Lexington Ins Co v. Educare Community

* Pursuant to the 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under limited
circumstances set forth in 5TH CIR. R. 47.5.4.
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United States Court of Appeals
Fifth Circuit
F I L E D
October 11, 2005
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 05-20050
Summary Calendar
LEXINGTON INS. CO.,
Plaintiff - Counter-Defendant -
Appellee - Cross-Appellant,
versus
EDUCARE COMMUNITY LIVING CORP.-GULF COAST, ET AL,
Defendants,
EDUCARE COMMUNITY LIVING CORP.–GULF COAST,
Defendant - Counter-Claimant -
Appellant - Cross-Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. H-02-2822
Before HIGGINBOTHAM, BENAVIDES, and DENNIS, Circuit Judges.
PER CURIAM:*
Defendant, Educare Community Living Corporation–Gulf Coast
(“Educare”) appeals the summary judgment in favor of Plaintiff,
Lexington Insurance Company (“Lexington”), the judgment declaring
that Lexington has no duty to indemnify Educare for the remaining
$1,500,000 that Educare paid in partial fulfillment of a settlement

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agreement. Lexington cross-appeals the denial of attorney’s fees.
Educare was sued as a result of one of its employee’s alleged
sexual assault of a resident in an Educare group home. Educare
Employees DeLaCerda and Elvenia Hackett were implicated in claims
for negligent hiring and negligent supervision and training. The
parties settled the underlying lawsuit, Lexington contributing
$1,000,000 to the settlement in accordance with the primary
policy’s maximum commercial general liability coverage. However,
the primary policy contained two coverage parts: commercial general
liability (“CGL”) and medical professional liability (“MPL”).
Pursuant to the MPL coverage of the primary policy and to a non-
waiver, reservation of rights agreement entered into between
Educare and Lexington prior to the settlement, Educare seeks
indemnification for the amount it paid in satisfaction of the
settlement agreement. The crucial question on appeal, therefore,
is whether the negligent supervision claim in the underlying
lawsuit falls within the MPL coverage included in the primary
policy, requiring Lexington to indemnify Educare for the additional
$1,500,000 that Educare paid in settlement. Additionally,
Lexington appeals the denial of attorney’s fees.
I.
Summary judgment is appropriate if no genuine issue of
material fact exists and the moving party is entitled to judgment

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1 See Fed. R. Civ. P. 56.
2 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
3 See Prejean v. Foster, 227 F.3d 504, 508 (5th Cir. 2000).
4 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 253 (1986).
5 Id. at 255; Cabillo v. Cavender oldsmobile, Inc., 288 F.3d 721, 725 (5th
Cir. 2002).
6 Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005).
7 Am. Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir 2001).
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as a matter of law.1 Under FED.R.CIV.P. 56(c), the moving party
bears the initial burden 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.”2 When the moving party has met its Rule
56(c) burden, the nonmovant cannot survive a motion for summary
judgment by resting on the mere allegations of its pleadings.3
“The mere existence of a scintilla of evidence in support of the
plaintiff’s position will be insufficient; there must be evidence
on which the jury could reasonably find for the plaintiff.”4 In
deciding a summary judgment motion, the court reviews the facts
drawing all reasonable inferences in the light most favorable to
the nonmovant.5 This court reviews a grant of summary judgment de
novo, applying the same standard as the district court.6
Texas rules of contract interpretation control in this
diversity case concerning disputed language in an insurance
policy.7 In a coverage dispute, the primary concern of the court

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8 Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.
1983).
9 Puckett v. U.S. Fire Ins. CO., 678 S.W.2d 936 (Tex. 1984).
10 N. Am. Shipbuilding, Inc. v. S. Marine & Aviation Underwriting, Inc.,
930 S.W.2d 829, 834 (Tex. Ct. App. 1996).
11 Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).
12 Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994).
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is to give effect to the intentions of the parties as expressed by
the policy language.8 The court gives the terms used in the policy
their plain, ordinary meaning unless the policy itself shows that
the parties intended the terms to have a different, technical
meaning.9 The court must “consider the policy as a whole and
interpret it to fulfill [the] reasonable expectations of the
parties in light of customs and uses of the industry.”10 When
considered as a whole, a contract is ambiguous only if “it is
reasonably susceptible to more than one meaning.”11 Although a
court will construe ambiguities in an insurance contract against
the insurer and in favor of coverage, “not every difference in the
interpretation of a contract or an insurance policy amounts to an
ambiguity.”12
A.
The language of the insurance policy is clear. The MPL
covered amounts that Educare become legally obligated to pay as
“damages resulting from a medical incident arising out of
professional services.” The MPL defined a “medical incident” as
“any act, error or omission in the providing of or failure to

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13 Additionally, the MPL provisions excluded coverage “for any actual,
alleged, attempted, or proposed erotic physical contact, or any sexual abuse or
harassment” and contained a “separation of insureds” clause. The primary policy
limited insurance to $1,000,000 per “each medical incident.”
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provide professional services.”13 The MPL defined “professional
services” as follows:
1. Medical, surgical, dental, nursing or other
health care services including but not limited to
the furnishing of food or beverages in connection
with such services; the practice of nuclear
medicine; the furnishing or dispensing of drugs or
medical, dental or surgical supplies or appliances;
or the handling or treatment of deceased human
bodies, including autopsies, organ donation or
other procedures;
2. Services by any person as a member of a formal
accreditation, standards review or similar
professional board or committee of any Insured; or
3. Supervising, teaching, proctoring others at
your request.
On appeal, Educare argues that the negligent training
and supervision of its employee qualifies as falling within
the “supervising, teaching, and proctoring” prong of the
professional services definition, resulting in coverage
under the MPL. This assertion, however, wholly removes the
phrase from the list in which it is enumerated and from the
context which that list provides–-namely, professional
healthcare. The very title of the coverage, “Medical
Professional Liability,” suggests that coverage depends on
providing professional medical care. All of the examples
of services enumerated in part 1 of the definition require

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14 Cochran v. B.J. Services Co. USA, 302 F.3d 499, 502 (5th Cir. 2002)
(stating “[i]nsured professionals, such as engineers...ordinarily carry special
insurance separate from the CGL policy to cover obligations arising from the
rendering of professional services”).
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some specialized education or experience. Furthermore,
part 2 requires some special accreditation. Though urging
a broad interpretation of the language “other health care
services” found in part 1, Educare does not argue that the
relevant employees are covered by parts 1 or 2 of the
definition. If we were to accept Educare’s view of
coverage under part 3, all of Educare’s employees, simply
by virtue of being trained or supervised in a group home
environment, would qualify for coverage under the MPL part
of the policy, irrespective of the employee’s level of
participation in providing healthcare. This cannot be
true.
Interpreting the policy as a whole, it is clear that
the MPL excludes the training and supervision of an
employee not possessing the type of skills set forth in
parts 1 or 2 of the definition. After all, this is the
purpose of MPL coverage, to supplement non-professional CGL
coverage.14 Therefore, when read in context, the
supervision and teaching must be for healthcare services--
professional in nature–-demanding either specialized
knowledge, such as that required to perform the enumerated
tasks in part 1, or recognized training, such as that

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15 Id. In an appeal from the Western District of Louisiana, a supervisory
exclusion within the definition of professional services was deemed not to
preclude coverage where an insured was injured merely by removing a cement head
from an oil rig because the nature of the work did not constitute a professional
service, which would require “special insurance.” The policy defined
professional services as: “1. The preparing, approving, or failure to prepare or
approve maps, shop drawings, opinions, reports, surveys, field orders, change
orders or drawings and specifications; and 2. Supervisory, inspection,
architectural, or engineering activities.” Id.
16 Big Town Nursing Homes v. Reserve Ins. Co., 492 F.2d 523, 525 (5th Cir.
1974); Guaranty Nat’l Ins. Co. v. North River Ins. Co., 909 F.2d 133, 137 (5th
Cir. 1990) (applying same definition).
17 Duncanville Diagnostic Ctr. v. Atlantic Lloyd’s Ins. Co., 875 S.W.2d
788, 790-91 (Tex.App.-Eastland 1994), reh’g denied (Though holding that a
professional services exclusion from coverage in a CGL policy was inapplicable
to a radiological technician who administered a lethal dose of a chemical to a
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required by part 2. In affirmation, this court previously
has interpreted a coverage exclusion for supervisory
activities contained within a detailed definition for
professional services to require specialized training.15
Moreover, when not expressly defined in such a way
that purports to vary the customary usage of the term, the
accepted meaning of professional services, according to
both Fifth Circuit and Texas state law, conforms to this
interpretation of the professional services definition in
the present case. This Court has defined professional
healthcare services as not “a purely physical action in
response to a business determination, but rather the
exercise of a trained judgment in obedience to an
established medical policy.”16 Likewise, Texas courts
define “professional services” as requiring specialized
education and knowledge.17 These customary definitions do

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patient, Duncanville limited “professional services” to those applying
specialized education and knowledge, as well as predominantly intellectual rather
than physical skills.).
18 The Duncanville lawsuit included claims of negligence, as well as the
failure to adequately hire, train, and supervise the medical center's employees
and the failure to institute adequate policies and procedures at the center. See
Duncanville Diagnostic Ctr., 875 S.W.2d at 788. The court determined that
without the rendering of negligent medical services, the other negligence claims
could not follow. Id.
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not singularly inform but, rather, stand to buttress the
conclusion that the parties contracted for coverage related
to professional medical treatment.
B.
The record demonstrates that the training of and
supervision by the Educare employees named in the
underlying lawsuit did not involve professional services as
defined by the instrument, thereby precluding coverage
under the MPL part of the insurance policy.18 Neither
DeLaCerda nor his supervisor Elvenia Hackett had any
specialized medical education or experience. DeLaCerda was
hired as a night-time “program technician,” a position that
required a high school diploma or equivalent, a valid
driver’s license with an acceptable driving record, and a
demonstration of competency on the one-week new employee
orientation that included a thirty-minute introduction to
mental retardation. No state license was required. The
program administrator for Educare described the night-shift
program technician’s duties as typically not involving

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19 Duncanville Diagnostic Ctr., 875 S.W.2d at 790-91 (Though actual
diagnosis of medical conditions certainly rises to the level of professional
service, “to the extent the acts involved in this case did not require the
exercise of professional medical judgment, the acts were nonetheless an intricate
part of the professional medical services provided by the Center.”); Employers
Reins. Corp. v. Newcap Ins. Co., 209 F.Supp.2d 1184, 1197-98 (D.Kan. 2002)
(distinguishing Duncanville, stating that security guards who enforced hospital
policy by calling a dispatcher upon recognizing a health emergency were not
intimately involved in providing health care services).
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resident contact, except in the case of emergency.19 The
job required cleaning and home maintenance duties and
visually verifying that the residents were sleeping safely.
Moreover, DeLaCerda was not allowed to perform medical
tasks or even hand a pill to a resident; therefore, he was
not even remotely involved in administering any type of
professional medical care. The evidence on record does not
create a question of fact; DeLaCerda’s employment duties
with Edurcare did not qualify as “professional services” as
defined in the insurance policy.
The claims against Educare in the underlying
litigation also alleged the negligent supervision and
training of DeLaCerda’s supervisor Elvenia Hackett.
Hackett, a residential director, obtained a G.E.D. and had
attended both a business program and a cosmetology school
prior to her employment with Educare. In addition to the
same one-week orientation that DeLaCerda attended, she also
received one week of on-the-job training, which included
sitting in on interviews and familiarization with the

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20 See Big Town Nursing Homes, 492 F.2d, 525 (recognizing a distinction
between medical and administrative activities for the purposes of distinguishing
between professional and non-professional services but concluding that the facts
of the case did not support a finding that a nurse’s restraining of a patient
constituted administrative activity).
21 Consequently, we do not reach other arguments against coverage raised
by Lexington.
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paperwork involved in the administration of a group home.20
Hackett was responsible for the grocery and household
supply shopping, for staffing, and for interacting with the
residents’ guardians. She was not, however, allowed to
perform any medical tasks, such as distributing medication
to a resident. Thus, Hackett was not responsible for
providing professional services.
The record before this Court, viewed in light most
favorable to Educare, does not raise a genuine issue of
material facts regarding DeLaCerda and Hackett’s provision
of professional services as required by the MPL part of the
insurance policy. We agree with the district court that
Educare is not entitled to indemnification for the
additional $1,500,000 it paid in satisfaction of the
settlement agreement.21
II.
Lexington also cross-appeals the district court’s
rejection of its claim for attorney’s fees under its
written agreement with Educare.

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22 Boudreaux, 402 F.3d at 540.
23 See Lockette v. Greyhound Lines, Inc., 817 F.2d 1182, 1185 (5th Cir.
1987).
24 Texas Commerce Bank Nat’l Ass’n v. Capital Bancshares, Inc., 907 F.2d
1571, 1575 (5th Cir. 1990).
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Again, this court reviews a grant of summary judgment
de novo, applying the same standard as the district court.22
Of course, state law governs construction of the
agreement.23 For diversity cases, attorney's fees awards
are also governed by state law.24
Lexington and Educare entered into an agreement
preserving rights and possibly for reimbursement. Two
separate paragraphs provided for recovery of fees in
litigation in the event of any overpayment during
settlement. Paragraph five provided that any party funding
more than its share of the settlement would be reimbursed
with interest and reasonable attorney’s fees. Paragraph
nine provided that “[t]he successful party shall be
entitled to recover its reasonable and necessary attorney’s
fees incurred in connection with this coverage dispute
between the Parties incurred from the effective date of
this agreement through final resolution.” The agreement
did not define the term “successful party.”
Again, extricating a single clause from the whole
instrument, Lexington now argues that it is the successful

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party under paragraph nine and is, therefore, entitled to
attorney’s fees. However, the instrument, as read in its
entirety, requires that the successful party prevail in an
action for reimbursement of funds paid in excess of its
share. Paragraph nine states that “[t]he successful party
shall...recover...attorney’s fees incurred in connection
with this coverage dispute”–-not in connection with any
coverage dispute (emphasis added). Lexington did not
overpay in the present case and is not entitled to any
reimbursement pursuant to the non-waiver agreement.
Therefore, as the district court concluded, attorney’s fees
cannot be sustained by the non-waiver agreement.
AFFIRMED

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