United States District Court,

W.D. Texas,

El Paso Division.

CANAL INSURANCE CO.

and

Canal Indemnity Co., Plaintiffs,

v.

Juan FLORES, Sr.; Veronica Flores, Individually and on Behalf of the Estate of Raymond Flores, Deceased, and as Next Friend of Michael Anthony Mendoza, a Minor Child; Olivia Murguia, as Guardian and Next Best Friend of Natalia Dahil Flores, a Minor; Complete Distribution Services, Inc.; and HRA Trucking, Defendants.

Civil Action No. 3:06-CV-84-KC.

 

April 14, 2009.

 

ORDER

 

KATHLEEN CARDONE, District Judge.

 

On this day, the Court considered Plaintiff Canal Insurance Company’s (“Canal Insurance”) and Plaintiff Canal Indemnity Company’s (“Canal Indemnity”) (collectively “Canal” or “Plaintiffs”) Motion for Summary Judgment (“Motion”) (Doc. No. 211); Defendant Complete Distribution Services, Inc.’s (“CDS”) and HRA Trucking’s (“HRA”) (collectively “CDS/HRA”) Response to Plaintiffs’ Motion for Summary Judgment (“CDS/HRA’s Response”) (Doc. No. 216); Defendants Juan Flores, Sr., Veronica Flores, and Olivia Murguia’s (“Individual Defendants”)  [Amended] Response to Plaintiffs’ Motion for Summary Judgment (“Individual Defendants’ Response”) (Doc. No. 226); Canal’s Reply to Individual Defendants’ Response (“Plaintiffs’ Individual Reply”) (Doc. No. 219); and Canal’s Reply to CDS/HRA’s Response (“Pls.’ CDS/HRA Reply”) (Doc. No. 220).

 

When referring to CDS/HRA and Individual Defendants collectively, the Court will employ the term “Defendants.”

 

For the reasons set forth herein, Plaintiffs’ Motion is DENIED.

 

I. FACTS AND PROCEDURE

 

A. Facts

 

The following facts are derived from the parties’ pleadings, Plaintiffs’ Proposed Undisputed Facts (“Facts”), and from various exhibits in the record. Unless otherwise indicated, these facts are undisputed.

 

CDS is an interstate contract carrier operating with a Federal Motor Carrier Permit. See CDS/HRA’s Resp. Ex. A at 4; Pls.’ Mot.App. C (Salvador Herrera Dep. 11:13-12:21 (Feb. 28, 2006)). Prior to October 3, 2004, CDS operated a small fleet of trucks and trailers, and paid approximately six drivers to haul its loads. Pls.’ Mot.App. D (Salvador Herrera Dep. 30:16-32:2 (Oct. 24, 2007)). These drivers were employed by the owner/operators of the trucks CDS leased.Id. CDS insured its fleet with a policy issued by Northland Insurance Company, with the effective dates of November 6, 2003, through November 6, 2004. CDS/HRA Resp. Ex. G at 1 (Salvador Herrera Aff.); Salvador Herrera Dep. 77:1-3 (Oct. 24, 2007).

 

In early 2004, CDS decided to expand its business, and was informed by its current insurer that the insurer would not insure additional units in CDS’s hauling fleet. Salvador Herrera Dep. 48:19-49:19 (Oct. 24, 2007); Facts ¶ 94. In May 2004, Salvador Herrera, president of CDS, approached Southwest Surety and its agent Jeff Arnold (“Arnold”), who agreed to provide CDS a policy on the additional trucks in its fleet.Salvador Herrera Dep. 51 (Oct. 24, 2007). Herrera then signed a mostly blank application for insurance with Southwest Surety that had “Canal Indemnity Company” written in the top left corner; Herrera then allowed Southwest Surety to complete the paperwork for him.Id. at 69, 79, 101-102; Facts ¶ 58. The resulting policy had the effective dates of May 17, 2004, to May 17, 2005. Facts ¶ 7. In its dealings with Arnold, CDS never asked Arnold whether the policy at issue covered claims that might be made against CDS employees, and Arnold never told CDS that such claims would be covered. Facts ¶¶ 43-44. CDS also did not see a copy of the final policy at that time. Salvador Herrera Dep. 53:5-7 (Oct. 24, 2007).

 

During the time when CDS was attempting to procure its policy, Southwest Surety was licensed as a general lines and properly and casualty agent. Facts ¶ 37. Arnold was licensed as a general lines property and casualty agent. Id. ¶ 38.

 

The application for insurance with Southwest Surety was later filled in to reject coverage for “Property damage uninsured motorist, bodily injury uninsured motorist and personal injury protection.”See Salvador Herrera Dep. 71-72 (Oct. 24, 2007). At the time Hererra signed the application, these areas of the application were blank. When asked why he signed a blank document, Herrera stated he “trusted [Arnold]-to fill in the application. I mean, he-he seemed to be knowing what he was doing. I mean he didn’t have that information filled in.”Id. at 74:13-18.

 

The parties dispute what happened next. The parties do agree that subsequent to CDS’s interactions with Southwest Surety, Texas Specialty Underwriters (“TSU”) reported the issuance of a surplus lines insurance policy to the Comptroller of Public Accounts and paid the requisite premium tax for the policy.Facts ¶ 29. TSU then filed a policy with the Surplus Lines Stamping Office of Texas (“SLSOT”), which SLSOT has since verified as policy L037910, issued by Canal Indemnity Company. See Pls.’ Mot.App. Ex. L. TSU also reported its issuance of a policy to the Texas Department of Insurance. Facts ¶¶ 29-31. During this time, TSU had no direct contact with CDS or HRA. Facts ¶ 34.

 

TSU has been a licensed surplus lines agent at all times relevant to the instant suit.

 

The Court notes that the copy of the policy provided to SLSOT contains an MCS-90 Endorsement Form with “Canal Indemnity” on it, but does not contain the terms of the policy itself, including the “employee exclusion” at issue in this Order or the “domestic employment” exception to the “employee exclusion.” See id.

 

On October 3, 2004, CDS and HRA entered into a Contractor Operating Agreement, under which CDS leased a tractor/trailer from HRA Trucking to haul loads for CDS. Facts ¶¶ 82-83; Canal Mot.App. Ex. D 32:24-25 (Salvador Herrera Dep. (Oct. 24, 2007)). On November 10, 2004, the tractor/trailer that CDS leased from HRA was involved in an accident on Interstate 20 in Smith County , Texas (“Underlying Accident”). Facts ¶ 1. The driver of the HRA vehicle-Raymond Flores-died in the accident. Id. At the time of the Underlying Accident, the vehicle involved was owned by HRA, Flores was operating the vehicle as a driver for HRA, and the responsible permitted motor carrier making that arrangement possible was CDS. Facts ¶ 85.

 

Within two days of the Underlying Accident, CDS received a copy of its insurance policy from Southwest Mutual for the first time. Salvador Herrera Dep. 53-54, 64-65 (Oct. 24, 2007). The policy identification number was L037910. Id. at 82:5-19; Facts ¶ 7. The copy of policy L037910 that Herrera received had “Canal Indemnity Company” on the policy jacket, and the “Canal Indemnity Company” logo on the front of the policy. Salvador Herrera Dep. 53-54, 64-65, 79, 101-102 (Oct. 24, 2007).

 

At this time and prior to the “clarifications” he received through this lawsuit, Salvador Herrera understood that Canal Insurance and Canal Indemnity were simply “Canal;” in other words, he did not know that Canal Indemnity and Canal Insurance were different business entities. Facts ¶ 57.

 

On October 28, 2005, the Individual Defendants brought a wrongful death suit against CDS in the District Court of El Paso County, Texas, 34th Judicial District (“Underlying Action”). Canal Mot.App. Ex. M. The Individual Defendants claimed in their Original Petition, inter alia, that Flores was an employee of CDS, and that he was within the course and scope of his employment at the time of the Underlying Accident. Id. at 2. By the time the Individual Defendants had filed their Eighth Amended Petition in the Underlying Action on October 24, 2008, the Individual Defendants had included HRA and other parties as defendants. Id. at 1. The Individual Defendants had also changed their allegations to argue that Flores was an employee of HRA but was hauling loads for CDS at the time of the accident. Id. at 3-4.Nevertheless, the Eighth Amended Petition alleges that CDS “had a right of control and/or exercised actual control over the injury causing activity giving rise to a duty of care under Texas law, but Decedent was not the borrowed servant, borrowed employee or employee of Defendant [CDS] under Texas law.”Id. at 4. The petition further alleges CDS “is liable for the damages and injuries which were caused by the negligence” of CDS. Id. at 5.

 

On November 22, 2005, Roger Brown, senior claims adjuster for Canal Indemnity and Canal Insurance, issued a reservation-of-rights letter to CDS on Canal Insurance letterhead. Facts ¶ 13; see also CDS/HRA Resp. Ex. J (“Reservation Letter”). In the Reservation Letter, it states: “As you may know, Canal Insurance carries the truck liability insurance for Complete Distribution Services and have [sic] received notice of the above accident by way of a lawsuit.”Reservation Letter 1. The Reservation Letter further stated that “[s]ince Mr. Flores was an employee in the course and scope of his employment at the time, we do not feel our truck liability would apply.”Id. Canal Insurance then stated it would file a declaratory judgment suit to obtain a ruling on applicable coverage. Id. In the meantime, Canal Insurance stated that it would provide an attorney for CDS’s defense in the Underlying Lawsuit.Id.

 

At all times since the inception of the Underlying Action, either Canal Insurance or Canal Indemnity has provided a defense for CDS/HRA in the Underlying Action. Facts ¶¶ 68-69. No evidence has been presented that this attorney has in any way participated in the instant action or represented Canal in any way with regards to the instant action. As of the date of the instant Order, no judgment has been entered against CDS or HRA in the Underlying Action. Id. ¶¶ 70-71.

 

B. Procedure in This Court

 

On February 23, 2006, Canal Insurance filed a Declaratory Judgment action in this Court pursuant to 28 U.S.C. § 2201, against CDS and the Individual Defendants. See Pl.’s Original Compl. (Doc. No. 1). In its Original Complaint, Canal Insurance alleged that it “is the re-insurer for Canal Indemnity Company which issued insurance policy No. L037190 (‘The Canal Policy’)” and that the vehicle driven by Flores in the Underlying Accident was listed as an “owned vehicle” in the policy. Id. ¶ 7. Canal Insurance further alleged that it had no duty to defend or indemnify CDS or any other named party in the Underlying Action, because the policy excluded the harms that took place in the Underlying Accident. Id. ¶¶ 8, 13, 15.On April 10, 2007, more than a year after Canal Insurance filed its Original Complaint, Plaintiffs filed a Fifth Amended Complaint, adding Canal Indemnity for the first time as a Plaintiff.See Plaintiffs’ Fifth Am. Compl. (Doc. No. 79) ¶ 1. By the Fifth Amended Complaint, Canal had also included HRA as a Defendant to the instant case.Id. ¶ 11.

 

Plaintiffs also added Veronica Flores as an Individual Defendant. See Plaintiffs’ Fifth Am. Compl. ¶ 2.

 

On May 7, 2007, CDS/HRA filed their Answer to Plaintiffs’ Fifth Amended Complaint and Counterclaim.(Doc. No. 90.) As part of their Counterclaim, CDS/HRA allege that Canal Insurance and Canal Indemnity “entered into a scheme where Canal issued policies under its name in order to avoid the reporting procedures required by law.”Id. ¶ 41.Consequently, CDS/HRA claimed Plaintiffs engaged in various nefarious activities, ranging from fraud to failure to provide prompt payment of claims. Id. ¶¶ 43-60.

 

On May 18, 2007, Plaintiffs filed an “Amended Motion to Strike [CDS/HRA’s] Counterclaim,” alleging in their “Procedural Background” section that Plaintiffs’ Motion for Leave to File Fifth Amended Complaint was unopposed. Doc. No. 94 at ¶ 5. This assertion, like so many other assertions Plaintiffs make throughout the course of this litigation, is directly contradicted by Plaintiffs’ own submissions. See Pls.’ Mot. for Leave to File Pls.’ Fifth Am. Compl. (Doc. No. 71) at ¶ 8 (“Plaintiff’s counsel did confer with … counsel for [CDS/HRA], and [he] is opposed to this Motion.”).

 

On January 15, 2009, Plaintiffs filed the instant Motion. On February 13, 2009, both CDS/HRA and the Individual Defendants filed their Responses.0 On February 27, 2009, Plaintiffs filed their Replies.

 

0. On March 11, 2009, pursuant to a Court Order, Individual Defendants filed an Amended Response.

 

II. STANDARD

 

Summary judgment is required if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Warfield v. Byron, 436 F.3d 551, 557 (5th Cir.2006). The substantive law identifies which facts are material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202,(1986); Ellison v. Software Spectrum, Inc., 85 F.3d 187, 189 (5th Cir.1996). A dispute about a material fact is genuine only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248; Ellison, 85 F.3d at 189.

 

[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323; Wallace v. Texas Tech. Univ., 80 F.3d 1042, 1046-1047 (5th Cir.1996). If the moving party meets its initial burden, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. FED. R. CIV. P. 56(e). The nonmovant’s burden may not be satisfied by conclusory allegations, unsubstantiated assertions, or only a scintilla of evidence. Warfield, 436 F.3d at 557 (quoting Freeman v. Texas Dep’t of Crim. Justice, 369 F.3d 854, 860 (5th Cir.2004)). Factual controversies are to be resolved in favor of the nonmovant, but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc). Thus, the ultimate inquiry in a summary judgment motion is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 251-52.

 

III. DECLARATORY JUDGMENT

 

Plaintiffs argue that the insurance policy issued to CDS excludes coverage for the harm that took place in the Underlying Accident. Pls.’ Mot. 3. Both Plaintiffs and CDS/HRA have submitted as evidence multiple copies of Policy L037910, some of which contain the name “Canal Insurance Company” as the insurer, and some of which contain only “Canal Indemnity Company” throughout. In addition, certain copies contain the federally-mandated Endorsement Form MCS-90 and some do not. Finally, both Plaintiffs and CDS/HRA have submitted evidence showing that, at different times, Canal Insurance and Canal Indemnity have asserted that one entity has issued the policy in question, only to later contradict themselves and state that the other entity is the insurer. As will be described in greater detail infra, this conflicting evidence creates questions of fact which precludes judgment as a matter of law determining coverage. Moreover, these questions of fact preclude judgment as a matter of law regarding CDS/HRA’s counterclaims.

 

To demonstrate why the evidence on the record creates these issues of fact, the Court will first-for illustration purposes only-analyze Plaintiffs’ most recently produced copy of the policy as if it were the definitive and undisputed version. See Pls.’ Mot.App. K-1 (“The Policy”).1 The Court will then compare the analysis of this Policy to other copies of the policy on the record to illustrate why the multiple contradictory copies and Plaintiffs’ inconsistent statements throughout the course of this litigation make it impossible to determine coverage and other potential liability without first placing before a fact finder the questions of what the policy constituted and who issued it.

 

1. This copy of Policy L037910 appears to be the most complete and internally consistent policy on the record, and contains language regarding the “employee” exclusion and “domestic employment” exception, which appear in almost all copies of the policy on the record (with the exception of the copy held in the SLSOT records, see Pls.’ Mot.App. Ex. L). The Policy also contains an Endorsement Form MCS-90, which is required by federal law to be attached to any federal motor carrier policy engaged in interstate commerce. The effect of the “employee” exclusion, “domestic employment” exception, and the inclusion of the MCS-90 are at specific issue in this case.

 

A. Coverage Under Plaintiffs’ Alleged Policy

 

Because this is a diversity action, the Court will apply the law of the state in which it sits and in which the events at issue took place, namely Texas law. See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Am. Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir.2001) (citation omitted) (interpreting Texas law for contract formed under Texas law).“Under Texas law, the same rules apply to the interpretation of insurance contracts as apply to the interpretation of other contracts.” Ryan, 274 F.3d at 323 (citing Forbau v. Aetna Life Ins. Co. (Tex.1994)) (additional citations omitted).“A court’s primary concern is to give effect to the intentions of the parties as expressed by the policy language.”Id. (citing Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.1983)). The Court gives the terms of a policy “their plain, ordinary meaning unless the policy itself shows that the parties intended the terms to have a different technical meaning.”Id. (citing Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984)). However, the Court does not consider terms in the abstract but must “consider the policy as a whole and interpret it to fulfill the reasonable expectations of the parties in light of customs and usages of the industry.” Consumers County Mut. Ins. Co. v. P.W. & Sons Trucking, Inc., 307 F.3d 362, 365 (5th Cir.2001) (citing N. Am. Shipbuilding, Inc. v. S. Marine & Aviation Underwriting, Inc., 930 S.W.2d 829, 834 (Tex.App.1996)).

 

Plaintiffs argue that the Policy excludes coverage for the harm resulting from the Underlying Accident. Consequently, Plaintiffs argue they have neither a duty to defend CDS/HRA in the Underlying Action nor a duty to indemnify CDS/HRA for any damages resulting from the Underlying Action. Under Texas Law, the duty to defend and the duty to indemnify are separate and distinct obligations. Ryan, 274 F.3d at 323-24 (citing Am. Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W. S.e.2d 152, 153 (Tex.App.1990)). The Court will analyze each in turn.

 

1. Plaintiffs’ duty to defend

 

Texas follows the eight corners rule of insurance contract interpretation.United Nat’l Ins. Co. v. Hydro Tank, Inc., 49 F.3d 445, 448 (5th Cir.2007) (citing GuideOne Elite Ins. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex.2006)). This rule states that 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., v. 197 S.W. at 308;see also King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 188 (Tex.2002). The duty to defend, therefore, is determined by the allegations in the underlying pleadings and the language of the insurance policy. Gehan Homes Ltd. v. Employers Mut. Cas. Co., 146 S.W.3d 833, 838 (Tex.App.2004) (citing Nat’l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997)). If the pleadings allege facts stating a cause of action potentially falling within the insurance policy’s scope of coverage, the insurer has a duty to defend.Hydro Tank, Inc., 49 F.3d at 448 (citing Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 599 (5th Cir.2006)).

 

When applying the eight corners rule, the Court liberally interprets allegations in the petition. Gehan Homes Ltd., 146 S.W.3d at 838 (citing Nat’l Union Fire Ins. Co., 939 S.W.2d at 141). Doubtful cases will be resolved in favor of the insured. Hydro Tank, Inc., 497 F.3d at 448 (citing Nat’l Union Fire Ins. Co., 939 S.W.2d at 141). Therefore, the facts alleged in the underlying petition against the insured are presumed to be true when gauging the insurer’s duty to defend. Gehan Homes, Ltd., 146 S.W.3d at 838 (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex.1965)).

 

The Policy states, in relevant part, that the insurer

 

will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use, including loading and unloading, for the purposes stated as applicable thereto in the declarations, of an owned automobile or of a temporary substitute automobile, and the [insurer] shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient ….

 

Policy 3.

 

Plaintiffs do not dispute that “an occurrence” took place, and that it arose of the use of an “owned automobile” under the Policy. Plaintiffs argue, however, that decedent Flores was a statutory employee of CDS under federal law for purposes of the policy. Pls.’ Mot. ¶¶ 8-9. Plaintiffs argue that Decedent Flores was therefore not covered by the Policy, due to an “employee” exclusion. Id.

 

a. “Employee” exclusion

 

The Policy states that coverage does not apply

 

(c) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury;

 

Policy 3 (emphasis added).

 

The Policy does not define “employee.” However, relevant provisions in the Policy inform how the parties intended to define the term. First, the Policy is a public-liability policy designed specifically for use by a motor-carrier in the interstate trucking industry. Salvador Herrera Dep. 11-12 (Feb. 28, 2006) (describing CDS’s business as a “[l]ong-haul company” with a Federal Motor Carrier Permit, “plated for all 48 states,” and particularly servicing nineteen states). In addition, the Policy contains an MCS-90, a federally-mandated endorsement promulgated by the Secretary of Transportation that is designed to protect the public by ensuring motor carriers maintain the minimum level of insurance in order to obtain a permit. See Policy 20-21; see also49 U.S.C. § 13906; 49 C.F.R. § 390.3(a); Consumers County Mut. Ins. Co., 307 F.3d at 365-66.

 

The MCS-90 states that

 

the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles.

 

Policy 20.

 

However, the MCS-90 adds that “such insurance as is afforded for public liability does not apply to injury or to death of the insured’s employees while engaged in the course of their employment ….”Id.(emphasis added). The term “employee,” as used in the MCS-90 is defined as

 

any individual, other than an employer, who is employed by an employer and who in the course of his or her employment directly affects commercial motor vehicle safety. Such term includes a driver of a commercial motor vehicle (including an independent contractor while in the course of operating a commercial motor vehicle), a mechanic, and a freight handler.

 

49 C.F.R. § 390.5 (emphasis added).2

 

2. The Fifth Circuit in Consumers County explained that “[b]y eliminating the common law employee/independent contractor distinction, the definition services to discourage motor carriers from using the independent contractor relationship to avoid liability exposure at the expense of the public.” Consumers County Mut. Ins., Co., 307 F.3d at 366.

 

Given the interstate nature of CDS/HRA’s business and the clear intention of the parties to comply with federal insurance requirements by including an MCS-90, the federal definition for what constitutes “an employee” is relevant to the entire Policy. See Consumers County Mut. Ins. Co., 307 F.3d at 365-66; Pouliot v. Paul Arpin Van Lines, Inc., 292 F.Supp.2d 374, 381 (D.Conn.2003) (“[A]ny situation involving a motor vehicle accident on a public highway is probably covered by [49 C.F.R.] § 390.5) (collecting cases).

 

In the Underlying Action, Individual Defendants’ Eighth Amended Petition states that the decedent Flores was employed by HRA and was hauling a load for CDS at the time of the Underlying Accident. Pls.’ Mot.App. Ex. N. at 3. Individual Defendants further allege that “[CDS] had a right of control and/or exercised actual control over the injury causing activity,” and that “[CDS] failed to provide a safe work environment and proper training for [Flores].”Id. at 4. These allegations demonstrate that, at the very least, decedent Flores was an independent contractor working for CDS. See Schievink v. Wendylou Ranch, Inc., 227 S.W.3d 862, 866 (Tex.App.2007) (defining “independent contractor” as “any person who, in the pursuit of an independent business, undertakes to do a specific piece of work for other persons, using his own means and methods, without submitting himself to their control in respect to all its details.”) (citing Indus. Indem. Exch. v. Southard, 138 Tex. 531, 160 S.W.2d 905, 907 (Tex.1942)). Accordingly, under the definition of 49 C.F.R. § 390.5, Flores qualifies as a statutory “employee” in the Policy and falls under the Policy’s relevant “employee” exclusion. See Consumers County Mut. Ins. Co., 307 F.3d at 366;see also White v. Excalibur Ins. Co., 599 F.2d 50, 51 (5th Cir.1979); Northland Cas. Co. v. Rocky Harrell, No 4:06CV731 JMM, 2007 WL 2319863, at * 4 (E.D.Ark. Aug.9, 2007).

 

b. “[D]omestic employment” exception to the “employee” exclusion

 

The Policy contains an exception to the “employee” exclusion. Specifically, the Policy states that

 

this exclusion does not apply to any such injury arising out of and in the course of domestic employment by the insured unless benefits therefor are in whole or in part either payable or required to be provided under any workmen’s compensation laws.3

 

3. Flores was not covered under any Workmen’s Compensation policy as an employee of HRA trucking. See Canal Mot.App. Ex. H (Amalia Herrera Dep. 14:6-17 (Oct. 24, 2007)); see also Ex. N at 4 (“[HRA] failed to maintain worker’s compensation insurance.”). Accordingly, if the “domestic employment” exception applies, there is no exemption from the exception to the exclusion in the instant case.

 

Policy 3 (emphasis added).

 

Plaintiffs argue that the term “domestic employment” means employment within a home or domicile and therefore does not apply to decedent Flores. Pls.’ CDS/HRA Reply ¶¶ 14-22. CDS/HRA argue that the term may indicate work within the continental United States. CDS/HRA Resp. ¶¶ 32-36. At the very least, CDA/HRA argue that the term is ambiguous, and that any ambiguity should be resolved in favor of the insured. CDS/HRA Resp. ¶ 34. Plaintiffs have the better argument.

 

“Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex.1997); see also Am. Mfgs. Mut. Ins. Co. v. Shaefer, 124 S.W.3d 154, 157 (Tex.2004). However, if a term has more than one reasonable interpretation, a court must construe the exclusion in favor of the insured as long as that construction is not unreasonable. Fiess v. State Farm Lloyds, 202 S.W.3d 744, 756 (Tex.2006) (citation omitted). Nevertheless, “a policy provision is not ambiguous merely because different parties or different courts have interpreted it differently.”Id.; see also Stinnett v. Colorado Interstate Gas Co., 227 F.3d 247, 254 (5th Cir.2000). Indeed, “[t]he court will not torture words to import ambiguity when ordinary meaning leaves no room for such.” Canal Ins. Co. v. Earnshaw, 629 F.Supp. 114 (D.Kan.1985) (citing Kansas State Nak & Trust Co. v. Old Am. Ins. Co., 491 F.2d 307 (10th Cir.1974)). Ultimately, “[i]f a contract as written can be given a definite or certain legal meaning, then it is unambiguous as a matter of law.” Progressive County Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 551 (Tex.2003) (citing McKee, 943 S.W.2d at 458).

 

The American Heritage Dictionary of the English Language defines “domestic” as both “[o]f or relating to the family or household” and “[o]f or relating to a country’s internal affairs.”AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE, Houghton Mifflin Co. (2006); see alsoBLACK’S LAW DICTIONARY (8th Ed.2004) (defining domestic as “of or relating to one’s country” and “of or relating to the family or the household”). As the dictionary supports both Plaintiffs’ and CDS/HRA’s definition of “domestic,” the term, taken in isolation, may be subject to more than one interpretation.

 

However, when interpreting a contract, a court “must examine and consider the entire writing in an effort to harmonize and give effect to all provisions so that none is rendered meaningless.” MEMC Elec. Materials, Inc., v. Albemarle Corp., 241 S.W.3d 67, 71 (Tex.App.2007) (citing J.M. Davidson Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003)). In other words, a court must not consider provisions in isolation but in the context of the entire instrument.Id. (citing J.M. Davidson, Inc., 128 S.W.3d at 229). In the context of insurance contracts, courts almost unanimously recognize the term “domestic employment” as meaning employment within the home. See, e.g., United Fire & Cas. Co. v. Gravette, 182 F.3d 649, 655 (8th Cir.1999) (“A ‘domestic employee’ is commonly understood to be a household servant.”); Canal Ins. v. J-Lin Trucking, No. 2:95CV156-B-A, 1996 U.S. Dist. LEXIS 21394, at *6-7 (N.D. Miss. Sep 4, 1996) (finding that “the term ‘domestic employment’ is unambiguous and carries its generally accepted meaning of services of a household nature in or about a private home.”); Richoux v. Allais & Sons, Inc., No. 85-4161, 1987 U.S. Dist. LEXIS 3614, at *2-3 (E.D.La. May 6, 1987) (same); Earnshaw, 629 F.Supp. at 118 (D.Kan.1985) (same); see also Dakota, Minn. & E. R.R. Corp. v. Heritage Mut. Ins. Co., 639 N.W.2d 513, 516-17 (S.D.2002); United States Fid. & Guar. Co. v. Ross, 521 A.2d 301, 304 (Me.1987).4

 

4. CDS/HRA cite one case holding that the term “domestic employment” is ambiguous. See Caroll v. Castillo, No. 13-99-006-CV, 2000 Tex.App. LEXIS 2304, at 13-14 (Tex.App. April 6, 2000) (“ ‘Domestic employee’ could mean an employee … who works in a home, such as a cook, maid or housekeeper; or it could mean an employee who works in the United States as contrasted with one who works abroad in a foreign country.”). This case, however, provides no analysis and is an unpublished opinion by an intermediate court of appeals. Further, it has no precedential value. See United Teachers Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 565-566 (5th Cir.2005) (While decisions of intermediate state courts provide guidance, they are not controlling. If a state’s highest court has not ruled on an issue in question, a federal court must determine, to the best of its ability, what the highest court would decide.”) (internal citations omitted). Given the clear direction of the remaining case law and the context in which the term is employed, the Court declines to follow Caroll.

 

In addition, the term “domestic employment” is employed in the Policy such that the employee exclusion does not apply “unless benefits therefor are in whole or in part either payable or required to be provided under any workmen’s compensation laws.”Policy 3. This connection of domestic employees to workers’ compensation appears repeatedly in Texas insurance cases, none of which employs “domestic employment” to distinguish between intra-national and international work. See, e.g., Travelers Indem. Co. v. Cen-Texas Vending Co., 530 S.W.2d 354, 354 (Tex.App.1975) (stipulating that decedent was not a “domestic employee” even though no indication is made that the accident triggering the policy occurred internationally); Commercial Standard Ins. Co. v. Am. Gen. Ins., 455 S.W.2d 714, 715 (Tex.1970); Travelers Ins. Co. v. Chicago Bridge & Iron Co., 442 S.W.2d 888, (Tex.1969); Williams v. Employers Mut. Cas. Co., 368 S.W.2d 122, 123 (Tex.1963); Green v. Am. Gen. Ins. Co., 354 S.W.2d 616, 618 (Tex.App.1962).

 

Moreover, the Texas Labor Code exempts “a person employed as a domestic worker or a casual worker engaged in employment incidental to a personal residence” from Workers Compensation Insurance Coverage in Texas. SeeTEX. LAB.CODE ANN. § 406.091 (Vernon 2006). The comparison of a domestic employee to one who is employed in a personal residence clearly indicates that the Texas Labor Code views a domestic employee as one who works in the home and not generally within the United States. Indeed, the Texas Labor Code makes no indication that the term “domestic employment” has anything to do with in-country employment when determining whether an employee is entitled to workers’ compensation. Related case law interpreting the workers’ compensation laws further points to “domestic” employees as those who work in the home. See, e.g., Tex. Employers Ins. Ass’n v. Choate, 644 S.W.2d 112, (Tex.App.1982) (employing “domestic” in workers’ compensation case in relation to services furnished by wife of injured worker); Hardware Dealers’ Mut. Fire Ins. v. King, 426 S.W.2d 215, 218 (Tex.1968) (workmen’s compensation case involving issue of whether janitor hired by family corporation and as household servant at homes of family members was a “domestic servant” at time of accident).

 

 

Accordingly, the case law interpreting “domestic employment” clearly favors a meaning of the term related to home employment, particularly when the term is directly tied to workers’ compensation laws in the Texas Labor Code. The Court can therefore give “definite or certain legal meaning” to “domestic employment” as work in a home or domicile in the context of the Policy without having to first resolve any ambiguity. As there is no allegation that decedent Flores was a worker in someone’s home, it would appear that under the Policy most recently produced by Plaintiffs, the “domestic employment” exception would not apply to decedent Flores, and that decedent Flores would be excluded from coverage as a statutory employee of CDS. See Consumers County Mut. Ins. Co., 307 F.3d at 365-66.

 

In conclusion, pursuant to the copy of Policy provided by Plaintiffs in their Motion for Summary Judgment, and pursuant to the facts in the Individual Defendants’ Eighth Amended Petition, there appears to be no coverage in the Policy for decedent Flores’s death in the Underlying Action. Accordingly, there would be no duty to defend under this version of the Policy.

 

2. Plaintiffs’ duty to indemnify

 

Plaintiffs also argue that if there is no duty to defend CDS/HRA under the Policy, there is also no duty to indemnify. Pls.’s Mot. ¶ 13. Even assuming the Policy under consideration is the authentic one, the Court disagrees.

 

The duty to defend is triggered by the alleged facts in the underlying petition, while the duty to indemnify is triggered by the actual facts establishing liability in the underlying suit. Heyden Newport Chem. Corp. v. S. Gen., 387 S.W.2d 22, 25 (Tex.1965); see also United Nat. Ins. v. Hydro Tank, 497 F.3d at 448. Accordingly, 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 Ins. Co. v. Loving Care, Inc., 363 F.3d 523, 528 (5th Cir.2004) (quoting Farmers Texas County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex.1997) (emphasis in original)).

 

The Court has held above that if it were to make its ruling based on the alleged facts in the Eight Amended Petition and the Policy submitted with Plaintiffs’ Motion for Summary Judgment, Plaintiffs would have no duty to defend CDS/HRA in the Underlying Action. This is so because all alleged damages would be barred by relevant exclusions. Nevertheless, neither party has presented evidence that any facts have been conclusively established in the Underlying Action. It remains possible, then, that facts may later be alleged in subsequent amended pleadings and proven at trial which would establish damages that do not fall within any exclusion.5

 

5. The Court notes that it is already proceeding from the Individual Defendants Eighth Amended Petition. How many more times the Individual Defendants will amend their Petition and thereby change the facts of the case is certainly beyond the ken of this Court. Moreover, this Court does not expect the state court in the Underlying Action to close the door on subsequent amended pleadings simply because this Court has ruled there is no duty to indemnify based on the allegations in the current amended pleading.

 

Additionally pleaded and proven facts may thus potentially trigger Plaintiffs’ duty to indemnify even if there is no current duty to defend under the relevant policy. Ruling on the duty to indemnify might therefore be premature and might very well conflict with findings yet to be made in the state court. Westport Ins. Corp. v. Atchley, Russell, Waldrop & Hlavinka, 267 F.Supp.2d 601, 634 (E.D.Tex.2003). Ultimately, the Court cannot state with certainty that all possibility is negated that Plaintiffs will ever have a duty to indemnify. Northfield Ins. Co., 363 F.3d at 528 (emphasis in original).

 

The Supreme Court has held that district courts have the discretion to grant relief as to the duty to indemnify. See Wilton v. Seven Falls Co., 515 U.S. 277, 283, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); see also Northfield Ins., 363 F.3d at 536-37; Westport Ins. Corp., 267 F.Supp.2d at 633. Declining to adjudicate a case is particularly appropriate where parallel proceedings, presenting opportunity for ventilation of the same state law issues, [are] underway in state court. Wilton, 515 U.S. at 290. In Wilton, the Supreme Court held that the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration. Id. at 288.

 

Any holding this Court makes regarding Plaintiffs duty to indemnify remains contingent on a finding that CDS/HRA are liable in the Underlying Action. See Allstate Ins. Co. v. Employers Liab. Assur. Corp., 445 F.2d 1278, 1281 (5th Cir.1971) (We have held that no action for declaratory relief will lie to establish an insurer’s liability in a policy clause contest such as the one at bar until a judgment has been rendered against the insured since, until such judgment comes into being, the liabilities are contingent and may never materialize.) (citing Am. Fid. & Cas. Co. v. Penn. Threshermen & Farmers’ Mut. Cas. Ins. Co., 280 F.2d 453 (5th Cir.1960)). If the Underlying Defendants are found not liable for decedent Flores’s injuries, for example, any holding this Court makes on Plaintiffs’ duty to indemnify becomes moot. It is therefore in the consideration of practicality and wise judicial administration that the Court declines to rule on Plaintiffs’ duty to indemnify before the Underlying Action is fully adjudicated, since the state court proceeding presents an opportunity for ventilation of a key issue regarding Plaintiffs’ duty to indemnify. Because there has yet to be any finding of liability in the Underlying Action that has been brought to this Court’s attention, the Court declines to reach this issue. See also Lamar Homes Inc. v. Mid Continent Cas. Co., 501 F.3d 435, 435 (5th Cir.2007) (“We do not reach the duty to indemnify, however, as that duty is not triggered by allegations but rather by proof at trial.”).

 

B. Questions of Fact Remain Regarding Which Policy was Issued and Who Issued The Policy

 

Regardless of whether there is coverage under the Policy produced by Plaintiffs in their latest Motion, there ultimately remains a question of fact as to who issued CDS’s insurance policy and which of the policies is the authentic one. Without a resolution of these questions of fact, the Court can make no declaration of Plaintiffs’ duties either to defend or indemnify CDS.

 

As stated above, Salvador Herrera, president of CDS, signed an insurance policy application which had the name “Canal Indemnity” written on it. Shortly after the Underlying Accident, Herrera also received a copy of the policy L037190 with the name “Canal Indemnity” written on it. Had this been the extent of the evidence, there would be no question of fact. However, from this point on, Canal Insurance and Canal Indemnity proceeded to repeatedly change positions regarding which entity is the insuring company. Indeed, the record provided by Plaintiffs alone is replete with statements from both Canal Insurance and Canal Indemnity at different times asserting that one entity is the insurer, only to later be contradicted by the other entity.

 

First, as both parties acknowledge, Canal Insurance-not Canal Indemnity-issued the Reservation Letter to CDS in the Underlying Suit. Plaintiffs have presented no authority, nor has the Court found any, where one independent entity can assume the rights and obligations of another company and then reserve those rights, even when the former entity is the parent company and re-insurer of the latter. Plaintiffs attempt to explain this “oversight” by stating that Roger Brown, claims supervisor for Canal Insurance and Canal Indemnity, mistakenly put a Canal Indemnity reservation on Canal Insurance letterhead. Facts ¶ 13. Brown further states in his affidavit that he inadvertently referred to Canal Insurance in the text of the Reservation Letter as the insuring party, and “simply overlooked the fact that the policy was issued by Canal Indemnity Company[.]” Pls.’ Mot.App. Q (Brown Aff. ¶¶ 6, 7). Brown then unambiguously states that “Policy L037190 was written and issued by Canal Indemnity Company” and that the Reservation Letter “should have been issued on the letterhead and made reference to Canal Indemnity Company.”Id. ¶¶ 4, 8. Again, were this the only case of mistaken identity on the record, one might be able to overlook this “oversight,” or at least take Plaintiffs’ explanation at face value. Unfortunately, this is only the beginning.

 

It in its Original Complaint, Canal Insurance states that it is the re-insurer for a policy issued by Canal Indemnity to CDS. Pl.’s Original Compl. ¶ 8. Canal Insurance then refers throughout its Complaint to “the policy” and states that “[a] copy of said Canal Policy is attached hereto and marked as Exhibit B.”Id. ¶ 7. However, no exhibit is so attached.

 

In fact, no copy of the policy appeared in the record until Canal Insurance filed its “Motion for Leave to File Plaintiff’s First Amended Complaint.”(Doc. No. 32). Attached to this Motion is a copy of a policy L037190 with the words “Canal Insurance Company” on the front page, “Canal Indemnity Company” on the second page, and “Canal Insurance Company” on the third page. (Doc. No. 32-2.). The final identification of Canal Insurance states that Canal Insurance will thereafter be referred to as “the company,” and that “the company” “will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies[.]”Id.The attached policy then proceeds to enumerate all of its coverage and exclusions, including those at issue in the instant case, in reference to the rights and duties of “the company.” Id. The name “Canal Indemnity” then reappears on several endorsements at the end of the policy, including on an Endorsement Form MCS-90. Id.

 

A similar copy of this policy appears as Exhibit C of “Plaintiff’s First Amended Motion for Leave to File Plaintiff’s Second Amended Complaint” (Doc. No. 34), Canal Insurance’s “Second Motion for Leave to File Third Amended Complaint” (Doc. No. 37), Canal Insurance’s “Third Motion for Leave to File Plaintiff’s Fourth Amended Complaint” (Doc. No. 55), and Canal Insurance’s “Motion for Leave to File Plaintiff’s Fifth Amended Complaint” (Doc. No. 71). In each of these copies of the asserted policy, the names “Canal Insurance” and “Canal Indemnity” once again appear on alternating pages of the policy. Canal Insurance is once again described on page three of each copy of the policy as “the company” that “will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies[.]”See Ex. C, Doc.Nos. 34, 37, 55.“Canal Indemnity” once again shows up on the endorsements, though an MCS-90 is noticeably absent in Canal Insurance’s “First Amended Motion for Leave to File Plaintiff’s Second Amended Complaint,”“Second Motion for Leave to File Third Amended Complaint,” or “Third Motion for Leave to File Plaintiff’s Fourth Amended Complaint.”6

 

6. What appears to be page two of an MCS-90 is present in Canal Insurance’s “First Amended Motion for Leave to File Plaintiff’s Second Amended Complaint,” and “Second Motion for Leave to File Third Amended Complaint.”However, no explanation is given as to where the first page is. This is significant, because the first page contains the names of the parties, the terms of the Endorsement, and the relevant employee exclusion. No MCS-90 whatsoever is found in “Third Motion for Leave to File Plaintiff’s Fourth Amended Complaint.”

 

In addition to these differently-labeled policies, Canal Insurance makes multiple affirmative statements throughout the record that Canal Insurance, not Canal Indemnity, is the insuring party for CDS. For example, in Canal Insurance’s “Second Motion for Leave to File Third Amended Complaint,” Canal Insurance describes the policy as its own and calls CDS “its named insured.” Doc. No. 34 ¶¶ 3-4. In Canal Insurance’s “Second Motion for Leave to File Third Amended Complaint,” Canal Insurance states that it is “the insurer under a policy (‘the Canal Policy’)” issued to CDS.7 Doc. No. 37 at 1. In Canal Insurance’s “Third Motion for Leave to File Plaintiff’s Fourth Amended Complaint,” Canal Insurance states that it has assumed the defense of HRA in the Underlying Action as a “ ‘Persons Insured’ under the Canal policy.”Doc. No. 55.

 

7. Canal Insurance specifically says that “Plaintiff CANAL is the insurer under a policy (the ‘Canal Policy’),” but the only plaintiff in the suit at that time is Canal Insurance.

 

Nevertheless, in Canal Insurance’s “Third Amended Complaint” and “Fourth Amended Complaint” (filed contemporaneously with the motions in the preceding paragraph), Canal Insurance alleges that Canal Indemnity issued the policy. Doc. Nos. 40 ¶ 10, 50 ¶ 10; see also Doc. No. 75 ¶ 15.8The assertion that Canal Indemnity is CDS’s insurer is made despite the fact that Canal Insurance continues to be identified as “the company” which is obligated to pay out on any covered damages in the attached copies of the policy. See attachments to Doc. Nos. 40, 50.No MCS-90 is included with the Fifth Amended Complaint. (Doc. No. 75-3.)

 

8. It is not until Plaintiffs’ Fifth Amended Complaint that Canal Indemnity is even a party to the instant case.

 

It is not until Plaintiffs’ April 13, 2007, Motion for Summary Judgment that there appears a copy of the policy in the record where “Canal Indemnity Company” is referenced as the insuring party throughout the document. Pls.’ Mot. for Summ. J. Doc. No. 80-6. Specifically, for the first time, “Canal Indemnity Company” is described in the attached policy as “the company” who is “legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies[.]”Id.In that Motion, Plaintiffs give no explanation why there is the sudden change in identified parties in the policy, nor do they explain why a MCS-90 with the parties’ names was not included in copies of the policy attached to the Third, Fourth, or Fifth Amended Complaints.

 

In the instant Motion, Plaintiffs omit any explanation for the glaring discrepancies in the record, stating only that “[a]lthough Canal Indemnity has produced at least two different versions of Policy # L037190 in this case, the only copy of the Policy which was certified by Canal Indemnity to be correct refers to ‘Canal Indemnity Company’ throughout as the insurer of the policy.”Facts ¶ 16. Plaintiffs make this claim despite the fact that it was Plaintiffs themselves who issued the now-discredited copies of the policy in support their claims, and that it was Canal Insurance, Canal Indemnity’s parent company, through five amended complaints (and Canal Indemnity itself in the Fifth Amended Complaint) who assert that the correct policy was the copy which included Canal Insurance as “the company” obligated to pay any damages.

 

The Court also notes, as it did in its November 9, 2007, Order denying CDS/HRA’s Motion for Summary Judgment, that Canal Insurance’s own claims manager stated in a deposition that Canal Indemnity issued the policy, only to later to acknowledge in the same deposition that the policy on the record clearly indicated Canal Insurance as the insurer. See Order, Nov. 9, 2007 at 10-11 (Doc. No. 141) (citing Cotton Dep: 17-22 (Feb. 7, 2007) (Doc. No. 107-7)). The claims manager then went on to state that he could not say one way or the other whether Canal Insurance or Canal Indemnity issued the policy and that he was unqualified to do so. Id. The Court is at a loss as to how Plaintiffs expect the Court to declare the rights of the parties with regard to a policy that their own claims manager cannot readily identify as having been issued by one entity or the other.

 

In addition to Plaintiffs’ own conflicting assertions to the Court and to CDS/HRA, CDS/HRA have produced additional evidence that Canal Insurance has asserted to other parties that Canal Insurance is CDS’s insurer, and that Canal Insurance carried the policy for CDS. For example, in Canal Insurance’s July 13, 2006, “Initial Disclosures,” Canal Insurance refers to “the Canal Insurance policy at issue.”See CDS/HRA Resp. Ex. E. In addition, CDS/HRA has produced a “Uniform Motor Carrier Bodily Injury and Property Damage Liability Certificate of Insurance” which states that “Canal Insurance Company [address omitted] has issued to Complete Distribution Services, Inc. [address omitted] a policy or policies of insurance effective 5/17/04[.]”Id.Ex. F at 9. The policy is identified as “L037190.” Id. CDS/HRA also submit a document where Canal Insurance asserts to Texas Specialty Underwriters, Inc., that it has insured CDS. Id.Ex. F. at 10. CDS/HRA also produces an MCS-90 which states that Canal Insurance Company is the insurer for CDS. Id.Ex. F. at 12. Finally, CDS/HRA produces four different “Texas Liability Insurance Card[s],” each of which state that Canal Insurance is CDS’s insurer under Policy L037190. Id. Ex. F. 13-16. The evidence in these documents stands in stark contrast to Canal Insurance’s statement to the Court that “it has been the position of CANAL INSURANCE COMPANY throughout this action that it is the re-insurer for CANAL INDEMNITY COMPANY which issued policy number LO37190 [sic][.]” Pls.’ Am. Motion to Strike [CDS/HRA]’s Countercl. ¶ 11. The evidence also contradicts Canal Insurance’s assertion to CDS/HRA that “CANAL INSURANCE COMPANY does not market or sell surplus lines policies in the State of Texas, and CANAL INDEMNITY COMPANY markets and sells surplus lines policies in the State of Texas by and through a surplus lines managing general agent.”CDS/HRA’s Resp. Ex. D. at 3.

 

In conclusion, there is a mountain of conflicting evidence as to who ultimately issued policy L037190, and as to who is liable for any damages pursuant to the policy provisions. This conflicting evidence creates several problems. First, and most importantly, the Court cannot declare the rights of Plaintiffs with regard to any policy without first determining which policy is the actual policy issued to CDS. Similarly, the Court cannot declare Plaintiffs’ rights without finding first which Plaintiff issued the policy to CDS. The Court will not declare, for example, that Canal Indemnity has no duty to defend or indemnify CDS, if it remains possible that Canal Indemnity did not even issue the policy. Nor would the Court be inclined to declare the rights of Canal Insurance regarding the policy when Canal Insurance has stated unequivocally that it both issued the policy and did not issue the policy.9 Any declaration therefore would be based on a potentially hypothetical set of facts that would go well beyond the Court’s prerogative in a Declaratory Judgment action. The Court has ostensibly made one such declaration by interpreting the policy produced as part of Plaintiffs’ instant Motion. The Court reiterates that it has done so only by way of illustrating one possible outcome in order to demonstrate the problems created if one set of facts is assumed over another. As the facts were only assumed for sake of illustration, the Court’s interpretation of that particular copy of the policy is not a legal declaration of rights in any way.

 

9. The Court additionally notes that all parties have stipulated that the policy in question is a surplus lines policy, regardless of which copy is considered. However, only Canal Indemnity is an eligible surplus lines policy carrier in Texas. Plaintiffs have presented no evidence that Canal Insurance is authorized to issue surplus lines policies, nor does either party discuss what effect Canal Insurance issuing a surplus lines policy would have on coverage.

 

This is particularly true when different copies of the policies present different legal obligations. For example, while almost all copies of the policy contain the same operative language as to the “employee” exclusion and “domestic employment” exception, several copies of the policy do not contain an Endorsement Form MCS-90. In determining whether coverage would exist under Plaintiffs’ most-recently-produce copy of the policy, the MCS-90 formed an integral part of the Court’s basis for determining the meaning of the “employee” exclusion. Without the MCS-90, and given the conflicting evidence as to which entity issued the policy, the Court cannot be sure that the parties clearly intended to comply with federal insurance requirements when drafting its terms. Indeed, an intentional omission of a federally-mandated MCS-90 may demonstrate that the parties specifically bargained for the use of common-law terms regarding “employee,” rather than relying on the statutory definitions in federal law. Accordingly, without determining first whether the policy contained an MCS-90, the Court cannot conclude with certainty that the parties intended 49 C.F.R. § 390.5 to supply the definition of the term “employee” in the policy. Cf. Consumers County Mut. Ins. Co., 307 F.3d at 366 (noting the district court’s finding regarding the “clear intentions of the parties” to comply with federal regulations when applying § 390.5 to the policy); see also Kline v. Gulf Ins. Co., 98 Fed. App’x 471, 473 (6th Cir.2004) (unpublished) (reversing district court’s grant of summary judgment when question of fact remained in the record over whether policy contained an MCS-90).

 

Failure to include an MCS-90 has other implications as well. The MCS-90“is in effect, suretyship by the insurance carrier to protect the public-a safety net [.]” Travelers Indem. Co. of Ill. v. W. Am., 409 F.3d 256, 260 (5th Cir.2005). To protect the public from uninsured interstate motor carriers, federal law imposes an $11,000 penalty on motor carriers who fail to include the MCS-90 endorsement in their insurance policies. 49 C.F.R. § 387.17; Ill. Cent. R.R. Co. v. Dupont, 190 F.Supp.2d 880, 885 (M.D.La.2001); see also Perry v. Harco National Ins. Co., 129 F.3d 1072, 74 (9th Cir.1997); Canal Ins. v. A & R Transp. & Warehouse,827 N.E.2d 942946-47 (Ill.App.2005) ( MCS-90 is required to be attached to any liability policy issued to a certified interstate carrier). Federal law further subjects anyone who aids or abets a motor carrier in procuring a policy without an MCS-90 to civil and criminal penalties. See49 C.F.R. §§ 390.13, 35, 37. The Court will not therefore declare the rights and duties of the parties when such a declaration potentially overlooks and enables violations of federal law.

 

Accordingly, for the reasons given herein, the Court finds that questions of fact remain as to who issued the policy to CDS and what coverage the policy ultimately provided. The Court further holds that such questions of fact are relevant in determining the rights and duties of the parties. Because questions of fact remain, summary judgment is inappropriate, and Plaintiffs’ Motion regarding declaratory judgment is denied.

 

C. Dismissal of the Action for Unclean Hands is Inappropriate

 

Ultimately, given the repeated and conflicting representations regarding who issued the insurance policy and what the policy contains, the Court expresses doubt that declaratory judgment is appropriate in this case. In their Response, CDS/HRA ask the Court to dismiss Plaintiffs’ Declaratory Judgment claim, as Plaintiffs have come to this Court seeking relief with unclean hands. CDS/HRA’s Resp. ¶¶ 19-29. While the Court recognized that Plaintiffs may have acted improperly throughout the course of this litigation, it ultimately holds that a dismissal of Plaintiffs’ claims because of unclean hands would be contrary to the interests of justice.

 

By its very nature, the Federal Declaratory Act is a form of equitable relief, which states that a court with jurisdiction “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.”28 U.S.C. § 2201 (emphasis added); see also Venator Group Specialty, Inc. v. Matthew/Muniot Family, LLC, 322 F.3d 835, 839-40 (5th Cir.2003). As an equitable doctrine, “[t]he Declaratory Judgment Act offers the court an opportunity to afford a plaintiff equitable relief when legal relief is not yet available to him, so as to avoid inequities which might result from a delay in assessing the parties’ legal obligations.”Venator Group Specialty, Inc., 332 F.3d at 839-40 (citing 28 U.S.C. § 2201).0 However, as a form of equitable relief, declaratory judgment may be foreclosed by equitable defenses, including unclean hands. See Coastal Corp. v. Tex. E. Corp., 869 F.2d 817, 818 (5th Cir.1989); Abbott Labs. v. Gardner, 387 U.S. 136, 155, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967) (“Further, the declaratory judgment and injunctive remedies are equitable in nature, and other equitable defenses may be interposed.”), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977); WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL 3D § 2759 (factors that courts have considered in whether to deny declaratory relief include “any inequitable conduct on the part of the party seeking the declaration”); see also Blankenship v. Blackwell, 341 F.Supp.2d 911, 924 (S.D.Ohio 2004) (refusing to grant declaratory and injunctive relief because of moving party’s unclean hands); accord Buromin Co. v. Nat’l Aluminate Corp., 70 F.Supp. 214, 216 (D.Del.1947) (“It is quite apparent that the issues of a [declaratory judgment] case partake of the nature of equity and I do not think the equitable doctrine of ‘unclean hands’ can be entirely discarded merely because this is a suit for declaratory judgment.”)

 

0. Plaintiffs cite VT, Inc. v. Geico Ins. Co., No. 3:03-CV-522-P, 2004 U.S. Dist. LEXIS 11849, at *28-29 (N.D. Tex. June 16, 2004), for the proposition that a declaratory judgment is not an equitable proceeding, and therefore the unclean hands doctrine may not be asserted. Id. (citing, e.g., Furr v. Hall, 553 S.W.2d 666 (Tex.App.1977)). Clearly, the Fifth Circuit holds otherwise, and the Supreme Court has held that a federal court is not deprived of equitable remedies simply because those equitable remedies do not exist in state courts. See Guaranty Trust of N.Y. v. York, 326 U.S. 99, 105, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); Clark Equipment Co. v. Armstrong Equip. Co., 431 F.2d 54, 57 (5th Cir.1970). This is all the more true because Plaintiffs seek relief pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, a creature of wholly federal law.

 

Unclean hands is historically an equitable doctrine which operates to guide a court’s discretion in granting equitable relief. See eBay v. MercExchange, L.L.C., 547 U.S. 388, 394, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006); see also Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 244, 54 S.Ct. 146, 78 L.Ed. 293 (1933) (“It is one of the fundamental principles upon which equity jurisprudence is founded, that [a complainant] must come into court with clean hands.”). The doctrine applies “when a party seeking relief has committed an unconscionable act immediately related to the equity the party seeks in respect to the litigation.” Highmark, Inc. v. UPMC Health Plan, Inc., 276 F.3d 160, 174 (3d Cir.2001) (citing Keystone Driller, 290 U.S. at 244);accord Dahl v. Pinter, 787 F.2d 985, 988 (5th Cir.1986), vacated on other grounds,488 U.S. 622 (1988); see also Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852, 863 (5th Cir.1979) (“The maxim of unclean hands is not applied where [the] plaintiff’s misconduct is not directly related to the merits of the controversy between the parties”).

 

The unclean hands doctrine requires a finding of both inequitable conduct and a finding that the conduct relates to the requested relief. See11A CHARLES ALAN WRIGHT, ARTHUR R. MILLER, MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2946 (2d ed.1995). The precise meaning of “inequitable conduct”-itself a circular proposition-has not been stated identically in every case. Compare Mitchell Bros. Film Group, 604 F.2d at 863 (“wrongful acts”), with Conan Properties, Inc. v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir.1985) (“explicit bad faith intent”), with Dahl, 787 F.2d at 988 (“unconscionable [acts]”), with Levi Strauss & Co. v. Shilon, 121 F.3d 1309, 1313 (9th Cir.1997) (“fraud or deceit”) (quotation omitted).

 

In its historical formulation, the unclean hands doctrine may preclude equitable relief only when the wrongful act “has immediate and necessary relation to the equity that [the plaintiff] seeks ….” Keystone Driller, 290 U.S. at 244 (citing W.H. LYONS, JR., STORY’S EQUITY JURISPRUDENCE § 98 (14th ed.1918); 1 JOHN NORTON POMEROY, JR., EQUITY JURISPRUDENCE, § 397 (4th ed.1918)) (emphasis added); accord Fickett-Brown, 140 F.2d at 884; Dahl, 787 F.2d at 988. The Fifth Circuit has stated that the conduct must be “directly related,” Mitchell Bros. Film Group, 604 F.3d at 863, or “immediately related,” to the plaintiff’s claim. Dahl, 787 F.2d at 988. Under any formulation, a court applies the unclean-hands doctrine because “[t]o aid a party [who has acted inequitably] would make th[e] court the abetter of iniquity.” Keystone Driller, 290 U.S. at 244 (quoting Bein v. Heath, 47 U.S. 228, 247, 6 How. 228, 12 L.Ed. 416 (1848)). On the other hand, the doctrine “should not be used as a loose cannon, depriving [a] plaintiff of an equitable remedy … merely because he is guilty of unrelated misconduct.” Healthpoint, Ltd. v. Ethex Corp., 273 F.Supp.2d 817, 848 (W.D.Tex.2001) (quoting American Hosp. Supply Corp. v. Hospital Prod. Ltd., 780 F.2d 589, 601 (7th Cir.1986)). It “does not purport to search out or deal with the general moral attributes … of a litigant.” Mitchell Bros. Film Group, 604 F.2d at 863 (quoting NLRB v. Fickett-Brown Mfg. Co., 140 F.2d 883, 884 (5th Cir.1944)).

 

In Coastal Corporation, the Fifth Circuit vacated an injunction after it learned post-appeal that the party seeking injunctive and declaratory relief had misrepresented to the Court that it had no related cases pending, when in fact the party had filed a related suit in another court. Coastal Corp., 869 F.2d at 822. The Court noted that the “judicial basis for [injunctive and declaratory relief] is narrow, as comports with the demands of equity and … federalism.”Id. The Court further stated that even if other statutes were inapplicable to foreclose the party’s claim, “the prior filing of [the party’s related case] would have cast serious doubt on the propriety of equitable relief.”Id. at 821.The Court added that “we should not allow the issuance of injunctive relief where the movant has not represented its material litigating posture fully and accurately to the district court. The issue of Coastal’s clean hands alone is sufficiently telling to warrant our vacating the preliminary injunction.”Id. at 821-22 (emphasis omitted).

 

Similarly to the party in Coastal Corporation, Plaintiffs have not “represented [their] material litigating posture fully and accurately to the district court.” Coastal Corp., 869 F.2d at 822. They have, in fact, repeatedly changed their posture, and misrepresented their position both with regard to what constitutes the policy, and who issued the policy. These inaccurate and constantly changing representations are directly related to the resolution of this case, and have caused the litigation to drag on for more than three years, despite the fact that the material facts regarding coverage should have been available since the filing of Plaintiff Canal Insurance’s Original Complaint. In addition, Plaintiffs have materially misrepresented their legal duties and obligations to CDS/HRA, starting with a concededly erroneous reservation of rights letter and continuing through five amended complaints, through which Plaintiffs repeatedly alternated the entity they claimed to be the insurer on the policy. In addition to Plaintiffs’ own contradictory evidence and assertions, CDS/HRA present evidence that Plaintiffs have misrepresented their rights and obligations to TSU and various other parties. Such misrepresentations potentially demonstrate an intent to deceive, and a declaration of rights and duties could therefore make the Court an “abetter of iniquity.” Keystone Driller, 290 U.S. at 244.

 

Nevertheless, despite-or more accurately because of-Plaintiffs’ continued misrepresentations, the determination of which policy was issued and who issued the policy remain key issues to any resolution of this case. This would be true even if the Court dismissed Plaintiffs’ declaratory judgment claims.1Accordingly, dismissal of the declaratory judgment claim would not serve the interests of justice.

 

1. As to be demonstrated infra, in order to determine whether Plaintiffs are liable on several of CDS/HRA’s counterclaims (e.g., breach of contract, unfair settlement practices, breach of duty of good faith and fair dealing, etc.), the Court must first determine whether coverage exists and which Canal entity issued the policy.

 

Moreover, given CDS/HRA’s outstanding counterclaims, the Court agrees that CDS/HRA’s alleged harms are “subject to correction independent of the unclean hands doctrine.”See Janes v. Watson, No. SA-05-CA-0473, 2006 U.S. Dist. LEXIS 59004, at (W.D.Tex. Aug. 2, 2006) (citing City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex.App.2003). Because the issues in the declaratory judgment are independently vital to the resolution of this case, and because CDS/HRA have independent remedies for their alleged harms, applying the unclean hands doctrine would be inappropriate. Accordingly, the Court declines to dismiss Plaintiffs’ Declaratory Judgment action based on unclean hands.

 

IV. COUNTERCLAIMS

 

CDS/HRA allege the following in their Counterclaim:

 

In an effort to avoid the provisions of Section 981.001. et seq. of the Texas Insurance Code, Counter-Defendants have entered into a scheme where Canal [Insurance] issued policies under its name in order to avoid the reporting procedures required by law. [TSU] issued the declarations page naming Canal Indemnity as the carrier, but making none of the statutorily mandated filings and representations. In this way, the three companies were able to save large sums by avoiding the administrative costs associated with issuing surplus lines insurance while increasing profits by charging their customers surplus lines premiums. When claims were made under the Canal policy, Canal claimed to be the re-insurer and Canal Indemnity asserted defenses available under wrongfully issued endorsements. In this way, the carriers further increased profits by avoiding their contractual obligations.

 

Counterclaim ¶¶ 41-42.

 

Based on these allegations, CDS/HRA claim Plaintiffs committed fraud, conspiracy, breach of contract, unfair claim settlement practices, breach of good faith and fair dealing, and failed to promptly settle legitimate claims.Id. ¶¶ 43-60.Plaintiffs argue that no evidence exists for any of CDS/HRA’s Counterclaims.2Pls.’ Mot. ¶ 18.

 

2. Plaintiffs additionally argue that they are intended beneficiaries of a settlement agreement between CDS/HRA and TSU which not only disposed of CDS/HRA’s Third-Party Claim against TSU, but also foreclosed CDS/HRA’s counterclaims against Plaintiffs. See Pls.’s CDS/HRA Reply ¶¶ 2-6. Having reviewed the settlement agreement and Plaintiffs’ and CDS/HRA’s supplemental arguments on the matter, which are all under seal, the Court holds that the settlement agreement does not foreclose CDS/HRA’s counterclaims. See Sealed Appendix.

 

A. Fraud

 

CDS/HRA claim that Plaintiffs committed fraud by misrepresenting the entity which issued the policy in order to avoid coverage and to persuade CDS/HRA to drop their claims of coverage. Countercl. ¶ 46. As part of their Response, CDS/HRA further allege that Plaintiffs knowingly and illegally replaced CDS’s current insurance policy with a surplus lines policy without subsequently informing CDS that the Canal policy was a surplus lines policy. CDS/HRA’s Resp. ¶ 46. Failure to inform CDS resulted in CDS having to pay higher premiums for a surplus lines policy than it would for a traditional policy. Id. CDS then allegedly relied on Plaintiffs’ purported misrepresentations and paid premiums in excess of what it should have paid. Id.

 

To establish a case of common-law fraud in Texas, the claimant must establish each of the following elements:

 

(1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.

 

Allstate Ins. Co. v. Receivable Fin., Co., L.L.C., 501 F.3d 398, 406 (5th Cir.2007) (quoting In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex.2001)); Id.(citing Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 438 (Tex.2000)).

 

Assuming that Canal Indemnity issued the policy, and assuming that the policy is the one represented in Plaintiffs’ Motion, CDS has presented no evidence that no violation of § 981.004 took place. Nor is there evidence that Canal Indemnity defrauded CDS/HRA simply by issuing a surplus lines policy. The Texas Insurance Code states, in relevant part, that

 

“[a]n eligible surplus lines insurer may provide surplus lines only if:

 

(1) the full amount of required insurance cannot be obtained, after a diligent effort, from an insurer authorized to write and actually writing that kind and class of insurance in this state;

 

(2) the insurance is placed through a surplus lines agent; and

 

(3) the insurer meets the eligibility requirements of Subchapter B as of the inception date and annual anniversary date of each insurance contract, cover note, or other confirmation of insurance.

 

TEX. INS.CODE ANN. § 981.004 (Vernon 2003).

 

As CDS/HRA themselves admit, CDS sought-and was unable to procure-additional insurance for their truck fleet through traditional insurers. See Salvador Herrera Dep. 48:19-49:19 (Oct. 24, 2007); Facts ¶ 94. Indeed, CDS CEO Salvador Herrera testified that he spoke to his own insurance agents, who stated that they were unable to find a policy for the growth in CDS’s truck fleet. Salvador Herrera Dep. 48:19-49:19 (Oct. 24, 2007). Herrera then contacted Southwest Surety’s agent Jeff Arnold,3 who procured a surplus lines policy through TSU. Id. TSU then reported the issuance of a Canal Indemnity surplus lines insurance policy to the Comptroller of Public Accounts, paid the requisite premium tax for the policy, filed the policy with SLSOT, and reported the policy to the Texas Department of Insurance. Facts ¶¶ 29-31. None of these organizations rejected the policy as ineligible for the surplus lines market. Accordingly, there is no evidence that Plaintiffs defrauded CDS simply by issuing a surplus lines policy, as Salvador Herrera’s own diligent attempts to procure additional traditional insurance failed and the full amount of required insurance for CDS’s fleet could not otherwise be obtained.4

 

3. CDS/HRA also argue that Jeff Arnold was not licensed to sell surplus lines insurance, and that only surplus lines agents can place surplus lines policies with surplus lines carriers. CDS/HRA’s Resp. ¶ 37. However, it appears that Texas law allows for licensed surplus agents (such as TSU) to accept business from and issue surplus lines through a “general property and casualty agent” such as Arnold. TEX. INS.CODE ANN. § 981.220; see also Pls.’ Mot. Ex. T.

 

4. Plaintiffs’ expert Hector De Leon opines that under the “custom and practice of the surplus lines marketplace, the duty under § 981.004… was satisfied when” CDS failed to procure additional traditional insurance and Arnold then relied on CDS’s assertions that it could not get traditional insurance. See Pls.’s Ex. W (De Leon Aff. (Feb. 25, 2009)). The Court makes no finding on what the “custom and practice of the surplus lines marketplace” may be, and only finds that the statute is unclear as to who must make the “diligent effort,” that “diligent efforts” were in fact made, and that there is no evidence that a surplus lines policy in the instant case was inappropriate.

 

There is evidence, however, that Canal Insurance and Canal Indemnity committed fraud in issuing the policy CDS/HRA eventually received, and in subsequently denying coverage. As noted above, the questions of who issued the policy and what policy was issued remain in dispute. Accordingly, if TSU registered a policy with SLSOT and the State of Texas that had been issued by Canal Indemnity, but it was Canal Insurance who actually issued the policy to CDS/HRA, then Plaintiffs would have illegally replaced a policy by an authorized, audited, regulated and licensed carrier, with an unaudited, unlicensed, and unregulated policy, one without the necessary MCS-90 Endorsement form, and by a party who later asserted that it is not currently in the business of issuing surplus lines policies. Moreover, if Canal Insurance knowingly asserted to the insured that it was the insurer while it was Canal Indemnity who registered a policy with the state, such misrepresentations and resulting confusion could easily lead to CDS’s inability to properly make claims on the correct policy. As demonstrated above, there is ample evidence on the record that such a series of events took place.5

 

5. The Court notes that these are simply illustrations of potential instances of fraud and are not intended to be exhaustive. Rather, they demonstrate the inability of the Court generally to determine whether Plaintiffs committed fraud without first determining who issued the policy and what the policy contained.

 

Furthermore, there is evidence that Plaintiffs knowingly failed to produce a correct copy of the policy through an entire year of litigation, and otherwise asserted that an incorrect copy with improper names and lack of MCS-90 was the right copy. Conversely, there is evidence that Plaintiffs provided the correct copy of the policy for a year only to substitute it with an incorrect copy. Regardless, Plaintiffs have provided conflicting answers as to the actual insurer on the policy before filing suit and later during discovery, and thereby materially misrepresented the nature of their claims with the intention that such representations should be relied upon by CDS/HRA. By doing so, Plaintiffs have improperly obfuscated the issues of coverage and liability, mislead opposing parties, and needlessly delayed proper payment under the policy, thus incurring unnecessary costs for all involved.

 

Accordingly, there remains a question of fact as to whether Plaintiffs attempted to defraud CDS/HRA in the course of its transactions with CDS and during the course of this litigation.

 

B. Conspiracy

 

CDS/HRA also allege that Plaintiffs engaged in a conspiracy “to avoid costs, increase profits and avoid paying the customer’s legitimate claims.”CDS/HRA’s Countercl. ¶ 49. As a result, CDS/HRA allege they have sustained damages.Id.

 

Under Texas law, the elements of civil conspiracy are (1) two or more persons; (2) an end to be accomplished; (3) meeting of the minds on the end or course of action; (4) one or more unlawful acts; and (5) proximately resulting in injury. Lane v. Halliburton, 529 F.3d 548, 564 (5th Cir.2008) (citing Eagle Props., Ltd. v. KMPG Peat Marwick, 912 S.W.2d 825, 828 (Tex.App.1995)).

 

The Court has already found evidence that Plaintiffs may have attempted to defraud CDS/HRA through their multiple conflicting statements, and that harm in the form of frivolous litigation and denial of coverage may have resulted. Moreover, the evidence clearly demonstrates both that Plaintiffs were involved in these misrepresentations, and that Plaintiffs now make a concerted effort to establish one legal set of claims, despite having made material representations to the contrary. Accordingly, the Court finds questions of fact as to whether Plaintiffs engaged in a conspiracy to defraud CDS/HRA.

 

C. CDS/HRA’s Remaining Counterclaims

 

CDS/HRA’s remaining counterclaims (breach of contract, unfair claim settlement practices, breach of good faith and fair dealing, and failure to provide prompt payment of claims) all require the issue of coverage to be resolved before any analysis can be provided. As that remains an issue of fact, summary judgment on these claims is inappropriate.

 

VI. CONCLUSION

 

There is conflicting evidence regarding what insurance policy was issued to CDS and who issued the policy. These questions of fact preclude the Court from declaring coverage or lack thereof. Accordingly, Plaintiffs’ Motion for Summary Judgment (Doc No. 211) regarding its Declaratory Judgment claim is DENIED.Nevertheless, while Plaintiffs’ have repeatedly misrepresented their position throughout the course of their transactions with CDS/HRA and during the course of this litigation, dismissal of Plaintiffs’ Declaratory Judgment action based on unclean hands is not in the interest of justice.

 

Questions of fact also preclude the Court from determining as a matter of law whether Plaintiffs conspired or otherwise attempted to defraud CDS/HRA in denying coverage, or whether Plaintiff engaged in any other unlawful conduct regarding CDS/HRA’s claims on the policy. Accordingly, Plaintiffs’ Motion for Summary Judgment (Doc. No. 211) regarding CDS/HRA’s counterclaims is DENIED.

 

As there remain questions of fact to be resolved in the instant case, the Court will enter a Trial Preparation Order forthwith.

 

SO ORDERED.

 

SIGNED on this ______ day of April, 2009.