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

                                                                                 FILED
                                       No 13-50469                          January 8, 2014
                                     Summary Calendar
                                                                            Lyle W. Cayce
                                                                                 Clerk
STAR-TEX RESOURCES, L.L.C.; MARIANA ESQUIVEL,

                                                    Plaintiffs-Appellants
v.

GRANITE STATE INSURANCE COMPANY

                                                    Defendant-Appellee




                     Appeal from the United States District Court
                          for the Western District of Texas
                               USDC No. 1:12-CV-326


Before HIGGINBOTHAM, DENNIS, and GRAVES, Circuit Judges.
PER CURIAM:*
       Both Plaintiffs-Appellants—Star-Tex Resources, L.L.C. (“Star-Tex”) and
Mariana Esquivel (“Esquivel”)—and Defendant-Appellee—Granite State
Insurance Co. (“Granite State”)—moved for summary judgment before the
magistrate judge 1 on what is, at base, an insurance-coverage dispute. The
magistrate judge granted Granite State’s motion and denied Star-Tex and



       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
       1   Both sides consented to trial by magistrate judge.
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                                No. 13-50469
Esquivel’s motion. Star-Tex and Esquivel have now appealed. For the reasons
that follow, we AFFIRM.
                              BACKGROUND
      The lawsuit underlying this appeal is a declaratory action seeking to
determine insurance coverage. The lawsuit underlying that action is a tort
suit brought by Eddie Siegmund (“Siegmund”) in Texas state court against
Star-Tex and Esquivel. Siegmund alleges that he was injured in an automobile
collision caused by Esquivel and based on negligence, negligent-hiring, and
respondeat superior theories of liability. Specifically, Siegmund alleged that
            [o]n or about June 29, 2010, [Siegmund] was seriously
      injured in an automobile collision caused by the negligence of
      Defendant Esquivel, an employee of Star-Tex Resources.
      Defendant Esquivel was under the influence of alcohol and/or
      drugs at the time of the collision.
      Star-Tex is a staffing company based in Austin, Texas that sends its
employees to other companies for temporary-staffing purposes. As relevant
here, Star-Tex contracted with a company called Auto Auction, which buys and
sells cars, to supply temporary staff. Esquivel was staffed to Auto Auction
when Siegmund, an Auto Auction employee, was struck and injured by a
vehicle owned by Auto Auction while he was walking in the Auto Auction lot.
      When Star-Tex and Esquivel were notified of Siegmund’s lawsuit, they
requested defense from Granite State, Star-Tex’s insurer. The plaintiffs sent
Granite State a General Liability Notice of Occurrence/Claim, which stated
that “Mariana Esquivel( an employee of Star-Tex) put car in motion pinning
Eddie Siegmund between t[w]o cars causing injury.” The notice further stated
that “Mariana[] Esquivel was the Star-Tex employee driving the car. She
tested positive for drugs.”
      On evaluating the plaintiffs’ requested defense, Granite State denied
coverage on the basis that the claims asserted in Siegmund’s suit were barred

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                                    No. 13-50469
by the auto-exclusion exception in Star-Tex’s insurance policy with Granite
State.      Effective June 4, 2010, Granite State insured Star-Tex with
commercial-property and commercial-general-liability insurance, providing
coverage through June 4, 2011. The policy provides that Granite State
         will pay those sums that the insured becomes legally obligated to
         pay as damages because of “bodily injury” or “property damage” to
         which this insurance applies. We will have the right and duty to
         defend the insured against any “suit” seeking those damages.
         However, we will have no duty to defend the insured against any
         “suit” seeking damages for “bodily injury” or “property damage” to
         which this insurance does not apply. We may, at our discretion,
         investigate any “occurrence” and settle any claim or “suit” that
         may result.
Included in the definition of “the insured” are “your ‘employees’, other than
either your ‘executive officers’ . . . or your managers . . . , but only for acts within
the scope of their employment by you or while performing duties related to the
conduct of your business.”
         The auto exclusion excepts from coverage:
               “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”.
               This exclusion applies even if the claims against any insured
         allege negligence or other wrongdoing in the supervision, hiring,
         employment, training or monitoring of others by that insured, if
         the “occurrence” which caused the “bodily injury” or “property
         damage” involved the ownership, maintenance, use or
         entrustment to others of any aircraft, “auto” or watercraft that is
         owned or operated or rented or loaned to any insured.
         Following Granite State’s denial of coverage, Star-Tex and Esquivel filed
a declaratory action in Texas state court (subsequently removed to federal
court) asking the court to declare that Granite State erred in its denial-of-
coverage determination and that Star-Tex and Esquivel were entitled to full
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                                  No. 13-50469
coverage under the policy.     Additionally, the declaratory action sought to
determine whether Granite State owed the plaintiffs duties to defend and
indemnify in Siegmund’s underlying suit.
      Both parties moved for summary judgment. Granite State moved for
summary judgment on the basis that, under the “eight-corners” rule, which
governs an insurer’s duty to defend in Texas, courts must make the reasonable
inference that Esquivel was driving an automobile at the time of the collision,
which would trigger the insurance policy’s auto exclusion and negate any
duties to defend and indemnify on the part of Granite State. Star-Tex and
Esquivel moved for summary judgment on the basis that the eight-corners rule
requires courts to construe their claim broadly and expansively, resolving all
doubts in favor of coverage. Because, according to the plaintiffs, Sigemund’s
underlying complaint asserts a potentially covered claim, Granite State’s duty
to defend was triggered. Further, the plaintiffs reason that the auto exclusion
does not apply because the complaint does not state that Esquivel was driving
or operating an automobile at the time of the collision. On review of the parties’
respective arguments, the magistrate judge granted Granite State’s motion
and denied Star-Tex and Esquivel’s motion.             Star-Tex and Esquivel
subsequently appealed.
                          STANDARD OF REVIEW
      “We review de novo a district court’s award of summary judgment,
applying the same standard as the district court.” Trinity Universal Ins. Co.
v. Emp’rs Mut. Cas. Co., 592 F.3d 687, 690 (5th Cir. 2010). “The court shall
grant summary judgment if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56(a). “A genuine issue of material fact exists when the
evidence is such that a reasonable jury could return a verdict for the non-
moving party.” Gates v. Tex. Dep’t of Protective & Regulatory Servs., 537 F.3d
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                                  No. 13-50469
404, 417 (5th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986)). “On cross-motions for summary judgment, we review each party’s
motion independently, viewing the evidence and inferences in the light most
favorable to the nonmoving party.” Ford Motor Co. v. Tex. Dep’t of Transp.,
264 F.3d 493, 498 (5th Cir. 2001). An insurer’s duty to defend is a question of
law that we review de novo. Ooida Risk Retention Grp., Inc. v. Williams, 579
F.3d 469, 471-72 (5th Cir. 2009).
                                 DISCUSSION
      “When, as here, jurisdiction is based on diversity, we apply the forum
state’s substantive law.” Bayle v. Allstate Ins. Co., 615 F.3d 350, 355 (5th Cir.
2010). In this case, both parties agree that Texas law applies, and so we
discuss and apply (1) Texas’s eight-corners rule, (2) a relevant exception to that
rule recognized by this court, and (3) Texas law regarding an insurer’s duty to
indemnify.
                                        I.
      “Under the eight-corners or complaint-allegation rule, an insurer’s duty
to defend is determined by the third-party plaintiff’s pleadings, considered in
light of the policy provisions, without regard to the truth or falsity of those
allegations.” GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197
S.W.3d 305, 308 (Tex. 2006); see also Zurich Am. Ins. Co. v. Nokia, Inc., 268
S.W.3d 487, 491 (Tex. 2008) (“Thus, ‘[e]ven if the allegations are groundless,
false, or fraudulent the insurer is obligated to defend.’” (quoting 14 LEE R. RUSS
& THOMAS F. SEGALLA, COUCH ON INSURANCE § 200:19 (3d ed. 2007))
(alteration in original)). “The rule takes its name from the fact that only two
documents are ordinarily relevant to the determination of the duty to defend:
the policy and the pleadings of the third-party claimant.” GuideOne, 197
S.W.3d at 308. Importantly, “[f]acts outside the pleadings, even those easily
ascertained, are ordinarily not material to the determination and allegations
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                                   No. 13-50469
against the insured are liberally construed in favor of coverage.” Id.; see also
Zurich, 268 S.W.3d at 491 (“The duty to defend is not affected by facts
ascertained before suit, developed in the course of litigation, or by the ultimate
outcome of the suit.”).
      Under Texas law, the insured bears the burden of establishing that the
insurance policy covers the claim. See Northfields Ins. Co. v. Loving Home
Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004). At that point, “to defeat the duty
to defend, the insurer bears the burden of showing that the plain language of
a policy exclusion or limitation allows the insurer to avoid coverage of all
claims, also within the confines of the eight corners rule.” Id. In evaluating
whether each side has satisfied its respective burden, the Texas Supreme
Court has directed courts applying Texas law to “resolve all doubts regarding
the duty to defend in favor of the duty and . . . construe the pleadings liberally.”
Zurich, 268 S.W.3d at 491 (citation omitted). “Where the complaint does not
state facts sufficient to clearly bring the case within or without the coverage,”
however, “the general rule is that the insurer is obligated to defend if there is,
potentially, a case under the complaint within the coverage of the policy.” Id.
(quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26
(Tex. 1965)) (internal quotation marks omitted). “Thus, the duty to defend
arises only when the facts alleged in the complaint, if taken as true, would
potentially state a cause of action falling within the terms of the policy.”
Northfield, 363 F.3d at 528.
      In undertaking this analysis, ordinarily “[c]ourts may not[] . . . (1) read
facts into the pleadings, (2) look outside the pleadings, or (3) imagine factual
scenarios which might trigger coverage.” Guar. Nat’l Ins. Co. v. Azrock Indus.,
211 F.3d 239, 243 (5th Cir. 2000). However, “we may draw inferences from the
petition that may lead to a finding of coverage.” Gen. Star Indem. Co. v. Gulf
Coast Marine Assocs., 252 S.W.3d 450, 456 (Tex. App. 2008). Accordingly,
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                                        No. 13-50469
when a court applies the eight-corners rule, it must consider “any reasonable
inferences that flow from the facts alleged.” Lib. Mut. Ins. Co. v. Graham, 473
F.3d 596, 601 (5th Cir. 2006) (citing Allstate Ins. Co. v. Hallman, 159 S.W.3d
640, 645 (Tex. 2005)).
       Siegmund’s suit asserts that he was “seriously injured in an automobile
collision caused by the negligence of . . . Esquivel,” who was “under the
influence of alcohol and/or drugs at the time of the collision.” 2 Apart from that,
however, the complaint is short on factual allegations. Nevertheless, Granite
State argues that the auto exclusion applies because it is reasonable to infer
from the complaint that Esquivel was operating a vehicle at the time she
allegedly caused the collision. Granite State also reasons that the fact that
Siegmund sued only Esquivel and no one else underscores that it is reasonable
to infer that Esquivel was operating a vehicle.                    Any other assumption,
according to Granite State, would impermissibly imagine factual scenarios not
capable of reasonable inference based on the pleadings.
       However, whereas Granite State’s inference is a reasonable one, it is not
the only reasonable inference that we may draw from the complaint. Other
reasonable inferences are possible that would not place Esquivel in an
automobile at the time of the accident. For example, Star-Tex and Esquivel
argue that it would be reasonable to infer from the complaint that Esquivel
caused the accident while directing traffic in the Auto Auction lot or while
walking in the lot, causing another driver to swerve and hit Siegmund. Both
are reasonable inferences based on the complaint and both would explain why
Siegmund supposedly brought suit only against Esquivel.                          Because the


       2  The complaint asserts negligence, negligent-hiring, and respondeat superior theories
of liability, but we have said that “[i]t is the factual allegations, not the legal theories, that
control” our analysis. Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365,
369 (5th Cir. 2008).

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                                 No. 13-50469
allegations in the underlying complaint—which can charitably be described as
terse—lend themselves to multiple reasonable inferences, we cannot
determine, based solely on the pleadings, whether there is a potentially
covered claim. Compare Ooida, 579 F.3d at 475 (“The underlying complaint
does not establish Moses’[s] role in the truck at the time of the accident; thus,
determination of his status as tandem driver”—necessary to determine
whether the insurance policy’s fellow-employee exclusion applied—“requires
consideration of evidence outside the eight corners of the complaint and the
Policy.”).
                                       II.
      Our conclusion that the pleadings alone do not permit a determination
concerning the issues of coverage and Granite State’s duty to defend does not
end the analysis.     Granite State asserts that we may consider extrinsic
evidence in determining the duties it owes to Star-Tex and Esquivel in the
event that Siegmund’s complaint is insufficiently precise to determine
coverage. We conclude that there is a limited exception to the eight-corners
rule that, under the circumstances of this appeal, allows us to consider
extrinsic evidence.
      “Although [the Texas Supreme Court] has never expressly recognized an
exception to the eight-corners rule, other courts have.” GuideOne, 197 S.W.3d
at 308; see, e.g., Northfield, 363 F.3d at 531. “Generally, these courts have
drawn a very narrow exception, permitting the use of extrinsic evidence only
when relevant to an independent and discrete coverage issue, not touching on
the merits of the underlying third-party claim.” GuideOne, 197 S.W.3d at 308
& n.2 (collecting cases). For instance, this court has Erie guessed that “if [the
Texas Supreme Court] were to recognize an exception to the eight-corners rule,
it would likely do so under [these] circumstances.” Id. at 308-09.


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       Specifically, this court has Erie guessed that the Texas Supreme Court
would recognize an exception to the eight-corners rule “when it is initially
impossible to discern whether coverage is potentially implicated and when the
extrinsic evidence goes solely to a fundamental issue of coverage which does
not overlap with the merits of or engage the truth or falsity of any facts alleged
in the underlying case.” See Northfield, 363 F.3d at 531. Importantly, we have
said that “[i]n GuideOne, the Supreme Court of Texas cited this language from
Northfield with approval, though it held that the circumstances of the case
before it did not meet the conditions of the exception.” Ooida, 579 F.3d at 475-
76 (citation omitted). 3 Accordingly, we concluded in Ooida that “GuideOne
supports our ‘Erie guess’ that the limited conditions of an exception to the eight
corners rule exists here.” Id. at 476. 4
       Further, we have suggested that extrinsic evidence is more likely to be
considered when an “explicit policy coverage exclusion clause[]” is at issue. See
Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 603 (5th Cir. 2006); see also
Oodia, 579 F.3d at 476 (considering extrinsic evidence to determine whether



       3 We note that Granite State incorrectly describes GuideOne as failing to reject the
extrinsic-evidence exception despite having had the opportunity to do so. In GuideOne, the
insurer “relie[d] on extrinsic evidence that [was] relevant both to coverage and the merits
and thus [did] not fit the . . . exception to the rule.” 197 S.W.3d at 309 (emphasis added).
Because the insurer failed to satisfy even the limited exception recognized by this court, the
GuideOne court had no opportunity to reject our exception to the eight-corners rule. See id.
at 309-10.
       4 Star-Tex and Esquivel state that Texas courts have specifically declined to consider
extrinsic evidence under the eight-corners rule. However, we observed in Northfield that
“certain Texas appellate courts[] . . . have appeared to recognize a narrow exception” to the
eight-corners rule. 363 F.3d at 528 & n.1 (citing State Farm Fire & Cas. Co. v. Wade, 827
S.W.2d 448, 452-53 (Tex. App. 1992); Gonzales v. Am. States Ins. Co., 628 S.W.2d 184, 187
(Tex. App. 1982); Cook v. Ohio Cas. Ins. Co., 418 S.W.2d 712, 715-16 (Tex. App. 1967); Int’l
Serv. Ins. Co. v. Boll, 392 S.W.2d 158, 161 (Tex. App. 1965)). Further, the plaintiffs ignore
that this court has endorsed the exception. Absent a change in law announced by the Texas
Supreme Court, a subsequent panel of this court may not overlook or ignore a prior panel’s
Erie guess.

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                                  No. 13-50469
deceased was tandem truck driver because coverage depended on applicability
of fellow-employee exclusion); W. Heritage Ins. Co v. River Entertainment, 998
F.2d 311, 314-15 (5th Cir. 1993) (considering extrinsic evidence demonstrating
that cause of defendant’s “impairment” was intoxication, triggering application
of insurance policy’s liquor-liability exclusion); Boll, 392 at 160-61 (considering
extrinsic evidence that underlying car accident occurred while insured’s son
was operating the vehicle, thereby excluding coverage). Because coverage and
Granite State’s duty to defend in this case depend on the application of an
“explicit policy coverage exclusion clause”—namely, the auto exclusion—it is
more likely that extrinsic evidence may be considered. See Graham, 473 F.3d
at 603.
      Granite State argues that, if we look beyond the eight corners, we should
consider the undisputed extrinsic evidence that Esquivel was driving a car, put
the car in motion, and pinned Siegmund between the car and another car, thus
causing him injury and thereby triggering the auto exclusion. First, however,
we must consider, based on the underlying complaint, whether “it is initially
impossible to discern whether coverage is potentially implicated.” Northfield,
363 F.3d at 531. We believe that it is. The complaint contains only one, brief
sentence describing the facts of the accident.      Importantly, it contains no
description of how Esquivel caused the collision. Because Granite State’s duty
to defend hinges on what Esquivel was doing when she caused the accident,
“[s]uch an explanation is critical to the question of coverage” under the policy.
W. Heritage, 998 F.2d at 315 (considering extrinsic evidence because it was
impossible, based on the vague allegations in the complaint, to determine the
basis of the defendant’s impairment when causing a car accident). In this
respect, we find the magistrate judge’s reasoning persuasive:
      Siegmund’s petition triggered the potential application of the Auto
      Exclusion in alleging he was injured in an “automobile collision.”

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                                 No. 13-50469
      Had Siegmund’s petition alleged only an accident without
      referencing an automobile or collision, it would have stated a
      potentially covered claim and the Auto Exclusion would not have
      applied. Alternatively, had the petition stated Esquivel was
      “driving” or “operating” at the time she negligently caused the
      collision, this case would fall squarely within the Auto Exclusion.
      Because Siegmund’s petition triggers a potential exclusion but
      omits a fundamental fact—how Esquivel’s negligence caused the
      collision that harmed Siegmund—the first requirement to permit
      the Court to consider evidence outside the eight corners of the
      complaint is satisfied.
      Second, we must consider whether “the extrinsic evidence goes solely to
a fundamental issue of coverage which does not overlap with the merits of or
engage the truth or falsity of any facts alleged in the underlying case.”
Northfield, 363 F.3d at 531. We conclude that the extrinsic evidence here goes
to coverage because it establishes that Esquivel, an “insured” within the
meaning of the insurance policy, was operating a vehicle at the time of the
accident, triggering the auto exclusion. Moreover, the evidence goes only to
coverage. It does not overlap with the merits of the underlying dispute because
the mere fact that Esquivel was operating a motor vehicle does not establish
her negligence or relate to Siegmund’s negligent-hiring or respondeat superior
claims. Further, the evidence does not engage in the truth or falsity of any fact
alleged, particularly given the paucity of facts contained in Siegmund’s terse
complaint.
      Thus, considering this undisputed, extrinsic evidence in addition to the
eight corners, we conclude that the auto exclusion applies, bars coverage, and
removes Granite State’s duty to defend Star-Tex and Esquivel in the
underlying lawsuit.
                                      III.
      Finally, we must consider Granite State’s motion for summary judgment
with respect to its duty to indemnify Star-Tex and Esquivel. “[T]he duty to

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                                      No. 13-50469
defend is distinct from, and broader than, the duty to indemnify.” Zurich, 268
S.W.3d at 490 (alteration in original) (quoting COUCH ON INSURANCE § 200:1)
(internal quotation marks omitted). “[T]he facts actually established in the
underlying suit determine whether the insurer must indemnify its insured.”
Id.    Thus, “[g]enerally, Texas law only considers the duty-to-indemnify
question justiciable after the underlying suit is concluded, unless ‘the same
reasons that negate the duty to defend likewise negate any possibility the insurer
will ever have a duty to indemnify.’” Northfield, 363 F.3d at 529 (quoting
Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.3d 81, 84 (Tex. 1997)). 5 In
this case, because there is no duty to defend in the underlying lawsuit due to
of the auto exclusion, the same reason that negates that duty likewise
precludes any possibility that Granite State will have to indemnify Star-Tex
and Esquivel. Accordingly, we conclude that Granite State has no duty to
indemnify Star-Tex and Esquivel.
                                    CONCLUSION
        For the foregoing reasons, we AFFIRM the magistrate judge’s grant of
summary judgment in favor of Granite State and also AFFIRM the magistrate
judge’s denial of summary judgment in favor of Star-Tex and Esquivel.




        5Perhaps recognizing that Granite State’s duty to indemnify depends on the insurer’s
duty to defend, Star-Tex and Esquivel offer no argument with respect to the magistrate
judge’s duty-to-indemnify ruling.
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