Excess Insurance

Irving insurance lawyers will see situations where someone has “excess insurance.” There are many variables that can result from these situations. A 2000, Texas Supreme Court case styled, Keck, Mahin & Cate v. National Union Fire Insurance Company, is an opinion to read to see one of the variables.
Granada Food Corp. held one million in primary insurance issued by the Insurance Company of North America as well as nine million in excess insurance issued by National Union. Wolf Point Shrimp Farm, a supplier, sued Granada and the Keck law firm was hired to defend the company. The supplier demanded $3.6 million to settle the lawsuit, but North America, National Union, and Keck were unwilling to settle.
Errors by Keck and the insurance companies compromised Granada’s defense before trial. Shortly before trial, Granada executed a release of malpractice claims against Keck in exchange for Keck’s forgiveness of Granada’s unpaid fees stemming from unrelated matters. On the first day of trial North America tendered its policy limits. National Union then took over the defense and ultimately settled for seven million.
National Union then sued North America and Keck for negligence. National Union also sued North America for gross negligence and violations of the Texas Insurance Code. National Union asserted these claims through equitable subrogation to recover the money it had paid to settle the underlying suit. North America cross claimed for legal malpractice against Keck. North America and Keck both asserted contributory negligence/ comparative responsibility as affirmative defenses; Keck also asserted a release agreement between it and Granada, barred the suit. The trial court:
1) granted summary judgment to Keck on the release issue;
2) granted summary judgment to National Union on the comparative responsibility issues;
3) granted partial summary judgment to North America on the gross negligence and statutory issues; and 4) severed the insurers’ claims against Keck and rendered a take-nothing judgment.

The insurance companies appealed, and the court of appeals reversed in part, holding that:
1) the release was not a bar to suit and that 2) Keck and North America could admit evidence of National Union’s negligent actions after North America’s tender as a defense.
Keck filed this appeal.
The Texas Supreme Court affirmed the appeals court on both release and comparative responsibility issues.
On the release issue, the court of appeals construed the release agreement narrowly, limiting it to claims arising from past business with Granada paid for Keck’s services.
With regard to the comparative responsibility issue, the Court applied the “general rule” that an excess insurer has no duty to defend until its coverage is triggered by the exhaustion of the primary insurer’s policy limits. This Court agreed with the Court of Appeals that National Union’s failure to participate in the defense, evaluate settlement offers, or exercise reasonable care in the investigation of Wolf Point’s claims prior to North America’s tendering of policy limits is not admissible as evidence of comparative fault. But while National Union did not have a duty to defend until North America’s tender, it was obligated not to disrupt or harm its insured’s defense, and this Court held that evidence of disruption or harm would be admissible. Additional, the Court liberally applied the reasonable belief rule and rejected Keck’s argument that National Union’s settlement was voluntary.

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