INSURER HAD NO DUTY TO DEFEND CLAIMS AGAINST SOCCER ASSOCIATION BASED ON ASSOCIATION BYLAWS

Arch Insurance Co. v. U.S. Youth Soccer Ass’n.
Dallas Court of Appeals, No. 05-12-00596-CV (May 12, 2014)
Justices Bridges (Opinion), Fillmore, and Lewis
Finding that the facts alleged in an underlying complaint supported only a claim for breach of contract, which was expressly excluded from coverage, the Dallas Court of Appeals reversed a trial court’s judgment that the liability insurer had breached a duty to defend.

The United States Youth Soccer Association (“USYSA”) is a member of the U.S. Soccer Foundation (“USSF”), the national governing board for soccer in the United States, under the auspices of the U.S. Olympic Committee and the Amateur Sports Act, 36 U.S.C. §§ 220501 et seq. Other members of the USSF filed a grievance with the USSF, complaining that USYSA and other groups had violated USSF bylaws by instituting policies that restricted the complainants’ participation in USYSA programs. USYSA tendered its defense of the arbitration claim to Arch, its liability insurer, which refused to defend and denied coverage, relying on an exclusion for claims of “actual or alleged . . . breach of any oral or written contract or agreement.” After defending itself in the arbitration, USYSA sued Arch for breach of contract. The trial court granted summary judgment for USYSA, and awarded it over $365,000 in attorneys’ fees and expenses incurred in defending the arbitration claim.

The Court of Appeals reversed, holding the contractual-liability exclusion unambiguously barred coverage of all claims asserted by the complainants. It rejected USYSA’s argument that a duty to defend arose from allegations of discrimination in addition to breach of contract, insisting that the analysis under the “eight-corners rule” must focus on factual allegations, not legal theories. The Court determined that, viewing the entire complaint in context, the discrimination charge was just another way of claiming violation of the bylaws, which it held to be a claim for breach of contract. The Court found no facts alleged that would have made USYSA liable apart from its contractual obligations under the bylaws, notwithstanding USYSA’s argument that the alleged discrimination stated a violation of the Amateur Sports Act. It remanded, rather than entering judgment for Arch, because the insurer’s summary judgment motion was filed three days before the hearing on USYSA’s motion, and therefore presumably had not been adjudicated by the trial court.
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