Great Am. Ins. Co. v. Primo

• Citation: 512 S.W.3d 890
• Decision Date: 24 February 2017
• Docket Number: No. 15–0317,15–0317
• Parties: GREAT AMERICAN INSURANCE COMPANY, Petitioner, v. Robert PRIMO, Respondent
• Court: Supreme Court of Texas

512 S.W.3d 890

GREAT AMERICAN INSURANCE COMPANY, Petitioner,

v.Robert PRIMO, Respondent

No. 15–0317

Supreme Court of Texas.

Argued November 9, 2016

OPINION DELIVERED: February 24, 2017

Joseph J. Borders, Walker Wilcox Matousek, LLP, Chicago, IL, Stephen O. Venable, Walker Wilcox Matousek, LLP, Houston, for Petitioner.

Brock C. Akers, The Akers Firm, Houston, for Respondent.

Robert Primo, Houston, pro se.

Justice Brown delivered the opinion of the Court.

This case concerns the interpretation of an insurance contract. Specifically, it turns on the applicability of an insured-versus-insured exclusion in a directors-and-officers (D & O) liability-insurance policy. The trial court granted summary judgment for the insurer, Great American Insurance Company. The court of appeals reversed. Holding that the court of appeals incorrectly interpreted the exclusion's plain language, we reverse and render judgment for Great American.

I

Robert Primo served at one time as a director and treasurer of Briar Green, a non-profit condominium association. In 2008, shortly before resigning his positions with the association, Primo wrote himself two checks, totaling just over $100,000, from Briar Green's account. Briar Green maintained Primo misappropriated the funds. But Primo insisted they were payment for management services and that he obtained the association board's approval before writing the checks.

Briar Green made a claim for the alleged loss with its fidelity insurer, Travelers Casualty & Surety Company. Travelers paid the claim in exchange for a written assignment of all of Briar Green's rights and claims against Primo for the loss. Travelers, standing in the shoes of Briar Green, then sued Primo to recover the funds. Primo, in turn, asserted a third-party claim against Briar Green. In addition, as an insured former director under Briar Green's D & O liability policy, Primo then demanded that Great American, which carried the D & O policy, defend him in the Travelers suit. But Travelers non-suited its claims against Primo, making a defense by Great American unnecessary. Primo also non-suited his third-party claims against Briar Green.

Primo then filed a contractual-indemnity action against Briar Green to recover the attorney's fees and expenses he had incurred in the Travelers suit. Great American provided a defense to Briar Green as required by its policy. That suit ended in a judgment for Primo for about $100,000 in damages and fees.

While the indemnity suit proceeded, Primo sued Great American in another action, also seeking reimbursement for the defense costs and attorney's fees he incurred in the Travelers suit. He asserted causes of action for breach of contract, breach of the duty of good faith and fair dealing, fraud, negligent misrepresentation, and violations of the Texas Insurance Code and the Prompt Payment of Claims Act.

Great American moved for summary judgment on two grounds. First, the insurer argued that collateral estoppel and the one-satisfaction rule barred Primo's suit because he had already collected his defense costs and attorney's fees in his contractual-indemnity action against Briar Green. Second, Great American argued that it owed no duty to defend Primo in the Travelers suit because that action fell within the D & O policy's insured-v.-insured exclusion. The exclusion proscribes coverage of claims made by an insured against an insured and those made "by, or for the benefit of, or at the behest of [Briar Green] or ... any person or entity which succeeds to the interest of [Briar Green]." The trial court granted Great American's motion for summary judgment. After a divided court of appeals reversed the trial court, we granted review.

II

We interpret insurance policies under the well-established rules of contract construction. Gilbert Tex. Const., L.P. v. Underwriters at Lloyd's London , 327 S.W.3d 118, 126 (Tex. 2010). We have repeatedly affirmed that every contract should be interpreted as a whole and in accordance with the plain meaning of its terms. Nat'l Union Fire Ins. Co. v. Crocker , 246 S.W.3d 603, 606 (Tex. 2008) ; see also Don's Bldg. Supply, Inc. v. OneBeacon Ins. Co. , 267 S.W.3d 20, 23 (Tex. 2008). When reviewing policy language, we take care to ensure that no provision is rendered meaningless. Gilbert , 327 S.W.3d at 126. We also refuse to insert language or provisions the parties did not use or to otherwise rewrite private agreements. Crocker , 246 S.W.3d at 606.

The goal of contract interpretation is to ascertain the parties' true intent as expressed by the plain language they used. See Gilbert , 327 S.W.3d at 126 (explaining that "we look at the language of the policy because we presume parties intend what the words of their contract say"); Nat'l Union Fire Ins. Co. v. CBI Indus., Inc. , 907 S.W.2d 517, 520 (Tex. 1995) (per curiam) ("The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument."). "Plain meaning" is a watchword for contract interpretation because word choice evinces intent. A contract's plain language controls, not "what one side or the other alleges they intended to say but did not." Gilbert , 327 S.W.3d at 127 ; see also Crocker , 246 S.W.3d at 606. And we assign terms their ordinary and generally accepted meaning unless the contract directs otherwise. Crocker , 246 S.W.3d at 606 ; Gilbert , 327 S.W.3d at 126.

If the language lends itself to a clear and definite legal meaning, the contract is not ambiguous and will be construed as a matter of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer , 124 S.W.3d 154, 157 (Tex. 2003). An ambiguity does not arise merely because a party offers an alternative conflicting interpretation, but only when the contract is actually "susceptible to two or more reasonable interpretations." Id. "The fact that the parties may disagree about the policy's meaning does not create an ambiguity." State Farm Lloyds v. Page , 315 S.W.3d 525, 527 (Tex. 2010).

III

A

Great American's primary argument is that the D & O policy's insured-v.-insured exclusion bars Primo's claims against it in this action. The exclusion provides in pertinent part:

This Policy does not apply to any Claim made against any Insured by, or for the benefit of, or at the behest of [Briar Green] or ... any person or entity which succeeds to the interest of [Briar Green].

It is undisputed that as a former director of Briar Green, Primo is an insured under the D & O policy. So the exclusion means that no coverage exists for any claim made against Primo by "any person or entity which succeeds to the interest of" Briar Green. It is also undisputed that Briar Green assigned whatever claims it had against Primo to Travelers. In this action, Primo has sued Great American to recover defense costs he incurred when Travelers sued him to prosecute the claims it had obtained from Briar Green. So the question is whether Briar Green's assignment to Travelers of its claims against Primo means that Travelers "succeed[ed] to the interest of" Briar Green. If the answer is "yes," there is no coverage under the policy and we should render judgment for Great American.

The court of appeals addressed this question by relying on an interpretation it had given the term "successor" in Augusta Court Co-Owners' Ass'n v. Levin, Roth & Kasner, P.C. , 971 S.W.2d 119 (Tex. App.—Houston [14th Dist.] 1998, pet. denied). In Augusta Court , which concerned a construction contract, the court of appeals held that "a ‘successor’ is one who not only takes another's place, but also maintains the character of the place taken. It contemplates an assumption of both rights and obligations or ‘stepping into the shoes' of another." Id. at 126 (relying on Thompson v. N. Tex. Nat'l Bank , 37 S.W.2d 735, 739 (Tex. Comm'n App. 1931, holding approved)). Under this definition, the court of appeals held, Great American had failed to show that Travelers succeeded to the interest of Briar Green, "because Great American has not shown that Travelers assumed Briar Green's obligations as well as its claims and rights." Primo v. Great Am. Ins. Co. , 455 S.W.3d 714, 724 (Tex. App.—Houston [14th Dist.] 2015).

Dissenting from the court of appeals' decision, Justice McCally contends the majority rewrote the policy to limit the exclusion to a "successor" in the corporate-transaction sense:

Nothing in the policy at issue suggests that "successor in interest," as applied to corporate transactions is what the parties intended by the word "succeeds." The language of the exclusion is purposefully broad: "by, or for the benefit of, or at the behest of." The language applies not only to an entity that succeeds to the Organization's interest, but also "any person" who succeeds to that interest. To substitute "successor in interest" for the chosen language narrows its application. The exclusion, as the Majority rewrites it, does not apply unless the claim against the insured is brought by an entity to whom the Organization or its subsidiary has fully transferred every asset and every liability. And, the rewritten exclusion virtually writes out "any person." Under this "corporate

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