Federated Mutual Insurance v. Grapevine Excavation Inc. , 197 F.3d 730 ( 1999 )


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  •                IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    _______________________________________
    No. 98-10904
    _______________________________________
    FEDERATED MUTUAL INSURANCE COMPANY,
    Plaintiff,
    versus
    GRAPEVINE EXCAVATION INC.; ET AL,
    Defendants,
    GRAPEVINE EXCAVATION INC.,
    Defendant - Third Party Plaintiff - Appellant,
    versus
    MARYLAND LLOYDS, a Lloyds Insurance Company,
    Third Party Defendant - Appellee.
    _________________________________________________________________
    Appeal from the United States District Court
    for the Northern District of Texas
    _________________________________________________________________
    December 1, 1999
    Before JONES and WIENER, Circuit Judges, and WALTER, District
    Judge.*
    PER CURIAM:
    CERTIFICATE FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH
    CIRCUIT TO THE SUPREME COURT OF TEXAS, PURSUANT TO THE TEXAS
    CONSTITUTION, ART. 5, § 3-C AND RULE 58 OF THE TEXAS RULES OF
    APPELLATE PROCEDURE
    *
    District Judge of the Western District of Louisiana, sitting
    by designation.
    TO THE SUPREME COURT OF TEXAS AND THE HONORABLE JUSTICES THEREOF:
    I.     STYLE OF THE CASE
    The style of the case in which certification is made is
    Grapevine     Excavation,        Inc.,    Defendant-Third        Party    Plaintiff-
    Appellant versus Maryland Lloyds, Third Party Defendant-Appellee,
    Case No. 98-10904, in the United States Court of Appeals for the
    Fifth Circuit, on appeal from the United States District Court for
    the Northern District of Texas. This case involves a determinative
    question of state law, and jurisdiction of the case in the federal
    courts is based solely on diversity of citizenship.
    II.      STATEMENT OF THE CASE
    Maryland    Lloyds     (“Maryland”)        issued     a    commercial   general
    liability insurance policy to Grapevine Excavation, Inc. (“GEI”).
    Under   the   policy,     Maryland        had   a   duty   to    defend    GEI   from
    proceedings instituted to recover damages covered by the insurance
    policy. We have now held that Maryland breached this duty and have
    rendered judgment in favor of GEI.              We have retained jurisdiction,
    however, for the limited purpose of deciding if GEI is entitled to
    recover   attorney’s      fees     that    it    incurred      in   obtaining    this
    favorable judgment against Maryland for breach of contract, i.e.,
    failure to provide a legal defense.
    Chapter 38 of the Texas Civil Practice and Remedies Code first
    sets forth the general rule that litigants can recover reasonable
    attorney’s fees incurred in a valid claim on, inter alia, a written
    -2-
    contract.1    It then lists five exceptions:
    This chapter does not apply to a contract issued by an
    insurer that is subject to the provision of:
    (1) Article 3.62, Insurance Code [this Article
    was repealed in 1991];
    (2) Section 1, Chapter 387, Acts of the 55th
    Legislature, Regular Session, 1957 (Article
    3.62-1, Vernon’s Texas Insurance Code) [this
    Article was repealed in 1991];
    (3) Chapter 9, Insurance Code;
    (4) Article 21.21, Insurance Code; or
    (5) the Unfair Claims Settlement Practices Act
    (Article 21.21-2, Insurance Code).2
    In Dairyland Mutual Ins. Co. v. Childress, an insurance
    company was held liable for its policyholder’s attorney’s fees by
    a state appellate court because the policyholder had successfully
    pursued an action for breach of an insurance contract.3   On appeal
    to the Supreme Court of Texas, the insurance company argued that it
    was not liable for attorney’s fees under the predecessor to Chapter
    38 of the Texas Civil Practice and Remedies code because, as an
    insurance company, it was shielded from liability for attorney’s
    fees by the predecessor to § 38.006.   The Texas Supreme Court held
    that:
    Dairyland is a county mutual insurance company and as
    such is not one of the insurors exempt from the
    provisions of Art. 2226 [the predecessor to Chapter 38 of
    the Civil Practice and Remedies Code]. See Tex. Ins.
    Code Ann. Art. 7.22. Therefore, it is not exempt from a
    1
    See Tex. Civ. Prac. & Rem. Code § 38.001(8).
    2
    See 
    id. § 38.006.
         3
    See 
    636 S.W.2d 282
    , 284 (Tex. App. —— Eastland, 1982).
    -3-
    claim for attorney’s fees pursuant to Art. 2226.4
    Texas appellate courts and this court have disagreed as to the
    significance of this statement.          We have interpreted the statement
    to imply that “an insurer who falls within the provisions of
    section 38.006 is exempt from the payment of attorney’s fees and
    that only those insurers who do not qualify for the exemption are
    subject to the payment of attorney’s fees.”5              By contrast, Texas
    appellate courts have held that no such implication was intended,
    and that, consistent with the decision of the court in Prudential
    Ins. Co. v. Burke,6 the purpose of the exceptions now codified at
    §   38.006   is   “to   exclude   only   those   claims   against   insurance
    companies where attorney’s fees [are] already available by virtue
    of other specific statutes.”7
    III.     QUESTION CERTIFIED
    In a policyholder’s successful suit for breach of contract
    against an insurance company that is subject to one or more of the
    provisions listed in § 38.006, is the insurance company liable to
    4
    See Dairyland County Mutual Ins. Co. v. Childress, 
    650 S.W.2d 770
    , 774 (Tex. 1983).
    5
    Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 
    975 F.2d 1130
    ,
    1133 (5th Cir. 1992); see also Lafarge Corp. v. Hartford Cas. Ins.
    Co., 
    61 F.3d 389
    , 402-03 (5th Cir. 1995).
    6
    
    614 S.W.2d 847
    (Tex. App. —— Texarkana), writ ref’d n.r.e.,
    
    621 S.W.2d 596
    (1981).
    7
    
    Id. at 850.
    -4-
    its   policyholder   for   reasonable    attorney’s   fees   incurred   in
    pursuing the breach-of-contract action, either under an Insurance
    Code provision listed in § 38.006, or under § 36.001 if application
    of one or more of those sections does not result in the award of
    attorney’s fees?
    IV.   CONCLUSION
    We disclaim any intention or desire that the Supreme Court of
    Texas confine its reply to the precise form or scope of the
    question certified.    The answer provided by the Supreme Court of
    Texas will determine the remaining issue in this case.
    -5-
    

Document Info

Docket Number: 98-10904

Citation Numbers: 197 F.3d 730

Judges: Jones, Wiener, Walter

Filed Date: 12/1/1999

Precedential Status: Precedential

Modified Date: 11/4/2024