UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-41112
STOREBRAND INSURANCE COMPANY U.K., LIMITED,
Plaintiff-Appellant,
VERSUS
EMPLOYERS INSURANCE OF WAUSAU,
A MUTUAL COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
For the Southern District of Texas
May 7, 1998
Before POLITZ, Chief Judge, REYNALDO G. GARZA, and DENNIS, Circuit
Judges.
REYNALDO G. GARZA, Circuit Judge:
This is an appeal from the United States District Court for
the Southern District of Texas, Galveston Division, the Honorable
Samuel B. Kent, presiding. The district court granted summary
judgment in favor of the Defendant-Appellee, Employers Insurance of
Wausau (“Wausau”), and dismissed with prejudice the claims of the
Plaintiff-Appellant, Storebrand Insurance Company (“Storebrand”).
Storebrand appealed, and the matter now lies before this circuit.
Background
In December of 1991, the Texas Workers’ Compensation Insurance
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Facility (“the Facility”), Texas’ insurer of last resort, issued a
liability policy to Stafftek, Inc. (“Stafftek”), a staff leasing
company. Pursuant to the Texas Insurance Code, the Facility chose
Wausau to service the policy. This policy contained an Alternate
Employer Endorsement extending coverage to “all clients” of
Stafftek.
In February of 1992, Stafftex, Inc. (“Stafftex”), a staff
leasing company, entered into an employee leasing contract (“the
Contract”) with Texas Drydock, Inc. (“TDI”), a ship maintenance and
repair company. The Contract was subsequently assigned by Stafftex
to its sister company, Stafftek. The Contract provided that
Stafftek and TDI would be considered to be joint employers of the
leased employees and that Stafftek would obtain insurance coverage
protecting Stafftek and TDI from risks arising from this
arrangement, including the possibility of a lawsuit from an injured
employee. The aforementioned Wausau insurance policy covered this
arrangement, because TDI was a client of Stafftek. Storebrand
provided general liability insurance to TDI.
On February 12, 1992, Sylvester Dickey (“Dickey”), an employee
of Stafftek under the control and direction of TDI, was injured
while working on a barge.1 Dickey filed a lawsuit against TDI,
though he later amended his complaint to include Stafftek and
Stafftex as defendants. He brought claims under the Longshore and
1
Dickey was originally hired by TDI in 1987, but in 1990, TDI
required all hourly employees to enter into employment contracts
with Stafftek. Such employees continued in their original jobs
with TDI while Stafftek performed administrative employer
functions, such as payroll.
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Harbor Workers’ Compensation Act (“LHWCA”), 33 U.S.C. §901, et
seq., and asserted claims of negligence. Over the course of the
years of litigation, Dickey again amended his complaint, in a
manner which suggested to Wausau that Dickey alleged that Stafftek
alone was his employer.2 Dickey never alleged a third-party claim
under §905(b) of the LHWCA. Wausau alleges that this fact, among
others, led them to believe that there would be no §905(b)
employers’ liability, and Wausau analyzed its risk exposure
accordingly.
The case went to mediation. Based on the analysis of Wausau’s
attorney, W. Robins Brice (“Brice”), the Facility , through Wausau,
offered $300,000 to settle Dickey’s claims. Dickey would not
accept less than $500,000. TDI argued that the Facility should pay
the full amount. In the end, Wausau paid $300,000, and Storebrand
paid $200,000, the difference between what Wausau paid and Dickey’s
demands. Storebrand did not appeal the Facility’s decision to the
Texas Department of Insurance or any other body. Instead, it filed
suit against Wausau.
Storebrand filed suit against Wausau, in the Galveston
Division of the Southern District of Texas, asserting causes of
action for negligence, gross negligence, breach of the duty of good
faith and fair dealing (“bad faith”), violations of Texas Insurance
Code Article 21:21 and the Texas Deceptive Trade Practices Act
(“DTPA”), and common law indemnification. Storebrand sued in its
2
While TDI filed a motion for summary judgment on the
employment issue during the course of the Dickey litigation, it was
never decided upon.
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individual capacity and as the subrogee of TDI. The parties filed
cross-motions for summary judgment. The district court granted
summary judgment in favor of Wausau, though it disagreed with
Wausau’s contention that the district court lacked jurisdiction
over this matter. Storebrand’s claims were dismissed with
prejudice. Storebrand timely appealed, on the Article 21:21 and
DTPA issues, and on Stowers3 claims. The matter now lies before
this panel.
Standard of Review
The standard of review for the granting of a motion for
summary judgment is de novo. BellSouth Telecommunications, Inc. v.
Johnson Bros. Group, 106 F.3d 119, 122 (5th Cir. 1997); Guillory v.
Domtar Industries, Inc., 95 F.3d 1320, 1326 (5th Cir. 1996).
Summary judgment is warranted when “the pleadings, depositions,
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact.” FED.R.CIV.P. 56(c); Celotex v. Catrett, 477 US 317,
322 (1986).
Analysis
The first issue to be dealt with is the issue of subject
matter jurisdiction. Wausau argued at the district court level
that the district court did not have subject matter jurisdiction
3
A Stowers claim is based on the holding in Stowers Furniture
Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm’n.App. 1929,
holding approved), an issue to be defined and discussed later.
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over this matter because Storebrand had not exhausted its
administrative remedies. The district court rejected this
argument, and Wausau argued it again before this circuit. We agree
with the district court.
The district court described the law on this matter as being
“in flux.” The district court pointed out that in Northwinds
Abatement Inc. v. Employers Ins. of Wausau, 69 F.3d 1304, 1310-11
(5th Cir. 1995), this circuit held that the exhaustion of
administrative remedies doctrine did not apply in cases involving
tort claims against a company member of the Facility, because the
relevant administrative bodies do not have the authority to
adjudicate tort actions or to award damages.
Wausau cited two recent Texas court of appeals decisions for
the contention that one must pursue and exhaust all administrative
remedies even when extra-contractual damages are sought. See Metro
Temps, Inc. v. Texas Workers’ Compensation Ins. Facility, 949
S.W.2d 534, 535 (Tex.App.--Austin 1997, no writ); Producers
Assistance Corp. v. Employers Ins. of Wausau, 934 S.W.2d 796, 800
(Tex.App.--Houston [1st Dist.] 1996, no writ). These cases are
distinguishable, because they involve insureds who should have
exhausted their remedies, while Storebrand is not an insured and
was not a participant in the Facility. Judge Kent held that the
Texas law on this is at best unsettled, and that this circuit’s
reasoning in Northwinds governs.4 We agree, and affirm Judge Kent
4
Indeed, in his decision, Judge Kent considered and rejected
one of the cases cited by Wausau as authority on this point, and
pointed out that the Texas Supreme Court has not spoken on this
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on this point.
The next issue is whether Wausau’s actions were in violation
of the Texas Insurance Code or Deceptive Trade Practices Act. The
district court held that they were not. The district court stated
that the predicate for recovery on these claims is the same as that
required for bad faith causes of action. Higginbotham v. State
Farm Mut. Auto Ins. Co., 103 F.3d 456, 460 (5th Cir. 1997). Such
a cause of action exists “when the insurer has no reasonable basis
for denying or delaying payment of a claim or when the insurer
fails to determine or delays in determining whether there is any
reasonable basis for denial.” Id. at 459 (citing Arnold v.
National County Mut. Fire. Ins. Co., 725 S.W.2d 165, 167 (Tex.
1987). Also, it should be noted that under the Texas Insurance
Code, the Facility is the insurer, not Wausau, because Wausau
merely serviced the policy. Northwinds, 69 F.3d at 1306. As such,
Wausau cannot be held liable for general claims of breach of good
faith and fair dealing, only for the Insurance Code and DTPA
claims. See Id. at 1311.
The district court held that Wausau’s actions passed muster
under the standard set forth by Northwinds and Higginbotham with
regard to the Insurance Code and DTPA claims. Judge Kent held that
there was a reasonable basis for Wausau to offer a maximum of
$300,000 to settle the Dickey case, based on the analysis of its
attorneys regarding the value of the claim. Also, the district
court considered it reasonable that Wausau believed it did not have
specific issue.
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potential liability for TDI under §905(b), because Dickey never
asserted a claim against TDI under §905(b) and Wausau believed the
statute of limitations had passed on this issue.5 We agree with
the reasoning and decision of the district court on this issue, and
we see no reversible error on this point.
Storebrand contends that the district court erred in finding
that Wausau acted in good faith and thus was immune from liability
under Article 21:21 and the DTPA. Storebrand’s claims complain of
unfair claims settlement practices. As such, they do not sound in
fraud, nor do they claim fraud or misrepresentation. Instead, they
are essentially statutory bad faith claims. We have already stated
that we believe Wausau’s actions were reasonable. Similarly, we do
not see any evidence of bad faith. Wausau did not lie to
Storebrand or TDI, it merely acted on its analysis of what was
appropriate to be paid out in this matter, and its analysis was not
unreasonable. We find no reversible error with regard to this
issue.
Storebrand also appeals the dismissal of its Stowers claim.
The Stowers doctrine is a very old and venerable doctrine in Texas
law. Under Stowers, an insurer is required to exercise the degree
of care and diligence when responding to settlement demands within
5
Storebrand argued in its brief that the §905(b) claim could
relate back to the original filing, under a Texas court of appeals
case called Bradley v. Etessam, 703 S.W.2d 237, 240 (Tex.App.--
Dallas 1985, writ ref’d n.r.e.). We do not pass on this issue,
given that it is peripheral to this case, does not affect the
reasonability analysis given the totality of facts in this case,
and because our court is not bound by a singular decision of one
Texas court of appeals regarding a completely different case and
set of facts.
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policy limits which an ordinary and prudent person would exercise
in managing his own business. Stowers, 15 S.W.2d at 547. If the
insurer does not exercise that degree of care and diligence, “an
insured may recover from his insurer the entire amount of a
judgment in excess of policy limits rendered against him...”
Ecotech Int’l Inc. v. Griggs & Harrison, 928 S.W.2d 644, 646
(Tex.App.--San Antonio 1996, writ denied).
Storebrand does not prevail under the terms of the Stowers
doctrine. First, Wausau’s actions were not unreasonable, and they
were not imprudent. Also, no judgment was made against TDI,
because the matter was settled in mediation. Further, the insurer
in this case is the Facility, and Wausau should not be made liable
as an insurer in this context. On this issue, the district court
was correct in finding in favor of Wausau, as it did elsewhere. We
find no reversible error in Judge Kent’s decision, and we affirm.
Conclusion
Given the foregoing, we find no reversible error in Judge
Kent’s decision. Accordingly, we AFFIRM the decision of the
district court granting summary judgment in favor of Wausau in this
matter.
AFFIRMED.
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