Associated Insurance Service, Inc. v. Garcia , 307 S.W.3d 58 ( 2010 )

NOBLE, J.,

concurring.

I concur with Justice Cunningham’s well written opinion, but write separately to hopefully add further clarity. I do agree that tort claims arising out of a breach of contract are assignable, and that the assignment in this action was a valid assignment.

However, my first question was whether there was anything to assign to the Appel-lees, the Garcias. The bankruptcy of HIH left Star on its own for the Appellee’s liability claim for their injuries. However, Star avoided payment to Appellees, after admitting liability and arbitrating damages, by assigning its negligence claim against the brokers who sold Star the HIH policy. If the tortfeasor, Star, was not going to have to pay damages in exchange for its contract of assignment with the Appellees which included a covenant not to execute against Star “on any and all claims and awards,” then was there anything of value to assign to the Appellees that could lead to the satisfaction of their damage claims against Star? It appeared that their very agreement had removed the one thing which would require any insurance company to pay on behalf of its insured if covered — an actual loss. If Appellees agreed never to execute against Star for the damage award obtained when the two parties arbitrated, then why would Star’s insurance company have to pay if Star did not? Arguably, the underlying legal rationale requiring payment under Star’s contract of insurance with its carrier — an actual loss by Star — did not, and would not occur. By relieving the tortfeasor of the obligation to pay through the agreement not to execute, its privies would also appear to be relieved. Thus if Star’s insurance company was off the hook, what difference did it make if the Appellants (AON/Associated) had negligently obtained that insurance for Star?

Indeed, as the majority opinion points out, some jurisdictions do follow that reasoning.

However, Star’s claim against AON/Associated that the companies had negligently performed their professional duties to find a competent, appropriate insurance company to underwrite Star’s liability coverage needs is premised on the fact that the company that was engaged, HIH, failed. Thus, the relevant fact is not that Star, and thereby its carrier, did not pay, but that HIH could not cover Star’s loss. After admitting liability and arbitrating damages, Star did in fact have a loss that it was liable for (in the form of an arbitration award). In a manner of speaking, it paid that loss with the assignment to Ap-pellees of its negligence claim against AON/Associated, which allows the Appel-lees to stand in the shoes of Star to prosecute that negligence claim. The damages in the negligence action would encompass the amount Star owes to the Appellees. Essentially, Star has allowed the Appellees to collect the money Star owes them through the negligence suit, and the Ap-pellees have agreed to be paid by whatever they get from the assigned cause of action. This in no way means that Star does not owe these damages, but just that the Ap-pellees hope they can collect them from the parties Star claims actually caused the loss.

Star is no less liable after the assignment than it would have been if its insurance company was solvent. Star is liable whether the Appellees collect from it or not. Absent the assignment, if the Appel-lees chose, they could sit on the judgment up until limitations ran and execute at any time if Star became adequately solvent. Thus, Star has not been released, but has traded its cause of action against Appellants in lieu of paying the judgment itself, in exchange for Appellees’ promise not to execute on the judgment Star would otherwise have to pay. The relevant fact is that Star is liable and must secure the payment of judgment damages in some way. And even though the Appellees have agreed to pursue Star’s negligence claim against AON/Associated in lieu of collecting directly from Star, the judgment against Star remains actionable. The Appellees could still seek to execute the judgment against Star, even after the agreement; but because of the agreement, Star would have an equal and opposite breach of contract claim that would cancel out any execution of the judgment. A judgment against a party is not released until it has been satisfied, which will not happen in this case until after the Appellees pursue the claim against the Appellants.

Appellees may well not be able to obtain a judgment against AON/Associated, or may receive a judgment less than the arbitrated damages. Generally, this would leave Star hable for any excess amount. But here, the language of the agreement is broad, and appears to foreclose the Appel-lees from going back against Star if the claim against AON/Associated fails or falls short. Nonetheless, Star remains legally liable for the judgment amount because it was dismissed without prejudice, as a term of the assignment contract. Not until that suit is final will the case against Star be dismissed with prejudice.

This does result in Star never having to pay on the judgment, but Star will not be released from the judgment until the negligence suit is concluded, and the Appellees then dismiss their suit against Star with prejudice.

It is the legal liability of a party that triggers that party’s right to coverage under a contract of insurance it might have, not the amount of damages or whether they are ever paid. If the negligent acts of middlemen brokers caused a failure of the liable party’s coverage, then the liable party has a cause of action against the brokers, and can treat that cause of action as valid assignable property.

Otherwise, Star, if able, would have to pay the judgment, then sue the brokers to recover its loss caused by their negligent acts. But when a party is not able to satisfy the judgment, this approach doesn’t work. While creative, the assignment in this case was neither fraudulent nor collusive. Star had every right to evaluate and admit liability, and in fact for at least part of the suit, was represented by counsel hired by HIH. The damages were arbitrated according to the terms of Star’s insurance contract, and were fully presented to a neutral arbitrator. Appellees, as the injured parties, cannot be faulted for choosing a route that appeared to them most likely to result in payment of their damages. Under these unusual facts, the approach taken seems the most direct route to final resolution of the case.