Stonewall Surplus Lines Ins. Co. v. Drabek

• Decision Date: 18 June 1992
• Docket Number: No. 13-91-358-CV,13-91-358-CV
• Citation: 835 S.W.2d 708
• Court: Texas Court of Appeals
• Parties: STONEWALL SURPLUS LINES INSURANCE COMPANY, Appellant, v. Jaime A. DRABEK and Hirsch, Glover, Robinson & Sheiness, Appellees.

Page 708

835 S.W.2d 708

STONEWALL SURPLUS LINES INSURANCE COMPANY, Appellant, v. Jaime A. DRABEK and Hirsch, Glover, Robinson & Sheiness, Appellees.

No. 13-91-358-CV.

Court of Appeals of Texas,

Corpus Christi.

June 18, 1992.

Rehearing Overruled July 30, 1992.

Charles B. Lord, Law Offices of C.L. Ray, Austin, Richard Morrison, Ronald D. Krist, Krist, Gunn, Weller, Neumann & Morrison, Houston, C.L. Ray, Austin, for appellant.

D. Ferguson McNiel, Michael D. Fisse, R. Glenn Rigby, Vinson & Elkins, Houston, Tony Martinez, Martinez, Barrera & Robles, Brownsville, for appellee.

Before the Court En Banc.

OPINION

SEERDEN, Justice.

This is a summary judgment case. Appellant, Stonewall Surplus Lines Insurance Company, was the excess insurer for several insureds in a wrongful death suit. Appellees, Jaime A. Drabek and the law firm of Hirsch, Glover, Robinson, & Sheiness (collectively "Hirsch, Glover"), were hired by the primary insurance carrier to defend the suit. After the wrongful death suit was settled, appellant brought this suit for damages against appellees and the primary carrier alleging negligence by the defendants which proximately caused appellant to pay substantially more to settle the death case than it should have had to pay. Appellees filed motions for summary judgment which the trial court granted. This case was severed from the suit against the primary carrier and this appeal perfected. We reverse the trial court's judgment and remand the case for a trial on the merits.

During the course of the death suit, the trial court entered a sanctions order against the insureds. It found that they abused the discovery process when they refused to submit to depositions and to comply with a request for production. The trial court struck their pleadings and rendered a partial default judgment against them regarding their joint and several liability to the survivors for actual damages. It also ordered that the only issues for trial would be: (1) the amount of actual damages; (2) whether the insureds were grossly negligent; and (3) the amount of exemplary damages which would be assessed against them upon a finding of gross negligence.

After the sanctions were imposed, the case was settled for $1.8 million. Of that amount, Stonewall paid $1.3 million and the primary carrier paid $500,000, its policy limits.

In the instant suit, it is alleged that appellees' negligence caused the trial court to strike the insureds' pleadings and that such negligence proximately caused damages to appellant.

Appellees' motion for summary judgment contended that: (1) under Texas law, an attorney does not owe a duty to a non-client; and (2) nothing that appellees did or did not do proximately caused Stonewall any damages. The trial court granted the summary judgment. In its order granting summary judgment, the court found that: (1) appellees did not represent appellant and did not owe it a duty; (2) appellees still had available options with respect to the sanctions order, but as a result of Stonewall settling the death suit, those options were no longer available; and (3) Stonewall's summary judgment proof did not raise a genuine issue of material fact, precluding appellees' right to summary judgment as a matter of law.

Appellant's first point of error complains that the trial court erred in granting defendants' motion for summary judgment. This point is sufficient to raise any issues presented to the trial court and raised in appellant's brief. Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119, 121 (Tex.1970).

The first question to be resolved is whether appellees, the attorneys hired by the primary carrier to defend the insured parties, owed any duty to appellant. ¹

It is well settled that persons outside the attorney-client relationship do not have a cause of action for injuries they might sustain due to the attorney's failure to perform or his negligent performance of a duty owed to his client. Dickey v. Jansen, 731 S.W.2d 581, 582 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.). In the absence of privity of contract, an attorney owes no duty to third-party non-clients. Draper v. Garcia, 793 S.W.2d 296, 301 (Tex.App.--Houston [14th Dist.] 1990, no writ); First Mun. Leasing Corp. v. Blankenship, Potts, Aikman, Hagin and Stewart, 648 S.W.2d 410, 413 (Tex.App.--Dallas 1983, writ ref'd n.r.e.); Bell v. Manning, 613 S.W.2d 335, 339 (Tex.Civ.App.--Tyler 1981, writ ref'd n.r.e.).

Appellant does not dispute this general rule; however, it contends that the rule does not apply in this case. We agree. It is undisputed that the named defendants in the underlying death case had purchased liability insurance from the primary carrier with limits of $500,000. In addition, the primary carrier became obligated to furnish the insureds a defense in any suit brought by third parties concerning matters covered by the insurance contract. The underlying death case was such a suit. The primary carrier, pursuant to its contract, hired appellees to defend the case on behalf of its insureds. In doing so, appellees owed the defendants in the underlying suit the unqualified duty to conscientiously and adequately represent them. Employers Casualty Co. v. Tilley, 496 S.W.2d 552, 558 (Tex.1973). An attorney, like any other individual, is answerable in tort for any negligent performance of his employment obligations. Zidell v. Bird, 692 S.W.2d 550, 553 (Tex.App.--Austin 1985, no writ).

It is also undisputed that the defendant companies in the underlying suit, in addition to the primary coverage, had purchased excess liability coverage which obligated the excess carrier, in this case appellant, to pay any excess over the primary coverage not to exceed $3,000,000, which the insureds became obligated to pay and which arose from an incident covered by the primary policy. Appellant contends that it stands in the place of the insureds and that it is subrogated to their rights by reason of having been required to pay more money in settlement of the wrongful death case than it would have had to pay otherwise were it not for the negligence of appellees. There is no dispute that the insureds would have a cause of action against appellees, their attorneys, for damage caused by their negligent representation. The question is whether appellant should be subrogated to the rights of the insureds. While the question has not been specifically answered with reference to excess insurance companies, the principle of equitable subrogation has been adopted in Texas. This Court has held that:

[w]here the insurance policy is regarded as one of indemnity ... the company on payment of the loss is subrogated to any rights which the insured may have against the person alleged to be responsible for the loss. (citations omitted) The right of subrogation is not dependent upon an express stipulation in the policy or upon an actual assignment of the cause of action by the insured; ... payment of the loss operates as an equitable transfer of the claim. (citations omitted).

International Ins. Co. v. Medical-Professional Bldg., 405 S.W.2d 867, 869 (Tex.Civ.App.--Corpus Christi 1966, writ ref'd n.r.e.). This case was cited with approval and the principle confirmed in Thoreson v. Thompson, 431 S.W.2d 341, 347 (Tex.1968).

Appellees argue that American Centennial Ins. v. Canal Ins., 810 S.W.2d 246 (Tex.App.--Houston [1st Dist.] 1991, writ granted), is authority for their position that they owed no duty to appellant and that equitable subrogation should not be adopted in Texas in this instance. We disagree. American Centennial is similar in some respects, but distinguishable from this case. American Centennial involved an excess carrier suing the primary carrier and the lawyers who handled the underlying suit for the same type conduct complained of in our case. Summary judgment was granted for both the primary carrier and the lawyers. The Court of Appeals reversed as to the primary carrier, holding that equitable subrogation applied under the doctrine defined in Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm'n App.1929, holding approved); and Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656 (Tex.1987). Id. at 252. The Court characterized the Stowers duty as contractual. It further held that the Stowers duty only exists between the primary carrier and the insured and does not extend to the excess insurance carrier. Because the trial court in our case severed the appellants' suit against the primary carrier, this part of the American Centennial case is not relevant to us.

The Appellate Court in American Centennial also considered the aspects of the excess carrier's claim against the attorneys for legal malpractice and negligence against the attorneys hired to represent the insured. The Court noted that these claims are governed by the two-year statute of limitations and under the facts of that case, the insured's claim was barred by such statute. Since the insured's claim was barred, the excess carrier's claim was barred.

Our case is based on the negligence and legal malpractice of appellees; however, there is no limitation claim in our case.

A part or all of a claim for legal malpractice can be assigned, just as any other negligence claim. There is nothing in American Centennial which even implies that such a claim cannot be assigned or subrogated; in fact, in holding that the excess carrier's claim is defeated by the affirmative defense of limitations, it implies that, but for such defense, the claim would be upheld. We hold in this case that appellants are subrogated to the insureds' claim for legal malpractice and negligence against appellees and that the trial court's finding of no duty is erroneous.

On May 12, 1992, this case was re-submitted to the Court en banc. In oral argument, appellees argued the second ground of its motion for summary judgment, that as a matter of law appellant suffered no damage because of the imposition of the ...