Excess Underwriters v. Frank's Casing Crew

Decision Date01 February 2008
Docket NumberNo. 02-0730.,02-0730.
Citation246 S.W.3d 42
PartiesEXCESS UNDERWRITERS AT LLOYD'S, LONDON and Certain Companies Subscribing Severally but not Jointly to Policy No. 548/TA4011F01, Petitioners, v. FRANK'S CASING CREW & RENTAL TOOLS, INC., Respondent.
CourtTexas Supreme Court

S. Shawn Stephens, Baker & Hostetler, LLP, Fred A. Simpson, Jackson Walker, L.L.P., Houston, TX, G. Andrew Veazey, Huval Veazey Felder & Aertker, LLC, Lafayette, LA, Patrick J. Wielinski, Cokinos Bosien & Young, Arlington, Kent Hance, Hance Scarborough Wright Woodward & Weisbart LLP, E. Lee Parsley, E. Lee Parsley, P.C., Austin, Trevor Boyd Hall, Dallas, L. Hayes Fuller III, Naman Howell Smith & Lee LLP, Waco, James R. Old Jr., Germer & Gertz, L.L.P., Beaumont, E. Thomas Bishop, Bishop & Hummert, P.C., Dallas, Christopher Benjamin Dove, Locke Liddell & Sapp, LLP, Houston, David Taubenfeld, Haynes & Boone, LLP, Dallas Fred C. Bosse, Austin, TX, for Amicus Curiae.

J. Clifton Hall III, Natalie Jerae Carlson, Karen Klaas Milhollin, Westmoreland Hall, P.C., J. James Cooper, Gardere Wynne Sewell & Riggs, Houston, TX, for Petitioners.

Tracy C. Temple, Warren W. Harris, Bracewell & Giuliani, L.L.P., William Fred Hagans, Carl D. Kulhanek Jr., Hagans Burdine Montgomery Rustay & Winchester, Christopher W. Martin, Martin Disiere Jefferson & Wisdom, Houston, TX, Greg Abbott, Austin, for Respondent.

Justice O'NEILL delivered the opinion of the Court, joined by Chief Justice JEFFERSON, Justice MEDINA, Justice JOHNSON, and Justice WILLETT.

On January 6, 2006, we granted respondent's motion for rehearing. We now withdraw our opinion issued May 27, 2005, and substitute the following.

In Texas, an insurer that settles a claim against its insured when coverage is disputed may seek reimbursement from the insured should coverage later be determined not to exist if the insurer "obtains the insured's clear and unequivocal consent to the settlement and the insurer's right to seek reimbursement." Tex. Ass'n of Counties County Gov't Risk Mgmt. Pool v. Matagorda County, 52 S.W.3d 128, 135 (Tex.2000). In this case, which involves excess coverage, the insured consented to the settlement but not to the excess insurer's asserted reimbursement right. We must decide whether to recognize an exception to" the rule in Matagorda County and imply a reimbursement obligation when the policy involves excess coverage, the insurer has no duty to defend under the policy, and the insured acknowledges that the claimant's settlement offer is reasonable and demands that the insurer accept it. Because none of these distinctions alleviates the concerns that drove the Court's analysis in Matagorda County, we decline to recognize such an exception. We further hold that the excess insurers failed to establish that Louisiana law regarding an insurer's right to reimbursement differs from Texas law. Accordingly, we affirm the court of appeals' judgment.

I. Background

Frank's Casing Crew & Rental Tool, Inc. fabricated a drilling platform for ARCO/Vastar. When the platform collapsed, ARCO sued Frank's Casing and several others. Frank's Casing had a $1 million primary liability policy, and excess coverage up to $10 million with Excess Underwriters at Lloyd's, London, and Certain Companies Subscribing Severally But Not Jointly To Policy No. 548/TA4011F01 (collectively "excess underwriters"). The excess policy did not require the underwriters to assume control of the defense or the settlement of any claims, but did give them the right to associate with defense counsel retained by Frank's Casing or the primary insurer if it was reasonably likely that the excess coverage layer would be reached. After Frank's Casing notified the excess underwriters of ARCO's claims, the underwriters issued reservation-of-rights letters asserting that coverage for ARCO's claims was "limited or negated" under the policy's terms.

The primary carrier retained defense counsel for Frank's Casing. As trial approached, ARCO offered to settle its claims against Frank's Casing for $9.9 million, an amount within the excess policy limits. Frank's Casing rejected the offer without passing it on to the excess underwriters. Two weeks before trial, the excess underwriters contacted ARCO directly, without Frank's Casing's knowledge, and attempted to settle claims the underwriters were willing to concede were covered. No agreement was reached. ARCO later made an $8.8 million global settlement offer to all of the defendants, about $7.55 million of which was allocated to Frank's Casing. The excess underwriters offered to pay two-thirds of this amount if Frank's Casing and its primary carrier would pay the balance, and further agreed to waive all coverage defenses if Frank's Casing accepted that proposal. Alternatively, the excess underwriters offered to pay $5 million and defer all coverage issues to be resolved in arbitration. Frank's Casing rejected both proposals, insisting that it was covered under the excess policy and therefore the underwriters were obligated to fund the entire settlement.

Shortly before trial, the excess underwriters retained counsel to associate with Frank's Casing and its primary carrier in defending against ARCO's claims. As trial began, it quickly became clear that Frank's Casing was ARCO's primary target, prompting Frank's Casing's in-house counsel to contact ARCO and solicit a settlement demand within the excess coverage limits. Frank's Casing's counsel suggested that something in the $7 million range would be reasonable. ARCO responded with a $7.5 million demand. Frank's Casing forwarded ARCO's demand to the excess underwriters with a letter suggesting that the settlement offer was a reasonable one that the underwriters should accept. The letter reiterated Frank's Casing's disagreement with the underwriters' coverage position, and stated that Frank's Casing was looking to the underwriters to fund the settlement. In their response two days later, the underwriters agreed that the case should be settled, but noted that coverage issues remained. The underwriters offered to fund the entire settlement if Frank's Casing would agree to reserve those issues for resolution later. Frank's Casing rejected the underwriters' proposal, contending that the excess insurance policies obligated the underwriters to fund the settlement. In response, the excess underwriters advised Frank's Casing that they would pay $7.5 million to settle the claim, less any contribution from the primary carrier, and then seek reimbursement from Frank's Casing. Within hours, the underwriters contacted ARCO and orally accepted its settlement offer, and the primary carrier tendered its remaining policy limits of approximately $500,000. A written settlement agreement among ARCO, Frank's Casing, and the excess underwriters preserved "any claims that exist presently" between Frank's Casing and the underwriters. Before that agreement was executed, the excess underwriters filed this suit.

Both Frank's Casing and the excess underwriters filed a series of cross motions for partial summary judgment. The trial court initially granted the underwriters' motions on their right to reimbursement. It also granted their motions for partial summary judgment on coverage, and another concluding that the excess underwriters were entitled to $7,013,612 in damages on their reimbursement claim. Before a final judgment was entered, this Court issued Texas Association of Counties County Government Risk Management Pool v. Matagorda County, declining to recognize an implied-in-fact, an implied-in-law, or an equitable reimbursement right outside of the insurance policy's provisions. 52 S.W.3d at 128. In light of our decision, the trial court ordered Frank's Casing to file a motion for new trial only on the reimbursement issue. Frank's Casing filed the motion and the trial court granted it, withdrew its prior order, and signed a take-nothing judgment in Frank's Casing's favor. The court of appeals affirmed. 93 S.W.3d 178. We granted the excess underwriters' petition for review to decide whether our decision in Matagorda County allows the under writers to assert a reimbursement right under the circumstances presented.

II. Reimbursement Under Texas Law

In Matagorda County, we examined an insurer's asserted reimbursement right in similar, though not identical, circumstances. 52 S.W.3d at 129. There, the Texas Association of Counties (TAC) provided law-enforcement liability coverage to Matagorda County, but the policy excluded coverage for claims "arising out of jail." When three inmates who had been assaulted by other prisoners in the County's jail sued the County, TAC initially denied coverage based on the jail exclusion. After some negotiation, TAC agreed to pay defense costs, subject to a reservation of rights to preserve its coverage contest, and filed suit against the County seeking a declaratory judgment that the inmates' claims were not covered. Ultimately, the plaintiffs in the underlying suit offered to settle for $300,000, an amount within TAC's policy limits. Although the County did not dispute the reasonableness of the proposed settlement, the County refused to fund or contribute to it, insisting that the claims were covered. At this point, TAC issued a second reservation-of-rights letter, again reserving its right to continue to deny coverage, but adding a statement that it was not waiving "any of its rights to pursue full recovery of this settlement amount from the County ... in the declaratory judgment action." Id at 130. TAC settled the case, then amended its pending declaratory judgment action to seek reimbursement.

We held that, under the circumstances presented, TAC had not established a right to reimbursement. Id. at 133. First, we held that TAC could only reserve rights that were expressed in the policy, and TAC's policy did not contain a right of reimbursement. Id. at 131 (stating "a unilateral ...

To continue reading

Request your trial
89 cases
  • Simco Enterprises, Ltd. v. James River Ins. Co.
    • United States
    • U.S. District Court — Eastern District of Texas
    • 11 Julio 2008
    ... ... v. Moak, 55 F.3d 1093, 1095 (5th Cir.1995)); see Excess Underwriters at Lloyd's v. Frank's Casing Crew & Rental ... ...
  • McGinnes Indus. Maint. Corp. v. Phx. Ins. Co.
    • United States
    • Texas Supreme Court
    • 26 Junio 2015
  • McGowan & Co. v. Bogan
    • United States
    • U.S. District Court — Southern District of Texas
    • 17 Marzo 2015
  • Tijerina-Salazar v. Venegas
    • United States
    • U.S. District Court — Western District of Texas
    • 3 Junio 2022
    ... ... agreement. Excess Underwriters at Lloyd's, London v ... Frank's Casing Crew & Rental Tools, Inc. , 246 ... S.W.3d 42, 50 (Tex ... ...
  • Request a trial to view additional results
1 firm's commentaries
  • Duty To Defend On Collision Course
    • United States
    • Mondaq United States
    • 22 Agosto 2012
    ...if not included in written contract). See, e.g., Excess Underwriters at Lloyds, London v. Franks Casing Crew & Rental Tools, Inc., 246 S.W.3d 42 (Tex. 2008); Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510 (Wyo. Shoshone First Bank, 2 P.3d 510. Jerry's Sports Center, Inc.,......
3 books & journal articles
  • CHAPTER 12 Briefs of Amicus Curiae
    • United States
    • Full Court Press Practitioner's Guide to Civil Appeals in Texas
    • Invalid date
    ...nothing more than getting a good deal closed.' "); Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 47 (Tex. 2008) ("Several amici also warn that recognizing a reimbursement right risks weakening the insurer's incentive to negotiate a settle......
  • Chapter 3-4 Unjust Enrichment
    • United States
    • Full Court Press Texas Commercial Causes of Action Claims Title Chapter 3 Contract and Commercial Litigation
    • Invalid date
    ...680 (Tex. App.—Corpus Christi 2002, pet. denied); but see Excess Underwriters at Lloyd's v. Frank's Casing Crew & Rental Tools, Inc., 246 S.W.3d 42 (Tex. 2008).[192] Elledge v. Friberg-Cooper Water Supply Corp., 240 S.W.3d 869, 870 (Tex. 2007).[193] Fortune Prod. Co. v. Conoco, Inc., 52 S.W......
  • Chapter 24-3 Pleading and Proving Choice of Law
    • United States
    • Full Court Press Texas Commercial Causes of Action Claims Title Chapter 24 Pleading Choice of Law
    • Invalid date
    ...for the court, not for the jury.63--------Notes:[51] Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 53 (Tex. 2008) (refusing to apply Louisiana law to reimbursement issue in a reimbursement case following a coverage dispute where the insur......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT