Garcia v. American Physicians Insurance Exchange

agreed and APIE to share ICA REEVES, C.J., and Before PEEPLES equally defending suit and the costs of CARR, and JJ. any or to divide costs of settlement proportion the amounts verdict OPINION hired coverage. their Ross Crossland was CARR, Justice. attorney in Dr. as the defense lead Garcia’s Dr. appeal and was the two carriers. from a ren- This is attorney, Lyons, personal insured the Garcia’s Clem dered in favor in his James case. also assisted defense. insurer in a doctrine Based Stowers1 Kenneth were findings, and Patterson jury’s on elected Williams plaintiff 3.Actually, in that suit was Aramin- American 1. G.A.Stowers Furniture Co. v. Indem. (Tex.Comm’n Cardenas, Cardenas, App.1929, hold- Dr. 15 S.W.2d 544 the wife of Gustavo ta ing approved). patient. Garcia’s She sued in her individual guardian capacity es- as her husband’s and exchange reciprocal and 2. APIE is convenience, we "Cardenas” tate. will use For attorney. statutory See TEX.INS. APSG is represent and Ara- both Gustavo Cardenas (Vernon arts. 1981 and CODE ANN. 19.01-19.13 minta Cardenas. Supp.1990). be used in this Vernon "APIE”will except opinion APSG refer to both APIE and requires when the context otherwise. litigation hired APIE appeal to monitor the on The suit on filed now was Dr. its behalf.4 against ICA, APIE and on APSG August 8, alleged they (1) 1985. He were began Trial of v. Garcia on Cardenas negligent mishandling his defense in However, July July Garcia; the in- breached and notified Dr. Garcia the various by abandoning surance contracts his de- attorneys pro- that it involved would not failing investigate, negotiate fense coverage plaintiff’s plead- vide suit; (3) false, engaged settle the ings allege file did not then on acts of misleading deceptive acts violation during occurred the APIE Act; (4) Deceptive Trade policy period. The letter stated that APIE Practices advising Lyons and engaged deceptive ICA to continue to in unfair and acts provide coverage and a practices in violation of the Insurance defense. APIE continued to half the Code; fiduciary duty breached a defending August costs of the suit until good and the covenant faith and fair con-, dealing. sought indemnity APIE and tribution from ICA. 29, 1985, July On Cardenas filed a Sixth Original allege Amended Petition to acts of agreements prior entered Two were to negligence occurring during in 1983 first, the trial of the second case. In the coverage. given APIE APIE’s was 1986, $2,000,000.00 1,May paid dated ICA opportunity to re-enter the lawsuit but de Cardenas, attorneys to Dr. Garcia and their Physicians clined to do so. American See full release and settlement of all Cardenas, 707, Ins. Exch. v. against arising claims out of the occur- (Tex.App. Antonio — San (the alleged rences in both “Re- lawsuits n.r.e.). Garcia, ref’d day On the same Dr. lease”). agreement, In the second entitled attorneys Cardenas and their entered into Agreement” and “Partial Settlement dated “Assignment an of Interest in of Cause 5, 1987, May APIE and Dr. APSG Agreement Designating Action and Assets $500,000.00 attorneys and his in ex- Garcia Execution,” (the Subject to “Non-Execu change for their to a six-month Agreement”) whereby tion Cardenas any judg- continuance and for a release of agreed only proceeds of the to look to the against them in of ment million. policies any for satisfaction of might 9, 1987, be entered and to the case On November went indemnify Dr. amount of jury Garcia The returned a verdict favor- trial. in excess of rendered on each of his theories of able Dr. Garcia amounts and actually collected from ICA (1) recovery. jury found APIE The was return, assigned APIE. Dr. Garcia if negligent attempts, any, in its to settle attorneys Cardenas and his all of his claims prior September Dr. Garcia’s case against and causes the carriers of action 1985,(2) coverage provide APIE failed to arising handling out of the of Cardenas’ Dr. after Cardenas’ Sixth Amended Garcia against claims him. (3) filed, Original Petition and APIE was of failed to defend Dr. Garcia at the trial Trial of Cardenas v. Garcia was jury case. The further Cardenas court which found that Dr. Garcia had com- (1) negli- each of found that these acts was negligence period mitted acts of within the (2) disregard gent, a heedless and reckless of time he was insured APIE and ICA. rights, practice an unfair of Dr. Garcia’s Judgment against rendered Dr. Garcia insurance, (4) in of an uncon- August in of the business the amount action, (5) $2,235,483.30, plus pre- costs scionable action or course of of court and damage proximate interest. cause of to Dr. post-judgment and party bring because of APIE’s failure to forward a 4. APIE filed a third action indemnity Inti, seeking Williams and point challenging and Patterson of error it. Consol. Gulf (Tex. contribution. An instructed verdict was entered 1983). Murphy, Inc. v. urging They in their behalf. have filed a brief point is well taken. that we cannot reverse the instructed verdict APIE, percent of caused knowingly. jury found while done damages. provide those defend and to failures to coverage “false, misleading decep- or were Dr. jury Garcia Finally, the found practices." acts tive or $2,235,000.00, damages had of sustained ICA, Regarding jury found that $250,000.00 exemplary damages prior failure to settle the $250,000.00 damages in “additional” should negligence, September 1985 constituted APIE, Dr. and that be assessed disregard of Dr. a heedless and reckless аttorney’s fees Garcia should be awarded practice unfair rights, Garcia’s an $820,500.00. insurance, knowingly a failure business judgment en- Dr. elected have Garcia done, action course of unconscionable jury findings that APIE and tered on the action, proximate these were and that the Insurance Code. APSG had violated to Dr. Garcia. causes The trial court entered found that Cardenas’ sixth also APSG, jointly severally, alleged separate petition and dis- amended $1,331,574.00 plus post-judg- the amount committed tinct acts of Dr. percent per ment at the rate of ten interest period during coverage, APIE’s annum. percent and that 16 found error by the court in Cardenas v. Garcia were point Garcia’s erroneously calculated by those acts and omis- the trial court proximately caused fol- He would calculate them as sions. It also found that ICA caused 84 lows: percent Dr. Garcia’s - by damages found

$2,235,000.00 actual as - v. signing present 552,452.10 Cardenas Garcia judgment interest + judgment - - 500,000.00 Agreement by in paid amount APIE Partial Settlement - $2,287,452.10 amount to be trebled5

3X -

$6,862,356.30 damages - 820,500.00 attorney’s by jury fees awarded +

$7,682,856.30 damages Dr. Garcia’s has total Agreement. APIE tlement APIE filed a that Dr. Garcia contends cross-points. un- entitled amount because paid derlying already been in judgment DAMAGES MEASURE OF CORRECT $2,000,- full, by paymеnt of way of ICA’s GARCIA V. IN in and APIE’s 000.00 for release both cases $500,000.00 partial set- dam payment argues for the actual suit, (2) only v. APIE ages in the second could be the Garda tlement in v. the excess of the and several- jointly the two are not amount of carriers applicable policy more than its over the ly liable APIE has Kelly, limits. Allstate Ins. Co. share, pay more proportionate (Tex.App. Tyler Partial Set- than would violate — (Vernon 16(b)(1) Supp.1990). longer provides § ANN. 21.21 for art. 5. The Insurance Code no 4, 1985, Instead, April trebling The was effective if the trier amendment of actual knowingly suit was tried. thus in effect when this of fact that the defendant com- was finds same, however, of, complained whether the actual court result is the mitted is re- the acts damages award, damages trebled or whether actual quired actual are in addition to the dam- damages plus awarded. ages, two times actual two times that TEX.INS.CODE amount. n.r.e.). ref’d In this amount case actual issue was required to be submitted because the ac- $2,235,- -Cardenas v. Garcia damages tual sustained the Alves un- undisputed applicable It is 483.30. der each cause of action asserted herein policy limits Cardenas v. Garcia were were fixed as a matter of law in the $500,000.00 $1,100,000.00 for ICA and amount of the excess rendered APIE, $1,600,000.00. totalling The amount against Kelly her in favor of over the damages jury in of actual found applicable policy poli- limits Allstate’s $2,235,000.00, ap APIE is Garcia v. cy. proximate amount asked for Dr. Gar Applying Kelly attorney. cia’s facts of our case we find that the correct Kelly, damages the court held: measure is: - $2,235,483.30 judg Amount final snt in Cardenas v. Garcia - -1,600,000.00 Applicable policy limil of APIE and ICA - 635,483.30 Measure of v. APIE $ The actual sustained ble has failed and that the will be tried, the insurer could avoid Garcia Garcia v. APIE were established simply by offering its the excess as a matter of law in the amount of the judgment. limits in is not the law. Such excess rendered him in applicable Cardenas v. Garcia over Howard v. State Farm Mut. Auto. Liab. Kelly, limits. 680 S.W.2d at 606. 70 Wis.2d 236 N.W.2d issue in the second suit was cau- (1975). Nor is it the law that an insur- sation, which was established company may ance sit back and allow an APIE. to be taken offer to the excess insured and then THE JUDGMENT WHETHER thereby escape liability for judgment and PAID BEEN HAS article 21.21. statutory under points of contention primary of the settle, One alleged the tort is failure to When liability APIE’s on appeal in this is whether company’s breach occurs at the insurance judgment has been v. APIE Garcia rejection the time of the of a reasonable it and discharged. points out that offer. v. Farmers Ins. settlement Critz $2,500,- paid Dr. already Garcia Cal.App.2d Cal.Rptr. ICA have Group, 230 the Release and the Par- by way (1964). allegation 000.00 of is When the argues defend, It that Agreement. complete is at tial Settlement failure to the tort judg- $2,500,000.00 signing is more than the of the by this least the time of judgment against its insured. in v. Garcia. adverse ment case, 21.21 has any liability under article is based on the as- argument APIE’s signing judg- of the attached the the offer of the sumption post-judgment a that suit, pay in the first and an offer ment in first suit will judgment amount of judgment not absolve the insurer that will liability of under discharge an insurer liability. article 21.21 of Insurance Code. AGREEMENT attempt to offer PARTIAL SETTLEMENT A belated a carrier of always absolve limits will not Dr. question There is no Garcia refusing settle. in prior negligence its $500,000.00 APIE in the Par received encourage the insurer Such a could Agreement; only dis tial Settlement in money insured’s of funds. Dr. gamble pute with the is the nature those payment for a saving some of its own. refers to it as a hope of Garcia part. in only This is true apparent gam- that the continuance. When it becomes Agreement plainly The Partial limits and in tort for Settlement Stowers $500,000.00 liability is also to The is a release of in both provides that Release any against language contract and tort. The statеs release APIE from liability in of ICA released “from all for in million. is Garcia v. APIE agreement: in for arising actions tort or contract and quote We any any possible of of charac- causes action Agreement The Partial Settlement be- ter ... in connection with occurrence [sic] by your us contain a release tween will made the basis of ...” Cardenas v. Gar- any you part judg- of of the clients and Therefore, cia and v. APIE. Garcia may be ment which rendered herein $2,000,000.00 in payment for a release against APIE and/or APSG in excess of only, only suit in the second suit $500,- the sum of 2.5 dollars. The party subject liability. ICA was a against payment 000.00 will be a credit so judgment, such addi- LIABILITY JOINT AND SEVERAL of payment tional APIE and/or APSG $2,000,- up exceeding will but argues is Dr. that APIE not enti- Garcia example, 000.00. For if the is percent tled an 84 reduction the dam- against $3,000,- APIE and/or argues APSG ages by the He jury. found 000.00, APIE/APSG will receive credit jointly severally APIE and ICA are $500,000.00, thereon for and be released it is a suit which is liable because payment for the sum additional negligence, on rather than a contract based $2,000,000.00. If the Stowers, action. 15 S.W.2d at See $1,000,000.00, will be re- APIE/APSG hand, APIE, argues on the other $500,000.00. payment leased for the obligations that its ICA’s are several If APIE and APSG successful independent on their contractual re based cаse, so is rendered words, sponsibilities. In other APIE was them, you your clients will responsible only for caused $500,000.00. retain nevertheless occurring acts its insured ****** policy; of its on or after the date effective $500,000.00 consideration above liability during period it had no such referred to is APIE and APSG coverage. It Traders ICA’s cites & Gen. partly order to effectuate a continu- Co., 140 Co. Tex. v. Hicks Rubber cause from its current ance this (1943), but reliance setting May 1987.... misplaced. Hicks a con on brought tract action Agreement clearly The Partial Settlement failure to its insurers based their discharges part from a dam- it. issue taken ages appeal now seeks on appeal to Dr. injury this is the done provides extent that it maximum insurers, by the and inactions of actions $2,000,000.00. However, against APIE of by done Dr. injury not the to Cardenas $500,000.00paid by is not a APIE full Garcia. In the latter case would have discharge liability. of payment to appropriate apportion to been ICA’S RELEASE amounts cover Cardenas based age provided by APIE and in ICA. judgment was entered Cardenas After present injury. does not involve in v. before trial v. cause of payment statutory It is action APIE, ICA, of its rather in consideration defend, negoti to ‍​​​​‌‌​​‌‌​​‌‌‌​​‌​‌​​​​‌‌​​‌​‌​‌‌‌​​​​​​‌​‌‌​​‌‍$2,000,000.00, by on APIE’s failure released based settle, findings jury’s Garcia in ate Garcia and Cardenas v. of article that failure constituted violations v. Garcia was Garcia v. APIE. Cardenas defend, negotiate to against 21.21. The failure malpractice Dr. Garcia. ICA suit companies subject insurance or to settle Garcia’s party was not a suit injury to him that judgment. constituted an indivisible execution on that Garcia v. pro apportioned on a rata basis. policy is a cannot be APIE suit contract for 32 liability joint

APIE’s There- e.g., and several. Freeman v. Schmidt Real Estate & fore, jury’s finding APIE is re- Inc., (8th Ins. Cir.1985) 755 F.2d 135 (apply sponsible percent 16 of Dr. Gar- ing law); White, Iowa Bendall v. 511 immaterial, cia’s and the trial (N.D.Ala.1981); F.Supp. 793 Childress v. reducing court erred in due Co., State Farm Mut. Auto. Ins. 97 Ill. him. 112, App.2d (1968); 239 N.E.2d 492 Stub v. Paul St. Fire & Marine Ins. blefield addition, Dr. Garcia elected to Co., 397, (1973). 267 Or. 517 P.2d 262 damages calculated have his under the findings that APIE had violated article These cases are decided on two theories. 21.21 of Insurance Code. There is no First, the agreements nonexecution made statutory right to contribution or indemnity legally obligated the insureds not from other defendants for violations of ar damages in policy limits, excess of there- ticle 21.21. Stewart Title Guar. Co. v. fore, “legally obligated pay” lan- 242, Sterling, 772 S.W.2d 248 (Tex.App.— guage policies in the insurance shields the 1989, granted). Houston writ [14th Dist.] Second, liability. insurers from Therefore, APIE is not entitled to a credit the non-execution protects the $2,000,000.00 payment for the made any liability insureds from ICA. creditors, the insureds have suffered no damage compensable by the insurers. THE

EFFECT OF NON-EXECUTION agree AGREEMENT We do not either that the obligated insured “legally is no longer argues APIE possibili- that there was no pay” damage. he has suffered ty judgment against of an excess Dr. Gar- A covenant not to execute is a, iperely Agree- cia because of the Non-Execution contract and not a release. Young Men’s provides ment which that Cardenas will Christian Ass’n Metro. Fort v. Worth only against proceeds execute Commercial 552 Standard policies and not Dr. Gar- 497, (Tex.Civ.App. 505 Worth cia’s other assets. contends that Dr. — Fort 1977), n.r.e., curiam, per writ 563 responsible” Garcia “could not be held ref'd (Tex.1978); S.W.2d 246 First Nat’l Indem. in Cardenas v. Gar- Mercado, 354, (Tex. 511 Co. v. 358 cia, required and APIE is not therefore 1974). Civ.App. Therefore, the un indemnify him. — Austin derlying tort remains and a breach Dallas, Whatley City cites injured party if the contract action lies 301, (Tex.App. — Dallas seeks to collect violation denied), held that a cove “legal the contract. The is still tortfeasor nant not to an enforce a obligated” ly injured party, individually prevent recovery will insurer is still bоund its contractual an insurer in excess of lim promise pay. The insured’s claim case, however, distinguishable. its. That against the insurer for breach contract findings There as Whatley, were no extinguished by is not the covenant. Globe here, negli there insurer acted Blomfield, Indem. Co. v. 115 Ariz. gently Whatley or in did not bad faith. Critz, (Ariz.App.1977); P.2d decide whether insurer is liable for dam 410; Farmer, Cal.Rptr. at Whittlesea v. ages in excess of limits for which the (1970). Nev. 469 P.2d insured is liable when the personally negligently insurer has or in bad acted Likewise, the covenant does not faith. Id. at n. 6. Critz, personal judgment. “blot out” the 410; Crowther, Cal.Rptr. 41 Bishop APIE also out-of-state cases at v. cites several 341, 344, holding agreement Ill.App.3d that re 101 57 Ill.Dec. 428 a nonexecution (1981). obligation pay lieves the to N.E.2d 1024 In this state the insured of an personal judgment, an excess and likewise relieves could affect Dr. Gar See, obligation pay. the insurer cia’s to of an to credit cloud title real estate. when APIE on confidence trust” v. Great Am. based Hernandez (Tex.1971). refusing defend the to its S.W.2d was clearly alleging the dam- pleading v. Garcia established of a acts face ages in case. at Kelly, during period coverage. this the insured the to execute did not 606. The covenant not Obviously assignment not made the was it rea- thosе So cannot eliminate prior wrongful acts. Al to the insurer’s sonably asserted a covenant which that though Agreement the was Non-Execution merely the judgment does not release but day on sixth amended entered the same the negates to specific limits execution assets filed, nothing in petition the was there is may the debtor suf- all first, the record to indicate which came fer. We hold that the Non-Execution Agreement. petition or the Non-Execution liability Agreement not does affect APIE’s clear, given however, It is that APIE was Dr. to Garcia. suit, it opportunity an to re-enter the been left refused. Once an insured has argues

APIE also that the Non-Execu- Agreement provision alone to defend himself it reasonable the tion violated policy prohibiting assignabili- that he covenant his own the insurance argues by as- ty the insured. It that and hold the costs of his defense to a signing policy his interest in the to Carde- if minimum Men's Young he can. Chris nas, policy’s Worth, the “no Garcia violated tian Ass’n Metro. Fort action” clause which reads as follows: 504; at First Indem. Co. v. Nat’l Mercado, Exchange agree

No shall lie the 511 S.W.2d at 358. Such action courts, unless, precedent upheld thereto as a condition ments have been the compliance public there full shall have they beеn hold we violative this nor policy, with all of the terms of no policy long so as collusion been until the the amount of insured’s obli- shown. gation finally shall been de- have by judgment against termined either the TO FAILURE SETTLE

insured after actual trial or written insured, argues claimant court erred in Exchange. entering on it based APIE insists there failure settle. Agreement The Non-Execution duty to no settle can be violation already after APIE had was entered party injured evidence without refusing policy by provide breached pol- insured’s have settled within the would coverage. An the doctor with complains that icy limits. It further compliance company may not insist given sepa- settle opportunity never given no it has action clause ‍​​​​‌‌​​‌‌​​‌‌‌​​‌​‌​​​​‌‌​​‌​‌​‌‌‌​​​​​​‌​‌‌​​‌‍after been rately prior to the trial Carde- ICA opportunity to or to defend suit authority It offers nas Garcia. agree to a settlement and refuses to do arguments other than its al- support these Products, either. Ins. Co. v. Parker Gulf legation that an element of (Tex.1973). Inc., We injured party of action is cause reasoning applies to the hold that the same settle limits of the within would policy’s assignability prohibition. insurer. APIE also that the as maintains that Cardenas public ample com There is evidence

signment policy. It violates attempted to with Dr. Garcia’s coun- assignment made settle plains that when “the prior wrongful to the time withdrew. alleged acts of the sel even prior Further, insurer, offers were obligation on the settlement within still existed an there 15, 1985, July in On Carde- part to defend its limits. of the insurer Crossland, obligation attorney to Mr. sured[,]” is a nas’ wrote and that “[t]his ICA, attorney provided by APIE and offer- confi personalized relationship based on $600,000.00, the amount ing settle for wonder what dence and trust....” We obligation him to constitute avail- “personalized represented to became of this 34 coverage.6 This letter was cess and that it therefore no

able longer duty Lyons, policy soon a letter from Mr. had the to followed settle within counsel, imploring personal limits. Dr. Garcia’s accept to The offer Crossland offer. already have held We that the Non-Exe- to, 24th APIE replied not and on the Agreement cution did not affect APIE’s coverage and withdrew denied liability to Dr. Nor it Garcia. did affect the suit. duty prepared to settle. Nor are to we

Then, pe- plaintiffs duty after sixth amended hold that APIE had no to make alleging negligence attempt year filed on the to for the tition was settle four part provided coverage of Dr. within term of it months to again coverage, prior Cardenas offered APIE’s to its withdrawal on the eve trial. Guin, he to supreme to settle for what believed be the As court said again Lyons coverage, urged duty limits its insurer’s to insured extends to the Again, to Crossland settle. result was range agency relationship, full in- same; no settlement was reached. cluding investigation, preparation for de- APIE, conjunction or in either alone lawsuit, with of the trial of fense the case and ICA, attempt nego- to to made settle or no attempts to reasonable settle. 723 S.W.2d tiate with Cardenas. attempt policy at A belated to offer always not limits will absolve carrier of if no offers Even such had been prior negligence refusing to settle. made, it is not the law an insurer’s encourage Such a could the insurer duty respond only to to an unconditional gamble money with insured’s offer to settle all claims the insured saving hope of some of its own. policy. within the limits of insurer apparent gám- it When becomes duty investigate, prepare has the for the case will ble has failed and be lawsuit, try the case and defense tried, the insurer could avoid Rang attempts settle. make reasonable simply by offering its policy Guin, County er Mut. Ins. v. Co. 723 judgment. limits in Such is not the law. (Tex.1987). duty 5.W.2d of an implies duty Howard, insurer to settle also 648. See also аt N.W.2d negotiate. Chancey v. New Amsterdam Critz, 41 Cal.Rptr. at 406. (Tex.Civ. 763, 765 Cos. 336 S.W.2d DTPA AND INSURANCE n.r.e.). If App. writ ref’d — Amarillo CODE VIOLATIONS an insurer an offer of settlement refuses argues engage it in a ordinary prudent APIE did appears that an when deceptive practice act or in the person in situation would unfair the insured’s v. Gar- settled, may held defense or settlement the insurer liable have Guin, 659; cia or with respect coverage to its at under Stowers, policy. It also contends that there is no support evidence or insufficient evidence duty argues it had no to settle regard findings to its failures to prior petition to the amended sixth settle, provide coverage. to defend or plaintiffs allege failed had before then point, considering a no evidence we of Dr. Garcia part on the within only coverage. Following the evidence favorable to the period of APIE’s consider City of the trier of fact. Davis filing petition, decision of the sixth amended Antonio, (Tex. San duty 752 S.W.2d APIE claims no to settle be- it had Alviar, Garza v. 1988); Agreement ex- cause Non-Execution (Tex.1965). An evidence argues that insufficient day. ecuted on the same point requires we assess all the evi with that Dr. Garcia was if ex- dence and for a new longer exposed possibility reverse $500,000.00. attorney on the APIE were had been told that the lim- limits 6. Cardenas’ $100,000.00 policy were its on the ICA paid Cardenas, is the challenged finding so had been to Dr. the weight attorneys. of the evi- great preponderance their unjust. manifestly re dence to as be Second, argues APIE that the court 662, 244 King’s Estate, 150 Tex. excluding in of its efforts erred evidence (1951). appeal in the on behalf Cardenas Garcia 21.21, ANN. art. TEX.INS.CODE that Dr. Garcia volun- Garcia and (Vernon Supp.1990) makes actionable appeal. § tarily that APIE com- dismissed TEX.BUS. & any violation of COM.CODE duty to plains that Dr. Garcia breached 1987) (Vernon including any ANN. 17.46 § cooperate. 17.46(a) listed under or practice whether not, previously held that its false, to have that is determined be mislead We right participate in rejection of to the ing deceptive. or Vail v. its Texas Farm Bu filing Co., following of Cardenas’ sixth 754 S.W.2d 135 trial reau Mut. Ins. petition, right to (Tex.1988). jury amended APIE waived the found that APIE appeal or provide coverage challenge judgment by writ failed to defend and false, Physicians error. Ins. Exch. these failures were mislead of American and that Cardenas, deceptive also ing practices. acts and The v. 717 S.W.2d We duty a nego APIE held that APIE had re-enter evidence showed that failed filing attempt upon of the sixth amended tiate or to to reach a sеttlement Having duty to during petition. Id. breached its provided the time it with Cardenas Garcia, on defend Dr. it cannot insist its coverage to Dr. Garcia. It also showed performance provisions following insured’s filing the sixth judgment ren petition, given op require appeal amended APIE was Fidelity dered. American & Cos. Co. v. portunity provide re-enter the case and (Tex.Civ. Williams, 396, 404 coverage and a defense to Dr. but ref’d). App.-Amarillo 1930, There so. The jury’s it refused do answers no error in the exclusion of this evi questions the DTPA Insurance Code was supported by are Fur dence. sufficient evidence.

ther, Vail, reasoning in under the these findings constitute a determination that APSG 17.46(a) APIE section violated argues that the court erred ren- Vail, A DTPA. 754 S.W.2d at 135. viola dering given the APSG tion of section 17.46 is a violation of article for such absence the record a basis 16(a) 21.21 section of the Insurance Code. is recovery. reciprocal a Lloyds Chitsey v. National organized Chapter under 19 of exchange (Tex.1987). recip- Code. The affairs of a the Insurance exchange, rocal behalf of its subscrib- OF EVIDENCE EXCLUSION ers, required performed and main- erred APIE asserts trial court attomey-in-fact. by duly appointed tained excluding categories of evidence. two (Vernon art. 19.02 TEX.INS.CODE ANN. First, argues the trial errone it court 1981). Management, is APS Facilities Inc. ously the Release and Partial Set excluded attomey-in-fact of APIE. APIE is Agreement. argues ‍​​​​‌‌​​‌‌​​‌‌‌​​‌​‌​​​​‌‌​​‌​‌​‌‌‌​​​​​​‌​‌‌​​‌‍It that their tlement Management managed by APS Facilities pay defense of deprived exclusion it subsidiary wholly which is owned underlying judgment. ment of the complains that no APSG. APIE issues amount of Kelly, Under concerning APSG. were submitted jury question; not a established he pleaded underlying Dr. Garcia in the cause. APSG, issued APIE and purchased v. APIE amount of agent, as and that APIE acted APSG’s been submitted to should even have their actions or inac- injured him jury. It was therefore immaterial whether both $2,000,000.00 undisputed tion. It was that APSG was aware that the management arm of APIE. It was also PUNITIVE DAMAGES undisputed adjustors employ- APIE asserts that the punitive award of ees who handled the claim Dr. Gar- damages against it is violative of the exces- employees cia were of APSG and were provisions sive fines of the United States CONST, operating scope within the course and of Constitutions, and Texas U.S. CONST, employment their group. with the service VIII, I, 13, amend. TEX. art. § shows it was issued “Ameri- process and the due clause the United CONST, Physicians Corporation” can as at- Service States Constitution. U.S. amend. tomey-in-fact Specifically, challenges V and for APIE. XIV. it multiple damages

award of provided by authority The matter of APIE’s article 21.21 of the Insurance Code. agent and thereby to act as APSG’s bind objection APIE made no component a APSG its actions was ele question jury which asked the to determine theory ment of Dr. Garcia’s recovery. the amount damages. of Dr. Garcia’s It Rodriguez v. Higginbotham-Bailey-Lo also failed to objec raise its constitutional 991, (Tex.Civ. gan part tion to the jury charge 1943, App. ref’d). Antonio By — San inquired knowingly whether APIE commit failing request jury question regarding ted complained the acts of. An affirmative agency APIE’s it jury waived a determina finding “knowingly” requires on the issue element, tion of that and the trial court was award, the trial court to in addition to the free to find that APIE either was or was found, damages actual two times that agent. Id.; not APSG’s 279. TEX.R.CIV.P. amount. 21.21 TEX.INS.CODE ANN. art. upon entry joint Based the court’s aof 16(b)(1)(Vernon Supp.1991). APIE has § judgment against APSG, several therefore any complaint waived that dou however, impliedly the court found that the bling damages is unconstitutional. agency relationship existed. TEX.R.CIV.P. 274. Yorfino (Tex.Civ. Ferguson, 552 CALCULATION OF DAMAGES writ); App. Paso TEX. — El finding sup R.CIV.P. 279. The deemed damages properly Dr. Garcia’s calcu- ported by the evidence. lated as follows: 635,483.30 damages Measure of as a matter of $ law: Amount of excess judgment applicable policy Kelly, over limits. 680 S.W.2d at 606. - 146,774.73 judgment August interest on excess from 10% Cardenas v. Garcia + signing present judgment 1985 to December - 782,258.03 damages. Total actual $ - 1,564,516.06 Double actual Ins.Code 21.21.

+ $2,346,774.09 - 820,500.00 Attorney’s fees awarded. +

$3,167,274.09 damages $3,167,274.09 these the trial court is modified that Dr. Garcia Because $2,500,000.00, damages recover from APIE and pay- are in APIE’s APSG excess $2,000,000.00. modified, the amount of As $500,000 ment of in the Partial Settlement is affirmed. Agreement applies as a credit payment by additional so that an PEEPLES, Justice, dissenting. $2,000,000.00 APIE in re- the amount part majority leases this Stowers1 case the forgotten of that amount. The that actual are to com- million. Plaintiffs lies to were that a suit pensate, and I dis- this court to render addi- harm to the insured alone. ask redress (1) $7,682,856.30. holdings damages amounting majority’s tional sent extin- not to execute did not the covenant enough, major- As if all this not were action, APIE guish cause of the Stowers to let ity affirms the trial court’s refusal percentage not entitled to either a either the $2.0 tell about co-defen- or dollar offset for a reduction payment or the not to covenant settlement, the covenant dant’s di- execute. Both kinds of evidence bore payment the co-defendant’s to execute and rectly upon the issue of how much from excluded properly million were $2.0 really sustained. But the Garcia had jury. kept and hidden evidence knowing kept jury from about court Garcia, insured, has no dam- plaintiff The blindfolded, Thus this evidence. Cardenas, orig- ages to recover because $2,235 damages, the ex- million awarded not to plaintiff, gave him a covenant inal underlying judgment, act amount case A Stowers lies execute on his assets. million) ($2.0 paid most of which had been repair to the insured alone—not harm and does not Garcia cash which not original plaintiff covenant —and or his assets. threaten the threat that the un- to execute removes posed to derlying judgment Garcia. I. FACTS Apart the covenant not to exe- malpractice case. The details eliminates the insured’s dam- cute—which opinion, majority found in the this case are compen- ages plaintiffs real have been —the highlight only I the salient facts that and original judgment, sated for most of the pertain to the issues herein. Cardenas In recovery. should reduce their

which brought malpractice suit Dr. Gar- a underlying malpractice plaintiffs case the in 1984. Because Garcia’s treatment cia $2,235 million in were awarded one spanned more than Cardenas they After filed their case but Stowers coverage pеriod, had insurance with Garcia (ICA) before it was tried a co-defendant a and APIE —which had two carriers —ICA paid The trial court them million. $2.0 liability coverage of million. $1.6 combined them another Stowers case awarded attorney hired Ross The two carriers $1,331 majority million. The now holds Shortly be- to defend Garcia. Crossland wrong, and figure that the trial court’s was 24, July 1985—APIE an- fore trial —on an addi- plaintiffs that the are entitled to pleading did that Cardenas’ live nounced $1,331 tional million million. instead $2.0 during period allege negligence not plaintiffs agreed If the to a had not coverage, it would APIE had and that cap, says majority, they be enti- would longer defend him. Crossland $3,167 therefore no beyond the tled to million and above represent Cardenas Garcia.2 already continued they re- million that have $2.0 negligence alleged $5,167 promptly amended and recovery total ceived—a coverage, APIE never- during APIE’s but though in the under- even the trier of fact reenter the defense.3 their theless did not lying malpractice found that malpractice Fifth case Plaintiff’s Indem. 3.In 1. G.A.Stowers Furniture Co. v. American alleged (Tex.Comm’n Original Dr. Gar- App.1929, Petition hold- Amended ing approved). Cardenas from "about October cia treated Mr. April up When until about 1982." ground that its defense on thе APIE withdrew majority wrong suggest in- 2. allege petition not an act of did sured, Garcia, unrepre- was left undefended and (which began coverage period on during its throughout represented He sented at trial. was 8, 1983), plaintiffs January filed their Sixth Crossland, initially by who was Ross hired Petition, alleged Original which coverage, Amended When APIE withdrew ICA and APIE. from "about treated Mr. Cardenas representing Dr. Garcia kept he to whom Crossland February up September March, until about loyalty. Employers See Cos. owed his undivided (Tex.1973). Tilley, 1983.” 558-59 Co. v. $1,331 significant events dered million. Garcia July On 1985 two assigned rights all his occurred: seeks to have amount increased to companies $7,682 million, of his insurance both and seeks to have it Cardenas, APIE) (ICA eliminated or reduced. against any not to execute covenanted Thus, malpractice in the case Garcia suf- assets, exception with of his Garcia’s $2,235 million, fered a policies,4 parties coverage. million in excess of his $.635 was proceeded jury and to trial of the waived a million. The Cardenas has been $2.0 case. The case malpractice settled Cardenas, judgment, holder of coverage the combined insurance within against any of his agreed never to execute million, and the trial resulted $1.6 holds that Carde- majority assets. Yet the 30, 1985) (signed August assignment, asserting Garcia’s (by nas against Garcia for million. mil- rights) entitled to an additional 8, 1985, August case. On lion. brought suit a Stowers ICA that included claims under THE II. THE EFFECT OF COVENANT of the insur- the DTPA and article 21.21 EXECUTE NOT TO settled ance code. June 1986 ICA not to execute eliminate Did the covenant April-May In Cardenas for million. $2.0 I damages the insured under Stowers? $500,000 in re- 1987 APIE Cardenas majority does not think that it did. The continuance, agree- an turn for a six-month grips principle a fundamental come to plaintiffs oppose a ment that would litigation: the cause action of Stowers sought by any separate or of severance judgment malpractice lies not attorneys had of the defense who been fund Repair harm that the excess but to sued, liability cap of million in and a Of course causes the insured. judgment jury The case. answered up satisfying recovery does end a Stowers liability and as- favor issues the in- underlying judgment because $2,235 The damages at million. sessed money original plain- pays the sured of Garcia’s jury found that 16% action But the reason the Stowers coverage tiff. during APIE’s and occurred 84% the harm that the insured ren- is to eliminate during coverage. The court ICA’s foregoing entitled, "Assignment in consideration of the of In- For and 4. The instrument proceeds Agreement Desig- promise to the to look Cause of Action and terest in perti- liability policies above in Subject described nating to Execution.” Its insurance Assets any judgment these Plaintiffs provisions as follows: satisfaction of nent [Garcia, against may Garcia] entitled to CARDENAS, Individually and ARAMINTA transfers, sells, assigns, sets over and delivers OF GUSTAVO of the ESTATE as Guardian OFFICES OF PAT and LAW to [Cardenas] LAW OFFICES [Cardenas] CARDENAS executors, MALONEY,P.C., their administra- MALONEY, hereby agree and P.C. OF PAT benefit, tors, assigns, for their use judgment against DR. should covenant money now due any sum or sums of and all be obtained [Garcia] RAYMONDA. GARCIA demands, claims, owing and all or [Garcia] malprac- cause [the in the above-referenced of action of whatsoever and cause or causes case], levy they or issue execu- shall not tice tion, Defendant, nature, [Garcia], kind and which process, any in- garnishment or other has, may against have now or has had or against any cluding sets, as- abstract of API, any Attorneys or or other or ICA Defense any description, or property, of kind or them, any persons, each and person or exception sole with the [Garcia] of, arising severally, or jointly out or whether policies liability Defendant, [Garcia], which the or loss, any injury or sustained thereunder as insured him, arising, causes of action or cause or may API. with ICA hаve and/or to, of, relating growing or connected out handling of the claims of [Cardenas] with the agreed will [Cardenas] It is further against [Garcia]. indemnify extent of [Garcia] 29, 1985, instrument, signed July The dated might be rendered amount of Cardenas, Lyons Clem [his Mrs. against ex- [Garcia] in favor [Cardenas] attorney], D. Jones Law [for Thomas individual actually collected from the cess of what P.C.], Maloney, A. and James Offices of Pat insurance carrier. [attorney ad litem]. Kosub judg suffers of his insurer’s failure him caused excess (Stowers settle the case. In this case the covenant ment. In Stowers the insured $2,235 not to execute has removed Company) Furniture had a $5000 of harm to Garcia. worth policy. A tort suit it could have protects and his assets $4000, been settled for but the carrier malpractice judgment. would not settle the case for that amount. $14,000. returned a verdict for circumstances I hold Under these would (Stowers) said, “My in effect the cannot that Garcia recover the excess of company surance could have settled the malpractice judgment over his insur limits, my policy me within coverage. plaintiff original ance negligent and did not I but was settle. case cannot collect the excess injured by am directly from the insured's insurer. What Dallas, 301, 307, against me, I ley City paid. My 758 S.W.2d which have insur (Tex.App. 1988, denied); writ company compensate ance should me for — Dallas Co., Allstate Ins. Becker v. 678 S.W.2d the excess I have suffered.” 561, (Tex.App. appeals The commission of held that [14th Dist.] — Houston 1984, 'd, n.r.e.); ref writ v. All insured had a cause action Samford Co., 84, (Tex. state Ins. 529 S.W.2d 85-87 company its insurance for the dam Civ.App. Corpus Christi ref’d ages judgment. caused the excess — n.r.e.); Superior Cook v. Ins. 476 S.W.2d at 546-48.5 (Tex.Civ.App 364-65 . —Beau years supreme Six later the court in Uni- n.r.e.). mont writ ref’d In other Culberson, versal Automobile Co. v. words, right had no to collect the (1935), 126 Tex. part malpractice judgment adopted “prepayment” rule and said directly from APIE or ICA. She could judgment the insured had to the before judgment up the policy collect to the limits company. it could collect from its insurance million from the insurers. But she In effect the court said that the insured right had no to sue APIE or for ICA the injury paid does not suffer until it has all excess. she Otherwise would have sued part judgment. of the directly and would not have bothered get assignment from If Garcia. Gar Co., In Hernandez v. Am. Ins. ‍​​​​‌‌​​‌‌​​‌‌‌​​‌​‌​​​​‌‌​​‌​‌​‌‌‌​​​​​​‌​‌‌​​‌‍464 Great assign cia had refused to her his Stowers (Tex.1971), supreme 91 5.W.2d the court rights companies, from his insurance she Culberson, rejected prepay- overruled the collecting would have been limited to the rule, ment and hеld that the mere existence judgment ($.635 million) against judgment enough trig- of the excess is nonexempt assets. ger right bring the But Stowers suit. principle the court did not eliminate the only person bring

The who can suit suit the Stowers exists because the company the insurance and collect (the judgment Garcia, insured suffers Hernandez the excess because insured), court, said the suffered an excess the Stowers suit lies to redress the harm $56,636 judgment judgment in the amount of causes him. It does not because underlying judgment. lie to A of the fund the of Great American.6 Id. Stowers suit is a suit the insured for at 94. The court continued: 1990, following (Tex.App. recent have made the n. 2 Two cases S.W.2d 566 —Dallas denied). added): (emphasis statement in dictum "In reading The Stowers the court allowed a briefest of Stowers shows that [citation omitted] utterly wrong. this statement is In the Stowers third-party claimant to sue the insur- tortfeasor's Bichon, litigation original plaintiff, the original named portion judgment company ance for the of a defendant, sued the the G.A. Stowers excess of the limits when the insurance Stowers, Company. Furniture the insured tort- company unreasonably a claim failed to settle feasor, judgment paid the excess and sued its within the tortfeasor’s limits.” See Bow- carrier, Indemnity Company. American Inc., Agency, man v. Charter General 799 S.W.2d (Tex.App. Corpus $81,636 1 underlying judgment 380-81 n. Christi 6. The had — writ); appeal. Caserotti v. State Farm Ins. been affirmed on See v. Hernandez added). (emphasis at 301 The judgment injures Hernandez while it 756 S.W.2d impact the court then discussed economic unpaid. His credit is affected. remains judgment quoted passage the non- A lien to his land. His attaches quoted that is above. Hernandez constantly subject to exempt property is sale. He is execution and forced prin- sudden These some bedrock cases establish if it is from the harm ciples: (1) gist entitled to relief Stowers the fault of the tortfeasor. damage to the insured caused occurs, judgment; damage regard- quoted this supreme court Id. at 94. The less whether the insured Jeter, v. passage approval Montfort judgment, property because his is encum- (Tex.1978), Street subject to execu- constantly bered and is Appeals, 756 S.W.2d Court Second tion, lien, affected; etc. and his credit is (Tex.1988). original plaintiff legal has no supreme court said In Hernandez suit interest the Stowers repair the that “the action lies to Stowers repair lies to to the cause of action The tort of harm to the insured. insured, for the not to fund the mismanaging defense of the insurer in the es- original plaintiff. other words to the insured in the first casе harmful is the harm to the sence of a Stowers suit (empha- at 94 alone." insured property and credit caused insured’s added). Hernandez is hold that sis “We the excess will be threat unpaid entitled to sue for relief as individually. collected from the insured former as well as portion of the property is If the threat to the insured’s paid [by which has been execute, not to removed a covenant Id. Hernandez].” nothing left of the suit there is Stowers opinion recent supreme court’s judgment. That recover amount Appeals, 756 Court Street v. Second Whatley: the court held in is what (Tex.1988), reaffirms Hernan- policy limits more than the To recover of a principle that the essence dez insurer, judgment creditor is the harm to the insured suit Stowers injury. insured’s must assert the If and credit. to his assets and the threat cannot be enforced bring a the insured can held that Street insured, injury no such exists. judgment as on the excess action assign to his cred- may and the trial court as it becomes final soon against his insurer any claim he has itor it, unless the insurer jurisdiction award, over loses payment of the excess but for that the insurance supersedes only it. The fact is actionable assigned claim such judgment the does company appealing remains liable long as as the insured Thе court rea- the suit. damages. not stall Stowers the excess po- judgment unsuperseded the soned that added). (emphasis The at 310 758 S.W.2d though it is even collection ses threat thing in Fore of said the same Fifth Circuit being appealed: Home In County Mut. Ins. Co. v. most can, (5th Cir.1990): superseded Co., is not 757 judgment A 897 F.2d dem. regardless negligent course, upon only refusal must be not be executed “[T]here of of subsequent TEX.R.APP.P. the insurer but also appellate status. to settle The Fifth Circuit Thus, remains at the insured.” 40(a)(5). insured harm to the statement, if court’s readily apparent agreed Whatley the injustice is with The risk. enforced judgment cannot be exposed “If the can leave the the insurer exists,” insured, injury during against no such judgment to collection of injury to the that there must be and held appeal.... of an pendency original plain when the Baucum, (Tex.Civ.App.—San ther reduced to 498 344 S.W.2d An n.r.e.). parcel of limits on a Hernandez’s ref'd tiff levied execution nio were its, $25,000. lim The insurer v. Great Am. Ins. land. See Hernandez judg leaving for an excess Hernandez liable $56,636. judgment had been fur ment collected from the insurer even guilty the insurer is can be insured even when A negligence. 758 n. 4. in effect though bad faith or Id. at has been student commentator summarized the law longer the in- released and no threatens way: same credit. sured’s assеts and Texas Su- should be noted that the [I]t insured, present In the case the Dr. Gar- need dispose of the preme Court did not cia, agreement from has obtained it injury in suit when abol- a Stowers Cardenas, original plaintiff, that she will prepayment rule Hernan- ished the [in satisfy underlying judg- not seek to enlarged the merely The court dez]. ment his assets and that she will include the adverse scope injury only policies for satis- look to his insurance upon has unpaid effects an faction. Under these circumstances there Consequently, an judgment debtor. insured, Dr. absolutely no harm to the the insured that relieves of Garcia, possibility of collec- the sense of judg- previous his may tion.7 There be harm in the sense destroy Stow- probably ment would credit, possible damage liens and but the essential ers cause action since clearly it cannot be said that Dr. Garcia’s longer injury to the insured would “non-exempt property constantly subject under the terms the release. exist to sudden execution and forced sale.” Her- Comment, An Insurer’s Failure Settle: nandez, And, 464 S.W.2d at 94. to use Doctrine, Standing the Stowers Under terminology, it cannot said that Street’s Act, Deceptive Practices Texas Trade upon,” or can “be executed Code, 34 Article 21.21 the Insurance exposed the insured “leave[s] (1982) (em- BAYLOR L.REV. n. Street, collection.” 756 S.W.2d at added). phasis longer quarrel any Since Cardenas no case, Whatley was a failure-to-defend Garcia, I am not sure want who would six, and in footnote the court said that it judgment, anyone record and if did opinion application of expressed no on the it, certainly get a de- record Garcia could principle negligence the harm a case claratory judgment that his assets are free at 310. I am not bad faith. judg- of it. But in event the Stowers exactly sure what that statement means us is not on lien and ment before based because Street and Hernandez were Stow- injury-to-credit It is based cases, ers not failure-to-defend malpractice judgment,8 the amount of cases, quoted passage from What- assignment and which because of the cove- ley firmly cites and rests on it. Hernandez nant not to execute does not threaten Gar- The cause of action for an excess longer. property any cia or belongs to the insured in failure-to- both exclusively majority relies on All- cases, defend cases and failure-to-settle Kelly, Ins. Co. v. state and in each kind of case the cause of action n.r.e.), (Tex.App. Tyler writ ref’d repair lies harm or — that as a matter of law which said Whatley certainly insured. did not hold damages equal the excess amount insured’s that in cases the excess jury argu- in majority argument counsel made this clear makes the curious that 8. Plaintiffs 7. The added): (emphasis ment to execute does not because the covenant not underlying malpractice judgment, blot out the first was for determination You see the agree damages Garcia. I that that still judgment. This trial is of the verdict on the theory possibility is a that Cardenas judgment.... in there funding This actual the of for agreement try collect breach the and to would same amount as issue should be the levying individually quar- his as- judgment, roughly Garcia from is two and a the that theory, prejudgment not tried on that sets. But this case was a interest that ter million with attorney arguing imagine any Chapa Judge You see this is issue— and it is hard to found. present jury you that his the actual dam- to a in the Stowers case see that this is (Garcia) possibility against damaged ages that and a the that is Dr. client inflicted (Cardenas) assigned rights might over to Mr. breach the Dr. Garcia those his former client appropriate answer. pursue present So that is the and Cardenas. covenant not to execute point five million. Two two three client’s assets. I Citing For reasons would hold that the underlying judgment. Kelly, these of the damages majority says the that because the harm covenant not to execute removed law, matter “the were established as a therefore essential ele- Garcia and in the suit was causa- only issue second ment the cause of action—dam- Stowers raise answer Kelly But did not tion.” age missing. The trial the insured—is original questions here. the discussed granted APIE’s motion court should have plaintiff Kelly in not entered a cove- had ground. judgment, this which asserted execute,9 as Cardenas did nant not to cannot Kelly stand this case. Therefore III. REDUCTION are fixed as a PERCENTAGE notion

for the underly- of law the amount matter OF LIABILITY protect- when the insured ing judgment question This raises the case also by negotiating a not his assets covenant ed defen- of offset or contribution a what kind to execute. gets settled dant a co-defendant has when cites several cases hold that 21.21 of plaintiff recovers under § does not a not execute extin covenant majority holds the Insurance Code. The See, guish underlying judgment. e.g. the (APIE) gets non-settling defendant Ass’n v. Young Men’s Christian Commer percentage nor reduc- neither dollar offset Co., 552 S.W.2d 497 cial Standard holding. disagree I tion. with that 1977), (Tex.Civ.App. Worth — Fort on find- malpractice judgment rested curiam, per 563 S.W.2d 246 n.r.e. refd negli- (Tex.1978); ings Garcia had committed Co. that Dr. First Nat’l Indem. v. Mer (Tex.Civ.App.— he had cado, gence period of time when over ust writ). coverage But Y.M.C.A.and Mer insurance with two successive they and did not cases cado were Stowers had and APIE. Dr. Garcia carriers—ICA policy judgments not involve until from treated Mr. Cardenas late limits; they held that when insured lia- early provided Dr. Garcia’s 1983. ICA he not to execute enters into covenant begin- coverage bility insurance terms thereby does not violate ning January APIE had through 1983. words, by policy. In enter insurance other coverage January year, beginning one plain ing to execute the covenant not 8, 1983. right to give up the collect tiff does not found that jury In trial the the Stowers company up judgment from dur- injuries occurred 84% stated, I have As limits. during APIE’s coverage and ing ICA’s 16% does affect not to execute covenant coverage. separate answers In two judgment up right to collect the Cardenas’s caused 16% found limits, directly January of Cardenas’ after insurers, though signed she even coverage), (the beginning APIE’s the covenant not to execute. original plaintiff Kelly and [the Kelly had been after the excess satisfy rendered, attempt never original and will plaintiff Allstate’s creditor] against levy against judgment by agreed Allstate of execution join forces insured recovery judg- expenses split on stated the excess Alves' [Allstate’s agreement printed in full at 680 properties. Their debtor] terms. ment say rejected It one word about does not 610. The court then both 680 S.W.2d at assets. the insured's arguments: non-execution lack merit. Both contentions Concerning agreement, two this Allstate made provi- unambiguous. its simple Under First, arguments. it contended that since sion, assigned cause of her two-thirds Alves recover one-third of Stowers insured would her Allstate to ] Allstate, action [under the insured was creditor, Kelly, agreement creditor and this extin- extent own expenses. had This she a certain share liability. guished Allstate’s one-third of right to do. second contention summarized Allstate’s court facts, govern Kelly In cannot Id. view of these as follows: case, tightly express and involves an this which the the terms of Allstate further contends not to necessary implication covenant execute. give written a rise to

43 Co., 665 v. Cessna Duncan In (2) of Gar- that APIE had caused and 16% Aircraft (Tex.1984), supreme the damages: cia’s injuries notion that rejected court the 33. ISSUE NO. SPECIAL estab- that courts cannot and “indivisible” the dam- any, if percentage, What comparative causation percentage lish in Cardenas v. ages found the Court Duncan, As I read product liability cases. by the proximately caused Garcia were statute, the of a contribution the absence on or of Dr. Garcia acts or omissions (or one-recovery enforce the courts will after 1/8/83? it one-satisfaction) they replace rule unless percentage stating the Answer system comparative court-created with a found. “in mul- responsibility. Duncan held We, Jury, the Answer: % grounds of tiple defendant cases which NO. 36. ISSUE SPECIAL negligence are estab- recovery other than by you party found to have For each liability lished, non-settling defendants’ damage to Dr. Garcia find the caused recovery shall re- plaintiff’s and by: percentage caused percent share of causation duced ICA % settling by the assigned to the tortfeasor trier of fact.” Id. at % scheme comparative causation Duncan’s 100% [Total] cases, liability but on the applies product these says that under two multi-party issue of settlements $357,600, findings only it owes reasoning applies one-recovery principle its (the of Garcia’s 16% to this case. The Duncan court said $2,235 million), it against him for and that adopting comparative causa- it was liability paid more than its share of cases, liability no tion in strict would $500,000. Why doesn’t whеn it one-recovery rule of longer follow $500,000 majority simply hold Univ., Baylor v. 126 Tex. Bradshaw paid in Instead it was not settlement? (1935). had re- The court S.W.2d 703 a holds that APIE is not entitled to either v. rule in T.L. James & Co. affirmed that liability reduction of or to a dollar 84% Statham, 558 S.W.2d (Tex.1977) paid by ICA. credit for the million $2.0 (“We rule a claimant adhere to the ... that words, majority’s under the reason- other more entitled to recover in no event will be $2,235 ing, plaintiff injury with an required for full satisfac- than the amount from one million could recover million $2.0 McMillen v. damages”), of his tion (who responsible), and defendant was 84% 193, 196-97 Klingensmith, 467 S.W.2d then an additional million10 Duncan, recover (same). (Tex.1971) According to respon- from a defendant that is 16% in the one-recovery rule had its roots majority gives for two reasons sible! that “the courts could outmoded idea settle, holding: this ICA’s failure Injuries allocating liability. conceive of settle, APIE’s failure to defend and “con- Duncan considered ‍​​​​‌‌​​‌‌​​‌‌‌​​‌​‌​​​​‌‌​​‌​‌​‌‌‌​​​​​​‌​‌‌​​‌‍indivisible....” were injury stituted an indivisible Gar- Cessna, way That [Dr. apportioned that cannot be pro court, on a longer applies. thinking, said the no cia] statutory “There is basis,” comparative causation we system rata “The indemnity right between adopt contribution allows allocation injury itself is of article parties, other defendants 21.21_ violations even when Id. The court Therefore, then held that APIE is not entitled indivisible.” prevent our $2,000,000.00payment recovery rule does not to a credit “the one plain- added). system that reduces (emphasis adopting I would by ICA” made non-settling defen- recovery is entitled to one or tiff’s hold that APIE of causa- liability by percentage dants’ other. liability. ceiling on fully agreed plaintiffs to a do not benefit 10. In this case they majority’s legal rule because settle, assigned alleged tion to with whom When the tort is failure to tortfeasor the hereby company’s breach occurs plaintiff adopt has settled. a We rejection at the time of the of a reason- Accordingly, percent to the credit rule.... offer_ able settlement When the alle- opinion, it extent conflicts with this we defend, gation is failure to tort is the Baylor v. overrule Bradshaw University.” sign- time complete at least the of the Id. ing judgment against the its adverse Duncan only overruled Bradshaw any case, liability insured. under arti- the newly- extent conflicted with that it cle the of the 21.21 has attached time adopted system comparative causation suit, signing judgment the first words, In other product liability cases. pay judgment and offer to that will an still one-recovery rule exists Bradshaw’s not the of article 21.21 absolve insurеr replaced by in cases where it has not been liability. comparative a causation scheme. The ma- Payment These statements too broad. pick its and allow APIE jority must take judgment plus of the entire costs and attor- percentage reduction or dollar off- either neys in- every bit the fees removes comparative If is no causation set. there harm, sured’s and resolve the case. should cases, Stowers in multi-defendant then the majority plaintiff, Yet the allow the would still and APIE is one-recovery applies rule in- acting assignment under an liability by its entitled to reduce the sured, reject pay entire offer the plaintiffs. already by the amount received judgment and related costs and at- excess comparative responsibility is If there to be torney’s insurer statu- fees sue the cases, in multi-defendant Stowers then tory penalties. agree I and common-law is a that APIE entitled to reflects pay post-trial that the a offer findings. Under jury’s the 84%-16% automatically limits should resolve approach, APIE one-recovery, dollar-credit Stowers case. But I think that an offer $235,000 ($2,235 owe million minus would judgment plus costs the entire excess pay settlement); payment million fees should resolve the Stow- attorney $2.0 approach, ers casе because it underlying causation erases the percentage under (16 that that percent judgment completely, and is all figure would be complain about. It is non- the insured can $2,235 million). approach gives suggest my sense to Title Stewart Guar. majority cites in- to settle. The the insurer incentive (Tex. Sterling, Co. pays is if it it surer’s incentive settles App. [14th Dist.] — Houston less; if perhaps negligently it or limits held granted), but that case settle, pays plus fails it its limits statutory right “there is no to contribution excess. indemnity from other defendants for majority’s puzzled I am another (em 21.21.” Id. at violations of article says pay- holdings. majority ICA’s added). is enough, True but neither phasis a payment for ment of million was $2.0 statutory prohibition, there there only. ICA in the suit release in this field. Bradshaw applies fore still parties Does mean if recite this Duncan-style create a courts Until it payment the second suit would comparative system, which contribution underlying not reduce unwilling do, obviously we majority is (and presumably would the insured one-recovery rule. apply must Bradshaw's evidence)? if But not even be admissible majority says that once nothing to do payment the entire excess signed an offer the cov- underlying judgment, with the the insurer of judgment will not relieve not to execute does not erase enant Apparently article 21.21. assets, under threat to Garcia’s one wonders analysis the insurer majority’s permit under Carde- majority whether the would it penalties if does not article 21.21 nas Garcia. risks to collect happen, no one let that Obviously would pay the excess before any legal reason not aware of but I am signed. Says majority, underly not, by the excess amount of the why majority if the is correct that law $2,235 full ing judgment. there is still a make that state Kelly does notwithstanding the million ment, where, it cannot true in con but million the covenant payment of $2.0 Kelly, there is not to trast to a covenant not to execute. partial payment judg execute and a on the Kelly ment a co-defendant. was cited majority ways The cannot have both point in holding is no but not followed on this that in cases there William one-recovery comparative Mercer, Woods, causation and M. Inc. v. S.W.2d holding squared with rule. That cannot be 1986), (Tex.App. — Texarkana affirmed errs majority The also Duncan v. Cessna. part part on other and reversed in making unjustified statements broad and (Tex.1988). In grounds, 769 entire ex- that the insurer cannot appeals reasoned that Mercer the court case, cess and end the and that underlying judgment is some evidence applies only to the payment million $2.0 damages it does not establish dam but malpractice to the Stowers case and not ages at as a matter law. 717 S.W.2d judgment. 398-401. The court cited v. Jet Moritfort er, (Tex.1978), which FROM EVIDENCE OF IV. EXCLUSION existing “is said that EXECUTE AND COVENANT NOT TO damages.” some of actual evidence RECEIPT OF MILLION $2.0 wrong if I about the effect of Even am damages in Perhaps still suffers the covenant not to execute on the Stowers anguish judg- of mental from a the form right percentage APIE’s case and contri- ment that could never threaten his assets offset, or dollar I find it bution incredible still exists on the but which nevertheless that the covenant not to execute ex- was as- But the fact remains that his books. along cluded all refer- from evidence with sets are not threatened payment by ence to the million ICA.11 $2.0 anguish and no evidence of mental was We must remember that in the Stowers presented. Certainly any threat from the plaintiff, saying, suit the reduced injured by malpractice judgment malpractice judgment “I am this compensation I from payment. me and want should at million $2.0 contention, Concerning APIE.” not told about the covenant least have been sought really did show that Garcia payment, million $2.0 to execute damages suffer the amount mal- weight jury thought ap- whatever ($2,235 million) practice judgment judg- propriatе. Because verdict it could never cause that much obviously on the ment us are based before assets, having been million of it $2.0 theory causes Garcia paid. I that the court would therefore hold $2,235 taking without million excluding erred in the cove- evidence not to execute into account the covenant nant not and the fact execute I at payment, million would and the $2.0 mil- compensated Cardenas had $2.0 been for a new the least reverse and remand lion, certainly both of were relevant trial. much jury’s to the decision about how Gar- really injured. cia had been majority Allstate v. reasons that

Kelly, 680 held that S.W.2d at

insured’s are fixed as a matter of clearly a agree Stowers case—it was not the court million in the payment 11. I do not APIE that underlying judgment. excluding on the of its abused its discretion in payment evidence plaintiffs. payment by In view ICA is another $2.0 payment payment six- of the consideration for that evidence of that matter. APIE offered —a continuance, pay- separately month evidence of its own $500,000. plaintiffs oppose separate or sever- The court should have ad- would ment of attorneys payment sought by $2.0 of ICA’s mil- ance of the defense mitted evidence sued, underlying judgment. liability cap on the had been and a lion who

Case Details

Case Name: Garcia v. American Physicians Insurance Exchange

Court Name: Court of Appeals of Texas

Date Published: Apr 10, 1991

Citation: 812 S.W.2d 25

Docket Number: 04-88-00150-CV

Court Abbreviation: Tex. App.