This сase addresses whether an insurance policy that excludes coverage for an “obligation” incurred under “any workers’ compensation law” bars coverage for a judgment that an employee recovers in a negligence action against a Texas employer that does not subscribe to the Texas workers’ compensation system. Because the Texas Workers’ Compensation Act (“TWCA”) imposes no obligation on a non-subscriber to compensate an employee for injuries sustained due to the employer’s own negligence, we find that the exclusion is not applicable. Accordingly, we AFFIRM the district court’s summary judgment in favor of defendants-appellees.
I.
Plaintiff-Appellant American International Specialty Lines Insurance Co. (“AISLIC”) appeals from the district court’s summary judgment in favor of defendants, holding that AISLIC’s umbrella insurance policy (“the AISLIC policy”), issued to Rentech Boiler Systems, Inc., covered the negligence claims that Preston Teel, Lesa Crosswhite, and Jennings Teel (“the Teels”) asserted against Rentech Steel, L.L.C. in the underlying litigation and the resulting judgment. Rentech Steel, Rentech Boiler Systems, Inc., and Renz Family Partnership, Ltd. are entities under the control of or owned by a common owner/entity. Rentech Steel, a non-subscriber to the Texas workers’ compensation insurance system, maintained both a primary indemnity policy, which is not implicated in this case, and the AISLIC Policy. Rentech Steel shared the AISLIC Policy with Rentech Boiler Systems, a subscriber to the workers’ compensation system, but they maintained separate primary policies due to their differing statuses in relation to the workers’ compensation system.
The underlying litigation commenced when sixteen-year-old Preston Teel sustained severe injuries while working at
The jury found for the Teels on their negligence and negligence per se claims, but it did not find gross negligence on the part of Renteeh Steel. The court then entered a judgment against Renteeh Steеl for $12,470,000 in actual damages, which was reduced to $10,570,000 after applying a settlement credit. Renteeh Steel has appealed the judgment, and AISLIC has continued to defend Renteeh Steel under a reservation of rights during the appeal. As a consequence of the state-court judgment, the Teels became proper claimants to Renteeh Steel’s insurance policy.
Shortly after the state court entered its judgment, AISLIC filed a declaratory judgment action in federal court seeking to establish that it had no duty to either defend Renteeh Steel in the underlying state-court lawsuit or to indemnify Rentech Steel for the judgment because the AISLIC policy’s “Various Laws” exclusion excluded coverage for any “obligation of the Insured under ... any workers’ compensation, disability benefits, or unemployment compensation law, or any similar law.” AISLIC moved for summary judgment, arguing that a negligence claim filed against a nonsubscribing employer is an obligation arising under the TWCA, not state common law, so the Teels’ judgment against Renteeh Steel was necessarily an “obligation” under Texas’s workers’ compensation law — an obligation explicitly excluded from coverage under the “Various Laws” exclusion. The Teels and Renteeh Steel opposed AISLIC’s motion.
The district court denied AISLIC’s summary-judgment motion, holding that the judgment against Renteeh Steel did not fall within the Policy’s ‘Various Laws” exclusion. The order explained that, although the TWCA deprives appеllees of the right to assert a common-law negligence or negligence per se claim against a subscribing employer, the Act imposed no “obligation” on a nonsubscribing employer to compensate an employee for injuries resulting from the employer’s negligence, but merely limited an employer’s defenses against an employee’s common-law claims. Alternatively, the court held that, because the ‘Various Laws” exclusion was ambiguous, Texas law required that the exclusion be interpreted against AISLIC and in favor of coverage where appellees’ interpretation of the exclusion was reasonable.
Following the district court’s denial of AISLIC’s motion for summary judgment, appelleеs filed for summary judgment on the ground that the AISLIC policy’s ‘Various Laws” exclusion did not bar coverage of the judgment against Renteeh Steel, which the district court granted. This appeal followed.
II.
We review a district court’s summary judgment
de novo,
applying the same legal standards that the district court ap
III.
At issue in this case is whether an employee’s negligence action against an employer that does not subscribe to the Texas workers’ compensation system is an “obligation” under the TWCA, such that it is excluded under the AISLIC Policy’s “Various Laws” exclusion. The AISLIC Policy’s “Various Laws” exclusion provides:
This insurance does not apply to any obligation of the Insured under any of the following:
1. the Employee Retirement Income Security Act of 1974 (including amendments relating to the Consolidated Omnibus Budget Reconciliation Act of 1985), or any amendment or revision thereto, or any similar law; or
2. any workers’ compensation, disability benefits or unemployment compensation law, or any similar law.
Because Texas law governs this claim, we employ the principles of Texas contract construction in interpreting the “Various Laws” exclusion. Texas law provides that insurance policies are construed according to common principles governing the construction of contracts, and the interpretation of an insurance policy is a question of law for a court to determine.
New York Life Ins. Co. v. Travelers Ins. Co.,
Whether a contract is ambiguous is a question of law.
Kelley-Coppedge, Inc. v. Highlands Ins. Co.,
Employing these principles, we find no ambiguity in the language of the “Various Laws” exclusion. The exclusion plainly excludes from coverage only those legal obligations imposed by “any workers’ compensation ... law.” This provision is straightforward. If Texas’s workers’ сompensation law imposes a duty upon Rentech Steel to compensate the Teels for the injuries Preston Teel incurred due to Rentech Steel’s negligence, the exclusion applies and bars coverage. Hence, the only question before the court concerns the proper interpretation of Texas law: does the TWCA obligate a nonsubscribing employer to compensate an employee for injuries sustained as a result of the employer’s own negligence, or is such compensation a duty under Texas common law? 1
TV.
AISLIC and appellees disagree on two fundamental aspects of Texas law: (1) whether an employee’s negligence claim against a nоnsubscribing employer arises under the TWCA or common law, and (2) if it arises under the TWCA, whether the TWCA imposes an “obligation” upon a nonsubscriber to compensate an employee for injuries caused by its own negligence. AISLIC contends that the provision of the TWCA addressing negligence actions against nonsubscribers, codified at section 406.033 of the Texas Labor Code, wholly supplanted the Texas common-law claim with a statutory claim. According to AISLIC, because the TWCA creates the cause of action under which the Teels sued Rentech Steel for negligence, the TWCA necessarily imposes an obligation on Rentech Steel to pay the Teels’ judgment. AISLIC premises its theory on the fact that section 406.033 deprivеs nonsubscribing employers of certain defenses available at common law and sets out an employee’s burden of proof in negligence cases. Tex. Labor Code § 406.033(b), (c).
Appellees contend that AISLIC can prove neither that the TWCA creates the cause of action for negligence against a nonsubscriber, nor that section 406.033 imposes any “obligation” on a nonsubscriber to pay a judgment to an employee for injuries caused by negligence. According to appellees, rather than displacing the common law, section 406.033 “simply leaves the common law intact with one modification: as a carrot-and-stick incentive to participate in the compensation program, the TWCA deprives nonsubscribers of some traditional common-law defenses.” But regardless of what law creates the cause of action, appellees argue that section 406.033 is devoid of any language creating an “obligation” for nonsubscribing employers to compensate employees for accidents resulting from negligence, so the exclusion does not apply.
(1) decisions of the [Texas] Supreme Court in analogous cases, (2) the rationales and analyses underlying [Texas] Supreme Court decisions on related issues, (3) dicta by the [Texas] Supreme Court, (4) lower state court decisions, (5) the general rule on the question, (6) the rulings of courts of other states to which [Texas] courts look when formulating substantive law and (7) other available sources, such as treatises and legal commentaries.
Hodges v. Mack Trucks, Inc.,
Turning first to the text of section 406.033, nothing in the text indicates that the Texas Legislature intended to impose a legal “obligation” on a nonsubscriber to compensate an injured employee. The statute simply specifies that, “[i]n an action against an employer who does not have workers’ compensation insurance coverage to recover damages for personal injuries or death sustained by an employee in the course and scope of employment,” the defendant employer is deprived of certain defenses available at common law, though other defenses remain available. § 406.033(a), (b). It also clarifies that the common-law negligence standard continues to apply: “the plaintiff must prove negligence of the employer or of an agent or servant of the employer acting within the general scope of an agent’s or servant’s employment.” § 406.033(c).
Although we believe that this statute, on its face, does no more than modify the defenses available at common law, and does not create a cause of action that usurps the common-law cause of action, we “are emphatically not permitted to do merely what
we
think best; we must do that which we think the [Texas] Supreme Court would deem best.”
Jackson v. Johns-Manville Sales Corp.,
A. Texas Cases
In making our
Erie
guess, we look first to those Texas Supreme Court cases that, while not deciding the issue, provide guidance as to how the Texas Supreme Court would decide the question before us. Our preeminent Aria-guess authorities, language and decisions from the Texas Supreme Court, suggest that the court would find that a negligence claim against a non-subscriber is a common-law claim, and that section 406.033 imposes no “obligation” upon Rentech Steel to pay the Teels’ judgment. The Texas Supreme Court in
Kroger Company v. Keng,
allow[s] injured workers, whose employers subscribed to workers’ compensation insurance, to recover without establishing the employer’s fault and without regard to the employee’s negligence. In exchange, the employees received a lower, but more certain, recovery than would have been possible under the common law. Employers were, however, allowed to opt out of the system, resulting in their employees retaining their common-law rights. 2
Id. at 349-50 (emphasis added). This suggests that the right to bring a claim against a nonsubscriber for negligence remains what it has always been — a right arising under common law.
AISLIC, however, argues that this case supports exactly the opposite conclusion: that such a claim is an obligation arising under the TWCA because the TWCA “governs” the negligence cause of action. AISLIC reads Kroger as “unequivocally stat[ing] that the [TWCA] governs an employee’s personal-injury claim against a nonsubscribing employer,” as the Texas Supreme Court there explained that
Labor Code § 406.033, which is part of the Workers’ Compensation Act, governs an employee’s personal-injury action against his or her employer, when the employer is a nonsubscriber under the Act.
In enacting section 406.033 and its predecessors, the Legislature intended to delineate explicitly the structure of an employee’s personal-injury . action against his or her nonsubsсribing employer. Section 406.033(a) prescribes the defenses that are unavailable to a nonsubscriber; section 406.033(c) dictates the defenses that implicate the employee’s conduct and on which an employer may rely; and section 406.033(d) provides the employee’s burden of proof....
Not so. We agree that this language in
Kroger
indicates that a negligence claim against a nonsubscriber must proceed within the parameters delineated in section 406.033. But it does not follow that simply by virtue of governing the claim, the TWCA also “obligаtes” Rentech Steel to pay the Teels’ judgment. Many common-law claims are “governed” by statutes of limitations, but those statutes neither give rise to the cause of action they govern, nor do they obligate any party to pay a judgment arising from a governed claim.
See
Texas Civ. Prac. & Rem.Code § 16.003(a), (b) (providing a two-year statute of limitations for such common-law claims as trespass, injury to the estate or property of another, conversion of personal property, taking or detaining the personal property of another, personal injury, and forcible entry and detainer);
Porterfield v. Ethicon, Inc.,
Moreover, in
Kroger,
the Texas Supreme Court explicitly declined to adopt
Further, the Texas Supreme Court’s decision in
Fairfield Insurance Co. v. Stephens Martin Paving, L.P.,
dеmonstrates that, even where the TWCA sets certain parameters on an employee’s claim against a nonsubscriber, it does not necessarily transform the claim into an obligation under the TWCA.
Though the decisions and dicta of the Texas Supreme Court weigh more heavily in our
Erie
analysis, we also consider those decisions of Texas appellate courts in determining how the Texas Supreme Court would rule on this issue. AISLIC invites us to follow
Robertson v. Home State County Mutual Insurance Company,
— S.W.3d -,
We consider
Robertson
to be unpersuasive because it conflates “governs” with
B. Decisions From Other Courts
Although Texas cases provide greater guidance for our
Erie
analysis, we may likewise “consider, among other sources, treatises, decisions from other jurisdictions, and the ‘majority rule.’ ”
SMI Owen Steel Co. v. Marsh USA Inc.,
We begin this analysis by considering
Middleton v. Texas P&L Co.,
a Supreme Court decision examining the TWCA only a few years following its 1913 enactment.
We are also guided by those federal decisions that have considered the quеstion whether an action against a nonsubscriber arises under common law or the TWCA. Rentech Steel argues that we should follow
Pyle v. Beverly Enters.-Tex.,
state court petition does not seek recovery pursuant to the TWCA. It clearly alleges common law claims of negligence, intentional infliction of emotional distress and breach of duty of good faith and fair dealing. These are not causes of action that are created by the TWCA; they exist independently. Moreover, the fact that the TWCA deprives employers of certain defenses to negligence claims does not mean that claims by employees against nonsubscribing employers are brought pursuant to the TWCA. See Eurine v. Wyatt Cafeterias, Inc.,1991 WL 207468 at *2 (N.D.Tex. Aug. 21, 1991) (Sanders, C.J.) (“A cause of action does not arise under workers’ compensation laws merely because the workers’ compensation statute deprives the defendant of certain defenses to the cause of action.”).
Id.
This approach, we believe, is consistent with the Texas Supreme Court’s approach in
Kroger v. Keng,
Further, even if we assume arguendo that a claim that “arises under” the TWCA becomes an “obligation” under that law, the section 1445(c) cases nevertheless remain an imperfect litmus test for how the Texas Supreme Court would resolve the case before us. This is because of the deference courts afford to the congressional intent behind the removal statute, which is not applicable here. As the district court explained in
Figueroa,
“Section 1445(c) denotes an effort by Congress to restrict the district courts’ diversity juris'diction in order to relieve the collectively overburdened docket of the federal courts. Courts have therefore construed section 1445(c) broadly in order to further this purpose.”
Figueroa,
125 F. Suрp 2d. at 211 (internal citations omitted). This broad construction was also apparent in
Smith,
where the court found that a negligence claim “aro[se] under” the TWCA simply because “[njegligence actions against nonsubscribing employers are expressly contemplated by Texas workers’ compensation law; indeed, several common-law defenses have been eliminated by statute.”
Smith,
Likewise,
Illinоis National Insurance Co. v. Hagendorf Construction Co.,
Finally, we find
Hagendorf
unreliable because the three decisions upon which the cоurt premised its holding
Figueroa, Smith,
and
Dean
derive their respective holdings, at least in part, from a misreading of
Foust v. City Insurance Co.,
V.
Alternatively, assuming
arguendo
that the “Various Laws” exclusion is ambiguous, summary judgment for appellees would still be proper if their interpretation of the exclusion is reasonable.
10
See Amerisure Ins. Co. v. Navigators Ins. Co.,
the “Various Laws” exсlusion could be interpreted as only excluding claims already covered by workers’ compensation benefits rather than excluding all claims of employees, whether filed to collect workers’ compensation benefits or damages by common-law. In such a case, there is more than one plausible interpretation of the “Various Laws” exclusion. Thus, applying the provisions of the “Various Laws” exclusion to the dispute before the Court produces an uncertain or ambiguous result, and the exclusion will be interpreted against AISLIC and in favor of coverage.
We agree with the district court that an “obligation” under “workers’ compensation law” could be interpreted to refer only to benefits paid by the workers’ compensation system, as the meaning of the term obligation has “many, wide, and varied meanings” that depends on the context in which the word is used. See Black’s Law Dictionary (9th ed.2009). Where negligence claims against nonsubscribers, at least traditionally, have been recognized as arising under common law, we conclude that it is reasonable to interpret the “Various Laws” exclusion to exclude only mandatory benefit payments.
CONCLUSION
In summary, AISLIC has failed to meet its burden of proving that the “Various Laws” exclusion bars coverage of the Teels’ claims and the judgment against Rentech Steel. AISLIC has not shown that the Texas Supreme Court would conclude either that a negligence claim against a nonsubscriber arises under the TWCA rather than common law, or that Texas Labor Code section 406.033 imposes any obligation upon Rentech Steel to pay the Teels’ judgment. For these reasons, we AFFIRM the judgment of the district court.
Notes
. Although AISLIC challenges both its duties to indemnify and defend Rentech Steel, which are separate duties creating separate causes of action under Texas law,
see Amerisure,
. The Texas Supreme Court went on to explain that the purpose of enacting section 406.033 was to discourage employers from choosing to opt out by depriving them of certain traditional common-law defenses tо an employee's negligence action.
Kroger,
.Further, section 408.001 goes on to define “gross negligence” as “the meaning assigned by Section 41.001, Civil Practices and Remedies Code.” Tex. Lab. Code § 408.001(c).
.But see In re Autotainment Partners,
. We generally consider decisions from other states to the extent they are relevant, but the decisions AISLIC submits are largely inapposite because, unlike most other states, Texas grants employers the right to choose whether to participate in the workers’ compensation system. In AISLIC’s cases, the courts considered how nonsubscribers were acting illegally under state law, but Rentech Steel is not similarly situated.
See Indian Harbor Ins. Co. v. Williams,
In states where employers are compelled to participate in the workers’ compensation system, there is a stronger argument that employers who fail to participate in the mandatory system are nevertheless "obligat[ed]” by law to compensate injured employees. See 21 Eric Mills Holmes & Mark S. Rhodes, Holmes’ Appleman on Insurance 2d, § 132.5 (Lexis Nexis ed. 2002) (“The [policy] exclusion excludes ‘any obligation’ of the insured under a workers’ compensation, disability benefits, or unemployment compensation, or any similar law. Including the word ‘obligation’ means that no coverage applies when (1) an insured has statutory coverage and it applies to a loss or (2) an insured should have obtained the statutory protection that applies to a loss.”).
.
Middleton v. Texas P. & L. Co.,
.
See also Nunez v. Wyatt Cafeterias, Inc.,
. The exclusion in
Hagendorf
excluded "[a]ny obligation for which the insured or the insured’s insurer may be held liable under any workers compensation, disability benefits or unemployment compensation law or any similar law.”
Hagendorf,
. For these same reasons, we are not persuaded by
Market Insurance Company, Inc. v. Spirit of Texas Cheer & Gymnastics,
- F.Supp.2d -,
. We reject AISLIC’s argument that the district court was prohibited from finding ambiguity
sua sponte,
as we have previously held that "[t]he interpretation of the contract and determination of ambiguity, however, is a matter of law, and the court 'may conclude that a contract is ambiguous even in the absence of such a pleading by either party.’ ”
In re Newell Indus., Inc.,