United States Fidelity & Guaranty Co. v. Coastal Refining & Marketing, Inc.
369 S.W.3d 559
Tex. App.2012Background
- USF&G challenges a damages verdict requiring it to pay the limits of its primary and umbrella policies and seeks decoupling of excess policy contributions.
- Coastal parties, Coastal Refining & Marketing and related entities, are insureds/additional insureds under USF&G primary and COIL/Lexington excess policies, with Reliance providing primary coverage and COIL Lexington providing excess layers.
- Lopez suit settlement totaled $7 million; Coastal’s defense costs and self-insured retention were involved; Lexington and COIL intervened.
- Primary USF&G policy covered $1 million, Reliance contributed $500,000, excess COIL/USF&G together covered $6 million, Lexington covered excess beyond $2 million.
- Jury found Coastal didn’t voluntarily pay more than its share, and the trial court awarded $6 million plus fees; court later ordered remand to prorate among excess insurers.
- USF&G appealed, urging prorata allocation under Hardware Dealers and arguing Mid-Continent barred COIL/Lexington claims; Coastal argued against prorata allocation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Pro rata allocation between excess insurers under Hardware Dealers | USF&G argues Hardware Dealers requires prorata sharing | Coastal contends no prorata sharing; Lexington should not be exhausted first | Mutually repugnant clauses require prorata allocation |
| Applicability of Mid-Continent to bar COIL/Lexington | USF&G relies on Mid-Continent to bar COIL/Lexington | Coastal distinguishes facts; Mid-Continent not controlling here | Mid-Continent inapplicable; prorata required persists |
| Attorney’s-fee award under Chapter 38/37 | Coastal fees reasonable/necessary; may be awarded | Fees not recoverable under breach-of-contract; declaratory-judgment issue disputed | Fees affirmed; award upheld notwithstanding damage reduction |
Key Cases Cited
- Mid-Continent Insurance Co. v. Liberty Mutual Insurance Co., 286 S.W.3d 765 (Tex. 2007) (clarifies subrogation and contribution; distinction contractual vs equitable)
- Hardware Dealers Mutual Fire Insurance Co. v. Farmers Insurance Exchange, 444 S.W.2d 583 (Tex. 1969) (mutually repugnant other-insurance clauses require prorata sharing)
- St. Paul Mercury Ins. Co. v. Lexington Ins. Co., 78 F.3d 202 (5th Cir. 1996) (precedent on exhaustion and primacy in excess coverage)
- Utica Nat’l Ins. Co. v. Fid. & Cas. Co., 812 S.W.2d 656 (Tex. App.-Dallas 1991) (excess policy exhaustion considerations under specific underlying policies)
- Carrabba v. Employers Cas. Co., 742 S.W.2d 709 (Tex. App.-Houston 1987) (discussion of types of excess/primary policy relationships)
- Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462 (Tex. 2011) (context on parol evidence and policy text controls)