Colony National Insurance Co. v. United Fire & Casualty Co.
677 F. App'x 941
| 5th Cir. | 2017Background
- Carothers was the general contractor on a construction project; Self-Concrete was a subcontractor that formed and poured tilt-up wall panels. United insured Self-Concrete and listed Carothers as an additional insured; Colony insured Premier (another subcontractor) and also listed Carothers as an additional insured.
- Bonner (a Premier employee) sued Carothers, Self-Concrete, and Joyce after being pinned by a swinging tilt wall panel; he alleged Carothers had supervisory/control duties and breached safety obligations incorporated into subcontracts.
- Carothers tendered defense to both insurers; Colony accepted and defended Carothers, United declined. The Bonner suit settled.
- Colony sued United for breach of contract, subrogation, and contribution to recover half the costs Colony incurred defending Carothers. The district court granted summary judgment to Colony; United appealed.
- The Fifth Circuit reviewed whether (1) United owed Carothers a duty to defend under the United–Self-Concrete policy (imputed liability/operative control), (2) how defense costs should be allocated between insurers (other-insurance/priority), and (3) whether Colony waived subrogation rights.
Issues
| Issue | Colony's Argument | United's Argument | Held |
|---|---|---|---|
| Duty to defend Carothers under United policy | Bonner’s pleadings alleged facts (operative control, enforcement of safety rules, supplying/enforcing plans) creating potential imputed liability of Self-Concrete to Carothers, triggering United’s duty to defend its additional insured | Bonner’s allegations did not impute Self-Concrete’s negligence to Carothers because lifting tilt panels was excluded from Self-Concrete’s subcontract and Carothers’ acts were independent | Court held United had a duty to defend: Bonner’s petition alleged sufficient operative control by Carothers to impute liability and trigger coverage under the eight‑corners rule |
| Standard for duty to defend | Insurer must defend if complaint potentially alleges a covered claim | Same | Applied eight‑corners rule; duty to defend is broad and determined as a matter of law |
| Priority/allocation of defense costs between Colony and United | Both policies become excess when coverage is needed for an additional insured, their other‑insurance clauses are mutually repugnant, so costs are shared equally | Colony’s policy contains a Primary & Non‑Contributing endorsement that (United argues) makes Colony primary and United excess | Court held clauses are mutually repugnant in this context; insurers must share defense costs equally — United’s primary/excess argument fails because the endorsement applied only to losses “in respect of work performed by Premier” and did not make Colony exclusively primary for the Self‑Concrete‑based claim |
| Waiver of subrogation / right to recover defense costs from United | Colony says it retained subrogation rights and may recover from United because any contractual waiver in the subcontract applied only to Carothers and Colony’s endorsement waived rights only as to Carothers | United argues subcontract and Colony’s policy endorsement effected a waiver of subrogation as to Contractor’s insurers (including United) | Court held Colony did not waive subrogation against United: subcontract’s waiver applied to Carothers and Colony’s endorsement waived recovery only against the scheduled party (Carothers/Premier relationship), not Self‑Concrete or United |
Key Cases Cited
- King v. Dallas Fire Ins. Co., 85 S.W.3d 185 (Tex. 2002) (distinguishes duty to defend and duty to indemnify)
- GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305 (Tex. 2006) (adopts eight‑corners rule for duty to defend)
- Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487 (Tex. 2008) (duty to defend is broader than duty to indemnify)
- Lafarge Corp. v. Hartford Cas. Ins. Co., 61 F.3d 389 (5th Cir. 1995) (duty to defend arises if any claim in complaint is potentially within coverage)
- Hardware Dealers Mut. Fire Ins. v. Farmers Ins. Exch., 444 S.W.2d 583 (Tex. 1969) (conflicting other‑insurance clauses are mutually repugnant and ignored)
- Continental Cas. Co. v. N. Am. Capacity Ins. Co., 683 F.3d 79 (5th Cir. 2012) (insurer may seek recovery from other insurers when it defends an insured and another insurer breached its duty)
- Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344 (Tex. 2000) (requirements for a valid waiver of subrogation under Texas law)