          IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT
                                      _______________

                                        m 01-10744
                                      Summary Calendar
                                      _______________



                          MARTIN MARIETTA MATL;
                 MARTIN MARIETTA MATERIALS SOUTHWEST, LTD.,
                           FORMERLY KNOWN AS MAROCK, INC.;
                                     CONNIE SPRADLEY,

                                                               Plaintiffs-Appellants,

                                           VERSUS

             ST. PAUL FIRE AND MARINE INSURANCE COMPANY, ET AL.,

                                                               Defendants,

                     ST. PAUL GUARDIAN INSURANCE COMPANY,

                                                               Defendant-Appellee.


                              _________________________

                       Appeal from the United States District Court
                           for the Northern District of Texas
                                  m 3:00-CV-2585-X
                            _________________________

                                     January 31, 2002


Before JONES, SMITH, and                           JERRY E. SMITH, Circuit Judge:*
  EMILIO M. GARZA, Circuit Judges.
                                                        *
                                                            Pursuant to 5TH CIR. R. 47.5, the court has
                                                                                          (continued...)
   St. Paul Fire and Marine Insurance                  litigation.2 The parties filed cross-motions for
Company (“St. Paul”) insured Martin Marietta           summary judgment.
Matl (“Marock”) and Connie Spradley under
a commercial general liability policy that cov-            The district court granted St. Paul’s motion
ered liability and legal expenses stemming from        for summary judgment, concluding that Trin-
an “event” or “accident” but did not define            ity’s petition in the state suit did not allege an
“accident.” Marock argues that its diversion           “accident,” which would be necessary to trig-
of water fro m Big Sandy Creek without a               ger St. Paul’s duty to defend. The court held
water permit was an “accident” that resulted in        that the same facts that negated the duty to de-
unexpected property damage to downstream               fend also negated the duty to indemnify. On
users. The district court held that the                appeal, Marock argues that Trinity’s state peti-
deliberate, unlawful act was not an accident,          tion alleges an “event” as defined by the
because property damage was the natural and            policy.
probable result. Finding no error, we affirm.
                                                                              II.
                        I.                                 Under Texas law, general principles of con-
   Marock owned a facility that adjoined Big           tract interpretation apply to insurance policies.
Sandy Creek. St. Paul provided primary gen-            Am. States Ins. Co. v. Bailey, 133 F.3d 363,
eral liability coverage for Marock and its offi-       369 (5th Cir. 1999). State and federal courts
cers. Trinity Materials, Inc. (“Trinity”), which       follow the “complaint allegation” or “eight
held senior water rights to use water from the         corners” rule when determining an insurer’s
creek, operated a sand and gravel company              duty to defend.3 If the petition does not allege
downstream of Marock.                                  facts within the scope of coverage, an insurer
                                                       is not legally required to defend a suit brought
   The complaint alleges that Marock, without          against its insured. Trinity Universal Ins. Co.
a valid water permit, diverted the creek to            v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997).
dredge, wash, and screen sand and gravel for           We construe the pleadings in favor of the in-
on-site construction, depriving Trinity of water       sured. Heyden, 387 S.W.2d at 26.
that it needed to operate. In a suit in state
court against Marock, Trinity alleged that the
                                                          2
diversion had caused production and sales                    This statement of the facts is taken almost
losses. Marock filed the instant federal action,       verbatim from the district court’s opinion. Martin
seeking a declaration that St. Paul has a duty         Marietta Materials Southwest, Ltd. v. St. Paul
to defend and indemnify it in the state                Guardian Ins. Co., 145 F. Supp. 2d 794, 796
                                                       (N.D. Tex. 2001). The parties agree that the dis-
                                                       trict court’s statement of facts is accurate.
                                                       Appellant’s Br. at 5 (stating that the only flaw is
                                                       the conclusion that Marock acted “intentionally”);
                                                       Appellee’s Br. at 2-3 (accepting district court’s
                                                       statement).
   *
    (...continued)
                                                          3
determined that this opinion should not be                   Potomac Ins. Co. v. Jayhawk Med.
published and is not precedent except under the        Acceptance Corp., 198 F.3d 548, 550 (5th Cir.
limited circumstances set forth in 5TH CIR. R.         2000); Heyden Newport Chem. Corp. v. S. Gen.
47.5.4.                                                Ins. Co., 387 S.W.2d 22, 24, 26 (Tex. 1965).

                                                   2
   The general commercial liability policy pro-          that commission of an intentional tort bars
tects Marock from liability for an “event,”              finding an accident only for the “natural and
which the policy defines as “an accident, in-            probable consequence” of the action.5 In
cluding continuous or repeated exposure to               Lindsey, 997 S.W.2d at 155, the court cited
substantially the same general harmful                   both lines of cases with approval.
conditions.” Texas and federal courts applying
Texas law to insurance contracts often have                 Unsurprisingly, St. Paul argues that the in-
considered the definition of “accident.”                 tentional and unlawful acts should bar finding
                                                         an accident. Marock, on the other hand, rea-
    The Texas Supreme Court most recently                sons that intentional acts bar a finding of acci-
summarized the test for determining whether              dent only for the natural and probable conse-
an insured’s actions constitute an accident in           quences of the act. Marock contends that un-
Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d              predictable and unforeseeable consequences
153, 155 (Tex. 1999), explaining that “both              are covered accidents.
the actor’s intent and the reasonably
foreseeable effect of his conduct bear on the               We need not resolve this tension.
determination of whether an occurrence is                Regardless of whether intent is dispositive,
accidental.” The court described, in an                  Texas courts have been extremely reluctant to
ambiguous passage, the importance of the                 declare the consequences of an unlawful act as
insured’s intent, stating that “voluntary and            accidental. Trinity Universal, 945 S.W.2d at
intentional conduct is not an accident just
because ‘the result or injury may have been
unexpected, unforeseen, and unintended.’” Id.               4
                                                              (...continued)
(citation omitted). The court, however, went
                                                         damage may be.”); Argonaut Southwest Ins. Co. v.
on to say that “the mere fact that ‘an actor
                                                         Maupin, 500 S.W.2d 633, 635 (Tex. 1973)
intended to engage in the conduct that gave              (unknowing trespass classified as an intentional
rise to the injury’ does not mean that the injury        tort that gave rise to liability).
was not accidental.” Id. (citation omitted).
                                                            5
                                                               Meridian Oil Prod., Inc. v. Hartford Accident
   These paradoxical statements reflect an un-           & Indem. Co., 27 F.3d 150, 152 (5th Cir. 1994)
derlying tension in Texas law. Some Texas                (considering recklessness of oil rig operator’s be-
courts have held that the insured’s commission           havior leading to spill and natural consequences of
of an intentional tort or intentionally unlawful         spill); Trinity Universal, 945 S.W.2d at 827-28
act bars finding an accident, regardless of the          (considering relevant but not dispositive the in-
consequences.4 Other Texas courts have held              sured’s intent to make illegal copies of photograph
                                                         and violate plaintiff’s privacy); Hartrick v. Great
                                                         Am. Lloyds Ins. Co., No. 01-99-00215, 2001 WL
                                                         870072, at *5 (Tex. App.SSHouston [1st Dist.]
   4
      Federated Mut. Ins. Co. v. Grapevine               2001, no pet.) (“Intent or lack of intent is not
Excavation, Inc., 197 F.3d 720, 723 (5th Cir.            dispositive of coverage.”); Collier v. Allstate
1999) (“[D]amage that is the natural result of           County Mut. Ins. Co., No. 2-00-116-CV, 2001
voluntary and intentional acts is deemed not to          WL 629307, at * 5 (Tex. App.SSFort Worth 2001,
have been caused by an occurrence, no matter how         no pet.) (stating that objective natural consequence
unexpected, unforeseen, and unintended that              standard applies to the results of an intentional
                                    (continued...)       act).

                                                     3
827-28. Where the type but not the extent of                   First, Marock ignores the distinction that
the damages is predictable, Texas courts refuse             Texas law defining “accidents” makes between
to classify the act or its effects as an                    negligence and intentional torts. Marock cites
“accident.”6                                                out-of-state cases for the proposition that a
                                                            foreseeability test would eliminate insurance
   Marock deliberately diverted the water for               for negligence.7 Texas courts, however, have
the construction project and did so without                 been more willing to classify the consequences
water rights, which made its action unlawful.               as improbable and covered in the case of the
Marock faces a heavy burden to show that the                insured’s simple negligence; those courts have
consequences of its actions were so                         been less likely to find an accident and
unpredictable or bizarre as to make them                    coverage where the insured has acted
accidental.                                                 intentionally; they have been least likely to find
                                                            accident and coverage where the insured
   The district court correctly held that when              deliberately has violated the law.8
an upstream user usurps a downstream user’s
water rights, the upstream user should foresee                 Favoring coverage for negligence rather
damage to the downstream user. Marock                       than intentional torts makes good sense. An
could foresee that diversion would harm                     insurance company is less likely to contract to
downstream commercial users, even if it did                 protect the insured from the natural and
not know the particular effects; that it did not            probable consequences of his deliberate
foresee the particular harm is irrelevant. Mar-             decision to break the law. That would create
ock’s diversion and its consequences were not               a enormous moral hazard. An insurance
an “accident” within the meaning of the policy.             company can, however, much more easily
                                                            monitor and assist an insured who is seeking to
   Marock argues that by linking the term “ac-              avoid simple negligence.9 The Texas courts
cident” to foreseeability, the district court               have interpreted liability contracts in the way
made liability policies useless. Marock avers               most likely to fulfill the parties’ intent.
that because foreseeability is an element of
many torts, the petition often will allege fore-
seeability and will prevent the insured from                   7
                                                                 Appellant’s Reply Br. at 4-5 (citing Sheets v.
claiming coverage. This argument is premised                Brethren Mut. Ins. Co., 679 A.2d 540 (Md. 1996);
on a misunderstanding of Texas insurance and                City of Carter Lake v. Aetna Cas. & Sur. Co., 604
tort law.                                                   F.2d 1052 (8th Cir. 1979)).
                                                               8
                                                                 Compare, e.g., Mass. Bonding & Ins. Co. v.
                                                            Orkin Exterminating Co., 416 S.W.2d 396, 400-
   6
     Meridian Oil, 27 F.3d at 152 (describing               01 (Tex. 1967) (negligent application of
pollution as “natural and probable” consequence of          pesticides); Meridian Oil, 27 F.3d 152 (reckless
reckless oil rig operation even though specific im-         failure to take precautions to keep oil rig from
pact might not be foreseeable); Wessinger v. Fire           leaking); Maupin, 500 S.W.2d at 635 (trespass).
Ins. Exch., 949 S.W.2d 834, 841 (Tex.
App.SSDallas 1997, no pet.) (“Simply because the               9
                                                                  Seth J. Chandler, Visualizing the Moral
degree of injury suffered may have been great does          Hazard, 1 CONN. INS. L.J. 97, 135-36 (1995)
not make the specific type of injury alleged any less       (describing limits on liability coverage as a means
a natural result of the act.”).                             for insurers to reduce moral hazard).

                                                        4
   Second, regardless of the competing policy                Trinity’s allegations of negligence, the state
arguments, Texas courts have chosen to                       petition alleges that negligence arises from
impose a requirement that to count as an                     Marock’s deliberate, unlawful acts. Those un-
“accident,” intentional torts must lead to an                derlying acts drive our “accident” analysis, as
unforeseeable type of harm. Because this case                described above.
is brought pursuant to diversity jurisdiction,
we have an obligation to apply Texas law as                                        III.
state courts would apply it, regardless of the                  The district court held that St. Paul did not
policy consequences.10                                       have the duty to defend or indemnify. Martin
                                                             Marietta, 145 F. Supp. 2d at 800. On appeal,
    Marock argues that because Trinity alleges               Marock argues that the district court
negligence in the state petition, we should con-             prematurely resolved the question of
sider Marock’s diversion non-intentional. In                 indemnification.
Texas, negligent acts that create improbable
consequences are accidents.11 Texas courts                       In Farmers Tex. County Mut. Ins. Co. v.
also have held, however, that the facts, rather              Griffin, 955 S.W.2d 81, 84 (Tex. 1997), the
than legal theories alleged in the state petition,           court held that a trial court can resolve the in-
should determine the insured’s intent. Where                 demnification question at summary judgement
a state petition alleges facts that could support            if “no set of facts could be developed” to cre-
theories of both negligence and intentional                  ate a cause of action for indemnification. The
torts, Texas courts will consider the insured’s              court held that the petition’s allegations of a
actions intentionally unlawful.12         Despite            drive-by shooting never could state a claim for
                                                             an “accident.” Id.

   10                                                            The duty to defend is broader than the duty
       Klaxon Co. v. Stentor Elec. Mfg. Co., 313
                                                             to indemnify. State Farm Lloyds v. Borum, 53
U.S. 487, 497 (1941) (stating that “the proper
function of [a] federal court is to ascertain what the       S.W. 3d 877, 889 (Tex. App.SSDallas 2001,
state law is, not what it ought to be”).                     pet. denied). In most cases in which the un-
                                                             derlying petition does not state factual
   11
       E.g., Harken Exploration Co. v. Sphere                allegations sufficient to create a duty to
Drake Ins. PLC, 261 F.3d 466, 474 (5th Cir.
2001) (concluding that negligent oil leak that con-
                                                                12
taminated water, killed cattle, and destroyed land                 (...continued)
had unpredictable effects that could be considered           ligence claims should be considered an intentional
accidental); Hartford Cas. v. Cruse, 938 F.2d 601,           tort for purposes of defining as an accident); Fol-
604-05 (5th Cir. 1991) (classifying extensive dam-           som Investments, Inc. v. Am. Motorists Ins. Co.,
age from negligent failure properly to level house           26 S.W.3d 556, 559 (Tex. App.SSDallas 2000, no
as accidental); Mass. Bonding, 416 S.W.2d at 400-            pet.) (stating that “negligence that is related to and
01 (holding that negligent application of pesticide          interdependent on claims of intentional conduct
that had cumulative, toxic effects was an accident).         does not constitute” an accident); King v. Dallas
                                                             Fire Ins. Co., 27 S.W.3d 117, 123 (Tex.
   12
     Am. States Ins. Co. v. Bailey, 133 F.3d 363,            App.SSHouston [1st Dist.] 2000, pet. granted)
371-72 (5th Cir. 1998) (stating that alleged sexual          (same); Freedman v. Cigna Ins. Co. of Texas, 976
misconduct giving rise to intentional tort and neg-          S.W.2d 776, 779 (Tex. App.SSHouston [1st Dist.]
                                      (continued...)         1998, no pet.) (same).

                                                         5
defend, there is no duty to indemnify. Id.

   The district court held that the state petition
could never state a claim for an accident.
Marock does not isolate a single fact or legal
theory that would transform the deliberate di-
version of water into an “accident.” We can-
not envision such a development at trial, so
summary judgment was appropriate.

   AFFIRMED.




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