For the third straight year, Allen Smith was selected by the publishers of Texas Monthly magazine as one of its SuperLawyers. According to the publisher, “Our objective with SuperLawyers is to create a credible, comprehensive, and diverse listing of outstanding attorneys.” The selection process began several months ago, when over 60,000 Texas lawyers were invited to participate in the nomination process. Lawyers were asked to nominate the best attorney they’ve personally observed in action. Once all of the nominations were in, a specialized research department examined the background and experience of the candidates, evaluating 12 separate indicators of peer recognition and professional achievement. Evaluations were based upon information gathered from a variety of sources. Allen’s name can be found on pages 59 and 94 of the 2009 Texas SuperLawyers magazine, and on pages 56 and 70 of the Texas SuperLawyer supplement to the October issue of Texas Monthly magazine, which have recently hit the newsstands. Allen Smith is a shareholder at SettlePou and Chair of its Commercial Litigation practice group. He has been practicing law for 25 years, and has been Board Certified in Commercial Trial Law by the Texas Board of Legal Specialization for over 17 of those years.
Purchasers of real property secure title insurance to protect themselves against adverse claims to their land. Because mineral rights can be leased or deeded separate from the surface estate of the property, such rights can create an interest adverse to the property owner. Texas title companies and owners have been struggling with how to address mineral interests in title insurance since the recent resurgence of mineral development in Texas. Finally, the Texas government has settled the dispute.
On August 12, 2009 the Texas Department of Insurance adopted Order No. 09-0650 which introduced certain changes to the Basic Manual of Laws, Rates and Forms for the Writing of Title Insurance in the State of Texas. In doing so, the order significantly affects the way title companies and property owners address issues involving mineral rights in Texas title policies.
New Rule – Excepting to Minerals
First, the order creates a new procedural rule, Rule P-5.1, which permits title companies to generally except to insuring mineral rights in Texas title policies. It should be noted that when referring to mineral rights in the context of P-5.1, the term “minerals” includes “coal, lignite, oil, gas and all other minerals in, under and that may be produced from the land together with all rights, privileges and immunities relating thereto.”
P-5.1 permits a title company to except minerals from coverage of a title policy in two ways. First, a title company may specifically exclude minerals from the description of the insured estate in Schedule A, Item 2 of the policy. Also, P-5.1 allows a title company to generally except to minerals in Schedule B as a separate and distinct title exception, in addition to any mineral leases or severed mineral rights specifically listed in Schedule B of the policy.
Given the broad definition used for the description of “minerals” under P-5.1, landowners are exposed to significant risks which may arise from the future development of minerals which have either been leased to third parties or severed from the surface estate. However, while the title to minerals and related rights can be excepted from title coverage, a land purchaser can receive title protection for the improvements existing on, or to be built on, such land through endorsements.
New Endorsements Available.
Procedural rule P-5.1 requires title companies, upon request by the insured, to issue one or more applicable endorsements as provided in procedural rule P-50.1. Procedural rule P-50.1 introduces two new title endorsements that insure minerals otherwise excepted in the policy. These endorsements operate similarly, but are applicable in different situations.
The T-19.2 endorsement, titled “Minerals and Surface Damage Endorsement,” is available for real property of one acre or less, whether currently or intended to be improved for use as a one-to-four family residential property. The T-19.2 endorsement is also available for real property improved or intended to be improved for office, industrial, retail, mixeduse retail/residential or multifamily purposes. Any other type of real property not specifically permitted coverage under T-19.2 is eligible for the T-19.3 endorsement, also titled “Minerals and Surface Damage Endorsement.”
The two endorsements generally provide the same coverage. Each endorsement insures against loss by reason of damage to improvements resulting from the exercise of a right to use the surface of the land for the extraction or development of minerals. One notable feature of both endorsements is that they protect against damage to improvements existing not only as of the date of the policy, but also those improvements added to the property in the future. However, any mineral interest causing the damage to improvements must exist as of the date of the policy and be specifically excepted to in either Schedule A, Item 2, or in Schedule B. Notably, there is one minor difference between the T-19.2 and T-19.3 endorsements. While the T-19.2 generally protects against damage to all improvements (excluding only lawns, shrubbery or trees), the T-19.3 protects only against damage to permanent buildings. Therefore, any improvements that are not permanent buildings would receive protection only under the T-19.2. Each
endorsement requires the payment of a $50.00 premium.
Potential Cost Savings for the Insured
Prior to availability of the T-19.2 and T-19.3 endorsements, owners relied upon the T-19.1 endorsement for protection against any mineral exceptions. The mineral protections in the T-19.1 endorsement reflect those provided in the T-19.2. However, the T-19.1 endorsement provides additional protections beyond minerals, and in certain situations, those protections could exceed the needs for the specific property. Generally, if the insured property is unimproved and no applicable covenants or conditions are listed in the title commitment, a T-19.1 endorsement may not be the most cost effective method of mineral insurance. Since the title premium for the T-19.1 endorsement on nonresidential property is either 10% or 15% of the basic rate for a single issue policy, the cost of the T-19.1 would far exceed the $50.00 cost of a T-19.2 or T-19.3 endorsement.
Beginning November 1, 2009, title companies will begin generally excepting to minerals and all rights related to those minerals in Texas title policies. The new endorsements provided by procedural rule P-50.1 will be necessary to protect property owners from the risk of development of minerals on their properties.
By Brian H. Baker and Jeffrey J. Porter
Over the past several months, there have been several decisions and developments which are potentially significant to the practice of insurance law. These involve legal malpractice, employer liability, and claims against health care providers for premises liability. Always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.
Legal Malpractice: Probate Proceedings
In Smith v. O’Donnell, Executor of the Estate of Corwin Denney, 07-0697 (Tex. 2009), the Supreme Court extended its previous holding that an executor was in privity with a decedent’s attorney (and thus could sue for estate planning malpractice) to allow suit by an executor against a decedent’s attorney for the decedent’s survivable claims for legal malpractice against the attorneys who advised decedent with respect to the decedent’s actions while serving as executor to the estate of the decedent’s previously deceased wife.
Though the facts are complex, some 29 years after the alleged malpractice, the beneficiaries of the wife’s estate sued the estate of the deceased executor of the wife. The executor of the deceased executor settled the claims of the wife’s beneficiaries, and then brought suit for legal malpractice against the attorneys who had advised the deceased executor. Although the rule ostensibly remains in Texas that intended beneficiaries under a will or other third parties who lack privity with a deceased’s attorney cannot sue for malpractice in their own right, given the right approach and the right facts, there are ways around that prohibition which can ultimately allow a recovery against a decedent’s attorneys for malpractice, whether it be for malpractice involved in estate planning or for malpractice committed during the probate process.
No Liability of Employer to Third Party for Injuries due to Fatigue of Off-Duty Employee:
In Nabors Drilling, USA, Inc. v. Escoto, 06-0890 (Tex. 2009), the Supreme Court reiterated the general rule that employers in Texas do not owe a duty to third parties for the tortious activities of off-duty employees occurring off the work site. Although limited exceptions exist, e.g., when an employer sends an obviously intoxicated employee to drive home, and/or where the employee is using the employer’s vehicle, our Supreme Court held that an employer in Texas has no duty to prevent injury due to the fatigue of its off-duty employee or to train employees about the dangers of fatigue.
Thus the employer had no liability for an accident arising out of a fatigued employee’s use of the employee’s own vehicle while driving home from work after a tiring work shift, where the employer did not affirmatively exercise control over the tired employee. Because of the many factors which can contribute to an employee’s fatigue, including factors arising from the employee’s activities before reporting to work and while at work, the court held that imposing a duty on employers to prevent their employees from driving while fatigued is not reasonably justified, and concomitantly held that there is no duty of an employer to train employees about the dangers of fatigue.
Negligently Maintained Hospital Bed is Not a Healthcare Liability Claim:
In Marks v. St. Luke’s Episcopal Hospital, 07-0783 (Tex. 2009), the Supreme Court dealt with whether a hospital patient’s fall from a negligently maintained hospital bed was a healthcare liability claim under the “Medical Liability and Insurance Improvement Act” of Texas, which act precludes claims if the plaintiff fails to timely file an expert report substantiating the claim. Noting that the Texas medical liability statute was specifically intended to apply to situations having a “material adverse effect on the delivery of medical
and healthcare services in Texas,” the Supreme Court rejected the hospital’s contention that a healthcare liability claim includes any injury to a patient negligently caused by any unsafe condition at a healthcare facility.
Rather, the Supreme Court held that the patient’s fall from a defective hospital bed involved the failure of a piece of equipment which did not involve a “departure from the accepted standards of medical care or health care,” was merely “incidental to the patient’s care,” was more in the nature of a premises liability claim, and that the claim in this case based on the defectively assembled or maintained hospital bed was not governed by the Texas healthcare liability statute.
The result of this ruling was to obviate the need for any supporting expert medical report, avoided the damage caps contained in the Texas medical liability statute, and ostensibly would invoke insurance coverage available from the hospital’s CGL carrier rather than or in addition to the hospital’s medical malpractice carrier. Indeed, in cases alleging both premises liability and healthcare liability claims, both the CGL carrier and the medical malpractice carrier of a healthcare provider in Texas could see defense and apportionment issues arise.”
By H. Norman Kinzy