Storebrand Ins. Co. U.K., Ltd. v. Employers Ins. of Wausau, 97-41112

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation139 F.3d 1052
Docket NumberNo. 97-41112,97-41112
PartiesSTOREBRAND INSURANCE COMPANY U.K., LIMITED, Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, A Mutual Company, Defendant-Appellee.
Decision Date07 May 1998

Michael L. McAlpine, Franklin H. Jones, III, McAlpine, Peuler & Cozad, New Orleans, LA, for Plaintiff-Appellant.

Christopher Weldon Martin, James Michael Cleary, Jr., Bracewell & Patterson, Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, Chief Judge, and REYNALDO G. GARZA and DENNIS, Circuit Judges.

REYNALDO G. GARZA, Circuit Judge:

This is an appeal from the United States District Court for the Southern District of Texas, Galveston Division, the Honorable Samuel B. Kent, presiding. The district court granted summary judgment in favor of the Defendant-Appellee, Employers Insurance of Wausau ("Wausau"), and dismissed with prejudice the claims of the Plaintiff-Appellant, Storebrand Insurance Company ("Storebrand"). Storebrand appealed, and the matter now lies before this circuit.


In December of 1991, the Texas Workers' Compensation Insurance Facility ("the Facility"), Texas' insurer of last resort, issued a liability policy to Stafftek, Inc. ("Stafftek"), a staff leasing company. Pursuant to the Texas Insurance Code, the Facility chose Wausau to service the policy. This policy contained an Alternate Employer Endorsement extending coverage to "all clients" of Stafftek.

In February of 1992, Stafftex, Inc. ("Stafftex"), a staff leasing company, entered into an employee leasing contract ("the Contract") with Texas Drydock, Inc. ("TDI"), a ship maintenance and repair company. The Contract was subsequently assigned by Stafftex to its sister company, Stafftek. The Contract provided that Stafftek and TDI would be considered to be joint employers of the leased employees and that Stafftek would obtain insurance coverage protecting Stafftek and TDI from risks arising from this arrangement, including the possibility of a lawsuit from an injured employee. The aforementioned Wausau insurance policy covered this arrangement, because TDI was a client of Stafftek. Storebrand provided general liability insurance to TDI.

On February 12, 1992, Sylvester Dickey ("Dickey"), an employee of Stafftek under the control and direction of TDI, was injured while working on a barge. 1 Dickey filed a lawsuit against TDI, though he later amended his complaint to include Stafftek and Stafftex as defendants. He brought claims under the Longshore and Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C. § 901, et seq., and asserted claims of negligence. Over the course of the years of litigation, Dickey again amended his complaint, in a manner which suggested to Wausau that Dickey alleged that Stafftek alone was his employer. 2 Dickey never alleged a third-party claim under § 905(b) of the LHWCA. Wausau alleges that this fact, among others, led them to believe that there would be no § 905(b) employers' liability, and Wausau analyzed its risk exposure accordingly.

The case went to mediation. Based on the analysis of Wausau's attorney, W. Robins Brice ("Brice"), the Facility, through Wausau, offered $300,000 to settle Dickey's claims. Dickey would not accept less than $500,000. TDI argued that the Facility should pay the full amount. In the end, Wausau paid $300,000, and Storebrand paid $200,000, the difference between what Wausau paid and Dickey's demands. Storebrand did not appeal the Facility's decision to the Texas Department of Insurance or any other body. Instead, it filed suit against Wausau.

Storebrand filed suit against Wausau, in the Galveston Division of the Southern District of Texas, asserting causes of action for negligence, gross negligence, breach of the duty of good faith and fair dealing ("bad faith"), violations of Texas Insurance Code Article 21.21 and the Texas Deceptive Trade Practices Act ("DTPA"), and common law indemnification. Storebrand sued in its individual capacity and as the subrogee of TDI. The parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of Wausau, though it disagreed with Wausau's contention that the district court lacked jurisdiction over this matter. Storebrand's claims were dismissed with prejudice. Storebrand timely appealed, on the Article 21.21 and DTPA issues, and on Stowers 3 claims. The matter now lies before this panel.

Standard of Review

The standard of review for the granting of a motion for summary judgment is de novo. BellSouth Telecommunications, Inc. v. Johnson Bros. Group, 106 F.3d 119, 122 (5th Cir.1997); Guillory v. Domtar Industries, Inc., 95 F.3d 1320, 1326 (5th Cir.1996). Summary judgment is warranted when "the pleadings, depositions, interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." FED.R.CIV.P. 56(c); Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).


The first issue to be dealt with is the issue of subject matter jurisdiction. Wausau argued at the district court level that the district court did not have subject matter jurisdiction over this matter because Storebrand had not exhausted its administrative remedies. The district court rejected this argument, and Wausau argued it again before this circuit. We agree with the district court.

The district court described the law on this matter as being "in flux." The district court pointed out that in Northwinds Abatement Inc. v. Employers Ins. of Wausau, 69 F.3d 1304, 1310-11 (5th Cir.1995), this circuit held that the exhaustion of administrative remedies doctrine did not apply in cases involving tort claims against a company member of the Facility, because the relevant administrative bodies do not have the authority to adjudicate tort actions or to award damages.

Wausau cited two recent Texas court of appeals decisions for the contention that one must pursue and exhaust all administrative remedies even when extra-contractual damages are sought. See Metro Temps, Inc. v. Texas Workers' Compensation Ins. Facility, 949 S.W.2d 534, 535 (Tex.App.--Austin 1997, no writ); Producers Assistance Corp. v. Employers Ins. of Wausau, 934 S.W.2d 796, 800 (Tex.App.--Houston [1st Dist.] 1996, no writ). These cases are distinguishable, because they involve insureds who should have exhausted their remedies, while Storebrand is not an insured and was not a participant in the Facility. Judge Kent held that the Texas law on this is at best unsettled, and that this circuit's reasoning in Northwinds governs. 4 We agree, and affirm Judge Kent on this point.

The next issue is whether Wausau's actions were in violation of the Texas Insurance Code or Deceptive Trade Practices Act. The district court held that they were not. The district court stated that the predicate for recovery on these claims is the same as that required for bad faith causes of action. Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir.1997). Such a cause of action exists "when the insurer has no reasonable basis for denying or delaying payment of a claim or when the insurer fails to determine or delays in determining whether there is any reasonable basis for denial." Id. at 459 (citing Arnold v. National County Mut. Fire. Ins. Co., 725 S.W.2d 165, 167 (Tex.1987)). Also, it should be noted that under the Texas Insurance Code, the Facility is the insurer, not Wausau, because Wausau merely serviced the policy. Northwinds, 69 F.3d at 1306. As such, Wausau cannot be held liable for general claims of breach of good faith and fair dealing, only for the Insurance Code and DTPA claims. See Id. at 1311.

The district court held that Wausau's actions passed muster under the standard set forth by Northwinds and Higginbotham with regard to the Insurance Code and...

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