A Texas Supreme Court decision to review its ruling giving carriers the ability in certain cases to pay a settlement and then seek a refund from the insured has set up a major battle between two groups often on the same side in civil litigation–business interests and insurance companies.
The top Texas court decided in May by a 7-0 decision to reverse lower court rulings and give an insurer that funds a settlement of third-party claims against a policyholder the right to later attempt to recoup the settlement payment from the insured.
In Excess Underwriters at Lloyd's, London, et al., vs. Frank's Casing Crew & Rental Tools Inc., the high court allowed Lloyd's and first-party carriers to recoup payment by asking a court to make a “no coverage” determination. The payment in the case was $7.5 million. Oral arguments in the case will be held Feb. 15.
The Texas Supreme Court agreed to review the ruling based on a brief by lawyers for Frank's Casing. The case has been pending in the Texas Supreme Court since August 2002.
Anderson Kill & Olick, P.C., which represents policyholders in insurance coverage disputes, submitted a friend-of-the-court brief on behalf of Frank's Casing while representing United Policyholders–a California-based nonprofit association of insurance consumers.
John Ellison, who wrote the Anderson Kill brief, said the case is important nationally because “ever since the Texas Supreme Court ruled on Frank's Casing, policyholders have expressed broad-based concern that the decision, by enabling insurance companies to seek to recover claims they settled without a policy provision granting that right and any advance notice to the insured entity, creates an unacceptable new burden of risk for policyholders.”
He added that “since Texas is a bellwether state in insurance law, policyholders nationwide applaud the court's willingness to reconsider the full implications of the earlier decision.”
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