State & County Mutual v. Miller

• Decision Date: 18 January 2001
• Docket Number: No. 99-0501,99-0501
• Citation: 52 S.W.3d 693
• Parties: (Tex. 2001) State and County Mutual Fire Insurance Company, Petitioner v. Walter A. Miller, Respondent
• Court: Texas Supreme Court

Page 693

52 S.W.3d 693 (Tex. 2001)

State and County Mutual Fire Insurance Company, Petitioner v. Walter A. Miller, Respondent

No. 99-0501

Supreme Court of Texas.

January 18, 2001

Rehearing Overruled March 8, 2001.

On Petitions for Review from the Court of Appeals for the Thirteenth District of Texas

Per Curiam.

Three lawsuits arose out of a single automobile accident involving an insured, Walter Miller. This case concerns the preclusive effect to be given the final judgment issued in the first of these cases on this, the second case, which Miller filed against his insurance company, State and County Mutual Insurance Company. In the first case ("the Windsor suit"), which was a declaratory judgment action, the trial court held that Windsor Insurance Company was the reinsurer of an insurance policy that State and County Mutual had issued to Walter Miller. The court further held that only Windsor was liable to Miller under the policy. This ruling was affirmed on appeal. The trial court in the present case held that the Windsor-suit declaratory judgment precluded Miller from asserting causes of action against State and County Mutual relating to the insurance policy and the auto accident. The court of appeals reversed and held that neither res judicata nor collateral estoppel barred Miller's claims against State and County Mutual. 988 S.W.2d 326. Although most of Miller's claims against State and County Mutual involve issues that have already been resolved in a prior suit and are thus barred by collateral estoppel, some of Miller's claims allege that State and County Mutual misrepresented the nature of his insurance policy. With regard to these claims, we affirm the court of appeals' judgment and remand them to the trial court. With regard to the rest of Miller's claims, we reverse the court of appeals' judgment and render judgment that Miller take nothing.

Miller was injured in a car accident with an underinsured motorist. State and County Mutual, the primary insurer of Miller's insurance policy, had a separate reinsurance agreement with Windsor covering that policy.¹ Miller requested permission from Windsor to settle with the underinsured motorist's liability carrier, State Farm, for the applicable $20,000 limit. Windsor gave written permission to Miller to settle his bodily injury claim with State Farm, thereby allowing Miller to submit a claim under his own underinsured-motorist coverage. This permission was given in the name of "State and County Mutual Fire Insurance Company (Windsor Group)." Miller settled with State Farm, and then submitted a written demand to Windsor on behalf of himself, his wife, and their two minor children, for the total sum of $300,000 (the full, per-occurrence limit of the policy).

Windsor advanced $10,000 to Miller for his injuries, and Miller accepted the payment. Windsor then tendered the remaining $90,000 it contended was due under the policy. Miller refused to accept this payment. Windsor then filed an interpleader action in Tarrant County (the "Windsor suit"), seeking a declaration that the policy only entitled Miller to $100,000, and that the $90,000 payment coupled with the $10,000 previously paid would release Windsor from all liability under the policy. The trial court granted Windsor's motion for summary judgment and rendered judgment that Windsor was fully liable for Miller's underinsured claim in the amount of $100,000 (not the $300,000 Miller had previously demanded). The Second Court of Appeals affirmed, and this Court denied Miller's application for writ of error. Miller v. Windsor Ins. Co., 923 S.W.2d 91, 97 (Tex. App. Fort Worth 1996, writ denied).

While the Windsor suit was in the trial court in Tarrant County, Miller filed this suit in Nueces County against State and County Mutual, asserting various theories such as delay in payment and DTPA violations. The Nueces County suit was abated because of the pending Windsor suit. After the trial court rendered judgment in the Windsor suit, the trial court in this case granted summary judgment for State and County Mutual based on res judicata and collateral estoppel. The court of appeals reversed, holding that (1) any claims Miller could have filed against State and County Mutual in the Windsor suit would have been permissive cross-claims, not compulsory counterclaims, and therefore neither res judicata nor collateral estoppel bars Miller's claims in this case; and (2) the "law of the case" doctrine prevents the court from considering whether Windsor was State and County Mutual's reinsurer on this policy.

Both State and County Mutual and Miller filed petitions for review. State and County Mutual argues that the final judgment in the Windsor suit bars Miller's claims in this case under the doctrines of collateral estoppel, res judicata, and compulsory counterclaim. Miller responds that neither res judicata nor collateral estoppel applies because the issues in this case are different from the issues adjudicated in the Windsor suit, and that any claims he had against State and County Mutual at the time Windsor brought the declaratory judgment action were permissive cross-claims that were not required to be asserted in that case. In his petition for review, Miller asserts that the court of appeals erred by applying the "law of the case" doctrine to hold that Windsor was in fact the reinsurer of his policy.

Res judicata, also known as claim preclusion, prevents the relitigation of a finally-adjudicated claim and related matters that should have been litigated in a prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). Texas follows the transactional approach to res judicata. Id. at 630. This approach mandates that a defendant bring as a counterclaim any claim arising out of the transaction or occurrence that is the subject matter of the opposing party's suit. Id. But when the parties are co-parties rather than opposing parties, the compulsory counterclaim rule and res judicata only act as a bar to a co-party's claim in a subsequent action if the co-parties had "issues drawn between them" in the first action. Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 800 (Tex. 1992). For the purposes of res judicata, co-parties have issues drawn between them and become adverse when one co-party files a cross-action against a second co-party. See id.

In the Windsor declaratory judgment action, Windsor was the plaintiff and State and County Mutual and Miller were defendants. As a result, Miller and State and County Mutual were co-parties in the Windsor suit. Therefore, if either Miller or State and County Mutual had filed a cross-action against the other in the Windsor suit, any claims arising from the same transaction or occurrence that was the subject matter of the cross-action would be barred by res judicata if not filed in the same suit. See id. ("The cross-claimant becomes a plaintiff for res judicata purposes, and is required to assert all claims against the cross-defendant arising from the subject matter of the original cross-claim."). Although Miller or State and County Mutual could have...