Gonzaba, et al v. St Paul Fire Mrne Co

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
April 27, 2006
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 05-50313
WILLIAM GONZABA, M.D.; CHAVE D. GONZABA; WILLIAM AND CHAVE
GONZABA GRANTOR TRUST,
Plaintiffs-Appellants,
versus
ST. PAUL FIRE AND MARINE INSURANCE CO., ET AL.,
Defendants,
ST. PAUL FIRE AND MARINE INSURANCE CO.,
Defendant-Appellee.
--------------------
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:03-CV-374
--------------------
Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.
PER CURIAM:*
The Gonzaba Trust’s insurer, Appellee St. Paul, refused to
defend Appellants Dr. Gonzaba and the Trust against various
claims asserted against them by Jihad Kanafani. After Appellants
allegedly spent over $2 million in defense, they sued St. Paul in
Texas court for breach of contract. St. Paul removed to federal
district court, and both parties moved for summary judgment. The

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No. 05-50313
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1 See Am. Home Assurance Co. v. United Space Alliance, L.L.C., 378 F.3d
482, 486 (5th Cir. 2004).
2 See Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 667 (Tex. 1987)
(holding that if multiple interpretations are reasonable, courts favor the
insured’s); Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984)
(holding that if only one interpretation is reasonable, it controls). Under
Texas’s “eight corners” doctrine, we compare the words of the policy with the
claims in the complaint; if any claim is potentially covered, the insurer must
defend. See Nat’l Union Fire Ins. Co. of Pittsburgh v. Merchants Fast Motor
Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997).
3 Dr. Gonzaba’s argument noting that the phrase “persons or
organizations” in the exclusion mirrors that in the “Receiver of Assets”
section is simply unconvincing, partially because that same phrase also exists
in the “Co-owner” section.
district court granted summary judgment to St. Paul, concluding
the insurance policy did not require St. Paul to defend
Appellants against Kanafani’s claims. We review de novo.1
First, Appellants argue that the policy covers Kanafani’s
libel and slander claims against Dr. Gonzaba. This
interpretation of the policy, specifically the Fiduciary
Liability Endorsement, is unreasonable.2 As the district court
held, the provision excluding protection for “any business
pursuits not directly related to or arising from fiduciary
property” applied to a “Co-fiduciary,” “Co-owner,” “Receiver of
Assets,” or “Beneficiary,” like Dr. Gonzaba, not just a Receiver
of Assets, as Appellants contend. Not only is the prefatory
phrase to that provision (“none of the persons or organizations
described above”) plural,3 but the prefatory phrase to the entire
section states that the section “adds certain protected persons
and limits their protection.” Appellants’ interpretation would
not limit the protection of natural person beneficiaries at all;

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No. 05-50313
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4 Appellants argue that that the protection of beneficiaries is limited
because non-natural beneficiaries are covered only for “injury or damage in
connection with fiduciary property.” But that limitation - limiting only non-
natural beneficiaries - is not much of one, and still results in one group -
natural person beneficiaries - having coverage without limitation,
contradicting the prefatory phrase. Appellants also argue that our
interpretation would render the distinction between natural and non-natural
beneficiaries meaningless. Not so, for while both are insured only for
business pursuits “related to or arising from fiduciary property,” the latter
is insured only for injury or damage “in connection with fiduciary property,”
while the former’s coverage is not so limited. The two limitations are not
necessarily identical. We note also that the primary policyholder here, as
trustee of the Gonzaba Trust and many others, is Chase Bank; consequently,
Appellants’ interpretation would mean that all natural person beneficiaries
for all Chase’s trusts are covered for all their business pursuits.
5 Emphasis added.
6 See Puckett, 678 S.W.2d at 938.
7 Appellants also argue briefly that the exclusion is inapplicable
because Kanafani’s libel and slander allegations do not relate to any
“business pursuit.” We are unpersuaded - the allegations, though seemingly
personal, relate to the heart of Klafani’s case, one centered on a business
dispute.
to the contrary, it would insure every natural person beneficiary
for all their business pursuits, regardless of the pursuits’
relation to the Gonzaba Trust.4 Furthermore, it seems clear that
another exclusion in the provision, that excluding claims for
“bodily injury to any fellow employee or executive officer,”
applies to all four categories of protected persons, not just
Receivers of Assets.5 Consequently, the only reasonable
interpretation is that the policy covers only claims “related to
or arising from fiduciary property.”6 Because the libel and
slander claims do not relate to or arise from any fiduciary
property, as Gonzaba implicitly concedes by not arguing to the
contrary, the district court was correct in concluding that St.
Paul did not have to defend those claims.7

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No. 05-50313
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8 Appellants argue in their reply brief that Kanafani did not
specifically allege Appellants’ state of mind until his Tenth Amended
Petition, which also removed the Gonzaba Trust as a defendant, hence St. Paul
cannot rest its refusal to represent the Trust on that basis. However, what
Kanafani was alleging was clear from his earliest petition: that Appellants’
deliberate, improper transfer of the property from Dr. Gonzaba to the Trust
harmed him. Indeed, Appellants themselves urge us to look past another
supposed anachronism - that Kanafani did not allege loss of use until his
Thirteenth Amended Petition, after the Trust had been dropped as a defendant -
for the same reason. They cannot have it both ways. Appellants also argue in
their reply brief that St. Paul had to defend the Trust (even if not Dr.
Gonzaba) because none of Kanafani’s petitions allege that the Trust acted
intentionally, only Dr. Gonzaba. But the Trust acted almost exclusively
through Dr. Gonzaba, of course, evident from a correct reading of the
petitions. The Fourth Amended Petition, for instance, stated that Dr. Gonzaba
acted through the Gonzaba Trust in breaching a fiduciary duty. Appellants’
own conflation of Dr. Gonzaba and the Trust underscores the point: in their
blue brief they argued that St. Paul had to defend Dr. Gonzaba against the
loss of use claim, waiting until their reply brief to argue that St. Paul owed
a special, separate duty to the Trust based on its supposed lack of intent.
The key point is simple: Kanafani never alleged an “accident.”
Second, Appellants argue the policy covers Kanafani’s “loss
of use” claim against them. This interpretation is unreasonable
because the policy only covers loss of use resulting from an
“accident,” and the alleged cause of loss of use here,
Appellants’ deliberate acts, is not an “accident.” Indeed,
Kanafani’s petition alleged that Dr. Gonzaba’s improper sale of
the property, and Appellants’ consequent de facto exclusion of
Kanafani from his use and share of the property, was done
“intentionally, knowingly, maliciously, and fraudulently.”8
There is no hint of an “accident.”
For the foregoing reasons, the judgment of the district
court is AFFIRMED.

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