Federated Mutual Insurance v. Grapevine Excavation Inc.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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No. 98-10904
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FEDERATED MUTUAL INSURANCE COMPANY,

Plaintiff,

versus

GRAPEVINE EXCAVATION INC.; ET AL,

Defendants,

GRAPEVINE EXCAVATION INC.,

Defendant - Third Party Plaintiff - Appellant,

versus

MARYLAND LLOYDS, a Lloyds Insurance Company,

Third Party Defendant - Appellee.

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Appeal from the United States District Court
for the Northern District of Texas
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December 1, 1999
Before JONES and WIENER, Circuit Judges, and WALTER, District
Judge.*

PER CURIAM:

CERTIFICATE FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH
CIRCUIT TO THE SUPREME COURT OF TEXAS, PURSUANT TO THE TEXAS
CONSTITUTION, ART. 5, § 3-C AND RULE 58 OF THE TEXAS RULES OF
APPELLATE PROCEDURE

*
District Judge of the Western District of Louisiana, sitting
by designation.
TO THE SUPREME COURT OF TEXAS AND THE HONORABLE JUSTICES THEREOF:

I. STYLE OF THE CASE

The style of the case in which certification is made is

Grapevine Excavation, Inc., Defendant-Third Party Plaintiff-

Appellant versus Maryland Lloyds, Third Party Defendant-Appellee,

Case No. 98-10904, in the United States Court of Appeals for the

Fifth Circuit, on appeal from the United States District Court for

the Northern District of Texas. This case involves a determinative

question of state law, and jurisdiction of the case in the federal

courts is based solely on diversity of citizenship.

II. STATEMENT OF THE CASE

Maryland Lloyds (“Maryland”) issued a commercial general

liability insurance policy to Grapevine Excavation, Inc. (“GEI”).

Under the policy, Maryland had a duty to defend GEI from

proceedings instituted to recover damages covered by the insurance

policy. We have now held that Maryland breached this duty and have

rendered judgment in favor of GEI. We have retained jurisdiction,

however, for the limited purpose of deciding if GEI is entitled to

recover attorney’s fees that it incurred in obtaining this

favorable judgment against Maryland for breach of contract, i.e.,

failure to provide a legal defense.

Chapter 38 of the Texas Civil Practice and Remedies Code first

sets forth the general rule that litigants can recover reasonable

attorney’s fees incurred in a valid claim on, inter alia, a written

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contract.1 It then lists five exceptions:

This chapter does not apply to a contract issued by an
insurer that is subject to the provision of:
(1) Article 3.62, Insurance Code [this Article
was repealed in 1991];
(2) Section 1, Chapter 387, Acts of the 55th
Legislature, Regular Session, 1957 (Article
3.62-1, Vernon’s Texas Insurance Code) [this
Article was repealed in 1991];
(3) Chapter 9, Insurance Code;
(4) Article 21.21, Insurance Code; or
(5) the Unfair Claims Settlement Practices Act
(Article 21.21-2, Insurance Code).2

In Dairyland Mutual Ins. Co. v. Childress, an insurance

company was held liable for its policyholder’s attorney’s fees by

a state appellate court because the policyholder had successfully

pursued an action for breach of an insurance contract.3 On appeal

to the Supreme Court of Texas, the insurance company argued that it

was not liable for attorney’s fees under the predecessor to Chapter

38 of the Texas Civil Practice and Remedies code because, as an

insurance company, it was shielded from liability for attorney’s

fees by the predecessor to § 38.006. The Texas Supreme Court held

that:

Dairyland is a county mutual insurance company and as
such is not one of the insurors exempt from the
provisions of Art. 2226 [the predecessor to Chapter 38 of
the Civil Practice and Remedies Code]. See Tex. Ins.
Code Ann. Art. 7.22. Therefore, it is not exempt from a

1
See Tex. Civ. Prac. & Rem. Code § 38.001(8).
2
See id. § 38.006.
3
See 636 S.W.2d 282, 284 (Tex. App. —— Eastland, 1982).

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 claim for attorney’s fees pursuant to Art. 2226.4

Texas appellate courts and this court have disagreed as to the

significance of this statement. We have interpreted the statement

to imply that “an insurer who falls within the provisions of

section 38.006 is exempt from the payment of attorney’s fees and

that only those insurers who do not qualify for the exemption are

subject to the payment of attorney’s fees.”5 By contrast, Texas

appellate courts have held that no such implication was intended,

and that, consistent with the decision of the court in Prudential

Ins. Co. v. Burke,6 the purpose of the exceptions now codified at

§ 38.006 is “to exclude only those claims against insurance

companies where attorney’s fees [are] already available by virtue

of other specific statutes.”7

III. QUESTION CERTIFIED

In a policyholder’s successful suit for breach of contract

against an insurance company that is subject to one or more of the

provisions listed in § 38.006, is the insurance company liable to

4
See Dairyland County Mutual Ins. Co. v. Childress, 650 S.W.2d
770, 774 (Tex. 1983).
5
Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130,
1133 (5th Cir. 1992); see also Lafarge Corp. v. Hartford Cas. Ins.
Co., 61 F.3d 389, 402-03 (5th Cir. 1995).
6
614 S.W.2d 847 (Tex. App. —— Texarkana), writ ref’d n.r.e.,
621 S.W.2d 596 (1981).
7
Id. at 850.

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its policyholder for reasonable attorney’s fees incurred in

pursuing the breach-of-contract action, either under an Insurance

Code provision listed in § 38.006, or under § 36.001 if application

of one or more of those sections does not result in the award of

attorney’s fees?

IV. CONCLUSION

We disclaim any intention or desire that the Supreme Court of

Texas confine its reply to the precise form or scope of the

question certified. The answer provided by the Supreme Court of

Texas will determine the remaining issue in this case.

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