Justia Insurance Law Opinion Summaries

Articles Posted in Supreme Court of Texas
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Cobalt International Energy partnered with three Angolan companies to explore and produce oil and gas off the coast of West Africa. Later, the federal Securities and Exchange Commission announced it was investigating Cobalt for allegations of illegal payments to Angolan government officials and misrepresentation of the oil content of two of its exploratory wells. This led to a significant drop in Cobalt’s stock price and prompted a class action lawsuit from Cobalt's investors, led by GAMCO, a collection of investment funds that held Cobalt shares. Prior to these events, Cobalt had purchased multiple layers of liability insurance from a number of insurance companies, collectively referred to as the Insurers in this case. When the allegations surfaced, Cobalt notified the Insurers, who denied coverage on the grounds that Cobalt's notice was untimely and certain policy provisions excluded the claims from coverage.In 2017, Cobalt filed for bankruptcy and began settlement negotiations with GAMCO. Eventually, a settlement agreement was reached, which stipulated that Cobalt would pay a settlement amount of $220 million to GAMCO, but only from any insurance proceeds that might be recovered. Cobalt and GAMCO then jointly sought approval of the settlement from the federal court and the bankruptcy court, both of which granted approval.The Insurers then filed a petition for a writ of mandamus, arguing that the settlement agreement was not binding or admissible in the coverage litigation, that Cobalt had not suffered a "loss" under the policies, and that GAMCO could not sue the Insurers directly.The Supreme Court of Texas held that (1) Cobalt had suffered a “loss” under the policies because it was legally obligated to pay any recoverable insurance benefits to GAMCO, (2) GAMCO could assert claims directly against the Insurers, and (3) the settlement agreement was not binding or admissible in the coverage litigation to establish coverage or the amount of Cobalt’s loss. The court reasoned that the settlement was not the result of a "fully adversarial proceeding," as Cobalt bore no actual risk of liability for the damages agreed upon in the settlement. The court conditionally granted the Insurers' petition for a writ of mandamus in part, ordering the trial court to vacate its previous orders to the extent they relied on the holding that the settlement agreement was admissible and binding to establish coverage under the policies and the amount of any covered loss. View "IN RE ILLINOIS NATIONAL INSURANCE COMPANY" on Justia Law

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This case involves a dispute between a homeowner, Mario Rodriguez, and his insurance company, Safeco Insurance Company of Indiana. After a tornado damaged Rodriguez's home, Safeco issued a payment of $27,449.88, which Rodriguez accepted. Rodriguez's counsel then informed Safeco that it owed an additional $29,500 and threatened to sue. Rodriguez sued Safeco, bringing several claims, including breach of contract and statutory claims under the Insurance Code. Safeco invoked the insurance policy’s appraisal provision and subsequently issued a check to Rodriguez for $32,447.73, which it viewed as full payment of the appraisal amount due under the policy. Safeco also paid an additional $9,458.40, which it claimed would cover any interest possibly owed on the appraised amount.The Supreme Court of Texas was asked to answer a certified question from the United States Court of Appeals for the Fifth Circuit: “In an action under Chapter 542A of the Texas Prompt Payment of Claims Act, does an insurer’s payment of the full appraisal award plus any possible statutory interest preclude recovery of attorney’s fees?” The Supreme Court of Texas held that the answer is yes. When an insurer has fully discharged its obligations under the policy by voluntarily paying the appraised amount, plus any statutory interest, in compliance with the policy’s appraisal provisions, section 542A.007 of the Insurance Code prohibits an award of attorney’s fees. This is because there is no remaining “amount to be awarded in the judgment to the claimant for the claimant’s claim under the insurance policy,” which means no attorney’s fees are available under section 542A.007(a)(3)’s formula. View "RODRIGUEZ v. SAFECO INSURANCE COMPANY OF INDIANA" on Justia Law

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The Supreme Court conditionally granted a writ of mandamus in this action brought by Plaintiff, Thalia Harris, against Defendant, her insurer, for underinsured motorist (UIM) benefits, holding that the trial court did not abuse its discretion by quashing requested discovery and by ordering Defendant's counsel to pay $2,000 as a sanction.Following a car collision, Plaintiff settled with the other driver for his policy limits and sued Defendant for UIM benefits. Defendant disputed the amount of Plaintiff's alleged damages and sought production from her primary care physician of Plaintiff's medical records spanning a period of ten years during which Plaintiff was involved in five other car accidents, some of which caused injuries similar to those Plaintiff sustained in the accident at issue. The trial court granted Plaintiff's motion to quash the discovery and for sanctions. The Supreme Court conditionally granted a writ of mandamus and ordered the trial court to vacate its order quashing deposition notices and ordering sanctions, holding (1) the trial court's order vitiated or several compromised Defendant's ability to present a viable defense at trial, and an appeal was not an adequate remedy; and (2) the trial court clearly abused its discretion by quashing Plaintiff's discovery requests. View "In re Liberty County Mutual Insurance Co." on Justia Law

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The Supreme Court reversed the judgment of the court of appeals in the underlying insurance dispute, holding that the insurance policy at issue did not incorporate the payout limits in an underlying service agreement.ExxonMobil Corporation hired Savage Refinery Services to work as an independent contractor at Exxon's Baytown refinery, and the parties memorialized their arrangement with a service agreement. Under the agreement, Savage promised to obtain at least a minimum stated amount of liability insurance for its employees and to name Exxon as an additional insured. Savage ultimately procured five different insurance policies, three of which were underwritten by National Union Fire Insurance Company and Starr Indemnity & Liability Insurance Company. After a workplace accident at the Baytown Refinery two injured employees sought compensation. Plaintiffs settled with Exxon for $24 million. When National Union and Starr denied Exxon coverage under their umbrella policies Exxon sued for breach of contract. The trial court ruled for Exxon. The court of appeals reversed, concluding that Exxon was not insured under National Union's umbrella policy. The Supreme Court reversed, holding that Exxon was an "insured" under National Union's umbrella policy and that the lower court's ruling with respect to Starr's bumbershoot policy was predicated on a similar error. View "ExxonMobil Corp. v. Nat'l Union Fire Insurance Co. of Pittsburgh, PA" on Justia Law

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The Supreme Court reversed in part the judgment of the court of appeals in this insurance dispute, holding that Tex. Ins. Code 705.051 does not displace the common-law rule that insurers may not avoid liability under an insurance policy based on a misrepresentation in an insurance application unless the insurer pleads and proves the insured intended to deceive or induce the insurer to issue the policy.At issue was whether the common-law scienter requirement was repugnant to the plain language of section 705.051, which provides that a misrepresentation in an application for an insurance policy does not defeat recovery under the policy unless the misrepresentation is of a material fact and affects the risks assumed. The court of appeals held that the common-law scienter requirement survived section 705.051's recodification, and therefore, summary judgment was not proper. The Supreme Court affirmed in part, holding (1) section 705.051 does not displace the common-law rule; and (2) as a matter of law, the insurer in this case was exempt from complying with the ninety-day notice provision in Texas Ins. Code 705.005. View "American Nat'l Insurance Co. v. Arce" on Justia Law

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The Supreme Court reversed the judgment of the court of appeals in this insurance dispute, holding that an insurance policy does not incorporate by reference the payout limits in an underlying service agreement.Two employees that were severely burned in a workplace accident at an ExxonMobil Corporation refinery sought compensation for their injuries and settled for a collective amount over $24 million. When two of Exxon's insurers, National Union Fire Insurance Company and Starr Indemnity & Liability Insurance Company, denied Exxon coverage under their umbrella policies Exxon sued both insurers for breach of contract. The trial court sided with Exxon, ruling that National Union was obligated to reimburse Exxon. The court of appeals reversed, concluding that Exxon was not insured under National Union's umbrella policy. The Supreme Court reversed, holding (1) Exxon was an insured under National Union's umbrella policy, and the court of appeals erred in ruling otherwise; and (2) because the court of appeals' holding with respect to Starr's policy was predicated on a similar error, judgment in favor of Starr must also be reversed. View "ExxonMobil Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA" on Justia Law

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The Supreme Court held that the Texas Insurance Code does not authorize a private cause of action by a physician against an insurer for payment of claims that accrued prior to 2020 and that Plaintiffs' claims for recovery in quantum merit and for unfair settlement practices failed as a matter of law.In each of the consolidated cases before the Supreme Court, Plaintiffs, groups of emergency medicine doctors outside of an insurer's provider network, brought suit against Defendant, the insurer, alleging that it did not pay them at the usual and customary rates for treating its insureds. Defendant moved for dismissal under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The district court granted the motion with respect to Plaintiff's implied contract and quantum merit claims and with respect to claims brought under the Emergency Care Statutes. On appeal, the court of appeals certified a question to the Supreme Court. The Supreme Court held (1) the Insurance Code does not create a private cause of action for claims under the Emergency Care Statutes; and (2) with respect to one case, the lower courts did not err in dismissing Plaintiffs' quantum merit and unfair settlement practices claims. View "Texas Medicine Resources, LLP v. Molina Healthcare of Texas, Inc." on Justia Law

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In this wrongful death and survival action brought against an automobile insurer, the Supreme Court reversed the judgment of the court of appeals reversing the trial court's judgment in favor of the insurer as to Plaintiff's negligence and gross negligence claims, holding that the court of appeals erred.An insured motorist was involved in a single car accident. The motorist's husband later arrived and began taking photos, but while he was engaged in that activity on the side of the road, he was struck by another vehicle and killed. Plaintiff, the motorist, brought this action alleging that the insurer had instructed her to take the photos and that her husband was complying with that instruction when the other driver hit him. Thus, Plaintiff argued, the insurer proximately caused her husband's death. The trial court granted summary judgment for the insurer on the negligence and gross negligence claims. The court of appeals reversed. The Supreme Court reversed, holding that Defendant did not have a duty to exercise reasonable care in providing post-accident guidance so as not to increase the risk of harm to its insured. View "Elephant Insurance Co., LLC v. Kenyon" on Justia Law

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The Supreme Court held that the Texas Workers' Compensation Act (TWCA) does not affect the enforceability of an additional-insured provision under the Texas Anti-Indemnity Act (TAIA).A general contractor's employee injured in an accident obtained a negligence judgment in Texas state court against the subcontractor that operated the crane (Berkel) and the company that leased the crane (Maxim). Berkel was an indemnity and Maxim was an indemnity for TAIA purposes because Berkel had provided Maxim with coverage as an additional insured. After the injured worker settled with Maxim, Maxim unsuccessfully sought reimbursement from Berkel's insurer (Zurich). The court of appeals reversed the judgment against Berkel, concluding that Berkel and the injured worker were "statutory co-employees" of the general contractor under the TWCA, and therefore, the TWCA provided the worker's exclusive remedy. In a separate suit in federal court, Maxim and Zurich disputed over whether the additional-insured coverage was enforceable. The Supreme Court answered a certified question by holding that the word "employee" in Tex. Ins. Code 151.103 bears its common meaning, which is not affected by whether the indemnity and injured employee are considered co-employees for purposes of the TWCA. View "Maxim Crane Works, LP v. Zurich American Insurance Co." on Justia Law

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In this insurance coverage dispute presenting two certified questions from the United States Court of Appeals for the Fifth Circuit the Supreme Court held that the Northfield exception to the "eight-corners rule" is permissible under Texas law. See Northfield Insurance Co. v. Loving Home Care, Inc., 363 F,3d 523 (5th Cir. 2004).Plaintiff brought the underlying suit alleging that Insured negligently drilled an irrigation well, damaging Plaintiff's land. Insured demanded a defense from its two liability insurers, BITCO General Insurance Corp., which defended under a reservation of rights, and Monroe Guaranty Insurance Company, which refused to defend. BITCO sued Monroe seeking a declaration that Monroe owed a defense to Plaintiff. The certified questions in this case related to the subsidiary issue of whether Texas law permits consideration of stipulated extrinsic evidence to determine whether the duty to defend exists when the plaintiff's pleading is silent about a potentially dispositive coverage fact. The Supreme Court held (1) the Northfield exception is permissible provided that the extrinsic evidence meets three conditions; and (2) the stipulation offered in this case may not be considered because it overlaps with the merits of liability. View "Monroe Guaranty Insurance Co. v. Bitco General Insurance Corp." on Justia Law