     Case: 10-41131     Document: 00511564231         Page: 1     Date Filed: 08/08/2011




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                           August 8, 2011

                                       No. 10-41131                        Lyle W. Cayce
                                                                                Clerk

NATIONAL FIRE INSURANCE COMPANY OF HARTFORD, ET AL,

                                                  Plaintiffs
v.

RADIOLOGY ASSOCIATES, L.L.P., ET AL,

                                                  Defendants

AMERICAN PHYSICIANS INSURANCE COMPANY,

                                                  Third Party Defendant - Appellant

v.

RADIOLOGY ASSOCIATES, L.L.P.,

                                                  Third Party Plaintiff - Appellee



                   Appeal from the United States District Court
                        for the Southern District of Texas
                              USDC No. 2:09-CV-76


Before JONES, Chief Judge, and HIGGINBOTHAM and SOUTHWICK, Circuit
Judges.
PER CURIAM:*

       *
        The court has determined under 5TH CIR. R. 47.5, that this opinion should not be
published and is not precedent except under the circumstances set forth in 5TH CIR. R. 47.5.4.
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                                  No. 10-41131

      Radiology Associates filed a declaratory judgment action against American
Physicians Insurance Company, claiming it had a duty to defend Radiology
Associates against claims stemming from an employee’s sexual misconduct. The
district court granted summary judgment in favor of Radiology Associates.
Because the claims alleged against Radiology Associates are excluded from
coverage under the policy, we REVERSE.
                           STATEMENT OF FACTS
      Radiology Associates and its former employee, Brian K. Riley, were sued
in Texas state court by Marie and Daniel Pecore, who alleged that Riley sexually
assaulted Marie Pecore when he performed an unauthorized vaginal
examination at Radiology Associates’ facility. The Pecores specifically alleged
that Radiology Associates negligently failed to provide a chaperone during the
examination, failed to post notices informing patients of the right to a chaperone,
and failed to monitor its employees properly. Upon receipt of the Pecores’
complaint, Radiology Associates requested a defense from its professional
liability insurer, American Physicians Insurance Company (“American
Physicians”), as well as its standard and umbrella insurers. All three insurers
refused to defend.
      Radiology Associates subsequently filed a third-party complaint against
American Physicians, seeking a declaratory judgment and alleging a breach of
contract claim for refusing to defend.
      Radiology Associates’ policy with American Physicians (“the Policy”)
provided coverage for claims resulting “from professional services which you
provided or which you should have provided to your patients . . . .” The Policy
listed exclusions for certain claims. The relevant exclusions are as follows:
      (2) Exclusion for sexual misconduct. We will not cover any claims
      made against you, whether the injury or damage itself was intended
      or not, which arises out of any sexual act.


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      (3) Exclusion for violation of law. We will not cover any claims
      against you, whether the injury or damage was intended or not,
      which arises out of an act or omission in violation of the penal code
      or criminal statutes in the jurisdiction in which the act occurred.
      ...
      (14) Exclusion for intentional acts. We will not cover any claims
      made against you for any injury or damage, whether the injury or
      damage itself was intended or not, which in whole or in part, arises
      out of an intentional tort.

      The district court held it to be unclear whether any of these exclusions
applied to Riley’s actions as described in the complaint. Accordingly, American
Physicians had a duty to defend. American Physicians timely appealed.
                                 DISCUSSION
      This court reviews a grant of summary judgment de novo. Gonzalez v.
Denning, 394 F.3d 388, 391 (5th Cir. 2004). Interpretation of an insurance
contract is a question of law that we also review de novo. Principal Health Care
of La., Inc. v. Lewer Agency, Inc., 38 F.3d 240, 242 (5th Cir. 1994). Jurisdiction
in this case is founded on diversity; accordingly, Texas rules of contract
interpretation control. Canutillo Indep. Sch. Dist. v. Nat’l Union Fire Ins., 99
F.3d 695, 700 (5th Cir. 1996). “Under Texas law, the interpretation of insurance
contracts is governed by the same rules that apply to contracts generally.” Id.
(citation omitted). The policy is viewed in its entirety, with a goal of discerning
the parties’ intent at the time of the contract. Provident Life & Accident Ins. Co.
v. Knott, 128 S.W.3d 211, 216 (Tex. 2003) (citations omitted).
      “Although the insured bears the burden of showing that the claim against
it is potentially within the policy’s coverage, the insurer bears the burden of
establishing that an exclusion in the policy constitutes an avoidance of or
affirmative defense to coverage.” Canutillo, 99 F.3d at 701 (citations omitted).
If an insurer successfully asserts an exclusion, “the burden shifts back to the
insured to show that an exception to the exclusion brings the claim” back within


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the scope of coverage. Harken Exploration Co. v. Sphere Drake Ins. PLC, 261
F.3d 466, 471 (5th Cir. 2001) (citations omitted).
      American Physicians contends that the district court erred when it held
that American Physicians had a duty to defend Radiology Associates in the
Pecore lawsuit. The Texas “eight-corners rule provides that when an insured is
sued by a third party, the liability insurer is to determine its duty to defend
solely from terms of the policy and the pleadings of the third-party claimant.
Resort to evidence outside the four corners of these two documents is generally
prohibited.” GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d
305, 307 (Tex. 2006). “If a petition does not allege facts within the scope of
coverage, an insurer is not legally required to defend a suit against its insured.”
Nat’l Union Fire Ins. Co. v. Merchants, 939 S.W.2d 139, 141 (Tex. 1997)
(citations omitted). When reviewing a complaint, “the court must focus on the
factual allegations that show the origin of the damages rather than on the legal
theories alleged.” Id. (quotation marks and citation omitted). The duty to
defend arises only when the facts in the complaint, “if taken as true, potentially
state a cause of action within the terms of the policy.” Gulf Chem. &
Metallurgical Corp. v. Assoc. Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir.
1993) (applying Texas law) (quotation marks and citation omitted).
      The district court reasoned that the facts alleged by the Pecores potentially
stated a claim for negligence because Riley may have negligently thought he was
entitled to administer a vaginal exam, or that in the course of performing the
authorized ultrasound, he negligently and inappropriately touched Pecore. The
district court concluded that because it was unclear whether the alleged facts fit
into an exclusion, American Physicians had a duty to defend. The complaint,
though, makes no allegation that Riley may have negligently believed his actions
were authorized. A court should not “imagine factual scenarios which might



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trigger coverage.” Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538
F.3d 365, 369 (5th Cir. 2008) (quotation marks and citation omitted).
      Because the court may consider only the facts as set out in the complaint
to determine the duty to defend, the question is whether the Pecore complaint
potentially states a claim within the scope of coverage triggering American
Physicians’ duty to defend. The complaint described Riley’s conduct as “a sexual
assault” and also alleged that the acts of Riley were an intentional tort. This
court must focus, though, on the facts asserted, not the legal theories presented.
Merchants, 939 S.W.2d at 141. Based on the actual facts in the complaint,
Riley’s conduct constituted unauthorized sexual conduct. His acts were sexual
in nature and not authorized by Pecore’s treating physician.
      Riley was not an insured party under the Policy. Therefore, any coverage
issues relate solely to the claims against Radiology Associates. Because the
Policy excludes injury or damage that “arises out of any sexual act,” we now
must decide whether the claims against Radiology Associates arose out of Riley’s
excluded actions. The Texas Supreme Court “has held that ‘arise out of’ means
that there is simply a ‘causal connection or relation,’ which is interpreted to
mean that there is but for causation, though not necessarily direct or proximate
causation.” Utica Nat’l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 203
(Tex. 2004) (citations omitted). Likewise, in applying Texas law, we have held
that “when an exclusion prevents coverage for injuries ‘arising out of’ particular
conduct, ‘[a] claim need only bear an incidental relationship to the described
conduct for the exclusion to apply.’” Sport Supply Group, Inc. v. Columbia Cas.
Co., 335 F.3d 453, 458 (5th Cir. 2003) (citations omitted).
      The Pecore complaint alleges that Radiology Associates negligently failed
to provide a chaperone, failed to post notices informing patients of the right to
a chaperone, and failed to monitor its employees properly. These claims “arise



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out of” Riley’s unauthorized sexual conduct. But for Riley’s improper conduct,
Pecore would have no claims against Radiology Associates.
      Radiology Associates urges that in analyzing the duty to defend, this court
must interpret the allegations in the complaint from the standpoint of the
insured. In other words, because Radiology Associates is the insured, we should
focus on its alleged acts or omissions and not Riley’s. Radiology Associates
reasons that because the complaint does not allege that Radiology Associates
committed sexual misconduct, an intentional tort, or violated a criminal code,
American Physicians must defend it against the lawsuit.
      The cases Radiology Associates relies on to support its “standpoint of the
insured” argument are inapposite. See King v. Dall. Fire Ins. Co., 85 S.W.3d
185, 188 (Tex. 2002); Roman Catholic Diocese of Dall. v. Interstate Fire & Cas.
Co., 133 S.W.3d 887, 890 (Tex. App.–Dallas 2004, pet. denied); Acceptance Ins.
Co. v. Lifecare Corp., 89 S.W.3d 773, 777 (Tex. App.–Corpus Christi 2002, no
pet.). Those cases analyzed whether there had been a policy “occurrence,” not
whether an exclusion applied. Radiology Associates has not cited, nor have we
found, a Texas case extending this “standpoint of the insured” position to the
application of exclusions. Instead, the Texas Supreme Court has made clear that
the use of the insured’s perspective is limited to defining occurrences. See King,
85 S.W.3d at 191-92.
      Even though the Pecore complaint alleges Radiology Associates was
negligent, those claims all arise out of Riley’s excluded conduct, therefore falling
outside the policy coverage and relieving American Physicians of its duty to
defend. The judgment of the district court is REVERSED and RENDERED.




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