As you can see from the below introductions of Kent Williamson and Mark Craig, our insurance practice is expanding and we are pleased to have Kent and Mark's expertise available to the division.
That said, there have been a number of recent court decisions which are of significance to the practice of insurance law. These include cases dealing with the CGL contractual liability exclusion, exemplary damages, subrogation rights in a settlement contract, and mold coverage, among others.
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.
CGL – Contractual Liability Exclusion:
In Gilbert Texas Construction, LP v. Underwriters at Lloyds, London, 08-0246 (TX 2010), the Texas Supreme Court continued to refine its earlier 2007 LamarHomesdecision and dealt with the scope of the ISO form CGL policy exclusion for contractual liability. Drawing on the plain language of the exclusion, our Supreme Court held that the language of the exclusion applies without qualification to exclude coverage for all liabilities assumed by contract except for two situations:
- policy – defined types of contracts, including an "insured contract," e.g., indemnity agreements by which the insured assumes another's tort liability; and
- situations in which the insured's liability for damages would exist absent the contract, i.e., situations in which the insured's liability for damages does not depend solely on obligations assumed in a contract.
Exemplary Damages – Standards for Review on Appeal:
In Bennett v. Reynolds, 08-0074 (Tex. 2010), the Supreme Court clarified the standards for reviewing exemplary damage awards in Texas in view of the increasingly strict due-process scrutiny mandated by recent United States Supreme Court decisions.
This case involved the wrongful conversion and sale of 13 cattle for $5,327.00, a sum which the court found to constitute "substantial" injury to the plaintiff justifying imposition of exemplary damages, and which the civil jury also found to constitute theft.
Awards for exemplary damages based upon either gross negligence and for statutorily defined "malice" are subject to Texas statutory "caps," except when felonies such as theft and/or other enumerated crimes are found to exist, in which case an award of exemplary damages is not subject to the statutory "caps." However, the Court noted that even absent a "cap," such awards are nonetheless constrained by due process rulings of the United States Supreme Court which normally will require a "single digit" ratio between the amounts of exemplary damages and actual damages.
Following on, our Supreme Court utilized language which leads one to the conclusion that even ratios of exemplary damages to actual damages as low as 4 to I will, absent extraordinary circumstances, be difficult to sustain on appeal.
Further our Supreme Court admonished Texas courts when awarding or reviewing exemplary damage awards to rigorously apply the three-part GorelCampbell test requiring detailed factual analysis into (I) the degree of reprehensibility of a defendant's conduct, (2) .the disparity between actual or potential harm suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and civil sanctions and criminal penalties legislatively authorized or imposed in comparable factual situations.
The Texas Supreme Court thus reversed the two instant judgments for exemplary damages which were 47 times actual damages as to one defendant and 188 times actual damages as to another defendant and remanded those judgments for remittitur proceedings.
Subrogation – "Made Whole" Doctrine- Allocation of Settlement Proceeds:
Elaborating on its 2007 Fortis Benefits v. Cantu decision, the Supreme Court dealt with subrogation rights versus allocation of settlement dollars in Texas Health Insurance Risk Pool v. Sigmundik, 09-0772 (Tex. 2010).
Reiterating its earlier decision in Fortis Benefits, the Supreme Court noted that a contractual right to subrogation prevails over the "made whole" limitation applicable to equitable subrogation rights, and held that where a case was settled, a trial court abused its discretion when it allocated settlement monies between wrongful death claimants and their decedent's estate/subrogor in such fashion as to cut out any recovery by a subrogee asserting a contractual lien to subrogation. Although a trial court is free to exercise some discretion in dividing the settlement funds, it is thus an abuse of discretion for a trial court to award the contractually-based-lien subrogee nothing from the settlement
In Personam Jurisdiction —Specific jurisdiction:
In Zinc Nacional, S.A. v. Bouche Trucking, Inc., 09-0734 (Tex. 2010), the Supreme Court dealt with the question of whether a non-resident defendant has minimum contacts with Texas for purposes of establishing specific jurisdiction (as opposed to general jurisdiction) by using a third party trucking service to transport its goods through Texas to an out-of-state customer, and concluded that the mere fact that goods have traveled into a state, without more, does not establish the minimum contacts necessary to subject a manufacturer to personal jurisdiction within the state insofar as specific jurisdiction is concerned.
Accordingly, the court remanded the case to the Court of Appeals to determine whether general jurisdiction was, appropriate.
Premises Liability — Slip and Fall Caused by Ice:
In Scott and White Memorial Hospital v. Fair, 08-0970 (Tex. 2010), the Supreme Court dealt with a premises liability case involving a fall which occurred on ice as a result of a winter storm. The court held that naturally occurring ice which accumulates without the assistance or involvement of unnatural contact is not an unreasonably dangerous condition sufficient to support a premises liability claim, even where a premises owner utilized chemical deicers, which caused the ice to melt, but allowed the water to thereafter re-freeze naturally.
Homeowner's Policy —Coverage for Mold:
In State Farm Lloyds v. Page, 080799 (Tex. 2010), the Supreme Court interpreted provisions of the Texas Standard Homeowner's Policy Form B, and held that coverages contained therein (I) afford coverage for mold damage to personal property caused by plumbing leaks, but (2) that the policy does not cover mold damage to the dwelling itself caused by those same leaks.
In Waffle House, Inc. v. Williams, 07-0205 (Tex. 2010), the Supreme Court dealt with claims for sexual harassment–….. – under (1) common law theories of negligent supervision and retention of the harassing employee, and (2) the Texas Commission on Human Rights Act (TCHRA). The court resolved the case by holding that TCHRA is a legislative anti-harassment remedy which is preemptive of the common law when the complained-of negligence is entwined with the complained-of sexual harassment. Thus, where the gravamen of a plaintiff's case is TCHRA-covered harassment, the Act forecloses recovery of any common law theory predicated on the same underlying sexual-harassment facts, in part because TCHRA provides different standards of liability, limitations periods, administrative review procedures, elements, defenses, and remedies than those involved in a common law negligence claim.
Noting that there is no common law tort for sexual harassment in Texas, the court also held that a common law claim for negligence in the supervision and retention of an offending employee cannot stand absent the employee having committed a common law tort. Since sexual harassment is not a recognized common law tort in Texas, a common-law negligent supervision and retention claim based on sexual harassment also failed.