Enough is Enough: Fifth Circuit Holds Duty to Defend Does Not Include Costs of Prosecuting Insured’s Fee-Dispute Counterclaim

Aldous v. Darwin National Assurance Co., No. 16-10537 (5th Cir. Mar. 16, 2017), presents a thicket of coverage issues. However, the clearest and most significant one for the insurance industry is that the duty to defend, under Texas law, does not extend to the cost of prosecuting an insured’s counterclaim. This coverage litigation started as an attorney-client dispute over the non-payment fees and then morphed into a legal malpractice action. Darwin National Assurance Co. insured Aldous under a professional liability
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Below Limit Settlement Obliterates Excess Coverage

In Martin Resource Management Corporation v. AXIS Insurance Company, an excess insurer was held by the United States Court of Appeals for the Fifth Circuit to have no obligation to indemnify its insured under the terms of its excess insurance policy after the insured settled with its primary insurer for an amount below the primary policy limits. The insured had sought coverage from both its primary and excess policies for the cost of defending underlying litigation in Texas state court.
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Texas Supreme Court Holds that EPA Proceedings Constitute “Suit”

In McGinnes Industrial Maintenance Corp., v. The Phoenix Ins. Co., the Texas Supreme Court answered a certified question from the Fifth Circuit on whether a U.S. Environmental Protection Agency proceeding against an alleged polluter constitutes a suit under an insurance policy, warranting defense coverage. In a 5-4 decision, the Texas court determined that the EPA proceedings constitute suits against and found that the insured could now pursue claims against the insurers for defense costs. The policyholder sought a ruling allowing
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Policyholder Required to Pay Back Insurer $900,000 Based on Misrepresentations

A Texas appellate court upheld a substantial jury award against a policyholder on fraud claims in Jackson Fulgham v. Allied Property and Casualty Ins. Co.. The insurer counter-sued the policyholder real estate firm over fraudulent claims it had made about hailstorm damage, resulting in a $900,000 jury award in favor of the insurer. The appellate court upheld the verdict claiming that the evidence supported such finding. In 2009, the policyholder made a claim under its property insurance policy for damage to the
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No Sanctions for Policyholder Discovery Abuses

An insurer brought a claim for sanctions in dismissing a property owner’s lawsuit over coverage for damage from Hurricane Ike over discovery abuses. The insurer sought what is commonly known in Texas as “death-penalty” sanctions over the discovery abuses. The lower court had granted the sanctions, but this court found that the trial court had imposed excessive sanctions when it dismissed the plaintiff’s pleadings against the insurer and claims adjuster. This court determined that, while the purported discovery sanctions may
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Texas Federal District Court Holds Both Professional Liability Insurers on the Hook for Insured’s Defense

In Corinth Investors Holdings, LLC v. Evanston Insurance Co., 2015 U.S. Dist. LEXIS 36273 (E.D. Tex. Mar. 24, 2015), the U.S. District Court for the Eastern District of Texas held that two professional liability insurers were both on the hook to defend an insured in an action where notice of the claim could have been received under separate, concurrent insurance policies issued by the two entities. Corinth Investors Holdings, LLC, d/b/a Atrium Medical Center was the named insured under a
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Texas Supreme Court Rejects Additional Insured Coverage for BP To the Tune of $750 Million

In a decision handed down by the Supreme Court of Texas on Friday, the court determined that BP was not entitled to additional insured coverage under several insurance policies issued to Transocean by a variety of insurers.  In re:  Deepwater Horizon, No. 13-0670 (Tex. Feb. 13, 2015).  The opinion also provides significant insights regarding the relationship between insurance and indemnity as risk transfer mechanisms, namely, that:  (1) a named insured can purchase a greater amount or scope of coverage for
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