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In a significant insurance coverage ruling, the Texas Supreme Court has ruled that plaintiffs’ judgment against an insured had not been the product of a “fully adversarial proceeding” because the parties had “entered into an agreement” that had “eliminated any meaningful incentive” for the insured to contest the claims. As a result, the court also ruled, the judgment that followed was not enforceable or admissible as evidence in the plaintiffs’ subsequent suit against the insured’s insurance carrier as judgment creditors and as the insured’s assignees. Finally, the court also decided that, in such a lawsuit against an insurer, the parties could cure any defect in the underlying litigation by litigating “any disputed underlying issues with the benefit of full adversity.”
