___________________________________________________________

INSURANCE LAW UPDATE by Rebecca Raper, Associate

___________________________________________________________

1. In re Allstate County Mutual Insurance Company, 85 S.W.3d 193 (Tex. 2002)

Appraisal provision in automobile policy is enforceable.

A group of insureds brought suit against various auto insurers to recover for breach of contract, fraud, and deceptive trade practices in connection with valuations for property losses. The insurers filed a plea in abatement and motion to invoke the appraisal provisions in the auto policies. The trial court denied the plea and motion and determined that the appraisal provisions in the policies constituted an unenforceable arbitration agreement.

The insurers filed a writ of mandamus with the Texas Supreme Court asking that the court direct the trial court to vacate its decision and order the plaintiffs to comply with the appraisal provisions. In determining that the trial court erred, the Texas Supreme Court held that the appraisal provisions were both enforceable and constituted a necessary means through which evidence on the claims could be established. The court determined that the insurers were entitled to enforcement of the appraisal provisions but that the case need not be stayed while the appraisals were being done.

2. Excess Underwriters at Lloyds v. Frank’s Casing Crew & Rental Tools, Inc. 93 S.W.3d 178 (Tex. App.-- Houston [14th Dist] 2002, pet. filed).

Because it did not procure the insured’s prior consent to its right to seek reimbursement, excess insurer was not allowed to seek equitable reimbursement after it settled a claim against its insured.

Insured was sued after a drilling rig it built in the Gulf of Mexico for a client collapsed. The insured was covered by both primary and excess policies. The excess insurer contested coverage and sent the insured a reservation-of-rights letter. The excess insurer offered to contribute $5 million to the settlement of the claim if the insured would agree to arbitrate coverage issues. The offer was refused. The plaintiff in the suit against the insured made a demand within the excess carrier’s policy limits. The insured demanded that the insurer pay the demand amount. Because it did not want to risk a larger judgment, the excess insurer paid the entire amount and informed the insured that it planned to seek reimbursement. On the day the excess insurer settled the claims it filed a declaratory action.

The trial court, citing the Texas Supreme Court’s decision in Texas Association of Counties County Government Risk Management Pool v. Matagorda County, 52 S.W.3d 128 (Tex. 2000), held that the insurer had no right to reimbursement inasmuch as the insured had never agreed to allow the insured to seek such. On appeal, the insurer argued that the Matagorda County decision was inapplicable because it dealt with a primary carrier, not an excess insurer. The court of appeals disagreed, holding that the Matagorda County rule requiring an insurer to seek equitable reimbursement only after obtaining "clear and unequivocal consent" of the insured applied to excess carriers as well as to primary ones.

3. Old American County Mutual Fire Insurance Company v. Renfrow, 90 S.W.3d 810 (Tex. App. -- Fort Worth 2002, no pet.).

Omnibus clause in commercial auto policy contains an implied scope of permission limitation. Permission to use a vehicle can be either actual or implied.

An employee of an oil field services company had his employer’s permission to take a company truck home for the evening because the employee was supposed to directly return the next morning to a well site at which the company was performing operations. The employee was aware of a company policy that prohibited any personal use of company vehicles. However, the employee chose to take the company truck on a personal errand that evening. The employee’s companion was killed in a single-vehicle accident that occurred during the personal errand. The family and estate of the deceased sued the employee and the company, but obtained a verdict against the employee only.

When the employee sought coverage for the judgment under the company’s commercial auto policy, the insurer filed a declaratory action to determine whether the employee was an insured at the time of the accident. The trial court granted summary judgment for the employee, finding that he was covered under the policy because he had permission to use the truck. The court of appeals reversed, holding that permission, for purposes of the omnibus clause, means "consent to use the vehicle at the time and place in question and in a manner authorized by the owner, either express or implied." Thus, whether or not the omnibus clause contains an explicit scope of permission limitation, one will be read into the clause.

The appellate court further determined that while the summary judgment evidence established that the employee did not have express permission to use the company truck for personal errands, the evidence established a fact question as to whether the employee had implied permission. Testimony showed that the employee had previously used company vehicles for personal purposes and that at least some of his superiors had reason to know that he did so. As such, the court could not rule out the possibility that permission to use the truck could be inferred from a course of conduct, including possible tacit acquiescence.

******************************************

If you have any questions about any of these cases or would like copies of specific cases, please contact Leslie Pitts (LPitts@fhmlaw.com) or Rebecca Raper (RRaper@fhmlaw.com).

******************************************

© Fanning, Harper & Martinson, P.C., March 4, 2003.

Fanning, Harper & Martinson, P.C.

Two Energy Square

4849 Greenville Ave., Suite 1300

Dallas, Texas 75206

Phone: (214) 369-1300

Fax: (214) 987-9649

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

Copyright © by Fanning Harper & Martinson P.C.. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.