Opinion

the Hartford Accident & Indemnity Company v. Texas Hospital Insurance Exchange Davis & Davis, P.C. And C. Dean Davis

Court: Texas Court of Appeals, 3rd District (Austin)
Filed: Sep 11, 1998
Status: Published
Cited by: 0 cases
Authority: More cited than 35.8%

final judgment is not subject to collateral attack unless the judgment complained of is void

How later courts described this case

final judgment is not subject to collateral attack unless the judgment complained of is void

Written by the judges who cited it.

The opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-97-00562-CV

The Hartford Accident & Indemnity Company, Appellant

Texas Hospital Insurance Exchange; Davis & Davis, P.C.; and C. Dean Davis, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO. 91-2726, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

Appellant, the Hartford Accident Indemnity Company ("Hartford") appeals a

summary judgment rendered in favor of appellees, Texas Hospital Insurance Exchange ("THIE"),

the law firm of Davis & Davis, P.C., ("Davis & Davis") and C. Dean Davis. (1) Following the birth

of a seriously injured child, the mother filed a medical malpractice suit against Methodist Hospital

Health Care Systems, Inc. ("Methodist"), among others. (2) THIE, as Methodist's primary insurer,

retained Davis & Davis as defense counsel. After a hearing regarding discovery abuses by

defendants, the trial court ordered "death penalty" sanctions which, in addition to other

punishment, struck all of Methodist's pleadings. Subsequently, Hartford, the excess insurer of

Methodist, chose to settle the Harris suit instead of appealing the sanctions order. Proceeding as

Methodist's subrogee, Hartford then brought suit against THIE and Davis & Davis , contending

that appellees' negligent failure to settle the Harris case and negligent handling of Methodist's

defense in the Harris case forced Hartford to contribute $5.5 million to the Harris settlement.

THIE and Davis & Davis moved for summary judgment. Without specifying its reasons, the trial

court granted appellees' motions. Hartford now appeals in fourteen points of error. We will

affirm.

STATEMENT OF FACTS

The Underlying Suit: The Harris Case

Dedrick Harris was born at Nan Travis Memorial Hospital ("Nan Travis"), a

hospital managed by Methodist, on April 20, 1982. Dedrick was a gravely injured child who

suffered from severe cerebral palsy, mental retardation, and quadriplegia. He required custodial

and medical care for his entire life, which was estimated to be the normal life expectancy. In

1987, Dedrick's mother filed a medical malpractice suit against Nan Travis in Dallas County,

alleging that Dedrick's injuries were caused by, among other things, the negligence of Nan Travis

during his birth. Ms. Harris also sought recovery for her bystander injuries.

THIE had issued Nan Travis an insurance policy that covered medical malpractice

claims, such as those asserted in the Harris case, in May 1981. The policy afforded up to $1

million for each claim and $3 million aggregate. Under the policy, THIE had the right to

investigate all claims and the ability to settle any claim or suit, with the written consent of Nan

Travis. THIE also had a duty to defend Nan Travis against any suit seeking damages.

Accordingly, THIE retained Davis & Davis to defend Nan Travis in the Harris case.

While the Harris plaintiffs had developed evidence that Nan Travis was negligent

in failing to have properly trained staff, appropriate working equipment, and appropriate policies

and procedures for the delivery of babies, proximate cause remained a hotly contested issue

between the parties. Defense witnesses stated that Dedrick's injuries indicated that his condition

developed during gestation and were not a result of the birthing process, because he had only brain

damage but no kidney or other vital organ deterioration. The Harris plaintiffs' expert, however,

believed that Dedrick's brain damage was due to asphyxia that occurred during labor and delivery.

As a lawyer with Davis & Davis wrote in a report to a THIE employee, "No one can prove that

this child was injured by the birth process as well as not injured by the birth process."

Despite their expert's calculations that Dedrick's damages ranged from $11.5

million to $14 million, the Harris plaintiffs were willing to settle for a greatly reduced sum

because of the uncertain proximate cause issue. In October 1988, the Harris plaintiffs sent an

unconditional settlement demand letter to THIE offering to settle for one million dollars in

exchange for a full release of Nan Travis. Although the requested amount was within THIE's

policy limit covering Nan Travis, THIE declined to accept the proposed settlement and countered

with a $100,000 settlement offer. While the settlement letter stated the offer was only open

through November 30, 1988, the record indicates that the Harris plaintiffs would have accepted

the amount they demanded until the first part of January 1989, at which time they learned of

Methodist's involvement with Nan Travis.

On February 10, 1989, the Harris plaintiffs added Methodist as a defendant in the

case. The Harris plaintiffs alleged that Methodist was negligent in failing to supervise the

employment of Nan Travis personnel, including the nurses in the obstetrical section, pursuant to

a Management Contract between Methodist and Nan Travis. Whereas Nan Travis had only

primary insurance coverage, Methodist had both primary and excess coverage. Methodist had

primary coverage as an additional insured under Nan Travis's policy with THIE. Consequently,

THIE also retained Davis & Davis to defend Methodist in the Harris case. In addition, in March

1982, Hartford had issued Methodist two excess coverage policies totaling $15 million. These

Hartford policies did not cover Nan Travis, but only provided coverage to Methodist. With the

addition of Methodist, the Harris plaintiffs' assessment of the value of the case increased to $2

million or $3 million. The record does not reflect, however, that the Harris plaintiffs actually

submitted an additional settlement demand letter after Methodist had been joined. In April 1989,

THIE increased its settlement offer to $500,000.

Because of discovery disputes, the Harris plaintiffs moved for sanctions against

appellees in June 1989. As grounds for the alleged discovery abuse, the Harris plaintiffs cited

incomplete production of a nurse's personnel file, misleading and untimely production of proof

of insurance coverage, and bad faith production of answers to interrogatories and requests for

production of documents. Specifically, the Harris plaintiffs' motion for sanctions accused

appellees of purging approximately three-fourths of nurse Janie Bell Gibson's personnel file. The

Harris plaintiffs averred that detailed complaints against Gibson, whom they described as a key

figure in proving the negligence of appellees, and incident reports concerning her gross

misbehavior were removed from her file. The Harris plaintiffs' second ground involved

appellees' misrepresentations of the amount of insurance coverage available under the policies of

Nan Travis and Methodist. The Harris plaintiffs charged appellees with submitting a false

response to an interrogatory in which they stated they had only a one million dollar insurance

policy that might cover them. Additionally, they alleged that an attorney with Davis & Davis

represented to them that one million dollars was the total coverage under THIE's policy, but due

to settlement of other claims, only $500,000 remained to settle the Harris case. As final grounds

for sanctions, the Harris plaintiffs claimed appellees would not produce certain documents related

to management of the hospital.

After a two-day hearing in Dallas in July 1989, District Judge Candace Tyson

imposed sanctions against the Harris defendants. The sanctions order taxed Nan Travis and

Methodist each $50,000, struck all defenses of Nan Travis and Methodist, and ordered trial to

commence solely on the issue of damages. After the imposition of sanctions, which removed the

issue of proximate cause, the settlement demand of the Harris plaintiffs increased to $13 million.

Methodist participated in the filing of petitions seeking writ of mandamus against Judge Tyson to

both the Fifth District Court of Appeals and the Texas Supreme Court. Both courts declined to

issue the writs. Rather than proceeding with trial and appealing the sanctions order, the parties

settled. THIE paid $2 million, and Hartford contributed $5.5 million dollars to the settlement on

behalf of Methodist. Thereafter, Hartford brought this suit against appellees.

The Present Controversy

Hartford initially filed suit against appellees in July 1990. Hartford asserts that

Davis & Davis committed legal malpractice in its handling of the Harris case. Although Hartford

lists seventeen grounds demonstrating its malpractice claim, the crux of Hartford's complaint is

that Davis & Davis' negligent conduct caused the imposition of sanctions, which forced Hartford

to contribute $5.5 million to the settlement. Hartford accuses THIE of negligently failing to settle

the Harris case, both before and after Methodist was made a party to the suit, and of negligently

handling Methodist's defense.

Appellees initially moved for summary judgment on the basis that they did not

negligently fail to settle the Harris suit. Appellees argued that the Harris plaintiffs' only offer to

settle within THIE's policy limits came before Methodist was joined as a party, and, after

Methodist was joined, the settlement demand far exceeded the policy limit. Under both

circumstances, they contend they did not owe Methodist a duty to settle. Not owing a duty to

Methodist to settle, appellees took the position that they owed no duty to Methodist's subrogee,

Hartford. Davis & Davis argued additionally that THIE retained all control over the authority to

settle. On March 3, 1997, the trial court denied the motion as to THIE but granted it as to Davis

& Davis without specifying its reasons. Appellees again moved for summary judgment on April

26, 1997. THIE urged the trial court to reconsider its previously denied motion regarding the

failure to settle claim. Additionally, appellees argued that Hartford could not recover under its

theory that appellees' negligently handled Methodist's defense. Appellees urged that Hartford

could not establish causation or damages. Without specifying the grounds, the trial court granted

both of appellees' motions, thereby disposing of the entire case in favor of appellees on July 21,

1997. Consequently, Hartford now appeals, bringing fourteen points of error.

STANDARD OF REVIEW

A summary judgment is proper only when a movant establishes that there is no

genuine issue of material fact and that it is entitled to judgment as a matter of law. See Tex. R.

Civ. P. 166a. In deciding whether a disputed material fact issue precluding summary judgment

exists, evidence favorable to the nonmovant will be taken as true. See Nixon v. Mr. Property

Management Co. , 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference must be

indulged in favor of the nonmovant, and any doubts resolved in its favor. See id. To prevail on

summary judgment, a defendant must disprove at least one essential element of each of plaintiff's

causes of action, or it must conclusively establish one or more of its defenses. See Friendswood

Dev. Co. v. McDade , 926 S.W.2d 280, 282 (Tex. 1996).

A motion for summary judgment must expressly state the grounds upon which it

is made and will stand or fall on those grounds alone. See McConnell v. Southside Indep. Sch.

Dist. , 858 S.W.2d 337, 339 (Tex. 1993). Summary judgments may not be affirmed or reversed

on grounds not expressly set forth in the motions presented to the trial court. See City of Houston

v. Clear Creek Basin Auth ., 589 S.W.2d 671, 677 (Tex. 1979). Where, as here, a trial court's

order granting summary judgment does not specify the basis for the ruling, the nonmovant must

defeat each summary judgment ground urged by the movant. See Carr v. Brasher , 776 S.W.2d

567, 569 (Tex. 1989). Otherwise, the appellate court must uphold the summary judgment if any

of the theories advanced are meritorious. Id.

DISCUSSION

Negligent Failure to Settle

Hartford claims in its first point of error that the trial court erred in granting THIE

summary judgment because material fact issues exist as to whether THIE was negligent or in

breach of its contract with Methodist in failing to settle the Harris case for a sum within THIE's

policy limit. Under Texas law, an insurer responding to settlement demands within policy limits

must exercise that degree of care and diligence which an ordinarily prudent person would exercise

in the management of the person's own business. See Texas Farmers Ins. Co. v. Soriano , 881

S.W.2d 312, 314 (Tex. 1994); American Physicians Ins. Exch. v. Garcia , 876 S.W.2d 842, 848

(Tex. 1994). Accordingly, an insurer may be liable for negligently failing to settle claims made

within policy limits against an insured. See G.A. Stowers Furniture Co. v. American Indem. Co. ,

15 S.W.2d 544, 547-48 (Tex. Comm'n App. 1929, holding approved). To impose a Stowers duty

on an insurer, a settlement demand must propose a full release of the insured in exchange for a

stated sum of money. See American Physicians , 876 S.W.2d at 848-49 . The Stowers duty is not

activated by a settlement demand unless three prerequisites are met: (1) the claim against the

insured is within the scope of coverage; (2) there is a demand within policy limits; and (3) the

terms of the demand are such that an ordinarily prudent insurer would accept it, considering the

likelihood and degree of the insured's potential exposure to an excess judgment. See American

Physicians , 876 S.W.2d at 849 .

Hartford claims that THIE breached its duty to settle on Methodist's behalf both

before and after Methodist was joined. Before Methodist was made a party, Hartford claims that

the Harris plaintiffs would have accepted a one million dollar settlement, an amount within

THIE's policy covering Nan Travis. Because Methodist was also an insured of THIE, and since

THIE knew of the potential risk to Methodist arising from Methodist's relationship with Nan

Travis, Hartford contends THIE should have accepted the Harris plaintiffs' settlement offer to Nan

Travis and owed Methodist the duty to do so. Hartford argues that had the Harris lawsuit settled

before any evidence implicating Methodist developed, the Harris plaintiffs would have executed

a general release that would have protected Methodist against further claims. To support this

contention, Hartford introduced affidavit testimony from the attorney for the Harris plaintiffs that

the Harris plaintiffs probably would have released Methodist from liability, even before Methodist

had been joined, if THIE would have settled the claim against Nan Travis for one million dollars.

Consequently, Hartford, as the excess insurer, never would have had any financial obligation and

would not have been required to pay the $5.5 million in settlement monies. Furthermore,

Hartford alleges that once Methodist was joined as a party, THIE was again negligent for failing

to settle the suit before the sanctions hearing in June 1989.

THIE contends in its summary judgment motion and on appeal that any Stowers

duty it owed to Methodist was never triggered at any time during the proceedings. We agree. The

summary judgment proof establishes that, before Methodist was joined, the Harris plaintiffs made

a settlement demand for one million dollars, an amount within the limits of THIE's policy, but that

the settlement demand proposed to release only Nan Travis . Even assuming THIE could owe a

Stowers duty to an insured who is not a party to a pending lawsuit but merely a potential target,

this duty was not activated in this instance because THIE did not receive a demand to settle within

policy limits in exchange for a full release of its insured, Methodist. (3) See American Physicians ,

876 S.W.2d at 848-49 . We decline to hold that affidavit testimony, given in hindsight, that the

Harris plaintiffs probably would have released Methodist if THIE had settled with Nan Travis for

one million dollars satisfies the requirements of the Stowers threshold. Further, the fact that the

Harris plaintiffs' letter proposed to release Nan Travis is of no consequence to Hartford's present

claim because Nan Travis was not Hartford's insured. Hartford is only subrogated to Methodist's

causes of action against THIE. Thus, THIE did not negligently fail to settle before Methodist was

joined.

The Harris plaintiffs' one million dollar settlement demand letter was set to expire

November 30, 1988. While there is summary judgment proof that the Harris plaintiffs would have

accepted one million dollars until January 1989, Methodist was not joined until February 1989.

After Methodist was joined, the summary judgment proof does not reflect that the Harris plaintiffs

made an additional settlement demand within THIE's policy limits covering Nan Travis and

Methodist that proposed a full release of Methodist. Although Hartford has introduced affidavit

testimony that the Harris plaintiffs might have been willing to settle for $2 million, a figure within

THIE's policy covering Nan Travis and Methodist, THIE was under no obligation to make or

solicit settlement proposals. See American Physicians , 876 S.W.2d at 849 . Further, this

testimony is not the equivalent of a settlement demand letter. In the absence of a demand letter

purporting to release Methodist fully in exchange for a sum of money within the policy limits,

THIE's Stowers' duty to Methodist was not triggered.

The supreme court has stated:

[T]he Stowers remedy of shifting the risk of an excess judgment onto the insurer

is inappropriate absent proof that the insurer was presented with a reasonable

opportunity to prevent the excess judgment by settling within the applicable policy

limits.

American Physicians , 876 S.W.2d at 849 . By establishing that the Harris plaintiffs never made

a settlement demand within the policy limits against Methodist that proposed to fully release

Methodist at any time during the proceedings, THIE has negated an essential element of Hartford's

Stowers claim. Consequently, THIE demonstrated its entitlement to summary judgment on this

cause of action as a matter of law. See Friendswood , 926 S.W.2d at 282 . We overrule Hartford's

first point of error.

In its second point of error, Hartford contends that material fact issues exist as to

whether THIE was negligent for failing to notify Methodist of settlement offers in the Harris case.

Apparently, Hartford is complaining that THIE did not notify Methodist of the Harris plaintiffs'

settlement offer of one million dollars made before Methodist was joined. (4) Citing American

Physicians , Hartford claims the failure of an insurer to notify an insured of an offer within the

limits of coverage can support a verdict for the plaintiff. In broadly discussing an insurance

company's duties to its insureds, the supreme court in American Physicians recognized its previous

conclusion in Ranger County Mutual Insurance Co. v. Guin , 723 S.W.2d 656, 660 (Tex. 1987),

that an insurer's failure to inform an insured of a settlement offer can support a jury's finding of

negligence. See American Physicians , 876 S.W.2d at 849 . In addition to a number of factors

distinguishing the facts in this cause from the cited authorities, we note particularly that in Ranger ,

the insured was a defendant in the action at the time the insurer received the settlement offer. See

Ranger , 723 S.W.2d at 660 . Here, Methodist was not a party to the cause when the Harris

plaintiffs submitted their settlement demand letter. We decline to hold that THIE had a duty to

notify Methodist of a settlement offer made in a pending lawsuit to which it was not a party and

that expired before it became a party. Point of error two is overruled.

Negligent Handling of Methodist's Defense

In eleven of the remaining twelve points of error, Hartford describes appellees'

conduct which it claims amounts to negligent handling of Methodist's defense. Points of error

three, four, ten, and eleven complain that appellees were negligent for: participating in a false

answer to an interrogatory; refusing to allow counsel other than Davis & Davis to represent

Methodist; failing to timely advise Methodist and Hartford that it was more likely than not that

a verdict in excess of the one million dollar limit of THIE's coverage would be rendered if the

Harris case were tried; and in assigning the Harris case to inexperienced counsel and not

removing such counsel. Point of error five asserts that Davis & Davis' negligent failure to settle,

both before and after Methodist was joined and before sanctions were imposed, precluded Hartford

from negotiating meaningfully. Point of error six avers that Davis & Davis negligently

misrepresented THIE's coverage of Nan Travis and Methodist. Points of error seven, eight, and

nine accuse Davis & Davis of committing malpractice because Davis & Davis failed to prepare

a witness for his deposition, failed to supervise discovery of Nurse Gibson's personnel file, and

failed to evaluate the Harris case and timely recommend that THIE pay one million dollars to

settle. Point of error twelve claims material fact issues exist as to whether the negligent conduct

outlined under the previous points of error proximately caused Hartford's damages. Point of error

thirteen claims that appellees' negligent conduct and acts of malpractice raise material issues of

fact as to whether each was a proximate cause of sanctions in the Harris case, whether such

sanctions increased the value of the Harris case, and, if so, to what extent. Since these points of

error are related, they will be discussed together. We will, however, begin our analysis with

Hartford's claim that Davis & Davis committed malpractice.

Hartford takes the position that the negligent conduct of Davis & Davis led to the

imposition of sanctions, and that the sanctions eliminated Methodist's defenses and increased the

settlement value of the case, thereby forcing Hartford to contribute more to the settlement than it

otherwise would have paid on Methodist's behalf. In other words, Hartford claims that, had the

sanctions order not been rendered, Hartford would not have been required to pay $5.5 million in

settlement monies. Davis & Davis contends that Hartford cannot prevail, as a matter of law,

because Hartford chose to settle the Harris case, against the advice of Davis & Davis, rather than

appeal the sanctions order. We agree with Davis & Davis and conclude that Hartford's decision

to settle the Harris case against Davis & Davis' advice, in combination with Hartford's refusal to

appeal the sanctions order, precludes Hartford's recovery for malpractice.

The uncontroverted summary judgment proof demonstrates that Hartford chose to

settle the Harris case over Davis & Davis' objections. In his affidavit attached to appellees'

motion for summary judgment, Bruce Anderson, an associate with Davis & Davis who acted as

lead counsel for Nan Travis and Methodist at the sanctions hearing in the Harris case, testified that

he advised the Harris defendants and their insurance companies not to settle but to appeal the

sanctions order because he was very confident the sanctions order would be overturned on appeal.

He further testified that despite his urgings, Hartford settled. On appeal, Hartford does not

dispute the truth or challenge the credibility of Anderson's affidavit, and it does not offer any

controverting proof.

A client may sue an attorney for malpractice who advised settlement after the

attorney's negligence adversely impacted the underlying case. In Heath v. Herron , 732 S.W.2d

748 (Tex. App.--Houston [14th Dist.] 1987, writ denied), a client brought a legal malpractice

action against an attorney whose failure to verify an answer resulted in the opposing party's

motion for instructed verdict and, ultimately, a settlement. The attorney charged with malpractice

argued that the client's decision to settle barred the malpractice suit. At trial, however, the client

testified that the attorney told him the case was lost as a result of the pleading mistake, and, while

trying the case and hoping for "different results on appeal" was an option, settling was "probably

what [the client] should do." See Heath , 732 S.W.2d at 750-51 . Based on this advice, the client

settled. The court held that the client's decision to settle did not bar the subsequent malpractice

action. Id. at 751 .

In a case factually similar to the one at hand, an excess insurer brought suit against

the law firm retained by the primary insurer for negligence in handling the defense of the

underlying wrongful death case. See Stonewall Surplus Lines Ins. Co. v. Drabek , 835 S.W.2d 708

(Tex. App.--Corpus Christi 1992, writ denied). As in this case, during the course of the

proceedings, the trial court rendered a sanctions order against the insureds for discovery abuses

and, among other things, struck the insureds' pleadings. After the sanctions order was imposed,

the case settled, with the primary insurer contributing its policy limits and the excess insurer

shouldering the majority of the settlement. The excess insurer alleged that the law firm's

negligence caused the trial court to strike the insureds' pleadings and that such negligence

proximately caused damage to the excess insurer. The trial court granted the law firm summary

judgment, partially on the ground that the excess insurer had not appealed the sanctions order.

The appellate court, however, reversed the trial court's decision and remanded the case. In

rejecting the law firm's argument that the excess insurer had not suffered damage because it had

failed to appeal the sanctions order, the appellate court stated that the real inquiry was whether the

value of the underlying lawsuit changed because of the alleged negligence and sanctions order.

The appellate court concluded that summary judgment was inappropriate because a material fact

issue existed concerning any change in the settlement value of the case.

Drabek is instructive for two reasons. First, the summary judgment proof

established that the settlement offer, made after the imposition of sanctions, was based upon the

evaluation and recommendation of the attorney charged with malpractice. Thus, the court was in

essence holding that a client may sue an attorney for malpractice who urged settlement after the

attorney's malpractice harmed its legal position in the case. Second, the court rejected the law

firm's defense that the excess insurer could not sue for malpractice because it had not appealed the

sanctions order. We believe that the court's conclusion resulted from the fact that the attorney

charged with malpractice was the one who recommended settling. Since the attorney

recommended settling rather than appeal, the court logically rejected the attorney's argument that

the client could not prevail because the client had settled instead of exhausting its appellate

remedies.

In contrast, Davis & Davis advised Hartford to appeal the sanctions order and not

to settle the Harris case. Hartford's refusal to appeal the sanctions order and its decision to settle

the Harris case is, therefore, crucial to our analysis. By electing to settle the case and refusing

to appeal the sanctions order, Hartford effectively eliminated any opportunity Davis & Davis had

to challenge the trial court's ruling and disprove the charge that their actions caused harm to

Hartford. Even if Davis & Davis' conduct was a cause of the sanctions order, Hartford's decision

to settle prevented Davis & Davis from mitigating any damages Hartford might have sustained at

trial. The impact the sanctions order might have had on the trial was rendered purely speculative

by Hartford's decision to settle.

Hartford's additional decision not to appeal the sanctions order compounds the

effect of the settlement. First, a successful appeal of the sanctions order would have restored

Methodist's defenses and possibly prevented any damage Hartford now claims because of the

settlement. Second, despite Davis & Davis' urgings, we cannot now review the propriety of the

sanctions ruling because it was ordered in a cause in which a final judgment has been rendered in

a separate proceeding. See Browning v. Placke , 698 S.W.2d 362 (Tex. 1985) (final judgment is

not subject to collateral attack unless the judgment complained of is void). Without an appeal of

the sanctions order, Davis & Davis cannot demonstrate that its conduct, of which Hartford now

complains, was not sanctionable or negligent. Moreover, Hartford's election precludes

Davis & Davis from demonstrating that the sanctions order was erroneous. The combination of

these factors convinces us that Hartford's decision to settle the case against the advice of Davis

& Davis and refusal to appeal the sanctions order bars Hartford from prevailing on its malpractice

claims against Davis & Davis.

Hartford also claims that THIE negligently handled Methodist's claim, attempting

to impute Davis & Davis' alleged malpractice to THIE. We have held that Hartford cannot pursue

a malpractice action against the law firm. On that basis alone, THIE is relieved from

accountability. Even assuming, though, that Davis & Davis committed actionable malpractice,

the Texas Supreme Court recently has held that "an insurer is not vicariously liable for the

malpractice of an independent attorney it selects to defend an insured." See State Farm Mut. Auto.

Ins. Co. v. Traver , 41 Tex. Sup. Ct. J. 1343 , 1343 (Aug. 25, 1998). Thus, as a matter of law,

THIE cannot be liable for any malpractice committed by Davis & Davis in the course of Davis &

Davis' representation of Methodist.

Points of error four and eleven possibly can be interpreted as claims that THIE was

independently negligent in its handling of the Harris case. The fourth point of error asserts that

THIE should not have hired Davis & Davis to represent Methodist as this raised a conflict of

interest because Davis & Davis already was representing co-defendant Nan Travis. However, the

Traver opinion appears to place the burden of declining and withdrawing from representation on

the law firm, not the insurance company. The supreme court stated:

The lawyer must advise the insured of any conflicts that may arise between the

insured's interest and the carrier's, and the lawyer may not proceed in the face of

any conflicts unless he or she reasonably believes that the insured's representation

will not be materially affected and obtains the insured's consent after full

disclosure.

See Traver , 41 Tex. Sup. Ct. J. at 1344. The eleventh point of error complains that THIE was

negligent by not removing the "inexperienced counsel" that Davis & Davis assigned to handle the

"large and dangerous Harris case." The decision of which staff to assign to the Harris case,

though, was that of Davis & Davis. Thus, we do not believe that THIE can be independently

liable for Davis & Davis' decision, and under Traver , THIE cannot be liable for Davis & Davis'

assignment of counsel.

For the foregoing reasons, we overrule points of error three through thirteen.

Based on our disposition, we need not consider Hartford's fourteenth point of error concerning

damages.

CONCLUSION

Having overruled all fourteen of Hartford's points of error, we affirm the judgment

of the trial court.

Marilyn Aboussie, Justice

Before Chief Justice Yeakel, Justices Aboussie and Jones

Affirmed

Filed: September 11, 1998

Do Not Publish

1. We will refer to THIE, Davis & Davis, and C. Dean Davis collectively as "appellees." All

references to Davis & Davis include reference to C. Dean Davis.

2. According to the Plaintiff's Third Amended Original Petition, the medical malpractice suit

was styled Kathy Harris Rufus, Individually And As Parent And Next Friend Of Dedrick Harris,

A Minor v. Peter McKinney; Nan Travis Memorial Hospital; The Methodist Hospital Health Care

System. Inc., A/K/A The Methodist Health Care Network, Inc.; And The Methodist Hospital

System, Inc

. For convenience, we will refer to this suit as the "Harris case."

3. We decline to comment on the feasibility of successfully maintaining a Stowers lawsuit on

behalf of an insured who was not a party to the suit at the time of the alleged breach because,

under these circumstances, THIE's Stowers duty never arose.

4. Hartford does not point to any settlement offers that were tendered after Methodist was

joined.

d malpractice to THIE. We have held that Hartford cannot pursue