Gen. Agents Ins. v. Home Ins. Co.

• Decision Date: 15 March 2000
• Docket Number: No. 04-99-00596-CV,04-99-00596-CV
• Citation: 21 S.W.3d 419
• Parties: (Tex.App.-San Antonio 2000) GENERAL AGENTS INSURANCE COMPANY OF AMERICA, INC., Appellant v. THE HOME INSURANCE COMPANY OF ILLINOIS, Appellee
• Court: Texas Court of Appeals

Page 419

21 S.W.3d 419 (Tex.App.-San Antonio 2000)

GENERAL AGENTS INSURANCE COMPANY OF AMERICA, INC., Appellant v. THE HOME INSURANCE COMPANY OF ILLINOIS, Appellee

No. 04-99-00596-CV

In the Fourth Court of Appeals San Antonio

March 15, 2000

From the 79th Judicial District Court, Jim Wells County, Texas Trial Court No. 95-05-33629 Honorable Terry A. Canales, Judge Presiding

[Copyrighted Material Omitted]

Sitting: Phil Hardberger, Chief Justice, Catherine Stone, Justice, Sarah B. Duncan, Justice

OPINION

Opinion by: Phil Hardberger, Chief Justice

General Agents Insurance Company of America, Inc. ("GAINSCO") appeals a judgment rendered in favor of The Home Insurance Company of Illinois, Inc. ("Home") in a subrogation action. GAINSCO presents seven issues for review, asserting: (1) Home is barred from recovering as a subrogee because it violated the provisions of GAINSCO's policy; (2) Home is precluded from recovering on its subrogation claim because: (a) Home breached its policy by failing to defend the insured; and (b) Home had unclean hands in the handling and settlement of the underlying lawsuit; (3) the jury charge was erroneous; (4) Home is judicially estopped from asserting a right to recover based on a contrary position taken in another lawsuit; and (5) Home is not entitled to recover attorney's fees. We reverse the trial court's judgment and remand the cause for a new trial.

Factual Background

GAINSCO and Home were concurrent primary insurers of Power Equipment International, Inc. ("Power Equipment"). Both policies had $1 million limits. Power Equipment also had excess insurance through Royal Insurance ("Royal"), in the amount of $5 million.

Manuel Godines died after a tank truck he was driving rolled over and caught on fire. There were gruesome pictures depicting Godines's injuries, and there was some evidence that Godines survived a short period of time while burning. Godines was survived by his wife of 38 years, his four adult children, and his fourteen grandchildren. The evidence revealed that Godines was a likeable family man and a hard worker.

Various causes were alleged to have contributed to the accident, including: (1) the poor condition of the road, (2) Godines's negligent driving during rainy weather that caused the truck to hydroplane, (3) the poor mechanical condition of the truck, and (4) the brakes. Various entities were sued, including Power Equipment. Power Equipment had worked on the truck's brakes three months prior to the accident. In examining the brakes after the accident, oil was located on a portion of the brakes, and the plaintiffs contended that this oil evidenced negligence in the work that Power Equipment previously performed. Power Equipment's attorney stated that the oil could have been caused by: (1) the accident itself; or (2) the oil that poured from the central axle during the disassembly of the truck by the plaintiffs' expert. There was competing expert testimony with regard to whether the brakes were a contributing factor to the accident. There were four eyewitnesses, but none saw Godines's brake lights come on. The inference was that Godines never applied his brakes. The investigating DPS officers concluded that the accident was due to Godines's failure to take evasive action. Witnesses were available to testify regarding the poor condition of the road and the problems they had experienced with that road during rainy weather. A mechanic, who inspected the truck the day before the accident, would testify that the brakes were fine. This testimony had its weaknesses because of the cursory nature of the mechanic's inspection. Members of Godines's family would testify that Godines continually complained of the condition of the truck, including the brakes. This testimony was corroborated by a co-worker, who also said that the brakes were not working properly. In summary, there was the usual potpourri of evidence favoring and disfavoring both sides. It is likely that a jury verdict favoring either side would have sufficient evidence to support it.

GAINSCO was the first to receive notice of the claim and hired Larry Coffey to defend Power Equipment. Home later received notice and initially agreed that Power Equipment was covered under its policy. Home's file was later transferred to Michael Hansen in Dallas. Hansen testified that the endorsement adding Power Equipment was missing from the policy when he received the file. As a result, Hansen instructed Coffey that Power Equipment was not covered in March of 1994. Hansen corrected this misinformation upon receiving the missing endorsement in April of 1994. Hansen testified that he was pleased with Coffey's performance and did not perceive a need to hire an additional attorney. Both Hansen and Jack Wisdom, GAINSCO's representative, testified that GAINSCO never requested reimbursement for the amounts GAINSCO paid Coffey; however, Hansen stated that Home was willing to reimburse GAINSCO for 50% of the amount paid.

Coffey estimated that Power Equipment had a 60% chance of prevailing at trial. He estimated the potential damage award at $2 million - $5 million. The original settlement demand by the plaintiffs was $10 million. In January of 1995, Wisdom viewed the case as one of no liability but would offer $7,500 to settle. On March 16, 1995, the plaintiffs lowered their settlement demand to $5 million. This demand was within policy limits, and Todd Dunn, Power Equipment's business manager, sent a Stowers letter to the insurance companies demanding that the case be settled at some figure within the insurance coverage. In response to Dunn's demand, Royal, the excess carrier, also demanded that Home and GAINSCO either tender their limits or settle the case within those limits.

Mediation was scheduled for April 11, 1995. As of April 3, 1995, Coffey's estimations regarding the case were unchanged. Wisdom, who estimated the chance of prevailing at trial at 80%, was willing to offer $50,000 in settlement on behalf of GAINSCO. Hansen thought $500,000 was a reasonable offer and obtained authority to offer $250,000 at mediation. During the course of the mediation, Wisdom obtained authority to offer up to $100,000. Home and GAINSCO, therefore, offered a combined $200,000 during mediation. The plaintiffs continued to demand $4.95 million. Hansen and Wisdom saw the photos of Godines's body and the accident scene for the first time at the mediation.

On April 13, 1995, Coffey sent Hansen and Wisdom a fax regarding the composition of the jury. The fax summarized the information Coffey obtained regarding the various jurors, and Coffey concluded that he had faced better juries in Alice, Texas, but he had faced worse. The next day, Hansen spoke with Coffey. Hansen testified that Coffey decreased his estimate regarding the possibility of prevailing at trial to 50%; Coffey testified that he never decreased his estimation from 60%. Based on his re-evaluation of the case at that point, including his conversation with Coffey, Hansen received authority to offer Home's limits - $1 million. Hansen contacted Coffey, who contacted Wisdom. Wisdom expressed his surprise at Home's sudden change and stated that he would not offer above the $250,000. Wisdom told Coffey to inform Hansen that Home's payment of the $1 million was a voluntary payment on its part and not part of anything GAINSCO was doing. Coffey contacted the plaintiffs attorney, who subsequently accepted the $1,250,000 settlement offer.

Home then sued GAINSCO for the difference between half of the settlement amount of $625,000, and the amount GAINSCO actually paid ($250,000). Home moved for partial summary judgment in an effort to clarify the issue to be decided by the jury. The trial court granted the summary judgment motion, ordering that if the finder of fact found that settlement of the Godines lawsuit for $1.25 million was reasonable, then Home was entitled to recover a pro-rata portion of the settlement paid from GAINSCO. The case was tried to a jury, which heard the evidence previously summarized regarding the history of the litigation. In addition, Home presented an expert witness who testified that the $1.25 million was a reasonable settlement amount. Dunn testified that the $1.25 million was a reasonable settlement and that he wanted the case settled, but Dunn also testified that it was reasonable to proceed to trial under the facts. Dunn stated that Power Equipment's position continued to be that it had not performed any defective brake work. The jury found that $1.25 million was the fair and reasonable amount that should have been paid to settle the Godines's claim against Power Equipment, and the trial court rendered judgment in favor of Home based on that finding.

Standard of Review

For summary judgment to be proper, it must be shown that there is no genuine issue of material fact in the case and that the movant is entitled to judgment as a matter of law. See Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 549 (Tex. 1985). Legal conclusions of a trial court are given no deference on appeal. See Fidelity & Cas. Co. of New York v. Hailes, 969 S.W.2d 123, 124 (Tex. App--El Paso 1998, pet. denied). As the final arbiter of the law, the appellate court has the power and the duty to independently evaluate the legal determinations of the trial court. See id.

Charge error is reviewed under an abuse of discretion standard. See Texas Dep't of Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990); Pressler v. Lytle State Bank, 982 S.W.2d 561, 564 (Tex. App.--San Antonio 1998, no pet.). The "abuse of discretion" standard, however, contains two components, and which aspect of the standard applies depends upon the type of issue involved. See Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992); Pressler, 982 S.W.2d at 564. A reviewing court may not reverse a trial court's resolution of a factual issue under an abuse of discretion standard unless "the trial court could...