Dresser Indus. v. Underwr. Lloyd's, London

• Decision Date: 29 April 2003
• Docket Number: No. 06-02-00113-CV.,06-02-00113-CV.
• Citation: Dresser Indus. v. Underwr. Lloyd's, London, 106 S.W.3d 767 (Tex. App. 2003)
• Parties: DRESSER INDUSTRIES, INC., Appellant, v. UNDERWRITERS AT LLOYD'S, LONDON, et al., Appellees.
• Court: Texas Court of Appeals

106 S.W.3d 767

DRESSER INDUSTRIES, INC., Appellant, v. UNDERWRITERS AT LLOYD'S, LONDON, et al., Appellees.

No. 06-02-00113-CV.

Court of Appeals of Texas, Texarkana.

Submitted February 20, 2003.

Decided April 29, 2003.

Rehearing Overruled June 10, 2003.

David J. White, David L. Patterson, Godwin Gruber, PC, Dallas, for appellant.

David M. Gunn, Beck, Redden & Secrest, LLP, Houston, Bruce R. Grace, Baach, Robinson & Lewis, PLLC, Washington, DC, for appellees.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

Opinion by Justice CARTER. Background

In 1989, Dresser Industries, Inc. was sued by Parker and Parsley for fraud and negligence in providing well servicing operations. Dresser defended the federal court suit and was found liable for both fraud and negligence, and was assessed damages of $185 million. However, the federal court case was reversed. A similar suit was then filed in state court. The case was settled with Parker and Parsley for $115 million. By this time, Dresser called on its insurance companies to provide coverage for the Parker and Parsley claims. Dresser also had an excess insurance policy with London insurers (excess carrier) and also called on it for indemnity and later sued its insurance companies and the excess carrier for indemnity. On the eve of trial, all the underlying insurance companies and the excess carrier settled with Dresser. The underlying insurance companies paid their limits of liability (except for two insolvent companies), and the excess carrier paid 85.5 million to Dresser and obtained a release. Dresser now has different claims (asbestos-related) and presented them to the excess carrier. The excess carrier refused the claims. Dresser filed this action for a declaratory judgment that the primary insurance was exhausted. Dresser moved for summary judgment on the doctrine of res judicata, which was denied by the trial court. The excess carrier moved for summary judgment on the basis that the underlying claims were not covered losses and did not properly exhaust the underlying insurance coverage, which was granted. The trial court denied the excess carrier's motion for summary judgment based on the release by Dresser executed at the conclusion of the previous litigation between these parties.

The primary issue in this case is whether Dresser has exhausted its primary coverage in accordance with the underlying insurance contracts and thus is allowed to recover from the excess carrier. The trial court agreed with the excess carrier that the underlying claims were not covered and could not serve to exhaust the underlying coverage so the excess carrier could not be reached. Dresser argues that the previous judgment is now res judicata and precludes the carrier from asserting lack of exhaustion in this case. The excess carrier argues not only that the underlying claims were for fraud and uncovered, but also that Dresser released the claim now made. Dresser alternatively argues fact issues remain as to coverage.

Issues

1. Does res judicata apply, precluding the issue that the underlying claims were not covered, thereby failing to exhaust the primary insurance?

2. Did Dresser release the claim now being asserted?

3. Are there issues of fact to be determined as to whether the underlying claims were covered losses?

Summary Judgment Standard of Review

Summary judgment is proper when the movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. TEX.R. CIV. P. 166a(c); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979); Baubles & Beads v. Louis Vuitton, S.A., 766 S.W.2d 377, 379 (Tex.App.-Texarkana 1989, no writ). The question on appeal is not whether the summary judgment proof raises a fact issue with reference to the essential elements of the plaintiff's cause of action, but whether the summary judgment proof establishes that the movant is entitled to summary judgment as a matter of law. Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 736 (Tex.1990). Because the movant bears the burden of proof, all evidence favorable to the nonmovant is taken as true and all doubts as to the genuine issue of material fact are resolved in favor of the nonmovant. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985).

When both parties move for summary judgment and the trial court grants one and denies the other, the reviewing court shall review the summary judgment evidence presented by both sides and determine all questions presented. Comm'rs Court of Titus County v. Agan, 940 S.W.2d 77, 81 (Tex.1997).

Res judicata

Dresser argues that this matter has been resolved. Specifically, when it previously sued the insurance companies, they defended the suits on the same grounds as in this case, i.e., that the Parker and Parsley claims grew out of fraud actions, not negligence, and therefore no coverage was provided. Before trial, that case was settled and a judgment entered dismissing all claims with prejudice between Dresser and its underlying insurance companies and the excess carrier. The judgment did not address the issues of exhaustion of the insurance.

Texas follows the "transactional" approach to res judicata. See Barr v. Resolution Trust Corp. ex rel. Sunbelt Fed. Say., 837 S.W.2d 627 (Tex.1992). Under this approach, a judgment in an earlier suit "precludes a second action by the parties and their privies not only on matters actually litigated, but also on causes of action or defenses which arise out of the same subject matter and which might have been litigated in the first suit." Id. at 630; Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 798 (Tex.1992).

The doctrine of collateral estoppel precludes relitigation of ultimate issues of fact actually litigated and essential to the judgment in a prior suit. Id. at 801; Tarter v. Metro. Say. & Loan Ass'n, 744 S.W.2d 926, 927 (Tex.1988).

In the previous litigation, Dresser sued its primary carriers, together with the excess carrier, alleging it had sustained covered losses within the meaning of its policies. These claims arose from the Parker and Parsley claims against Dresser involving well servicing that Dresser had incurred. To recover on the underlying insurance, the policies required an "occurrence," defined as "an accident or event ... during the policy period neither expected nor intended from the standpoint of the insured...." To recover against the excess carrier, Dresser had to prove that the underlying insurers "have paid or have been held liable to pay the full amount of their respective ultimate net loss ... covered by underlying Policy/ies." Dresser alleged that the Parker and Parsley claims were covered by both the primary and excess carriers. The insurance companies alleged that such claims were for fraudulent activity of Dresser and therefore not covered by the policies. Those issues were vigorously contested, but were settled and dismissed before the trial.

As a prelude to the present litigation, Dresser has asserted a claim against the excess carrier for asbestos claims it has incurred. It also asserts that the underlying policies have been exhausted by the Parker and Parsley claims. Establishing these issues are conditions precedent to the liability of the excess carrier. Utica Nat'l Ins. Co. v. Fid. & Cas. Co. of New York, 812 S.W.2d 656, 662 (Tex.App.-Dallas 1991, writ denied).

The doctrine of res judicata precludes relitigation of a claim or cause of action which arises out of the same subject matter and which might have been litigated in the first suit. Amstadt v. United States Brass Corp., 919 S.W.2d 644 (Tex. 1996). Res judicata extinguishes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction or series of transactions out of which the action arose. Barr, 837 S.W.2d at 630.

The cases use terms such as barring, preventing, and extinguishing a cause of action by res judicata. Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 206-07 (Tex.1999) (res judicata prevents parties and their privies from relitigating cause of action that has been finally adjudicated by competent tribunal); Barr, 837 S.W.2d at 631 (subsequent suit will be barred if it arises out of same subject matter of previous suit and through the exercise of diligence could have been litigated in the prior suit); Dennis v. First State Bank of Tex., 989 S.W.2d 22, 26 (Tex.App.-Fort Worth 1998, no pet.) (final judgment extinguishes the right to bring other suits on the transaction); Lentworth v. Trahan, 981 S.W.2d 720, 723 (Tex.App.-Houston [1st Dist.] 1998, no pet.) (dismissal with prejudice would act as a bar to any lawsuit arising out of same facts).

In this case, Dresser argues that the issue of the underlying coverage being exhausted by covered claims was resolved by the agreed judgment in the previous litigation between these parties. It is true that issue was before the court in the previous case. It is also true that a judgment based on a settlement is final and may be used to preclude causes of action concerning the same subject matter as was in the previous case. Freeman v. Cherokee Water Co., 11 S.W.3d 480 (Tex.App.-Texarkana 2000, no pet.). However, Dresser does not want this issue precluded in this case, but rather argues that the issue has been conclusively found in its favor. Dresser filed this action for a declaration concerning that very issue. Dresser must prove the exhaustion of underlying insurance as a condition precedent to recovery against the excess carrier. Utica Nat'l Ins. Co., 812 S.W.2d at 662. What Dresser is in essence arguing is that the issue of exhaustion of underlying coverage was found in its favor in the prior case and serves to establish that issue in this case. Dresser is not urging the issue should be precluded or prevented entirely in this case. If all use of such issue is precluded, Dresser's declaratory judgment action...