Texas excess insurer indemnity reimbursement from primary insurer.

In Colony Ins. Co. v. Peachtree Construction, Ltd., No. 09-11106 (5^th Cir. July 19, 2011), Peachtree was the general contractor for a highway paving project.  Peachtree subcontracted with CrossRoads for signs, barricades and warning devices.  Peachtree was sued by the estate of a motorcyclist killed in an accident occurring within the construction site.  Peachtree filed a third party complaint against CrossRoads and also tendered its defense as an additional insured under CrossRoads’ CGL policy issued by Colony.  Colony defended Peachtree under a reservation of rights and filed a declaratory judgment action against Peachtree and Peachtree’s CGL insurer Travelers.  The underlying lawsuit was then settled for $2M with Travelers paying its primary limit of $1M on behalf of Peachtree, Peachtree’s excess insurer Great American paying $650K on behalf of Peachtree, and Colony paying $350K on behalf of CrossRoads.   Great American sought to intervene in the Colony declaratory judgment action to seek reimbursement from Colony.  The federal district trial court dismissed Great American’s intervention complaint and entered summary judgment for Colony, holding that, because the underlying complaint did not allege any involvement of CrossRoads, Colony had no duty to defend Peachtree as an additional insured and, absent a duty to defend, there could be no duty to indemnify, refusing to consider extrinsic evidence demonstrating CrossRoads’ involvement.  On appeal of the ruling on Colony’s duty to indemnify (Great American  did not challenge the ruling that Colony did not have a duty to defend), the U. S. Court of Appeals for the Fifth Circuit reversed.   Applying Texas law, the court held that, under D.R. Horton-Texas, Ltd. v. Markel International Ins. Co., Ltd., 300 S.W.3d 740 (Texas 2009), the trial court erred in ruling that, absent a duty to defend, there can be no duty to indemnify.  The court remanded the case back to the trial court for consideration of the extrinsic evidence purportedly demonstrating CrossRoads’ involvement such that Colony was obligated to indemnify Peachtree as an additional insured.   The court also reversed the trial court’s dismissal of Great American’s intervention complaint, holding that, based on its decision in Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299 (5^th Cir. 2010), because Colony denied any duty to defend or indemnify Peachtree, the intervention complaint sufficiently alleged causes of action entitling Great American to contractual and equitable subrogation.  The court states that the Texas Supreme Court’s ruling in Mid-Continent Ins. Co. v. Liberty Mutual Ins. Co., 236 S.W.3d 765 (Tex. 2007) “does not preclude subrogation claims by excess insurers, but rather, is limited to disputes between co-primary insurers.”