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Click here for the full text of this decision FACTS:Pietra Nieto Trevi�o’s survivors brought a wrongful death and survival action in state court against Methodist Retirement Communities (MRC) and five of its nurses. MRC maintained primary and excess insurance coverage for general and professional liability that covered MRC and its employees. Hartford Underwriters Insurance Co. provided primary coverage of up to $1 million for each “medical incident” under a professional liability policy or “occurrence” under a general liability policy. Caliber One Indemnity Co. provided the same amount of primary coverage. Royal Insurance Co. of America provided excess coverage. Hartford and Caliber One agreed to share the cost of defending MRC in the state court action brought by Trevi�o’s survivors. Trevi�o’s family offered to settle for $3 million, and MRC sent a Stowers demand letter to Hartford, Caliber One and Royal requesting them to accept the offer. After negotiations, the Trevi�o family’s suit was settled for $2 million. Caliber One contributed $800,000, Hartford contributed $200,000, and Royal contributed $1 million under protest, asserting that it would attempt to recover that amount from the primary carriers. Royal then sued Hartford and Caliber One in state court to recoup the $1 million it had paid. The suit was removed to federal district court on the basis of diversity jurisdiction. The parties consented to conduct all proceedings before a U.S. magistrate judge, including trial and entry of final judgment. They filed cross-motions for summary judgment, and the magistrate granted judgment in favor of the primary carriers. The magistrate concluded that under Texas law, which governs this action, an excess carrier has an equitable subrogation claim against a primary insurer “only when it is predicated on the violation of a tort duty owed to the insured” and that the only tort theory under which such an insured may proceed is negligence. The magistrate further concluded that even if Royal could assert an equitable subrogation claim based on breach of the contractual duties the primary carriers owed to MRC, there was only one occurrence or medical incident within the meaning of the primary insurance policies because Trevi�o’s death stemmed from an ongoing course of care and treatment. Under such circumstances, the magistrate concluded, Texas law does not allow an insured to “stack” coverage. Rather, the highest limits under any one policy apply, even if the negligence spanned multiple policy periods, and Hartford and Caliber One therefore had tendered the full limits, $1 million. The magistrate also rejected Royal’s contention that the general commercial liability policies applied. Royal appealed. HOLDING:The court affirmed the summary judgment in favor of Hartford, reversed the summary judgment in favor of Caliber One, and remanded the case to the district court for further proceedings. The court stated that an insured cannot reduce its primary policy limits to the detriment of its excess carrier any more than it can expand those limits. To allow MRC to estop its excess carrier would give MRC the unilateral right to determine when primary policy limits were exhausted within the meaning of its excess policy. The limits of the primary policies are questions to be determined by the policies themselves, not the insured, just as the question of whether those limits have been exhausted is determined by the policies. The court held that Caliber One was required to exhaust its policy limits of $1 million before Royal was obligated to indemnify Methodist. The court stated that the magistrate erred in granting Caliber One’s motion for summary judgment. OPINION:Owens, J.; Jones, C.J., and DeMoss and Owen, J.J.

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