*1 692 result, York, violation. As v. Crane & constitutional
tire record. See Simon
Co., Inc.,
793,
court
discretion
abused its
when
Rigging
739 S.W.2d
(Tex.1987).
challenging
challenged
the tri-
orders. Because
party
The
entered
currently
the State baseball tournament
al court’s decision must establish
adequate
progress,
has no
rem-
permit
law
the trial court
the UIL
facts and
Johnson,
Walker,
edy at law.
that the UIL district executive committee “previously
had ruled” that the Robstown eligible. player question
baseball
Thus, when apply 27 did not Section deter-
UIL State Executive Committee penalty playing Robstown
mined ineligible player. CATE, KECK, GRANT MAHIN & COOK, Plessala, A. Robert event, Indepen In in Eanes Petitioners, we held Logue, District v. dent School v. trial court its discretion abused interfering concerning with UIL decision FIRE INSUR- NATIONAL UNION games. 712 playoff school baseball high OF ANCE PITTS- COMPANY (Tex.1986). so, doing S.W.2d PA, Respondent, BURGH, no constitu we concluded there was v. partici tional violation because Company of North is not pate in activities extracurricular 742; see America, Respondent. right. Id. at fundamental Dist. v. Sta Indep. Branch Sch. Spring No. 98-0034. (Tex.1985). mos, And 695 S.W.2d ISD, Texas. Supreme judicial Court recognized in Eanes as we as these often intervention matters such Argued Jan. good. harm than 712 S.W.2d at does more 25, 2000. May Decided 742; Bastrop Board Trustees see also v. Toungate, Dist. Indep. Sch. (Tex.1997); v. Barber Colorado Dist., 447, 451 Indep. Sch.
(Tex.1995). case, present
In the the Rob- parents only pleaded their
stown immediate and children will suffer
eligible participate if they harm do not
irreparable baseball tournament. This the State is not to demonstrate a
allegation enough *3 Renfroe, Wilde, Trade Key J.
William Houston, Rank, Petition- E. Deborah ers. Austin, H. Rob- Iris Kurhajec,
Curtis J. Jewell, Houston, B. inson, D. Robert Kevin Stratton, Summers, Austin, Hous- Mark C. ton, Respondent. (INA), Company
Chief
PHILLIPS delivered the
North America
Justice
carrier,
Na-
opinion of the Court which Justice
excess insurance
Granada’s
BAKER,
ENOCH,
OWEN,
Company
Justice
Justice
tional
Fire Insurance
Union
HANKINSON,
(National).
ABBOTT,
primary
Pa.
Pittsburgh,
Justice
Justice
and Justice
period provided
Justice O’NEILL
the relevant
policy for
joined.
per
GONZALES
limit
million
occurrence. Nation-
of $1
policy provided
al’s commercial umbrella
Following
third-par-
of a
settlement
coverage.
additional million
car-
ty
excess insurance
rier,
equitable subrogee
as the insured’s
to defend
under a
agreed
Granada
sued
insurance carrier and
coverage.
to contest
reservation
*4
attorneys
primary
the
insurer hired to de- Granada,
policy
which under the INA
had
al-
fend the insured.
excess carrier
counsel,
right
the
select its own defense
leged that it
the
had been forced to settle
keep
chose to
KMC. INA therefore for-
third-party claim too much
the
for
because
mally engaged KMC to defend Granada
attorneys
primary
and
carrier had mishan-
litigation,
the Wolf Point
with Grant Cook
dled the insured’s defense. We consider
assuming primary
A.
and Robert
Plessala
(1) whether
primary
two
issues:
a release
for
responsibility
the defense. The excess
agreement, executed between the insured
require
National to investi-
did
attorneys during
attorney-
and its
the
gate
against
or defend claims
Granada as
car-
relationship,
client
bars the insurance
long
underlying
as another
insurance car-
equitable subrogation
riers’
for le-
claims
providing
rier was
a
While Na-
defense.
(2)
malpractice;
gal
pri-
and
whether the
right
tional
have the
associate in the
did
attorneys
carrier and
the
may assert
trial of
claim it deemed a
defense and
negligence
settling
excess carrier’s
own
liability,
threat
to its
it did not exercise
third-party
the
claim as an
de-
affirmative
litigation.
the Wolf Point
equitable
fense
excess carrier’s
sub-
the
Point
During
litigation, Wolf
de-
rogation claim. We conclude that the re-
manded
million to
the suit.
settle
$3.6
agreement
complete
lease
a
bar.
Both INA and National
informed of
were
further
alle-
appropriate
We
conclude
demand,
expressed
the
but neither insurer
gations of negligence or misconduct
amount,
settling
interest
for this
and
against the
excess carrier
be asserted
could probably
KMC
that the case
advised
in defense to
that carrier’s
sub-
for
half
less than
this sum.
settled
rogation
Although
agree
claim.
we do not
January
gave
In
the trial court
the
respects
in all
appeals’
with the court of
litigation
preferential
Wolf Point
reasoning,
conclude that its judgment
we
setting for
1992. KMC’s efforts
correct, and
affirm it.
unsuccessful,
setting
continue
were
proceeded
trial.
and the case
On the
trial,
day
first
INA tendered its
History
I. Procedural
later,
days
National.
limits to
Two
Na-
September
Shrimp
Wolf Point
million,
tional settled the suit for
and a
Farm and
sued
Food
its owner
Granada
signed
judgment
final
was later
for that
Corporation
damages allegedly
caused
amount.
improper
processing
Granada’s
later,
marketing
shrimp grown
years
and harvested
than two
National filed
Less
previous
against
Point
fall.
INA and KMC recover
Wolf
Granada
suit
Keck,
immediately
paid
the law firm of
to settle Wolf Point
money
hired
(KMC)
INA
attorneys
alleged
&
as
suit.
and the
Mahin
Cate
thereafter,
had
suit.
ten-
mishandled Granada’s de-
Shortly
attorneys
KMC
fense, forcing
National to
the third-
dered the defense of
suit to Granada’s
settle
carrier,
protect
party
Insurance
claim to
both Granada and
insurance
cluding
release
from an
National’s
the Granada-KMC
judgment.
itself
was not
bar to
insurance carriers’
allegations
claims
INA included
against
claims,
malpractice
the court
reversed
negligence, gross negligence and violations
summary
and re-
Code,
take-nothing
and its claim
Texas
manded
claims to the trial court.
these
malpractice.
legal
was for
The court
court’s
also reversed the trial
belonged
Because all of these claims
ruling
summary
motion for
insured, National asserted them under the
and INA
judgment, holding
equitable subrogation.
doctrine of
comparative respon-
could raise National’s
responsibility
and asserted
denied
court, however,
sibility as
a defense.
malpractice
cross-claim
KMC for
period
prov-
limited the
time
relevant
and an
Nation-
affirmative defense
ing this
conduct after
defense National’s
al,
contribu-
based on the excess carrier’s
limits.
primary policy
INA’s tender of the
responsi-
tory
negligence
must
Because we
that these claims
agree
bility.
also denied
the trial court for further
be remanded to
that a
affirmatively pled
agreement
release
ap-
affirm
court of
proceedings, we
between it
the insured barred Nation-
peals’ judgment.
that KMC
additionally
al’s and INA’s claims. KMC
*5
re-
comparative
INA can
National’s
raise
of contribu-
asserted affirmative defenses
respective
to
sponsibility in defense
the
responsi-
tory
comparative
and
negligence
fur-
against
negligence claims
them.
All
bility against
parties
National.
filed
was
entitled to
ther
that KMC
summary
motions
judgment.
for
release,
summary
on
al-
judgment
the
The
these
rulings
trial court’s
on
mo-
the court of
though
disagree
how
trial all
tions eliminated for
but National’s
agreement.
that
appeals construed
negligence
INA. The trial
granted
judgment
summary
court
for
II. The Release
KMC on the two insurance carriers’ subro-
the re
signed
and Granada
KMC
malpractice
claims for
because of
gation
1992,
10,
a
more than
little
April
lease
agreement.
the
release
KMC-Granada
trial was
two weeks
the Wolf Point
before
granted partial
The
sum-
trial court
KMC,
to
Granada
begin. According
National,
rejecting
for
judgment
past legal
owed it a
sum
substantial
INA’s and
affirmative defenses of
KMC’s
and want
to Wolf Point
services unrelated
contributory negligence and
balance
debt from its
ed
clear that
responsibility.
Finally,
the trial court
Thus,
for KMC’s
exchange
in
sheet.
granted
partial summary judgment,
fees, Gra
unpaid
these
promise
forgive
gross neg-
of
eliminating National’s claims
demands,
from “all
nada
KMC
released
violations.
ligence and
Code
any kind
action of
claims or
of
causes
motions, the trial
resolving
'After
these
law or
whatsoever,' statutory, at common
claims
court severed National’s and INA’s
otherwise,
arise
existing
might
or that
now
KMC,
assigned these claims new
hereafter,
indirectly attribut
directly or
number,
final judg-
and
cause
rendered
legal
professional
[of]
able
rendition
two
nothing
ment that
the
insurers take
between
to Granada
by
services
KMC
appealed.
National and INA
against KMC.
1,
1,
The
April
1992.”
June
1988 and
of “all
the release
court concluded
appeals
part,1
affirmed
court of
demands,
was
causes of action”
claims or
part,
and remanded
reversed
liti-
Point
cover Wolf
enough
120. Con- broad
to the trial court.
S.W.2d
the release more con- Paragraphs immediately 1 and follow cluding parties’ intention “in en- and set to Granada out consideration into this to resolve tering release was agreement. para- and to KMC for the fees, unpaid issue not to release KMC 1, Granada for all graph forgives KMC any malpractice and all legal claims.” unpaid legal fees for services rendered INA, Because 1, 1, and April between June 1992: Granada, paying Point Wolf releases, hereby by 1. KMC defense, court appeals concluded release, hereby presents these does ac- that it was not included within release. Granada, quit discharge and forever officers, servants,
agents, employees, di- rectors, persons, all natu- Scope A. Release affiliates and corporate, privity ral or with them or complains ap- the court of KMC demands, any any of them from claims “unpaid peals erroneously implies fees” as any or causes of action of kind which a limitation on its consideration under the have, directly KMC had or might or release. submits that consider- indirectly Unpaid attributable to the for the agreement ation set forth in pro- Fees owed to KMC Granada for which, paragraph plain language, re- fessional legal services rendered be- any and all claims Granada may leases 1, April tween June directly indirectly being intended release Granada from legal attributable services be- Unpaid such obligation pay Fees. June tween 1988 and Then Granada paragraph releases all Unpaid legal fees are not mentioned. *6 has, have, it may claims or in KMC fees Unpaid only are mentioned in the legal connection with KMC’s services to at the beginning agreement recitals of the during period: the time Granada same in again and the first numbered paragraph hereby by 2. Granada releases and which sets out Granada’s consideration for release, presents hereby these does ac- the release. The agreement begins: KMC, quit discharge and forever servants, agents, employees, partners, WHEREAS, performed KMC has le- persons, affiliates and natural all or cor- gal services for since June Granada of it, porate, any in with from privity and 1988; demands, all claims or causes of action WHEREAS, as of the date written whatsoever, any statutory, kind above, Granada a owes KMC substantial otherwise, existing common law or now for outstanding unpaid sum and invoices hereafter, or that might directly arise or professional legal for services rendered indirectly to the attributable rendition or (the Granada up April to to professional legal [sic] services KMC Fees”); “Unpaid to Granada June and between WHEREAS, Granada de- KMC and April 1 1992. to Unpaid resolve the sire issue appeals The court of thus reads the “un- satisfaction; to their Fees mutual in the paid fees” mentioned recitals and WHEREAS, has advised KMC Gra- limitation the paragraph implied as an independent in writing repre- nada paragraph claims mentioned in 2. KMC in appropriate is connection sentation imply no reason to this limitation. sees Agreement. with the execution of this appeals But the court of relies on our NOW, THEREFORE, in in v. exchange holding Victoria Bank and Trust Co. (Tex.1991), Brady, the promises, agreements for mutual to read S.W.2d contained, Brady, releases In narrowly. herein KMC and the release we said do as must hereby agree releasing Granada follows: instrument mention Although 1988 and 1992.” to to be effective. June the claim be released cases, identify specific the release does not Id. at 938. forgive it does Granada’s exist- expressly here agreement did Because release legal services ren- ing debt Point not mention Wolf 1,1988 April in dered June applied only it court concluded should be present of all release return Granada’s mentioned; claims which were i.e. to those attributable to and future claims KMC’s unpaid fees. 955 involving those claims period. The legal during work this same imposes a appeals’ construction court conclude that our decision in simply absent from the symmetry not the construction of Brady does control While the recitals agreement’s language. Brady agreement The this release. primarily in this release are concerned to release all claims attributable purported unpaid legal the issue Granada’s with between a specific loan transaction fees, an intent limit they convey do not subsequent bank and customer. for the forgive- to KMC the consideration parties, the cus litigation between these merely The recitals ness of those fees. to another relating tomer raised claims “to parties’ desire resolve general state bank, the bank with Fees, transaction to their mutual Unpaid the issue of In rejecting raised the release defense. 1 and 2 Paragraphs then satisfaction.” defense, par that the bank’s we noted parties’ mutual satisfaction— explain plainly limited itself agreement ties’ bills; legal forgives unpaid Gra- all cover loan and did not specific thus relating to releases all claims KMC’s nada pres transaction. Id. at 939. other during a specific legal services rendered than the clearly one ent release broader forgives the release period. time Because It is not limited Brady. expressly any malpractice legal KMC for but rather claim or transaction specific period, court of during this committed demands, claims to cover “all purports contrary. holding appeals erred action of kind whatsoever.” causes of Nevertheless, we do Brady a broad- Nothing forbids such completely bars this release Brady holds simply form release. claims.2 release claim to be must “mention” the release apply “claims causes or does *7 require It does not Id. at 938. effective. indirectly attribut- directly action ... or parties anticipate identify and the professional legal the [of] able to rendition relating potential of action each April after to Granada” services subject Memori matter. See the release’s Point 1, trial did 1992. Because the Wolf 433, Keszler, v. Center 943 S.W.2d al Med. 1992, 28, and until KMC’s begin April (Tex.1997). releases often Although 435 trial, through the continued representation time existing claims at consider Na- do bar terms of release plain execution, encompass may a valid release based malpractice claims or INA’s tional’s develop damages claims and unknown rendered after solely on services Pearson, v. 383 in the future. See Cannon lj Thus, while release (Tex.1964); Quebe 565, v. Gulf, 570 S.W.2d of National’s proof of elements bar certain 20, 6, 22 Ry., 98 81 S.W. & S.F. Tex. C. claim, bar may not other malpractice it (1904). elements. Thus, release was conclude that this we Release B. Validity forgive all claims sufficient subrogee, Na- legal As malpractice attributable Granada’s validity of this challenges the tional also “between to Granada sendees rendered ar- assume, insurance carrier deciding, KMC because neither that Grana- without 2. We differently affect Na- agreement gues could this Court. with KMC da’s rights respective tional’s 699 (Tex.1994); appeals v. release. The court of did not 13 Womack Allstate Ins. Co., 467, 233, this reach issue because its view that 156 Tex. 296 S.W.2d 237 only “unpaid” (1956). release KMC’s covered legal work. 955 S.W.2d Because view, disagree with that we consider the burden KMC had on sum additional challenge.
this mary judgment prove that the release agreement negotiated Granada was the trial National contends that court Archer, See fair 390 reasonable. release enforcing erred because Maverick, 739; v. S.W.2d see also Willis did agree- Granada not understand the 642, (Tex.1988); 760 S.W.2d 646 Texas and was not informed fully ment before Moore, 502, it. Bank & Trust v. 595 signing Alternatively, argues National S.W.2d (Tex.1980); Granada intended release the International 508-09 Bankers Point 567, Wolf is a agreement Holloway, sham. Ins. v. 368 Co. S.W.2d Life least, submits, very At (Tex.1963); Locke, Thigpen there 576 v. questions fact are about whether the re- 247, (Tex.1962); Fitz-Gerald v. was negotiated length lease at arms and in Hull, 39, 256, 150 Tex. 237 S.W.2d good faith. National urges that the sum- Lee, (1951); 114, 12 v. Cooper Tex. S.W. for KMC was erroneous 483, (Tex.1889). Further, it was argument. either under fiduciary KMC’s burden as a to establish that Granada was informed of all material attorneys Contracts between facts relating to the release. See Schlum their clients negotiated during the exis Swanson, berger Tech. Corp. v. 959 S.W.2d tence the attorney-client relationship 171, 175 (Tex.1997)(citing Johnson v. Peck closely are scrutinized. See Archer v. ham, 132 Tex. 120 S.W.2d (Tex.1964). Griffith, 390 S.W.2d (1938))(fiduciary duty requires full disclo the relationship Because is fiduciary in information). important of all sure nature, presumption there is a of unfair present summary judgment record does invalidity attaching ness to such cont not establish the state of Granada’s infor Putz, racts.3 See Ames v. mation or that agreement was fair and 583 (Tex.Civ.App. — Eastland The only reasonable. evidence that KMC 'd). Further, writ ref disciplinary our rules identifies is a recitation the release that an attorney forbid making agree KMC “advised writing Granada ment that prospectively limits the attor independent representation ap [would be] ney’s malpractice the client un (1) propriate connection with the execution agreement by law, less permitted This (2) Agreement.” bare recitation independently the client repre is not “presumption sufficient to rebut the in making sented agreement. See Tex. *8 invalidity to attaching of unfairness or DISCIPLINARY R. Conduct 1.08(g). Prof’l Archer, 739; contract.” 390 S.W.2d at see maintains that can KMC its conduct with Ames, at 583. According scrutiny, argues stand this but it also that ly, summary KMC has not carried its National waived failing any this issue at judgment burden. Because KMC plead to it in has not time court. See agreement that release disagree. By Tex.R. Civ. P. 94. established is a rais complete ing the issue of the in defense to National’s and INA’s validity release’s claim, equitable subrogation to for next response summary KMC’s motion we con any judgment, preserved the issue for sider other defenses are available to B.I.V., appeal. See In re KMC. presumption applies relationship The this case be- and hired new with KMC attor- negotiated release, during cause the release neys agreeing pre- to before representation KMC's Granada. Converse- of sumption would not have arisen. ly, attorney-client had Granada severed Duty A. to Defend Subrogation
III. Excess Carrier’s Equitable In Centennial Insurance Co. American that the finder of fact argues KMC Co., S.W.2d 480 v. Canal Insurance to permitted should consider National’s (Tex.1992), insur- recognized an excess of the pri conduct INA’s tender before malpractice a legal assert er’s to equally with National’s policy limits attor- against the defense claim insured’s Although INA was post-tender conduct. Al- ney equitable subrogation. through defense, providing sug Granada’s permit a non- though law does not Texas pre-tender conduct gests that National’s attorney malpractice, client sue an National also had a was relevant because an excess car- permitting we reasoned that defense. Ac duty to contribute rier to in the shoes of its insured and stand KMC, cording duty arose once not bur- assert the claims would insured’s became under existing attorney-client relation- den reasonably KMC cites four clear. cases poten- with duties create ship additional or support and two commentaries the attorney. tial conflicts of interest for explain, position. Both commentators the in- “Subrogation permits Id. at 484. however, view is that KMC’s favored only existing duties of surer to enforce by majority of courts that have shared In Id. defense counsel insured.” Ostrager considered the issue. See & concurring majority of the Court opinion, Coverage Newman, Handbook on INSURANCE th that the defendant to Canal also stated (10 ed.2000); 6.03[c], § at 296 Disputes, nd subrogation whether 51:36, § at 14 Couch on Insurance attorney, or should carrier (1982). 446-47 “have available either defense carrier, including the insured or the excess majority rule the excess carrier’s unreasonable refusal “[wjhere pri maintains both the insured cooperate in the defense and settlement policies, ... the excess mary and excess (Hecht, con- the action.” Id. at 486 J. partici obligated liability insurer is curring). primary pol until the pate the defense See Texas case, icy limits are exhausted.” and INA claim that Underwriting Ass’n v. Employers it to set- Ins. negligence caused own F.Supp. Lloyds, 836 Granada Members third-party tle the (S.D.Tex.1993)(quoting 14 it would have. for more than otherwise on Insur Couch nd 51:36, citing nu § majority’s Relying concurring on the ob- ance cases); Canal, argue see also 14 Russ & Segala, merous servation in §§ 3rd 200:44-200:45 consider Na- Couch the fact finder should Ostrager (1999); supra Newman, negligence apportioning tional’s alleged &. 6.03[b], rule majority allegedly for Granada’s mis- expectations supported by the reasonable ap- the court handled defense. While carriers. the insured and its insurance agreed KMC and INA could of peals provide are able to rela contributory negligence insurers Excess assert National’s National, high tively inexpensive insurance fault require the in act, they limits because National had no concluded that underlying primary negli- sured contract been and thus could not itself have *9 pri another carrier. carrier ten- insurance with primary until gent, after provides much mary generally carrier policy or its limits. The dered exhausted but must in coverage, limited of Nation- lower amount proof court accordingly great is to be against likely what after INA ten- sure negligence al’s to conduct provide a claims and must er number of limits on 28. 955 policy dered City Twin Fire Harville v. INA com- defense. See at Both KMC and S.W.2d 138. (5 Co., 276, th 279 Cir. F.2d Ins. 885 plain of that limitation here.
701 1989); did, Accident Indem. it would be relevant to & Co. such evidence Hartford Cos., respon- v. Continental Nat’l Am. Ins. 861 the issue of National’s (9 Cir.1989). pre F.2d th 1187 sibility. charged
miums are thus a reflection of pri the risks undertaken. Because the Duty B. Excess to Settle Carrier’s duty insurer’s to defend extends to argues that the mil regard covered claims without to their lion settlement was excessive and that Na amount, duty an excess to de insurer’s tional bear be should some typically merely fend is not invoked be to settle the opportunity cause had a claim has been asserted Specifically, much case for less. primary the insured excess of limits. points respond out that National did not Disputes Windt, See 1 Insurance Claims & to, to, or suggest counter offers even dis (3rd ed.1995). Thus, § 4.11 plaintiffs cuss the million settlement $3.6 appeals the court of that National’s al presented demand weeks before the leged negligence failing participate began. in or otherwise contribute to Granada’s defense before primary carrier’s ten duty An insurer’s to settle is der limits is irrelevant independent duty 14 defend. contributory claims of negligence or com 203:12-203:13; §§ Couch on Insurance 3rd parative fault. 5.26, § Windt, at An supra excess Although duty duty accept insurer its insured a owes tender, defend was not invoked before nei settlements, duty reasonable but that is ther affirmatively disrupt could National typically primary also not invoked until the Canal, or harm the insured’s defense. See insurer has tendered its limits. 1 (Hecht, at concurring); S.W.2d J. 5.26; Windt, supra Employers Nat’l Cf. One, Texas, Stewart, see also Bank N.A. v. Co., Co. v. Accident Ins. General Ins. (Tex.App. — Houston (S.D.Tex.1994)(when F.Supp. 554-55 1998, pet. denied)(duty coop [14th Dist.] likely, excess is an excess insurer implied every erate is contract which may interject negoti itself into settlement cooperation necessary performance). primary ations before tender insur Any evidence that National interfered with er). Here the insurer did not or controlled the defense before tender began, tender its limits until the trial well may be relevant compara to the issue of million been after the demand had $3.6 See, responsibility. tive e.g., Birmingham withdrawn. National did not con assume Fire Ins. v.Co. American Nat’l Fire Ins. trol of the defense before INA tendered its Co., (Tex.App . —Tex duty had no limits and evaluate $3.6 arkana denied)(eomparative writ re million demand until after that settlement sponsibility issue submitted Accordingly, tender. National’s failure to negligently carrier who disclosed informa respond to the settlement demand is not plaintiffs tion to in third-party’ counsel contributory negligence evidence of its insured). claim against complains comparative fault. that National failed to appear deposi during litigation tion the Wolf Point Duty Excess C. Carrier’s in contempt by was held the trial court. It Ordinary Care is not summary judgment clear from the complains though record this conduct the in INA4 how harmed even defense; sured’s but KMC can show that National not have been under a ment, appeals explained, leaving 4. As the court of the merits the claim for trial. 955 S.W.2d negligence part of National’s Such claim was 125-26. therefore part appeal appealed not a of this because the trial of the severed cause to that court. *10 however, judg- appeals, summary court denied INA’smotion for The court considered the of the defense, reasonably progress to follow the investigation participate in the But, prior explained, case National of the Wolf Point case. as we have negotiation tender, nevertheless to INA’s INA should until tendered its duty had no to act INA evidence of National’s permitted use to Na- the defense limits and surrendered excess claim to mismanagement 2.01, of the supra Windt, at 31. tional. 1See comparative responsibili show National’s with the court of Accordingly, prudent ty. urges reasonably INA that a pre-tender conduct appeals that have done more than excess carrier would to the issue of is irrelevant protect National did to itself is evidence that responsibility unless there policy. Specifically, INA under the excess with the insured’s de- National interfered explored says that National should have: control of the defense fense or assumed diligently, reserved coverage issue's more point in time. some earlier insured, investigated against its rights claim more third-party the merits of the as a Volunteer D. Excess Carrier independent counsel to thoroughly, hired claim, supervised third-party monitor the that National is KMC contends adjuster closely, and de its claims more be equitable subrogation not entitled to the claim months before manded to settle voluntarily the case National settled submits, actions, INA were trial. These that had KMC submits Granada. protect necessary duty under National’s the un thoroughly investigated National Shivers, Walgreen-Texas v. itself. See Co. derlying claim it would have discovered 137 Tex. 154 S.W.2d provide did not cov that its excess negligence is that con (1941)(contributory If Na Point claim. erage for the Wolf creates an unreasonable risk duct which obligation under no tional was indeed oneself). harm to reasons, insured, sub- indemnify its available. We dis rogation would not be however, appeals, The court of agree. not have that National could concluded failing to take the actions negligent been pays a third- An who insurer duty it had no suggested by INA because not a insured is party claim its limits. to act INA tender before good made in payment if the volunteer explained, we have before agree. As belief that and under a reasonable faith tender, responsibility for Granada’s protection. necessary to its payment carrier with the defense rested Ins. Co. Mut. Arkwright-Boston See period, this During and KMC. Mfrs. F.2d Corp., Aries Marine v. supervise the insured’s required was not Cir.1991). (5 In context of th anticipate no that and had defense lib have been subrogation, “Texas courts per attorneys INA were or Granada’s payments determinations eral their they were forming indeed appropriately, Ins. involuntarily.” Argonaut made Allen, 316, were Tex. De Winne v. not. See Co., Ins. 869 S.W.2d (1955)(claimant Co. v. Allstate is not 1993, writ (Tex.App —CorpusChristi contributorily negligent failing antic . denied). payment to another). fact, An excess insurer’s ipate negligence has been the insured settle suit defense deny and KMC still involuntary for presumptively to be mishandled, said contending instead subrogation purposes. See id. it failed disorganized so National was objected to party appeal, and no other has defense com- of INA’s affirmative merits negli- separate but parative responsibility including to National’s the merits of INA's appeal. On gence being part as these appeal. Under identical defense in the circumstances, court's sum- issue reversed the trial we also consid- unusual rather de- mary judgment foreclosed this that had (cid:127), appeal. arguments part of er as INA's issue KMC has the identical fense. raised *11 position contrary KMC’s to our liberal dollar settlement because INA’s inade- application supervision inept of quate the reasonable belief rule. and KMC’s Adopting significantly preparation put grave it would increase it and the insured at Thus, potential everyone apparently in- financial risk. conflicts interest between “If excessive. agrees sureds and their insurers. an insur- settlement was company’s right subrogation They only disagree ance could on who was fault for challenged by being paid. be the wrongdoer on the the excessive amount grounds actually did not recoup any payment, To of its National provide coverage, necessarily it would prove must that its million settlement $7 company’s in the litigate interest all abstract, was in the reason- yet excessive questionable claims with insured. The able under these circumstances because of ignoring effect of the reasonable belief provided the defense If the Granada. therefore, rule, discourage is to insurance competent value case with a of the defense companies paying settling disput- million, equaled would have or exceeded $7 thereby ed claims and force insureds more then National no harm regardless suffered litigation often into with their insurers.” of whether INA or KMC mishandled supra Windt, 10.10 at 150-51. KMC’s insured’s defense. can Even National conception of the volunteer doctrine is bad excessive, prove that its settlement public policy, adopt and we decline to it. prove must also that INA or KMC mishan- dled and that the defense a E. Causation Wolf Point excess of the case’s true argues that because Nation value5 would have resulted from KMC’s subrogation rights upon al’s eq are based malpractice. National’s entitlement principles, uitable requires fairness that all depend proof damages will thus on pre- post- National’s conduct—both the true value of Wolf Point’s claim was comparative tender —be considered less than million but that mal- KMC’s $7 parties’ respec issue. The practice Assuming inflated its value. such theories, however, liability tive fail to raise proof, may then recover as dam- any pre-tender issue about con ages the difference between the true and duct. any by inflated value less amount saved the settlement.
INA asserts that National caused its by own harm deciding negotiate IV. Conclusion settle litigation the Wolf Point without first making reasonable assessment of The release agreement between KMC coverage, insured, valid, potential facts or dam- assuming it is does ages. preparation, This lack of INA rea- legal malpractice foreclose claims aris- sons, pay caused National to much. ing too from KMC’s actions or omissions after Similarly, appeals KMC asserts that National set- 1992. The court of there- litigation correctly summary judg- tled Wolf Point for too much fore reversed the KMC, because of fault but ment for remanded National’s erroneously because National lacked faith and INA’s claims for trial. The court of appeals correctly KMC’s work. KMC likewise attributes reversed the sum- mary judgment excessive settlement to National’s own for National on KMC’s and panic following abrupt tender INA’s affirmative defense of National, primary policy appeals court fur- responsibility. limits. hand, agrees scope other that it properly have settled ther limited the much, conduct, post-tender the claim for too but contends that to National’s defense negotiate although pre-tender might it was forced to million conduct be ad- recovery reasonably competent, The true value is the Wolf Point which Granada had following malpractice-free would have a trial obtained defense. *12 alleges in this missible the defense were subro- insured’s pay interference. Be- action it had to an gation harmed National’s exces- there is no in the of liability cause error claim sive amount settle a be- appeals, affirm. the court of INA’s and mishandling KMC’s and
the defense the claim. INA own conduct contrib- argue National’s concurring HECHT filed a Justice payment the uted to of an excessive settle- joining I and II of the opinion, Parts ment. The Court holds that Opinion Judgment. Court’s Court’s the prior policy conduct tender of HECHT, in concurring part Justice third-party liability limits to the claimant concurring in the judgment. is irrelevant unless National interfered with or took control of the defense. The I statement of the Court’s holding general bases this on a rule Court its the the case and resolution of issues duty an excess has no insurer hence, release; join I in relating before liability defend or settle a claim the opinion. I II I Parts of the Court’s primary insurer tendered the limits of has conclude on before us that also the record policy. America, its Company Insurance of North the third-party primary insurer lia- the purports The Court to follow “ma- claim, Cate, Keck, bility Mahin & the “ liability jority rule” that an ‘excess insur- hired to attorneys defend the have obligated participate is not the er entitled, they not be shown should until third-party [of claim] defense equitable subrogation of this ac- defense ”3 policy are exhausted.’ primary limits carrier, brought by the Nation- tion excess proposition authority cited for this Company al Fire Insurance of Pitts- Union treatise, Insurance the 1982 Couch on PA, offer burgh, evidence of National’s adds, “But two later: cer- which sentences INA ten- conduct that occurred before have excess carri- tain courts held that the policy liability its to settle the dered limits participate in the defense and er must- I its But do insured. not in the cost when it is clear share of defense which agree with the broad basis on potential judgment against in Part III of founds conclusion Court substantially greater than insured opinion. policy amount of limits.”4 primary primary lia- provided INA million $1 1999 supple- It is not at all from the clear coverage, provided bility and National the rule stat- ment to the treatise whether coverage. million in excess As the Court Later ed holds true.5 treatis- still states, require excess did “[t]he es, of Couch on including the third edition investigate National to or defend claims Insurance, cites as which addi- the Court long as as another insured] [the material, reflect some erosion tional source underlying providing insurance carrier rule”. One of “general from the so-called notes, But a defense.”1 as the Court explains: these treatises [under “National did have the pri- both maintains Where insured and trial policy] to associate in the defense general policies, and excess claim it a threat to its deemed insurer is rule is that liability”.2 George J. 1. Ante 695. Couch, Insurance 2d Couch (1982))). § 51.36 2. Ante at 695. 51.36, § 2d at 446 14 Couch on Insurance (1982). Employers (quoting at 700 Texas Ins. 3. Ante (Supp. 51.36 Lloyds, Underwriting 5. See Ass’n v. Members of Couch on 2d 1999) cases). (S.D.Tex.1993) (citing (quoting 14 numerous F.Supp. obligated participate the de- sive. and KMC never believed that primary policy until are fense limits the claim could be settled within limits, exhausted. and thus INA had little to gain by tendering its limits. Had National Accordingly, has been held that an case, attempt intervened to to settle the excess insurer no has defend certainly where there the result would almost was no evidence that *13 underlying policy paid limits would be ex- far less than the million it been $7 ceeded, primary where an exclusion in began. after trial These circumstances primary insurer’s relieved the in- hardly unique. are Even if National suc- duty indemnify surer of the the in- against ceeds in its claims INA and KMC sured, or where allegation there was no recoups part paid, of what it insur- primary that the might insurer become point ance rates will still be affected. The insolvent. is, obvious, intuitively it is not as the Court
An may excess insurer a duty it certainly seems to think —and is defend insured where the claim obvious from this case—that the Court’s against the insured is excess of the “general keeps rule” down insurance costs. limits of the underlying coverage. Some persuaded I am not that an excess insur- courts have held that an excess carrier duty er never has to defend or settle a participate must in the defense and primary claim its insured before share in the cost of when it defense coverage is exhausted. An carrier excess potential clear that judgment against that has the in the de- intervene may the insured be substantially greater may obligated protect fense to do so to than the amount of the primary policy itself and its insured when is clear that limits.6 claim primary will exceed cov- The other treatise refers to the Court’s P erage. following example. Take the rule as “the traditional view” but cites D, insurer, PI, primary sues whose as- numerous cases for the proposition that sumes the probably defense. P’s claim is circumstances, appropriate “in excess car- million, worth which exceeds PI’s $5 may riers owe a to participate in the $100,000policy poli- limits and El’s excess insured’s defense.”7 P cy limits million. offers to settle $1 The Court policy justification offers one million, but PI D refuses, for believing $1.1 “general for the rule”—that excess insur- El has an absolute defense to P’s claim. expensive ance is less because in- P nothing. does When obtains a “duty surers’ typically defend is not PI El million, $100,000, pay must $5 case, however, invoked”.8 Nation- million, and D must pay pay must $1 $3.9 refusal al’s to involve itself in the defense million. D has no Stowers claim against of the claim ultimately pay- resulted PI because it never received a settlement ing plain- million to settle a claim limits, and, demand within its under had willing tiffs been earlier to settle for rule, D the Court’s absolute has no claim indication, million. This is some $3.6 El.9 at all This result least, obtains complete that an excess insurer’s paid D though premiums even for insur- litigation pri- abstention from the until the liability. limits are tendered ance that would have settled his makes excess El Also, expensive, expen- insurance more not less no subrogation has 6. Lee R. Russ & Thomas F. Segalla, 8. Ante Couch on (1999) (footnotes §§ 3d 200.44-.45 omitted). 9. See Westchester Fire Ins. v. American Co. Group, Contractors Ins. Co. Risk Retention Ostrager R. Barry & Thomas R. Newman, Dist.], (Tex.App. [1st Coverage — Houston Disputes Handbook on Insurance pet.). no (9th 1998) (footnotes omitted). ed., 6.03 El to look for someone else to D has no claim to which genuous effort PI because to P. Thus, paid principal the burden what was subrogated. share could be PI, made, think, I wholly argument A can be judgment, strong of the excess excess, This is but insurer’s hands are not responsibility. from insulated I think an excess claim of purposes equitable in which clean for of its one instance duty to be involved the defense subrogation. insurer’s carefully examined. a claim must be But I not have to decide that issue do insulating an excess absolutely exactly A rule prepared I am not to decide here. any defense insurer an excess insurer be liable for when prior of a claim to tender of a refusing to involve itself the defense defensible, it less seems coverage is even learned commen- weight claim. The me, subrogation action in an in multitude of tary and the differences *14 my example that Suppose like one. in the area convinces me that cases A, attorneys carefully hired to defend than proceed more Court should PI re- offer, PI P’s accept but urge today. us does it does The record before A writes El as follows: present justify fuses. So that ad- not circumstances KMC and type mission of the of evidence no to assist you We know that have National. I do to offer case, INA wish you but do in the defense of this exists, only that no evidence say such pro- right your have the under record. On that it is not reflected our interests, you should your tect own basis, I that the court that narrow now. P has made exercise result. appeals reached the correct primary and ex- offer within settlement although liability could be coverage cess are worried that not greater.
much We your limits be exhausted but
only could D exposed even be himself could
personally. have handled this case low an
superbly to have obtained as P made. Attached is
offer as has
complete summary of what we decided not to and what we have done ENTERPRISES, KAGAN-EDELMAN do. If P by judgment ultimately obtains Petitioner, pres- than the much more or settlement v. offer, certainly think as we almost ent will, you if surprise it will not us he then Con- C. BOND Shamrock James d/b/a Gateway Company try to shift some struction us, claiming Co., Inc., Respondents. that we did inaction to your Lumber If the case. properly handle No. 00-0517. to defend happens, we want to be able fully you were by showing of Texas. Supreme ourselves Court you warned, any complaints May to cover pretextual us are make us ineptness. you sue your own So
later, this letter we intend to introduce jury can see so that into evidence Morristown, Brookner, Mi- Jeffrey J. really happened. what Houston, Hord, for Petitioner. F. chael El itself refused to involve Assuming has Nipper, Donn Chapman, Oscar Bridget defense, rule bar the Court’s would in D’s Houston, for Joers, Cupples, that El’s A. D. James A this evidence offering Respondents. a disin- malpractice claim was subsequent