Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc.
246 S.W.3d 42 · Texas Supreme Court · 2008
Facts
Frank's Casing (insured) had excess liability coverage with Excess Underwriters (insurer). When ARCO sued Frank's, the underwriters disputed coverage but settled the $7.5 million claim after Frank's deemed it reasonable and demanded payment. The underwriters paid the settlement but reserved the right to seek reimbursement from Frank's, who did not consent to reimbursement.
Issue
Can an excess insurer imply a right to reimbursement from its insured for a settlement paid under a disputed policy, even if the insured consented to the settlement but not to reimbursement, and the insurer had no duty to defend? The court also considered whether Louisiana law on reimbursement differed from Texas law.
Holding
No, the court declined to recognize an exception to the rule requiring clear and unequivocal consent for reimbursement, affirming the lower court's judgment against the excess underwriters. The court also found no evidence that Louisiana law regarding an insurer’s right to reimbursement differs from Texas law.
Rule
An insurer settling a disputed claim can only seek reimbursement from its insured if it obtains the insured's clear and unequivocal consent to both the settlement and the insurer's right to seek reimbursement. Unilateral reservation-of-rights letters or equitable theories cannot create a reimbursement right not expressed in the policy or clearly agreed upon. Insurers are better positioned to manage coverage uncertainties by drafting policies to include reimbursement rights.
Read the full opinion on CourtListener
Case brief last reviewed . Prepared by CaseReader from the published opinion.