*3 MURPHY, Before SEARS DRAUGHN, JJ.
MAJORITY ON REHEARING OPINION MURPHY, Justice. carrier case.
This an excess insurance (Emseor’s Appellants, Manning P. Jr. Walter President) former and Emscor Manufactur- required by whether Alliance was the terms ing, (collectively Inc. referred to as “Ems- provide a defense to Emscor cor”), against appellees, filed suit granted the Ketcher suit. The trial court Inc., Group, Syndicate, Insurance summary judgment Alliance’s motion for (collectively and Alliance General Insurance upon language based “Alliance”), claiming referred to as that Alli- summary denied Emscor’s cross-motion for wrongfully refusing ance was liable for to judgment. appealed the trial court’s negligence settle suit filed Emscor. ruling Mfg., to this court. See Emscor Inc. granted The trial summary judgment court (Tex. Group, Alliance Ins. in favor of Alliance on all of Emscor’s causes writ). App. [14th Dist.] — Houston appealed. of action and Emscor We affirm. *4 During pendency appeal, of that Ems- detail, relationship As we will between began cor negotiations settlement with the Emscor and lengthy history. Alliance has a plaintiffs. 7, 1990, Ketcher On March coun- 28, 1987, February On purchased Emscor Alliance, sel for Emscor stating wrote to that (the policy excess policy) insurance from Alli negotiations” “serious settlement were about policy ance. The was effective from Febru begin to in demanding the Ketcher suit and 28, ary 1987, through 28, February 1988. It that Alliance tender the limits of its cover- provided comprehensive general liability cov age. Emscor’s counsel advised Alliance that erage $500,000 in the amount of as excess unless it “immediately” came forward to ten- over and primary comprehensive above a $500,000 coverage, der the in excess he would general liability policy in the amount of “any deals,” arrangements make with oth- $500,000 issued to Emscor Moun Stone protect er to counsel his In clients.2 re- (Stone Mountain). tain Insurance Company sponse, later, almost two months Alliance policy, Pursuant to the required, Alliance was asked to review the case with Emscor and when and if met, certain conditions were inquired about a number of issues related to indemnify $500,000 up Emscor for losses possible suit, settlement of the Ketcher in- which were covered pol Stone Mountain’s cluding any whether monies were available icy, and which were in excess of Stone Moun from the Board of [State Insurance] Guaran- $500,000 policy 25, tain’s April limit. On ty any specific Fund and whether settlement 1987, collapsed, a crane injuring and ulti May 10, demands had made. been On mately causing the deaths of Steven Ketcher expressed willingness its to review Michael May Weaver. In the fami continuing the case and advised that was lies of the dead men sued Emscor and sever Guaranty work with the Fund to determine al other in defendants connection with the much, any, money how if would be available (the accident litigation).1 July On meeting from the Fund. The between 26, 1988, Stone Mountain placed was into attorneys place for Emscor and Alliance took receivership. subsequently tendered May Following meeting, 1990. that legal a bill for expenses fees and incurred in kept Alliance asked to be informed of all litigation the Ketcher Sep to Alliance. On significant developments respect with to the 23, 1988, tember Alliance informed Emscor Ketcher suit. that it would not those expenses fees and obligated because it was not under the terms Throughout months, the next several Ems- policy “drop replace down” and attempted cor to obtain a commitment of primary coverage in primary the event of the Guaranty settlement funds Fund. insolvency. insurer’s fact, July In in Emscor sent Alliance a January On copy correspondence of a Emscor filed a de- it had received claratory judgment action to Guaranty eorrespon- determine from the Fund. That parties herein, appeal judg- The families are to this as 2. All communication discussed unless indicated, correspondence partial assignees ment otherwise creditors and involved of Emscor. to, by, which was sent received the re- and/or spective counsel for Emscor and Alliance. Guaranty the Proof forms as proceeds
denee stated that of Claim Fund well as certain provide coverage filed Emscor were amount for excess from Alliance.” “sufficient $500,000 September 25, objected up indemnity coverage Ems- Alliance On any assignment and stated that it not response, “congratulated” cor.” Alliance would authorize until the apparently obtaining its “the Guaranty pay- Fund “at least authorizes” the step Board’s commitment into the shoes $500,000. ment of initial Alliance also provide $500,000 pri- Mountain and in Stone asked Emscor’s commitment to settle the mary coverage to Emscor in connection $500,000” possible case “for as little above However, litigation.” the Ketcher Alliance repeated pledge wrap up “to the case its reiterated the fact was Guaranty if pays when and Fund excess of the and that it was pay $500,000.” agrees to required monies until the first $500,000 in primary exhausted. 19, 1990, Emscor to Alli On October faxed Alliance further stated “as soon Fund, ance and the the Ketcher has received evidence the Board has $1,000,000 plaintiffs’ settlement demand fact to Emscor its attor- and/or Although it indicated suit. case, neys in connection with this *5 yet Emscor obtain that had to monies will make its available.” Guaranty Fund, the demand settlement it contingent upon stated that Alliance’s was August In Emscor notified Alliance $500,000 policy limit. The its plaintiffs agreed to that the Ketcher had expire that it on demand also stated would of the defendants settle all Ketcher 24, 1990, On October two $8,000,000. October Emscor Alliance of for reminded days before the Ketcher settlement demand 12, 1990, re- the November trial date and expire, to for Alliance faxed a was counsel quested policy lim- Alliance to “authorize” its lengthy response In to counsel for Emscor. In response, its for settlement. Alliance pertinent part, Alliance’s counsel stated inquired for asked a case assessment and follows: Guaranty progress about Emscor’s with the obliged Alli- Fund. Emscor and reassured before, again me as I Let reiterate have “working vigorously it ance that was with you that we believe we have worked with Guaranty Fund to a commit- Texas obtain past working you are cur- and $500,000 pay to limits.”
ment rently regarding to make decisions of that litigation, Ketcher the resolution 17, 1990, September On notified Emscor any litigation, the resolution of other and Guaranty Fund and that Alliance litigation against arising Emscor out plaintiffs had settled with all of the April you I 1987 accident. have told be- except defendants Emscor. The letter fore, you, again tell that if and when Guaranty sought confirmation from the Fund Guaranty the Texas Fund Emscor and/or on whether it had received “all information they provides us have evidence to that necessary on to make a final determination $500,- pay arrangements made the first later, releasing settlement funds.” week One case, any we will 000 of settlement this reported to Alliance it was con- that try at a respond promptly to to arrive Guaranty tinuing closely” to “work with the mutually agreeable litiga- resolution of the Fund, process “slow and but that tion. inquired also as to wheth- tedious.” Emscor Alliance contribute its excess cover- er would recognizes obligations Alliance its under age any amount policy your to add to contributed the excess Alliance issued Guaranty client, and whether Alliance would fully prepared Fund to meet those that it obligations policy’sprovisions assume Emscor’s defense the event are when not its de- did exhaust limits. invoked. The Plaintiffs’ settlement put that the further Alliance that it was consid- mand has Alliance notice informed demanding any an ering assignment “rights of its Plaintiffs in Ketcher are money may amount of that it invoke the formed Alliance had been “unsuccess- a) obtaining ful thus far in settlement funds provisions if: Alliance Guaranty from the Texas Fund” and that its Guaranty agrees Fund and/or “ability to continue business and meet b) $500,000; the Plaintiffs are severely im- obligations cash flow would be $500,000. However, unwilling to settle for paired” if it forced “to were policy, Alliance does not believe its and I money.” responded by its own fax any not do believe the Stowers doctrine or 26,1990. counsel, stat- on October Alliance’s statute, requires other Texas case or law pertinent part: ined us to now ‘assume the or defense’ ‘settle pursuant the case’ to the Plaintiffs’ Octo- response your October fax 19,1990, ber demand letter. I also do aware, and as I am sure the are Plaintiffs responsible believe Alliance can held be position respond Alliance is not apparent Guaranty fact that the Texas plaintiffs the Ketcher settlement demand yet any Fund has not made commitment to unless and until the Texas Fund you primary coverage. ap- in terms of I insured, both, your give preciate your desire to this case they resolve sufficient assurance have now, resolved, agreed going if it can be have have without and/or and/or expenses incurred sufficient to Alli- invoke expense present the additional time and policy coverage. ance’s I As sit deposition, complete witnesses for discov- 4:30, given here at Alliance has not been ery, prepare I trial. have been in any my of this information because to before, position and I know is not knowledge, none of these events oc- have However, pleasant. policy, under its Al- curred. The Plaintiffs should be told that liance is unable to move forward in *6 if given any and when Alliance is of these way Guaranty until the Texas Fund assurances, prepared Alliance will be pays $500,000 Emscor the first and/or respond pro- to their current settlement demanded the Plaintiffs in this case. posal, meeting and that I am with Alliance [italics and bold added] 5, 1990, just pur- on November that pose.
Alliance’s counsel also stated that she was going [emphasis to meet with her added] client to further day, discuss the case. The next October 31, 1990, days On October five after the Alliance, Emscor sent a express- fax to supposed Ketcher settlement demand was ing understanding its “that Alliance would expired, have a letter at- faxed $500,000 part contribute all or of its tached a “Confirmation of De- Settlement once the Texas State Board of Insurance documents, mand” to Alliance. Those when Guaranty Fund or paid Emscor has first together, taken that state Emscor had $500,000.” Emscor advised Alliance that it $500,000 “agreed obligate” pay itself to steps necessary would take whatever were plaintiffs the Ketcher and that the Ketcher $500,000 coverage, reach the first but that $500,000 plaintiffs “agreed accept had this its efforts were interpreted not to be as a obligation” “only and release all claims if position waiver of its that Alliance “immedi- $500,000 obligates Alliance itself to its ately plaintiffs’ meet the Ketcher settlement [emphasis original] limits.” demand and assume Emscor’s defense.” Emscor also advised Alliance that it was again p.m. faxed Alliance at 2:30 on willing give guaranty a letter of to reflect 26, 1990, day October the Ketcher settle- “obligation” its and that it needed to know expire, ment offer was to and demanded “immediately guaranty whether the will be “today.” Alliance’s offer of settlement funds sufficient to invoke the excess cov- day p.m., That same at 4:30 Emscor once erage Alliance.” Emscor further in- Alliance, again stating faxed that Alliance’s accep- formed Alliance the deadline for October letter had set forth “unconsciona- proposal of this latest settlement tance payment. ble in- p.m., conditions” on at 5:00 November 1990. 3(b) day, inquired Paragraph The next Alliance then shall as to when Guarantors money immediately upon obligated would be and whether the become thir- (30) ty days guaranty impor- written demand of Benefi- would be secured. More following tantly, position ciaries to the amount due stated its that “a 3(a) Paragraph of above. promise pay by directives Emseor to the Plain- tiffs sometime in the future would not meet obligations d.Guarantors’ to Beneficia- requirements policy.” of the Al- ries are irrevocable and unconditional. suggested liance that “an irrevocable letter Security: of credit over Plaintiffs which the had exclu- control, Guaranty, To this and as induce- secure sive and which could be drawn down accept this ment to Beneficiaries to necessary the Plaintiffs when the settle- Emseor, Guaranty, hereby grants Inc. approvals ment and other Court documents security in and Beneficiaries interest occurred, likelihood, would, in all meet the Emseor, properties all assets requirements Policy.” Alliance stated Emseor, agrees Inc. and Inc. to execute guaranty that the described Emseor “did financing and cause to be filed state- requirements, not seem to its meet” but that perfect security such ments to interest. it would until ex- reserve could guaranty. amine the letter, accompanying In the Emseor stated guaranty own conclusion that the satisfied day On November the settle- imposed by Alliance. requirements expire, finally ment offer towas Emseor Emseor also stated it had met with copy faxed a of the executed Letter of Guar- representatives Guaranty Fund anty to Part and 4 of Alliance. the Letter “hope[d]” meeting “culminate would Guaranty its terms set out as follows: proofs of all or some of the filed_” 3. Terms: Also, day, claims Ems- same cor received from the faxed letter consideration, good For and valuable Fund, reflecting opinion that the Board’s receipt hereby acknowledged which is poli- have Stone Mountain would tendered its confessed, and in further consideration cy receivership. had it not been in limits compromise and settlement the sub- ject litigation, agree [Emseor] Guarantors response November Alliance faxed *7 following to the terms: 5th, informing Emseor that the Letter of letter, Guaranty Guaranty Fund a. Guarantors will Beneficiaries [the together, satisfy when did not the re- taken difference, plaintiffs] up Ketcher quirements they policy of the excess because ($500,- Thousand Five-Hundred Dollars did not that cover- demonstrate 000), of money the amount that between age paid paid had or would be before been the Texas Board of State Insurance setting. Although 12th trial November Guaranty approves Fund for as emphasized that its had not been a result claims filed triggered, offered nevertheless Guaranty subject litigation, Fund $100,000 toward contribute settlement of total sum Five-Hundred (1) following occurred: when the the Guaran- ($500,000). Thousand Dollars $500,000 ty actually paid pursuant Fund (2) or, obligated policy; b. Before are Guarantors Mountain Emseor Stone anything, actually paid Beneficiaries Beneficiaries the difference between obligated paid are to exhaust all efforts and and the to be amount determined Fund, if less than up remedies collect Five-Hundred (3) or, ($500,000) $500,000; ef- Emseor made its “best Thousand Dollars $600,000 or the Ketcher suit for fort settle Texas Board of Insurance Guaran- State less.” ty Fund. declaratory appeal of
c. After have exhausted all The Emseor Beneficiaries judgment court on was submitted to this efforts and remedies stated above alternative, 6, Alliance, or, According that those November 1990. conditions parties argument met after oral to dis- conditions had been modified and waived. day, cuss the Ketcher suit. There were no further Emscor executed a written That same claims, parties rights, contacts between the until November assignment of 75% of “all 14, 1990, when Emscor faxed to Alliance a against of action Alliance” to the causes $8,000,000 copy Agreed Judgment later, of a Final plaintiffs. days Four plaintiffs. between Emscor and the Ketcher response reply filed a to Emseor’s to the Agreed Judgment That 29, was rendered follow- summary judgment. motion On June 12, ing hearing on Alli- November granted trial court Alliance’s mo- appear hearing. ance did not at In a summary judgment. mo- tion for After its accompanying copy Agreed letter by operation trial was overruled tion new Judgment, Final Emscor stated that it was law, perfected appeal. of this agree “compelled” to to the “in the error, points In four of Emscor contends wake Alliance’s refusal to settle” and it granting the trial court Alli- erred lim- demanded tender the Alliance summary judgment. ance’s motion for 16, 1990, its. In a November letter Ems- cor, Alliance denied “refusal to settle” summary judgment A movant for has the objections and voiced its to Emscor’s “unilat- showing genuine burden there is subsequent eral” settlement and demand for fact and that it is issue material entitled January tender of the limits. On judgment as a matter of law. Nixon v. Mr. opinion this Court issued an which Property Management, 690 548- S.W.2d ruling affirmed the trial court’s that Alliance deciding whether there is duty had no to defend under the terms of the disputed precluding material fact issue Inc., Mfg., summary judgment, proof to the favorable [emphasis opinion added]. 198-99 did true, the court in non-movant taken speak appeal. to the instant matters on dulging every reasonable inference and re solving any doubts in favor of the non-mov- May On Emscor filed this suit summary judgment, prevail ant. Id. To Alliance, alleging that Alliance’s fail- a defendant must as a matter of law establish pursuant ure to settle to G.A Stowers Furni- genuine that there is no issue of fact as to ture Co. v. American Indem. one or more of the essential elements of the (Tex.Comm’n App.1929, holding ap- plaintiff’s cause of action. Gibbs v. General proved), contract, constituted breach of (Tex. Corp., 450 Motors good breach of the faith and fair 1970). dealing, negligence, gross negligence, and vi- provisions olated of the DTPA and the Insur- *8 gener- may
ance Code. Alliance answered a An insurer be held liable for the wrongful against al denial and asserted certain affirmative de- refusal to settle a claim fenses, Stowers, including policy that Emscor insured limits. 15 was barred within recovery by for the terms of the excess at 544. The basis Emscor’s law S.W.2d 22, 1992, refusal, May alleged wrongful policy. On moved for suit is Alliance’s Alliance summary judgment contending, among despite coverage insistence that other Emscor’s triggered, things, policy that Emscor failed to meet the condi- under the had been to ten coverage policy during peri limits policy tions of under the and failed der its “Stowers 3 outset, satisfy precedent suit At the we note that the Stow- certain conditions od.” 22, 1992, doctrine, discuss, policy. never under the On June ers as will has been response, contending applied that it met those to an excess carrier like Alliance. filed period purposes 3. all and extra- of its contract claim. Emscor focused of its contractual Stowers Nonetheless, discuss, contractual claims below on whether the condi- we will policy during tions of the were satisfied the Stow- recovering policy by the no- barred from on the However, period. necessarily ers did not action clause. satisfy Policy during the have to conditions 902 underlying
However,
Company only
justice,
will
after
in the interest of
we
paid
held to
have
or have been
claim. The Stow-
insurers
address Emscor’s Stowers
19, 1990,
pay
respective
of their
loss
the full amount
period
ers
extended from October
underlying lim-
liability
Emseor first notified Alliance of the
as described
when
$1,000,000
liability
Compa-
plaintiffs’
settlement de-
its and the limits of
Ketcher
mand,
when the
be as shown
ny
policy
until November
under this
shall then
plaintiffs’
final settlement offer ex-
the Declarations.
item of
Thus,
primary question
pired.
confront
[emphasis added]
complied
ing
court is whether Emseor
this
coverage
with the conditions of
under the
5 states as follows:
Condition
policy during
period.4
the Stowers
Liability Liability under
Attachment of
—
until
policy
not attach unless and
this
shall
policies are contracts
Insurance
underlying
ad-
insurers
shall have
by
of con
and as such are controlled
rules
liability
limits
mitted
for the
applicable
are
to contracts
struction which
by
Insured has
or unless and until
Ins.,
v. Aetna
generally. Barnett
Life
judgment
adjudged to
final
been
Normally, in the
S.W.2d
underlying limits.
sum which exceeds such
context,
language and terms of
insurance
by
compa
policy
are chosen
the insurance
[emphasis added]
Therefore,
ny.
the lan
Id.
when
Thus,
Alliance’s
would have been
inconsistent,
guage
ambiguous
chosen is
triggered during
period
Ems-
Stowers
susceptible to more than one reasonable
follow-
compliance with
one of the
cor’s
construction,
con
policies
such
should be
ing conditions:5
strictly against the insurer and lib
strued
(1)
erally
in favor of
for the insured.
underlying insurers have
The
Am. Ins.
respective
See Gonzalez v. Mission
loss liabil-
full amount of their
Barnett,
(Tex.1990);
ity.
A
at 666.
strict construction
(2)
have been
The
insurers
required
the case in
the insurer is
when
full amount of their
held to
limitation to
exception
volves an
liability.
respective loss
Only
id.
when the
under the
See
(3)
underlying insurers shall have ad-
expressed
plain
insurance contract is
underlying limits.
liability for the
mitted
unnecessary
unambiguous language, is it
to the various rules
a court
resort
(4)
has
final
The insured
Here,
See id. at 665.
construction.
which ex-
adjudged
a sum
been
plain
policy
are
terms of the
underlying limits.
such
ceeds
unambiguous.
it com-
Although Emseor contends
Insuring Agreements in the
Part 2 of the
policy
conditions of the
plied with all four
policy
as follows:
states
period, a review of the
during the Stowers
proof
that Emseor
summary judgment
shows
Liability Underlying Limits:
Limits
—
coverage.
triggered Alliance’s
attach to
never
Liability under this
shall
Court,
coverage un
holding
opinion regarding whether the
argues
that this
4. Alliance
triggered.
event of the
had no
to defend in the
Id. To the
Alliance
underlying
had been
der that
*9
insolvency,
otherwise,
determined
also
insurer’s
argues
it misinter
extent that Alliance
coverage
triggered.
was not
See
that Alliance’s
holding
prets
in Emseor.
our
Inc.,
How
Mfg.,
S.W.2d at 198-99.
Emscor
804
ever,
presents
triggered”
a
is
“when
prop-
disputes
could
whether Emseor
5. Alliance
duty
question
is a
than “whether there
different
"step
in-
erly
the shoes" of the
into
Emseor, we
the identi
to defend.” In
reviewed
satisfy
cover-
the conditions of
surer in order to
obligated
policy
whether it
Alli
cal
to determine
even
age.
decide this issue because
We need not
litigation.
in the Ketcher
ance to defend Emseor
step into Stone Mountain’s
if Emseor could
shoes,
[emphasis
As
added].
at
197-98.
satisfy
of cover-
did not
the conditions
stated,
it
policy was
while we found the
we earlier
policy.
age
policy,
expressed
under the excess
we
nature of an excess
primary
are
in which there
a situation
Condition 1—Paid
coverages,
lim-
the
insurance
and excess
it
in the trial court that
Emscor conceded
be
primary insurance must
the
its of
actually
underlying limits as
paid the
had not
primary carrier
exhausted before
12,
In-
hearing
1990.
on November
of the
require
carrier
right
the excess
has
deed,
days before
five
on October
settlement,
[citations
contribute to
letter,
guaranty
Emscor
execution of the
situation, the various
In such a
omitted]
financially
it
unable
told Alliance that was
covering
not
companies are
insurance
addition,
$500,000
In
pay the first
itself.
rather,
covering sepa-
risk;
they are
same
show that
nothing in the record to
there is
layers of risk.
clearly defined
rate
$500,000 underlying
paid the
Emscor has
insurer
position of an excess
The remote
appeal.
limit as of the time of this
exposure to a
chance of
greatly reduces its
generally
is
re-
This reduced risk
loss.
that an
policy
expressly
does not
state
The
the excess
in the cost of
flected
pay” triggers coverage. How-
“agreement to
ever,
contends that Alliance waived
[emphasis added]
F.Supp. at 1017.
reliance,
relying
estopped
or is
on
payment”
of the
because
liability
“actual
terms
recognized, an excess
this court
As
by its Octo-
Alliance “modified” those terms
defend an insured
has no
insurer
letters, requiring only that
and 26th
ber 24th
insolvency of the insured’s
the event of
Fund,
“agree
Guaranty
Emscor or both
Emscor, Inc., 804
primary liability insurer.
pay.”
pay”
arrangements to
See
or “make
(Tex.App.
198-99
— Houston
Casualty
Tilley,
v.
Employers
Co.
writ) (and
cases cited
Dist.]
[14th
did not
therein). Yet,
5th Circuit in
panel
as a
of the
during
pe-
relevant
make this contention
Ar
Arkwright-Boston
Mut. Ins. Co.
Mfr.
preceding this
but did so
riod of time
lawsuit
(5th
Corp., 932 F.2d
Marine
ies
filed and Alliance had
after suit was
Cir.1991) observed,
estoppel
paradigm
“the
summary judgment.
moved for
Neverthe-
the insurer assumes
situation occurs when
less,
“fact
argues
that
there is a
arguably not
a claim
defense of
the insured’s
concerning
paid the
issue”
whether Emscor
reserving its
policy,
without
covered
i.e.,
liability,
respective
full
of its
loss
amount
words,
deny coverage.” In other
right
limit,
underlying policy
by exe-
ordinarily
in circumstances
estoppel
arises
cuting the
on October
Letter
insur
primary carrier where the
involving a
defense without
the insured’s
er undertakes
might
inter
advising
insured that
first
however,
recognize,
Emscor refuses
adjudication
following
policy defense
pose a
dealing
circumstances are different when
injured
suit
claimant’s
of the
insurer as
an insured and an excess
insured.
This differ-
opposed
to a
insurer.
explained by the court
Union
ence was
insurer,
Arkwright,
excess maritime
New York v. Certain Un-
Indem Ins. Co. of
from its
Arkwright, sought reimbursement
Lloyd’s,
F.Supp. 1015
derwriters
Aries,
under-
insured,
for the amount
(S.D.Tex.1985):
Arkwright
limits
lying primary
injured
aboard
the claim of a worker
settle
insurance
Primary insurance
443-44.
932 F.2d at
Aries.
vessel owned
coverage whereby, under the terms of
insolvent
for Aries was
primary insurer
immediately upon
policy,
attaches
itself.
to defend
employed counsel
and Aries
gives
occurrence that
happening
policy did
Although the excess
Id. at 444.
liability,
An ex-
omitted]
[citation
rise
Aries, Ark-
Arkwright to defend
require
provides
cess
is one
negotia-
in settlement
wright participated
above and
insurer is liable for the excess
its excess
protect
during the trial
tions
may
beyond that
be collected
which
*10
insurance,
settle-
444-45.
the
coverage.
Id at
When
In
omitted]
primary
[citation
Aries,
reached,
agreement
appar-
principles
waiver.
estoppel
ment
was
to invoke
of
or
Arkwright,
believing
policy See
cy, refused to tender the limits Finally, if even it could be said that requested Arkwright and instead offered provided with a Alliance somehow Emscor only primary policy the to deductible. defense, voluntarily Alliance did not relin risking collapse 444. Id. at Rather than of quish right a known or otherwise act incon agreement, Arkwright to proceeded the express the sistent with conditions amount of Id. entire the settlement. policy. Warren v. Ins. See American Nat’l (Tex.App. 188-89 — Fort action, subsequent In the reimbursement denied) (holding Worth writ that excess Arkwright argued duty to disclaim carrier, em who offered to defend insured’s coverage duty of rights part or reserve is subject ployee rights, to reservation of did to defend and that the failure reserve waive, estopped, or was assert not not rights give estoppel could not rise to where defenses). ing policy Although did Alliance duty was no Id. at 445. there defend. provide reserva Emscor with a formal directly Arkwright’s ar- addressing Without rights policy, tion under the never of Arkwright’s gument, par- the court held that obligations misrepresented duties and in ticipation negotiations the settlement was consistently Emscor Emscor. Alliance told assumption not tantamount to an of Aries’ prior to the October 24th and 26th corre rights, defense without reservation of thereafter, underly spondence, and that the therefore, Arkwright estopped was not from ing “paid” limits had be or “exhausted” policy denying responsibility under the coverage policy under before the the Alliance amount of Id. at the entire the settlement. fact, triggered. could In in the October be which 24th letter Emscor claims establishes waiver, “un Alliance reiterated that it was Likewise, estoppel is the doctrine of any way forward in until the able to move inapplicable to the facts of this case. As pays first Fund and/or Arkwright, provide a Alliance did not defense $500,000.” [emphasis When Emscor added] fact, brought In to Emscor. when Emscor tried to subsequently advantage take rights against Alliance to determine its language, suit “agree pay” “arrange pay” or policy, specifically “agree under this court held immediately objected any that Alliance had no Emscor. pay” triggering defend as a condition for ment to Emscor, Inc., coverage policy. S.W.2d at 198-99. While under the kept negotia progress informed of the was plain Ketcher
tions between and the importantly, 10 of More condition periodically requested ease assess tiffs expressly states that the terms ments, partic Alliance did not manner changed cannot be “waived or ipate negotiations in those what conduct except by endorsement.” No such endorse investigation. be could considered an only pay” requiring “agreement ment an fact, ongoing between communication pay” lim “arrangement product merely Alliance was parties. Further its was executed persistent that Alliance of Emscor’s demands more, estoppel used the doctrine cannot be assume Emscor’s defense and its excess coverage none ex to create insurance where limits, regardless whether Farm ists the terms of the Texas properly McGuire, was exhausted. Alliance ers Ins. Co. those if it could be refused demands. Even Tex 602-3 Emscor asserts that participated inapplicable said that Alliance somehow is was as Farmers because there investigation negotiation dispute liability coverage about but suit, give This triggered. rise to conduct did not about when without a While assumption of Emscor’s sufficient a distinction difference. defense *11 that seeking enlarge coverage Although guaranty to the letter stated Emscor not was “obligations” un- were “irrevocable” the asserted it the Emscor’s claims “unconditional,” that clause mean- derlying improperly it at- and was litigation, was did not have coverage by ingless creat- because Emscor tempting expand to be fixed ing “obligations” where that could considered a condition of excess Indeed, imagine hard to an it is previously none existed. or definite. vague non-binding. or agreement more Assuming express language of the Moreover, Guaranty not the Fund was as interpreted be the can somehow arrangement party the and as even a to requiring merely “agreement pay” an to or concedes, by limited statute Emscor now was “arrangement pay” “actual to rather than $100,000 per claim. to a covered suggests, payment,” Emscor the Letter (Ver- 5(8) § Tex.Ins.Code Ann. art. 21.28-C Guaranty not as a estab does matter of law Yet, during Supp.1993). non the Stowers binding agreement a or lish definite and Emscor mentioned period, never this statuto- promise by Emscor Texas either or the ry kept telling and Alliance it was limit Guaranty pay underlying policy the Fund to trying get Guaranty pay to Fund the the to 5, 1990, limits November the Ketch- when $500,000. fact, Emscor, full In after numer- plaintiffs’ expired. er final settlement demand attempts despite representations to ous sufficiently guaranty letter Whether the was contrary, a commitment the never obtained binding satisfy so as the definite and to amount, pay any Guaranty from the Fund to policy, conditions is con a matter of $200,000 provided by let alone the maximum a interpretation question tract of law. statute. e.g., Stanley El See Boot v. Bank T.O. Co. Paso, Further, when notified on October to a that Emscor intended execute showed, previously guaranty As we guaranty “agreement to letter of to reflect required plaintiffs letter the Ketcher “to ex- $500,000,” obligate im itself to haust all efforts remedies” to collect mediately questioned arrangement. $500,000 Guaranty full It from the Fund. finally copy of Emscor faxed an actual When granted plaintiffs security also the Ketcher guaranty on November letter property interest Emscor’s assets and expire, day the demand was to settlement Emscor, required upon the of “all exhaustion notify response, Alliance faxed an immediate efforts and upon and remedies” demand ing guaranty Emscor that letter was plaintiffs, Ketcher “the difference rejecting than set insufficient. Rather $500,000” up ap- between the amount hand, tlement offer out of Alliance countered $500,000, proved Guaranty Fund and $100,000 that, offer consistent with with However, days thirty within after demand. representations, contingent on was earlier guaranty specifically letter stated limits. the exhaustion obligated pay “anything,” not duty to Clearly, had no tender its attempted plaintiffs unless the Ketcher first policy limits neither Emscor nor the because Guaranty collection Fund. Guaranty agreed Fund or had ever limits. guaranty letter did importantly, More specify period not a time deadline for the plaintiffs to undertake such efforts Pay Condition 2—Held To demand, that such tender a but phrase Emscor contends taken some in the fu-
action would be time essence, pay,” synonymous “agree “held to supposed ture. Emscor was and, therefore, ambiguous pay” because pay an uncertain amount some time hold plaintiffs specify had at who could future after the Ketcher does attempted suggests that it be held point pay. time obtain an could some jurisdiction or pay by competent Fund. uncertain from the court of amount *12 906
could pay by agreement hold itself to mere whether it was the result of a trial on the promise. explanation or by The set forth agreement, the merits or a settlement was not Emscor, however, phrase does not make the days rendered until seven after the Stowers pay,” ambiguous. “held question to period expired. Moreover, of agreed had that whether an ambiguous judgment insurance contract is obligate did pay not to Emscor the question is a Lloyds law. State Farm underlying Inc. limits because the covenant to Williams, 542, v. 791 (Tex.App.— postpone 545 assignment execution rights denied). Dallas every writ by Not differ entered plaintiffs into the Ketcher interpretation ence in thereafter, the of a contract shortly or an Emscor discharged Ems- ambiguity. insurance amounts to an any liability cor from judgment for the Ins., Forbau v. Aetna 876 event that compro- the Alliance lawsuit was Life (1994) (on 134 motion rehearing). Both plainly mised or settled. Emscor was the likely insured and the insurer pay” limits, are to take underlying by “held to the either conflicting coverage, views of by judgment but neither its own volition during or conflicting expectations disputation nor period. is Stowers Id., sufficient to ambiguity. create 876 (emphasis original).
S.W.2d at 134
Liability
Condition 3—Admitted
Policy
When the
Emscor
is viewed in its
contends that it “admitted liabili
entirety
ty”
isolating
without
for the
giving priority
underlying
limits in certain corre
section,
phrase,
spondence
one
Generally,
sentence or
forwarded to Alliance.
clearly
phrase
“confession,
demonstrates that the
“held
an admission
is a
concession or
pay”
ambiguous.
phrase,
is not
voluntary
That
as
acknowledgment by party
we
of the
detail,
will
is consistent with the no-action
existence of certain facts.” Black’s Law
Dictionary
(5th
1979).
clause
plainly posits
of the
44
“liability”
ed.
A
pay”
first be “held liable to
generally
obligation
either
refers
“to an
one is
by judgment
justice
after a trial on the merits or
perform; every
bound in law or
See,
agreement.
settlement
e.g., Hudson
legal obligation, responsibility
kind of
Co.,
Inc.,
Ins.
v. Gelman
duty;
Sciences
921 F.2d
obligation
which one is under
(7th Cir.1990); Highlands
92
pay,
Ins. Co. v. Ger
or for which one is liable.” Black’s Law
Dictionary
Inc.,
(D.Md.
(5th
1979)
ber
F.Supp.
Products
(citing
ed.
Recon
1988);
Lexington
Gossett,
Vickodil v.
Corp.
Ins.
struction Finance
130 Tex.
(1992).
(1938)).
Mass.
underlying limits.
Assuming, for the reason stated Emscor, phrase pay” ambigu “held to predicted in the let While ous “promise pay” Emseor’s was ters of March 7th and October 19th that a required, satisfy still did not this verdict or litigation the Ketcher condition explained, probably As we the would exceed the limits of both guaranty confessed, letter policies, executed on October it never conceded or ac not, law, did as a knowledged any legal obligation pay matter hold Emscor to underlying Also, any pay underlying limit because policy limits. contingent solely ment “agreement obligate on the Ketcher Emscor’s itself’ as plaintiffs taking appropriate action at some noted in the 31st tied October letter was Guaranty solely which, time the future Guaranty, to the Letter of addition, Guaranty stated, Fund. In already obligate Fund was we did not Emscor to party arrangement Moreover, not a underlying or to the limits. Further, subsequent agreed judgment. the Letter of did not contain recital Agreed Judgment, regardless Final legal that confessed or conceded Emscor’s until” ny ... unless ... nor certain obligation [Alliance] limits. fact, nothing Specifically, the it said about Emscor’s no-action events occurred. Rather, limits. as we compliance requires full clause Emscor’s out, Ems- previously pointed it declared that policy and a determina all terms *13 anything pay cor did not have by obligation pay either tion of Emscor’s by absence of collection efforts the Ketcher by judgment actual trial or written after spoke of plaintiffs primarily Emscor’s Emscor, plaintiffs, agreement the Ketcher of $500,- future of an less amount than validity type The of this of and Alliance. Obviously, did not liabili 000. Emscor admit recognized long clause has been in Texas. during ty underlying for the limits the Stow- Kline, County Co. Guaranty Mut. Ins. v. See period. ers (Tex.1993) curiam); (per 811 845 S.W.2d v. Second
Street The Honorable Court of Pay 4—Adjudged (Tex.1988); To Appeals, Condition 756 S.W.2d By Judgment Prods., Inc., Final Ins. v. Parker Co. Gulf (Tex.1973); Am. Ins. Great stated, Agreed As we earlier the (Tex. Murray, 437 Co. v. Final was on Judgment executed November 1969). Thus, if triggered even Emscor had period expired, the after Stowers policy, Emscor not under the could judgment, along with the subse bring this unless it satisfied either the suit quent postpone covenant execution agreement” require “actual trial” or “written assignment rights, obligate of not Ems- did of clause. ment the no-aetion Hence, cor the limits. adjudged Emscor was not the under
lying during period. Agreement limits the Stowers Written ap- undisputed It is that Alliance did not during failed the Because Emscor hearing pear at the 12th and was November any the period comply Stowers with Agreed party Judgment. Final not a to the conditions of under the Thus, Judgment not Agreed the Final did policy, Alliance never settle. had In- agreement constitute a “written the Therefore, suit this is barred. This lawsuit claimant, sured, Company [Alli- the and the is also barred the no-action clause. required ance]” as no-action clause. the Similarly, Letter did not the The “No-Action” Clause satisfy requirements the of the no-action i.e., clause because not was Alliance exclud- policy, Condition 8 of the no-action the clause, bringing party arrangement, to that also prerequisites states the ed as but against Alliance: suit itself the instrument did constitute obligation determination of Emscor’s Against Company: Action No action shall liability. or a release of Emscor’s Nonethe- against Company lie the unless as a less, complied contends that it with precedent thereto, condition the Insured clause because the November the no-action fully complied all the shall have hearing an “actual trial.” 12th policy, nor the terms of this until obligation to amount of the Insured’s finally
pay shall have been
determined
Actual Trial
by judgment against
Insured
either
judge
points out that
agree-
trial
after actual
written
giv
testimony from
before
heard
witnesses
Insured,
ment
the claimant and
sup
approval
In
ing his
settlement.
Company.
Ins.
argument,
Emscor cites
port of
Gulf
[emphasis added]
Vela,
(Tex.App.—Aus
Alliance contends
issues
there was no “actual tri-
to a
final
jury
al”
determination
court or
because the trial court did not hear evi-
dence,
to resolving
contrast
a
the same
findings,
made no
issues
and did not deter-
agreement
parties, i.e.,
of the
without a con
mine
damages.
Alliance is cor-
Wright
Inc.,
test.”
v. Allstate Ins.
285
widow,
rect. Michael Weaver’s
Kristina
376,
(Tex.App.
1956,
S.W.2d
379-80
Weaver,
President,
and Emscor’s
Jim Jen-
— Dallas
n.r.e.).
writ
question
ref'd
There is no
son, testified at
hearing,
the November 12th
disposition
litigation
of the Ketcher
according to
plaintiffs’ attorney,
the Ketcher
“friendly
where,
judgment
suit” or consent
prove up
“to
the settlement” on behalf of the
upon hearing,
objective
only
par
minor, Lyndsey Michelle
In
Weaver.
actual-
ties was to obtain
approval
the court’s
ity,
parties
already agreed
had
before the
agreement
their
and to memorialize that
hearing to the ad litem fees to be taxed
agreement
judgment
as the
of the court. See
against
settling
other
defendants and
Co.,
Ins.
v.
Casualty
Co. Texas
Ins.
agreed
Gulf
hearing
then
at the
to defer “other ad
(Tex.App
Worth
litem
respect
Emscor,
matters” with
. —Fort
pend-
n.r.e.);
Wright,
writ ref'd
see also
ing
against
the outcome of the suit
Alliance.
S.W.2d at 379. The
hearing
November 12th
Thus,
only
“evidence” the trial court
did not involve a
regard
“contest of issues”
parties respective
heard was the
understand-
ing liability, damages
other matter.
ing
agreement.
Mrs. Weaver ac- The trial court did not hear “evidence” or
knowledged that
for consideration of the
thereto,
findings
judg
make
related
and the
$3,000,000settlement,
foregoing
she was
the ment contains no such recitals as described
option
“going
against”
to trial
Emscor and
in Vela and
The trial court did
Jefferson.
“obtaining
judgment
may
that [she]
approve
parties’ agreement
on the rec
recognized
collect.”
also
She
she was to
ord; however, had the court withheld its
give Emscor a
postpone
covenant to
execu-
approval,
parties
still would not have
tion of the
until such time as at-
litigated
hearing.
the matters raised at the
tempts were
made
collect funds from
Co.,
the See
Ins.
App. writ Theode ref'd — Austin insured, International, range full of Co., extends to the v. Service 600 Ins. S.W.2d poli expressed 389, relationship (Tex.App agency Dist.] 391 [14th . —Houston n.r.e.); cy. 1980, Ranger County Ins. Co. Young ref'd See Mut. v. writ Men’s Christian Co., Guin, 656, v. [em As soc. Commercial Standard Ins. 723 S.W.2d 659 497, 504 (Tex.App may 552 S.W.2d Worth That phasis duty include inves added]. . —Fort (Tex. 1977), n.r.e., writ ref'd 246 563 S.W.2d tigation, preparation for defense law 1978) curiam).; (per Liberty Ins. Co. v. Mut. suit, case, trial of and reasonable at (Tex. 791, Corp., 517 General Ins. 798 S.W.2d Physicians tempts to settle. See American 1974, n.r.e.); App. Tyler writ ref'd Merca Garcia, 842, Exchange v. Ins. 876 S.W.2d 849 — do, 511 S.W.2d (Tex.1994) rehearing). (opinion on motion Here, investigate, duty had Alliance no However, this case an excess car- concerns negotiate or defend Emscor under terms duty had no rier who contractual to defend. law, policy of the excess or at and never Inc., Emscor, 199-98; 804 Harville S.W.2d responsibilities those on its own. undertook Co., (5th 276, v. Twin Fire Ins. F.2d 279 885 Emscor, 804 at 197-99. There See Cir.1989). points out that it does fore, duty Alliance had no under and Stowers complain erroneously that Alliance refused cause Emscor has failed state a Stowers of litigation, defend Emscor in the but Ketcher action. wrongfully that Alliance and erroneous- ly refused to settle the case for the excess Similarly, has faded to state during Alli- policy period. limits the Stowers of action for faith. No a cause bad Texas might wrongfully have refused settle- ance applied duty good has of faith court only if Emscor ment had satisfied one dealing to an insurer. None of stated, fair of we coverage. four conditions As law, which and, applying the federal cases Texas apparent not do so Emscor did as is dissent, record, expressly recognizes doing had no so. cited from the intention of are duty good and fair common-law faith a part dealing on the of an excess carrier an Failure To State A Stowers merely Those cases assume without insured. Faith Bad Cause of Action duty deciding that such a exists. Harbor Co., 195, F.2d simply v. Urban Constr. 990 authority is no in this Ins. Co. There State Mill, (5th Cir.1993); establishing insured Rice Inc. cause action an 202 Beaumont 910 Co., and, processing
v. Mid-American Indem. Ins. 948 F.2d of claims when (5th Cir.1991); defense, assuming McCracken v. U.S. the insured’s to act as an (W.D.Tex. Co., F.Supp. Fire Ins. ordinary prudent person would act in the 1992). Having duty to “handle” the management of his or her own business af- plaintiffs’ Emscor, claim for County fairs. v. Arnold Nat’l Mutual Fire duty could not have breached a and Emscor (Tex.1987); Ins. 725 S.W.2d assign therefore had no cause of action to Guin, Ranger County Mut. Ins. Co. v. plaintiffs.6 subject the Ketcher To (Tex.1987) Stowers, (citing potential liability, to such forge would tobe 547). 15 S.W.2d at To recover for breach previously recognized cause of action not good dealing, faith and fair this State. It is not for an intermediate (1) plaintiff prove: must the absence of a appellate court to create new causes of ac denying delaying pay- reasonable basis tion. (2) benefits; ment of
insurer knew or should have known that
denying
there was no reasonable basis for
Recovery
No
delaying payment.
National
See
Union Fire
Assuming Emscor has stated a cause of
(1994)
Dominguez,
Ins. Co. v.
based
anything
Likewise,
terms cannot be
but reasonable.
Emscor cannot recover
McCracken,
F.Supp.
802
at
In-
on its bad faith or
See
36-37.
Stowers claim. Texas law
deed,
recognizes
Supreme
recently
of an insurer to deal
the Texas
Court has
fairly
good
merely
and in
faith with its insured
held that evidence that
shows a bona
action,
785,
Scheffey,
(Tex.App.—
6. Even if Emscor had such a cause of
828 S.W.2d
791-92
1992,
denied);
Texarkana
writ
Bowman v. Char
expressly prohibited
assigning
Emscor was
Co.,
(Tex.
Agency
ter General
9H alleged misrepre- preeise nature of Alliance’s dispute on the insur- fide about allega- Assuming that Emscor’s of bad sentations. contract does not rise to the level ance true, however, Moriel, its claims are barred tions are Transportation Ins. Co. v. faith. 2, 1994); limitations. 450, 455, (February Tex.Sup.Ct.J. Lyons, see at 601. Nor is bad 866 S.W.2d of the Insur- An action under article 21.21 fact, faith established when the trier the DTPA must be ance Code and under hindsight, decides the insurer the benefit of decep- years after the commenced within two simply wrong
was
about the factual basis
years
practice or within two
after
tive act or
proper
its denial of the claim or about
discovered, or in the exercise of
plaintiff
Moriel,
construction of the
See
diligence,
have discovered
reasonable
should
Tex.Sup.Ct.J.
[emphasis
at 455.
added]
deceptive
practice.
act
Tex.Ins.Code
16(d) (Vernon Supp.1994);
§
art. 21.21
Ann.
faith
“The issue of bad
focuses
(Vernon
§
17.565
Ann.
Tex.Bus. & Com.Code
valid,
claim
on the
on whether the
but
1987).
purchased
Policy in
conduct in
reasonableness
insurer’s
that it did not learn of Alliance’s
but asserts
rejecting
Lyons,
at
the claim.”
alleged misrepresentations until Alliance “re-
summary judgment proof
601. The
estab
coverage
provide
fused to
and refused
was, most,
lishes that there
a “bona fide
say exactly
does not
when
settle.” Emscor
controversy” about whether Emscor satisfied
summary judgment
that occurred. The
coverage.
the conditions of
Paul’s
See St.
proof
September
that on
shows
Fong
Huang,
Ins. v.
Chun
that Alli-
Emscor was notified
(Tex.App.—Houston
Dist.]
[14th
“drop
policy would not
down
ance’s excess
Mill,
denied);
also
Rice
writ
see
Beaumont
primary carrier
pick up
that the
dispute
Alliance: Conclusion requirement that such be made [the the insured before excess It is obvious from Emscor’s communica- acceptable can insurer] become hable is an Guaranty tions with Alliance and the Fund precedent. and reasonable condition It negotiations and from its with the Ketcher objective prevention has as its of an plaintiffs financially that Emscor was unable arrangement by which the insured would pay primary coverage. the first imposed seek to cause to be on the Indeed, summary judgment proof reflects company insurance for an amount in ex- paying Emscor had no intention of cess of the retained limit without first ex- underlying Rather, limits. tried periencing any financial detriment himself. $500,- get Guaranty pay Fund to the first 000. Emscor never obtained the had,
Fund’s commitment if it and even $500,000. Fund could not have the entire policy If the did not contain such a condi- actually pay Nor did Emscor ever or uncon- tion, subjected could be [the insurer] $500,000. ditionally promise the first fraudulent and collusive transactions of a failed, attempted these When efforts kind to which an excess insurer becomes payment provision circumvent the actual particularly primary vulnerable when the policy by asserting at the “last minute” refuses, unable, perform insurer or is policy that it had satisfied the conditions as obligation protect by provid- the insured and, finally, by executing “modified” ing appropriate investigation him an Agreed Judgment obligat- Final which never arising defense related to claims from a Yet, ed it limits. occurrence_ in- [The covered excess events, throughout sequence these surer] had no to defend [the insured] continued to insist that Alliance tender its damage though option suit it had the limits. Had Alliance done so to do so. If an excess carrier not to elects without assurance that Emscor would ever defense, provide primary and if the carri- limits, it would have been insured, er fails or refuses to defend the insurer, position left in the temptation part there contrary express to the terms of the excess join injured party in insured to with the contrary to the laws of this State. arrangement give collusive that would Placing such a burden on the excess carrier immunity expo- insured financial very purpose would defeat the of excess lia- providing sure while at the same time bility insurance and make such *18 injured opportunity party an to seek col- expensive more and inaccessible. See Ems- lection under the excess insurance cor, Inc., (quoting 804 at 198 Harville requirement, When there is a such as the Co., (5th 276, City v. Twin Ins. 885 F.2d 279 poli- one contained in the [excess insurer’s] Cir.1989)). cy, that the excess insurer cannot be liable Co., In Laster v. American Nat’l Fire Ins. signifi- unless the insured has first made a (N.D.Tex.1991), F.Supp. aff'd, 775 966 own, that the cant of his the risk (5th Cir.1992), strikingly F.2d 676 a case with injured insured and the will take unfair facts, summary similar the court held that advantage greatly of insurer is the excess judgment in of favor an excess carrier reduced. brought by personal injury causes of action a 993; F.Supp. see also Farm Fire State plaintiff assignee prop of the insured was Gandy, & Cas. Co. v. 880 S.W.2d paid er where the insured had not the under pending) (Tex.App. writ lying policy limit and where the insured’s — Texarkana personal injury (observing agreed judgment underlying defense of the that an executed Mountain, insurer, or its re- derlying not to Stone contemporaneously with covenant ceiver, Guaranty Fund. The Poli- Texas public policy execute violates because cy reads that: court). perpetrates a fraud on the (1) underlying insurers have satisfy the condi- Because Emseor failed respective full amount of their loss liabil- policy tions of the Alliance and failed to state ity; action, summary judgment in favor cause of of Alliance on Emscor’s contractual and ex- (2) underlying held insurers have been proper. tra-contractual causes action was respective the full amount of their Accordingly, points we overrule Emscor’s liability; loss judgment error and affirm the of the trial (3) underlying ad- insurers shall have court. limits; underlying mitted for the SEARS, Justice, dissenting. (4) has final been the insured adjudged pay a sum exceeds which significant Perhaps the most observation such limits. inequity that illustrates embraced majority opinion is in the dated letter Octo- interpretation only Alliance’s Stone attorneys Alli- ber from Emseor satisfy conditions is un- Mountain can those attorneys: ance words, In other under Alliance’s reasonable. (4) interpretation, only have condition could certainly ... It is not Emscor’s fault that policy triggered coverage under the once primary company its insurance has become insolvent, Mountain became because Stone insolvent. There is also no doubt that had (4) condition was the condition that primary company insurance not be- compliance by omitted a reference come insolvent this case would have been “underlying insurer”. Such a construction of $500,000.00 full settled now with the coverage and is policy favors exclusion of primary being paid, along with the full National Fire Ins. unreasonable. See Union $500,000.00 excess Energy Co. v. Hudson you represent. grossly
whom It would be unfair to allow Alliance the windfall of not $500,000.00 having excess cover- ambiguities the rule that Consistent with age simply acci- because the historical in insurance contracts are and inconsistencies dent of Emscor’s insurance carri- strictly coverage, to be construed favor of becoming er insolvent.... “step I that Emseor could into would hold for the the shoes” of the insurer foregoing I respectfully concur purpose satisfying conditions. majority opinion. I dissent would id.; see also Stonewall Ins. Co. v. Mode See summary judgment reverse the because Inc., Exploration, 434-35 rn express Emseor satisfied the conditions ( writ) (holding Tex.App. — Dallas policy during period. the Alliance the Stowers third-party beneficiary poli excess Alternatively, I would there is a hold cy step into of the insured could the shoes question fact as to whether Alliance modified satisfy where order to conditions of policy during or waived the conditions of the upon a res provided insurer defense *19 and, therefore, period the under the Stowers is rights). interpretation This ervation estoppel, not doctrines of waiver or could September Alliance’s consistent with require comply condi- Emseor to with those acknowledging that “Emseor letter tions. responsible primary level of would be the coverage.”
Initially, Alliance contends that the first trigger properly step conditions that could the excess into three Emseor could Because carrier, primary Moun- only by un- shoes of Stone could be satisfied the the its tain, “drop into the question request whether Emscor Alliance to down” becomes Instead, conditions of the Alliance shoes of the insolvent carrier. Ems- satisfied the during period. majority stepped cor into the shoes of the insolvent the Stowers As observes, carrier, correctly agreement, comply Emscor did not executed a settlement (4) (1) during agreed primary conditions the Stowers $500,000. period. actually paid not demanded that Alli- Emscor had then carrier, ance, underlying limits as of the 12th as excess its excess cover- November $500,000. Agreed Judgment age hearing, and the Final re- sulting hearing from that was not rendered Highlands No. Insurance Co. v. Case 2: days period until seven after the Stowers had (D.Ma- Co., F.Supp. Gerber Products However, expired. only com- had to 1988). ryland ply with 1 of the 4 conditions in order to trigger coverage. the excess primary carried insurance with Gerber Mutual,
Liberty
Mis-
first-level excess with
National,
sion
and second-level excess with
Pay
2—Held To
Condition
AIU,
Highlands,
American and Federal.
majority opinion
position
The
takes the
settled a lawsuit for one million dol-
Gerber
only
pay”
that “held to
is
satisfied when
coverage.
primary
The
lars
pay by “judgment”.
liable to
held
carrier,
National,
level excess
Mission
second
However,
majority
cited
the cases
sought
bankrupt.
then
to have
was
Gerber
clearly
opinion
compliance
with the
show
AIU,
Highlands,
American and Federal
requirement
the insured be
contract
“drop
provide
level excess
down”
first
pay” may
“held to
be satisfied
“settlement
coverage.
policy,
High-
Like the Emscor
agreement”.
In the three cases cited
language providing that
lands
had
majority opinion
uphold
position,
this
the Highlands
not become liable until the
would
holdings
majority misstates
of those
paid or had been
carriers had
cases, as will be shown below.
majority opinion
pay.”
“held liable to
The
holding
Maryland
indicates that
Court
v.
Case No. 1: Hudson Insurance Co. Gel
pay”
phrase,
“held liable to
was
(7th
Inc.,
Sciences,
man
satisfaction primary policy. Liability 3—Admitted Condition guaranty The terms of the letter of are as Emscor contends that it “admitted liabili- good consider- follows: “for and valuable primary ty” underlying for limits of the ation, hereby receipt of which is acknowl- thereby satisfied condition edged and in further consider- and confessed ignore majority opinion to the satis- For the compromise and settlement ation majority must be- faction of condition agreed subject litigation, guarantors not Ems- Mountain and lieve Stone following terms:” responsible for the cor could be However, specifically coverage. told 3(a) will Guarantors beneficiaries responsible be Emscor that Emscor would difference, thou- up to five-hundred primary coverage as a result of for its own ($500,000), dollars between the sand Further, insolvency. underlying insurers money the Texas state amount attempt responsibility, in an to fulfill that ap- guaranty fund board of insurance to Alliance’s instructions accordance proves as the result conditions, Emscor executed and modified guaranty fund filed with the claims guaran- guaranty. The letter of the letter of subject litigation, and the total ty plaintiffs’ all of claims satisfies thousand dollars sum of five-hundred liability. Emscor and is an admission ($500,000). (b) obligated guarantors are Before Condition anything, beneficiaries beneficiaries obligated all efforts and
are to exhaust states as follows: Condition 5 up to collect to five-hundred remedies Liability Liability under Attachment of — ($500,000) thousand dollars from the unless and until this shall not attach guaranty state board of insurance shall have admit- insurers fund. underlying limits ted (c) all final After beneficiaries have exhausted the insured has unless and until para- adjudged stated sum efforts and remedies been limits, (em- 3(b) imme- graph guarantors shall which exceeds such then added). thirty phasis diately obligated upon become
917 majority context, opinion interprets ordinarily requires showing The the under- it portion of lined Condition 5 to mean that prejudiced by the the conduct of insured was underlying Williams, “the insurers have the 791 at the insurer. 552 full respective liability.” 560). amount of their loss (citing Tilley, Assuming 496 S.W.2d added). (emphasis Further, 5, by footnote summary judgment proof that Alliance’s es- majority disputes “step the that Emscor can non-compliance tablished Emscor’s with the into the shoes of the insurer.” policy, on conditions the the burden was interpretation This the insurer must Emscor, non-movant, the to adduce evidence “pay clearly the full amount” is erroneous estoppel or waiver which was sufficient simply requirement is not a of Condition necessary raise a fact issue to defeat sum- majority belief that Swiderski, mary judgment. See 672 S.W.2d full required supported by any is not part of at 268. by excess insurance issued Alliance The October 24th and 26th letters written to Emscor. by Alliance were attached to Emscor’s re- Clearly, step Emscor can into shoes of sponse summary to the Alliance’s motion for bankrupt primary carrier, clearly judgment. Those letters show that when liability Emscor “admitted for the trying desperately Emscor was to avoid ex- Therefore, summary judgment limits.” liability destroy company, cess that would Alliance was error. trigger Alliance told Emscor that it could coverage by “arranging pay”
Alliance’s
or
$500,000.
“agreeing
pay”
In
the first
oth-
aiver/Estoppel
Modification/W
words,
er
told Emscor
could satis-
if
Even it can be said that Emscor failed to
fy
“pay”
pay”
or be “held to
if
condition
comply
express
with the
conditions of the
“arrange
pay”
“agree
Emscor would
policy, a
fact question
material
exists as to pay.”
subsequently
After Emscor
executed
whether
express
Alliance modified the
condi
Guaranty,
rejected
Letter
prohibited
tions and
by
the doctrines of guaranty
coverage, thereby
and denied
ex-
estoppel
waiver or
demanding
from
strict
posing
Emscor to
in excess of its
compliance with those conditions. See Em
ability
pay.
certainly changed
ployers Casualty
Tilley,
Co. v.
496 S.W.2d position for the worse based on Alliance’s
552,
(Tex.1973);
561
see also State Farm
modify
by complying
offer to
the conditions
Lloyds,
Williams,
542,
Inc. v.
791 S.W.2d
552 with Alliance’s definition of the condition.
denied).
(Tex.App.
1990, writ
Al
— Dallas
precedent
Performance of
condition
can
though the terms are
interchange
often used
by
by
party
be modified
word
deed
ably,
“estoppel”
“waiver” and
are two distinct
obligation
whom the
was due. Ames v. Great
doctrines.
Id. at 552.
requires
“Waiver”
(Tex.
Bank,
447,
Southern
672 S.W.2d
449
voluntary and
relinquishment
intentional
of a
1984). Clearly,
question
fact
material
ex
known, existing right, or intentional conduct
Alliance,
deed,
by
ists as to whether
word or
inconsistent
claiming
right.
Id.
changed
the conditions of
Ems-
citing
Montgomery,
Utilities Ins. Co. v.
and, therefore,
eor’s detriment
(Tex.
waived reli
Tex.
138 S.W.2d
ance,
estopped
relying
or was
on Ems-
App.1940, opinion adopted);
Comm’n
Swider
compliance
express
cor’s strict
with the
con
Ins.,
Property
ski v. Prudential
& Cas.
policy.
ditions of
(Tex.App —Corpus
Christi
.
dism’d) (and
therein).
writ
cases cited
majority
Alliance and the
maintain that the
hand,
estoppel
doctrines of waiver and
cannot
“Estoppel,” on the
be
other
arises
one,
“where
fault
used
create insurance
where
another has been
change
position
induced to
his
none exists
the terms of the
Tex-
for the worse.”
(citations
McGuire,
omitted);
Id. at
see
Farmers Ins. Co. v.
Stonewall
Ins.,
(Tex.1988)
(opinion
rehearing).
“In other waiver terms to enable policy must contain such re contract with a new and different create fact, insurer to be “Stowerized.” policy.” Id. risks covered spect to Exchange v. Gar- Physicians Ins. American Ins. Co. (quoting Am. Reserve Great (1992) *23 842, (opinion on 848-49 cia 876 S.W.2d Mitchell, to (Tex.App.—San 707 835 S.W.2d An majority, by rehearing), cited motion for 'd)). Here, 1960, there was no writ ref nio Guin, Court, citing stat- Supreme the Texas by Alliance covered dispute that the risks duty that the insurer’s without reservation ed injury personal claims policy included the in- includes ordinary care under Stowers in the against Emscor that were asserted of the preparation for defense vestigation, no litigation. Because there was ease, lawsuit, reasonable trial of by policy, risks covered dispute about the attempts importantly, the More to settle. triggered, only when was but about duty might extend suggested that this court inapplicable. Texas Farmers is n. 25. Id. at 855 “excess insurers”. event, thoroughly itself involved any The “No-Action” Clause of the investigation and settlement refusing the settlement Ketcher suit before regarding issue Notwithstanding the fact plaintiffs and by the Ketcher proposed offer express or compliance with the Emscor’s by Emscor. recommended majority policy, the condition of the modified by no- this suit is barred points out that $3,000,000 As the reasonableness majority, According to the clause. action settlement, majority assert Alliance and obligation never deter- was Emscor’s steps reasonable to take that Emscor failed trial”, mined “after actual liability primarily legal minimize Alliance’s a agreement, to which Alliance was written times three the settlement was because true, However, if that were party. even original Neither demand. greater than the question is still the of whether there authority majority cite Alliance nor the clause rely on the no-action entitled to was the amount proposition for the recognized in Ins. exception under the Gulf is sufficient establish judgment alone Inc., 676 Products 498 S.W.2d v. Parker Co. Con- per se unreasonable. was a settlement observes, majority As the assertion, there is majority’s trary to the Ins. that held in Supreme Texas Court summary judgment nothing in Alliance’s Gulf ordinarily insist company may insurance an “reasonable- proof undermines which ex- least, a clause upon compliance with no-action very At the ness” of settlement. opportunity given the cept where it was to the reason- question is a there of fact settlement, suit, agree or to defend a of the settlement. ableness on the erroneous to do either and refused responsibility under it had no ground that Duty The Of Good Breach Of Alliance’s Id. at 679. Whether Dealing And Fair Faith erroneous agree to settle was
refusal jury must question that precise fact cases, holds citing host of majority, The decide. claim a bad faith cannot assert that Emscor recognize a cause not law does
because Texas insurer for against its by an insured of action Doctrine Stowers third-party handling of a faith in the bad cases, Ranger County Mutu- those Charter majority, citing In one of claim. Roof 903, Co., Guin, 841 S.W.2d Tri-State Ins. ing Co. v. al Ins. Co. Dist.] (Tex.App [14th (Tex.1987), Alliance owes no held that 905-6 . —Houston writ), brought a bad faith suit required by the insured not no Alliance was Emscor because denying party’s a third its insurer control policy to assume terms of the that there observed This court claim. negotiation, or defense investigation, but did a claim authority support such plaintiffs. Guin by the Ketcher the claim claim, expressly rejected Guaranty. rule out such a and in Alliance the Letter of proceeded fact to review whether the Suit was filed six months later and well insurer Therefore, period. had within the limitations acted bad faith. 841 at 905-6. Here, faith claim is presents entirely cogniza- Emscor’s bad not-barred See, limitations. e.g., ble cause of action. Harbor Ins. Co.,
Co. v. Urban Constr. 990 F.2d (5th Cir.1993); Mill, Beaumont Bice Inc. v. Violations Of The Insurance Co.,
Mid American Indem. Ins. 948 F.2d Code and DTPA (5th Cir.1991); McCracken v. U.S. (W.D.Tx and, Fire Ins. F.Supp. majority Alliance also contends 1992) agrees, (recognizing may that the Emscor’s DTPA excess carrier and Insur- *24 duty good by have of ance Code claims are barred dealing). faith and fair limitations plaintiffs standing and that the Ketcher lack compliance In direct with Alliance’s in- under those statutes. Tex.Bus. & Com.Code structions, Emscor “held” itself to (Vernon 17.45(4), 1987); §§ 17.565 Ann. Tex. by limits Guaranty. the Letter of (d) (Vernon 16(a), § Ins.Code Ann. art. 21.21 subsequently After Alliance refused to ten- Supp.1994). These contentions are also with- limits, der judgment was ren- notes, majority out merit. As the against dered Emscor in excess of both its claimed that it misrepresentations learned of coverage. and excess Emscor is by respect made Alliance with jury entitled to have a determine whether provide coverage when Alliance refused to that excess resulted from Alli- previ- settle the Ketcher suit. As we negligence. ance’s bad faith or stated, ously period the limitations did not accrue until Emscor learned of Alliance’s re- Finally, although not addressed the ma- provide coverage. fusal to its excess That jority, Alliance contends that Emscor’s cause beginning occurred sometime after the of of action duty good for breach of the of faith negotiations settlement in March which dealing and fair is barred limitations. was fourteen months before suit filed. The statute of limitations governing a cause Thus, Emscor’s DTPA and Insurance Code of duty action for good breach of the faith claims are not barred limitations. dealing years and fair is day “two after the cause of action accrues.” I am Supreme aware of the Texas Court’s Tex.Civ.PRAC. & 16.003(a) (Vernon 1986). Watson, opinion § recent in Allstate Ins. Co. v. Rem.Code Ann. (Tex.1994) A (opinion bad faith ordinarily cause of action S.W.2d on motion accrues rehearing), holding third-party when that a an insurer fails to has an insured under standing no under article 21.21 to sue an policy; words, in other when there is a directly practic- insurer for unfair settlement coverage. denial of Murray v. San Jacinto However, es. the court was con- Watson Inc., Agency, potential cerned conflict that could with Alliance asserts that limitations accrued if exist an insurer owed a to deal in September when Emscor learned on good faith with its insured as well as an 1988, that provide pri Alliance would not injured third-party. 876 S.W.2d 150. No mary coverage as a result Stone Moun plaintiff such conflict exists here. The insolvency. tain’s Emscor did not file this third-party claimant, Watson was with 9,May However, suit until Alliance’s duty. whom the insurer had no contractual primary coverage denial of is irrelevant for plaintiffs third-party The Ketcher are not purposes of this lawsuit because Emscor was se, per assignees claimants but are seeking coverage, pri to invoke excess rights e.g. contractual Emscor. See Gar- Thus, mary coverage. significant (Justice cia, event Hightow- at 871-72. in determining period when the limitations dissenting). assignees, er As Emscor’s accrued is Alliance’s denial of cover plaintiffs obligations excess Ketcher can enforce the age, which occurred November when and duties that Alliance owed to Emscor present appeal. There dealing, than the policy. The the excess under deny equity at law or good reason postpone exe- plaintiffs’ covenant
Ketcher imba- protection from abuse for Ems- insured judgment in return cution on the carri- power by an excess insurance lance of negligence and bad assignment of its cor’s Alliance, er. entitled faith claims just recovery plaintiffs to more than has satisfied I hold that Emscor would recovery them policy; it allowed on the matter of pay” as a requirement of “held judgment. Id. the entire agreement law, a settlement have executed earlier, may plaintiffs they settle admit- we noted have plaintiffs, As pri for the against an insured one liability. Upon
their lawsuit the occurrence ted assignment of coverage, obligated take an mary foregoing, Alliance was against an ex cause of action In the alterna- coverage. the insured’s provide its excess pay. Safeco, question its refusal to as to tive, carrier for a fact cess there is at least purchased or if so foregoing at 854. occurred whether acquired triggered requirement insurance services they whether in unfair engaged coverage. that Alliance provide and claimed the excess deceptive acts dur practices and settlement question of fact as is also material There Garcia, 876 policy. See ing the sale of the *25 modified the ex- defined or whether (breach duty of the Stowers at 847 therefore, and, of the press conditions of the constitute a violation alone does not compliance with necessity of waived DTPA); see also Code or Insurance conditions, de- estopped from or is those n. Kelly, Ins. v. Allstate manding compliance. n.r.e.). (Tex.App. Tyler writ ref'd — conclusion, summary judgment favor standing under the In has Because Emscor of Accordingly, all of Alliance was error. Code, under the and is a consumer surance sustained, be points of error should Emscor’s assignees, the DTPA, it’s the same is true for re- should be court’s the trial plaintiffs. versed, be remanded and this case should proceedings consistent the trial court Dealing Fair Faith & Good opinion. this dealing” faith and fair duty “good of The relationship special be- of a exists because insured. It does insurer and the
tween the specific of the insur- terms
not emanate Further, of it exists because contract.
ance bargaining power between unequal tendency for that imba- parties,
two strong to take advan- encourage the
lance to COMPANY, v. National See Arnold tage of the weak. ALKALI CHLOR PIONEER Co., 725 INC., Appellant, Fire Insurance County Mutual duty also exists relationship”, created “special of that because COMPANY, INDEMNITY ROYAL imbalance, gives insurers which by the Appellee. “evaluation, over control power and exclusive Id. at 167. of claims.” and denial processing, No. A14-93-00391-CV. and the power, Because imbalance Texas, Appeals Court insurer existing between relationship special Dist.). (14th Houston duty good insured, a breach of cause of gives rise to a dealing and faith faith 31, 1994. March simple than damages, rather tort action for contract. liability for breach of deserving situ- of a more conceive
I cannot fair good faith and apply
ation