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Click here for the full text of this decision FACTS:The appeal turned on the effect of a settlement of one of two sets of fraud-related claims involving two separate liability policies issued by the same insurer, Caliber One Indemnity Co., to two different insureds. The insureds were 22 Texas Services LP and 22 Keystone Services LP (collectively, 22s) and Senior Living Properties LLC (SLP). They are unaffiliated and were not insured under each other’s policies. Heath Insurance Brokers of Texas LP or a related entity, and Clair Odell Insurance Agency LLC, were 22s’ and SLP’s wholesale and retail insurance brokers, respectively, and were involved in soliciting and procuring both the 22s policy for 22s and the SLP policy for SLP. Caliber later disputed coverage on both policies alleging they were induced fraudulently by various misrepresentations or nondisclosures relevant to insurability or underwriting risk. Coverage litigation ensued in disparate venues. 22s and SLP claimed innocence of any fraud, blaming Heath and Odell. Caliber ultimately sued Heath and Odell as third-party defendants on the SLP claims. All suits ultimately settled. Before Caliber sued Heath and Odell, it separately settled with 22s. In that settlement, Caliber assigned its 22s claims against Heath and Odell to 22s. 22s later assigned them to Equitable, which then brought this suit as assignee of the 22s claims, to recover what Caliber paid 22s in the Caliber/22s settlement. Odell was nonsuited. Equitable did not seek, in the trial court or on appeal, any relief related to the SLP policy or on the SLP claims. Equitable based all its fraud, negligent-misrepresentation, Texas-Insurance-Code-violation, fiduciary-duty and contribution/indemnity recovery theories on the same allegations of fraud inducing Caliber’s policy-issuance. Heath sought summary judgment on affirmative defenses of release, res judicata, collateral estoppel, judicial estoppel and limitations, and on Equitable’s contribution/indemnity claims, which the trial court granted. In two points of error, Equitable argued that the court erred in granting summary judgment, because there were fact issues on Heath’s affirmative defenses, and also erred in granting summary judgment on its contribution/indemnity claims. The core issue before the 5th Court of Appeals was whether release of claims involving the SLP policy also extinguished claims involving the 22s policy. Specifically, Heath argued that the record conclusively established that various court-approved transactions and a release and dismissal of the SLP claims also extinguished Equitable’s 22s claims as a matter of law. Heath admitted that Equitable was a nonparty to and had no involvement with any of the above transactions and proceedings. Equitable brought suit against Heath on the 22s claims on July 13, 2004. It acquired them from 22s under the 22s equitable assignment the day before. Alleging that Heath fraudulently induced Caliber to issue the 22s policy to 22s, Equitable sought to recoup amounts Caliber paid 22s under the Caliber/22s settlement, amounts Caliber paid on any claims under the 22s policy and commissions Heath received in brokering the 22s policy for 22s. At the trial court level, Heath sought and obtained a complete summary judgment on affirmative defenses of release, res judicata, collateral estoppel and judicial estoppel. It argued that the 22s claims that Equitable asserted as Caliber’s ultimate assignee (through 22s) were extinguished by the court-approved transactions and proceedings in the SLP bankruptcy and Caliber/Heath suit. Equitable appealed the take-nothing judgment against it. HOLDING:Affirmed in part, reversed and remanded in part. First, Equitable argued that the summary judgment evidence did not conclusively establish Heath’s affirmative defenses of res judicata, collateral and judicial estoppel, and release as a matter of law. The court agreed. All of Heath’s defenses, the court stated, depend on SLP’s or the SLP bankruptcy trustee’s ownership of the 22s claims. That claim of ownership can arise only from the Caliber/SLP assignment contained in the Caliber/SLP settlement. But both expressly specify the claims settled and assigned relate to the SLP policy only. Because there was summary judgment evidence that neither SLP nor the SLP bankruptcy trustee owned the 22s claims at the time of any transaction or proceeding that Heath claims extinguished them and to which SLP or the SLP bankruptcy trustee were parties, the court concluded that Heath failed in its burden to conclusively prove as a matter of law all elements of its affirmative defenses of res judicata, collateral estoppel, judicial estoppel and release. Second, Equitable argued that Heath failed as a matter of law to establish conclusively its limitations affirmative defense. Equitable, the court stated, stands in the shoes of its assignors and takes them subject to defenses against them. Equitable based all its fraud, negligent misrepresentation, Texas Insurance Code and fiduciary duty recovery theories on the same underwriting fraud allegations. Heath argued that the 22s claims were barred, because Caliber or 22s were on notice, more than four years before the filing of Equitable’s July 13, 2004, suit, of the factual basis of the claim that Heath fraudulently induced Caliber to issue the 22s policy. Heath based its limitations argument, the court stated, on Caliber’s joinder as a party-defendant in the earlier Texas state court coverage litigation between Caliber and 22s on June 13, 2000, and service of that suit on July 10, 2000. Heath also argued that 22s had already appeared in that suit before Caliber was served. In the Texas suit, a different insurer of 22s sued 22s alleging fraudulent inducement and also sought a coverage declaration of relative liability among 22s’ various insurers. Heath argued that Caliber and 22s were then put on actual, constructive or inquiry notice of the basis of the 22s claims prosecuted in this suit, because the Texas suit alleges the same type of misrepresentations (that 22s and its agent Odell misrepresented 22s’ loss history and financial condition, fraudulently inducing issuance of an unrelated insurance policy). These allegations, the court stated, are relevant to the discovery rule. The general rule governing when a claim accrues, to start limitations running, is the “legal injury rule,” which states that a claim accrues “when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred.” The discovery rule is an exception to the legal injury rule and defers accrual “until the plaintiff knew or in the exercise of reasonable diligence should have known of the wrongful act and resulting injury.” Heath’s trial court reply brief, the court stated, contained a sentence asserting that the 22s policy issuance date, more than four years before this suit was filed, was Caliber’s legal injury date, when it “first assumed the risk” on it. But Heath’s summary judgment motion did not address the “legal injury rule” and instead addresses the “discovery rule.” Regardless of whether Heath states the correct accrual rule in insurance fraud cases or whether alleging an unquantified or theoretical risk under an insurance policy conclusively establishes legal injury on summary judgment, the court stated that “alleging for the first time in a reply brief an essential element of Heath’s affirmative defense does not comply with Texas Rule of Civil Procedure 166a(c). Thus, the court sustained Equitable’s argument that Heath failed to establish conclusively its limitations affirmative defense as a matter of law. Third, Equitable argued that the trial court erred in granting Heath’s supplemental summary judgment motion on Equitable’s contribution and indemnity claims, which sought to recoup what Caliber paid 22s under the Caliber/22s settlement. The claims are based on Heath’s liability to Caliber, if any, on the 22s claims. But Caliber’s claim against Heath was that it was induced to issue the 22s policy by Heath’s misrepresentations made directly to Caliber. Heath argued that under these allegations Equitable could assert no contribution or indemnity claim as a matter of law. The court agreed in overruling Equitable’s argument. OPINION:O’Neill, J.; Whittington, Moseley and O’Neill, JJ.

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