RSR Corporation v. Great Northern Ins, et a ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-11317
RSR CORP.; QUEXCO INC; QUEMETCO, INC.;
QUEMETCO METALS LIMITED, INC.,
Plaintiffs-Counter Claimants-
Appellants,
versus
GREAT NORTHERN INSURANCE CO.,
CHUBB & SON, INC.,
Defendants-Counter Defendants-
Appellees.
Appeal from the United States District Court for
the Northern District of Texas
(USDC No. 3:99-CV-961)
_______________________________________________________
September 11, 2002
Before REAVLEY, BARKSDALE and CLEMENT, Circuit Judges.
PER CURIAM:*
RSR Corp., the insured, appeals the dismissal of its claims against Great Northern
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
Insurance Co., its insurer, and Chubb & Son, an insurance broker. We affirm the judgment of the
district court for the following reasons:
1. RSR contests the district court’s Rule 12(b)(6) dismissal of its claim against its
insurer under Texas Insurance Code. RSR has failed to identify the “unfair
settlement practice” that is prohibited by Article 21.21 § 4, or the Texas Supreme
Court’s interpretation of that statute, in which Great Northern engaged. See
Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co., 77 S.W.3d 235, 262 (Tex. 2002).
The district court did not err by dismissing RSR’s Article 21.21 claim.
2. RSR complains of the district court’s order of summary judgment on its breach of
contract claim because Great Northern initially sought reimbursement for the
settlement amount, failed to investigate the claim, and settled over RSR’s
objections. The insurance policy at issue contained a clause allowing the insurer to
settle any claim or dispute it “deem[ed] expedient.” Although Great Northern did
not have the right to conduct RSR’s defense once it disputed coverage, it did not
lose the right to settle the case within policy limits for a reasonable amount. See
Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 913-914 (Tex. App.--Dallas 1997,
writ denied) (“This [‘deems expedient’] language unambiguously vests [the
insurer] with an absolute right to settle third-party claims in its own discretion and
without [the insured’s] consent... .”).
3. RSR contends the district court erred by granting summary judgment on its
allegation that Great Northern negligently settled the claims against it. In a third-
party insurance case, an insurer must accept a reasonable settlement offer from the
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claimant within or at policy limits if a prudent insurer would accept the offer in the
same circumstances. See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15
S.W.2d 544 (Tex. Comm’n App. 1929, holding approved). An insurer’s liability in
negligence must be founded upon a breach of the duty articulated in Stowers. See
Ford v. Cimarron Ins. Co., 230 F.3d 828, 832 (5th Cir. 2000). Great Northern
settled the claims against RSR within policy limits for a reasonable amount, and
thus the district court did not err in finding that Great Northern did not breach its
Stowers duty as a matter of law.
4. Finally, RSR has failed to establish that it has been damaged by Great Northern’s
settlement of the claims. There is no evidence that Great Northern settled for an
excessive amount, regardless of the effect of the settlement on the availability of
funds to satisfy future claims arising from the same circumstances. The
reasonableness of a settlement turns on whether a reasonably prudent insurer
would have settled the claim considering solely the merits of the claim and the
potential liability of the insured. Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d
312, 316 (Tex. 1994). The case settled within policy limits and Great Northern
has paid RSR for all of the defense expenses it incurred. As damages are a prima
facie element of each of RSR’s claims, summary judgment was proper on this
ground alone.
The judgment of the district court is AFFIRMED.
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