LEGAL MALPRACTICE CASE:

CLIENT INSURER AGAINST COVERAGE COUNSEL

In re Houston Specialty Insurance Company, Relator

On Petition for Writ of Mandamus

17-1060

Opinion Delivered: January 25, 2019

 

Michael Sean Quinn*

 

         This is a piece of a legal malpractice action that an insurer (“HSIC”) brought against its coverage counsel (“TCCI” or “TC”) arising out of how the law firm handled its interests in an underlying case. Specifically, HSIC complained that TC had mistakenly advised it that it had no duty to defend in an underlying case and advised it to deny so-called indemnity coverage as well.  HSIC had done as it was advised and sustained a loss thereby

         HSIC had provided Commercial General Liability (CGL) insurance to South Central Coal Company (“Coal”). Coal was sued by property owners for mining coal under their property without their consent and for its own profit.  In this opinion, that is called the “Carter lawsuit.” It settled, and that resolution is called the “Carter settlement” by the Court.

         Coal sued HCIC as a third-party in the Carter lawsuit alleging breach of contract and insurer bad faith. The Carter settlement included a settlement between Coal and HSIC. In this case, it was named the “Insurance settlement.”

         Thereupon, HSIC demanded $2.8M from TC. The law firm preemptively  filed a declarative judgment against HSIC under the Uniform Declaratory Judgment Act (“UDJA”). [Qunn’s Comment: Lawyers love initials.] TC’s live petition—he once considered by the courts–contained requests for ten different declarations.

         HSIC filed a motion to dismiss under Rule 91a of the Texas Rules of Texas Civil Procedure. That rule covers relevant motions to dismiss, the motion at issue here being one of them. While that motion was pending HSIC filed a malpractice action in Oklahoma where the underlying litigation had proceeded. The trial court in Harris County, Texas (Houston) denied HSIC’s motion to dismiss, and a court of appeals denied HSIC’s petition for a writ of mandamus without addressing its merits. TC than filed a motion in Harris County seeking an “anti-suit injunction” barring HSIC from pursuing litigation in Oklahoma and filed a motion in the Oklahoma case seeking to abate or dismiss HSIC’s claims. The Oklahoma court granted the motion to abate, and that is where this case stood when HSIC petitioned the Texas Supreme Court for a writ of mandamus.

         I stop here for a moment to sketch was a writ of mandamus is in Texas.  A litigant can obtain mandamus relief if and only if two propositions are true and the party seeking the writ must prove them. First, the trial court must have abused its discretion in granting or refusing to grant something, and second, the petitioner must have no adequate remedy by appeal. In re Essex Ins. Co., 450 S.W.3d 524, 526 (Tex. 2014)(orig. proceeding).

         The Supreme Court ruled in this case that the trial court abused its discretion in denying HSIC’s Rule 91a notion to dismiss. As the Court points out, there is a very important and controlling earlier Supreme Court of Texas opinion, Arbor v. Black, 695 S.W.2d 564, 565 (Tex. 1985)(orig. proceeding). That case answers the following question: “whether a potential defendant in a negligence action can choose the time and forum for trial by beating the potential plaintiff to the courthouse and filing suit seeking a declaration of non-liability under [the UDJA].

The answer in Arbor was no. The rule has stood the test of time; other Supreme Court decisions stand behind it; at the same time, the rule in Arbor has not been extended to include breach of contract. Nevertheless, the rule in Arbor seems to control even the jurisdiction of lower courts. According to the Court in this case, there is one case which appears to be to the contrary, but the Court also says that case was wrong since it  got things backwards. One thing for sure, “[a] legally invalid claim cannot be saved by accompanying claim that may be valid.”

The remaining second question is “whether a traditional appeal after summary judgment provides HSIC an adequate? The court held that “it does not.” There was a time when mandamus relief in situations like this one was available only if the court granting a stay also enjoined the other court from proceeding further. That stringent rule has been tossed aside for some time now, said the court. “[M]andamus relief is appropriate to ‘spare private parties and the public the time and money utterly wasted enduring eventual dismissal of improperly conducted proceedings.’”

The Court has already held twice that the impact of an improperly conducted proceeding makes awaiting a later appeal destroys there being an adequate appeal.

On this basis, without oral argument, the Court granted mandamus relief and directed the trial court to grant HSIC’s Rule 91a motion to dismiss. The writ will issue, however, only if the trial court fails to comply.

         This was a “per curiam” opinion. What does that mean? The phrase itself means “by the court.” No judge is identified as writing the opinion for the court, and that distinguishes a per curiam opinion from a unanimous opinion. Generally, per curiam opinions rule on simple (or simple looking) matters about which there is no real or genuine controversy.  Per curiam opinions tend to be short and straight forward. If the Supreme Court of Texas—and all other supreme courts, for that matter—whomsoever set up a case to be subject to a per curiam opinion for the Court will be and then is embarrassed. In a mandamus case, the lower court is also embarrassed. (He who “sets up” is not the Relator or necessarily the Petitioner.)

*Michael is a Partner in the firm of Quinn and Carmona. The firm’s website is www.QClaw-adr.com. His email is quinn@QClaw-adr.com. The firm’s phone number is (512) 768-6840, and its fax number is (512)768-642. The mailing address is P.O. Box 162344, Austin, Texas 78716. Michael’s cell phone number is (512) 656-0503, and for now he can also be emailed at mquinn@msqlaw.com.

 

Although the following plays no role in the case, it may be some interest to note that HSIC is part of or affiliated with Houston International Insurance Group.

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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