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Excess Under Writers at Lloyd's v. Frank's Casing Crew & Rental Tools5/27/2005
Argued September 24, 2003
JUSTICE OWEN delivered the opinion of the Court, in which CHIEF JUSTICE JEFFERSON, JUSTICE HECHT, JUSTICE MEDINA and JUSTICE GREEN joined. JUSTICE O'NEILL joined in Part I and Part II, C and D, and JUSTICE WAINWRIGHT joined in Part II, C.
JUSTICE HECHT filed a concurring opinion.
JUSTICE O'NEILL filed a concurring opinion.
JUSTICE WAINWRIGHT filed a concurring opinion.
JUSTICE BRISTER and JUSTICE JOHNSON did not participate in the decision.
The issue in this case is whether excess insurance carriers that disputed coverage but that settled third-party claims against their insured are entitled to recoup the settlement payments from their insured when it was subsequently determined that the claims against the insured were not covered. There was no express agreement allowing reimbursement. The trial court granted summary judgment for the insured, holding there was no right to reimbursement, and the court of appeals affirmed. Both courts concluded that this Court's decision in Texas Association of Counties County Government Risk Management Pool v. Matagorda County was controlling. Because the facts at issue in that case differ from those before us today, and because we are persuaded that a right of recoupment can arise even absent an insured's express agreement to reimburse settlement payments made by an insurer if there is no coverage, Matagorda County does not foreclose reimbursement in this case. We accordingly reverse the court of appeals' judgment and remand this case to the trial court to enter judgment in the excess underwriters' favor.
I.
Frank's Casing Crew & Rental Tools, Inc. fabricated a drilling platform at its facility in Louisiana for ARCO/Vastar. The platform was installed in the Gulf of Mexico and collapsed several months later. ARCO sued Frank's Casing, among others.
Frank's Casing had a primary liability policy with limits of $1 million, and Frank's Casing had obtained excess coverage of up to $10 million from Certain Companies Subscribing Severally But Not Jointly To Policy No. 548/TA4011F01 and Excess Underwriters at Lloyd's, London (whom we will call the excess underwriters). The excess underwriters issued reservation of rights letters in which they asserted that certain of ARCO's claims against Frank's Casing were not covered.
The primary carrier retained defense counsel for Frank's Casing. ARCO made a pre-trial settlement offer of $9.9 million, which Frank's Casing rejected. Two weeks before trial, the excess underwriters contacted ARCO directly, without Frank's Casing's knowledge, and attempted to settle only the claims the underwriters were willing to concede were covered. No agreement was reached. ARCO subsequently offered to settle all claims against all defendants for $8.8 million, which would have required Frank's Casing to contribute about $7.55 million. The excess underwriters proposed to Frank's Casing that the underwriters pay two-thirds of that amount, that Frank's Casing pay one-third, and that all coverage issues would be waived by the underwriters. In the alternative, the underwriters proposed that they pay $5 million and that all coverage issues be resolved in arbitration. Frank's Casing did not accept either proposal.
As trial approached, the excess underwriters retained counsel to associate with Frank's Casing and its primary carrier in the defense of ARCO's claims, as the underwriters were entitled to do under the excess liability policy. ARCO's suit against Frank's Casing proceeded to trial, and it readily became apparent that Frank's Casing was the target defendant. By the close of the second day
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