Hochheim Prairie Casualty Insurance Company v. Charles Appleby, as Executor of the Estate of Stephen D. Seffel, Deceased--Appeal from 73rd Judicial District Court of Bexar County

OPINION

No. 04-07-00028-CV

HOCHHEIM PRAIRIE CASUALTY INSURANCE COMPANY,

Appellant

v.

Charles APPLEBY,

as Executor of the Estate of Stephen D. Seffel, Deceased,

Appellee

From the 73rd Judicial District Court, Bexar County, Texas

Trial Court No. 2006-CI-13400

Honorable Michael Peden, Judge Presiding (1)

Opinion by: Sandee Bryan Marion, Justice

Sitting: Alma L. L pez, Chief Justice

Sandee Bryan Marion, Justice

Phylis J. Speedlin, Justice

Delivered and Filed: January 16, 2008

AFFIRMED

This appeal presents the issue of whether allegations that an insured, who is suffering from Alzheimer's and dementia and has had a temporary guardian appointed, "knocked down" another patient at an assisted care facility triggered the insurer's duty to defend. We conclude the allegations contained in the petition filed in the underlying survivorship action present the potential for coverage within the policy; therefore, we affirm.

BACKGROUND

In 2005, Stephen Seffel was diagnosed with dementia and Alzheimer's disease. Charles Appleby was appointed temporary guardian of Seffel's person and his estate, and shortly thereafter, Seffel was placed in an assisted care facility. While in the facility, Seffel twice "knocked down" another resident, Margaret Ann Sundby, over a period of three days. Sundby died from her injuries about two weeks after the second incident. Sundby's family sued Seffel (2) and Appleby, both individually and as Seffel's guardian.

Seffel was an insured under a Farm Liability Policy issued by appellant, Hochheim Prairie Casualty Insurance Company. When Hochheim refused to provide coverage, Seffel's estate filed a third party petition seeking a declaration on coverage and indemnity issues. The declaratory judgment action was severed from the Sundby suit, and Hochheim and Seffel's estate each moved for summary judgment. The trial court granted the estate's motion, denied Hochheim's motion, and ordered Hochheim to pay defense costs incurred by the estate (3) in the Sundby litigation. This appeal by Hochheim ensued.

EXTRINSIC EVIDENCE

We first decide whether the trial court properly considered extrinsic evidence in determining Hochheim's duty to defend. In his motion for summary judgment, Appleby argued that Seffel's actions may have been the result of "a disease process and not controllable by" Seffel because he suffered from dementia. In support of his motion, Appleby attached the affidavit of a neurologist who opined that Seffel was not responsible for his actions when he struck Sundby because such aggressive behavioral outbursts are not uncommon in patients with dementia. The trial court overruled Hochheim's objection to the affidavit. On appeal, Hochheim asserts the trial court erred in considering extrinsic evidence of Seffel's mental state in determining whether it had a duty to defend. We agree.

Under the eight-corners rule, an insurer's duty to defend is determined solely by comparing the allegations within the four corners of the petition with the language contained within the four corners of the policy. King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). The allegations in the petition are considered without reference to their truth or falsity. Id. at 191. If a petition does not allege facts within the scope of coverage, an insurer is not legally required to defend a suit against its insured. Id. When applying the eight-corners rule, resort to evidence outside the policy and the pleadings is generally prohibited. GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 307 (Tex. 2006). The eight-corners 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. "Facts outside the pleadings, even those easily ascertained, are ordinarily not material to the determination and allegations against the insured are liberally construed in favor of coverage." Id.

The Texas Supreme Court has not recognized an exception to the eight-corners rule. In GuideOne, the Court noted that some appellate courts have recognized such an exception, but those 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." Id. at 308-09. Although not adopting this narrow exception, the GuideOne Court expressly rejected "the use of overlapping evidence as an exception to the eight-corners rule because it poses a significant risk of undermining the insured's ability to defend itself in the underlying litigation." Id. Here, in the underlying Sundby lawsuit, Appleby pled Seffel's diminished capacity as a defense to liability. Seffel's diminished capacity was also the basis upon which Appleby sought coverage in the third-party action against Hochheim. As in GuideOne, the evidence here went to the issue of both coverage and the merits of the underlying lawsuit, and therefore, should not have been considered by the trial court.

DUTY TO DEFEND We next decide, looking only to the policy and the allegations in the petition, whether Hochheim's duty to defend was triggered. At issue in this appeal is whether Sundby's "bodily injury" was caused by an "occurrence" within the scope of the insurance policy. The policy defines "occurrence" as "an accident . . . ." Hochheim asserts its duty to defend was not triggered because Seffel's assault on Sundby was not an "accident." Appleby counters that Seffel could not have intentionally assaulted Sundby because he lacked the mental capacity to form the intent to harm her.

An insurer's duty to defend is triggered when the allegations in the plaintiff's pleadings raise a potential for coverage under the policy. Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965). The insurer bears the burden of proving the allegations contained in the underlying plaintiff's petition are excluded from coverage. Westchester Fire Ins. Co. v. Gulf Coast Rod, Reel & Gun Club, 64 S.W.3d 609, 613 (Tex. App.--Houston [1st Dist.] 2001, no pet.). If the pleadings do not state facts sufficient to bring the case clearly within or without the coverage, the general rule is that the insurer is obligated to defend if potentially there is a case under the pleadings within the coverage of the policy. Heyden Newport Chem. Corp., 387 S.W.2d at 26.

On appeal, we believe Hochheim focuses too narrowly on the allegation contained in the petition filed in the survivorship action that Seffel "assaulted" Sundby. Our focus must be on the factual allegations that show the origin of the damages and not on the legal theory alleged. National Union Fire Ins. Co. of Pittsburgh v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). Also, allegations are given a liberal interpretation, and any doubts regarding whether the allegations trigger a defense are resolved in favor of the insured. Heyden Newport Chem. Corp., 387 S.W.3d at 26; Westchester Fire Ins. Co., 64 S.W.3d at 613. Here, the petition contains the following allegations: (1) Seffel was diagnosed with dementia and Alzheimer's and began to engage in impulsive and aggressive behavior; (2) Seffel became unable to care for his person or financial affairs and became a danger to himself and others; (3) a temporary guardian of Seffel's person and estate was appointed by a probate court; and (4) Seffel twice, over a period of three days, "knocked [Sundby] down." Giving these allegations their most liberal interpretation, we conclude the petition alleges facts potentially within the scope of coverage because they raise the question of whether Seffel unintentionally knocked Sundby down, causing her injury.

CONCLUSION

We conclude Hochheim did not bear its burden of proving that the allegations contained in the underlying petition are excluded from coverage; therefore, we affirm the trial court's summary judgment in favor of Appleby.

Sandee Bryan Marion, Justice

1. The Honorable Michael Peden, presiding judge of the 285th Judicial District Court, Bexar County, Texas, signed the judgment at issue in this appeal. The Honorable Andy Mireles is the presiding judge of the 73rd Judicial District Court, Bexar County, Texas.

2. During the pendency of the lawsuit, Seffel died and Appleby was appointed Independent Executor of Seffel's estate.

3. Hochheim does not insure Appleby individually; therefore, the duty to defend as to him individually is not the subject of this appeal.