# American Centennial Insurance Co. v. Canal Insurance Co.

> Texas Court of Appeals, 1st District (Houston) · May 30, 1991 · 810 S.W.2d 246

URL: https://www.frixlaw.com/law-library/cases/9774542

## Case

- **Full name:** AMERICAN CENTENNIAL INSURANCE COMPANY and First State Insurance Company, Appellants, v. CANAL INSURANCE COMPANY; Talbert, Giessel, Stone and Lyman; Giessel, Stone, Barker and Lyman; Henry P. Giessel; And Richard S. Joseph, Appellees
- **Court:** Texas Court of Appeals, 1st District (Houston)
- **Decided:** May 30, 1991
- **Citations:** 810 S.W.2d 246; 1991 WL 74500
- **Precedential status:** Published
- **Opinion:** Dissent by Wilson
- **Judges:** Dunn, Bass, Wilson
- **Cited by:** 28 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9774542

## Opinion text

WILSON, Justice,
dissenting.
My dissenting opinion remains unchanged.
From the portion of the majority opinion that, for the first time in Texas, permits an excess insurance carrier to sue a primary insurance carrier by means of “equitable subrogation” for breach of a Stowers 1 duty, I respectfully dissent.
Fundamentally, I believe the majority is mistaken in creating this cause of action without guidance from a higher authority. Further, I note my disagreement with the Stowers analysis used by the majority.
The majority expresses forthrightly that no Texas court has recognized such a cause of action, and then proceeds to weigh alternative methods from other jurisdictions by which such a suit can be maintained. Ultimately, the majority chooses the doctrine of equitable subrogation as a vehicle for permitting the suit, and casts off, apparently as a matter of public policy, what the majority labels the “theory of direct duty” and the “doctrine of triangular reciprocity.” For the reasons stated herein, I will not engage the majority in debate over the merits of such a cause of action in the context of “promoting important public concerns.”
This Court has frequently stated, in the broad area of recognizing new causes of action, that justice is best served by following a policy of judicial self-restraint. In the context of deciding whether an intermediate court of appeals would recognize a cause of action for the implied covenant of good faith and fair dealing in the employer-employee relationship, this Court recently stated that “an intermediate court is duty-bound to follow the Texas Supreme Court’s authoritative expressions of the law and to leave changes in the application of common law rules to that court.” Lumpkin v. H & C Communications, Inc., 755 S.W.2d 538, 540 (Tex.App.—Houston [1st Dist.] 1988, writ denied) (citing Swilley v. McCain, 374 S.W.2d 871, 875 (Tex.1964), and Bruno v. Bruno, 589 S.W.2d 179 (Tex.Civ.App.—Waco 1979, writ ref’d n.r.e.)). We further stated in Lumpkin that “[tjhis Court must recognize and apply the Texas Supreme Court’s deliberate statement of the law and, by exercising judicial self-restraint, refrain from extending or restricting the scope of the Supreme Court’s declaration.” Lumpkin, 755 S.W.2d at 540 ; see also Watson v. Zep Mfg. Co., 582 S.W.2d 178, 180 (Tex.Civ.App.—Dallas 1979, writ ref’d n.r.e.).
*258 Citing the same rule, this Court previously refused to recognize a cause of action for damages suffered by a fetus not born alive in Witty v. American Gen. Capital Distrib., Inc., 697 S.W.2d 636, 639 (Tex.App.—Houston [1st Dist.] 1985), rev’d in part, aff'd in part, 727 S.W.2d 503 (Tex. 1987). In Molder v. Southwestern Bell Tel. Co., 665 S.W.2d 175, 177 (Tex.App.—Houston [1st Dist.] 1983, writ ref’d n.r.e.), this Court declined to deviate from the “at-will” employment termination rule and “recognize[d] that the legislature is the appropriate agency for effecting a change in policy regarding the employer-employee relationship.”
The insurance business is a heavily regulated industry within the state of Texas. The legislature has, by statute, enacted an Insurance Code, which in turn created a State Board of Insurance to administer, through regulation, significant portions of the insurance business in Texas. Thus, the market for the buying and selling of insurance contracts is statutorily restricted in Texas. Generally speaking, the rights, responsibilities, duties, and obligations of buyers and sellers of insurance contracts are defined by the statutes and the common law of Texas, as well as by the contracts themselves.
Administrative agencies are sometimes legislatively created in areas where a need for the accumulation of expert opinion and oversight is perceived. These agencies often serve as the institutional memories of government in a particular field, and gain experience from the daily activities of conducting statutory assignments. The legislature vests the day-to-day business of regulating in these statutory creations, and assumes a more indirect, oversight role as it also monitors and shapes the long-term direction a particular agency may take.
As one reason to support its conclusion to create a new cause of action, the majority states that “recognizing such a cause of action promotes stability in rates for excess insurance without destablizing rates for primary insurance.” I do not believe this statement is self-evident, nor do I find it an issue generally justiciable by an intermediate court of appeals, if any court.
The appellants in this case bargained for their position as excess carriers to General. The appellants were in the business of writing such policies, accepting premiums, and assuming the risks of unfavorable results. They contracted with knowledge of the existence of the primary carrier, as well as with knowledge of the rights of the primary carrier under its policy. In my judgment, permitting a new cause of action from wholecloth, without legislative intervention or warning or guidance by supreme court decisions, would tend to create confusion in the industry, and deny the type of risk-reward predictability necessary for appropriate business decision making. Making fundamental changes concerning legal duties between companies in a heavily regulated industry are, in my opinion, not within the mandate or expertise of an intermediate appellate court.
I also disagree with the characterization of this case as a Stowers case, at least to the extent it requires a statute of limitations defense to be counted from the day a judgment becomes final. A typical Stow-ers case occurs when an insurance company fails in settling, or attempting to settle, a case when a prudent person in the exercise of ordinary care would have done so, and a resulting judgment is in excess of policy limits. Stowers, 15 S.W.2d at 547. The basic principle is that an insurance carrier has a duty to its insured to settle a claim within the policy limits if it would have been prudent to do so.
The set of facts before us is actionable, if it is at all, only by the expansion of the Stowers doctrine by the supreme court’s holding in Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656, 659 (Tex.1987). There, the plaintiffs alleged Ranger was negligent in handling a range of settlement-related matters, in addition to allegations of negligence in the handling, investigation, and ultimate trial of the claim. In the case before us, the appellants alleged some 30 acts of negligence against the appellees. Only two of the 30 touch on any aspect of negligence in the handling of *259 settlement matters. The appellants state in their own brief that Canal and its agent, Giessel, knew at all times that the damage potential of the case (two fatalities) vastly-exceeded the primary coverage of $100,000. Knowing this fact, how Canal was to attempt settlement without running the risk of entering “bad-faith” negotiations with the original plaintiffs is unclear.
This case is, in reality, a direct suit by an excess carrier against a primary carrier and the primary carrier’s lawyers. With reference to the appellees’ statute of limitations defense, the majority permits the appellants to do indirectly what they are not permitted to do directly. The majority states that whatever causes of action may exist directly between an excess and a primary carrier are barred by computation of the statute of limitations, but the same causes of action on the same facts and same dates are within the statute of limitations when the excess carrier stands in the shoes of an original insured.
Whatever the viability of the “equitable subrogation” cause of action, and whether without allegations of negligence in handling of settlement matters being central to the suit, the cause may be properly termed a Stowers case, it is an unwarranted expansion of Ranger County to assume that a sophisticated insurance company is fairly put on notice for statute of limitations purposes only with the finality of judgment required for the normally unsophisticated insurance consumer.
In my opinion, allowing the appellants to receive the benefits of a statute of limitations beginning with the finality of a judgment is particularly inappropriate in this fact situation. The appellants in this case, through their own individual actions, chose to settle the case with the original plaintiffs, based solely on the knowledge they had relative to the alleged negligence of Canal and Canal’s lawyers. The appellants settled the case while a motion was pending before the trial court that conceivably could have mooted many of the claims now sued upon.
If a hybrid Stowers cause of action is appropriately created here through an expanded application of Ranger County, justice requires a hybrid application of the Stowers statute of limitations rule. Under the facts of this case, I would begin to count the appellants’ time in which to bring a lawsuit at the very latest from January 17, 1986, the date of the appellants’ memorandum entitled, “Negligent Handling Problems,” which listed numerous complaints the appellants had with the way Canal and Canal’s lawyers handled the claim. I would agree with the majority that, in a direct cause of action, application of traditional rules in fixing the date from which a statute of limitations is computed begins with the appellants’ actual knowledge of the events it now alleges were actionable negligence. Therefore, I agree with the majority’s application of the stat ute of limitations computations to the direct causes of action alleged between the parties.
If the “equitable subrogation” right to sue is properly recognized, I would apply the same statute of limitations rule as the majority applies in the remainder of the case to the newly created case of action and affirm the ruling of the trial court in its entirety.
. G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm’n App.1929, holding approved).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9774542. Public record. Not legal advice.