American Centennial Insurance Co. v. Canal Insurance Co. , 36 Tex. Sup. Ct. J. 339 ( 1992 )

HECHT, Justice,

concurring.

I agree that if an excess insurance carrier is required to pay a portion of a judgment rendered against its insured in favor of a third party, it is equitably subrogated to its insured’s rights against a primary insurance carrier under G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm’n App.1929, holding approved), and Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656 (Tex.1987), for negligently investigating, preparing to defend, trying or settling the third party action. As the Court notes, this is already the rule in many jurisdictions. Ante at 482 & n. 3; see also North River Ins. Co. v. St. Paul Fire & Marine Ins. Co., 600 F.2d 721, 723 n. 3 (8th Cir.1979); Fireman’s Fund Ins. Co. v. Continental Ins. Co., 308 Md. 315, 519 A.2d 202, 204-205 (1987); see generally Annotation, Excess Carrier’s Right to Maintain Action Against Primary Liability Insurer for Wrongful Failure to Settle Claim Against Insured, 10 A.L.R. 4th 879, 881-87 (1981); Jane M. Draper, Liability Insurance: Excess Carrier’s Right of Action Against Primary Carrier for Improper or Inadequate Defense of Claim, 49 A.L.R. 4th 304, 305 (1986); Cherry D. Williams, A New Twist in Insurance Litigation: Stowers Suits by Excess Carriers Against Primary Carriers, 33 S.Tex. L.Rev. 1 (1992); Anthony M. Lanzone & Stephen G. Ringel, Duties of a Primary Insurer to an Excess Insurer, 61 Neb.L.Rev. 259 (1982). As a general rule, “[sjubrogation gives indemnity and no more.” Phipps v. Fuqua, 32 S.W.2d 660, 663 (Tex.Civ.App.—Amarillo 1930, writ ref’d) (citation omitted). Thus, an excess carrier may recover only the difference between what it was required to pay and what it would have paid but for the primary carrier’s negligent handling of the action, plus interest. It is not entitled to damages in its own right, or statutory or punitive damages. See InterFirst Bank Dallas v. United States Fidelity & Guar. Co., 774 S.W.2d 391, 399 (Tex.App.—Dallas 1989, writ denied) (subrogee limited to recovery of amount paid); McAllen State Bank v. Linbeck Constr. Corp., 695 S.W.2d 10, 24 n. 5 (Tex.App.—Corpus Christi 1985, writ ref’d n.r.e.) (subrogee not entitled to statutory damages under Texas Deceptive Trade Practices — Consumer Protection Act). The primary carrier is entitled to assert any defense available against either the insured or the excess carrier.

The excess carriers in this case assert claims against the primary carrier based upon negligence, gross negligence, breach of a duty of good faith and fair dealing, and violations of the Texas Deceptive Trade Practices — Consumer Protection Act, Tex.Bus. & Com.Code §§ 17.41-63, and article 21.21 of the Texas Insurance Code. Although the Court does not expressly consider which of these theories is available to the excess carriers by subrogation, I assume from its reliance on the Stowers and Ranger County cases, and would so hold, that the excess carriers’ only cause of action is for negligence. I agree with the Court that the primary carrier failed to establish as a matter of law that such an action is barred by limitations.

I also agree that an excess carrier in the circumstances described above is equitably subrogated to its insured’s rights against his attorney for negligent handling of the defense of the third party action. Ante at 484 n. 5; see generally Ronald E. Mallen & Jeffrey M. Smith, Legal Malpeactice §§ 7.7, 23.11 (1989). Like the primary carrier, the attorney would have any defense available against either the insured or the excess carrier, including the excess carrier’s unreasonable refusal to cooperate in the defense and settlement of the action. Thus, the attorney should not be exposed to any greater liability to the excess carrier than to his client, the insured. Again, the excess carrier is limited to an action for negligence, which, on the record before us, is not as a matter of law barred by limitations. By allowing the excess carrier an action against its insured’s attorney through equitable subrogation, the Court’s holding does not suggest that a client’s rights against his attorney may be assigned. See id.; Charles F. Herring, Jr„ Texas Legal Malpractice & Lawyer Discipline § 3.28 (1991).

With this understanding of the Court’s opinion, I join in the judgment.

PHILLIPS, C.J., and GONZALEZ, COOK and CORNYN, JJ., join in this concurring opinion.