Mid-Continent Casualty Co. v. Global Enercom Management, Inc.
(Tex.App.- Houston [1st Dist.] Jul. 21, 2009)(Anderson)(insurance law, coverage dispute, construction of
policy, applicability of exclusion, formation of contract without signature, performance by party)
AFFIRMED: Opinion by
Justice Anderson     
Before Chief Justice Hedges, Justices Anderson and Seymore   
14-07-01006-CV Mid-Continent Casualty Company v. Global Enercom Management, Inc   
Appeal from 215th District Court of Harris County
Trial Court Judge:
Concurring and Dissenting Opinion by Justice Seymore     

M A J O R I T Y   O P I N I O N

This case involves an insurance coverage dispute arising out of a fatal accident that occurred on a work
project in Arkansas.  Appellee, Global Enercom Management, Inc., sought defense and indemnity from
appellant, Mid-Continent Casualty Company, under a commercial general liability policy and a commercial
auto policy issued to the subcontractor on the project, Allstates Construction Company (“Allstates").  When
appellant denied appellee's requested defense and indemnity, appellee filed a declaratory judgment
action.  The parties ultimately filed cross-motions for summary judgment.  The trial court granted appellee's
motion, denied appellant's, and appellant appealed.  Finding no error, we affirm.

Factual and Procedural Background

In December 2001, appellee transmitted a proposed subcontract to Allstates for repair work to be
performed on a cellular telephone tower in Forrest City, Arkansas.  On December 27, 2001, Allstates
signed the subcontract and returned it to appellee.  Allstates' employees commenced work on the tower
project prior to Christmas Day, 2001.  After the Christmas vacation, the Allstates workers returned to the
project on January 2, 2002.  As part of the repair project, the Allstates workers installed a pulley and rope
system on the tower.  One end of the pulley system was attached to a headache ball, which consists of a
heavy weight.  The other end was attached to a pick-up truck, which would provide the power to raise and
lower the headache ball.  An equipment building on the tower site was between the headache ball end of
the pulley system and the pick-up truck.

During the afternoon of January 2, the job site foreman, Forester Barnes, instructed three workers, John
Seabolt, Jamie Anders, and Brian Barnes, to climb to the 280 foot level of the tower to take measurements.  
Approximately ten minutes later, Barnes heard the signal to raise the headache ball.  Barnes then went to
the pick-up truck, started it, and started slowly backing the truck up to raise the headache ball.  Barnes did
not know where the three workers were or that they had attached themselves to the headache ball.  When
the headache ball had been raised fifteen to twenty feet, the headache ball moved above the equipment
building and Barnes was able to see the three men attached to the headache ball.  When they came into
view, Barnes exchanged hand signals with the workers asking what was going on?  The men signaled for
Barnes to continue raising them to the top of the tower.  Barnes then continued slowly backing the truck up
until the men had reached about the eighty foot elevation level.  At that point, the rope broke and the men
fell to their deaths.

Allstates performed no further work under the subcontract after January 2, 2002.  On January 3, 2002,
appellee signed the subcontract.

On August 12, 2002, Anders' and Seabolts' heirs filed suit against appellee in federal district court in
Mississippi.  Appellee sought defense and indemnification from appellant, Allstates' insurer, pursuant to an
indemnity clause found in the subcontract.  Appellant had insured Allstates with both a commercial general
liability policy (ACGL policy") and a commercial automobile policy (“auto policy").  Appellant denied
coverage.  Appellee then filed a declaratory judgment action in Texas state court.  Appellant
counterclaimed for declaratory judgment as well.  While the declaratory judgment action was pending,
appellee settled the Mississippi lawsuit.

Eventually, the two sides narrowed the issues in the declaratory judgment action down to whether two
exclusions of coverage applied.  Both exclusions are found in section I, part 2 of the CGL policy:

Exclusion b:

This insurance does not apply to:

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:

* * *

(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.

Exclusion g:

“Bodily injury" or “property damage" arising out of the ownership, maintenance, use or entrustment to
others of any aircraft, “auto" or watercraft owned or operated by or rented or loaned to any insured.  Use
includes operation and “loading or unloading".

The same contractual liability exclusion is also found in the auto policy.  Both sides filed competing
traditional motions for summary judgment on the applicability of the exclusions.  The trial court ultimately
granted appellee's and denied appellant's motion.  This appeal followed.


Appellant raises two issues on appeal.  First, appellant contends Exclusion g in the CGL policy, the auto
exclusion, applies to the Arkansas accident because a pick-up truck was used to power the pulley system.  
Next, appellant asserts the contractual liability exclusion precludes coverage under both the CGL and auto
policies because appellee did not sign the subcontract until the day after the Arkansas accident.

A.        Insurance Contract Construction and the Standard of Review

Insurance policies are construed according to the ordinary rules of contract construction.  Am. Mfrs. Mut.
Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003).  In determining the scope of coverage, a court
examines the policy as a whole to ascertain the true intent of the parties.  Utica Nat'l Ins. Co. of Texas v.
Am. Indem. Co., 141 S.W.3d 198, 202 (Tex. 2004) citing Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d 153,
158 (Tex. 1999).  To determine this intent, we generally limit our inquiry to the “four corners" of the policy.  
See Esquivel v. Murray Guard Inc., 992 S.W.2d 536, 544 (Tex. App.- Houston [14th Dist.] 1999, pet.
denied).  When dealing with an exclusionary clause, a court 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.  Utica Nat'l Ins., 141 S.
W.3d at 202 citing Nat'l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991).  
Because this case deals with exclusions, the appellant insurance company bears the burden of proof to
establish that the exclusions apply in this case.  Id. at 204.

Declaratory judgments decided by summary judgment are reviewed under the same standards of review
that govern summary judgments generally.  Tex. Civ. Prac. & Rem. Code Ann. § 37.010 (Vernon 2006);
Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725, 730 (Tex. App.- Houston [14th Dist.] 2003, no
pet.).  Under the traditional summary judgment standard of review, a movant has the burden to show at the
trial level that there are no genuine issues of material fact, and it is entitled to judgment as a matter of law.  
KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999).  In
determining whether there is a genuine fact issue precluding summary judgment, evidence favorable to the
non-movant is taken as true and we make all reasonable inferences in his favor.  Id.  We review the trial
court's summary judgment de novo.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).  
A movant is entitled to summary judgment only if it conclusively proves all essential elements of its claim.  
Johnston v. Crook, 93 S.W.3d 263, 273 (Tex. App.- Houston [14th Dist.] 2002, pet. denied).

When both parties move for summary judgment, each party bears the burden of establishing that it is
entitled to judgment as a matter of law.  City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex.
2000).  When the trial court grants one motion and denies the other, we review the summary judgment
evidence presented by both parties and determine all questions presented.  Id.  The reviewing court should
render the judgment that the trial court should have rendered or reverse and remand if neither party has
met its summary judgment burden.  Id.

B.        Exclusion “g," the Auto Exclusion

The trial court, by granting appellee's motion for summary judgment, decided Exclusion g did not apply.  
The parties agree the resolution of this issue is guided by the test found in the Lindsey case cited above.  
There, the Supreme Court held:

For an injury to fall within the “use" coverage of an automobile policy,

(1)       the accident must have arisen out of the inherent nature of the automobile, as such,

(2)       the accident must have arisen within the natural territorial limits of an automobile, and the actual
use must not have terminated,

(3)       the automobile must not merely contribute to cause the condition which produces the injury, but
must itself produce the injury.

Lindsey, 997 S.W.2d at 157.

In Lindsey, a young boy climbed through the back window of a pick-up, which dislodged a gun from a gun
rack, which in turn discharged, hitting another boy sitting in a car parked next to the pick-up.  The injured
boy's family settled with the pick-up owner for the limits of that insurance policy.  The settlement fell far
short of the amount needed to pay the injured boy's medical expenses so the family sought coverage
under their own Uninsured/Underinsured Motorist Policy.  The insurance company denied coverage
because the injury did not involve the “use" of an automobile.  The Supreme Court disagreed, holding the
incident met all three elements.  In the process, the Supreme Court distinguished an entire line of cases
addressing drive-by shootings, which consistently held they did not involve the “use" of an automobile, by

[a] drive-by shooting involves a vehicle only incidentally.  The shooter could be standing still and
accomplish the same result.  In such a situation, even if the first two factors of the Appleman/Couch[1] test
were satisfied, the third could not be because the vehicle's role in the occurrence is minimal as compared
with the shooter's.  Lindsey, 997 S.W.2d at 158.[2]

The result in Lindsey does not determine the result here.  In Brown v. H.I.S.D., this court affirmed the trial
court's determination that the school district was immune from liability in a suit filed by a victim of a sexual
assault perpetrated by a school district police officer who used his district patrol car to pull the victim over.  
Brown v. H.I.S.D., 123 S.W.3d 618, 622-23 (Tex. App.- Houston [14th Dist.] 2003, pet. denied).  The victim
argued the Texas Tort Claims Act (“TTCA") applied because the incident involved the use of a motor
vehicle.  Id. at 619.  This court held the TTCA did not apply because, while the incident did involve a motor
vehicle, the motor vehicle did not actually cause the victim's injuries.  Id. at 622.  In the process, we
distinguished the result in Lindsey because the Supreme Court “relied on a line of insurance coverage
cases in which a gun was discharged in or from vehicles."  Id. at 621.  Finally, we limited Lindsey to its facts
by holding “we believe [Lindsey] may be of limited use outside the context in which it occurred.  The
accidental discharge of firearms has produced a whole body of case law in which insurance coverage was
the issue.  This body of law ultimately controlled - or at least directed - the outcome in [Lindsey]."  Id.  The
court then applied the three element Lindsey test and determined (1) the incident did not occur within the
territorial limits of the patrol car (the assault actually occurred in the victim's vehicle), and (2) the patrol car
did not itself produce the injury, but only assisted the officer in accomplishing his unlawful purpose.  Id. at

The result in this case is determined by Brown, the line of drive-by shooting cases distinguished by the
Supreme Court in Lindsey, and a second, earlier Supreme Court case, Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. 1997).  In Merchants, a truck driver
negligently fired a gun while driving his truck, which struck and killed a person riding in a vehicle traveling
next to the truck.  Merchs., 939 S.W.2d at 141.  The Supreme Court held there was no duty to defend
because the petition did not allege facts showing the injury was the result of the use of a vehicle.  Id. at
142.  Here, the pick-up truck did not cause the deaths of the three workers, the defective rope did.  
Instead, the pick-up truck simply provided the power for the pulley system, which is not enough to
constitute “use" under the CGL policy.  See Collier v. Employers Nat'l Ins. Co., 861 S.W.2d 286, 289 (Tex.
App.- Houston [14th Dist.] 1993, writ denied).  Therefore, even assuming the facts of this case meet the
first two Lindsey requirements, we hold they do not meet the third requirement, that the vehicle actually
produce the injury rather than merely contribute to it.  Because the workers' deaths did not arise out of the
use of a motor vehicle, we overrule appellant's first issue.

C.        The Contract Exclusion

In its second issue, appellant contends the contract exclusion precludes coverage because only one party,
Allstates, had actually signed the subcontract prior to the underlying incident.  According to appellant, to
meet the execution requirement found in the insurance policies, both appellee and Allstates had to
physically sign the subcontract prior to the incident.  We disagree.

Initially, appellee forwarded the subcontract to Allstates and Allstates signed the subcontract on December
27, 2001 and returned it to appellee.  The term “execution" is not defined in the subcontract or in the
insurance policies.  It is undisputed both parties were performing under the subcontract when the
underlying incident occurred on January 2, 2002.  Finally, it is undisputed appellee signed the contract on
January 3, 2002.

This issue is resolved by two similar cases: Travelers Ins. Co. v. Chi. Bridge & Iron Co., 442 S.W.2d 888
(Tex. Civ. App.- Houston [1st Dist.] 1969, writ ref'd n.r.e.) and ABB Kraftwerke Aktiengesellschaft v.
Brownsville Barge & Crane, Inc., 115 S.W.3d 287 (Tex. App.- Corpus Christi 2003, pet. denied).

In Travelers, Chicago Bridge and J. T. Thorpe Co. agreed Thorpe could use certain equipment owned by
Chicago Bridge provided Thorpe executed a printed rental agreement.  Travelers, 442 S.W.2d at 890-91.  
Prior to the accident at issue in that case, Chicago Bridge's representative signed the agreement, while
Thorpe's representative only signed after the accident.  Id. at 891.  Following the incident, Thorpe's
insurance company denied coverage, arguing the insurance policy required both parties to sign a written
agreement prior to the incident.  Id.  The court of appeals disagreed stating that the parties were
performing under the contract prior to the incident and there was a written agreement.  The court
continued that there was evidence from which an inference could be drawn that the parties intended the
contract to be in writing and to be effective from the time the equipment was first used by Thorpe.  Id. at

In Brownsville Barge, the contract was prepared by Brownsville Barge and sent to ABB, which signed the
contract and returned it to Brownsville Barge.  Brownsville Barge, 115 S.W.3d at 292.  The court concluded
ABB accepted the contract even though Brownsville Barge never signed it.  Id.  The court held that as long
as both parties gave their consent to the terms and there is no evidence of an intent to require both
signatures as a condition precedent, signatures are not required in the making of a valid contract.  Id.

Because (1) the term “execution" is not defined in either the CGL policy or the auto policy, (2) there is no
language in the policies requiring both parties to sign the contract, (3) Texas law does not require the
parties to a contract to actually sign for a contract to be valid and enforceable, and (4) there was no
summary judgment evidence raising a fact issue of the parties' intent to require both signatures as a
condition precedent, in fact the evidence established the exact opposite,  we conclude appellant's
construction of the insurance policies is incorrect.  See Travelers, 442 S.W.2d at 890-91.  Accordingly, we
hold that, under Texas law, the subcontract was executed prior to the January 2, 2002 incident and we
overrule appellant's second issue.


Having overruled both of appellant's issues on appeal, we affirm the trial court's final judgment.

/s/      John S. Anderson


Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.

[1]  See JOHN A. APPLEMAN, INSURANCE LAW AND PRACTICE (Buckley ed.) § 4317, at 367B69 (1979);
8 COUCH ON INSURANCE 3D § 119.37, at 119-56 (1997).

[2]  See Le v. Tex. County Mut. Ins. Co., 936 S.W.2d 317, 321 (Tex. App.- Houston [1st Dist.] 1996, writ
denied) (holding that the “use" requirement of uninsured motorist coverage is not satisfied by a drive-by
shooting because the gun was the instrumentality that caused the injuries, not the car); see also Collier v.
Employers Nat'l Ins. Co., 861 S.W.2d 286, 289 (Tex. App.- Houston [14th Dist.] 1993, writ denied) (holding
that a drive-by shooting does not involve the use of a motor vehicle simply because an automobile
provided the site for a criminal assault or provided transportation to the location of a criminal act).