's allegations fell within policy exclusions; and (3) BBI was on notice of these problems prior to purchasing Acadia's policy, causing the fortuity doctrine to apply. On November 3, 2016, BITCO agreed to defend BBI in the underlying lawsuit subject to a reservation of rights.
On March 7, 2017, after BITCO learned of Acadia's declination, BITCO re-tendered BBI's request for defense to Acadia, contending that Acadia impermissibly relied on extrinsic evidence in their declination. On May 23, 2017, BITCO sent another demand letter on behalf of BBI to Acadia, again requesting that Acadia provide a defense to BBI. On July 18, 2018, BITCO sent Acadia a list of all carriers currently providing a defense to BBI. On October 17, 2018, BITCO, dissatisfied with Acadia's position, filed the instant lawsuit against Acadia seeking a declaration that Acadia owes BBI a duty to defend and that Acadia's refusal to defend constitutes a breach of contract with respect to BBI. BITCO seeks recovery of amounts paid for the defense of the underlying lawsuit and its attorney's fees incurred in this action. The parties agreed to resolve this dispute through Cross-Motions for Summary Judgment, BITCO (#16) and Acadia (#17).
The following carriers and the respective policy periods are currently providing a defense to BBI: IFG Company (10/31/08 to 10/31/10), BITCO Insurance Company (10/31/10 to 10/31/12), Nationwide Headquarters (11/02/12 to 11/02/14), and Maxum Specialty Insurance Group (11/02/14 to 11/02/15). Each of the policies listed incepted before December 17, 2014, the date referenced in the Original Petition when Edwards and GTT received the City's demand letter. Plaintiff's Exhibit 14, (#16-15).
II. Analysis
A. Summary Judgment Standard
A party may move for summary judgment without regard to whether the movant is a claimant or a defending party. See Parrish v. Premier Directional Drilling, L.P. , 917 F.3d 369, 380 (5th Cir. 2019) ; Apache Corp. v. W & T Offshore, Inc. , 626 F.3d 789, 793 (5th Cir. 2010) ; CQ, Inc. v. TXU Mining Co., L.P. , 565 F.3d 268, 272 (5th Cir. 2009). Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a) ; Parrish , 917 F.3d at 378 ; Hefren v. McDermott, Inc. , 820 F.3d 767, 771 (5th Cir. 2016). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Jones v. United States , 936 F.3d 318, 321 (5th Cir. 2019) ; Mabry v. Lee Cty. , 849 F.3d 232, 234 (5th Cir. 2017) ; Davis v. Fort Bend Cty. , 765 F.3d 480, 484 (5th Cir. 2014), cert. denied , ––– U.S. ––––, 135 S. Ct. 2804, 192 L.Ed.2d 847 (2015). To warrant judgment in its favor, the movant "must establish beyond peradventure all of the essential elements of the claim or defense." Dewan v. M-I, L.L.C. , 858 F.3d 331, 334 (5th Cir. 2017) (quoting Fontenot v. Upjohn Co. , 780 F.2d 1190, 1194 (5th Cir. 1986) ); accord Access Mediquip L.L.C. v. UnitedHealthcare Ins. Co. , 662 F.3d 376, 378 (5th Cir. 2011), cert. denied , 568 U.S. 1194, 133 S.Ct. 1467, 185 L.Ed.2d 364 (2013).
Once a proper motion has been made, the nonmoving party may not rest upon mere allegations or denials in the pleadings but must present affirmative evidence, setting forth specific facts, to demonstrate the existence of a genuine issue for trial. Celotex Corp. , 477 U.S. at 322 n.3, 106 S.Ct. 2548 ; see Beard v. Banks , 548 U.S. 521, 529, 126 S.Ct. 2572, 165 L.Ed.2d 697 (2006) (quoting FED. R. CIV. P. 56(e) ); Hassen v. Ruston La. Hosp. Co., L.L.C. , 932 F.3d 353, 356 (5th Cir. 2019) ; Distribuidora Mari Jose, S.A. de C.V. v. Transmaritime, Inc. , 738 F.3d 703, 706 (5th Cir. 2013). The court "should review the record as a whole." Black v. Pan Am. Labs., LLC , 646 F.3d 254, 273 (5th Cir. 2011) (quoting Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) ); see City of Alexandria v. Brown , 740 F.3d 339, 350 (5th Cir. 2014). All the evidence must be construed in the light most favorable to the nonmoving party, and the court will not weigh the evidence or evaluate its credibility. Reeves , 530 U.S. at 150, 120 S.Ct. 2097 ; Nall v. BNSF Ry. Co. , 917 F.3d 335, 340 (5th Cir. 2019) ; Tiblier v. Dlabal , 743 F.3d 1004, 1007 (5th Cir. 2014) ; see Hefren , 820 F.3d at 771. The evidence of the nonmovant is to be believed, with all justifiable inferences drawn and all reasonable doubts resolved in its favor. Tolan v. Cotton , 572 U.S. 650, 651, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ); Davenport v. Edward D. Jones & Co., L.P. , 891 F.3d 162, 167 (5th Cir. 2018) ; Hemphill v. State Farm Mut. Auto. Ins. Co. , 805 F.3d 535, 538 (5th Cir. 2015) ; Pioneer Expl., L.L.C. v. Steadfast Ins. Co. , 767 F.3d 503, 511 (5th Cir. 2014). The evidence is construed "in favor of the nonmoving party, but only where there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Spring St. Partners-IV, L.P. v. Lam , 730 F.3d 427, 435 (5th Cir. 2013) (quoting Boudreaux v. Swift Transp. Co. Inc. , 402 F.3d 536, 540 (5th Cir. 2005) ).
Nevertheless, "only reasonable inferences in favor of the nonmoving party can be drawn from the evidence." Mills v. Warner-Lambert Co. , 581 F. Supp. 2d 772, 779 (E.D. Tex. 2008) (citing Eastman Kodak Co. v. Image Tech. Servs., Inc. , 504 U.S. 451, 469 n.14, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) ); see Hassen , 932 F.3d at 355 (holding that the court views "the evidence and draw all justifiable inferences in favor of the nonmovant"). "If the [nonmoving party's] theory is ... senseless, no reasonable jury could find in its favor, and summary judgment should be granted." Stearns Airport Equip. Co., Inc. v. FMC Corp. , 170 F.3d 518, 528 (5th Cir. 1999) (quoting Eastman Kodak Co. , 504 U.S. at 468-69, 112 S.Ct. 2072 ); accord Shelter Mut. Ins. Co. v. Simmons , 543 F. Supp. 2d 582, 584-85 (S.D. Miss.), aff'd , 293 F. App'x 273 (5th Cir. 2008). "Summary judgment may not be thwarted by conclusional allegations, unsupported assertions, or presentation of only a scintilla of evidence." Hemphill , 805 F.3d at 538 (citing McFaul v. Valenzuela , 684 F.3d 564, 571 (5th Cir. 2012) ); see Lujan v. Nat'l Wildlife Fed'n , 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) ; accord Heath v. Elaasar , 763 F. App'x 351, 354 (5th Cir. 2019) (" Heath II "); Stauffer v. Gearhart , 741 F.3d 574, 581 (5th Cir. 2014).
"On cross-motions for summary judgment, [the court] considers ‘each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party.’ " Aldous v. Darwin Nat'l Assurance Co. , 851 F.3d 473, 477 (5th Cir. 2017) (quoting Morgan v. Plano Indep. Sch. Dist. , 589 F.3d 740, 745 (5th Cir. 2009), vacated in part on reh'g , 889 F.3d 798 (5th Cir. 2018) ). Cross-motions for summary judgment will not, in and of themselves, warrant the granting of summary judgment unless one of the parties is entitled to judgment as a matter of law. Joplin v. Bias , 631 F.2d 1235, 1237 (5th Cir. 1980) ; Bricklayers, Masons & Plasterers Int'l Union of Am. v. Stuart Plastering Co. , 512 F.2d 1017, 1023 (5th Cir. 1975) ; accord Flecha v. Medicredit, Inc. , No. 1:16-CV-792-LY, 2018 WL 3014422, at *3 (W.D. Tex. May 15, 2018). The rationale for this rule is that each party may move for summary judgment using different legal theories that rely upon different sets of material facts. Bricklayers, Masons & Plasterers Int'l Union of Am. , 512 F.2d at 1023. Nonetheless, cross-motions for summary judgment may be probative of the absence of a factual dispute when they reveal a basic agreement concerning what legal theories and material facts are dispositive. Id. ; Schlytter v. Baker , 580 F.2d 848, 849-50 (5th Cir. 1978) ; accord Flecha , 2018 WL 3014422, at *3 (W.D. Tex. May 15, 2018) ; Thorne v. Union Pac. Corp. , 290 F. Supp. 3d 635, 639 (W.D. Tex. 2017), aff'd , 742 F. App'x 875 (5th Cir. 2018), cert. denied , ––– U.S. ––––, 139 S. Ct. 1574, 203 L.Ed.2d 716 (2019).
B. Interpretation of Insurance Policies
It is well recognized that "[i]nsurance policies are contracts." Certain Underwriters at Lloyd's of London v. Lowen Valley View, L.L.C. , 892 F.3d 167, 170 (5th Cir. 2018) ; see One Beacon Ins. Co. v. Crowley Marine Servs., Inc. , 648 F.3d 258, 271 (5th Cir. 2011) ; USAA Texas Lloyds Co. v. Menchaca , 545 S.W.3d 479, 488 (Tex. 2018) ("[A]n insurance policy is a contract that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed."); JAW The Pointe, L.L.C. v. Lexington Ins. Co. , 460 S.W.3d 597, 603 (Tex. 2015) ; Ulico Cas. Co. v. Allied Pilots Ass'n , 262 S.W. 3d 773, 778 (Tex. 2008). As with other contracts, a federal court, sitting in diversity in Texas, applies Texas law in the interpretation of insurance policies. Citigroup Inc. v. Fed. Ins. Co. , 649 F.3d 367, 371 (5th Cir. 2011) (citing Erie R.R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ); see Lowe v. Hearst Commc'ns, Inc. , 487 F.3d 246, 252 n.4 (5th Cir. 2007). Under Texas law, the interpretation of insurance policies is governed by the same rules that apply to the interpretation of other contracts. Lawyers Title Ins. Corp. v. Doubletree Partners, L.P. , 739 F.3d 848, 858 (5th Cir. 2014) ; Pendergest-Holt v. Certain Underwriters at Lloyd's , 600 F.3d 562, 569 (5th Cir. 2010) ; Great Am. Ins. Co. v. Primo , 512 S.W.3d 890, 892-93 (Tex. 2017) ; JAW The Pointe, L.L.C. , 460 S.W.3d at 603 ; Nat'l Fire Ins. Co. v. Crocker , 246 S.W.3d 603, 606 (Tex. 2008). Moreover, "the proper interpretation of an insurance policy is a question of law." Cooper Indus., Ltd. v. Nat'l Union Fire Ins. Co. of Pittsburgh , 876 F.3d 119, 128 (5th Cir. 2017) ; see Allstate Ins. Co. v. Disability Servs. of the Sw. Inc. , 400 F.3d 260, 263 (5th Cir. 2005) (citing Performance Autoplex II Ltd. v. Mid-Continent Cas. Co. , 322 F.3d 847, 853 (5th Cir. 2003) ); St. Paul Guardian Ins. Co. v. Centrum GS Ltd. , 283 F.3d 709, 713 (5th Cir. 2002) (quoting N.Y. Life Ins. Co. v. Travelers Ins. Co. , 92 F.3d 336, 338 (5th Cir. 1996) ).
C. Duty to Defend
An insurer has a duty to defend a policyholder in actions brought by a third party who asserts claims potentially covered by the insurance policy. Trinity Universal Ins. Co. v. Emp'rs Mut. Cas. Co. , 592 F.3d 687, 691 (5th Cir. 2010) ; Zurich Am. Ins. Co. v. Nokia, Inc. , 268 S.W.3d 487, 490 (Tex. 2008). In Texas, when determining an insurer's duty to defend an insured, the court follows the "eight corners" or "complaint allegation" rule. Century Sur. Co. v. Seidel , 893 F.3d 328, 333 (5th Cir. 2018) ; Cont'l Cas. Co. v. Consol. Graphics, Inc. , 646 F.3d 210, 212-13 (5th Cir. 2011) ; Trinity Universal Ins. Co. , 592 F.3d at 691 ; Ewing Constr. Co., Inc. v. Amerisure Ins. Co. , 420 S.W.3d 30, 33 (Tex. 2014). Under this rule, an insurer's duty to defend is determined by examining "the four corners of the most recent complaint in the underlying action as well as the four corners of the insurance policy." Century Sur. Co. , 893 F.3d at 333 (quoting City of Coll. Station v. Star Ins. Co. , 735 F.3d 332, 336 (5th Cir. 2013) ); Harken Expl. Co. v. Sphere Drake Ins., PLC , 261 F.3d 466, 471 (5th Cir. 2001) ; accord Cont'l Cas. Co. , 646 F.3d at 213 ; Trinity Universal Ins. Co. , 592 F.3d at 691 ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33. "If the underlying complaint pleads facts sufficient to create the potential of covered liability, the insurer has a duty to defend the entire case, even if the allegations are demonstrably false, fraudulent, or groundless, and even if some of the injuries alleged are not covered or fall within the scope of an exclusion." Century Sur. Co. , 893 F.3d at 333 (quoting City of Coll. Station , 735 F.3d at 336 ); accord Trinity Universal Ins. Co. , 592 F.3d at 691 ; Zurich Am. Ins. Co. , 268 S.W.3d at 490. If the complaint is unclear or ambiguous, or there is doubt whether an allegation states a cause of action within the coverage of a liability policy, the complaint is construed liberally in favor of the insured, and any doubt is resolved in favor of potential coverage. Laney Chiropractic & Sports Therapy, P.A. v. Nationwide Mut. Ins. Co. , 866 F.3d 254, 259 (5th Cir. 2017) (citing Mid-Continent Cas. Co. v. JHP Dev., Inc. , 557 F.3d 207, 212 (5th Cir. 2009) ); Trinity Universal Ins. Co. , 592 F.3d at 691 ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33.
"In reviewing the underlying pleadings, the court must focus on the factual allegations that show the origin of the damages rather than on the legal theories advanced." VRV Dev. L.P. v. Mid-Continent Cas. Co. , 630 F.3d 451, 457 (5th Cir. 2011) (quoting Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc. , 939 S.W.2d 139, 141 (Tex. 1997) ); accord United Fire & Cas. Co. v. Kent Distrib., Inc. , 759 F. App'x 326, 330 n.2 (5th Cir. 2019) ; Nat'l Union Fire Ins. Co. v. Willis , 296 F.3d 336, 342 (5th Cir. 2002) ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33 ; Zurich Am. Ins. Co. , 268 S.W.3d at 491. The court must ascertain whether the facts, as alleged, fall within the policy's coverage. Ewing Constr. Co., Inc. , 420 S.W.3d at 33 ; Zurich Am. Ins. Co. , 268 S.W.3d at 491. In making this assessment, the court may not consider the truth or falsity of the allegations in the underlying pleadings. Trinity Universal Ins. Co. , 592 F.3d at 691 ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33 ; Zurich Am. Ins. Co. , 268 S.W.3d at 491. Instead, all the facts alleged in the third party's complaint are assumed to be true. Lincoln Gen. Ins. Co. v. Reyna , 401 F.3d 347, 350 (5th Cir. 2005) ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33. Moreover, the insurance company's duty to defend is not affected by extrinsic evidence, including facts learned before, during, or after the suit. Trinity Universal Ins. Co. , 592 F.3d at 691 ; Zurich Am. Ins. Co. , 268 S.W.3d at 491 Chapman v. Nat'l Union Fire Ins. Co. , 171 S.W.3d 222, 226 (Tex. App.—Houston [1st Dist.] 2005, no pet.). Even if the allegations in the third party's complaint are known or discovered to be untrue, an insurer that has contracted to defend must do so. See Lyda Swinerton Builders, Inc. v. Okla. Sur. Co. , 903 F.3d 435, 447 (5th Cir. 2018) ; Zurich Am. Ins. Co. , 268 S.W.3d at 491 ; Heyden Newport Chem. Corp. v. S. Gen. Ins. Co. , 387 S.W.2d 22, 24 (Tex. 1965).
The duty to defend does not arise, however, until a complaint alleging a potentially covered claim is tendered to the insurer. Crocker v. Nat'l Union Fire Ins. Co. , 466 F.3d 347, 356 n.9 (5th Cir. 2006) (citing Royal Ins. Co. v. Hartford Underwriters Ins. Co. , 391 F.3d 639, 644 (5th Cir. 2004) ). The most recently amended complaint provided to the insurer is examined to ascertain the existence of such duty. Northfield Ins. Co. v. Loving Home Care, Inc. , 363 F.3d 523, 528 (5th Cir. 2004) ; Harken Expl. Co. , 261 F.3d at 471 ; Guar. Nat'l Ins. Co. v. Vic Mfg. Co. , 143 F.3d 192, 194 (5th Cir. 1998) ; accord Colony Ins. Co. v. Custom Ag Commodities, LLC , 272 F. Supp. 3d 948, 958 (E.D. Tex. 2017). An insurer is obligated to defend an insured as long as the complaint alleges at least one cause of action within the scope of the policy. See 2200 W. Al., Inc. v. W. World Ins. Co. , 751 F. App'x 501, 504 (5th Cir. 2018) ; Northfield Ins. Co. , 363 F.3d at 528 ; Lafarge Corp. v. Hartford Cas. Ins. Co. , 61 F.3d 389, 393 (5th Cir. 1995). "Even if the plaintiff's complaint alleges multiple claims or claims in the alternative, some of which are covered under the policy and some of which are not, the duty to defend arises if at least one of the claims in the complaint is facially within the policy's coverage." Fed. Ins. Co. v. Northfield Ins. Co. , 837 F.3d 548, 553 (5th Cir. 2016) (quoting Lafarge Corp. , 61 F.3d at 393 ); Zurich Am. Ins. Co. , 268 S.W.3d at 491. "If coverage exists for any portion of a suit, the insurer must defend the insured in the entire suit." St. Paul Guardian Ins. Co. , 283 F.3d at 714 (quoting St. Paul Fire & Marine Ins. Co. v. Green Tree Fin. Corp. , 249 F.3d 389, 391 (5th Cir. 2001) ); accord Harken Expl. Co. , 261 F.3d at 474 ; Zurich Am. Ins. Co. , 268 S.W.3d at 491 ; see Hartford Cas. Ins. Co. v. DP Eng'g, L.L.C. , 827 F.3d 423, 427 (5th Cir. 2016). Moreover, the duty to defend is owed by each insurer whose policy is potentially implicated and remains absolute until the insurer proves that its policy covers no remaining claims. See Gulf Chem. & Metallurgical Corp. v. Associated Metals & Minerals Corp. , 1 F.3d 365, 372 (5th Cir. 1993).
If a plaintiff's complaint does not allege facts within the scope of policy coverage, an insurer has no legal obligation to defend the insured against the plaintiff's claims. Laney Chiropractic & Sports Therapy, P.A. , 866 F.3d at 259 (citing Ooida Risk Retention Grp., Inc. v. Williams , 579 F.3d 469, 472 (5th Cir. 2009) ); Cont'l Cas. Co. , 646 F.3d at 213 ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33. An insurer also does not have a duty to defend when the complaint makes allegations which, if proven, would place the plaintiff's claim within an exclusion from coverage. Century Sur. Co. , 893 F.3d at 333 ; Laney Chiropractic & Sports Therapy, P.A. , 866 F.3d at 259 (citing Ooida Risk Retention Grp., Inc. , 579 F.3d at 472 ); see Cont'l Cas. Co. , 646 F.3d at 213 ; Ewing Constr. Co., Inc. , 420 S.W.3d at 33. The insurer is entitled to rely on the plaintiff's allegations in determining whether the facts are within the coverage of the policy. Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co. , 279 S.W.3d 650, 655 (Tex. 2009) (citing Trinity Universal Ins. Co. v. Cowan , 945 S.W.2d 819, 829 (Tex. 1997) ). While the plaintiff's allegations are to be construed liberally, if the complaint alleges only facts that are not within the scope of policy coverage or that are excluded by the terms of the policy, the insurer is not required to defend. Century Sur. Co. , 893 F.3d at 333 (citing City of Coll. Station , 735 F.3d at 336 ); Laney Chiropractic & Sports Therapy, P.A. , 866 F.3d at 259 (citing Ooida Risk Retention Grp., Inc. , 579 F.3d at 472 ); Zurich Am. Ins. Co. , 268 S.W.3d at 491. Thus, pursuant to the eight corners rule, the court will consider the relevant policy provisions of Acadia's policy, the Original Petition, and the Third-Party Petition to determine whether Acadia has a duty to defend.
1. Acadia's General Policy Provisions
An examination of Acadia's policy reveals that the "Insuring Agreement" contains the modifying phrase "to which this insurance applies." See T.C. Bateson Constr. Co. v. Lumbermens Mut. Cas. Co. , 784 S.W.2d 692, 699 (Tex. App.—Houston [14th Dist.] 1989, writ denied) ; see Luxury Living, Inc. v. Mid-Continent Cas. Co. , No. CIV. A. H-02-3166, 2003 WL 22116202, at *12 (S.D. Tex. Sept. 10, 2003). The insuring agreement states in pertinent part:
(a) We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result....
(b) This insurance applies to "bodily injury" and "property damage" only if:
* * *
(2) The "bodily injury" or "property damage" occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II - Who is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence" or claim, knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured or authorized "employee" knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.
* * *
(d) "Bodily injury" or "property damage" will be deemed to have been known to have occurred at the earliest time
According to Acadia's policy, "Property Damage" means:
a. Physical injury to tangible property including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it.
According to Acadia's policy, "Occurrence" means: "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
when any insured listed under Paragraph l of Section II - Who Is An Insured or any "employee" authorized by you to give or receive notice of an "occurrence" or claim:
(1) Reports all, or any part, of the "bodily injury" or "property damage" to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the "bodily injury" or "property damage"; or
(3) Becomes aware by any other means that "bodily injury" or "property damage" has occurred or has begun to occur.
Defendant's Exhibit 1, p. 6 (# 17-2). This language "underscores the basic notion that the premium paid by the insured does not buy coverage for all property damage but only for that type of damage provided for in the policy." T.C. Bateson Constr. Co. , 784 S.W.2d at 699. Any limitations on the types of damages covered are set forth in the exclusion clauses of Acadia's policy, which are "meant to be read with the Insuring Agreement, independently of every other exclusion." Id. The court must look to Acadia's policy in order to determine what damages are covered and whether any exclusions apply.
2. Acadia's Policy Exclusions
The purpose of an insurance exclusion is "to remove from coverage an item that would otherwise have been included." Gemini Ins. Co. v. S & J Diving, Inc. , 464 F. Supp. 2d 641, 650 (S.D. Tex. 2006) (citing Am. Mfrs. Ins. Co. v. Schaefer , 124 S.W.3d 154, 160 (Tex. 2003) ). Under Texas law, "[a]n unambiguous exclusion, even an exception that materially limits the scope of a more general provision, must be given effect unless it wholly repugn[s] that general provision." Celestino v. Mid-Am. Indem. Ins. Co. , 883 S.W.2d 310, 313 (Tex. App.—Corpus Christi 1994, writ denied) (citing Lyons v. Montgomery , 701 S.W.2d 641, 643 (Tex. 1985) ; accord McGinnes Indus. Maint. Corp. v. Phoenix Ins. Co. , 477 S.W.3d 786, 796 n.2 (Tex. 2015) ; see Northfield Ins. Co. v. Herrera , 751 F. App'x 512, 515-16 (5th Cir. 2018). Whether the court agrees with the rationale of an exclusion or likes the result it produces in a particular case, the court is bound to enforce it as written, not to nullify it. See Betco Scaffolds Co. v. Houston United Cas. Ins. Co. , 29 S.W.3d 341, 347 (Tex. App.—Houston [14th Dist.] 2000, no pet.). "Courts cannot make new contracts between the parties, but must enforce the contracts as written." Royal Indem. Co. v. Marshall , 388 S.W.2d 176, 181 (Tex. 1965) ; accord McGinnes Indus. Maint. Corp. , 477 S.W.3d at 796 n.2 ; Betco Scaffolds Co. , 29 S.W.3d at 347 ; see Nautilus Ins. Co. v. Country Oaks Apartments, Ltd. , 556 F. Supp. 2d 611, 616 (W.D. Tex. 2008). Similarly, it is not the court's function to "rebalance policy costs and risks after a risk was realized." Garza v. State Farm Mut. Auto. Ins. Co. , 208 F. Supp. 2d 693, 698 (S.D. Tex.), aff'd , 54 F. App'x 409 (5th Cir. 2002). Acadia's policy expressly excludes:
a. Expected or Intended Injury
"Bodily injury" or "property damage" expected or intended from the standpoint of the insured....
b. Contractual Liability
"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) That the insured would have in the absence of the contract or agreement; or
(2) Assumed in a contract or agreement that is an "insured contract",
provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an "insured contract", reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of "bodily injury" or "property damage", provided:
(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same "insured contract"; and
(b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.
* * *
k. Damage to Your Product
"Property damage" to "your product" arising out of it or any part of it.
l. Damage To Your Work
"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard". This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
m. Damage to Impaired Property or Property Not Physically Injured
"Property damage" to "impaired property" or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your·work"; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms. This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.
Defendant's Exhibit 1, p. 7-10 (# 17-2).
3. Original Petition
The Original Petition contains the following factual allegations:
7. The City and [GTT], as contractor, made an agreement through an AIA A101-1997 contract effective on February 23, 2009 ("Construction Contract"). The City entered into the Construction Contract relying upon GTT's representations about its skills and experience as a general contractor and that the design and construction would serve the purpose for which it was intended: to provide safe, well-installed, and aesthetically pleasing Library for use by the City's community.
9. Despite the representations, warranties, and contractual obligations and duties of GTT and Edwards, the Library has experienced severe problems that have caused the City to suffer significant past and future economic harm and damages. In general, elements of the building were not constructed as designed which led to water infiltration, serviceability issues, and aesthetic issues. Moreover, several items were not adequately defined in the design documents. These problems include, but are not limited to: (1) structural issues, including: multiple issues with the concrete masonry unit (CMU) blocks and walls and shear wall issues, including inadequate code-required load reinforcing steel; (2) aesthetic issues, including color, texture, and sheen problems with CMU walls; (3) moisture protection and serviceability issues, including: porous exterior CMU walls, CMU walls with lack of insulating fill as required by the Structural drawings, incorrectly placed
or missing weep holes, application of non-specific dampproofing on the CMU block walls, cracks and opening in mortar joints and CMU blocks, improperly placed control joints, and sealant joints instead of expansion joints; (4) cast-in-place concrete lintel beam issues; (5) window issues leading to leaks and overhead door with lack of weather resistance; (6) roofing issues, including: membrane flashing failures, reflective coating issues, standing water areas, and water within the roofing system; and, (7) architectural issues, including lack of coordination, lack of information, and lack of design details. Many of these problems persist, but some have been patched by repairs. New problems, such as the emergence of mold, continue to emerge based on the design and/or construction defects mentioned above. The [City] reserves the right to amend this list, as it is still investigating and analyzing issues pertaining to the design and construction of the Library.
11. [The City] retained Wiss, Janney, Elster Associates, Inc. ("WJE"), an independent, third-party registered engineering firm, to conduct testing and determine the extent of the issues at the Library.
12. To date, WJE has inspected and conducted testing of the Library internally and externally. The inspections and tests by WJE have been conducted at the expense of the City.
13. GTT was given notice of the defects with the Library by, among other notices, a demand letter dated December 17, 2014. The City allowed GTT to investigate the Library through its attorney and consultants.
Plaintiff's Exhibit 3, p. 3-5 (# 16-4).
4. Third-Party Petition
GTT's Original Third-Party Petition contains the following relevant factual allegations:
4.2 [The City] is seeking to recover damages from GTT for the work performed by its Subcontractors. [The City] alleges that the work performed by the Subcontractors has caused damage to certain portions of [the Library] and [the City] is seeking to recover damages from GTT for: (1) Structural Issues regarding: concrete masonry units (CMU) blocks, walls, and shear walls, inadequate code-required load reinforcing steel; (2) Aesthetic Issues regarding: color, texture, and sheen problems with CMU walls; (3) Moisture Protection and Serviceability Issues regarding; porous exterior CMU walls, CMU walls with lack of insulating fill as required by the structural drawings, incorrectly placed or missing weep holes, application of non-specific dampproofing on the CMU block walls, cracks and opening in mortar joints and CMU blocks, improperly placed control joints, and sealant joints instead of expansion joints; (4) Cast-in-Place concrete lintel beam issues; (5) Window Issues leading to leaks and overhead door with lack of weather resistance; (6) Roofing Issues regarding: membrane flashing failures, reflective coating issues, standing water areas, and water within the roofing system; and (7) Architectural Issues regarding: lack of coordination, lack of information, and lack of design detail.
4.3 [The City's] petition makes it clear it is alleging that Subcontractors' negligence caused defective work to be performed and also has damaged work which was not otherwise defective, which resulted in property damage that necessitated repairs, not only to the defective work, but also to other work which was affected thereby.
4.4 GTT has denied, and continues to deny, all allegations made by [the City].
Neither GTT nor its Subcontractors caused or contributed in any way to the damages that [the City] is seeking to recover. However, to the extent [the City's] allegations are correct, GTT would show that the damages alleged by [the City] were caused by its Subcontractors who actually performed the work at [the Library].
4.5 Below is a list of parties whose work or materials have been implicated by [the City's] allegations. Also included is a description of the respective roles of each of the parties in connection with [the Library]:
A. [BBI] provided and installed a complete masonry system at [the Library].
Plaintiff's Exhibit 4, p. 5-6 (# 16-5).
Here, BITCO argues that the Original Petition clearly seeks to recover for "property damage" caused by an "occurrence," thus triggering Acadia's duty to defend. Acadia maintains that the underlying allegations did not occur within the policy period. BITCO's assertions hinge on the fact that the underlying pleading does not allege when the damage occurred, thus creating the possibility for property damage to occur within Acadia's policy period. BITCO's reliance on the fact that the property damage cannot be determined is unreasonable. Even with a liberal reading of the Original Petition and all doubts resolved in the insured's favor, the Library's property damage occurred sometime between March 2, 2009, the date GTT and BBI entered into the subcontract agreement, and the commencement of the underlying suit, October 9, 2015. This time frame can be reasonably inferred from the Original Petition, which incorporates by reference a WJE investigation report completed on October 13, 2013. The WJE investigation report identified the property damage that is the basis of the underlying litigation. Even if the date of the WJE report is disregarded, the Original Petition alleges "[t]o date, WJE has inspected and conducted testing of the Library internally and externally" which definitively establishes that property damage had occurred as of October 9, 2015.
To the court's knowledge, the City has not filed an amended petition in the underlying litigation.
Acadia's policy defines property damage as "[p]hysical injury to tangible property," and explicitly states that coverage is available if and only if " ‘property damage’ occurs during the policy period." In this case, property damage occurred when the Library suffered structural and aesthetic issues. Logically, the property damage had to occur before the investigation report (October 13, 2013) and before the commencement of the underlying litigation (October 9, 2015). Hence, the Library's structural and aesthetic issues occurred between March 2, 2009, and October 9, 2015.
Moreover, according to the Original Petition, GTT had an opportunity to inspect and repair such defects, which further implies that the structural and aesthetic issues had already occurred prior to October 9, 2015. The Original Petition's allegations explicitly state that any "new problems, such as the emergence of mold, continue to emerge based on the design and/or construction defects mentioned above." This also implies that the property damage had already occurred and any subsequent problems ensue from the water infiltration, serviceability, and aesthetic issues that arose before Acadia's policy became effective on October 31, 2015. Although, the Library seeks damages for past and future economic harm, the definition of property damage covered by Acadia's policy does not include "economic harm and damages." Additionally, the underlying allegations fall within various policy exclusions.
Acadia's declination letter states:
In addition, even if there were continuing damage, the policy requires that [BBI] be unaware that any damage occurred, in whole or in part, prior to the policy's inception. Subpart b.3, specifically provides that any continuation, change or resumption of known damage, during or after the policy period, will also be deemed to have been known prior to the policy period.
Defendant's Exhibit 8, p.6 (Doc. 16-9).
BITCO argues that Acadia's refusal to provide a defense is "overtly based on extrinsic evidence" and not from inferences that can logically be drawn from the pleadings. Acadia's declination letter explicitly refers to its note as extrinsic. Acadia contends that its declination is not overtly based on extrinsic evidence but the note merely bolsters the denial. The court agrees. Acadia's declination letter provides adequate justification that solely references the allegations within the Original Petition, establishing that: (1) the property damage is not within the policy period, (2) there are several exclusions that apply, and (3) the loss-in-progress rule applies to this circumstance. The mere noting of extrinsic evidence in Acadia's declination letter does not render the entire declination letter ineffective.
This is the note cited within Acadia's declination letter:
(Note: Extrinsically, [WJE] provided a report to the city dated October 15, 2013 concerning the library addition. Presumably GTT was provided a copy of that report following its publication. We note too that WJE highlighted a number of mortar joint repairs in the CMU block walls, repairs that may have been performed by your company. WJE started its investigation in November, 2012 and performed a 2nd infrared exam of the CMU block walls of the building on May 22, 2014. Cores were also drilled in the block walls at that time to determine if they were properly backfilled with insulating material. Only 4 of 13 drill holes were found to be filled in WJE's investigation, a matter which should have been brought to Brickfield's attention.).
Furthermore, Acadia's declination letter addresses the applicable exclusions that preclude coverage. First, Acadia identifies the contractual liability exclusion b, which precludes coverage if the damage arises from a breach of an express warranty or other contractual obligation. Second, Acadia references exclusion k, which precludes coverage for damage to the insured's "product." Acadia explains that the "CMU blocks [used by BBI] would likely be considered to be [BBI's] ‘product.’ Therefore, any damage for the repair or replacement of the blocks themselves would not be covered." Third, Acadia lists exclusion l, which excludes coverage for "property damage" to work completed by BBI. Lastly, Acadia notes an exclusion for fungi or bacteria, which precludes the costs of monitoring, removing, or remediating fungi or bacteria. Acadia maintains that to the extent that there is mold damage arising from the complained of moisture intrusions into the building, it is not covered. Therefore, Acadia's declination letter addresses the underlying allegations and the corresponding exclusions which provide a secondary justification for declining its duty to defend. In accordance with the eight corners rule, the court concludes that Acadia's duty to defend is not triggered when the underlying pleadings are considered in light of Acadia's policy provisions. Therefore, Acadia has no obligation under the CGL policy to defend BBI in the underlying litigation. D. The Fortuity Doctrine
Acadia's policy defines "Your Product" as "any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by: you; others trading under your name; or a person or organization whose business or assets you have acquired."
"The fortuity doctrine relieves insurers from covering certain behaviors that the insured undertook prior to purchasing the policy." RLI Ins. Co. v. Maxxon Sw. Inc. , 108 F. App'x 194, 198 (5th Cir. 2004) ; see Wesco Ins. Co.v. Layton , 725 F. App'x 289, 293 (5th Cir. 2018). Under Texas law, "fortuity is a requirement of all insurance policies." Warrantech Corp. v. Steadfast Ins. Co. , 210 S.W.3d 760, 766 (Tex. App.—Fort Worth 2006, pet. denied) (citing Two Pesos, Inc. v. Gulf Ins. Co. , 901 S.W.2d 495, 501 (Tex. App.—Houston [14th Dist.] 1995, no writ)). "Under the fortuity doctrine, an insured cannot obtain coverage for something that has already begun and which is known (or should have been known) to have begun." Colony Ins. Co. , 272 F. Supp. 3d at 961 (citing Summers v. Harris , 573 F.2d 869, 872 (5th Cir. 1978)) ; see Wesco Ins. Co. , 725 F. App'x at 292-93. The fortuity doctrine bars coverage for "known losses" and "losses in progress." Warrantech Corp. , 210 S.W.3d at 766 ; Scottsdale Ins. Co. v. Travis , 68 S.W.3d 72, 75 (Tex. App.—Dallas 2001, pet. denied) ; Two Pesos, Inc. , 901 S.W.2d at 502. A "known loss" is a loss the insured knew had occurred before the insured entered into the contract for insurance. Warrantech Corp. , 210 S.W. 3d at 766 (citing Burch v. Commonwealth Mut. Ins. Co. , 450 S.W.2d 838, 840-41 (Tex. 1970) ); see Wesco Ins. Co. , 725 F. App'x at 292-93 ; Scottsdale Ins. Co. , 68 S.W.3d at 75. A "loss in progress" is a progressive loss the insured knew or should have known was ongoing when the insured entered into the contract for insurance. Wesco Ins. Co. , 725 F. App'x at 292-93 ; Warrantech Corp. , 210 S.W.3d at 766 ; Scottsdale Ins. Co. , 68 S.W.3d at 75 ; Two Pesos, Inc. , 901 S.W.2d at 502. The fortuity doctrine does not require an insured to have specific, actual knowledge of the loss. Instead, the fortuity doctrine precludes coverage when "the insured is or should be aware of an ongoing progressive or known loss at the time the policy is purchased." RLI Ins. Co. , 108 F. App'x at 198 (citing Two Pesos, Inc. , 901 S.W.2d at 502 ).
Here, the Original Petition alleges that GTT was given notice of the defects concerning the Library by, among other items, a demand letter dated December 17, 2014. Moreover, the City asserts that it allowed GTT to investigate the Library through its attorney and consultants. Further, according to the Subcontract Agreement between GTT and BBI entered into on March 2, 2009, clause 12 (a) Notice of Claim states:
[I]f either party becomes aware of a claim, complaint, petition, suit, proceeding, occurrence, or circumstance which has or is likely to result in a claim for indemnity or insurance coverage under this Agreement, then that party shall, as soon as reasonably practical, give notice in writing to the other party.
The inspection opportunity, the demand letter, and the notice requirement in the Subcontract Agreement demonstrates that BBI should have been aware of a known loss before or around December 17, 2014, or at the latest, October 9, 2015, which is antecedent to Acadia's policy incepting on October 31, 2015. It is unreasonable to infer that BBI had no notice of the purported defects regarding the Library until GTT filed their Third-Party Petition against BBI on February 9, 2016. Therefore, the fortuity doctrine precludes Acadia's coverage because BBI should have been aware of an ongoing progressive or known loss at the time it purchased Acadia's policy.
E. Attorney's Fees
The United States Court of Appeals for the Fifth Circuit has established that an attorney's fee award "is governed by the same law that serves as the rule of decision for the substantive issues in the case." Chevron USA, Inc. v. Aker Maritime Inc. , 689 F.3d 497, 505 (5th Cir. 2012) (citing Mathis v. Exxon Corp. , 302 F.3d 448, 461 (5th Cir. 2002) ). In Mathis , the Fifth Circuit made explicit that "[s]tate law controls both the award of and the reasonableness of fees awarded where state law supplies the rule of decision." 302 F.3d at 461 (citing Northwinds Abatement, Inc. v. Empl'rs Ins. of Wausau , 258 F.3d 345, 353-54 (5th Cir. 2001) ); accord Symetra Life Ins. Co. v. Rapid Settlements, Ltd. , 775 F.3d 242, 248 (5th Cir. 2014). Hence, when attorney's fees are sought for state law claims brought in federal court, the applicable state law governs. Symetra Life Ins. Co. , 775 F.3d at 248 ; Chevron USA, Inc. , 689 F.3d at 505 ; Ashland Chem. Inc. v. Barco Inc. , 123 F.3d 261, 263 (5th Cir. 1997). Texas generally follows the "American Rule," which imposes the burden of attorney's fees on the individual litigants. In re Nalle Plastics Family Ltd. P'ship , 406 S.W.3d 168, 172 (Tex. 2013) ; accord Ortiz v. State Farm Lloyds , 589 S.W.3d 127, 133-34 (Tex. 2019) ; see Ferrari v. Aetna Life Ins. Co. , 754 F. App'x 266, 269 (5th Cir. 2018).
In Texas, attorney's fees are recoverable only when provided by statute or by contract between the parties. Richardson v. Wells Fargo Bank, N.A. , 740 F.3d 1035, 1038 (5th Cir. 2014) (citing In re Nalle Plastics Family Ltd. P'ship , 406 S.W.3d at 172 ); see Symetra Life Ins. Co. , 775 F.3d at 248 ; Great Am. Ins. Co. v. AFS/IBEX Fin. Servs., Inc. , 612 F.3d 800, 807 (5th Cir. 2010) ; 1/2 Price Checks Cashed v. United Auto. Ins. Co. , 344 S.W.3d 378, 382 (Tex. 2011). "The authorization of attorney's fees in civil cases may not be inferred; rather it ‘must be provided for by the express terms of the statute in question.’ " Travelers Indem. Co. v. Mayfield , 923 S.W.2d 590, 593 (Tex. 1996) (quoting First City Bank v. Guex , 677 S.W.2d 25, 30 (Tex. 1984) ); see Brainard v. Trinity Universal Ins. Co. , 216 S.W.3d 809, 817 (Tex. 2006) ; Holland v. Wal-Mart Stores, Inc. , 1 S.W.3d 91, 95 (Tex. 1999).
Attorney's fees are available by statute for certain types of claims, including contracts. See TEX. CIV. PRAC. & REM. CODE § 38.001 (listing those claims upon which an attorney's fee award may be predicated); Amoco Prod. Co. v. Smith , 946 S.W.2d 162, 165-66 (Tex. App.—El Paso 1997, no writ). Texas law authorizes an award of "reasonable attorneys' fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for ... an oral or written contract." TEX. CIV. PRAC. & REM. CODE § 38.001(8) ; see Fluorine On Call, Ltd. v. Fluorogas Ltd. , 380 F.3d 849, 866 (5th Cir. 2004) ; DP Sols., Inc. v. Rollins, Inc. , 353 F.3d 421, 436 (5th Cir. 2003) ; Mathis , 302 F.3d at 462. An award of reasonable attorney's fees is mandatory under § 38.001(8) of the Texas Civil Practices and Remedies Code if the plaintiff recovers damages for a breach of contract claim. See TEX. CIV. PRAC. & REM. CODE § 38.001(8) ; Plains Cotton Coop. Ass'n v. Gray , 672 F. App'x 372, 377 (5th Cir. 2016) (quoting Coffel v. Stryker Corp. , 284 F.3d 625, 640 (5th Cir. 2002) ); In re Deepwater Horizon , 807 F.3d 689, 699 n.10 (5th Cir. 2015) ; Crisalli v. ARX Holding Corp. , 177 F. App'x 417, 421 (5th Cir. 2006) ; Ventling v. Johnson , 466 S.W.3d 143, 154 (Tex. 2015). In other words, to recover attorney's fees under § 38.001(8), a party must prevail on the underlying claim and recover damages. In re Nalle Plastics Family Ltd. P'ship , 406 S.W.3d at 173 ; 1/2 Price Checks Cashed , 344 S.W.3d at 382.
In the case at bar, BITCO cannot prevail on its declaratory judgment action against Acadia. Therefore, BITCO is not authorized by statute to an award of attorney's fees.
III. Conclusion
Accordingly, Acadia's Motion for Summary Judgment (#17) is GRANTED. BITCO's Motion for Summary Judgment (#16) fails to present a claim that warrants relief. There remain no material facts in dispute, and Acadia is entitled to judgment as a matter of law.