809 F. Supp. 2d 616
S.D. Tex.2011Background
- Mt. Hawley seeks declaratory relief against America First on defense/indemnity obligations for Millis and Trendmaker in an underlying personal-injury suit; America First contends no duty to Trendmaker and defense was triggered only for Millis after a sixth amended petition; underlying actions involve construction-project defendants including Trendmaker, Millis, and TMC; TMC/Millis subcontract and Trendmaker/Millis contract documents instantiate written agreements adding Trendmaker as an insured; Mt. Hawley and America First dispute cost-sharing and subrogation rights; court applied Texas law in a diversity context; issues revolve around who is an additional insured, when defense duties attach, cost-apportionment, and subrogation rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Trendmaker an additional insured under America First? | Millis and Trendmaker are added as AI by written contracts; Trendmaker qualifies under written-agreement clause | Only direct contract between TMC and Trendmaker could create AI status; no direct contract existed | Trendmaker qualifies as an additional insured under the policy |
| When did America First's duty to defend begin? | Duty to defend triggered by Gordon's original petition | Duty began only with Gordon's sixth amended petition | America First's duty to defend Millis and Trendmaker began with the original petition |
| How should defense costs be apportioned between Mt. Hawley and America First? | America First and Mt. Hawley provide pro rata coverage for Trendmaker; Millis coverage would be primary for each absent the other | Two other-insurance provisions conflict and must be resolved | Costs for Millis and Trendmaker defense should be apportioned pro rata under hardware-dealers/Royal Insurance framework |
| Can Mt. Hawley recover from America First under subrogation? | Mt. Hawley has contractual subrogation rights to recover pro rata defense/indemnity costs | Mid-Continent bars recovery since insured fully indemnified; but Amerisure/Trinity carve out; denial of coverage negates bar | Mt. Hawley entitled to contractual subrogation recovery from America First for pro rata share |
Key Cases Cited
- Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Exch., 444 S.W.2d 583 (Tex. 1969) (conflict-of-provisions rule; pro rata apportionment when two clauses conflict)
- Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650 (Tex. 2009) (extrinsic evidence limitations in eight-corners context; coverage/merits separation)
- Royal Ins. Co. of Am. v. Hartford Underwriters Ins. Co., 391 F.3d 639 (5th Cir. 2004) (conflicting other-insurance provisions may require pro rata sharing under Hardware Dealers approach)
- Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523 (5th Cir. 2004) (duty to defend exists if underlying allegations may fall within policy coverage under eight-corners rule)
- Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299 (5th Cir. 2010) (limits broad readings of Mid-Continent; subrogation rights where defense denied may be preserved)
- Trinity Universal Ins. Co. v. Employers Mutual Casualty Co., 592 F.3d 687 (5th Cir. 2010) (subrogation and coverage issues; clarifies subrogation recovery principles)