Northwinds Abatement v. Employers Ins. of Wausau

• Decision Date: 11 July 2001
• Docket Number: No. 00-20380,00-20380
• Citation: 258 F.3d 345
• Parties: (5th Cir. 2001) NORTHWINDS ABATEMENT, INC., Plaintiff-Appellee, v. EMPLOYERS INSURANCE OF WAUSAU, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 345

258 F.3d 345 (5th Cir. 2001)

NORTHWINDS ABATEMENT, INC., Plaintiff-Appellee, v. EMPLOYERS INSURANCE OF WAUSAU, Defendant-Appellant.

No. 00-20380

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

July 11, 2001

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Texas

Before KING, Chief Judge, REAVLEY and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge:

In the second appearance of this case before us on appeal, Employers Insurance of Wausau ("Wausau") appeals a jury verdict in favor of Northwinds Abatement, Inc. ("Northwinds") and the resulting judgment of nearly $1.1 million, including actual and treble damages, attorney's fees, interest and costs. Wausau asserts that, as a servicing company, it was an agent of the Texas Workers' Compensation Insurance Facility (the "Facility") and therefore exempt from liability claims pursuant to now-superseded Article 5.76-2, § 2.12 of the Texas Insurance Code. We disagree, and affirm the district court's holding that Wausau is not an agent of the Facility. Wausau also argues that the claims underlying the jury verdict are all invalid as a matter of law. Wausau is in part correct, but under Texas law both the Texas Deceptive Trade Practices Act ("DTPA") and Insurance Code claims are viable, and we must affirm the judgment on these extra-contractual claims. Finally, although the award of statutory attorneys' fees to Northwinds is high, it is not reversible. The judgment is AFFIRMED.

BACKGROUND

Northwinds is a corporation engaged in the hazardous business of asbestos abatement, remediation and removal work. Unable to obtain workers' compensation insurance on the open market, it applied for and received coverage through the Texas Workers Compensation Insurance Facility, a private, nonprofit, unincorporated association of insurers created by statute with the purpose, inter alia, of providing coverage for employers who are unable to obtain insurance in the voluntary insurance market.¹ The Facility designated Wausau as the primary "servicing company" for Northwinds and Wausau subsequently issued Northwinds a workers' compensation policy.²

In 1993 Northwinds filed suit against Wausau for alleged mishandling of workers' compensation claims filed by four Northwinds employees. Northwinds alleged that Wausau paid these four claims without properly investigating them, thereby causing increased insurance premiums for Northwinds and a loss of business due to the customer perception that Northwinds was a safety risk. Northwinds characterized its claims as raising fraudulent and bad faith settlement practices, breach of contract, negligence, violations of the Texas DTPA and violations of the Texas Insurance Code.

Northwinds' suit was removed to federal court, where Wausau filed a motion to dismiss for lack of subject matter jurisdiction, citing Northwinds' failure to exhaust its administrative remedies through the Facility and the Texas Department of Insurance. The district court denied this motion. Wausau then moved for summary judgment, contending that it was not liable to Northwinds because it was only a servicing company for the Facility and not Northwinds' insurer. When the district court granted this motion, Northwinds appealed. On appeal, Wausau renewed its challenge to the district court's jurisdiction.

This court determined that, pursuant to the doctrine of primary jurisdiction, the district court had jurisdiction because the remedies sought by Northwinds could not be provided administratively. See Northwinds Abatement, Inc. v. Employers Insurance of Wausau, 69 F.3d 1304 (5th Cir. 1995) (Northwinds I). However, this court also determined that the district court should abstain from resolving Northwinds' claims until certain factual determinations were made in the administrative proceedings. Rejecting Northwinds' claim for breach of the duty of good faith and fair dealing, the court nevertheless reversed the summary judgment as to all other claims. See Northwinds I, 69 F.3d at 1311-12.

In September 1998, the district court held that Northwinds had exhausted all avenues of administrative review, and the case approached trial. Wausau filed a last-minute motion for summary judgment, asserting that it was an agent of the Facility and, as such, protected from liability under Article 5.76-2, § 2.12 of the Texas Insurance Code. After supplemental briefing on the issue, the district court denied the motion, and the case went to trial.

The jury returned a verdict in favor of Northwinds on all claims except that for breach of contract. The jury awarded actual damages of $19,234.95 for the increased premiums Northwinds was forced to pay, $55,335.49 for attorneys' fees incurred in defending the lawsuit initiated against it by the Facility at Wausau's urging, and $712,000 in attorneys' fees incurred in the federal suit against Wausau. The district court entered a judgment awarding Northwinds $74,570 in actual damages, $223,711.32 in treble damages, $712,000 in attorneys' fees, prejudgment interest on the actual damages, post-judgment interest, and costs. Wausau now appeals.

WAUSAU AS AN "AGENT" OF THE FACILITY

Wausau first argues that as a servicing company, it is an agent of the Facility and thereby immune from liability under Article 5.76-2, § 2.12 of the Texas Insurance Code.

Article 5.76-2, § 2.12 states in relevant part that:

"There shall be no liability on the part of and no cause of action shall arise against the governing committee, the facility, its executive director, or any of its staff, agents, servants, or employees arising out of or in connection with any judgment or decision made in connection with the performance of the powers and duties under this article or for recommendation or decision concerning any inspections or safety engineering investigations performed or for any recommendation or decision made in good faith". (Emphasis added).

According to Wausau, this court has already deemed it an agent of the Facility, based on the conclusion in Northwinds I that "an agent [Wausau] may be liable for its own acts of negligence or fraud". 69 F.3d at 1311. Wausau takes this as a judicial determination that it is an agent of the Facility. Further, Wausau argues that this court's invocation in Northwinds I of Maintenance, Inc. v. ITT Hartford Group, Inc., 895 S.W.2d 816 (Tex.App.--Texarkana 1995) ("Maintenance III"), demonstrates that Wausau has already been determined to be the agent of the Facility.

We disagree that Wausau's agency status under § 2.12 was determined in Northwinds I. That opinion explicitly refused to consider whether Wausau was an agent of the Facility for § 2.12 purposes. See Northwinds I, 69 F.3d at 1308, n.3. Additionally, the citation in Northwinds I to Maintenance III represented not a wholesale adoption of the Texas intermediate court of appeals' opinion, but an acknowledgment that the Maintenance III decision had been withdrawn and substantially modified. See id. at 1311. Thus, the law of the case does not govern Wausau's status as an agent under § 2.12.

Whether a "servicing company" is an "agent" of the Facility is a novel question of Texas law. Article 5.76-2 of the Texas Insurance Code does not define an "agent." It defines a "servicing company" as "a member of the facility or other eligible entity that is designated by the board to issue a policy that evidences the insurance coverages provided by the fund to a rejected risk and to service the risk as provided by this article." Tex. Ins. Code Ann. art. 5.76-2, § 1.01(12). A "member," in turn, is defined as "an insurer that is a member of the facility." Id. at § 1.01(15). We have found no evidence that the Texas Legislature intended to protect servicing companies from liability in § 2.12, and the Texas Supreme Court has never considered this issue.³ Texas intermediate court decisions contain offhand references to servicing companies as agents of the Facility, but they are not definitive.⁴

The structure of the Insurance Code offers the only direct interpretive information, and it suggests that § 2.12 does not apply to servicing companies. Article 5.76-2 of the Texas Insurance Code is divided into five parts. Part 2, in which § 2.12 is found, does not discuss or even mention servicing companies. Part 4, in turn, sets out the rules governing servicing companies but contains no exemption from liability comparable to § 2.12. Under the doctrine of ejusdem generis, the term "agent" in § 2.12 should be restricted to the class of persons enumerated in Part 2. See Dawkins v. Meyer, 825 S.W.2d 444, 447 (Tex. 1992)(outlining the doctrine of ejusdem generis and explaining that "where specific and particular enumerations of persons or things are followed by general words . . . , the general words are not to be construed in their widest meaning or extent, but are treated as limited and applying only to persons or things of the same kind or class as those expressly mentioned."). Viewed thus in context, "agent" must be a term related to the Facility, its governing body and employees, and not to the members or to servicing companies. Wausau's attempt to shelter itself under the wing of Part 2 of the Insurance Code thus seems ill-conceived.

Moreover, the ordinary meaning of the term "agent" also fails to express Wausau's relationship with the Facility. In Texas, "[a]gency is a legal relationship created by an express or implied agreement or by operation of law whereby the agent is authorized to act for the principal, subject to the principal's control." Karl Rove & Co. v. Thornburgh, 39 F.3d 1273, 1295-96 (5th Cir. 1994). The essential element in determining agency relationship is the principal's right to control the agent: "To prove an agency relation under Texas law, there must be evidence from which the court could conclude that '[t]he alleged principal [had] the right to control both the means and the details of the process by...