Unreported / Non-Citable
Background
Two groups of U.S. servicemembers, civilians, and their families sued Ericsson entities under the Anti-Terrorism Act over terrorist attacks and kidnappings in Iraq, Syria, Turkey, Afghanistan, and Niger. The underlying complaints alleged that Ericsson knowingly made protection payments, directly or through contractors, to foreign terrorist organizations and concealed those payments.
Travelers and ACE had issued commercial general liability policies covering bodily injury or property damage caused by an “occurrence,” defined as an accident. The insurers sought declarations that they had no duty to defend Ericsson. Applying Texas law, the district court granted partial summary judgment to the insurers, concluding that the underlying complaints alleged intentional conduct rather than an accident. It stayed the indemnification issue until the underlying litigation concludes and certified the duty-to-defend ruling for immediate appeal under Federal Rule of Civil Procedure 54(b).
The Court’s Holding
The Fifth Circuit affirmed. Under Texas’s eight-corners rule, the court compared the factual allegations in the underlying complaints with the policy language and did not consider extrinsic evidence or hypothetical allegations that might have supported coverage. The complaints alleged that Ericsson’s payments were volitional, not accidental or made under duress.
The court held that scattered references to “reckless” conduct did not transform the alleged acts into accidents. Allegations that Ericsson consciously disregarded known risks still described volitional conduct, and Ericsson’s asserted lack of intent or knowledge concerning the payments’ ultimate destination did not establish an occurrence. Whether Ericsson can ultimately defeat the Anti-Terrorism Act claims because its connection to the attacks was too attenuated was a question for the underlying suits, not the coverage action.
Key Takeaways
- Under Texas law, the duty to defend depends on the underlying complaint’s factual allegations, not its legal labels or facts the insured believes should have been alleged.
- An intentional act may fall outside accident-based coverage even when the insured denies intending the resulting injury.
- Isolated references to recklessness did not create a duty to defend where the complaints as a whole alleged knowing, volitional payments and concealment.
Why It Matters
The decision reinforces that Texas’s insured-friendly duty-to-defend standard does not permit courts to invent potentially covered factual scenarios. Even unusually long complaints must be assessed according to the conduct actually alleged, and allegations of conscious disregard do not necessarily establish an accidental occurrence.
The ruling addresses only the insurers’ duty to defend. Whether Travelers and ACE must indemnify Ericsson remains stayed pending further factual development and resolution of the underlying Anti-Terrorism Act suits.