We grant appellees’ motion for rehearing, withdraw our opinion issued December 8, 2011, and issue this opinion in its place.
In this subrogation case, appellant United States Fidelity & Guaranty Co. (“USF & G”) challenges a judgment requiring it to pay the limits of its primary and umbrella policies to its insured and two co-insurers. Although we do not agree that the subrogation claims are barred as USF & G contends or that the trial court abused its discretion in awarding attorney’s fees, USF & G is correct in asserting that a portion of the loss should have been prorated among the excess insurers. We therefore reverse the judgment and remand the case to the trial court with instructions to reduce the damage award. However, because the parties stipulated that the amount of attorneys’ fees requested was reasonable and necessary, we affirm the trial court’s award of $1,089,054.92 in attorney’s fees and costs and do not reverse and remand the attorneys’ fees award for recalculation in light of the reduced damage award.
I. Factual and Procedural Background
The origins of this insurance dispute are recounted in Coastal Refining & Marketing, Inc. v. United States Fidelity & Guaranty Co., 218 S.W.Bd 279 (Tex.App.-Houston [14th Dist.] 2007, pet. denied) (sub. op.). Briefly, Weaver Industrial Service, Inc. contracted with Coastal Refining & Marketing, Inc. to maintain Coastal’s equipment, and Weaver agreed to designate Coastal as an additional insured on insurance policies providing coverage for all claims arising out of Weaver’s work. Id. at 281-82. Through Weaver, Coastal is an additional insured on two policies issued by USF & G. One is a commercial general liability policy providing $1 million of primary coverage per occurrence, and the other is an umbrella policy providing $5 million of excess coverage.
Coastal also maintained its own primary and excess coverage. The Reliance National Indemnity Company provided $500,000 in primary coverage after payment of a $500,000 self-insured retention.
In May 1999, there was an explosion on Coastal’s property, and Weaver’s employee Rolando Lopez was injured. Id. at 282. The Lopez family sued Coastal and its parent company, Coastal Corporation, for negligence and gross negligence (the “Lopez suit”). Id. Coastal initially hired its own defense counsel and expended $161,363 of its $500,000 self-insured retention in defending against the suit. Eventually, however, it asked Lexington to assume defense of the case and tendered the remaining $338,637 of the self-insured retention, the $500,000 limits of the Reliance policy, and the $1 million of excess cover
Coastal’s counsel did not inform USF & G about the Lopez suit until about two weeks before the case settled. After learning of the settlement, USF & G sued Coastal, seeking a declaration that it had no duty to indemnify Coastal for the settlement. Id. at 288. COIL and Lexington intervened. Id. The trial court initially granted summary judgment in USF & G’s favor, but we reversed and remanded because USF & G failed to establish that it was actually prejudiced by the late notice of suit or that Coastal failed to cooperate in its defense. Id. at 298.
On remand, the parties agreed to submit certain issues to the jury, but stipulated that the priority of coverage was a question of law to be submitted to the trial court. The jury found that (a) all of the $7 million settlement was expended to settle the claims against Coastal and none of this amount was spent to settle the claims against Coastal’s parent corporation; (b) USF & G was not prejudiced by the late notice of the Lopez suit; (c) Coastal did not fail to cooperate with USF & G; (d) Coastal, COIL, and Lexington (collectively, “the Coastal parties”) did not voluntarily pay to settle the Lopez suit without USF & G’s consent; and (e) USF & G did not deny coverage for the Lopez claim.
After receiving the verdict, the parties filed competing motions to disregard certain findings. Coastal asked the trial court to disregard the jury’s finding that USF & G did not deny coverage, and argued that the finding was both immaterial and contrary to the conclusive evidence that USF & G constructively denied coverage. USF & G did not specifically oppose the request; moreover, it acknowledged that “even if USF & G had lost on that issue, the result would not change.” The trial court granted the request to disregard the finding without stating the ground on which the ruling was based. USF & G asked the trial court to disregard the jury’s finding that the entire $7 million settlement was expended to obtain the release of the claims against Coastal. The trial court impliedly denied the motion. On appeal, USF & G does not challenge the disposition of either motion.
The parties addressed the priority of coverage by filing competing motions for judgment. All agreed that if the Coastal parties were entitled to recover from USF & G at all, then the first $1 million of the loss was covered under USF & G’s primary policy, and the next $500,000 of the loss was covered under Reliance’s primary policy. The Coastal parties argued that USF & G’s $5 million excess policy was triggered next, and that COIL’s $1 million excess policy would be triggered only when USF & G’s excess policy was exhausted. According to the Coastal parties, Lexington’s $10 million excess policy would be triggered only when the coverage from all of the other policies was exhausted. Thus, the Coastal parties asked the trial court to award them $6 million, representing the combined coverage limits of USF & G’s primary and excess policies.
USF & G moved for entry of judgment on two alternative theories. First, it asked the trial court to rule that COIL and Lexington take nothing because their claims were foreclosed by the Texas Supreme Court’s ruling in Mid-Continent Insurance Company v. Liberty Mutual Insurance Company,
The parties also disagreed as to whether the Coastal parties would be entitled to recover attorney’s fees even if they prevailed on all of their claims. The Coastal parties pleaded for an award of attorney’s fees based on two chapters of the Texas Civil Practice & Remedies Code — Chapter 37, in which the legislature authorized an attorney’s-fee award to any party in a declaratory-judgment action, and Chapter 38, under which one who prevails in a breach-of-contract claim is entitled to recover attorney’s fees if certain requirements are met. USF & G stipulated that the Coastal parties’ attorney’s fees were reasonable and necessary, but argued that the Coastal parties did not satisfy the requirements for recovering attorney’s fees in a breach-of-contract claim. According to USF & G, this failure foreclosed the Coastal parties from recovering under either statute on which they relied.
The trial court ruled in favor of the Coastal parties on all issues, and awarded them $6 million in damages — an amount equal to the combined coverage limits of the USF & G primary and umbrella policies — as well as $1,039,054.92 in attorney’s fees and taxable court costs, together with pre- and post-judgment interest. The trial court awarded additional attorney’s fees in the event that USF & G filed post-judgment motions, and appellate attorney’s fees in the event that USF & G filed an unsuccessful appeal. USF & G’s motion for new trial was overruled by operation of law, and USF & G superseded the judgment and timely appealed.
II. Issues PRESENTED
USF & G presents three issues for our review. In its first issue, USF & G contends that the trial court erred in failing to allocate responsibility for the settlement funds between the excess insurers on a pro rata basis as required under the holding of Hardware Dealers. In its second issue, USF & G argues in the alternative that any right to payment that COIL and Lexington otherwise might have had was foreclosed by the Texas Supreme Court’s hold
III. Analysis
USF & G’s first two issues concern the trial court’s disposition of the competing motions for judgment on the priority of the coverage afforded under the various policies. In matters tried to the bench, parties may move for judgment in much the same way that they may move for directed verdict in a jury trial. One difference, however, is the standard of review on appeal. Sanchez v. Marine Sports, Inc., No. 14-03-00962-CV,
Because it is potentially dispositive, we begin our review with USF & G’s second issue.
A. Applicability of Mid-Continent Insurance Co. v. Liberty Mutual Insurance Co.
In its broadest argument, USF & G maintains that the Texas Supreme Court’s holding in Mid-Continent Insurance Co. v. Liberty Mutual Insurance Co. bars COIL and Lexington’s claims for subrogation. The Coastal parties contend that the case is distinguishable. We therefore begin with the facts and reasoning of that case.
In Mid-Continent, a general contractor was the named insured on two insurance policies issued by Liberty Mutual Insurance Company. Mid-Continent,
4. Other Insurance.
If other valid and collectible insurance is available to the insured for a loss we cover ..., our obligations are limited as follows:
a. Primary Insurance
If this insurance is primary our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. below.
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c. Method of Sharing
If all of the other insurance permits contribution by equal shares, ... each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.
If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer’s share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.
In its opinion, the Supreme Court of Texas addressed subrogation and contribution in the context of claims between liability insurers. The court explained that when asserting a subrogation claim, “the insurer stands in the shoes of the insured, obtaining only those rights held by the insured against a third party, subject to any defenses held by the third party against the insured.” Id. at 774. Although this is true of both contractual and equitable subrogation, the two are slightly different.
Contractual subrogation is created by policy language in which the insurer, in exchange for payment of the loss, receives the insured’s rights against the third party who was primarily liable for the payment. Id. Because the insurer pursuing a subrogation claim is exercising its insured’s rights, the third party may assert any defenses to the claim just as if the insured brought the claim directly. Id. But, an insured’s right to indemnification under a liability policy extends no further than the amount of the loss. Id. at 775. Because the insured’s right of indemnity under a liability policy is limited to the actual amount of the loss, an insured that has been fully indemnified by one of its insurers has no right to an additional recovery from another of its insurers. See id. at 775. And because it had been fully indemnified for its loss, the court held that the insured in Midr-Continent had no claim against the non-paying insurer, and thus, there was no claim to which Liberty Mutual could be contractually subrogated. Id. at 775.
Unlike contractual subrogation, equitable subrogation is not dependent on the terms of the policy, but instead “arises in every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which in equity should have been paid by the latter.” Id. at 774; accord, Frymire Eng’g Co., Inc. ex rel. Liberty Mut. Ins. Co. v. Jomar Inti, Ltd.,
USF & G argues that the holding of Midr-Continent applies to bar COIL and Lexington’s subrogation claims, but the facts of the two cases differ significantly. Although the court’s holding in Midr-Con-tinent was based in part on its conclusion that Liberty Mutual voluntarily paid more than its share of the settlement, the jury in this case found that none of the Coastal parties voluntarily paid to settle the underlying claim. USF & G did not challenge this finding in the trial court or on appeal.
USF & G’s position also is completely unlike that of Mid-Continent Insurance Co. Mid-Continent discharged its obligations to its fully indemnified insured by joining in its defense and contributing to the settlement, but USF & G has not discharged its obligations to its insured, despite the undisputed fact that Coastal has not been fully indemnified. To the contrary, even though USF & G admits that the first $1 million of the settlement was covered under USF & G’s primary policy, USF & G paid nothing, but instead left Coastal to contribute most of its self-insured retention toward the cost of settlement. A decade later, USF & G still has not indemnified this covered loss.
The other-insurance clauses of the policies at issue in this case also differ from those in Midr-Continent. The primary policies in Mid-Continent contained identical — and compatible — pro rata other-insurance clauses that limited each insurer’s indemnity obligation. Here, nothing limited USF & G’s indemnity obligation as Coastal’s primary insurer. The primary policies plainly provided that the USF & G policy was triggered first, and the Reliance policy was excess to primary policies in which Coastal was an additional insured. The other-insurance clauses of the USF & G, COIL, and Lexington excess policies also differ from those at issue in Mid-Continent. We are not presented with compatible pro rata other-insurance clauses, but with conflicting clauses, each of which purports to make the coverage afforded by the policy excess to any other coverage. As explained below, the other-insurance clauses of the excess policies in this case, unlike the clauses at issue in Mid-Continent, are mutually repugnant. See infra at Section III.B.
In sum, this is not a case in which similar facts dictate similar results. Because the facts of Mid-Continent are significantly unlike those presented here, we conclude that it is inapplicable, and we overrule USF & G’s second issue.
B. Applicability of Hardware Dealers Mutual Fire Insurance Co. v. Farmers Insurance Exchange
In an alternative argument, USF & G contends that the other-insurance clauses of the excess insurance policies are mutually repugnant, and thus, under the precedent established in Hardware Dealers Mutual Fire Insurance Co. v. Farmers Insurance Exchange, these insurers must contribute to the settlement on a pro rata basis. We agree.
The facts of Hardware Dealers resemble those presented here. In Hardware Dealers, Anita Hyde was involved in an auto accident while she was test-driving a vehicle owned by a dealership, and the driver of the other vehicle sued her. Id. at 584. Hyde was potentially covered by two primary insurance policies. Id. The dealership’s policy was issued by Hardware Dealers and contained an “escape clause.” Id. The policy covered any permissive driver of one of the dealership’s vehicles, “but only if no other valid and collectible automobile liability insurance, either primary or excess ... is available to such
The court held that when, from the insured’s point of view, coverage is afforded “from either one of two policies but for the other, and each contains a provision which is reasonably subject to a construction that it conflicts with a provision in the other concurrent insurance, there is a conflict in the provisions.” Id. at 590. The court considered and rejected Hardware’s argument that the more specific other-insurance clause prevails. The court explained that this method of determining priority “encourages the continuing battle of draftsmanship” but is “no better” than other methods that “had been described as a mechanical application of some arbitrary test.” Id. at 588. Instead, the court concluded that when faced with conflicting other-insurance clauses, “ ‘the only reasonable result to be reached is a proration between the two insurance companies in proportion to the amount of insurance provided by their respective policies.’ ” Id. at 590 (quoting United Servides Auto. Ass’n v. Hartford Accident & Indem. Co.,
Here, we are faced with conflicting other-insurance clauses in the excess policies. In each of these clauses, the insurer attempts to make the policy excess to any other policy in which it is not identified as underlying insurance. USF & G’s policy provides, “This insurance is excess over any other valid and collectible insurance whether primary, excess, contingent, or on any other basis, except other insurance written specifically to be excess over this insurance.” The COIL and Lexington policies do not identify the USF & G umbrella policy as underlying insurance; thus, one who read the USF & G policy first would conclude that it is excess to the COIL and Lexington policies. Those policies, however, likewise have other-insurance clauses, providing, “If other valid and collectible insurance is available to the Insured covering a Loss also covered by this Policy, other than insurance that is specifically in excess of this Policy, the insurance afforded by this Policy shall be in excess of and shall not contribute with such other insurance.” The USF & G policy does not identify the COIL and Lexington policies as underlying insurance; thus, one who read these policies first would conclude that they are excess to the USF & G umbrella policy. This is the just the kind of “circular riddle” described — and solved — in Hardware Dealers. See id. at 589 (explaining that the other-insurance clauses of two policies conflict if the reader would reach one conclusion by reading a particular policy first, but would reach the opposite conclusion by reading the other policy first); id. at 590 (holding that if one would reach opposite conclusions depending on which policy was read first, then “the only reasonable result” is proration).
The Coastal parties contend that the other-insurance clauses of the excess policies are not mutually repugnant if one considers the overall pattern of the insurance from Coastal’s point of view. See Hardware Dealers,
The Coastal parties also point out that the holding of Hardware Dealers does not apply to policies that are not of the same character and level. See Carrabba v. Employers Cas. Co.,
The Coastal parties also assert that the COIL and Lexington policies are excess to the USF & G umbrella policy because they are more specific. They point out that the COIL and Lexington other-insurance clauses contain language that those policies “shall not contribute with” any other insurance, and cite authority in which the authoring court held that, as between two polices with competing other-insurance clauses, a policy containing the more specific language is excess to a policy in which the language was less specific. See Atl. Mut. Ins. Co. v. Truck Ins. Exchange,
Finally, the Coastal parties state that the other-insurance clause in the Lexington excess policy does not conflict with that of the USF & G policy because the conditions triggering coverage under the USF & G umbrella policy occur before those triggering coverage under the Lexington policy. The excess coverage provided by the COIL and USF & G excess policies are triggered upon the exhaustion of the primary coverage ($1 million of which is provided by the USF & G primary policy, and $500,00 of which is provided by the Reliance policy). Lexington’s excess policy, on the other hand, is triggered when the loss exceeds $2 million. Because the USF & G and COIL excess policies are triggered first, the Coastal parties assert that the limits of those poli-
In sum, we agree with USF & G that the other-insurance clauses of the COIL, Lexington, and USF & G excess policies are mutually repugnant. Because coverage under these circumstances is prorated among the insurers, the Coastal parties are entitled to recover only a portion of the funds expended in settling the Lopez suit.
C. Effect of Hardware Dealers
USF & G contends that if Hardware Dealers applies, then the order in which the policies are triggered and the extent of contribution from each is as stated below.
The USF & G primary policy was triggered first, and under it, USF & G was required to contribute $1 million toward the cost of settling the Lopez suit. The Reliance primary policy afforded coverage for the next $500,000 of the ultimate net loss. In contrast, excess insurers do not contribute until the primary policies are exhausted. St. Paul Mercury Ins. Co. v. Lexington Ins. Co., 78 F.3d 202, 209 & n. 23 (5th Cir.1996); Emscor Mfg., Inc. v. Alliance Ins. Group,
With the exhaustion of the primary policies, the COIL and USF & G excess policies were triggered, but the Lexington policy was not. Lexington provided coverage only for losses in excess of $2 million, and
Payment of these sums would cover $2 million of the $7 million settlement, and would trigger coverage under the Lexington policy, which provided coverage for losses in excess of an underlying amount of $2 million. Thus, the remaining $5 million of the Lopez settlement is apportioned between the COIL, USF & G, and Lexington policies on a pro rata basis. USF & G asks that we allocate the loss among the three excess insurers in proportion to the remaining coverage available under each policy, and although the Coastal parties contend that proration is not required because, in their view, all of their policies are excess to the USF & G policies, they do not dispute that this formula is otherwise appropriate. We therefore employ it.
When the Lexington policy was triggered, $4,583,333 remained of the coverage afforded by USF & G’s umbrella policy; $916,667 remained of COIL’s excess coverage; and Lexington’s $10 million of coverage was untouched. Together, the three policies afforded $15.5 million of coverage. To allocate the remaining $5 million of the Lopez settlement, we divide each insurer’s remaining coverage by the total remaining coverage, then multiply the resulting figure by $5 million. Using this formula, COIL’s remaining share of the loss is ($916,667/$15,500,000) X $5,000,000, which is equal to $295,699. USF & G’s share is ($4,583,333/$15,500,000) X $5,000,000, or $1,478,495. And Lexington’s share of the loss is ($10,000,000/$15,500,000) x $5,000,000, which equals $3,225,806. Adding together all of the amounts owed by USF & G — $1 million of primary coverage; $416,667 of the first $500,000 of excess coverage; and $1,478,495 of the remaining excess coverage — we arrive at a total of $2,895,162.
Thus, we sustain USF & G’s first issue and hold that USF & G is liable to the Coastal parties for the amount of $2,895,162, exclusive of interest, attorney’s fees, and costs.
D. Attorney’s Fees
In its final issue, USF & G challenges the trial court’s award to the Coastal parties of their reasonable and necessary attorney’s fees. We review a trial court’s award of attorney’s fees for abuse of discretion. Bocquet v. Herring,
The Coastal parties sought attorney’s fees under two different statutory provisions. Under Chapter 38 of the Texas Civil Practice and Remedies Code, the trial court must award attorney’s fees to a litigant who prevails in breach-of-contract claim if (1) the claimant was represented by an attorney, (2) the claimant presented the claim to the opposing party or the party’s agent, and (3) the opposing party did not “tender payment for the just amount owed” within thirty days after the claim was presented. See Tex. Civ. Prac. & Rem.Code Ann. § 38.001(8) (West 2008)
USF & G argues that because the Coastal parties failed to obtain a jury finding that USF & G breached its insurance contract, they are not entitled to recover attorney’s fees under Chapter 38 in connection with their breach-of-contract claims. In addition, USF & G contends that the Coastal parties did not present their claims and could not have done so before the jury returned a verdict in this case. This is so, USF & G argues, because the Lopez claimants sued both Coastal and Coastal’s parent company, and although COIL and Lexington insured both of these entities, USF & G did not insure Coastal’s parent company. USF & G asserts that the Coastal parties could not validly present their claim until the jury determined what percentage of the settlement funds were expended for release of the claims against USF & G’s insured.
USF & G then asserts that an award of attorney’s fees under the Uniform Declaratory Judgments Act “is improper for the same reasons” — even though attorney’s fees may be awarded under this Act to a party who presented no claims, and even where the declaratory judgment sought concerns a question of law on which no jury finding is necessary. According to USF & G, if the Coastal parties are not entitled to recover attorney’s fees under Chapter 38 for their breach-of-contract claim, they cannot recover fees under Chapter 37 under the Uniform Declaratory Judgments Act because “a party cannot use the Act as a vehicle to obtain otherwise impermissible attorney’s fees.” It is true that “when a claim for declaratory relief is merely tacked onto a standard suit based on a matured breach of contract, allowing fees under Chapter 37 would frustrate the limits Chapter 38 imposes on such fee recoveries.” MBM Fin. Carp. v. Woodlands Operating Co., L.P,
The problem with this argument is that it was USF & G that filed this suit for declaratory judgment, and attorney’s fees can be recovered by a party in a declaratory-judgment action even if that party asserts no other claim. See id. at 669 (“[T]he Declaratory Judgments Act allows fee awards to either party in all cases.”); Chappell Hill Bank v. Smith,
We overrule USF & G’s third issue. Because the Coastal parties were eligible for an attorney’s-fee award in connection with USF & G’s suit for declaratory judgment, we need not consider whether they would have been entitled to the same award in connection with their breach-of-contract claims. In this case, the parties stipulated that the amount of attorneys’ fees requested was reasonable and necessary. We therefore affirm the trial court’s award of $1,039,054.92 in attorney’s fees and costs notwithstanding any reduction of the damages award.
IY. Conclusion
Because the trial court erred in failing to prorate a portion of the covered loss among COIL, Lexington, and USF & G, we reverse the judgment and remand the case with instructions to the trial court to (a) reduce the damage award from $6 million to $2,895,162, and (b) reduce the interest award in accordance with the reduced damages.
ANDERSON, J., not participating on rehearing.
Notes
. Because it had a deductible equal to the policy limits, this insurance is a “fronting” policy. In effect, Coasted was responsible for paying the first $500,000 of any losses through its self-insured retention, after which Reliance would pay for $500,000 of the loss, and Coastal would reimburse Reliance for that amount through the $500,000 deductible.
. In this argument, USF & G did not address the claims of Coastal itself.
. This is the amount that would be due if the insured were to be found 60% liable for a $2.5 million judgment.
. This figure would be equal to Mid-Continent’s half of the judgment if the insured were found to be only 10% liable for the same $2.5 million judgment.
. The allocation USF & G proposes on appeal differs from the allocation it proposed in the trial court in that it has abandoned its earlier contention that the COIL policy must be exhausted before the USF & G umbrella policy is triggered.