Jo hn T. B oy d, C hie f Justice (R et.) , Se v enth Cou rtof Appeal s, si tti ng by 1 ass ig nment. NO. 07-05 -001 88-CV IN THE CO UR T OF APPEA LS FO R THE S EVEN TH D ISTRI CT O F TEXAS

AT AM AR ILLO PAN EL E JU NE 20, 2007

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___ YORKSHIRE INSURANCE CO., LT D., AND OC EA N M AR IN E IN SU RAN C E C O. , LTD ., A PP EL LA N TS V. RO YSEG ER , I ND IVID UA LLY AN D SH IR LEY

F AY E H OSKI NS , IN DI VID UA LLY

AN D AS A DM IN ISTRATOR OF THE ESTATE OF RA ND ALL J AY

SEG ER , D EC EASED , AN D ALL A S AS SIGN EES OF DI ATOM D RI LLIN G C O., A TEX AS LI MI TED P AR TNER SH IP, APPEL LEES

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______ FRO M T HE 84 DIS T RI CT COU RT OF HU T CHI NS ON COU NT Y; TH NO . 33, 355; HO NO RA BLE J OH N LAGR ON E, J UD GE

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____ Before QUINN, C.J., and HANCOCK, J., and BOYD, S.J. 1 OPIN ION W e g ra nt t he Seg ers’ moti on for re hear ing

. W e w it h d ra w our opi nio n of Apr il 30, 2007, and s ubst it ute t he foll ow ing i n i ts pla ce. Appel lan ts, Y or ks hire Ins urance Co. , Lt d., and O cean Ma ri ne In surance Co. , Lt d., app eal a jud gmen t ent ered against the m awarding $26,7 32, 87 6

. 7 1 i n a ctua l dam ages,See g enerall y G.A. Sto w ers F ur nit ure C o. v . Am. Inde m. C o., 15 S. W .2d 5 44, 5 48 2 (Te x .Com m’n App . 192 9, ho lding approved). 2 $10,041 ,307. 94 i n pre-

jud g ment interest , post- jud g ment interestat the rate o f f iv e percent per annum from the Janua ry 3, 2005 date of

j udg ment, and c ost s, to ap pel lee s, Roy Seg er and S h i r l e y F a y e H o s k i n s , i n d i v i d u a l l y a n d a s a d mi n i s t ra t o r o f t h e e s t a t e o f R a n d all Ja y Seg er ( col lec ti v ely , “ the S e ger s”). W e aff ir m in par t and rev erse and remand for further proce edin gs. Beca use of t h e c o mp l e x i t y o f t h e i s s u e s p re s e n t e d o n a p p e a l , w e w i l l o u t l i n e t he facts and c ircums tanc es lea din g to thi s a ppeal and ide nti fy o th er per ti nent facts in our dis cus si on of the spec ifici ss ues present ed. Back g ro und T his is an ap p eal of

a Stowers action . Th e un derlyi ng incidentg iv ing r ise to this

2 act ion w as the d eath of Randall Ja y Seg er . Ran dal l did dr il li ng w or k for tw o rela ted com pan ies, Diatom Dri lling Co., L.P. (Diatom ), and Em ployer’s Contra ctor Services, Inc. (E CS ). ECS w as a corpo ra ti on establ is hed by D iat om’s g eneral par

tner , C y nthi a Gi ll man, to provide oil f ield servi ces to D iatom and oth er drilling cont ractors. On July 13, 199 2, w hile em ployed by ECS but providing serv ices to Diatom , Rand all w as killed w hen a Diatom rig he w as w or ki ng on col lap sed. Di atom, w ho w as ins ured by a Llo y d’s of Lo n d on- ty pe comprehens iv e g eneral li abi li ty (C GL) ins urance pol icy at the t ime of the ac ci dent, noti fied the s ubsc ri bin g i nsurers ( col lecti v ely , “ the CGL i nsurers” ) of the ac ci dent. Y or ks hire and Oce an M ar ine ( col lecti v ely , “ Ins ur ers” ) w ere members o f this g ro up.3

In J une of 1993, R andal l’ s p arents , t he Seg ers, f il ed s uitag ain st Di atom, it s par tners, and EC S al leg ing neg li g ence and g ro ss neg li g ence. The C GL i nsurers w ere not spec ific all y

noti fied of th e s u it at the t ime that itw as filed

. The sui t s at v ir tual ly dor mant unti l 1998. In 1998, Di atom demand ed th at t he C GL insurers p ro v ide a de fense to the Segers’ suit. Th e CGL insure rs ref used t o provide a def ense , cont end ing that Rand all’s death w as not a co v er ed oc cur re nce and t hat D iat om fail ed to prov ide timel y notic e of sui t. After the C GL i nsurers refused to prov ide Di atom a defense, the Seg ers o ff ered to set tl e the ir

su it a gai n st D iat om for $5 00,000, the pol icy l imi ts of the C GL po li cy . Di atom made deman d o n t h e CGL i nsurers t o s ettl e the cl aim based on t his offer . The CG L ins ur ers n oti fied D iat om thattw o of the ins urers had become ins olv ent a nd, t herefore, the demand ex ceede d the av ail abl e pol icy limi ts of the CGL poli cy . Base d on thi s a ddi ti onal informa tion, the Se gers off ered to settle the suit for $36 8,1 90, the po licy l im it s av ailable from the sol v ent C GL i nsurers. The Seg ers su b se quently l ow ered th eir

se ttl ement offer to $2 50,000. The C GL i nsurers refused eac h of thes e s ettl ement de mands. Prior to trial in the und erly ing law suit, the Segers non -suited Gillman , and Diatom ’s couns el w it hdrew

from represent ati on. On March 27, 20 01, t he unde rl y ing su itw as tr ied

. Gi ll man w as subpoe naed to attend and did attend as a w it ness . Gi ll man testi fied th at s he w as appear ing as the pro se represent ati v e of Di atom. H ow ev er , t he record reflect s t hat Gi ll man’s par

ti ci pati on i n the proceed ing w as cons is tent w it h tha t of a w it ness rather

than a par ty

. Gi ll man’s li mite d “represent ati on” of D iat om i s e v ide nced by the fact th at D iat om w as not represent ed by co unsel , present ed no openi ng or cl osi ng argum e n t, cal led no w it ness es and present ed no ev ide nce. G il lman tes ti fied and, at the c oncl usi on of her4

testim ony, w as dism issed. As a result of this trial, the trial court en tered judgmen t against Di atom and aw arded t he Seg ers $ 15,000, 000, plu s p re - and pos t- jud g ment i nterest

. Follow ing the ent ry

of judgmen t in t he und erly ing suit, G illman conta cted Diatom ’s CG L i nsurers t o i nq uire w hat t hey i ntended to do abou t t he j udg ment. W hen G il lman received no respo nse to her i nquiry , she assig ned Diatom ’s rig hts ag ainst th e CGL insure rs to t he Sege rs. T he as si g nment reser v ed D iat om’s r ig ht t o recov er i ts attor ney ’s fees inc ur re d i n defense of the underl y ing su it , butothe rw is e as si g ned al l of Di atom’ s r ig hts against th e CGL insure rs to the Se gers. Follow ing the assignme nt, th e Segers f iled suit ag ain st the CG L insurers s eeki ng damag es based on t he i nsurers’ w ro ng ful refusal to defend Di atom and negl ig ent fail ure to set tl e the Seg ers’ cl aim w hen demand w as made w ithin po licy

limits. Prior to trial on the S towers actio n, the S egers se ttled t heir assigned claim s against all of the remaini ng so lv ent C GL insur ers, ex ceptY or ks hire and Oce an M ar ine , and the settling insurers w ere dism issed f rom the su it. As the St owers litig ation against Insu rers mo v ed to w ard t ri a l, b o th th e Segers and Insurers f iled mu ltiple mo tions for sum ma ry jud g ment. The tr ial cour t heard thes e moti ons, deni ed all of Insurers’ moti ons, and g ra nted the S eg ers’ moti on for par ti al summar

y judg ment on the i ss ues of “c ov erag e, de mand w ithin limits, f ully

adversarial relatio nship , and trial.” Beca use e ach o f these issues w ere re sol v ed p ri or

to tr ial , t he onl y

i ss ues at t he St ow ers t ri al w ere the dete rmi nati on of Ins ur ers’ neg li g ence, ca usat ion , and damag es. Dur ing the tr ial , the tr ial co urt di re cte d the v erdic t as to damag es based on the jud g ment t he Seg ers o btai ned ag ain st Di atom i n theW e not e tha t t he tr ial co urt al so entered s ummary j udg ment reg ardin g i ss ues 3 re lat ed to damag es, but, as the damag es is sue w as ult imat ely dec ide d by

di re cte d v erdict, we wil l a d d re s s itse p a ra t e ly. 5 und erly ing suit. T he issues of n eglig ence a nd causa tion w ere subm itted t o a jury . Th e jury returne d a verdict in fa v or of the Se gers. Ins ur ers a ppeal the tr ial co urt’ s r uli ng s o n c ertai n proc edural is sues , t he c ompeti ng moti ons for s ummary

j udg ment, the d eni al of I nsurers’ moti on for direct ed v erdict, and t he g ra nti ng of the S eg ers’ moti on for direct ed v erdict on damag es. I nsurers p re sentsi x i ss ues on a ppe al. Iden tif

y ing these issue s i n t h e order tha t the y w ill be a ddre ssed, Insurers cont end t hat ( 1) the tr ial co urt er re d i n s tr ik ing Ins urers’ defenses for v iol ati ons of the Ins urance Cod e, ( 2) R andy ’s deat h w as not c ov ered by the CG L pol icy b e ca u se of the “l eased -i n w or ker” excl u sio n c ontai ned i n the pol icy , ( 3) the Seg ers fai led to make a set tl ement de mand w it hin Ins urers’ s e v eral pol icy l imi ts, ( 4) the Seg ers fai led to conc lus iv ely e st a b li sh thei r damag es, ( 5) ev ide nce of col lus ion betw een D iat om and t he Segers wa s improper ly co nceal ed, a nd ( 6) the tr ial co urt j udg e s houl d hav e recus ed hims elf and the S eg ers’ tr ial co unsel sh oul d hav e been dis q ual ified

. Summary

Ju dg ment I ss ues Three of Insurers’ i ss ues re lat e to matters tha t were decide d by the tr ial co urt by sum ma ry jud gmen t. Th ese issue s are the statu tory preclusio n of Insurers’ cont ract defenses, co v erag e, an d demand w it hin l imi ts. Ea ch of these ru li ng s w ill b e rev iew ed 3 u s in g t h e sa m e st a n d a rd o f re vie w.6

A. S tandard of Re v iew W h e n b o t h p a rt i e s t o a s u i t mo v e fo r s u mm a r y j u d g me n t , e a c h p a rtybears t he b u rd e n o f

e s t a b li s h in g t h a ti ti s e n t it le d t o j u d gm e n ta s a m a t t e r o f l a w. C it y o f

G a rl a n d v. Dal las M or nin g N ew s, 22 S.W .3d 351, 356 (Tex

. 2000)

. W hen the tr ial cour t g ra nts one par ty summar

y jud g ment and deni es the other , w e rev iew both par ti es’ su mmary

j udg ment e vide n ce , d e te rm in e al l que st io n s p re se n te d , a n d ren d e r th e ju d gm e n t t h e tri a l ju d ge shoul d hav e rendere d

. F M Pr ops. Operati ng C o. v . C ity of Aust in, 22 S .W .3d 8 68, 8 72 (Te x . 200 0). W hen the trial court do es no t specif y the basis on w hich it grant ed su mm ary judgme nt, th e judgme nt w ill be a f f irmed on an y

m eritorious ground ex pressly prese nte d in t h e m o t io n a n d wh ic h is p re s e rve d fo r a p p e ll a t e re vie w. St a t e Fa rm Fi re & Ca s . Co

. v. S.S. , 858 S.W .2d 374 , 380 (Tex. 1993 ). Bot h pa rties mo v ed for sum ma ry judgme nt on tradition al and no-evidence g roun ds. See T EX . R. C IV . P. 1 66a. W e rev iew a s ummary

j udg ment de n ovo to deter mine w hether the p re v ail ing par

ty has est abl is hed it s r ig ht t o s ummary j udg ment as a mat ter

of law

. See Dal las C ent. Apprais al Di st. v . Cun nin g ham, 161 S.W .3d 293, 295 (Tex .App. –Da ll as 2005, no pet .)

. In rev iew ing a summary judg ment, w e must ex amine the enti re record in the l ig ht most fav orabl e to the nonmov ant, ind ulg ing ev er y reason abl e i nferenc e and re sol v ing any d o u b t s a ga in s tt h e m o t io n . Se e Ci t y o f K e ll e r v. W il s o n , 1 6 8 S

. W

. 3 d 8 0 2 , 8 2 4 -2 5 (T e x. 2005)

.Fu rther referen ce to curren t provisi ons o f the In suran ce Code w ill be b y referen ce 4 to “ sec ti on __” or

“ § __. ” Fu rther citation t o the p re-am end me nt v ersion of article 1.14 -1 w ill be b y referen ce 5 to “forme r article 1.1 4-1, § __.” Further citation to the post-am end me nt version of article 1.14- 1 w il l be by

referenc e to “a mended ar ti cl e 1.1 4- 1, § __.” 7 B. Glob al Preclusion of Insurers’ Contra ct-Base d Defense s In 19 92, Insuran ce Co d e a rt icle 1.14 -1, section 8, provided, “Except for lawf ully procured s ur plu s l ine s i nsurance . . . any co ntractof

insurance effect iv e i n thi s s tate and ent ered into by an una uth oriz ed insu rer is une nforcea ble by such in surer.” See A ct of Apr. 27, 196 7, 60 th Le g., R.S., ch. 185 , § 1, 196 7 T ex. Ge n. Laws 40 0, 401 , am end ed by, Act of May 27, 1993, 73rd Leg ., R. S., ch. 999, § 3, 1993 Tex . G en. L aw s 4 373, 4374, re peal ed by , Ac t of Apr . 30, 1999, 76th Leg ., R. S., ch. 101, § 5, 1999 Tex . G e n . Law s 4 86, 5 38 (c ur re nt v ersi on atT EX . I NS . C OD E A NN . § 101 .20 1 (Verno n Sup p. 200 6) ). In 199 3, th is 4 5 section w as am end ed a nd th e langua ge of the excep t io n wa s chan ged f rom “lawfully procured sur plu s li nes ins urance” to “i nsurance procured bya li cens ed sur plu s l ine s a g ent from an e li g ib le surpl us li nes ins urer .” H ow ev er , und er both the former

and amended v ersi ons of art ic le 1.14- 1, s ect ion 8, w hether the ex cept ion appl ied to a par ti cul ar transacti on w as deter mined by re fe re n c e t o t h e re q u irements for “ Sur plu s L ine s I nsurance, ” cont ain ed i n ar

ti cl e 1.1 4- 2. See A ct of Apr. 27, 1967, 60th Leg ., R. S., ch. 185, § 1, 1967 Tex . G en. L aw s 4 00, 408- 14, a mended by , Act of M ay 27, 1993, 1993, 73rd Leg ., R. S., ch. 9 9 9 , § 1 6 , 1 9 9 3 Te x . G e n . L a w s 4 3 7 3 , 4 3 7 6 - 8 1 , r e p e a l e d b y , A c t o f M a y 22, 2 003, 78 thFurther citatio n to the p re-am end me nt v ersion of a rticle 1 .14 -2 will be by referen ce 6 to “forme r article 1.14-2 , § __. ” Furthe r citation to the post -ame ndm ent v ersion of article 1.14- 2 w il l be by

referenc e to “a mended ar ti cl e 1.1 4- 2, § __.” R ecent ly , the Tex as Supreme C our t c lar ified thatthe eff ectof the p ost -a mendment 7 prov is ion s a ppl ic abl e to thi s c ase is to precl ude un a u th or iz ed i nsurers from enforc ing i ts p o li c ie s . Se e L e xin gt o n I n s . Co

. v. S t ra yh o rn , 2 0 9 S

. W

. 3 d 8 3 , 8 9 ( T e x. 2 0 0 6 ). T h u s , we conc lud e that the T ex as Supreme C our t has sp eci fical ly

reje cte d Ins urers’ co ntent ion that the appli cabl e prov is ion s do no more than precl ude an unautho ri z ed i nsurer from br ing ing sui t. 8 Leg ., R. S., ch. 1274, § 26 , 200 3 Tex . G en. L aw s 3 611, 4138 (c ur re nt v ersi on at§ 98 1.001- .22 2). 6 The Seg ers c ontend tha t I nsurers c annot enforc e any defenses der iv ed from t he CG L pol icy , as a mat ter of law , bec ause Ins urers w ere unaut hor iz ed i nsurers w hen t he pol icy w as is sued. I nsurers c onten d t h a t, ev en th oug h the y w ere and are unaut hor iz ed ins ur ers, the s tatut e does not preclude an unau thor iz ed i nsurer ’s reli ance on c ontract based defenses i n s uit s i nit iat ed by the ins ured or , i f the s tatut e d o e s p re clude an

7 una uth oriz ed insu rer from asserting its contract-ba sed d efense s, th e p re clusion is ina ppl ic abl e to Ins urers b ecaus e the y met t he s ur plu s l ine s i nsurance ex cept ion

. Initially, be cause t he surplus lines e x cept ion cha nged w ith the 199 3 am end me nts, w e mustdete rmi ne th e l aw appl ic abl e to the c ur re nt c ase. The S eg ers c ontend that, becau se the p oli cy

at is sue w as entered i nto i n 1992, t h e l aw s e x is ti ng at the t ime the cont ract w as ma de b ecam e pa rt of the con tract an d gov ern the transact ion. Insu rers cont end t hat the 1993 amend ments w ere procedu ra l or remedia l in nature and, therefore, ar e proper ly

appl ied retroact iv ely

. Court s g enerall y presume that an amendmentto a statu te is to be app lied prosp ectively and not retroa ctiv ely. Sub aru of Am. , Inc. v. D avid9

Mc Dav id Ni ss an, Inc. , 84 S.W .3d 212, 21 9 ( Tex . 200 2)

. How ev er , t his g eneral ru le does notap p ly w h e n th e am e n d m e n t is pro ce d u ra l o r re m e d ia l, un le ss th e ret ro a ct ive a p p lic ati on of the amendmentw oul d affecta pa rty ’s v est ed r ig hts

. Id. at 21 9- 20. The 1993 a mendments to article s 1.14- 1 and 1.14- 2 w ere i ntended to prov ide “reason abl e and pract ic al safeg uards” to protec t Texa s cons umers . Amended a rt ic le 1.14- 2 , § 1

. An u n a u t h o ri ze d in s u re r wh o is s u e s a p o li c y t o a T e xa s c o n s u m e r is p e n a li ze d b y, among othe r thi ngs, being precl uded fro m enforc ing any defenses co ntai ned w it hin the unautho ri z ed pol icy . See amend ed ar ti cl e 1.1 4- 1, § 9; Le x ing ton I ns. C o., 209 S. W .3d a t 89. How ev er , bec ause sur plu s l ine s i nsurance is so meti mes ne ces sar y to ins ure r is ks for w hich coverage cann ot be obta ined f rom a licensed , residen t insurer, see ame nde d article 1.1 4-2, § 1 ; Mi d -A m . Inde m. Ins. Co. v. King , 22 S. W .3d 321 , 322 (Tex. 1995 ), unautho ri z ed ins ur ers may become “e li g ibl e” to is sue sur plu s li nes pol ic ies to T e x as cons umers , prov ide d that the ins urer compl ies w it h str ic t capi tal iz ati on and regi strati on r eq ui r em en ts

. S ee a me nd ed a rti c l e 1. 14 - 1, § 8 ; am en de d ar ti c l e 1. 14 - 2, § 3 ; M i d- Am

. Indem. Ins . Co., 22 S.W .3d at 323. As thes e s ur plu s l ine s i nsurers remain unautho ri z ed ins ur ers, they

are s ubj ectto the remedia l penal ti es impos ed on an unau thori z ed i nsurer condu cti ng the busi ness of insurance in the sta te, inc lud ing the los s o f their co ntract -b ased def ense s, u n le ss they stri ctly comp ly w ith the elig ibility

requirem ent s of

ame nde d article 1.14- 2. See Le x ing ton I ns. C o., 209 S. W .3 d a t 89. B ecaus e the 1993 amendment t o article 1.1 4-1, sect ion 8, af fects on ly

the rem edie s av ailable to an insu red w hen a rt icleOther T e x a s c o u rt s h a v e l i k e w i s e a p p l i e d p o s t - a me n d me n tu n a u t h o r i z e d and 8 sur plu s l ine s i nsurance prov is ion s retroact iv ely , ev en w hen the pol ic ies w ere i ss ued pr ior to 1993. See Lex ing ton Ins

. Co. , 209 S.W .3d at 85, 89- 90 (a ppl ying post- amendment arti cl e 1.14-1 , § 11, t o c ase inv olv ing i nsurance tax di sput e c ov er ing tax es acc ru ing from 1992 throug h 1995) ; M id- Am. I ndem. I ns. C o., 22 S. W .3d a t 325 ( re q uir ing el ig ibi li ty under post -a mendment ar

ti cl e 1.1 4- 2 as prereq uis it e to bond ex emption, e v en th oug h the ex empti on s p eci fical ly

req uired el ig ibi li ty

at the t ime cov erag e i ss ued, w hic h w as pr ior to 1993 amend ments) ; W heel w ay s I ns. C o. v . H odg es, 872 S.W .2d 7 76, 7 79, 7 84 n. 10 (Te x .Ap p. – T e x arkan a 19 94, no w rit) (app ly ing amen ded article 1.14 -1, § 8, to case involv ing accidentoccurring i n 19 89 wi th suit againstinsurer f iled in 199 1). 10 1.1 4-2 is v iolate d by the insurer, w e ho ld tha t the ame nde d v ersions of these articles app ly to t he presentca se. 8 W hil e the par

ti es and t he foreg oin g anal y si s c it e the former and amended ar

ti cl es 1.14- 1 and 1.14- 2, t hese a rt icl e s w ere repeal ed and re codi fied by the 76th and 78t h L e gi s la t u re s . S e e A c to f A p r. 3 0 , 1 9 9 9 , 7 6 t h L e g. , R. S

. , ch

. 1 0 1 , § 5 , 1 9 9 9 T e x. G e n . L a ws 486, 538; Act of M ay 22, 2003, 78th Leg ., R. S., ch. 1274, § 26 , 200 3 Tex . G en. L aw s 3 611, 4138. How ev er , the Legi sl ature ex press ly indi cat ed th at no su bst anti v e c hang e i n the l aw w as int ended b y

ei ther Ac t. See Actof

Apr. 30, 1999, 76th Leg ., R. S., ch. 101, § 6, 1999 T e x. G e n . L a ws 4 8 6 , 5 3 8 (“ T h is A c tis in t e n d e d a s a re c o d if ic a t io n o n ly, a n d n o su b s t a n t ive chang e i n l aw

i s i ntended by thi s Act .” ); Actof Ma y 22, 2003, 78th Leg ., R. S., ch. 1274, § 27, 2003 T ex . Gen. Law s 3611, 4139 (sa me). As a resu ltand based on our dete rmi nati on that the 1 993 amendment s s houl d be appl ied retroact iv ely , w e w il l re fer to the cur re nt codi ficat ion of the l aw

w hen pos si ble

. It is undi sput ed that Ins urers w ere unautho ri z ed ins urers a t al l ti mes rele v ant t o the prese nt case . Section 101

. 201 (a) prov ides th at, “An insurance contractef fective in thisThe s ame rest ri cti on on the enforcementof unauthor iz ed insu ra nce cont ra cts may 9 be found i n bot h the former and amended l aw . See amended arti cl e 1.14-1 , § 8; for mer arti cl e 1.1 4- 1, § 8. R eferenc e to the p re -a mendment v ersi on of ar ti cl e 1.1 4- 2, rev eal s that there w as 10 no s ect ion 6A. As se cti on 6A w as added b y the 1993 amend ments, but itdid no more than aut horize th e esta blishm ento f t he Surplu s Lines St am ping Of f ice. See ame nde d article 11 sta te an d ent ered i nto b y an u nauthori z ed i nsurer i s u nenforc eabl e by

the ins urer .” 9 How ev er , t he former

ar ti cl e 1.1 4- 1, § 8, the amended ar ti cl e 1.1 4- 1, § 8, an d the recodi fied sec ti on 101. 201( b) prov ide an e x cept ion to thi s proh ibi ti on for surpl us li nes ins urance. The Segers cont end thatInsurers cou ld produ ce no ev iden ce tha t the CGL policy in this case w as “lawf ully

procured surplus lines insura nce” or, al t e rn a t iv ely, the Segers conclusively est abl is hed t hat t he C GL po li cy w as not “ law

fully procured s ur plu s line s in suranc e” and, therefore, Ins ur ers a re precl uded fro m ass erti ng thei r cont ra ct- based def enses under former ar ti cl e 1.1 4- 1, § 8. Ins ur ers c ontend that they w ere enti tl ed to rely on t hei r cont ra ctbased defenses bec ause they es tabl is hed t hat t hey

met t he s ur plu s l ine s e x cept ion of a m e n d e d a rt ic le 1

. 1 4 -1 , § 8 , a s a m a t t e r o f la w. The Seg ers’ moti on for summary judg ment s tates that , for an i nsurer to ra is e any cont ra ctu al defense i n a s uiton t he pol icy , t he i nsurer mustprov e th a t itw as eit her author iz ed to do b usi ness i n Tex as or thatthe ins urance at i ss ue w as “l awfully procured sur plu s l ine s i nsurance. ” The Seg ers i ndi cat e tha t all referenc es to prov is ion s o f the In su ra n ce Co d e in th e ir m o ti o n are ref e re n ce s t o th e vers io n in ef fe ctw h e n th e co vera ge w as is sued in 1992, i. e., the p re -a mended v e rsi o n s o f a rt ic les 1.14 -1 and 1.14- 2. The Seg ers t hen al leg e tha t the CG L pol icy w as is sued in v iol ati on of former ar ti cl e 1.1 4- 2, §§ 2, 5, 6( a) , 6( c) , 6( d) , 6( e) , 6A (a 6) , 7( a) , 7( b) , and 8. Ul ti matel y , the S eg ers c ontend that, 101.14- 2, § 6A. 12

becau se Ins ur ers c oul d presentno e v ide nce that they m et the “ law

fully procured s ur plu s li nes ins urance” ex cept ion or bec ause the S eg ers h ad c oncl usi vely e st abl is hed t hat t he CG L pol icy

w as not “l awfully

procu re d surp lus line s ins urance, ” the Seg ers w ere ent it led to sum ma ry

ju dgme nt preclud ing Insurers f rom relying on the ir contractu al def ense s as a m a t t e r o f la w. Beca use w e hav e al re ady hel d tha t t he 1993 amendment s to arti cl es 1.14- 1 and 1.14- 2 w ere procedu ra l or remedia l and are to be appl ied retroa ct ivel y, any v iol ati on of former arti cl e 1.14- 1 or 1.14 -2 are of no effect on Ins urers’ abi li ty to enforc e i ts cont ra ctbased defenses i n the poli cy . As w e held ab ov e, t he pre- amendment l aw , reli ed upon by the S eg ers t o s uppor

t i ts moti on for summar y j udg ment, w as re ndered i neffect iv e by the 1993 amendments and, as a resul t, v iol ati ons of the pre- amendment p ro v is ion s w oul d not re sul t i n a precl usi on of I nsurers’ cont ra ct- based defenses

. Therefore, w e c oncl ude t hat the S e g e rs ’ mo t i o n fa i l e d t o e x p r e s s l y p r e s e n t g ro u n d s t h a t w o u l d e n t i t l e t h e S eg er s t o sum ma ry

judgmen t on coverage base d on Insu rers bein g preclud ed from asserting their cont ra ct-ba se d d e f e n ses . See T EX . R. C IV . P. 16 6a(c). Further, be cause the Se gers’ moti on c it es in e ff ect iv e l aw , w e c oncl ude t hat t he Seg ers’ moti on fail ed to st ate t he ele ments upon w hic h Ins urers c oul d produce no e v ide nce re lat ing to Ins urers’ r ig ht t o ass ert i ts cont ra ct- based defenses

. See T EX . R. C IV . P. 166 a(i). Becaus e t he Se gers’ s u m m a ry j u d gm e n tm o t io n p re s e n t s n o gro u n d s u p o n w h ic h t h e t ri a l c o u rtco u ld h a ve g ra nted summar

y judg ment, w e concl ude that, to the ex tent the tr ial co urt bas ed i ts g ra nt13

of summary

j udg ment on cov erag e on th e gl obal precl usi on of Ins urers’ co ntract -b ased defenses, the tr ial co urt er re d. Ins ur ers a ppeal the deni al of thei r moti on for par ti al summar

y j udg ment on coverage. Because surplus lines insura nce is excepted f rom th e general st a t u t o ry re str ic ti on on unautho ri z ed i nsurers, the b urden of prov ing ev er y f a ct e ssenti al to t he inv ocat ion of the e x cept ion rest s o n Ins urers. See Cramer v . Sheppard, 140 Tex . 271 , 167 S.W .2d 1 47, 1 55 ( 1942) ; Ri sk M anag ers I nt’ l, Inc . v . St ate, 858 S. W .2d 5 67, 5 70 (Te x .Ap p.–Aust in 199 3, w rit denied ). Thu s, for Insure rs to be en ti tled to summ ary jud g ment on cov erag e, I nsurers mus t es tabl is h tha t I nsurers w ere el ig ibl e s ur plu s l ine s ins ur ers and that the CGL poli cy w as procured th ro ug h a l ic ensed su rp lus l ine s a g ent a s a matt er of law , s ee § 101.201 (b ), and that the S eg ers’ cl aims are notco v ered by the CG L pol icy . W e w il l ini ti all y

rev iew the ev ide nce re g ardin g w hether Ins urers e sta bli shed that they w ere eligible surplus lines insure rs as a mat ter o f l a w. An “eligible surplus lines insurer” must compl y

w it h the req uirements of sec ti ons 981.051 -. 065 of the Ins urance Co de. See § 981. 002( 1)

. The r ecord contai ns a cert ific ati on from K athy A. W il cox , R eg is trati on Officer of the Tex as Depa rt ment of Insurance, that indi cat es, at all ti mes pe rt ine nt t o the presentSpeci fical ly , t he c erti ficat ion prov ide s t hat Y or ks hire w as “a n unl ic ensed i nsurer 11 w hic h i s a n el ig ibl e i nsurer for p ro v idi ng su rp lus l ine s i nsurance under ar ti cl e 1.1 4- 2, Tex as Ins urance Cod e from S eptember 1, 1989 t hr u N ov ember 12, 2001 an d from Ju ly 1, 2002 thr u the present .” Spec ific all y , t he c erti ficat ion prov ide s th a t O cean Ma ri ne w as “a n unl ic ensed 12 ins ur er w hic h is an eli g ibl e ins ur er for prov idi ng su rp lus l ine s i nsurance under ar ti cl e 1.1 4- 2, Tex as Ins urance Cod e from N ov ember 1, 1989 t hr u the present .” F urther , w e not e tha t t he Seg ers d o notco ntes t I nsurers’ g eneral eli g ibi li ty to 13 prov ide su rp lus l ine s i nsurance. 14 case, both Y orkshire and Ocean Marine w ere unlicensed insurers w hich w ere eligible 11 12 to prov ide su rp lus l ine s i nsurance under eac h i te ra ti o n o f the s tatut e and at al l ti mes pertin entt o t h e prese nt case . W e con clude that , beca use th ese ce rtif ication s w ere uncon trov erted, the ev ide nce conc lus iv ely es tabl is hed t hat I nsurers w ere el ig ibl e s ur plu s lines insurers. 13 How ev er , more i s req uired to m eet the ex cept ion of secti on 101.201( b)

. In ad dit ion to t h e i n su re r bei ng el ig ibl e to prov ide su rp lus l ine s i nsurance, the ins urance must be procu red t h ro ugh a licensed surplus lines agent . § 101 .20 1(b). Th e record includ es a sta tement fr o m M a tt Ray , D eputy C ommis si oner

of the L ic ensi ng D iv is ion of the Tex as Depa rtme nt of

Insuran ce, ind icating thatLon don A me rican Risk Sp ecialists, In c. (LARSI), hel d a s ur plu s l ine s a g ency l ic ense that w as is sued on F ebr uar y 14, 1984 and w as due t o expire Octobe r 25, 200 5, i f nottimely rene w ed. Notably, the cover note for the CGL policy specif ically

in dicate s t hatt he insuran ce w as place d throu gh LARSI. How ever, the Segers cor re ctl y i ndi cat e tha t t his ev ide nce ide nti fies LAR SI a s h old ing a l ic ense as a manag ing general a ge n c y. Se ction 9 81. 220 (b) restricts a surplus lines agent w hose license is g ra nted to i t as a manag ing general ag ent, thatis not al so li cens ed unde r Ar ti cl e 21. 14 ofRelating to local recording agent license s. 14 W e no te th at evidence w as of fered relating to this iss u e b y I n s urers, bu t this 15 ev ide nce w as obj ect ed to by the Seg ers, the obj ect ion w as sus tai ned by the tr ial co urt, and Insu rers fa iled to cha llenge the trial court’s ruling on ap pea l. 15 the I nsurance Cod e, to busi ness that ori g ina tes throug h a li cens ed g eneral proper ty and 14 cas ual ty ag ent. Thus, for L AR SI’ s sur plu s li nes ag ent li cens e to meet t he ex cept ion found in sec ti on 101. 201( b) , the trans act ion m usthav e been direct ed throu g h an ag ent t hat w as a license d general prop erty and casua lty agent. § 98 1.2 20(b ). No re cord ev ide nce est abl is hes that the CG L pol icy w as direct ed th ro ug h an ag ent that w as a lic ensed general proper ty and cas ual ty

agent

. As suc h, I nsurers h av e fail ed

15 to prove e very f actes sent ial to the i nv ocat ion of the s ect ion 101. 201( b) su rp lus l ine s insuran ce exception and the trial court did noterr i n overruling Insurers’ partia l summ ary jud g ment moti on on cov erag e. See Cramer, 167 S.W .2d at 155; Ri sk M anag ers I nt’ l, Inc ., 858 S. W .2d a t 570 . W e af firm the tri al cour

t’ s denia l of Ins urers’ parti al summar y j udg ment on th e i ss ue of cov erag e. C. Co vera ge W hile w e have held tha t the trial court erred in grant ing the Seger s su mm ary jud g ment on the i ss ue of cov erag e to the e xtent that summar y jud g ment w as based on t he pr ecl usi on of Ins ur ers’ co ntract -b ased defenses, bec ause the t ri al cour t did not s peci fy the groun ds up on which it g rante d sum ma ry judgmen t on t h e i s sue o f cov erage, w e mu st aff ir m the jud g ment i f it is su ppor ted byanym er it or iou s g ro und ex press ly prese nted in the moti on and preser

v ed for appel lat e rev iew

. S.S. , 858 S.W .2d a t 380

. In thei r moti on forBy thei r appeal , I nsurers u rg e er ro r onl y i n reg ard to the l eased -i n w or ker 16 exclusionary def ense to coverage. Thu s, any objection to any othe r contractu al def ense has been i nadeq uatel y br iefe d a n d i s waiv ed. See K nie v . Pi sk un, 2 3 S. W .3d 4 55, 4 60 (Tex .App. –Amar il lo 2000, pet. deni ed) ; Lew is v . D eaf Smith Elec. Co- op., Inc ., 768 S. W .2d 511 , 512 -13 (Te x .Ap p.–Am arillo 1989 , no wr it.). As w e hav e prev iou sl y

dete rmi ned that Insurers hav e fail ed to es tabl is h the ir r ig ht 17 to asse rt their contra ct-base d de fense s, Insu rers w ould not be e ntitled to sum ma ry jud g ment on cov erag e, ev en i f th e y es tabl is hed t hat a co ntract ual prov is ion ex cl uded cov erag e as a mat ter

of law

. See T EX . R. A PP . P. 4 7.1.

16 summar y j udg ment, the S eg ers a lt er nati v ely co ntend ed th at I nsurers c oul d produce no ev ide nce to su p p o rtany of the c ontract -b ased defenses they al leg ed and, inter alia , cont ended that the “ Ex cl udi ng Leas ed- In E mploy ees/W or kers” l ang uag e does not ex cl ude the S eg ers’ cl aims from c ov erage a s a matte r of law

. As su ch, a de ter minat ion that 16 Ins ur ers fai led to presentmore tha n a sc int il la of ev ide nce of anyof the d efenses all eg ed or that the Seg ers aff ir mati v ely neg ated each defense w oul d req uire aff ir mati on of the tr ial cour t’ s s ummary

j udg ment on the i ss ue of cov erag e. 17 The CG L policy i ncl udes, i n i ts cov er note , an ex cl usi on of “ Lease d- In Emplo y ees/W or kers.” Thi s p hrase is n ot de fined by the pol icy . Ins urers c ontend that a stan dard “leased worker” exclusion w a s n o ti nclud ed in th e po licy beca use a stand ard “l eased w or ker” ex cl usi on w as not est abl is hed unti l 1993. Of note, the p oli cy does i ncl ude a s tandard empl oy ee ex cl usi on. The emplo y ee ex cl usi on s peci fical ly ex cl udes any

l iab il ity for c lai ms as ser

ted b y , or

on behal f of, Di atom/EC S employ ees from co v erag e under the pol icy . Ins urers c ontend that eit her R andal l w as act ual ly

an e mplo yee o f

D iat om and, the refore, th e Segers’ claim is ex clude d by the stan dard emp loyee ex clusi o n o r Ran dall17

w as “leased in” by

Diatom f rom ECS and cov erage is ex clude d ba se d o n the lea sed-in w or ker ex cl usi on c ontai ned on the C GL c ov er note

. T he Se gers cl aim s are for bod ily injury to R and all. Th e CGL po licy g ene rally

cov ers claims for bod ily injury or prop erty dam age. T hus, there is no d ispute thatthe CGL p olicy general ly covers the kind of claims alleged by the Se gers. How ever, the pa rties hotly c on te s t t he a pp l i c at i on o f t he l ea s ed - i n w or k er /e mp l oy ee e x c l us i on t o th e Se g ers ’ c l ai m. Onc e g eneral cov erag e is esta bli shed, the burden of prov ing the ex is tenc e and appl ic abi li ty of a pol icy

ex cl usi on rest s w it h Ins urers. T EX . R. C IV . P. 94 ; Comsys Info. T ech. Serv s., Inc. v . Tw in Ci ty Fi re Ins

. Co. , 130 S.W .3d 181, 193 (Tex .App. –Ho ust on [1 4 D is t.] 2003, pet. th deni ed) ; Ve nture Enc odi ng Ser v ., Inc . v . At l. M ut. Ins . C o., 107 S. W .3d 7 29, 7 33 (Tex .App. –For

t W orth 20 03, p et. deni ed)

. The in ter pretati on of i nsurance pol ic ies i s g ov er ned by the same r ule s o f cons tr uct ion appl ic abl e to other w ri tten cont ra cts . State Farm Life Ins. Co. v. Beaston, 907 S.W .2d 430 , 433 (T ex. 19 95). In const ruing a w ritten con tract, th e cou rt’s primaryconce rn is to asc ertai n the tr ue i ntent ion s o f the par ti es as ex press ed in the ins tr ument. Id. ; C oker v . C oker , 650 S.W .2d 391, 393 (Tex . 1983). Terms in an ins urance cont ra ct w il l be g iv en thei r ordin ar

y meani ng unl ess the pol icy sh ow s t hat t he w ords w ere meant in a tec hni cal o r d i f fe r e n ts e n s e . S e c . M u t

. C a s . C o . v . J o h n s o n , 5 8 4 S

. W. 2 d 7 0 3 , 7 0 4 ( T e x . 1 9 7 9 )

. W e mu st read a ll parts of

the con tract togeth er and musts t ri ve to giv e me anin g to every s e n t e n c e , cl a u s e , a n d wo rd t o a vo id re n d e ri n g a n y p o rt io n in o p e ra t ive

. Ba la n d ra n v. Safeco I ns. C o. of Am., 972 S.W .2d 7 38, 7 41 ( Tex . 199 8 ). If , after appl y ing thes e r ule s18

o f co n st ru ct io n , a n in su ra n ce po lic y rem a in s a m b igu o u s, w e are to co n st ru e th e la n gua ge in a manner

thatfav ors c ov erag e. Beas ton, 907 S. W .2d a t 433

. Looki ng to the C GL p o li cy , t he phrase “L eased -I n Empl oy ees/W or kers” i s n ot defined a nyw h e re i n the pol icy . No sta ndard l eased w or ker ex cl usi on i s i ncl uded i n the policy. Read ing all of

the p a rt s o f

t h e po licy

rev eals th at every

ex clusion in th e con tract ex cl udes cover a ge f or

cl aims of ins ureds’ l iab il ity rela ted t o or

ar is ing from t he ev ent o r persons i denti fie d b y t h e vari ous ex cl usi ons. The ordin ar y meani ng of “l ease” i s a n a gre e m e n t fo r po ss e ss io n or u se o f p ro p e rt y fo r a sp e cif ie d pe rio d or a t will in exch a n ge for a spec ified rent o r compens ati on. See M ERR I AM -W E BST ER ’ S C OLLEGI AT E D I CTI ONA RY 7 9 8 ( Fre der ic k C . M is h, ed ., 11 ed. 2003) ; B L A CK ’ S L AW D I C T I O N A R Y 89 8 ( 7 e d. 1 99 9)

. th th The ordin ar

y m e a n in g of “w or ker” is a pe rs on th at “ ex erts streng th or facul ti es to do or perform so me thing.” M ERR I AM -W EBST ER ’ S C OLLEGI AT E D I C T I O N A R Y 144 2-43 (Frede rick C

. Mish, ed., 11 ed. 2003 ). T he ordinary me anin g of the word “ in,” w hen used as a mo dif ier, th is di re cte d t o w a rd s o me d e s t i n a t i on or pl ace. M ERR I AM -W EBST ER ’ S C OLLEGI AT E D I CTI ONA RY 627 ( Freder ic k C . Mi sh , e d ., 11 ed. 2003)

. Therefore, w e c oncl ude t hat, appl y ing the th ordina ry mea ning to the w ords use d in the CGL p olicy a nd strivi ng to gi v e me anin g to every p a rtt h e re o f , t h e c o n d it io n “ E xc lu d in g L e a s e d -I n E m p lo ye e s /W o rk e rs , ” a s a m a t t e r o f la w, una mb iguously excludes f rom cov erage all claims for a nam ed insu red’s liability for bod ily inj ur y or proper ty damag e broug ht by

or on b e h alf of persons thatper form w or k for

theW e focus on the t e rm “w or ker” in an effort t o har moniz e the prov is ion s o f the 18 pol icy . Cl aims for b odi ly inju ry bya lea sed- in w or ker

that c oncur re ntl y

hol ds the s tatus of an empl oy ee w oul d be cov er ed unde r the sta ndard employ ee ex cl usi on cont ain ed in the CG L pol icy . Thus, an ex cl usi on for a l eased -i n empl oy ee w oul d be re dundant

. 19 ins ur ed unde r an ag re ement w it h anot her al low ing temporar

y us e of t h e w or ker , ev en thoug h the l eased w or ker w oul d notbe a n empl oy ee of i nsured. 18 Loo king to the te stimo ny of Cy nth ia Gillman at the und erly ing Seger v . Diatom trial, Gillman testif ied th at ECS ha d a Cont ract for Person nel Se rvi c e s wi t h Diat om byw hich ECS w ould supp ly

w orkers to pe rform work in f ulf illmen t of Diatom ’s d ri ll in g cont racts. Gi ll man tes ti fied th at R andal l Seg er w as an empl oy ee of EC S that w as doi ng w or k at t he Diatom d ril l i ng s i te a t th e ti me o f hi s d ea th

. C on s i de r i ng t hi s e v i de nc e i n th e l i g htmo st fav ora b l e t o I n s u r e rs a n d i n d u l g i n g a l l re a s o n a b l e i n fe r e n c e s i n t h e i r fa v o r , w e co ncl ude that there is more than a sc int il la of ev ide nce that the S eg ers’ cl aims w ere ex cl uded by the CG L pol icy . Fur

ther , w e c annot say

thatthe Seg ers h av e neg ated the a ppl ic abi li ty of the CG L p o li c y’s “E xc lu d i n g L e a s e d -I n E m p lo ye e s /W o rk e rs ” c o n d it io n a s a m a t t e r o f la w. Therefore, w e concl ude that the tri al cour t erred in granti ng the Seg ers summar y j udg ment on th e i ss ue of cov erag e. The Seg ers c ontend that the lea sed- in w or ker ex cl usi on is ambi g uous becau se the ex clus io n c oul d reason abl y be c onst ru ed to ex cl ude l eased -i n w or kers from bei ng “i nsureds” under th e p o lic y , c lai ms made by l eased -i n w or kers, or

al l cl aims , i ncl udi ng w ro ng ful deat h c laims a ss e rt e d by su rv iv ors o f the l eased -i n w or ker , ar is ing from t he lease d-in w orker relation ship. How ever , a s in dicate d ab ove, w hen the CGL p olicy ’s provisi ons a re read to gether, we conclude thatthe exclusion excludes from coverage allW e no te t h a tt he Se gers’ prese nt no alterna tiv e inte rpretat ion of the ph rase 19 “l eased -i n empl oy ee/wo r k e r .” O ther than the int er pretati on i denti fied i n thi s o pin ion , w e c an ide nti fy no ot her

reason abl e i nter pretati on of thi s phrase and, therefore, conc lud e tha t t he phra se is unam biguous. 20 cl aims for a named ins ur ed’ s li abi li ty for bodi ly inj ur y or proper

ty damag e broug ht by

or on behal f of persons thatper

form wo rk f o r the ins ured unde r an ag re ement w it h anot her all ow ing the temporar

y us e of t he w or ker

. Thus, our cons tr uct ion of thi s c ondi ti on ex cl udes coverage fo r all claims fo r bod ily injury or prop erty dam age w het her brought by or on b eha lf of leas ed- in w or kers. W e do n o t f ind the Seg ers’ i nter pretati on of the condi ti on as excluding l ease d-in w orkers f rom b eing “insureds” reason able , since the CGL policy spec ific all y

i denti fies thos e par

ti es, D iat om and E CS , t hat w ere “i nsureds” and w oul d not need t o s peci fical ly

i denti fy others a s n ot be ing “ ins ureds. ” 19 Hav ing co n clu d e d tha t t he tr ial co urt er re d i n g ra nti ng su mmary j udg ment on the is sue of cov erag e, w e rev erse that por ti on of the summar

y j udg ment. W e aff ir m the tr ial cour t’ s d eni al of Insurer ’s moti on for summar y j udg ment on the i ss ue of cov erag e. D. D emand W it hin Li mits To prov e an ins ur er ’s neg li g ent fai lure to set tl e a c lai m, i .e., a S tow ers c lai m, the ins ur ed mus t es tabl is h tha t ( 1) the cl aim is w it hin the s cope of cov erag e, ( 2) a de mand w as made tha t w as w it hin poli cy limi ts, and (3 ) the demand w as suc h that an ordin ar y pr udent insurer w ould h a ve a c c e p ted it, conside ring the likelihood and degree of the insu red’s potent ia l ex posure to an ex ces s j udg ment. Am. Phy si ci ans Ins . Ex ch. v . G ar ci a, 87 6 S. W .2 d 84 2 , 8 4 9 (T e x. 19 9 4 ). A de m a n d th a t e xce e d s t h e p o l i c y l im it s, eve n th o u ghNo issue has be en raised regarding the timely pay me nt of these prem ium s. 20 21 reaso nab le, do es no t trig ger the insurer’s dut y to settle. Id. Insu rers conte nd th at, since the p oli cy

prov ide d tha t eac h i nsurer w as sev erall y

l iab le, the Seg ers’ coll ect iv e s ettl ement off ers w er e i neffect iv e to t rigge r Ins urers’ Sto w ers l iab il ity bec ause the S eg ers fai led to make s ettl ement de mands w it hin the sev eral li mits of Y or ks hire and Oce an M ar ine

. The Segers cont end thattheir collective settlem entdem and s w ere w it h in t he so lv entpolicy limits a va il a b le u nde r the CGL po licy and w ere suf

f icient to mee t the secon d Sto w ers ele ment. F urther , t he Seg ers rely on t he C GL i nsurers’ admi ss ion that the Segers made a demand that w as w it hin the av ail abl e pol icy l imi ts. The ter ms of the CG L policy p ro vi ded t hat, in ex chang e for premium p ay ments total ing $10, 850, the CG L i nsurers w oul d prov ide co v erag e for the p er iod of Janua ry 23, 20 1992 t hroug h J anuar

y 23, 1993, w it h pol icy

l imi ts of $500,000 per ac ci dent/ occ ur re nce. The cov er

note , w hic h w as inc or porated int o the pol icy , i ndi cat ed th at Y or ks hire i nsured 16. 472 percen t of

t he p olicy

and thatOcean Marine insured 10 pe rcent of the po licy . It is undi sput ed th at t he Seg ers d id not mak e demands upon Yor ks hire and Oce an M ar ine sepa rately tha t w ould fall w ithin their prop ortion ate share of the po licy ’s li mits. How ever, it is also undisp ute d tha t the Segers did ma k e d em and for the sta ted policylimits, $500,00 0, an d s ubseq uentl y made de m a n d s f o r $368,1 90 and $250,00 0. In fact , at Ins ur ers’ req uest , t he tr ial co urt t ook jud ic ial noti ce that the S eg ers o ff ered to se ttl e the underlying c ase for $250 ,000. Thus , t he facts rela ted t o thi s i ss ue are noti n di sput e. Rat her , t he q uest ion present ed i s w hether the Seg ers’ co ll ect iv e s ettl ement de mand for $25 0,0 00 was suf

f icient to mee t the “dem and w ithin po licy limits” eleme nt of

a Stowers22

act ion or w er e t h e Seg ers req uired to make separate d emands upon ea ch of the C GL insurers w ithin ea ch insurer’s prop ortion ate share of the po licy ’s li mits. In a typical Sto w ers a ction, a n insured brings suit against his insu rer fo r the insurer’s negligent failure to se ttle a covered claim asserted against the insured for an am oun t w ithin the a ppl ic abl e pol icy

l imi ts w hen the cov ered cl aim re sul ts in a j udg ment i n ex ces s o f the policy limits. How ever, before an insured ca n prevail in a Sto w ers action , the claiman t in the u nder ly ing proceed ing musthav e made a se ttl ement de mand tha t w as w it hin the appl ic abl e pol icy

l imi ts. I d. Thus, itis the cla imanti n the under ly ing su itthatdete rmi nes w hether the sec ond el ement of a S tow ers c lai m can be met by the insured. As a resul t, w e bel iev e tha t a cl aimantsh oul d be ent itled to re ly on t he s peci fic p ro v is ion s o f an in s u ra n c e p o li c y in m a k in g a se t t le m e n td e m a n d t h a ti s wi t h in t h e c o ve ra ge o f t h e p o li c y. T hatit is the policythat d ic tate s w het her a set tlem entdem and w as w ithin po licy limits is bol ste re d by

the Tex as Supreme C o u r t ’ s i ndi cat ion thata s ettl ement de mand tha t propose s to relea se the insured for “the po licy l im it s , ” in l ie u of a dem and for a sum certain, is suffici ent t o s ati sfythe “d emand w it hin li mits ” ele ment of a S tow ers a cti on. See I d. at848- 4 9

. Fu rt h e r, wh e n a cl a im a n tm a k e s su c h a d e m a n d a n d itis reje c t e d b y t h e in s u re r, we believe tha t proof

that a settle me nt de ma nd th at w as w ithin th e limits stat ed in th e po licy and thatw as rejecte d by the insurer is a ll th at is nece ssaryto satisf y the “de ma nd wi thin limits” elem entof

a Stowers claim

. T hus, in t he prese nt case, we conclud e tha t the Segers’ collective settlem entdem and of $25 0,0 00, w hich falls w ithin th e $5 00, 000 limit sta ted in the policy , w as suf

f icient to satisf

y the sec o n d e le me nt of a Stowers action againstW e express no op inion regarding wh a t , i f a ny, ef fect th e insolvency of

certain 21 sev erall y l iab le ins urers w oul d hav e on w hether a demand w it hin sta ted pol icy l imi ts, but ex ceedi ng the sol v ent i nsurers’ p ro por ti onate share of cov erag e, w oul d hav e on the est abl is hment of a “ demand w it hin l imi ts” i n the context of a subs eq uent Stow ers a cti on. In t he presentca se, i t i s u ndi sput ed th at, w hen t he Seg ers made thei r $250,00 0 demand, the dem and w as w ithin th e available po licy limits of the solvent CGL insu rers. 23 Ins ur ers. As the undi sput ed facts es tabl is h tha t t he Seg ers made a s ettl ement de mand

21 that w as w it hin the CG L pol icy l imi ts as a matter of law , w e aff ir m the tr ial co urt’ s g ra nt of summar y j udg ment i n fav or

of the S eg ers o n thi s i ss ue.

Damag es Ins ur e rs c o n t e n d t h a tt h e S e g e rs p r e s e n t e d n o e v i d e n c e t o e s t a b l i s h t h a tD iat om suffered i nju ry as a re sul t of an y neg li g ence on the p art of Ins urers a nd, t herefore, the t ri al co u rt ’s g ra nt of di re cte d v erdict as to damag es w as in er ro r. I nsurers c ontend that (1 ) Di atom w as jud g ment proof and, t herefo re , was n ot i nju re d by Ins urers’ neg li g ence, ( 2) direct ed v erdict w as an i mprop er method to d eter mine damag es, and (3 ) becau se the und erly ing j udgm entw as no t the result of a f ully adversarial trial, it constitu ted no evidence of damag es. The S eg ers c ontend that Di atom’ s fin ancial co ndi ti on i s i mmater ial to Ins ur ers’ Sto w ers l iab il ity and that, bec ause the d amag es aw arded i n the under ly ing jud g ment w ere the resul t of a fully adv ersar ial tri al, the damag es aw arded in that j udg ment are con clusiv e of

the da ma ges Di ato m suf fered as a result of

Insurers’ negligence. W e w ill add ress each of

Insurers’ subp oints regarding this issue in the order in w hich t h e y w ere pr esent ed.24

In rev iew ing the g ra n ti n g of a no- ev ide nce summar y j udg ment, w e mustdec ide w heth e r any

probati v e ev ide nce w as present ed th at w oul d rais e a g enui ne i ss ue of mater ial fa ct r e g ardin g the is sue upon w hic h the su mmary j udg ment w as g ra nted. D ow C he m. C o. v . F r an c i s , 46 S .W .3 d 23 7, 2 41 - 42 ( Tex

. 20 01 ) ( pe r c ur i am )

. Thi s is the s am e sta ndard uti li z ed in rev iew ing a direct ed v erdict. See Ki ng R anch, Inc . v . C hapman, 118 S.W .3d 7 42, 7 50- 51 ( Tex . 200 3)

. In de ter mini ng i f the ev ide nce ra is es a g enui ne i ss ue of mater ial fact, w e rev iew the e v ide nce in the l ig ht mos t fav orabl e to the p arty ag ain st w hom the v erdic t i s rendered. Mo rg an v . An thony , 27 S.W .3d 9 28, 9 29 ( Tex . 200 0)

. Ins ur ers c ontend that, bec ause Di atom w as unabl e to pa y any damag es aw arded by t h e j u d g me n t , t h e S e g e rs c a n n o t p ro v e t h a t D i a t o m s u ffe r e d a n y h a r m a s a r e sul t of Insu rers’ negl igent ref usal to settle th e Segers’ claims w hen dem and w as ma de wi thin pol icy l imi ts. The record does es tabl is h tha t D iat om is and w as judg ment proof. Di atom ceas ed doi ng busine ss in 1993, sold al l of it s ass ets to make pay ments to c re dit ors, and w as involunta rily

dissolv ed. As a result, Di ato m possesse d no assets f rom which it could pay any damag es aw arded t o the Seg ers. Ins ur ers’ co ntent ion i s a nal og ous to the arg ument made by the ins urer

i n Y MC A of Metro. Fort W orth v

. Com me rcial Sta nda rd Ins. Co., 552 S.W .2d 497 (Tex.Civ .Ap p.– Fort W orth 19 77, w ri t ref’d n. r. e.)

. In Y MC A, t he i nsurer arg ued t hat, becau se it s i nsured had entered i nto a cov enant w it h the plain ti ffs not t o ex ecut e the j udg ment ag ain st the i nsured, the i nsured had no obli g ati on to paythe jud g ment and, conseq uentl y , w as not harmed by the i nsurer ’s neg li g ent refusal to set tl e. Id. at 501. The cour t anal yz ed the l ang uag e i n the pol icy at is sue and concl uded that the poli cy w as a l iab il ity

pol icy rather than an i ndemni tyAn ins ur er i n a l iab il ity

pol icy ag re es to de fend the i nsured a n d p ro te ct i t from 22 liability . If

the insu rer is unsu ccessf ul in prote cting insured f rom liab ility and mustsettle or, if a j udg ment i s rendered ag ain st the i nsured, t he i nsured i s n o t re q uired to pay the obl ig ati on before the i nsurer i s req uired to pay . If a j udg ment is re n d e red ag ain st the ins ur ed, t he i nsurer ’s l iab il ity to pay attac hes at that ti me. This obl ig ati on to pa y co nti nues unti l the j udg ment i s s ati sfied. Conversely , an ind em nity policy provides tha t the insurer’s liability doe s not at tach unl ess the jud g ment ag ain st the i nsured has ac tual ly been pai d. See i d. at504. 25 policy. Id. at 504

. Notab ly , the court cited the policy’s provisi on that, “Th e com p a n y w ill pay on behal f of the ins ured all sums w hic h the i nsured s hal l become leg all y obl ig ated to pay as damag es . . . .” After di sc uss ing the differenc es betw een a li abi li ty pol icy and an ind emnity

pol icy , the cour

t c oncl uded t hat t he pol icy w as a l iab il ity

po lic y a n d t h at t he 22 cov enant not to ex ecut e did not re lea se the i nsurer from l iab il ity , ev en th oug h the i nsured w as under

no l eg al obl ig ati on to pay the damag es aw arded. See id. T h e CGL in su ra n ce po lic y invol ved in th e pre se n t c a se in clu d e s t h e exa ctla n gua ge ci ted a bov e i n the Y MC A pol icy . From thi s a nd ot her prov is ion s o f the pol icy , w e c oncl ude t h a tt h e CG L p o li c y is a li a b il it y p o li c y ra t h e r t h a n a n in d e m n it y p o li c y. T h e re fo re , we conc lud e tha t Di atom’ s inabi li ty to pay the damag es aw arded in the unde rl y ing j udg ment does not a ff ectDiat om’s liab il ity under t he j udg ment. See id. at 504. Thus, the fact th at Di atom w as jud g ment proof does not e sta b lis h Ins urers’ r ig ht t o di re cte d v erdic t on damag es. As s up po rt for i ts c on te nt i on , In s urers c i te F orem os t C ou nty M ut

. In s . C o. v . H om e Indem. Co. , 897 F. 2d 754, 757 (5 Ci r. 1990) , as hol din g that an unde rlyin g j udg ment th cons ti tutes no e v ide nce of da mag es in a Stow ers a cti on i f the j udg ment i s a cc ompani edW hile the Segers ente red into a covenantnot to ex ecut e the ju dgme nt against 23 Gi ll man i n the presentca se, w e understa nd In surers’ arg ument t o an a lo giz e a c ov enant not t o ex ecut e w it h a j udg ment proof insured. How ev er , w e c oncl ude t hat t he anal y si s a nd the resul t w oul d be the same i f Insurers w ere c ontendi ng thatthe cov enant not t o ex ecut e prec l ud ed p roo f of h ar m t o D i at om . Ins urers c ontend that itw as er ro r for th e j u d g ment t o hav e been admit ted i nto 24 ev ide nce for th e judg e’s ey es only

. How ev er , the judg ment w as admit ted int o ev ide nce. Beca use the t ri al cour

t g av e the j udg ment c oncl usi v e effecton t he i ss ue of damag es and re ndered a direct ed v erdict i n accordance w it h tha t j udg ment, the facti ss ue of the amount of damag es suffered by D iat om w as re mov ed from t he jury’s co n siderati on. Therefore, w hether the tr ial courterred in the manner in w hic h it ad mitt ed th e j udg ment i s s ubsumed w ithin th e issue of

wheth er t he trial cou rt erred in directing dam ages in accorda nce wi th th is ju d gm e n ta n d wil l b e a d d re s s e d b e lo w. 26 by a co v en an t no t to e x ec ut e ag ai ns t th e i ns ured

. Th e F orem os t c ou rt, h ow ev er, 23 re cog niz ed th e g eneral ru le that “[ i] n Tex as a c ov enant not t o ex ecut e by an i nsured does not rele ase an i nsurance car ri er from l iab il ity .” Id. at 758 (c it ing Y MC A, 5 52 S. W .2d a t 504 - 05)

. Fur ther , t he F oremost c o u rt s p e ci fical ly i ndi cat ed th at, “u nder

our dec is ion not to extend the Y MCA ru le the ins ur er w ho neg li g entl y

refuses to s ettl e w il l be abl e to use a cov enant not t o ex ecut e onl y to the d is adv antag e of an other i nsurer thathas breache d i ts dut y to the insured . . . and not to the disad v ant age of its insured. ” Id. a t 760 (emp hasis add ed). W e con clude thatthe For e m o s to p in io n is not con trolling because it is clearly dis ti ng uis habl e from t he presentcase. See Tex . Far mers Ins. Co. v. Sor ian o, 84 4 S. W .2d 8 0 8 , 8 2 4 -2 5 (T e x. A p p . – S a n A n t o n io 1 9 9 2 ), re v’d o n o t h e r gr o u n d s , 8 8 1 S

. W

. 2 d 3 1 2 (T e x. 1994) ( dis cus si ng the li mite d appl ic ati on of t h e h o ldi ng i n F oremost)

. W e aff ir m the tr ial court’s de nial of

Insurers’ mo tion for directed v erdict as to dam ages. Next, w e mustco nsi der w hether the tr ial co urt er re d i n gi v ing co ncl usi v e effectto the damag es found in the under ly ing jud g ment. By di re cti ng v erdict on the i ss ue of damag es 2427

in acc ordance w it h the damag es found in the u nder ly ing j udg ment, iti s e v ide nt t hat t he tr ial court foun d tha t the judgmen t set Diatom ’s dam ages as a ma tter of la w . Insurers’ cont ent ion th at directe d v erdict w as an inapp ropriate ve h icle to esta blish da ma ges is prem ised on their positio n tha t the e v iden ce tha t Diatom was judgmen t proof raised a fact issu e r e g ardin g w hether D iat om w as damag ed by the ex ces s d amag es aw arded i n the under ly ing j udg ment. H ow ev er , for the reasons di sc uss ed abov e, w e c oncl ude t hat Di atom’ s fin anci al sta tus i s i mmater ial to Dia to m ’s liabi li ty and, therefore, fails to ra is e a fact i ss ue reg ardin g damag es in the p re sentsu it

. A di re cte d ve rdic t i s a ppropr iat e onl y w hen “ re asona ble min ds can draw onl y one conclu sion f rom th e evidence .” C ol lo ra v. Nav arro, 57 4 S.W .2d 65, 68 (Tex. 1978 ). Revi ew of

a directed v erdict requires thatthe evidence b e vi e we d i n t he light mo st favorable to th e pa rt y a ga in s t w hom judgmen t w as en tered and thatall reaso nab le inferences from t hat e v ide nce be resol v ed i n tha t party ’s f av or . Mo rg an, 27 S.W .3d a t 929

. The g eneral ru le is that , i n a S tow ers a cti on, d amag es are fix ed as a mat ter of law in the amount of t he ex ces s of t he jud g ment re ndered in the under ly ing sui t in fav or of the pla int iff ov er

the appl ic abl e l imi ts of the poli cy . See All sta te Ins. Co. v . Ke ll y , 680 S.W .2d 595 , 606 (Tex.App .–T y ler 1984 , w rit n.r.e.). See al s o R ocor Int ’l, Inc. v . Nat’l Union Fire Ins . C o. of P it tsb urg h, Pa., 77 S.W .3d 253, 271 (Tex

. 2002) (B aker , J ., dis sent ing ); Sta te Farm Fire & Cas. Co. v . Gan dy, 92 5 S.W .2d 6 96, 7 13 (Te x . 199 6). T hus, a bsen t evi den ce that the u nderly ing j udg ment i s n ot reli abl e ev ide nce of the damag es suffered by the ins ur ed i n the under ly ing su it , t he j udg ment c oncl usi v ely est abl is hes the d amag es suffered by the ins ur ed and is su ff ic ien t ev ide nce to s uppor t a direct ed v erdic t.In rev iew ing the Segers’ mot ion r e la ting to these point s, w e no te th at th e “f ully 25 adv ersar ial rela ti onshi p” i ss ue i n no w ay address ed th e ev ents oc cur ri ng at the u nder ly ing tr ial

. W hil e the C our

t di d notdefin e “ f u lly a d vers ar ial tr ial ” in Gandy , w e bel iev e tha t a deter minat ion of w hether a he ar ing consti tutes a “full y adv ersar ial tr ial ” re q uires a rev iew of the extent to w hic h the parti es to the proc eedi ng parti ci pated. Se e Gan dy , 925 S.W .2d at 71 3. W hen t he j udg ment i s a n ag re ed j udg ment, defau lt j u d g ment, or w hen t he under ly ing defendant’ s p arti ci pati on i s s o mi nimal as to ev ide nce that the h ear ing w as not adv ersar ial , t he j udg ment resul ti ng f ro m that hear ing m ay not be admi tted as ev ide nce of damag es in the S tow ers a cti on. See i d. at713, 714. As su ch, the deter minat ion of w het her the hea ring w as f ully adversarial requires rev iew of the un derlyi ng proceed ings. 28 W hil e the g eneral ru le is thata j udg ment obt ain ed by a pl ain ti ff

ag ain st an i nsured is co ncl usi v e to est abl is h the amount of damag es suffered bythe ins ured i n a s ubseq uent Stow ers a cti on, see Kell y , 680 S.W .2d a t 606 , t he Tex as Supreme C our t has created an e x c e p t i o n t o t h i s g e n e r a l r u l e w h e n th e i n s u r e d as s i g n s hi s S t o w e rs a c t i o n t o t h e p l a i n t i ff in the und erly ing suit, see Gan dy, 925 S.W .2d at 714

. W hen such an assignmen t occurs, the u nder ly ing j udg ment i s n ot on ly n o t concl usi v e, bu t i s i nadmis si ble as ev ide nce of damag es, unl ess rendered as the re sul t of a “ful ly adv ersar ial tr ial .” Id. Ins urers c ontend that they present ed ev ide nce that w oul d rais e a factq uest ion as to w hether the jud g ment from the under ly ing su itw as the res ultof a fully adv ersar ial tri al and, therefore, that the t ri al cour t er re d i n di re cti ng the v erdict on damag es in acc ordance w it h the under ly ing j udg ment. Pr ior to tr ial , t he Seg ers fil ed a moti on for par ti al summar

y j udg ment i n w hic h the y cont ended, inter alia , tha t the ev iden ce esta blished thatt he partie s t o the u nde rly ing suit w er e i n a “ fully

adv ersar ial rela tio n sh ip at t he ti me of tr ial ” and t hat a n “ act ual tr ial ” had occurred . Th e trial court granted the Se gers’ mo ti o n . Howev er, w e con clude thatthese findi ng s b y

the tr ial co urt do not re sol v e w hether the jud g ment i n the under ly ing su itw as the result of

a f ully adversarial tri al. 2529

At the close of

e v iden ce in the Stowers action, th e Segers of fered the jud gmen t in the und erly ing suit fo r the cou rt’s review only and mo v ed the trial court for directed v erdict on damag es based on t he j udg ment. Ins urers o bje cte d t o a d m iss ion of the j udg ment cont endi ng t h a t i t w as not t he resul t of a full y adv ersar ial tr ial

. The tr ial co urt ov er ru led Ins ur ers’ obj ect ion and g ra nted the S eg ers’ moti on for direct ed v erdict on damag es. Di re cte d v erdict w as proper , i n thi s s it uati on, o n ly if n o probati v e ev ide nce w as pr esent ed th at w oul d rais e a g enui ne i ss ue of mater ial fact reg ardin g the amount o f damag es suffered by

D iat om as a r esul t of Ins urers’ neg li g ent fai lure to set tl e the under ly ing su it

. See D ow C hem. C o., 46 S. W .3d a t 242

. As the S eg ers’ onl y ev ide nce of dam ages in the S towers actio n w as the ju dgme nt in the u nde rly ing suit, t he trial court could only direct the verdict on dam ages if Insurers failed to raise a gen uine issue of mat erial fact regarding the reliabilityof the jud gmen t as evidence o f Diatom ’s dam ages. Ins ur ers rais ed th e q uest ion of w hether the jud g ment in the underl y ing acti on w as the resul t of a fully adv ersar ial tr ial

. As ev ide nce that itw as not, Ins urers c or re ctl y i ndi cat ed that Di atom w as not represent ed by co unsel at th e tr ial i n the under ly ing su it , made no openi ng or

cl osi ng st atements , offered no ev ide nce, and condu cte d no cross -e x aminat ion of the Se gers’ w itnesse s. Fu rther, Insu rers cite t he trial court’s ow n cha racterization of this proceed ing as a nihil dicit prov e up. W e con clude thatthis evi den ce is suf f icient to raise a genuine issue of m ate rial fa ct regarding w het her the und erly ing j udgm entupo n w hich th e trial court directe d the v erdict“ In no ev ent, how ev er , i s a j udg ment for pla int iff aga ins t defendant , re n dered 26 w ithou t a f ully

adversarial tri al, bind ing on d efend ant ’s insu rer o r adm issible as evidence of damag es in an act ion ag ain st defendant’ s i nsurer by pl ain ti ff as defendant’ s a ss ig nee” (emp hasis ad ded ). T he d ocum ent s subm itted for the trial cou rt’s in cam era rev iew i ncl ude doc uments 27 tha t w ere prep ared for the p urpo se of facilitating the ren dition of legal serv ices in def ense of Insurers’ thi rd -p arty

ac ti on ag ain st Di atom. These document s a ppear to be pr iv il eg ed u n d e r T e xas Ru le of

Evid e n ce 50 3 (b ), b u t, in a n y e ven t, a re n o t sou ght b y In su re rs t h ro u gh thi s i ss ue. 30 on damag es w as the resul t of a full y adv ersar ial tr ial

. See Ga ndy , 925 S.W .2d a t 714

. 26 As suc h, w e rev erse the d amag es por ti on of the jud g ment. Ev ide nti ar

y Ex cl usi ons Insu rers conte nd th at they w ere denied evidence o f collusion be tw een the Se gers and Diatom in the un derlyi ng proceed ing becau se the trial court abu s e d i t s d iscretion in sus tai nin g Di atom’ s ass erti ons of attor ney -c li ent pr iv il eg e and w or k product pr iv il eg e. As Ins ur ers’ i ss ue c hal len g es the ex cl usi on of those documents that speci fical ly rel ate to th e und erly ing j udgm entand subse quent a ssignmen t, w e w ill limit our revi ew to th ose document s. W e must determi ne w hether the tr ial courtabused i ts dis creti on i n uphol din g 27 Di atom’ s a ss erti ons of pri v il eg e and, i f s o, w hether the ex cl usi on of this ev ide nce har med Ins ur ers. See Ma y

v . Ba rt on’ s P ump Ser v ., Inc ., 153 S. W .3d 469, 47 7- 78 (Te x .Ap p.–Am arillo 2004 , no pe t.). Som e of the ev iden ce sought by Insu rers w as includ ed in th e ap pellat e record in th is ca u s e . Th e s e d o c u me n t s w e r e ma d e p a rt o f t h e r e c o rd o n D e c e mb e r 2 8 , 2004. They w er e inc lud ed in the appel lat e re cord after Di atom ass erted it s cl aims of pr iv il eg e. Not hin gHow ever, t h e con clusion th at Diato m ha s not at tem pte d to “sna p ba ck” these 28 document s i s n ot a deter minat ion thati t has w aiv ed i ts cl aim of pri v il eg e. Beca use Di atom is no longer a party to the prese nt action, Insurers’ iden tif ication of the disclosu re of

these document s d oes not n eces sar il y resul t i n D iat om’s ac tual kn ow led g e of the dis cl osure.

31 i n t h i s c o u rt ’ s fi l e e v i d e n c e s a n y a t t e mp t b y D i a t o m t o r e c a l l t h e s e d o c u me n t s as pr iv il eg ed. Se e T EX . R. C IV . P

. 1 9 3

. 3 (d ). T h e r e f o r e , fo r t h e p re s e n tli t ig a t io n , we

28 conc lud e tha t D iat om’s pr ior as ser ti on of pr iv il eg e as to thes e documents has been w aiv ed. Us ing thes e dis cl osed document s, Ins urers c ontend that other doc uments rela ti ng to t he unde rl y in g p ro ceedi ng are di sc ov erabl e and admis si ble

. After re v iew ing al l of the docu me nts provided to the trial court for in cam era inspect ion, t h e d ocum ent s Insurers seek by thi s i ss ue are dupl ic ates of the d o cument s t hat w ere i ncl uded i n the appel lat e re cord. As Dia to m’s pr ior as ser ti ons of pri v il eg e reg ardin g thes e doc uments hav e been w aiv ed, w e ov er ru le Ins ur ers’ i ss ue as moot. Re cu sa l o f

Ju d ge Ins ur ers c ontend that the d eni al of thei r moti on to recus e J udg e LaG ron e wa s an a b u se of di sc re ti o n be ca u se , a s t h e ju d ge t h a t p re sid e d ove r th e un d e rlyin g tria l, Ju d ge LaGrone w as a v it al mater ial w it ness in the S tow ers s uitand had personal kn ow led g e of dis puted mater ial facts

. The deni al of a moti on to recus e i s rev ie wed f o r a b u se of d isc re ti on. Bross eau v . R anz au, 8 1 S. W .3d 3 81, 3 99 ( Tex .App. –Beaumont2002, pet. deni ed)

. Ins urers cont end that the Seg ers’ ci tati on to Ju dg e LaG ro ne’ s s tatementi n the under ly ing tr ial transc ri pt t hat “ The Co urt w il l cal l for tri al in Cause No . 30,110, . . .” made Judg e LaGron e a v it al mater ial w it ness i n the Sto w ers a cti on. How ev er , t he c omplet e32

t ra n s c r i p to f t h e u n d e r l y i n g p ro c e e d i n g , w h i c h i n c l u d e s t h e s t a t e me n tI n s u r e rs c o mp l a i n o f, w as admit ted i nto e v ide nce in the S tow ers a ctio n . F u rt h er , J udg e LaG ro ne’ s c all ing the und erly ing proceed ing fo r tri al did no t const itute his participat ion “as . . . ma terial w itness in t h e m a t t e r in cont rov ersy .” T EX . R. C IV . P. 18b( 2) (d ). C ertai nly , as address ed abov e, Insu rers may ref ute Judge LaGrone ’s chara cteriz ation of the un derlyi ng proceed ing as a “trial,” but w e do not con clude thatthe trial court ab used its discretion in den y ing Insurers’ mo tion for recusal on this basis. Addi ti onal ly , I nsurers c o n t e n d t h a t J u d g e L a G ro n e m u s t

h a v e k now led g e of di sput ed evidentiary f a c t s regarding w het her the und erly ing proceed ing w as, in fact, a f ully adv ersari al tr ial

. How ev er , I nsurers fai l to i denti fy any sp eci fic k now led g e of di sput ed ev ide nti ar

y facts pur por

tedl y hel d by Judg e LaGrone. W e w il l not find re cus al appropr iat e sol ely on t he bas is of spec ula ti on reg ardin g facts thatmay or may not b e k n o wn b y t he pr esi din g j udg e. W e ov er ru le Ins ur ers’ ch all eng e to the d eni al of thei r moti on to recus e. Di sq ual ific ati on of C ounse l Finally , Insu rers conte nd th at two attorne y s in the Se gers’ coun sel, Brian Heinrich and Joe Hay es, w ere dis q ual ified from re present ing the Seg ers in thei r Stow ers action becau se each (1 ) w er e w it ness es in th e S tow ers a cti on, s ee T EX . D I SC . R. P ROF . C OND . 3.08, and (2 ) w er e to be paid on a cont ing ent basi s, see T EX . D I SC . R. P ROF . C OND . 3. 04. The deni al of a moti on for dis q ual ific ati on is rev iew ed for abuse of dis creti on. See M etro. Life In s. Co. v . Sy ntek

F in. C or p., 881 S. W .2d 3 19, 3 21 ( Tex . 199 4)

. As both par ti es to t he33

prese nt disp ute ackno w ledge, the d isqualifica tion of co unse l is a severe remed y , w hich is notto be i n vo k e d l ig h t ly. See In re Nitla S.A. de C.V., 92 S.W .3d 419 , 422 (Tex. 2002 ). Ev en i f chal len g ed c ounse l has co m m it ted a di sq ual ify ing act, the p arty req uest ing dis q ual ific ati on mus t demons trate t hat c ounse l’ s c onduc t c aused ac tual preju dic e. Id. As s u m in g, wit h o u td e c id in g, t h a tHe in ri c h a n d / o r H a ye s we re lawy er-w itnesse s such tha t the y w ould be disqualif ied f rom represe nting the S egers in the Stowers action, In surers hav e fail ed to presen t anyev ide nce that they w ere harmed. Insurers ci te a depos it ion of Professor

Bob Schu w er k, w hic h i s n ot a par t of the re cord, as co ncl udi ng thatH ein ri ch and Hay es v iol ated Rul es 3.04 and 3. 08 of the Tex as Di sc ipl ina ry R ule s o f Profess ion al Con duct

. How ev er , proof that an attor ney vi ola ted a R ule of Professi onal C onduc t, w it hout a f urthe r show ing of harm , is insuf f icient to justif

y disqualif ication

. Id. Noth ing i n Insu rers’ discu ss ion of Schu w er k’ s d eposi ti on i denti fies how they w ere har med by

any al leg ed v iol ati on of the Rul es by ei ther H ein ri ch or

H ay es. Ins ur ers c ontend thatthe tr ial courttook cer tai n unrel ated act ion s t o av oid hav ing to rule th at Heinrich an d Hayes w ere disq ualif ied to represe nt the Segers in the St owers action , howev e r, t his cont ent ion is w holly unsu ppo rted by ev iden ce an d is purely spec ula ti v e. See Mi ll er

v. Hood, 536 S.W .2d 2 78, 2 85 ( Tex .C iv .App. –Co rp us Chr is ti 1976, w rit ref ’d n.r.e. ) ( presu mp tion o f regularity

and v alidity of

trial court rulings unle ss facially inv ali d or i nv ali dity

sh ow n in the record)

. Addi ti onal ly , w hil e Ins urers c ontend that Hay es and H ein ri ch w er e di sq ual ified bec ause they w ere w it ness es w hose pay ment w as cont ing ent upon the outc ome of t he cas e, Ins urers fail to i denti fy any ev ide nce est abl is hin g that Hay es or

H ein ri ch w ere bei ng pai d on a c onti ng ent b asi s.34

W e ov er ru le Ins ur ers’ i ss ue reg ardin g the deni al of thei r moti on to di sq ual ify H ay es and H ein ri ch. Con cl usi on W e a f f irm the trial court’s de nial of Insurers’ mo tion to recuse, d enia l of Insurers’ moti on to di sq ual ify

co unsel , and g ra nt of s ummary j udg ment on the i ss ue of w hether the Seg ers ma d e a su ff ic ien t s ettl ement de mand w it hin the CG L pol icy l imi ts. I n al l other respe cts, w e reverse the judgme nt an d rema nd this cause for new trial consiste nt w ith this opi nio n.

Mackey K. Hancock Justice