TIG Insurance Co, et al v. Sedgwick James of, et a

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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m 01-20235
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TIG INSURANCE COMPANY AND SAFETY LIGHTS SALES & LEASING, INC.,
Plaintiffs-Appellants,
VERSUS
SEDGWICK JAMES OF WASHINGTON AND LUMBERMENS MUTUAL CASUALTY CO.,
Defendants-Appellees.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
January 9, 2002
Before SMITH and EMILIO M. GARZA, Circuit
Judges, and CUMMINGS,* District Judge.
JERRY E. SMITH, Circuit Judge:
The district court dismissed TIG Insurance
Co. (“TIG”) and Safety Lights Sales &
Leasing Co.’s (“Safety Lights”) claims to
recover for the costs of defending a lawsuit;
the insurance seller’s certificate of insurance
added Safety Lights as an additional insured
but disclaimed the power to alter an underlying
insurance policy. The parties agree that the
certificate of insurance’s express limitations
combine with the policy’s terms to bar
coverage contractually. Agreeing with the
district court that TIG and Safety Lights also
failed to provide summary judgment evidence
sufficient to support claims for estoppel,
mutual mistake, fraudulent misrepresentation,
or negligent misrepresentation, we affirm. * District Judge of the Northern District of
Texas, sitting by designation.

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I.
Lumbermens Mutual Casualty Insurance
Company (“Lumbermens”) issued two general
liability insurance policies to Corporate
Express, Inc. (“Corporate Express”).
Sedgwick James of Washington (“Sedgwick”)
brokered the general liability contracts among
Corporate Express, its subsidiaries, and
Lumbermens.
Corporate Express is the parent corporation
of Corporate Express Delivery Systems, Inc.
(“Corporate Express Delivery”), which owns
several delivery companies, including U.S. De-
livery Systems (“U.S. Delivery”), Vianet, Inc.
(“Vianet”), and United Transnet, Inc. (“United
Transnet”). Sedgwick issued two insurance
policies to Corporate Express and its
subsidiaries. Policy No. 5AA 038 362-00
(“Policy 362”) originally covered United
Transnet. An endorsement added Corporate
Express Delivery, U.S. Delivery, and Vianet as
named insureds. Policy 362 is the only
Lumbermens policy that covers U.S. Delivery
for general liability; that policy does not pro-
vide any additional insured coverage.
Corporate Express and its non-delivery,
service companies were covered under Policy
No. 5AA 038 300-01 (“Policy 300”), which
excluded Corporate Express Delivery from
coverage but did provide additional insured
coverage “where required by written or oral
contract” with respect to “liability arising out
of your [the named insured’s] operations on
premises owned or rented by or to you [the
named insured].”
U.S. Delivery is a subsidiary of Corporate
Express Delivery and insured only under Poli-
cy 362. One of U.S. Delivery’s subsidiaries,
Vianet, did business with Safety Lights, which,
in March 1996, sent a letter to Vianet,
requesting, within fifteen days, a certificate of
insurance (“COI”) that should evidence “waiv-
er of subrogation and additional insured in
favor of Safety Lights.”
In February 1997, Sedgwick issued a COI
to Safety Lights. The top of the certificate
stated, “This certificate is issued as a matter of
information only and confers no rights upon
the certificate holder. This certificate does not
amend, extend, or alter the coverage afforded
by the policies below.” The certificate
erroneously listed Safety Lights as an
additional insured under Policy 362.1
In June 1997, U.S. Delivery hired Guy
Wright, an independent contractor, to deliver
a steel plate to Safety Lights’s premises.
Wright was injured when the plate was
dropped on his hand during unloading. Wright
sued Safety Lights. TIG, as Safety Lights’s
insurer, defended, incurring defense costs of
$38,650.02, and settled for $235,000.
1 On appeal, Safety Lights argues that
Sedgwick issued a confirmation of placement (an
insurance binder) for policies 300 and 362 that
stated the general liability policy would be “subject
to the policy terms, conditions, limitations, and
exclusions” of specified Corporate Express
policies, each of which included an additional
insured clause. Safety Lights, however, failed to
raise this point in the cross-motions for summary
judgment, so we do not consider it. See Estate of
Martineau v. ARCO Chem. Co., 203 F.3d 904,
913 (5th Cir. 2000) (refusing to consider
limitations argument that party failed to raise at
summary judgment); Hinsley v. Boudloche (In re
Hinsley), 201 F.3d 638, 645 (5th Cir. 2000)
(refusing to consider plaintiff’s arguments for
tolling limitations where she had not raised it at
summary judgment).

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II.
TIG and Safety Lights sued Sedgwick and
Lumbermens in state court, and Lumbermens
removed to federal court. In the amended
complaint, plaintiffs sought a declaration that
defendants were obligated to defend and in-
demnify the Wright suit. In the alternative,
plaintiffs sought reformation of Policy 362 to
conform to the “intent of the parties” and pro-
vide coverage for Safety Lights. Plaintiffs also
alleged violations of the Texas Insurance
Code, Texas Deceptive Trade Practices Act,
breach of contract, fraudulent and negligent
misrepresentation, breach of the duty of good
faith and fair dealing, and fraud. The parties
moved for summary judgment on all claims.
The court granted summary judgment for
Sedgwick and Lumbermens on the agency
claims, plea for reformation, and claims of mis-
representation. TIG and Safety Lights appeal
that judgment.
The same standards for summary judgment
bind us and the district court. McDaniel v.
Anheuser-Busch, Inc., 987 F.2d 298, 301 (5th
Cir. 1993). Summary judgment is appropriate
only if “the pleadings, depositions, answers to
interrogatories, and admissions on file, togeth-
er with the affidavits, if any,” when viewed in
the light most favorable to the non-movant,
“show that there is no genuine issue as to any
material fact.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249-50 (1986). A dispute
about a material fact is “genuine” if the
evidence is such t hat a reasonable jury could
return a verdict for the non-moving party. Id.
at 248. The court must draw all justifiable
inferences in favor of the non-moving party.
Id. at 255. Once the moving party has initially
shown “that there is an absence of evidence to
support the non-moving party’s cause,” Celo-
tex Corp. v. Catrett, 477 U.S. 317, 325
(1986), the non-movant must come forward
with “specific facts” showing a genuine factual
issue for trial. FED. R. CIV. P. 56(e); Mat-
sushita Elec. Indus. Corp. v. Zenith Radio,
475 U.S. 574, 587 (1986). Conclusional alle-
gations and denials, speculation, improbable
inferences, unsubstantiated assertions, and le-
galistic argumentation do not adequately sub-
stitute for specific facts showing a genuine is-
sue for trial. SEC v. Recile, 10 F.3d 1093,
1097 (5th Cir. 1993).
III.
TIG asserts that Sedgwick’s COI should
obligate Lumbermens because Sedgwick acted
as Lumbermens’s agent. Although laying out
the agency relationship will aid us in resolving
other matters, TIG mistakenly assumes that
merely establishing an agency relationship will
create liability for Lumbermens. Lumbermens
delegated the power to issue COI’s to
Sedgwick, but those COI’s could not alter the
underlying policy’s terms or create liability.
Because the COI expressly disclaims any
power to alter the underlying policy, and the
parties agree that Lumbermens withheld from
Sedgwick the power to alter policies,
Sedgwick’s issuance of the COI did not create
coverage.
A.
Texas law classifies insurance sellers into
three categoriesSSbrokers, soliciting agents,
and recording agents. A seller can have an
agency relationship with both the insurer and
insured. McKillip v. Employers Fire Ins. Co.,
932 S.W.2d 268, 270 (Tex. App.SSTexarkana
1996, no writ). Regardless of the agency re-
lationship, the agent’s actual or apparent au-
thority to perform a task can create vicarious
liability. Duzich v. Marine Office of Am.
Corp., 980 S.W.2d 857, 865 (Tex.
App.SSCorpus Christi 1998, writ denied).

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An insurance seller acts as a broker when a
potential insured approaches the insurance
seller and the insurance seller only submits an
application to the insurance agency. McKillip,
932 S.W.2d at 270. If the insurance seller has
contact only with the buyer, the seller is a
broker. Id.; Employers Cas. Co. v. Mireles,
520 S.W.2d 516, 520 (Tex. Civ. App.SSSan
Antonio 1975, writ ref’d n.r.e.).
An insurance seller acts as a soliciting agent
when the seller contacts the insured but the
seller lacks the power to modify, change, or
waive the terms of the policy. TEX. INS. CODE
ANN. art. 21.04 (Vernon Supp. 2001); Macca-
bees Mut. Life Ins. Co. v. McNiel, 836 S.W.2d
299, 231-32 (Tex. App.SSDallas 1992, writ
denied). The soliciting agent has limited actual
authority to make representations on behalf of
the insurance company. Maccabees, 836
S.W.2d at 231-32.
A recording agent solicits insurance, has the
power to write policies of insurance, binds the
insurer on risks, and collects premiums on be-
half of the insurer. TEX. INS. CODE ANN. art
21.14 (Vernon Supp. 2001); Maccabbees, 836
S.W.2d at 231-32. The recording agent is
closest to the principal, and his actions will al-
ways bind the principal. Lexington Ins. Co. v.
Buckingham Gate, Ltd., 993 S.W.2d 185, 198
(Tex. App.SSCorpus Christi 1999, pet.
denied).
If the insurance seller is not a broker,
soliciting agent, or recording agent, the seller
falls into the catch-all category of the insurer’s
agent. TEX. INS. CODE. ANN. art. 21.02 (Ver-
non Supp. 2001); Maccabees, 836 S.W.2d at
232. Sellers in this category lack the power to
modify the terms of a policy. TEX. INS. CODE
art. 21.02 (stating that this article “does not
authorize an agent to . . . alter, amend, modify,
waiver, or change a term or condition of an
insurance policy . . .”).
The district court correctly categorized
Sedgwick as a soliciting agent, relying on the
agency agreement between Sedgwick and
Lumbermens to reach this conclusion. The
agency agreement authorized Sedgwick to so-
licit insurance on behalf of Lumbermens but
permitted Sedgwick to bind Lumbermens only
“to the extent specific authority [was] granted
in the schedule(s) attached.” Under Policy
362, Sedgwick had the authority to issue
COI’s and binders but lacked the authority to
modify the policy itself.
On appeal, TIG argues that Lumbermens
granted Sedgwick the power to issue COI’s.
The certificates of insurance, however, ex-
pressly state that they do not modify the un-
derlying insurance policy. The COI’s comport
with the agency agreement; Lumbermens
granted Sedgwick the power to solicit and ne-
gotiate but not to bind. The district court
properly categorized Sedgwick as a soliciting
agent.
B.
TIG contends that, regardless of the
statutory category in which Sedgwick falls,
Lumbermens granted Sedgwick the actual
authority to bind the principal. A soliciting
agent’s misrepresentations can create liability
for the principal if the agent acts with actual or
apparent authority. Celtic Life Ins. Co. v.
Coats, 885 S.W.2d 96, 98 (Tex. 1994). To
confer actual authority, the principal must
intentionally confer the authority, explicitly
allow the agent to believe that it has the
authority, or carelessly permit the agent to
believe it has the authority. Spring Garden
79U, Inc. v. Stewart Title Co., 874 S.W.2d
945, 948 (Tex. App.SSHouston [1st Dist.]

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1994, no writ).
Lumbermens did not do any of those things.
The agency agreement prohibits Sedgwick
from modifying the policy. Although Lumber-
mens permitted Sedgwick to issue COI’s, the
COI’s state that they will not alter the terms of
the underlying policy. The terms of the agency
agreement and COI make plain that Sedgwick
lacked the actual power to modify Policy 362.
C.
TIG contends that even if Sedgwick acted
as a soliciting agent without actual authority,
Sedgwick had the apparent authority to modify
Policy 362. A person who seeks to bind a
principal based on the agent’s apparent
authority must show that the principal acted in
such a way that a reasonably prudent person
would believe the agent could bind the
principal. Biggs v. United States Fire Ins. Co.,
611 S.W.2d 624, 629 (Tex. 1981). The
principal must visibly confer authority for the
agent to perform a range of tasks that include
the disputed action. Ames v. Great S. Bank,
672 S.W.2d 447, 450 (Tex. 1984). If the
agent acts with apparent authority, it will bind
the principal, regardless of the agent’s actual
authority. Biggs, 611 S.W.2d at 629.
Misrepresentations made when negotiating the
terms of a policy can fall within the scope of
the agent’s apparent authority.2
TIG, however, did not present any evidence
that Lumbermens visibly had granted
Sedgwick the power to add additional in-
sureds. The only visible sign identified by
either partySSthe COISSexpressly disclaimed
Sedgwick’s power to do so. Sedgwick did not
have the power to obligate Lumbermens con-
tractually. We must still consider, however,
whether the Sedgwick’s actions in issuing the
COI, pursuant to delegated authority, support
TIG’s disguised estoppel or straightforward
mutual mistake arguments.
IV.
TIG makes two possible claims against
Lumbermens: (1) The COI should obligate
Lumbermens to pay for the Wright litigation;
and (2) the COI proves that Policy 362
included a mutual mistake and the court
should reform Policy 362. Both theories seek
to establish Lumbermens’s liability despite the
express terms of Policy 362 and the COI.
A.
Estoppel cannot modify the express terms
of an insurance policy. Tex. Farmers Ins. Co.
v. McGuire, 744 S.W.2d 601, 602-03 (Tex.
1988). When a COI expressly incorporates
the terms of a policy, the policy trumps the
terms of the COI.3 TIG cites cases from
Alaska, Illinois, Massachusetts, New York,
and Ohio that permitted insureds to recover
under the terms of the COI. Most of these
jurisdictions do not read COI’s as modifying
the underlying insurance policy but, instead,
enforce the COI’s under an estoppel theory.
2 Celtic, 885 S.W.2d at 98-99 (finding that
agent’s actions bound insurer because reasonable
third person would have believed that agent had
power to explain policy during negotiations).
3 Wann v. Metropolitan Life Ins. Co., 41
S.W.2d 50, 51-52 (Tex. Comm’n App. 1931);
Granite Constr. Co. v. Bituminous Ins. Co., 832
S.W.2d 427, 429 (Tex. App.SSAmarillo 1992, no
writ). Similarly, when determining whether an in-
surer has a duty to defend the insured, Texas
courts will look only to the policy and to the
allegations of the complaint. McCarthy Bros. Co.
v. Continental Lloyds Ins. Co., 7 S.W.3d 725, 728
(Tex. App.—Austin 2000, no writ); Katerndahl v.
State Farm Fire and Cas. Co., 961 S.W.2d 518,
522 (Tex. App.SSSan Antonio 1998, no writ).

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E.g., Dumenric v. Union Oil Co., 606 N.E.2d
230, 233-34 (Ill. Ct. App. 1992). The Texas
Supreme Court has foreclosed us from
following them, so we now must consider
whether Texas courts can extend coverage
beyond the terms of the policy indirectly,
through the doctrine of mutual mistake,
despite the Texas Supreme Court’s prohibition
of directly extending coverage.
B.
TIG argues that the absence of a blanket
additional insured provision in Policy 362 was
the result of a mutual mistake among Lumber-
mens, Sedgwick, and Corporate Express. To
prevail in this claim, TIG must prove (1) the
content of the antecedent agreement and
(2) the subsequent mutual mistake when
reducing it to writing. Cherokee Water Co. v.
Forderhause, 741 S.W.2d 377, 379 (Tex.
1987). TIG failed to prove the content or ex-
istence of an antecedent agreement.
TIG must provide summary judgment evi-
dence that the parties “reached a definite and
explicit agreement understood in the same
sense by both.” Zurich Ins. Co. v. Bass, 443
S.W.2d 371, 374 (Tex. App.SSDallas 1969, no
writ). TIG had to prove that all of the parties
intended to include an additional insured
clause in Policy 362. TIG points to three
pieces of evidence to prove Sedgwick’s intent.
First, TIG directs us to correspondence be-
tween Sedgwick and Lumbermens regarding
the Corporate Express account. The district
court correctly noted, however, that this cor-
respondence does not specifically refer to Poli-
cy 300 or Policy 362. It is impossible to know
whether the letters are probative of the parties’
intent to include an additional insured clause in
Policy 362.
Second, Carly List, an account manager for
Sedgwick, stated that, after the Wright
litigation, some Lumbermens employees
worried that Policy 362 might contain an
additional insured clause. This does not speak
to whether, before issuing the policy, Lumber-
mens intended for Policy 362 to include an
additional insured clause. Secondhand
speculation after the fact does not create a fact
question regarding the actual content of the
insurance contract ; nor should such
speculation create a fact question about
Lumbermens’s beliefs when it issued Policy
362.
Finally, List testified that the terms and
conditions for United Transnet’s policy
(“Policy 362”) were intended to be identical to
those of Policy 300 (which contained an addi-
tional insured clause). Lumbermens responds
by pointing out ambiguities in List’s affidavit
that suggest she might have been describing
ongoing negotiations rather than a final
agreement. Although these ambiguities might
reduce the credibility of her testimony, List’s
affidavit, on the whole, suggests a fact issue as
to whether Sedgwick intended for Policy 362
to include an additional insured clause. TIG
offered some evidence that Sedgwick believed
that Policy 362 would contain an additional
insured provision.
TIG, however, failed to offer any summary
judgment evidence about Lumbermens’s be-
liefs when Sedgwick issued Policy 362. TIG
argues that the doctrine of mutual mistake jus-
tifies reforming its policy or contract with
Lumbermens. Although TIG presented
evidence of Sedgwick’s mistaken beliefs about
the contract, TIG did not provide a shred of
evidence that Lumbermens shared those be-
liefs. Nor did TIG present any evidence that
Sedgwick had the statutory, actual, or

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apparent authority to change the terms of the
underlying policy for Lumbermens.
We will not reform the terms of the
insurance policy without some proof that the
party with the power to do so shared an
antecedent understanding. Because TIG failed
to provide proof that the relevant parties
shared an antecedent agreement, its plea for
reformation must fail under Texas law.
V.
TIG argues that Sedgwick’s erroneous COI
is a fraudulent or negligent misrepresentation.
The district court found that Safety Lights and
Corporate Express did not reasonably rely on
the COI with disclaimer, and TIG failed to
present any evidence on several crucial
elements of both claims. We affirm on the
latter grounds.
A.
The elements of common law fraud are
(1) a material misrepresentation; (2) the
defendant knew the statement was false or
made the statement with reckless disregard for
the truth; (3) the defendant intended for the
plaintiff to rely upon the statement; and (4) the
plaintiff relied upon the statement (5) to his
detriment. DeSantis v. Wackenhut Corp., 793
S.W.2d 670, 688 (Tex. 1990). The district
court observed the absence of Sedgwick’s
fraudulent intent or reckless disregard as an al-
ternate ground of decision. TIG has never
presented any evidence that Sedgwick intend-
ed to defraud Corporate Express.
TIG presented evidence from List that
Sedgwick may have misunderstood Policy 362
to include an additional insured clause. TIG
never presented evidence that Sedgwick had
the intent to defraud. We do not need to reach
the question of reasonable reliance.
B.
The elements of negligent misrepresentation
are (1) a representation made by the defendant
in course of the defendant’s business, or in a
transaction in which the defendant has a
proprietary interest; (2) the defendant supplied
false information for the guidance of others in
their business; (3) the defendant did not
exercise reasonable care or competence in
obtaining or communication the opinion; and
(4) the plaintiff suffered pecuniary loss by
justifiably relying on the representation.
Federal Land Bank Ass’n v. Sloane, 825
S.W.2d 439, 442 (Tex. 1991). TIG did not
offer any summary judgment proof that
Sedgwick negligently or carelessly issued the
COI. TIG did not advance a theory about the
relevant standard of care; it does not cite omit-
ted precautions or any other indicia of
negligence; it did not explain why Sedgwick,
rather than Corporate Express, bore the
burden of reading the incorporated policy.
Absent a coherent legal theory and summary
judgment evidence, the district court properly
dismissed the claim.
AFFIRMED.

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