Emscor Mfg., Inc. v. Alliance Ins. Group

CourtCourt of Appeals of Texas
Citation879 S.W.2d 894
Docket NumberNo. B14-92-01121-CV,B14-92-01121-CV
PartiesEMSCOR MANUFACTURING, INC.; Walter P. Manning, Jr.; Cindy R. Ketcher, Individually and as Administratrix on Behalf of the Estate of Steven Ketcher; Carolyn J. Ketcher; Kristina Heilman Weaver, Individually and as Next Friend of Lyndsey Michelle Weaver and as Administratrix on Behalf of the Estate of Michael Weaver; and Charles D. Weaver, Appellants, v. ALLIANCE INSURANCE GROUP; Alliance Syndicate, Inc.; and Alliance General Insurance, Appellees. (14th Dist.). Motion for Rehearing Granted, Majority and Dissenting Opinions
Decision Date03 February 1994

Earl Landers Vickery, Houston, for appellants.

Linda M. Cipriani, Michael O. Connelly, of Houston, for appellees.



MURPHY, Justice.

This is an excess carrier insurance case. Appellants, Walter P. Manning Jr. (Emscor's former President) and Emscor Manufacturing, Inc. (collectively referred to as "Emscor"), filed suit against appellees, Alliance Insurance Group, Alliance Syndicate, Inc., and Alliance General Insurance (collectively referred to as "Alliance"), claiming that Alliance was liable for wrongfully refusing to settle a negligence suit filed against Emscor. The trial court granted summary judgment in favor of Alliance on all of Emscor's causes of action and Emscor appealed. We affirm.

As we will detail, the relationship between Emscor and Alliance has a lengthy history. On February 28, 1987, Emscor purchased an excess insurance policy (the policy) from Alliance. The policy was effective from February 28, 1987, through February 28, 1988. It provided comprehensive general liability coverage in the amount of $500,000 as excess over and above a primary comprehensive general liability policy in the amount of $500,000 issued to Emscor by Stone Mountain Insurance Company (Stone Mountain). Pursuant to the policy, Alliance was required, when and if certain conditions were met, to indemnify Emscor up to $500,000 for losses which were covered by Stone Mountain's policy, and which were in excess of Stone Mountain's $500,000 policy limit. On April 25, 1987, a crane collapsed, injuring and ultimately causing the deaths of Steven Ketcher and Michael Weaver. In May 1987, the families of the dead men sued Emscor and several other defendants in connection with the accident (the Ketcher litigation). 1 On July 26, 1988, Stone Mountain was placed into receivership. Emscor subsequently tendered a bill for legal fees and expenses incurred in the Ketcher litigation to Alliance. On September 23, 1988, Alliance informed Emscor that it would not pay those fees and expenses because it was not obligated under the terms of the policy to "drop down" and replace the primary coverage in the event of the primary insurer's insolvency.

On January 26, 1990, Emscor filed a declaratory judgment action to determine whether Alliance was required by the terms of the policy to provide a defense to Emscor in the Ketcher suit. The trial court granted Alliance's motion for summary judgment based upon the language of the policy and denied Emscor's cross-motion for summary judgment. Emscor appealed the trial court's ruling to this court. See Emscor Mfg., Inc. v. Alliance Ins. Group, 804 S.W.2d 195 (Tex.App.--Houston [14th Dist.] 1991, no writ).

During the pendency of that appeal, Emscor began settlement negotiations with the Ketcher plaintiffs. On March 7, 1990, counsel for Emscor wrote to Alliance, stating that "serious settlement negotiations" were about to begin in the Ketcher suit and demanding that Alliance tender the limits of its coverage. Emscor's counsel advised Alliance that unless it came forward "immediately" to tender the $500,000 in excess coverage, he would make "any arrangements or deals," with other counsel to protect his clients. 2 In response, almost two months later, Alliance asked to review the case with Emscor and inquired about a number of issues related to possible settlement of the Ketcher suit, including whether any monies were available from the [State Board of Insurance] Guaranty Fund and whether any specific settlement demands had been made. On May 10, 1990, Emscor expressed its willingness to review the case and advised that it was continuing to work with the Guaranty Fund to determine how much, if any, money would be available from the Fund. The meeting between the attorneys for Emscor and Alliance took place on May 22, 1990. Following that meeting, Alliance asked to be kept informed of all significant developments with respect to the Ketcher suit.

Throughout the next several months, Emscor attempted to obtain a commitment of settlement funds from the Guaranty Fund. In fact, in July 1990, Emscor sent Alliance a copy of a correspondence it had received from the Guaranty Fund. That correspondence stated that the Proof of Claim forms filed by Emscor were "sufficient to provide up to $500,000 indemnity coverage to Emscor." In response, Alliance "congratulated" Emscor for apparently obtaining "the Board's commitment to step into the shoes of Stone Mountain and provide $500,000 in primary coverage to Emscor in connection with the Ketcher litigation." However, Alliance reiterated the fact that its policy was in excess of the primary policy and that it was not required to pay monies until the first $500,000 in primary coverage was exhausted. Alliance further stated that "as soon Alliance has received evidence that the Board has in fact paid $500,000 to Emscor and/or its attorneys in connection with this case, Alliance will make its coverage available."

In August 1990, Emscor notified Alliance that the Ketcher plaintiffs had agreed to settle against all of the Ketcher defendants for $8,000,000. Emscor reminded Alliance of the November 12, 1990, trial date and requested Alliance to "authorize" its policy limits for settlement. In response, Alliance asked for a case assessment and inquired about Emscor's progress with the Guaranty Fund. Emscor obliged and reassured Alliance that it was "working vigorously with the Texas Guaranty Fund to obtain a commitment to pay the $500,000 primary limits."

On September 17, 1990, Emscor notified the Guaranty Fund and Alliance that the Ketcher plaintiffs had settled with all of the defendants except Emscor. The letter sought confirmation from the Guaranty Fund on whether it had received "all information necessary to make a final determination on releasing settlement funds." One week later, Emscor reported to Alliance that it was continuing to "work closely" with the Guaranty Fund, but that the process was "slow and tedious." Emscor also inquired as to whether Alliance would contribute its excess coverage to add to any amount contributed by the Guaranty Fund and whether Alliance would assume Emscor's defense in the event that it did not exhaust its policy limits. Emscor further informed Alliance that it was considering an assignment of its "rights to any Guaranty Fund proceeds as well as a certain amount for excess coverage from Alliance." On September 25, 1990, Alliance objected to any assignment and stated that it would not authorize any of its excess coverage until the Guaranty Fund "at least authorizes" the payment of the initial $500,000. Alliance also asked for Emscor's commitment to settle the case "for as little as possible above $500,000" and repeated its pledge "to wrap up the case when and if the Guaranty Fund pays or agrees to pay $500,000."

On October 19, 1990, Emscor faxed to Alliance and the Guaranty Fund, the Ketcher plaintiffs' $1,000,000 settlement demand in the underlying suit. Although it indicated that Emscor had yet to obtain monies from the Guaranty Fund, the settlement demand stated that it was contingent upon Alliance's payment of its $500,000 policy limit. The demand also stated that it would expire on October 26, 1990. On October 24, 1990, two days before the Ketcher settlement demand was to expire, counsel for Alliance faxed a lengthy response to counsel for Emscor. In pertinent part, Alliance's counsel stated as follows:

Let me reiterate again as I have before, that we believe we have worked with you in the past and are working with you currently to make decisions regarding the Ketcher litigation, the resolution of that litigation, and the resolution of any other litigation against Emscor arising out of the April 1987 accident. I have told you before, and again tell you, that if and when the Texas Guaranty Fund and/or Emscor provides evidence to us that they have made arrangements to pay the first $500,000 of any settlement in this case, we will respond promptly to try to arrive at a mutually agreeable resolution of the litigation.

Alliance recognizes its obligations under the excess Alliance policy issued to your client, and is fully prepared to meet those obligations when the policy's provisions are invoked. The Plaintiffs' settlement demand has put Alliance on notice that the Plaintiffs in Ketcher are demanding an amount of money that may invoke the provisions of the Alliance policy if: a) the Guaranty Fund and/or Emscor agrees to pay $500,000 ; and b) the Plaintiffs are unwilling to settle for $500,000. However, Alliance does not believe its policy, and I do not believe the Stowers doctrine or any other Texas case law or statute, requires us to now 'assume the defense' or 'settle the case' pursuant to the Plaintiffs' October 19, 1990, demand letter. I also do not believe Alliance can be held responsible for the apparent fact that the Texas Guaranty Fund has not yet made any commitment to you in terms of primary coverage. I appreciate your desire to resolve this case now, if it can be resolved, without going to the additional time and expense to present witnesses for deposition, complete discovery, and prepare for trial. I have been in that position before,...

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