Environmental Procedures, Inc. v. Guidry

• Decision Date: 03 February 2009
• Docket Number: No. 14-05-01090-CV.,14-05-01090-CV.
• Citation: 282 S.W.3d 602
• Parties: ENVIRONMENTAL PROCEDURES, INC. and Advanced Wirecloth, Inc., Appellants, v. George E. GUIDRY, Dwight W. Andrus, III, Dwight W. Andrus Insurance, Inc., and Lexington Insurance Co., Appellees.
• Court: Texas Court of Appeals

282 S.W.3d 602

ENVIRONMENTAL PROCEDURES, INC. and Advanced Wirecloth, Inc., Appellants, v. George E. GUIDRY, Dwight W. Andrus, III, Dwight W. Andrus Insurance, Inc., and Lexington Insurance Co., Appellees.

No. 14-05-01090-CV.

Court of Appeals of Texas, Houston (14th Dist.).

February 3, 2009.

Alene R. Levy, Christina Fontenot Crozier, Houston, David L. Ylitalo, Werner Powers, Erika Lea Blomquist, Dallas, for appellants.

Chester Joseph Makowski, Deborah Beck Alsup, Rick Lee Oldenettel, Houston, John E. McElligott, Lafayette, for appellees.

Panel consists of Justices FROST, SEYMORE, and GUZMAN.

MAJORITY OPINION ON REHEARING

EVA M. GUZMAN, Justice.

We grant appellants' motion for rehearing, deny as moot their motion for rehearing en banc, withdraw our opinions of April 17, 2008, and substitute this majority opinion on rehearing.

This multi-issue appeal arises from a dispute between an insurance broker and his clients as a result of the marketing and sale of several insurance policies. Appellants Environmental Procedures, Inc. and Advanced Wirecloth, Inc. (the "Insureds") contend the trial court erred in (a) granting partial summary judgment in favor of the insurance broker, the company that employed him, and the owner of that company on the Insureds' claims arising from the appellees' alleged negligence, negligent misrepresentation, and violations of former article 21.21 of the Texas Insurance Code;¹ (b) directing a verdict on the Insureds' claims for breach of fiduciary duty; (c) failing to render judgment in the Insured's favor regarding their claims under section 101.201 of the Texas Insurance Code; (d) excluding from evidence two issues of a trade publication; and (e) enjoining the Insureds and their counsel from further use or disclosure of certain documents obtained through discovery in another case. We conclude that the trial court erred in granting partial summary judgment; thus, we reverse the trial court's judgment in part and remand the Insureds' claims of negligence and violations of article 21.21 of the Texas Insurance Code. Additionally, we conclude that the trial court's non-disclosure order was void ab initio, and thus, we dismiss as moot the Insureds' appeal from this order. In all other respects, we affirm the trial court's judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant Environmental Procedures, Inc. d/b/a Sweco Oilfield Services ("EPI") operated as a tool rental and oilfield service company; its subsidiary, appellant Advanced Wirecloth, Inc. ("Wirecloth"), manufactured screens used in the oil industry. At the time of the events in question, the respective headquarters for EPI and Wirecloth (collectively, "the Insureds") were located in Texas. The Insureds' agent or broker was appellee George Guidry ("Guidry"), who was employed by appellee Dwight W. Andrus Insurance, Inc. (the "Agency") in Louisiana. Appellee Dwight W. Andrus, III ("Andrus") was the owner of the Agency. Guidry presented insurance proposals and presentations to the Insureds in Texas and delivered the relevant policies or cover notes there. Although Guidry sold surplus-lines coverage to the Insureds, he was not licensed to do so in Texas.

A. The Insurance Policies

In 1991, Guidry obtained insurance, effective October 1, 1991 through September 30, 1992, for the Insureds through British-American Insurance Group Ltd. ("British American"). The coverage consisted of a commercial general liability ("CGL") policy with a limit of $1 million for any one accident or occurrence and an umbrella policy with a $3.5 million limit for any one accident or occurrence. Coverage under the 1991 British American CGL policy was apportioned among seven insurers, and the responsibility for the coverage limits under the umbrella policy was shared among twenty-eight insurers. Guidry provided the Insureds with cover notes reflecting this coverage.

In November 1992, Guidry renewed the coverage on the British American CGL policy. He provided the Insureds with a cover note showing that this coverage was divided among three insurers. A few weeks later, British American sent cover notes to the Agency showing excess CGL coverage for the Insureds apportioned among eleven insurers and $5 million in umbrella coverage provided by Ocean Marine Indemnity Company Limited. These policies were effective from October 1, 1992 through September 30, 1993.

In 1993 and 1994, Guidry obtained the Insureds' CGL and umbrella insurance from Lexington Insurance Company. Under the terms of the Lexington policies, the limits of coverage were reduced by the costs of defense.

B. The Underlying Litigation

In the summer of 1994, Wirecloth notified Guidry that it had been sued by a competitor, Derrick Manufacturing Corporation, who alleged various patent and trademark violations, as well as other violations of Texas common law and the Texas Business and Commerce Code. Guidry forwarded this information to British American. In the summer of 1995, the Insureds, among others, again were sued by this competitor for similar alleged violations of a second patent. These lawsuits (the "Derrick litigation") were subsequently consolidated. The Insureds notified Guidry of the second suit, and Guidry forwarded the information to Lexington. Although Lexington appointed defense counsel under a reservation of rights in April 1996, the Insureds continued to pay most of their own defense costs.

In September 2001, Varco, L.P., a subsidiary of National Oilwell Varco, a successor in interest to the Insureds,² paid approximately $15 million to settle the Derrick litigation. By this time, the Insureds had incurred approximately $17 million in attorneys' fees. Lexington paid a fraction of the Insureds' defense costs, but did not contribute funds to settle the Derrick litigation.

Within a week of the settlement, Lexington filed a declaratory judgment action against the Insureds seeking a coverage determination (the "Coverage Suit"). Additional insurers were later added to the suit. The Insureds reached a number of settlement agreements with British American and several other insurers. Regarding the coverage procured through British American, there were no settlements with the insurers securing the 1991-1992 CGL and umbrella policies, but the Insureds settled with all of the insurers providing coverage under the 1992-1993 CGL and umbrella policies. Between these two extremes, the Insureds reached settlement agreements with some, but not all, of the insurers securing the 1992-1993 excess CGL policy. The Insureds settled their claims against Lexington in the Coverage Suit at the same time as they settled claims asserted against Lexington in this suit.

C. This Suit

The Insureds filed the instant suit against Guidry, the Agency, and Andrus (collectively, the "Brokers") on August 29, 2003 (the "Filing Date"), asserting claims against the Brokers for negligence, gross negligence, negligent misrepresentation, fraud, breach of fiduciary duty, and violations of article 21.21 of the Texas Insurance Code. The Insureds also asserted claims under section 101.201 of the Texas Insurance Code (hereinafter "Unauthorized Insurance" claims), alleging that British American was an "unauthorized insurer," that the Brokers assisted in the procurement of the British American policies, and that the Brokers therefore were liable for the unpaid amount of the claims covered under the terms of the British American policies. In addition, the Insureds alleged that Andrus negligently supervised Guidry, that Andrus operated the Agency as a sham to perpetrate a fraud, and that the Agency was Andrus's alter ego. Finally, the Insureds invoked the discovery rule and the doctrine of estoppel, alleging that they first learned of the misconduct when Guidry's deposition was taken in the Coverage Suit.

1. Partial Summary Judgment

The Brokers filed a motion for partial summary judgment based on a limitations defense. In their motion, the Brokers asserted that the Insureds' claims for negligence, negligent supervision, negligent misrepresentation, and violations of article 21.21 of the Texas Insurance Code were barred by the two-year statute of limitations. In support of the motion, the Brokers attached a letter dated May 12, 1999 from Lexington's attorney to the Insureds' attorney, in which Lexington's attorney stated, "Under the terms of the Lexington primary policies, the defense costs reduce the applicable limits of insurance." The Brokers also relied on a letter from Lexington dated December 10, 2000, in which Lexington's counsel asserted that the two-year limitations period applied to the Insureds' claims of negligence, negligent supervision, negligent misrepresentation, and violations of article 21.21 of the Texas Insurance Code. The Insureds responded and filed special exceptions on December 8, 2004.

The motion for partial summary judgment was submitted without oral argument on February 7, 2005. Less than two weeks before the submission date, the Brokers filed a reply accompanied by additional evidence, and less than a week later, the Insureds filed a surreply, objections, and a motion to strike the Brokers' summary-judgment motion on the grounds that it was set for submission after the summary-judgment hearing deadline specified in the trial court's docket control order. During a telephone conference on February 9, 2005, the trial court denied the Insureds' motion to strike, and on March 18, 2005, the trial court granted the Brokers' motion for partial summary judgment.

2. Non-Disclosure Order

A few days before the trial court granted partial summary judgment, Lexington filed a "Motion to Enforce Confidentiality Agreement and for Entry of Protective Order." No evidentiary hearing was held, and the trial court signed an order granting the motion on April 5, 2005 (hereinafter the "Non-Disclosure Order"). This order barred the Insureds, their attorneys, and additional non-parties from using or disclosing, in this...