                                                                                  United States Court of Appeals
                                                                                           Fifth Circuit
                                                                                          F I L E D
                                                In the                                   February 11, 2004
                        United States Court of Appeals                               Charles R. Fulbruge III
                                     for the Fifth Circuit                                   Clerk
                                          _______________

                                            m 03-20592
                                          _______________




                   ACE PROPERTY & CASUALTY INSURANCE COMPANY,

                                                              Plaintiff-Appellee,

                                               VERSUS

                                       DENISE DORISMOND,

                                                              Defendant-Appellant.




                                    _________________________

                            Appeal from the United States District Court
                                for the Southern District of Texas
                                        m H-02-CV-4871
                                 _________________________




Before JONES, MAGILL,* AND SMITH,                    JERRY E. SMITH, Circuit Judge:**
  Circuit Judges.


                                                         **
                                                           Pursuant to 5TH CIR. R. 47.5, the court has
   *
     Circuit Judge of the United States Court of     determined that this opinion should not be pub-
Appeals for the Eighth Circuit, sitting by desig-    lished and is not precedent except under the limited
nation.                                              circumstances set forth in 5TH CIR. R. 47.5.4.
   Denise Dorismond appeals a summary judg-                  it owed under its policy with Service. The dis-
ment in favor of ACE Property & Casualty                     trict court entered summary judgment in favor
Insurance Company (“ACE”). Concluding                        of ACE and held that ACE did not owe any
that ACE’s insured, Service Merchandise,                     funds to Dorismond.
breached a duty to ACE by not attempting to
limit liability arising from Dorismond’s original                                  II.
suit, we affirm.                                                 We review a summary judgment de novo
                                                             and follow the same standard as did the district
                     I.                                      court. See, e.g., Med. Care Am., Inc. v. Nat’l
   In 1997, Dorismond was injured in a Ser-                  Union Fire Ins. Co., 341 F.3d 415, 420 (5th
vice Merchandise (“Service”) retail store. In                Cir. 2003). “We likewise review matters of
1999, Service filed for bankruptcy in                        contract interpretation de novo.” HS Res.,
Tennessee. Two months later, Dorismond                       Inc., v. Wingate, 327 F.3d 432, 440 (5th Cir.
sued Service in Texas state court.                           2003). “Summary judgment is appropriate on-
                                                             ly if the movant demonstrates that there are no
   As a result of the bankruptcy proceedings,                genuine issues of material fact and that it is
Dorismond’s suit was automatically stayed.                   entitled to a judgment as a matter of law.” Id.
Eventually, she agreed to seek only insurance                We may affirm for any reason supported by
proceeds and asked that the stay be lifted. The              the record, even if the district court did not
bankruptcy court allowed the suit to go                      rely on such a reason.2 LLEH, Inc. v. Wichita
forward on August 5, 2002.                                   County, Tex., 289 F.3d 358, 364 (5th Cir.),
                                                             cert. denied, 537 U.S. 1045 (2002). Because
   ACE provided an excess insurance policy to                this diversity3 action concerns the
Service at the time of Dorismond’s injury,                   interpretation and application of an insurance
covering personal injury damages that exceed-                contract, Texas substantive law applies. Erie
ed $250,000. Service notified ACE of Doris-                  R.R. v. Tompkins, 304 U.S. 64 (1938).
mond’s suit on August 2, 2002SSover five
years after the original injury and over three
years after the original suit was filed. Service
also informed ACE that it did not intend to
defend itself against Dorismond’s state claim.1                 2
                                                                   The district court held that (1) Service
                                                             breached a notice provision of the insurance policy
                                                             by waiting three years to alert ACE of Dor-
   Neither Service nor ACE appeared at trial,                ismond’s suit; and (2) Service abrogated its duty to
and the Texas court entered a default judg-                  ACE to limit liability arising from the suit.
ment in Dorismond’s favor for $421,516.39.                   Because the second ground constitutes ample rea-
ACE sought a declaratory judgment, pursuant                  son to affirm, we do not address the notice issue or
                                                             ACE’s contention that Service and Dorismond
to 28 U.S.C. § 2201(a), regarding the amount
                                                             entered into a collusive agreement that violated
                                                             Texas public policy.
   1                                                            3
      Service’s senior legal counsel sent ACE a                  Because this case involves diverse litigants
letter that stated, “As Ms. Dorismond has waived             and an amount in controversy greater than
any right to receive a distribution from [Service, it]       $75,000, federal courts have jurisdiction under 28
does not intend to defend the personal injury case.”         U.S.C. § 1332(a)(1).

                                                         2
                      III.                                 She points to an admission filed in Service’s
    Service breached an implied duty to ACE                bankruptcy proceedings, wherein ACE stated
by taking no action to mitigate damages                    that it would assume the defense of any
arising from Dorismond’s suit. ACE owed no                 outstanding personal injury claims. At the
duty to defend Service; Service had a duty to              time of ACE’s statement, however, the Texas
take some action to limit damages; and Service             court already had entered summary judgment
breached such a duty by not defending in                   in favor of Dorismond. Thus, with respect to
Dorismond’s suit.                                          Dorismond, nothing remained for ACE to
                                                           defend.6
   First, ACE explicitly removed, through                      Secondly, Service had a duty to take some
language in the contract, any possible duty it             action to mitigate liability arising from Doris-
might have to defend Service. The policy                   mond’s suit. Texas courts and federal courts
stated that it “[did] not apply to defense, inves-         applying Texas law have made statements re-
tigation, settlement, or legal expenses, or pre-           garding the general duty of a insured to
judgment interest arising out of any                       minimize legal liability.7 Though these courts
‘occurrence’ or offense.” Although ACE                     have not provided the precise contours of a in-
retained the right “to assume from the insured             sured’s duty, the statements suggest that the
the defense and control of any claim or ‘suit,’”           insured must take some kind of minimum ac-
such intervention was contingent on ACE’s                  tion to limit liability to the insurer.
choice to participate in the defense. A court
may not compel an insurer to defend an                        Service’s failure to act falls outside any rea-
insured when the insurer disavows, in the                  sonable expectations one may have of an in-
contract, any duty to provide a defense.4                  sured. Rather than merely carrying out a bad
                                                           defense or have some misfortune strike its
   Dorismond argues, however, that ACE ex-
ercised its right to intervene and should bear
the costs arising from the default judgment.5                 5
                                                               (...continued)
                                                           it had a duty to defend by its own creation.”
                                                              6
   4
     See, e.g., St. Paul Guardian Ins. Co. v. Cen-              Dorismond also asserts that a settlement
trum GS, Ltd., 283 F.3d 709, 713 (5th Cir. 2002)           reached in the bankruptcy proceedings moots the
(“When the language of an insurance policy is not          current case. We disagree.
ambiguous, it is our duty to give the words used
                                                              7
their plain meaning.”); Harville v. Twin City Fire               See, e.g., Laster v. Am. Nat’l Fire Ins. Co.,
Ins. Co., 885 F.2d 276, 279 (5th Cir. 1989) (ap-           775 F. Supp. 985, 995 (N.D. Tex. 1991) (“[In-
plying Texas law and holding that, even if a pri-          surer] is at the mercy of the insured to see that
mary insurer who otherwise owed a duty to defend           proper steps are taken in [its] defense . . . . Im-
the insured went into receivership, the excess             plicit in an excess insurance contract of this kind is
liability insurer did not owe such a duty “under the       an obligation on the part of the insured to take
terms of the contract”).                                   reasonable steps to avoid legal liability . . . .”);
                                                           State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d
   5
    Dorismond maintains that “ACE assumed that             696, 714 (Tex. 1996) (“In no event, however, is a
duty to defend in it’s [sic] admission in the              judgment for plaintiff against defendant, rendered
Adversary Complaint in bankruptcy and therefore,           without a fully adversarial trial, binding on defen-
                                      (continued...)       dant’s insurer . . . .”).

                                                       3
case,8 Service consciously allowed the court to
enter a default judgment. The only way it
could have incurred more liability would have
involved an incompetent and belligerent attor-
ney who spurred the judge to enter numerous
contempt citations.

    Service deliberately decided not to take any
action, as shown in its August 2, 2002, letter
to ACE. Supra note 1. Service’s inaction
provides an egregious example of avoiding “a
fully adversarial trial” or even some sort of ag-
gressive settlement negotiation. Gandy, 925
S.W.2d at 714. Such inaction constitutes a
breach of Service’s duty to its insurer.

   Because Service breached its duty to
mitigate damages, ACE has no obligation to
pay Dorismond’s default judgment. The
summary judgment is AFFIRMED.




   8
     In Laster, for example, the insured at least be-
gan with an attorney but then mishandled that
attorney’s withdrawal from the case. Laster, 775
F. Supp. at 996-98.

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