IN THE SUPREME COURT OF TEXAS
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No. 05-0261
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Mid-Continent =
Insurance=20
Company, Appellant,
v.
Liberty Mutual =
Insurance=20
Company, Appellee
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On Certified Questions from the =
United=20
States
Court of Appeals for the Fifth=20
Circuit
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Argued October 18,=20
2005
=20
Justice=20
Willett, concurring.
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I concur with the Court=92s answer to the first certified =
question and with=20
the Court=92s analysis. I write only to provide some additional thoughts =
on why=20
Texas law=20
should not recognize a claim by one primary insurer against another in =
these=20
circumstances.
=20
At the outset I emphasize my belief that we must confine =
ourselves to the=20
factual circumstances presented. This Court frequently finds itself =
deciding=20
high-stakes insurance law questions, which, for me at least, can be =
fiendishly=20
difficult. With some regularity these questions originate in the form of =
certified questions from the United States Court of Appeals for the =
Fifth=20
Circuit. The Fifth Circuit appreciates that the outcomes of these cases =
often=20
pivot heavily on the underlying facts, and here it has continued its =
excellent=20
practice of providing us with a detailed compendium of the relevant =
facts. Some=20
insurance cases present recurring issues, and, of course, courts must=20
scrupulously apply governing legal principles, but it is indisputable =
that case=20
outcomes are often driven by unique factual circumstances.
=20
Here, the body of precedent presenting similar but not identical =
issues=20
deserves our respect and most careful analysis, but with an appreciation =
of the=20
factual differences between those cases and the one before us now. We =
should=20
start with the principle that Mid-Continent=92s primary, if not =
exclusive,=20
contractual and common-law duty is to its insured, Kinsel Industries. Mid-Continent did not deny =
coverage or=20
sit idly on the sidelines; it participated in the defense but disputed =
Liberty=20
Mutual=92s subjective assessment of what the =
case was=20
worth. I see no basis for concluding that Mid-Continent, by taking a =
hard line=20
in negotiations, breached a duty to Kinsel=97to defend,=20
to exercise good faith, to settle within policy limits, or any other =
contractual=20
or common-law duty an insurer might owe its insured. Kinsel purchased insurance and got what it paid =
for, a legal=20
defense of the claim against it and a settlement within policy limits, =
both=20
funded by its insurers. Not surprisingly, =
Liberty=20
Mutual, with Kinsel as its named (as opposed =
to=20
additional) insured and vastly greater exposure because of its excess =
policy,=20
paid most of the settlement.
=20
Insurance companies are not eleemosynary institutions, and where, =
as=20
here, the insured is protected throughout the litigation process, =
insurers are=20
entitled to exercise their business judgment in deciding whether to =
settle a=20
claim and for how much. I see no reason for courts in these =
circumstances to=20
prohibit insurance companies from engaging in sharp negotiations with =
each=20
other. To hold that primary carrier A has a claim against primary =
carrier B,=20
because a =93reasonable=94 insurer would have chipped in more toward the =
settlement,=20
would recognize a cause of action that is unnecessary for the protection =
of=20
insured parties or insurance companies. Again, here the insurance =
companies=20
provided the protection for which Kinsel =
bargained. As=20
for protecting insurance companies from each other, I would not =
recognize that=20
one owed a duty to protect the business interests of the other. I would =
treat=20
their negotiations inter se in this case as a matter best left to the =
business=20
world. Insurance companies that can successfully engage in such =
negotiations=20
stay in business, as they should as long as they fulfill their duties to =
their=20
clients.
=20
As a further reason for not recognizing the cause of action =
Liberty=20
Mutual pursues, claims of this sort present an almost impossibly complex =
challenge for the fact finder. A jury considering such a claim would =
have to=20
decide what the reluctant insurer should have paid in settlement, =
based,=20
I suppose, on (1) considering the range of awards that a jury hearing =
the=20
underlying claim against the insured might have awarded (given =
all manner=20
of tangible and intangible factors that inform such an analysis), (2) =
arriving=20
at an expected value of the judgment in the underlying case, and (3) =
factoring=20
into the calculus the implications of the Stowers doctrine and what a reasonable =
insurer would=20
do given this barrage of complicated information.
=20
So I would deny Liberty Mutual=92s =
claim. The=20
result would be different if language from the Mid-Continent policy =
required it=20
to pay more of the settlement. But I see nothing in the policy obliging=20
Mid-Continent to do so, and I agree with the Court that the =93other =
insurance=94=20
clause of the Mid-Continent policy, especially when considered with the=20
=93voluntary payment=94 and =93no action=94 clauses, precludes a claim =
by Liberty Mutual=20
against Mid-Century for contribution. I also see no claim based on =
subrogation,=20
whether contractual or equitable, since Liberty Mutual=92s right of subrogation must be premised =
on the=20
concept of standing in the shoes of the insured, Kinsel, and here Kinsel has no=20
complaint against Mid-Continent.
=20
The result might also be different in a case involving a primary =
insurer=20
and an excess carrier, where the primary alone provided the defense and =
failed=20
to settle within its policy limits, if a judgment had been entered =
against=20
and paid in part by Kinsel and Mid-Continent =
refused=20
to cover its proportionate share of the judgment,
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_______________________________________
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Don R. Willett
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Justice
Opinion delivered: =
October 12,=20
2007
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