National Union Fire Ins. Co. of Pittsburgh, Pa. v. Insurance Co. of North America

• Citation: 955 S.W.2d 120
• Decision Date: 16 October 1997
• Docket Number: No. 14-96-00049-CV,14-96-00049-CV
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellant/Cross-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant/Cross-Appellee, v. KECK, Mahin & Cate, Grant Cook, and Robert A. Plessala, Appellees/Cross-Appellants. (14th Dist.)
• Court: Texas Court of Appeals

Page 120

955 S.W.2d 120

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Appellant/Cross-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant/Cross-Appellee, v. KECK, Mahin & Cate, Grant Cook, and Robert A. Plessala,

Appellees/Cross-Appellants.

No. 14-96-00049-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

Oct. 16, 1997.

Rehearing Overruled Nov. 26, 1997.

Robert B. Summers, Austin, for appellants.

William K. Wilde, Iris H. Robinson, Houston, for appellees.

Before LEE, AMIDEI and EDELMAN, JJ.

OPINION

LEE, Justice.

This is an equitable subrogation case in which the excess insurance carrier sued the primary insurance carrier and the insured's attorneys. National Union Fire Insurance Company of Pittsburgh, Pa. ("National") sued Insurance Company of North America("INA") and the law firm of Keck, Mahin & Cate and two of its attorneys, Grant Cook and Robert A. Plessala (collectively "KMC"). INA filed a third-party action against KMC. All parties filed full or partial motions for summary judgment. The trial court (1) granted summary judgment in favor of KMC on all claims asserted by National and INA; (2) granted summary judgment in favor of INA on claims by National for violation of article 21.21 of the Texas Insurance Code and gross negligence, but denied summary judgment as to negligence; and (3) granted partial summary judgment in favor of National on INA's and KMC's affirmative defenses of contributory negligence and comparative responsibility. National and INA appeal raising points of error challenging the trial court's rulings, and KMC raises a conditional cross-point in the event we reverse the trial court's judgment as to KMC. We affirm in part, and reverse and remand in part.

In September of 1991, Wolf Point Shrimp Farm and its owner ("Wolf Point") filed suit against Granada Food Corporation ("Granada") for damages allegedly caused by Granada's improper processing and marketing of shrimp grown and harvested at the Wolf Point shrimp farm in the fall of 1990. Granada initially hired KMC to defend it in the Wolf Point litigation. In November of 1991, KMC tendered the defense of the suit to Granada's primary insurance carrier, INA, and Granada's excess insurance carrier, National. INA had issued a comprehensive general liability insurance policy effective from June 1, 1990, to June 1, 1991, covering Granada with a $1 million per occurrence policy limit. National had provided Granada with a commercial umbrella liability policy effective from June 4, 1990, to July 21, 1991 which provided excess coverage for Granada's liability from $1 million to $10 million.

INA agreed to defend Granada in the Wolf Point suit; however, its response to Granada's defense tender and demand for coverage included a reservations of rights. National never issued a reservation of rights to Granada. Under the operating instructions of the INA policy, Granada had the right to select its own defense counsel, and Granada chose to have KMC continue its representation. Thus, INA engaged KMC to defend Granada in the Wolf Point litigation and paid its fees.

During the pendency of the suit, Wolf Point's counsel made a settlement demand upon Granada for $3.6 million. Neither Granada nor the insurance carriers accepted this demand. INA points out that this was not a Stowers demand upon INA because it was not within INA's $1 million policy limits, and therefore, INA could not have settled without contribution from either Granada or National. See G.A. Stowers Furniture Co v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm'n App.1929, holding approved). National, on the other hand, contends INA never requested National contribute toward a settlement, and in fact advised National that the suit could be settled within the primary policy limits of $1 million.

In January of 1992, the trial court signed an order giving the Wolf Point suit a preferential trial setting of April 28, 1992. While the attorneys for Wolf Point were busy with discovery in anticipation of the trial, KMC, according to INA and National, had taken little if any action on behalf of Granada. KMC filed a motion for continuance on April 16, 1992, but could not obtain a hearing on the motion until the first day of trial. The trial court denied the motion for continuance and trial began the next day. The day the trial began, INA tendered its policy limits to National. On April 30, 1992, during trial, National negotiated and settled the Wolf Point suit for $7 million. INA contributed its $1 million policy limits, and National paid the remaining $6 million. The final judgment in the Wolf Point case was signed and entered in May of 1992.

Less than two years after the final judgment was entered in the Wolf Point suit, National filed suit in state court against INA alleging negligence, gross negligence, and violations of the Texas Insurance Code. Soon after National sued INA, INA filed a third-party petition against KMC alleging legal malpractice and entitlement to contribution and/or indemnity from KMC. National added KMC as a defendant in the suit alleging legal malpractice. ¹ Both INA and KMC asserted affirmative defenses of contributory negligence and comparative responsibility; they also asserted contribution claims against each other. National alleged that both INA and KMC had mishandled Granada's defense, and sought recovery of the $6 million it paid to settle the Wolf Point suit as well as punitive damages. National's suit was based on the doctrine of equitable subrogation as set out in American Centennial Ins. Co. v. Canal, 843 S.W.2d 480, 483 (Tex.1992). Under equitable subrogation, National stepped into the shoes of its insured, Granada, and became Granada's subrogee. See id.

Each of the parties filed a motion for partial and/or complete summary judgment. National filed a motion for partial summary judgment on the affirmative defenses of contributory negligence and comparative responsibility alleging its conduct was immaterial because, as an excess carrier, it had no duty to investigate, provide a defense, or participate in settlement negotiations until INA tendered its primary policy limits. INA sought summary judgment on the grounds that National had no cause of action as an equitable subrogee based on the facts of the case. Specifically, INA argued National was limited to its negligence claim and that such a claim was limited to an assertion that INA negligently failed to accept a reasonable settlement demand within its primary policy limits. Thus, INA argued, National could not recover punitive damages. INA also argued National paid the $6 million as a "volunteer," and therefore, it could not recover under an equitable subrogation theory. KMC filed a motion for summary judgment incorporating INA's arguments on punitive damages and the assertion that National paid the $6 million voluntarily. KMC also argued that any claims asserted by National or INA were barred by a written release entered into between KMC and Granada weeks before the Wolf Point suit was called to trial.

On September 11, 1995, the trial court signed an interlocutory order granting various forms of relief to each of the parties on their respective motions for summary judgment. The trial court ruled:

(1) National was entitled to judgment as a matter of law on INA's and KMC's affirmative defenses of contributory negligence and comparative responsibility;

(2) KMC was entitled to judgment as a matter of law on all claims based on the release; and

(3) INA was entitled to judgment as a matter of law on National's claims for gross negligence and violations of the Texas Insurance Code, but the court denied INA's motion for summary judgment as to National's negligence claim.

On September 13, 1995, the trial court signed an order granting a severance as to the only pending claim, the negligence claim against INA, and entered a final judgment that National and INA take nothing against KMC. National and INA independently perfected appeals from this judgment.

In reviewing a trial court's order granting summary judgment, the court must determine whether the summary judgment proof establishes, as a matter of law, that there is no genuine issue of material fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970). The movant has the burden to show there is no genuine issue of material fact, and that it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). Evidence favorable to the non-movant will be taken as true and every reasonable inference indulged in its favor. Id.

There are three main issues raised by the parties in this case: (1) whether the release between KMC and Granada bars all claims by National and INA; (2) whether the defenses of contributory negligence and/or comparative responsibility are available in an equitable subrogation action such as this; and (3) whether under the doctrine of equitable subrogation an excess carrier may recover on any claims other than negligence in a suit against a primary carrier.

Before reviewing these issues, however, we address a contention raised in INA's ninth point of error. In that point, INA argues the trial court erred in denying its motion for summary judgment as to the negligence claims asserted by National. ²

DENIAL OF INA'S SUMMARY JUDGMENT ON NATIONAL'S NEGLIGENCE CLAIM

Generally, a denial of a motion for summary judgment is not reviewable on appeal. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996) (citing Novak v. Stevens, 596 S.W.2d 848, 849 (Tex.1980)). This is because a denial of a summary judgment is not a final judgment. Id. There are, however, two exceptions to this general rule. When both parties file motions for summary judgment and the trial court grants one and denies the other, the denial may be appealed. See Davis v. Manning, 847 S.W.2d 446, 452 (Te...