Case: 09-11106 Document: 00511544486 Page: 1 Date Filed: 07/19/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 19, 2011
No. 09-11106
Lyle W. Cayce
Clerk
COLONY INSURANCE CO.,
Plaintiff–Intervenor Defendant–
Appellee
v.
PEACHTREE CONSTRUCTION, LTD.,
Defendant–Appellant
GREAT AMERICAN INSURANCE, CO.,
Intervenor–Appellant
Appeal from the United States District Court
for the Northern District of Texas
Before GARZA and BENAVIDES, Circuit Judges, and LYNN*, District Judge.
EMILIO M. GARZA, Circuit Judge:
Appellants Peachtree Construction, Ltd. (“Peachtree”) and Great American
Insurance Company (“Great American”) appeal the district court’s grant of
summary judgment in favor of Appellee Colony Insurance Company (“Colony”).
Great American also appeals the lower court’s Fed. R. Civ. P. 12(b)(6) dismissal
of Great American’s complaint in intervention.
*
District Judge of the Northern District of Texas, sitting by designation.
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This appeal raises two issues: (1) whether, under Texas law, an insurer’s
duty to indemnify an insured is subordinate to the insurer’s duty to defend that
insured; and (2) whether an excess-liability insurer can maintain a subrogation
claim against a primary-liability insurer after the insured has been fully
indemnified. The district court answered these questions, “yes,” and “no,”
respectively, based on the court’s interpretation of then-existing Texas law.
After the district court ruled, however, the Texas Supreme Court took up the
first question in D.R. Horton–Texas, Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740
(Tex. 2009), while we addressed the second in Amerisure Ins. Co. v. Navigators
Ins. Co., 611 F.3d 299 (5th Cir. 2010). Both appellate courts reached holdings
contrary to the district court on the issues now before us. Accordingly, we
VACATE the district court’s orders granting summary judgment for Colony and
dismissing Great American’s complaint in intervention, and REMAND for
further proceedings.
I
Peachtree was hired by the Texas Department of Transportation as the
general contractor for a highway repaving project. Peachtree subcontracted with
CrossRoads, L.P. (“CrossRoads”) to provide construction signs, barricades, and
warning devices for the project site. As mandated by the parties’ contract,
CrossRoads obtained general-liability and excess-liability insurance and named
Peachtree as an additional insured under both policies. The parties further
agreed that CrossRoads’ insurance would be “primary over any other insurance
carried separately by [Peachtree].” Colony provided CrossRoads’ primary-
liability coverage.1
In addition to being covered under the CrossRoads policies, Peachtree also
maintained its own primary and excess-liability insurance. Travelers Insurance
1
CrossRoads’ excess carrier has only been marginally involved in the litigation and is
not a party to this appeal.
2
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Company (“Travelers”) served as Peachtree’s primary insurer, covering claims
up to $1 million, while Great American provided Peachtree’s excess coverage.
Not long after the repaving project began, Kari Lee’s husband died after
losing control of his motorcycle and crashing at the construction site. Lee filed
a wrongful death suit (“the underlying suit”) against Peachtree for negligence
and gross negligence in causing her husband’s death by, among other lapses,
“failing to use required and reasonable signage, barricades, and warnings to
drivers of the hazardous drop-off.” Peachtree joined CrossRoads as a third-party
defendant and, as an additional insured under CrossRoads’ primary policy,
asked Colony to defend the underlying suit. Colony agreed, but paid the costs
of Peachtree’s defense with a reservation of rights.
While the underlying suit was pending, Colony filed a separate declaratory
judgment suit against Peachtree and Travelers. Colony maintained that it had
no duty to defend or indemnify Peachtree in the underlying suit because Lee’s
petition only named and alleged negligence by Peachtree. CrossRoads, Colony’s
named insured, was not mentioned in the petition. Peachtree and Travelers
counterclaimed, seeking a declaration of Colony’s duties to defend and indemnify
Peachtree as an additional insured.
Before the district court resolved the declaratory judgment suit, the
underlying suit settled for $2 million. Travelers and Great American
contributed $1 million and $650,000, respectively, on behalf of Peachtree, while
Colony contributed $350,000 on behalf of CrossRoads. The settlement meant
that Peachtree was fully indemnified for the claims asserted in the underlying
suit. Meanwhile, the insurers continued to dispute which company was liable
for the amount in excess of the $1 million paid by Travelers.
After the settlement, Great American intervened in the declaratory
judgment suit, asking the court to find that Colony had a duty to defend and
indemnify Peachtree in the underlying suit, and seeking reimbursement from
Colony for Great American’s $650,000 settlement contribution. The district
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court dismissed Great American’s complaint in intervention under Fed. R. Civ.
P. 12(b)(6). Relying on the Texas Supreme Court’s decision in Mid-Continent
Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765 (Tex. 2007), the court found that
Great American’s reimbursement claims were foreclosed as a matter of law.
The district court also entered summary judgment for Colony in the
declaratory judgment action, finding that because Colony had no legal duty to
defend Peachtree in the underlying suit, it could have no duty to indemnify
Peachtree either. The district court struck, and refused to consider, summary
judgment evidence offered by Peachtree and Great American to establish
Colony’s duty to indemnify.
On appeal, Peachtree and Great American challenge the district court’s
finding that Colony owed no duty to indemnify Peachtree. They do not contest
the court’s ruling on the duty to defend. Great American also appeals the
district court’s Fed. R. Civ. P. 12(b)(6) dismissal of its complaint in intervention.
Travelers is not participating in this appeal.
II
We review a district court’s grant of summary judgment de novo. Am.
Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir. 2001) (citation omitted).
Summary judgment is appropriate if “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” FED.
R. CIV. P. 56(a). Where federal jurisdiction is based on diversity of citizenship,
as it is here, a federal court looks to the substantive law of the forum state. See
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Tex. Indus., Inc. v. Factory
Mut. Ins. Co., 486 F.3d 844, 846 (5th Cir. 2007). The parties agree that the
substantive law of Texas applies here.
We also review a district court’s dismissal for failure to state a claim de
novo. Gen. Star Indem. Co. v. Vesta Fire Ins. Corp., 173 F.3d 946, 949 (5th Cir.
1999). When considering a Rule 12(b)(6) motion, we liberally construe the
complaint in favor of the plaintiff and accept all well-pleaded factual allegations
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as true. See Woodard v. Andrus, 419 F.3d 348, 351 (5th Cir. 2005). While a
complaint need not contain detailed factual allegations, it must set forth “more
than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Factual allegations must be sufficient to raise a non-speculative right to relief.
Id. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead
“enough facts to state a claim to relief that is plausible on its face.” Id. at 570.
III
This appeal requires us to determine: (1) whether the district court erred
in granting summary judgment for Colony based on the court’s finding that, as
a matter of law, Colony had no duty to indemnify Peachtree; and (2) whether
Great American can maintain a subrogation claim against Colony after
Peachtree has been fully indemnified.
A
In Texas, an insurer’s duties to defend and indemnify its insured are
“distinct and separate duties.” Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d
819, 821–22 (Tex. 1997). The duty to defend means the insurer will defend the
insured in any lawsuit that “alleges and seeks damages for an event potentially
covered by the policy,” while the duty to indemnify means the insurer will “pay
all covered claims and judgments against an insured.” D.R. Horton–Texas, Ltd.
v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009) (quoting 14 Lee R. Russ
& Thomas F. Segalla, COUCH ON INSURANCE § 200:3 (3d ed. 2009)). The
difference between the two is a matter of timing.
When an insured party is sued, an insurer’s duty to defend is determined
solely by the facts alleged in the petition and the terms of the policy. See Pine
Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650, 654 (Tex. 2009).
This is known as the eight-corners rule. Id. “Resort to evidence outside the four
corners of these two documents is generally prohibited.” GuideOne Elite Ins. Co.
v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex. 2006). Moreover, the
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duty to defend does not rely on the truth or falsity of the underlying allegations;
an insurer is obligated to defend the insured if the facts alleged in the petition,
taken as true, potentially assert a claim for coverage under the insurance policy.
Id. at 308; see also 14 COUCH ON INSURANCE § 200:19 (“Even if the allegations
are groundless, false, or fraudulent the insurer is obligated to defend.”). Because
the only two documents relevant to the duty-to-defend inquiry are the insurance
policy and the petition, an insurer’s duty to defend can be determined at the
moment the petition is filed.
In contrast, an insurer’s duty to indemnify generally cannot be ascertained
until the completion of litigation, when liability is established, if at all. See
Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997); see
also VRV Dev. L.P. v. Mid-Continent Cas. Co., 630 F.3d 451, 459 (5th Cir. 2011)
(“[A]n insurer’s duty to indemnify typically can be resolved only after the
conclusion of the underlying action.”). This is because, unlike the duty to defend,
which turns on the pleadings, the duty to indemnify is triggered by the actual
facts establishing liability in the underlying suit, and whether any damages
caused by the insured and later proven at trial are covered by the terms of the
policy. See Cowan, 945 S.W.2d at 821; D.R. Horton, 300 S.W.3d at 744.
Thus, in many cases an insurer may have a duty to defend but, eventually,
no duty to indemnify. See Griffin, 955 S.W.2d at 82 (“[A] plaintiff pleading both
negligent and intentional conduct may trigger an insurer’s duty to defend, but
a finding that the insured acted intentionally and not negligently may negate
the insurer’s duty to indemnify.”). This has led some courts to observe that in
Texas the duty to defend is broader than the duty to indemnify, see, e.g., Zurich
Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008); Lincoln Gen. Ins.
Co. v. Aisha’s Learning Ctr., 468 F.3d 857, 858 (5th Cir. 2006), because an
insurer is obligated to defend whenever there is any potential basis for liability
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under the policy, while the duty to indemnify may never be realized.2 See Pine
Oak, 279 S.W.3d at 656 & n.30; GuideOne, 197 S.W.3d at 310. Other courts
have run with this concept, erroneously holding that because the duty to defend
is broader than the duty to indemnify, there can be no duty to indemnify absent
a duty to defend. See D.R. Horton, 300 S.W.3d at 744–45 & n.4. The district
court relied on that faulty assumption in granting summary judgment for Colony
here.
In ruling on Colony’s motion, the district court first considered whether
Colony had a duty to defend Peachtree. Applying the eight-corners rule, the
court restricted its inquiry to Lee’s petition and the Colony-CrossRoads policy.
Since Colony’s duty to defend Peachtree as an additional insured was
conditioned on CrossRoads’ association in the underlying suit, and CrossRoads
was not mentioned in the petition, the court found that Colony had no duty to
defend Peachtree. That finding has not been challenged.
The district court then turned to the duty to indemnify. Though the court
appears to have recognized that the two duties are governed by separate
inquiries, it nonetheless found that since CrossRoads was not mentioned in Lee’s
petition, “even conclusive proof of the factual allegations asserted would not
trigger coverage by Colony for Peachtree under the Colony-CrossRoads policy.
Thus, there is no duty to indemnify.”
In granting summary judgment for Colony, the court did not consider
evidence offered by Peachtree and Great American intended to show a genuine
issue of material fact on Colony’s duty to indemnify (i.e., that Peachtree’s
2
Recently, we characterized the difference between the two duties in even starker
terms, noting that “[t]he relative breadth of the duty to defend when compared to the duty to
indemnify is actually irrelevant to the inquiry. In reality, the questions of defense and
indemnity are better understood as independent matters evaluated under their own
interpretive rules. A duty to indemnify can arise where there is no duty to defend . . . and vice
versa, though the former is less common than the latter.” Martco Ltd. P’ship v. Wellons, Inc.,
588 F.3d 864, 872 n.1 (5th Cir. 2009).
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liability arose out of CrossRoads’ operations as required by the Colony-
CrossRoads policy.)
Two months after the district court’s ruling, the Texas Supreme Court
rejected the view, relied on by the district court here, that the duty to indemnify
is appurtenant to the duty to defend. In D.R. Horton–Texas, Ltd. v. Markel Int’l
Ins. Co., a general contractor/homebuilder brought a coverage action against one
of its subcontractors’ insurers to recover funds paid in a pretrial settlement. 300
S.W.3d at 741. Although the underlying suit stemmed from conduct that the
homebuilder had subcontracted to another party, only the homebuilder was
named as a defendant. Id. at 742. The subcontractor’s insurer argued that it
had no duty to defend under the eight-corners rule because the homeowner’s
petition in the underlying suit, like Lee’s petition here, did not name the
subcontractor. Id. The insurer further argued that because it had no duty to
defend the homebuilder, by implication, it could have no duty to indemnify
either. Id. The state trial court and the court of appeals both embraced this
view. Id. The Texas Supreme Court did not.
In D.R. Horton, the Texas Supreme Court clarified that an insurer may
have a duty to indemnify even though the duty to defend never arises. Id. at
741, 744. The court repudiated those decisions, like the district court’s here, that
mistakenly rely on Griffin for the proposition that one duty is subordinate to the
other. Id. at 744–45 & n.4. Where there has been an underlying trial on the
issue of liability, the facts adduced at trial might differ from the allegations, and
thus, a duty to indemnify could be shown notwithstanding the absence of a duty
to defend. In cases like this, where the underlying liability dispute is resolved
before trial and there is no opportunity to develop the facts, additional
evidence—not relevant to the issue of liability but essential to coverage—may
be introduced during the coverage litigation to establish or refute the duty to
indemnify. Id. at 741, 744. Were the rule otherwise, insureds like Peachtree
could never establish coverage (i.e., the insurer’s duty to indemnify) where there
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was no underlying trial on liability, or the underlying trial failed to provide all
the facts necessary to determine coverage. See Nat’l Union Fire Ins. Co. v. Puget
Plastics Corp., 532 F.3d 398, 404 (5th Cir. 2008) (“The underlying case often does
not resolve all the factual issues necessary to determine coverage because issues
relevant to the question of coverage can be irrelevant to the question of the
insured’s liability. . . . Therefore, courts are not precluded from making factual
findings in coverage actions.”).
Here, Peachtree and Great American provided extrinsic evidence to show
that the claims in the underlying suit implicated CrossRoads, and therefore
required Colony to indemnify them. The district court refused to consider this
summary judgment evidence because it determined that “even conclusive proof
of the factual allegations asserted [in Lee’s petition] would not trigger coverage
by Colony for Peachtree under the Colony-CrossRoads policy.”
In light of D.R. Horton, the district court’s summary judgment for Colony
was both premature and incorrect. See 300 S.W.3d at 744–45. The Colony-
CrossRoads policy includes a blanket endorsement provision for additional
insureds that covers Peachtree “with respect to liability arising out of
[CrossRoads’] ongoing operations performed for [Peachtree].” (emphasis added).
Texas courts have interpreted “with respect to” to include coverage for an
additional insured’s negligence whenever there is a “causal connection or
relation” between the subcontractor’s work and the additional insured’s liability.
See, e.g., Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660,
666 (Tex. 2008) (holding “with respect to” means a “‘causal connection or
relation’ between the event and operations” and that “[t]he particular attribution
of fault between insured and additional insured does not change th[is] outcome”).
Peachtree and Great American’s proffered evidence was more than sufficient to
raise a question of fact concerning the existence of a “causal connection or
relation” between CrossRoads’ subcontracted work and the accident in the
underlying suit. As in D.R. Horton, facts outside the pleadings here may or may
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not prove that the actual basis of Peachtree’s liability was covered by the Colony-
CrossRoads policy. That issue will be determined in the coverage litigation on
remand.
B
We now turn to whether the district court erred in dismissing Great
American’s complaint in intervention under Fed. R. Civ. P. 12(b)(6) after finding,
as a matter of law, that under Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co.,
236 S.W.3d 765 (Tex. 2007), Great American could not maintain a subrogation
action against Colony after Peachtree was fully indemnified. We first address,
however, two of Colony’s preliminary arguments, either of which would obviate
the need to reach the Erie question that arises if we reverse the district court.
1
Colony first argues that Great American’s complaint in intervention is
legally insufficient to state a claim for relief. We disagree. Liberally construing
Great American’s complaint, as we are required to do, we find that Great
American has set forth sufficient factual matter to “state a claim for relief that
is plausible on its face.” Twombly, 550 U.S. at 570. Great American’s complaint
alleged, in sufficient factual detail, that Peachtree’s first layer of insurance
coverage was with Colony, that Colony was responsible for paying the remainder
of its policy limits on behalf of Peachtree in settling the underlying litigation,
that Great American tendered a $650,000 settlement contribution to indemnify
Peachtree for which Colony was actually responsible as a primary insurer, and
that Colony was obligated to reimburse Great American for that amount.
Reviewing the matter de novo, we find that Great American’s complaint sets
forth a facially plausible claim for reimbursement under theories of contractual
and equitable subrogation.3
3
Colony maintains that Great American’s complaint is insufficient to state a claim for
contractual subrogation because Great American failed to include the pertinent terms and
conditions of the Great American-Peachtree excess policy in its complaint. While this may
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Next, Colony contends that Great American’s settlement contribution was
voluntary, and thus, incapable of supporting a claim for reimbursement under
equitable subrogation. See Appellee’s Br. at 25–26. As Colony correctly notes,
equitable subrogation requires that the payee insurer have acted involuntarily
in making the payment. Nonetheless, in the context of equitable subrogation,
Texas courts have been liberal in their determinations that payments were made
involuntarily. See Argonaut Ins. Co. v. Allstate Ins. Co., 869 S.W.2d 537, 542
(Tex. App.–Corpus Christi 1993). Moreover, an excess insurer’s payment to
settle a suit against the insured has been said to be presumptively involuntary
for subrogation purposes. Id. at 543. “An insurer who pays a third-party claim
against its insured is not a volunteer if the payment is made in good faith and
under a reasonable belief that the payment is necessary to its protection.” Keck,
Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburgh, 20 S.W.3d 692, 702–03
(Tex. 2000). Because an inquiry into Great American’s good faith and the
reasonableness of its beliefs in tendering the settlement payment on behalf of
Peachtree would involve matters beyond the scope of the pleadings, the district
court could not have dismissed Great American’s complaint under Rule 12(b)(6).
See Sullivan v. Leor Energy LLC, 600 F.3d 542, 546 (5th Cir. 2010) (“In ruling
on a motion to dismiss, the district court generally ‘must not go outside the
pleadings.’”) (citation omitted). The voluntary payment doctrine cannot serve as
a basis for affirming the district court here.
2
Whether, as a matter of Texas substantive insurance law, Great American
can maintain a subrogation claim against Colony after Peachtree has been fully
indemnified is the ultimate question before us.
There are three types of subrogation rights recognized in Texas:
contractual, equitable, and statutory. See Fortis Benefits v. Cantu, 234 S.W.3d
have been advisable, it is certainly not required by Fed. R. Civ. P. 8(a)(2) or 12(b)(6).
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642, 648 (Tex. 2007). Caselaw most often discusses the first two. See, e.g., Mid-
Continent, 236 S.W.3d at 774; Hartnett v. Hampton Inns, Inc., 870 S.W.2d 162,
167 n.7 (Tex. App.–San Antonio 1993) (a right to subrogation may arise either
from an agreement between the parties or in equity to prevent a fraud or
injustice). To prevail on a claim of equitable subrogation, a party must show
that it involuntarily paid a debt primarily owed by another which in equity
should have been paid by the other party. See Mid-Continent, 236 S.W.3d at
774; Frymire Eng’g Co. v. Jomar Int’l, Ltd., 259 S.W.3d 140, 142, 144–46 (Tex.
2008). Contractual subrogation, on the other hand, is “created by an agreement
or contract that grants the right to pursue reimbursement from a third party in
exchange for payment of a loss.” Mid-Continent, 236 S.W.3d at 774. Under both
types of subrogation, the insurer “stands in the shoes of the insured” and may
assert only those rights held by the insured against a third party, subject to any
defenses the third party holds against the insured. Id. Here, the district court
relied on Mid-Continent in finding that, because Peachtree was a fully
indemnified insured, Great American’s subrogation claim against Colony was
foreclosed as a matter of law.
In Mid-Continent, two insurance companies separately provided primary
insurance coverage to the same insured and cooperatively assumed the defense
of the negligence suit against the insured. 236 S.W.3d at 769–70. The suit was
settled for $1.5 million, and based on their divergent valuations of the case, one
of the insurance companies paid a disproportionate share of the settlement. Id.
at 770. The overpaying insurer then sued its co-insurer for, inter alia,
reimbursement through subrogation to the rights of the insured. Id. In denying
the overpaying insurer’s contractual subrogation claim, the Texas Supreme
Court rested its decision on the precept in subrogation law that a subrogee
insurer “stands in the shoes of the insured,” and that its remedies are limited to
those held by the insured. Id. at 774. The court explained that
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a fully indemnified insured has no right to recover an additional pro
rata portion of settlement from an insurer regardless of that
insurer’s contribution to the settlement. Having fully recovered its
loss, an insured has no contractual rights that a co-insurer may
assert against another co-insurer in subrogation.
Id. at 775–76. Because the insured in Mid-Continent had no contractual rights
remaining against either co-primary insurer after it was fully indemnified, the
Texas Supreme Court held that there were no means by which the overpaying
insurer could maintain a subrogation claim against the second co-primary
insurer.4 Following Mid-Continent’s reasoning, the district court here found that
Peachtree had no remaining rights, after being fully indemnified, to enforce
Colony’s duty to pay its share of the indemnification, and thus, that Great
American could not recover its portion of the settlement contribution through
subrogation. The court dismissed Great American’s complaint under Fed. R.
Civ. P. 12(b)(6) accordingly.
After the district court issued its ruling, however, we rejected an overly
broad view of Mid-Continent’s subrogation exclusion, holding as an Erie guess
that Mid-Continent does not bar contractual subrogation simply because an
insured has been fully indemnified. See Amerisure Ins. Co. v. Navigators Ins.
Co., 611 F.3d 299, 305–07 (5th Cir. 2010).
In Amerisure, a primary insurer that disputed its liability nonetheless paid
$1 million toward a personal-injury settlement and then sought reimbursement
from the excess insurer through subrogation. 611 F.3d at 302. Relying on Mid-
Continent, the district court there held that subrogation was unavailable
because the insured was already fully indemnified. Id. We reversed, explaining
why such a broad reading of Mid-Continent was at odds with foundational
4
See id. at 777 (“Kinsel [insured] has no common law cause of action against Mid-
Continent [underpaying insurer], nor does it have, after being fully indemnified, any
contractual rights remaining against Mid-Continent. Because Kinsel has no rights to which
Liberty Mutual [overpaying insurer] may be subrogated, Liberty Mutual has no right of
reimbursement through subrogation.”).
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principles of Texas insurance law, id. at 307–08, as well as in conflict with later
decisions of the Texas Supreme Court. Id. at 307 (citing Tex. Health Ins. Risk
Pool v. Sigmundik, 315 S.W.3d 12 (Tex. 2010)).5 In addition, we observed that
the majority of district courts to have considered Mid-Continent had cabined it
to its facts, and we cited with approval to Judge Rosenthal’s “well-reasoned
opinion,” limiting Mid-Continent to those situations where the insurers (1) were
co-primary insurers; (2) did not dispute that both covered the loss; and (3) were
subject to pro rata clauses. Id. at 306 (citing Emp’r’s Ins. Co. of Wausau v. Penn-
America Ins. Co., 705 F. Supp. 2d 696 (S.D. Tex. 2010)).
Amerisure compels the preliminary result here: Mid-Continent does not
preclude Great American’s contractual subrogation claim as a matter of law.6
And although this is not the end of our inquiry—as we still must determine
whether Mid-Continent’s holding, however narrow, applies—we find that after
applying the criteria described by Judge Rosenthal and set out above, Mid-
Continent is distinguishable and does not control here.
In Mid-Continent, both insurers acknowledged their duties to defend and
indemnify the insured. 236 S.W.3d at 769. But here, as in Amerisure, one of the
insurers [Colony] has denied that is has any obligation to provide coverage. In
addition, Mid-Continent involved a reimbursement dispute between co-primary
insurers. Id. at 772. But this case, like Amerisure, involves a claim between an
excess carrier and a primary insurer. And, as we have already recognized
elsewhere, Mid-Continent does not preclude subrogation claims by excess
insurers, but rather, is limited to disputes between co-primary insurers. See
Nautilis Ins. Co. v. Pac. Emp’r Ins. Co., 303 F. App’x 201, 206 (5th Cir. 2008) (per
curiam).
5
In Sigmundik, the Texas Supreme Court allowed an insurer’s subrogation claim to
proceed even after the injured insured was fully indemnified. 315 S.W.3d at 14–15.
6
Because the Amerisure court found that contractual subrogation was available, it did
not reach the appellant’s equitable subrogation claim. 611 F.3d at 302, 308.
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Having concluded that Mid-Continent does not control Great American’s
contractual subrogation claim against Colony, we vacate the district court’s Rule
12(b)(6) order that dismissed Great American’s complaint in intervention.
IV
For the foregoing reasons, we VACATE the district court’s order granting
summary judgment for Colony, as well as the district court’s order dismissing
Great American’s complaint in intervention, and REMAND for further
proceedings consistent with this opinion.
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