Liberty Mutual units urged a Texas federal court to toss an automobile auction company's suit accusing them of failing to indemnify a settlement over stormwater runoff claims, saying the question of breach cannot be answered until a related suit determines whether the insurers had any duty to indemnify.

In a motion to dismiss filed Friday, Liberty Mutual Fire Insurance Co. and Liberty Insurance Corp. said Copart of Connecticut Inc. "has failed to state a claim, other than pure speculation, as to whether a breach occurred."

Before the court can answer whether a breach occurred, it must first interpret the insurers' respective policies to determine whether they had a duty to provide indemnity coverage to Copart in a separate action also before the Northern District of Texas, the Liberty Mutual units said.

Copart's bad faith claim must also be dismissed, the insurers asserted, saying "under Texas law, an insurer does not owe a duty of good faith in handling a third party's claims against its insured."

"Since there is no bad faith cause of action available in the third-party context, Copart cannot assert bad faith damages for any failure of indemnification here," the insurers added.

The coverage dispute stemmed from an underlying suit brought against Copart by owners of property located near the company's automotive salvage facility in Lexington County, South Carolina.

The property owners alleged in a complaint filed in South Carolina state court in October 2016 that Copart's expansion of its property caused stormwater runoff to flow from the company's property through a creek and, ultimately, into the waterways, wetlands and ponds on their properties.

LMFIC, which insured Copart under five consecutive commercial general liability policies, agreed to defend the company subject to a reservation of rights, according to court filings.

LMFIC and LIC, which insured Copart under three consecutive umbrella policies, went on to sue the company in Texas federal court in November 2019, seeking a declaration that they have no duty to defend or indemnify Copart.

The court ultimately ruled in the insurers' favor, and they withdrew defense. Copart appealed the ruling and later settled the underlying suit with the property owners in May 2022. In July 2023, the Fifth Circuit affirmed that the insurers had no duty to defend Copart in the underlying suit but reversed and remanded on the duty to indemnify.

The company filed the present action in July, accusing the Liberty Mutual insurers of breaching their policies and violating the Texas Insurance Code.

The insurers said Friday that Copart's suit "ignores the fact that whether defendants have an obligation to indemnify at all remains unresolved."

Moreover, the company "cannot sustain a breach of contract claim based on the insurer's refusal to pay a settlement that indisputably encompasses both covered and excluded losses," the insurers asserted. "The absence of allocation is fatal to Copart's claim, and dismissal is therefore required."

Representatives of the parties did not immediately respond to requests for comment Monday.

Copart is represented by Amy Elizabeth Stewart and Melinda K. Bradley of Amy Stewart PC.

Liberty Mutual is represented by Catherine L. Hanna, Jeffrey C. Glass and Samantha L. McCoy of Hanna & Plaut LLP.

The case is Copart of Connecticut Inc. v. Liberty Mutual Fire Insurance Co. et al., case number 3:25-cv-01931, in the U.S. District Court for the Northern District of Texas.