Gotham Insurance Co. v. Warren E & P, Inc., 455 S.W.3d 558

Background

In 1997 the Halff-Oppenheimer No. 1 oil well blew out and caught fire; Pedeco (now Warren E & P) was the operator and made claims under an insurance policy issued by Gotham to reimburse expenses to regain control of the well.
Pedeco initially told Gotham it held a 100% working interest; Gotham paid over $1.8 million after receiving proofs of loss and other documents.
A later-obtained joint operating agreement and other evidence suggested Pedeco’s working interest may have been only 12.5% and that WRI and the Fund had substantial interests; WRI had reimbursed some of Pedeco’s expenses.
Gotham sued (after suspending further payments) seeking return of payments on theories of breach of contract, restitution, unjust enrichment, subrogation, and equitable reimbursement; Pedeco counterclaimed for breach.
Procedurally the dispute produced multiple appeals: initial favorable rulings for Gotham on equity theories were later revisited after our decisions in Matagorda and Frank’s Casing; the Texas Supreme Court granted review.

Issues

Issue	Plaintiff's Argument (Gotham)	Defendant's Argument (Pedeco/WRI/Fund)	Held
Whether Gotham may pursue equitable reimbursement (restitution/unjust enrichment) despite contractual provisions	Equity permits recovery because Gotham paid third parties and was unjustly enriched when co-venturers benefitted	Policy and contract clauses address recovery and thus bar equitable claims	Court: Equity claims barred because the policy specifically addresses misrepresentation, reporting, salvage/recoveries, subrogation, and due-diligence; insurer must proceed under contract unless contract violates statute or public policy
Whether the insurance contract contains a contractual right to reimbursement or otherwise precludes recovery	Gotham: Contract clauses allow recovery or alternatively breach of contract supports recovery for overpayment	Pedeco: No contractual reimbursement right; WRI’s reimbursement meant Pedeco suffered no loss	Court: Contract does not conclusively preclude recovery; Gotham may pursue breach-based contract claims (misrepresentation, failure of due diligence); factual issues remain about breach and causation
Whether Gotham waived its contract claim by litigating equity claims first	Gotham: Contract claim was an independent alternate ground to affirm the trial judgment and thus preserved on appeal	Pedeco: Gotham abandoned/waived contract theory by seeking judgment only on equitable grounds during remands	Court: No waiver — Gotham preserved contract claim as an independent ground on appeal (City of Austin v. Whittington applied)
Whether Pedeco suffered no loss because WRI reimbursed expenses (defeating indemnity recovery)	Gotham: WRI’s reimbursement does not preclude Gotham’s recovery from Pedeco or others; insurance covers Pedeco’s loss if any	Pedeco/WRI: WRI reimbursed Pedeco, so Pedeco suffered no recoverable loss under the policy	Court: Summary-judgment record raises fact issues (e.g., profit/loss sharing agreement) so it is not established that Pedeco suffered no loss; remand for further proceedings

Key Cases Cited

Frank’s Casing Crew & Rental Tools, Inc. v. Excess Underwriters at Lloyd’s, London, 246 S.W.3d 42 (Tex. 2008) (discusses insurer reimbursement and limitations on equitable recovery)
Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007) (equity yields to contract when contract prescribes remedies unless contrary to law or public policy)
Texas Ass’n of Counties County Gov’t Risk Mgmt. Pool v. Matagorda County, 52 S.W.3d 128 (Tex. 2000) (insurer may not seek equitable reimbursement for settlements absent contractual right)
City of Austin v. Whittington, 384 S.W.3d 766 (Tex. 2012) (party may raise independent grounds on appeal to obtain same relief without cross-appeal)
Paramount Fire Ins. Co. v. Aetna Cas. & Sur. Co., 358 S.W.2d 841 (Tex. 1962) (illustrates principle that reimbursement may be precluded when insured suffered no loss due to reimbursement by another)