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

                                                 FILED
                                                                             April 6, 2009

                                       No. 08-10552                    Charles R. Fulbruge III
                                                                               Clerk

EMPIRE INDEMNITY INSURANCE COMPANY

                                                   Plaintiff - Appellant
v.

ALLSTATE COUNTY MUTUAL INSURANCE COMPANY

                                                   Defendant - Appellee




                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 3:06-CV-1415


Before GARWOOD, DENNIS, and PRADO, Circuit Judges.
PER CURIAM:*
       In this insurance dispute, plaintiff Empire Indemnity Insurance Company
(“Empire”) filed suit against Allstate County Mutual Insurance Company
(“Allstate”) alleging that Allstate breached its duties to defend and indemnify
under an automobile insurance policy.             The district court granted summary
judgment to Allstate. Because Allstate was not required to defend under Texas’s
eight-corners rule and the undisputed facts do not trigger a duty to indemnify,
we affirm.

       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                  No. 08-10552

                              I. BACKGROUND
      Allstate issued an automobile insurance policy to Edward Espinoza listing
him as the named insured and a 2001 Mitsubishi Eclipse as a covered vehicle.
The policy contained a broad coverage statement, providing that “[Allstate] will
pay damages for bodily injury or property damage for which any covered person
becomes legally responsible because of an auto accident.” The definition of
“covered person” included “[a]ny person using your covered auto.” The policy also
set forth a list of exclusions. The exclusion relevant in this case stated that
Allstate would “not provide Liability Coverage for any person . . . [u]sing a
vehicle without a reasonable belief that the person is entitled to do so.”
      Mitsubishi Motors Credit of America, Inc. (the “secured party”) held a lien
on Espinoza’s Mitsubishi. When Espinoza defaulted on the loan, the secured
party contracted with Innovative Asset Solutions (“IAS”) to repossess the vehicle.
In September 2002, IAS dispatched Lewis Breeden and another employee to
repossess the vehicle. Upon arriving at Espinoza’s residence, they found the
vehicle and had a discussion with Espinoza’s father. The father, after calling
Espinoza, told Breeden and his colleague that the keys were in the glove
compartment and that they should “take it.” Breeden and his co-worker loaded
the Mitsubishi onto a tow truck and left the Espinoza residence. However, the
tow truck subsequently broke down due to a defective belt. Breeden called into
headquarters and was instructed to “take the Mitsubishi off the truck and go
find a belt and get the truck fixed, and then get back to the yard.” Breeden and
his colleague took the Mitsubishi off the truck and, with Breeden driving, headed
to their nearest headquarters where they got petty cash.
      They could not locate a belt at the auto parts store in New Braunfels,
Texas; so they -- with the permission and knowledge of IAS personnel -- took the
Mitsubishi to San Antonio to find the part. In the course of retrieving the part,
Breeden (who was still driving) encountered “a white Mustang . . . [that] kept

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toying with us.” “The Mustang pulled up and slowed down, pulled up and slowed
down. The third time he pulled up to us, the driver, [Breeden] gassed the
Mitsubishi and went around the Mustang.” As Breeden pulled from the fast lane
into the slow lane (going about 80 mph), he lost control of the Mitsibishi and hit
a third-party’s Ford Explorer. The Explorer crashed into the highway median,
severely injuring the driver and his wife.
      Thereafter, in May 2003, the driver of the Explorer and his wife filed suit
in Texas state court against IAS and Breeden (the “underlying action”). Their
complaint gave no background facts relating to the repossession of the vehicle;
nor did it indicate the reason why Breeden was driving the vehicle. The
complaint also did not identify the Mitsubishi specifically, instead referring to
it only as “the vehicle.” The complaint stated in relevant part:
            11. On or about September 14, 2002, Plaintiffs were
      southbound on N. FM 1604. Defendant Luis Breeden was street
      racing against another vehicle southbound on N. FM 1604, when he
      suddenly and unexpectedly smashed into the rear of Plaintiffs’
      vehicle, causing it to flip end over end and causing Plaintiffs’ to
      incur serious bodily injuries . . . .

            12. At the time of the occurrence of the act in question and
      immediately prior thereto, Luis Breeden was within the course and
      scope of employment for defendant Innovative Asset Solutions, Inc.
            ....

            26. Defendant Luis Breeden’s acts or omissions described
      above, when viewed from the standpoint of Defendant at the time of
      the act or omission, involved an extreme degree of risk, considering
      the possibility of harm to Plaintiffs and others.

            27. Defendant Luis Breeden had actual, subjective awareness
      of the risk involved in the above described acts or omissions, but
      nevertheless proceeded with conscious indifference to the rights,
      safety, or welfare of Plaintiffs and others.




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       IAS had a policy with Empire that provided general coverage for damage
caused by an accident involving a “covered auto.” The Empire policy defined
“covered auto” as any vehicle not owned by the insured but that is used in
connection with the insured’s business. Empire agreed to defend the suit under
a reservation of rights.1 Approximately three months later (but 16 months after
the lawsuit was originally filed), Empire requested that Allstate defend the suit
because it believed Espinoza gave Breeden permission to drive the vehicle.
Empire sent a second request a couple of months later. Allstate refused to
defend and indemnify because Empire’s “insureds have never tendered the
Lawsuit to Allstate for a defense” and because there is no coverage under the
Allstate policy given that Breeden “did not reasonably believe he had permission
to operate Mr. Espinoza’s car at the time of the accident.” IAS and Breeden
settled the underlying suit for approximately $1 million, which Empire paid.2
       Empire filed the instant action in the United States District Court for the
Northern District of Texas in April 2007.           The complaint sought declaratory
relief under federal and state law stating that Allstate owed a duty of defense
and indemnity (and consequently breached those duties), and monetary damages
in the amount expended by Empire in the defense of and payments made for IAS
and Breeden relating to the accident.
       The parties filed cross-motions for summary judgment. The district court
held that Allstate had no duty to defend under the eight-corners rule because the
“reasonable belief” exclusion applied based on the facts alleged in the underlying
complaint. Specifically, the district court reasoned that the allegations of street


       1
        There is no dispute that the Empire policy provides coverage in this case; at issue is
whether Allstate also owed Empire’s insureds -- and consequently Empire as subrogee --
defense and indemnification.
       2
        On November 19, 2003, Breeden pleaded guilty to a charge of aggravated assault with
a deadly weapon for his part in the collision.


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racing and conscious indifference “negate any inference that Breeden may have
had a reasonable belief to use the vehicle in the manner it was being operated
at the time of the accident.” Because there was no duty to defend, the district
court also held that there was no duty to indemnify. Accordingly, the district
court granted Allstate’s motion for summary judgment and denied Empire’s
motion for summary judgment. Empire timely appealed.
                         II. STANDARD OF REVIEW
      We review district court’s grant of summary judgment de novo. Turner v.
Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). A party is
entitled to summary judgment only if “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c). On a motion for summary judgment, the
court must view the facts in the light most favorable to the non-moving party
and draw all reasonable inferences in its favor. See Hockman v. Westward
Commc’ns, LLC, 407 F.3d 317, 325 (5th Cir. 2004). In reviewing the evidence,
the court must therefore “refrain from making credibility determinations or
weighing the evidence.” Turner, 476 F.3d at 343.
                              III. DISCUSSION
      Empire first argues that the underlying complaint’s failure to specifically
identify the vehicle as the Mitsubishi covered by the Allstate policy is not fatal
to its defense claim; rather, Empire urges the court to apply a narrow exception
to the eight-corners for “pure coverage questions,” such as the identity of the
vehicle involved in the accident. Allstate contends we should affirm because a
strict application of the eight-corners rule reveals insufficient allegations to
trigger the duty to defend, and there can be no duty to indemnify absent a duty
to defend. Allstate further argues that the facts alleged in the underlying
complaint trigger the policy’s “reasonable belief” exclusion, thus relieving

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Allstate of the duty to defend. Alternatively, Allstate contends that it did not
receive proper notice of the request for defense and that the undisputed facts do
not require indemnity.
      “An insurer’s duty to defend and duty to indemnify are distinct and
separate duties.” Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81,
82 (Tex. 1997). To determine whether the insurer owed a duty to defend, we
apply the “eight-corners rule.” Under this rule, “[a]n insurer’s duty to defend is
determined solely by the allegations in the pleadings and the language of the
insurance policy.” King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002).
An insurer has no legal obligation to defend its insured unless the complaint
alleges facts within the scope of coverage. See id. When the insurer refuses to
defend based on a policy exclusion, the insurer bears the burden of showing that
the complaint’s allegations trigger the exclusion. See Harken Exploration Co. v.
Sphere Drake Ins. PLC, 261 F.3d 466, 471 (5th Cir. 2001). All doubts as to the
duty to defend are resolved in favor of the insured. King, 85 S.W.3d at 187.
      Here, the Allstate policy insured damage caused by any covered person
which, in turn, it defined as the named insured and his family members, as well
as “any person using your covered auto.”      The complaint in the underlying
action was completely silent as to the vehicle Breeden was driving, and it does
not mention Allstate’s named insured nor any of his family members. There is
no allegation in that complaint that the defendants were engaged in
repossessions, that the vehicle was repossessed from Espinosa, or that it was a
Mitsubishi Eclipse; nor are there any identifying facts establishing that Breeden
was using a“covered auto” under the Allstate policy. Thus, applying the eight
corners rule, the facts alleged in the complaint do not set forth a claim




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potentially covered by the Allstate policy (i.e., damage caused by a person using
a covered auto).3
         Next, we turn to Empire’s argument that the district court erroneously
granted summary judgment to Allstate on the breach of the duty to indemnify
claim.       We affirm the district court’s grant of summary judgment on the
indemnification claim because the undisputed facts trigger the “reasonable
belief” exclusion. The contract between the secured party and IAS did not allow
or contemplate that the vehicle would be used in this manner by Breeden.
Instead, the contract states that the secured party “relies upon [IAS’s]
representation and warrant that you are fully familiar with the requirements of
the federal and any state debt collection practices statutes. All services shall be
performed in strict compliance with the requirements of and provisions of these
statutes.” The relevant Texas statute mandates that the secured party -- and
by extension IAS and its agents -- “use reasonable care in the custody and
preservation of collateral.” Tex. Bus. & Com. Code § 9.207(a). Moreover, the
statute permits the secured party to “use or operate the collateral” but only for
the purpose of preserving the collateral itself (or its value) or as permitted by
court order. See id. § 9.207(b)(4). Driving the collateral to and from San Antonio
searching for a truck part -- when the Mitsubishi could have easily been



         3
         We note that in GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d
305 (Tex. 2006), the Texas Supreme Court suggested that cases such as International Service
Ins. Co. v. Boll, 392 S.W.2d 158, 160 (Tex. Civ. App.-Houston 1965, writ ref’d n.r.e.), might be
appropriate for an exception to the eight-corners rule. Boll is in some respects arguably
analogous to this case. However, in this case it has been properly determined, as explained
in the text below, that under the actual facts the Allstate policy provided no coverage. The
defendants in the underlying case were not named insureds in the Allstate policy and were
covered by Empire’s policy, and they were owed and were provided a defense (as well as
indemnity) by Empire. Moreover, those defendants never requested a defense from Allstate,
and Empire did not do so until about sixteen months after the underlying lawsuit was filed,
and did not then or thereafter purport to do so on behalf of those defendants. Cf. National
Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 609-10 (Tex. 2008). In these circumstances,
there is no valid reason to invoke an exception to the eight-corners rule.

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exchanged for another non-collateral vehicle at the office -- went far beyond the
limited purpose of preserving the collateral. Breeden and his principal were or
reasonably should have been aware of their legal obligations in dealing with
repossessed collateral. Breeden pleaded guilty to aggravated assault with a
deadly weapon, which is impossible to reconcile with a reasonable belief that he
was entitled to use the repossessed car as an auto parts delivery vehicle. Indeed,
Breeden admitted that he never had permission to use the vehicle for this
purpose. Thus, the undisputed facts require the application of the reasonable
belief exclusion, thereby relieving Allstate of its duty to indemnify.
                              IV. CONCLUSION
      For the foregoing reasons, we AFFIRM the judgment of the district court.




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