Insurance Coverage Issue

Benbrook insurance lawyers will find this case interesting. It is from the Western District, Austin Division. The style of the case is, State Farm Mutual Automobile Insurance Company v. Watkins.
State Farm filed this lawsuit to obtain a declaratory judgment that it has no duty to indemnify Defendants Ernest Lynden Watkins III (Mr. Watkins) and Kathy Watkins (Mrs. Watkins) for a separate lawsuit brought in Texas state court (Underlying Suit). In the Underlying Suit, police officer Doff Slade Fisher alleges Ernest Lynden Watkins IV (Watkins IV), the son of Mr. and Mrs. Watkins, negligently operated a vehicle causing bodily injury to Fisher. According to the petition, Officer Fisher was in pursuit of a car owned by Mr. and Mrs. Watkins that had evaded detention during a traffic stop. Fisher alleges Watkins IV was driving the vehicle, and in the processing of pursuing Watkins IV, Fisher crashed his motorcycle and sustained injuries.
According to State Farm, the express language and scope of coverage of the Policy have been implicated by the Underlying Suit. Indeed, State Farm is currently providing a defense in the Underlying Suit, and it does not seek an adjudication of its duty to defend through its declaratory judgment action. Instead, State Farm only requests a declaration the Policy bars any claim for indemnification arising from the Underlying Suit. In other words, State Farm contends the Policy does not provide coverage for the events at issue.
For this position of “no coverage,” State Farm represents that, while Fisher alleges Watkins IV was driving, he has subsequently testified he cannot identify the driver of the vehicle. Moreover, State Farm represents Watkins IV has testified that, while he was in the vehicle, he was not driving. Rather, according to State Farm, Watkins IV has testified he was kidnapped from his nearby home, tied up, and held in the car against his will. In addition, State Farm represents Fisher conceded in his deposition that his crash of the motorcycle did not directly involve the fleeing vehicle, and the accident was actually due to his operating error. In sum, State Farm argues it has no duty to indemnify because the evidentiary record already establishes an unauthorized driver was behind the wheel, and the accident was not caused by the negligence of the insured.
State Farm filed this declaratory judgment action before the Texas state court’s determination of Watkins IV’s liability. According to Mr. and Mrs. Watkins, the Underlying Suit is not even set for trial yet. Following the general rule in Texas, the instant case is therefore not ripe.
Moreover, there is no indication the same reasons that negate the duty to defend likewise negate any possibility the insurer will ever have a duty to indemnify. Fisher’s allegation is Watkins IV was driving, and his negligent driving caused Fisher’s accident and injuries. These allegations do not negate the possibility State Farm will ever have a duty to indemnify. State Farm asks the Court to go ahead and decide the factual disputes based on the testimony already elicited in the Underlying Suit, which contradicts Fisher’s allegations. In other words, State Farm asks the Court to find that Watkins IV was not driving and that any negligent acts of the driver did not cause Fisher’s accident. But the rule in Texas is “an insurer’s duty to indemnify generally cannot be ascertained until the completion of litigation, when liability is established, if at all.” The rule is not, as State Farm’s argument implies, the duty to indemnify can be ascertained before the completion of the underlying litigation if there is testimony –even undisputed testimony–negating liability. State Farm cites no authority for this contention, and the Court concludes it is inconsistent with clear Texas law.
Therefore, the facts must first be established in the state court by a fact finder before this Court can address State Farm’s duty to indemnify. If Watkins IV prevails on the fact question of who was driving, then the indemnity question will be moot since he cannot be held liable if he was kidnapped. If the fact finder instead determines Watkins IV was driving, then the indemnification issue becomes ripe. Consideration of State Farm’s duty to indemnify (and the various fact issues implicated) would then be appropriate for this Court.
The conclusion is that State Farm has failed to sue the proper party–Watkins IV. Even if State Farm had sued Watkins IV, however, the duty to indemnify question is not ripe because the resolution of the matter is dependent on factual findings and factual development in the Underlying Suit. The factual questions of who was driving the car and whether the alleged negligent acts of the driver proximately caused Fisher’s motorcycle wreck must be determined in the Underlying Suit first, not by the Court in a collateral insurance coverage case.

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