Colony Insurance v. Peachtree Construction, Ltd.
647 F.3d 248
5th Cir.2011Background
- Peachtree Construction contracted with CrossRoads to provide signs and barriers; CrossRoads' insurance named Peachtree as an additional insured under primary and excess policies, with CrossRoads' insurance primary over Peachtree's.
- Peachtree also carried its own primary (Travelers) and excess (Great American) insurance; Colony provided CrossRoads' primary coverage.
- Lee sued Peachtree for wrongful death; Peachtree defenseed by Colony under a reservation of rights; CrossRoads was not named in the petition.
- Settlement of the underlying suit paid $2 million, fully indemnifying Peachtree; Travelers contributed $1 million and Great American $650,000; Colony contributed $350,000 on CrossRoads’ behalf.
- Great American intervened seeking a declaration of Colony’s duty to defend/indemnify and reimbursement for its $650,000 contribution; the district court granted summary judgment for Colony and dismissed Great American’s claim.
- This court reversed, holding that (i) the duty to indemnify can arise independently of the duty to defend under Texas law, and (ii) Mid-Continent does not bar an excess insurer’s contractual subrogation claim against a primary insurer after full indemnification, remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to indemnify vs defense under TX law | Colony has no indemnity duty if no defense duty arises. | Indemnity is subsumed by defense; no indemnity duty without defense. | Indemnity and defense are distinct; can exist independently. |
| Excess insurer subrogation after full indemnification | Great American may recover via subrogation after Peachtree is fully indemnified. | Mid-Continent bars subrogation when insured is fully indemnified (co-primary context). | Mid-Continent does not foreclose excess-to-primary subrogation; Amerisure controls here. |
Key Cases Cited
- D.R. Horton-Texas, Ltd. v. Markel Int'l Ins. Co., 300 S.W.3d 740 (Tex. 2009) (insurer may have indemnity duty even without a defense duty)
- Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299 (5th Cir. 2010) (limits Mid-Continent; excess-insurer subrogation available after indemnification)
- Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765 (Tex. 2007) (fully indemnified insured has no contractual subrogation rights against another co-insurer; but limits apply)
- Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650 (Tex. 2009) (eight-corners rule; duty to defend based on petition and policy)
- Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487 (Tex. 2008) (duty to defend broader than duty to indemnify)
- Nat'l Union Fire Ins. Co. v. Puget Plastics Corp., 532 F.3d 398 (5th Cir. 2008) (coverage and indemnity considerations; extrinsic evidence may be admissible)
- Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008) ("with respect to" coverage requires causal connection)
- Amerisure Ins. Co. v. Navigators Ins. Co. (repeat case for context), 611 F.3d 299 (5th Cir. 2010) (see above)
- Guideline on Subrogation general principles, Frymire Eng'g Co. v. Jomar Int'l, Ltd. (Tex.App.-San Antonio 1993) (equitable subrogation requires involuntary payment aligning with fairness)