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Click here for the full text of this decision FACTS:Frank’s Casing Crew & Rental Tools Inc. fabricated a drilling platform at its facility in Louisiana for ARCO/Vastar. The platform was installed in the Gulf of Mexico and collapsed several months later. ARCO sued Frank’s Casing, among others. Frank’s Casing had a primary liability policy with limits of $1�million, and Frank’s Casing had obtained excess coverage of up to $10�million from excess underwriters at Lloyd’s, London. The excess underwriters issued reservation of rights letters in which they asserted that certain of ARCO’s claims against Frank’s Casing were not covered. The primary carrier retained defense counsel for Frank’s Casing. ARCO made a pre-trial settlement offer of $9.9 million, which Frank’s Casing rejected. Two weeks before trial, the excess underwriters contacted ARCO directly, without Frank’s Casing’s knowledge, and attempted to settle only the claims the underwriters were willing to concede were covered. No agreement was reached. ARCO subsequently offered to settle all claims against all defendants for $8.8 million, which would have required Frank’s Casing to contribute about $7.55�million. The excess underwriters proposed to Frank’s Casing that the underwriters pay two-thirds of that amount, that Frank’s Casing pay one-third, and that all coverage issues would be waived by the underwriters. In the alternative, the underwriters proposed that they pay $5�million and that all coverage issues be resolved in arbitration. Frank’s Casing did not accept either proposal. As trial approached, the excess underwriters retained counsel to associate with Frank’s Casing and its primary carrier in the defense of ARCO’s claims, as the underwriters were entitled to do under the excess liability policy. ARCO’s suit against Frank’s Casing proceeded to trial, and it readily became apparent that Frank’s Casing was the target defendant. By the close of the second day of trial, Frank’s Casing’s in-house counsel had contacted ARCO and requested that it make a settlement demand within the excess policy’s limits, suggesting $7 million. ARCO promptly responded with a demand of $7.5 million, which Frank’s Casing communicated to the excess underwriters accompanied by a demand that the underwriters accept this offer, thus “Stowerizing” the excess underwriters. The underwriters agreed that the case should be settled for this amount and stated that they would fund the settlement up to $7.5 million, less any contribution from the primary carrier, if Frank’s Casing would expressly agree that all coverage issues would be resolved at a later date. Frank’s Casing refused and sent a second letter demanding that the underwriters accept ARCO’s settlement offer. The excess underwriters then advised Frank’s Casing that they would pay $7.5 million, less any contribution from the primary carrier, and seek reimbursement from Frank’s Casing. That same day, the underwriters contacted ARCO and orally accepted the settlement offer. The primary carrier simultaneously tendered its remaining policy limits, approximately $500,000, to settle the suit. The excess insurance policy required Frank’s Casing’s approval of any settlement, and it gave that approval. A written settlement agreement among ARCO, Frank’s Casing and the excess underwriters preserved “any claims that exist presently” between Frank’s Casing and the underwriters. Prior to that agreement’s execution, the excess underwriters had filed this suit against Frank’s Casing for reimbursement, and Frank’s Casing had answered. In the coverage litigation, the excess underwriters and Frank’s Casing filed cross motions for summary judgment. Among the issues presented to the trial court was whether Texas or Louisiana law governed, and the trial court applied Texas law. The trial court initially dismissed Frank’s Casing’s counterclaims and granted three separate motions for partial summary judgment for the excess underwriters, finding that none of ARCO’s claims against Frank’s Casing were covered, requiring Frank’s Casing to reimburse the excess underwriters, and awarding the underwriters $7,013,612.00. Shortly thereafter, however, this court issued Texas Association of Counties County Government Risk Management Pool v. Matagorda County, 52 S.W.3d 128 (Tex. 2000). The trial court then directed Frank’s Casing to file a motion for new trial only on the issue of reimbursement, and Frank’s Casing complied. After further briefing and another hearing, the trial court withdrew its order granting partial summary judgment on the reimbursement issue and signed a take-nothing judgment against the excess underwriters. The court of appeals affirmed HOLDING:The court reverses the court of appeals’ judgment and remands the case to the trial court. In Matagorda County, the insurer had the unilateral right to settle claims against the insured without the insured’s consent. One of the chief concerns expressed by the court in Matagorda County was that when an insurer has the unilateral right to settle, an insurer could accept a settlement that the insured considered out of the insured’s financial reach, and the insured could be required to reimburse the insurer for that amount. The insured is forced to choose between rejecting a settlement within policy limits or accepting a possible financial obligation to pay an amount that may be beyond its means, at a time when the insured is most vulnerable. The court concludes that this concern is ameliorated, if not eliminated, in at least two circumstances: 1. when an insured has demanded that its insurer accept a settlement offer that is within policy limits, or 2. when an insured expressly agrees that the settlement offer should be accepted. In these situations, the insurer has a right to be reimbursed if it has timely asserted its reservation of rights, notified the insured it intends to seek reimbursement, and paid to settle claims that were not covered. In cases such as this, an agreement to reimburse an insurer is implied in law. It is quasi-contractual, the court determines. Under the rationale of Edmonston v. A-Second Mortgage Co. of Slidell Inc., 289 So. 2d 116 (La. 1974).and the provisions of Louisana Civil Code Article 2298, it appears that Louisiana law would permit the excess underwriters to obtain reimbursement from Frank’s Casing. Accordingly, the result under Louisiana and Texas law would be the same, and the court does not engage in a conflict of laws analysis to determine which state’s law applies. OPINION:Owen, J.; Jefferson, C.J., Hecht, Medina and Green, JJ., joined. O’Neill, J., joined in Part I and Part II, C and D, and Wainwright, JJ., joined in Part II,�C. Brister and Johnson, JJ., did not participate in the decision. CONCURRENCE:Hecht, J. “I join fully in the Court’s opinion and write separately only to say that while I agree distinctions can be found between this case and Texas Association of Counties County Government Risk Management Pool v. Matagorda County, in fact those distinctions are immaterial, and the rule in Matagorda County cannot survive today’s decision for the reasons Matagorda County was wrongly decided.” CONCURRENCE:O’Neill, J. “I agree that the excess underwriters are entitled to reimbursement under the circumstances presented in this case. As the Court notes, the insurers could not settle without their insured’s consent under the parties’ insurance agreements, and Frank’s Casing not only consented to the settlement, but initiated it. For this reason, I join Part I and Part II, C and D, of the Court’s opinion. I cannot join the remainder, however, for in my view the Court’s opinion is unduly broad and based at least in part upon faulty assumptions.” CONCURRENCE:Wainwright, J. “Matagorda County left open a very small window for insurers to seek reimbursement of settlement payments for claims later determined to be outside policy coverage. Although Matagorda County is not expressly overruled by the Court today, the small window Matagorda County left open to consider reimbursement is widened by the Court’s decision in this case such that the law on reimbursement comports with principles of the common law. Hence, consideration by Texas courts of common law contract theories and quasi-contract theories (e.g., quantum meruit and unjust enrichment) is appropriate once again in determining the rights and obligations of the parties. I concur in the Court’s result but join only one of the bases for its outcome, and write to further explain that basis. The parties reached an agreement on reimbursement and we should decide this case by enforcing their agreement. Therefore, I join section II.C. of the Court’s opinion. Although not inconsistent with precedent, the remainder of the opinion is based on equitable and policy considerations and concludes that the parties are bound by a contract implied in law.”

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