COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-13-00169-CV 

TEXAS FARMERS INSURANCE 

COMPANY AND FARMERS 

INSURANCE EXCHANGE

APPELLANTS

V.

FRANK KUROSKY AND PAMELA 

RUST

APPELLEES 

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FROM THE 236TH DISTRICT COURT OF TARRANT COUNTY

TRIAL COURT NO. 236-243367-10

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MEMORANDUM OPINION1

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Appellants Texas Farmers Insurance Company (Texas Farmers) and 

Farmers Insurance Exchange (Farmers Exchange) appeal the trial court’s 

summary judgment in favor of appellees Frank Kurosky and Pamela Rust.2

 We 

reverse and render judgment in favor of Texas Farmers and Farmers Exchange.

 1

See Tex. R. App. P. 47.4.

2

This case was originally submitted with oral arguments on 

January 7, 2014, before a panel consisting of Justice Dauphinot, Justice Meier, 
2

Background Facts

Kurosky lives at 4325 Fossil Drive. He also owns a home at 4333 Fossil 

Drive, which he rents to his daughter, Rust. Kurosky has homeowners insurance 

on his home at 4325 Fossil Drive with Texas Farmers on which he is listed as the 

sole insured. Texas Farmers also issued an insurance policy for 4333 Fossil 

Drive that names both Rust and Kurosky as the insureds. Kurosky also has a 

personal umbrella policy with Farmers Exchange. 

In June 2008, Rust was injured while riding a lawnmower in her backyard. 

She sued Texas Farmers in the 153rd District Court for medical benefits under 

both Fossil Drive insurance policies. Rust later added a negligence cause of 

action against Kurosky in her second amended petition, filed October 23, 2009. 

Rust never pleaded a cause of action against Farmers Exchange. On 

November 25, 2009, Texas Farmers sent a reservation-of-rights letter to Kurosky 

to 4325 Fossil Drive, Fort Worth, Texas, as his address was listed on the policy. 

Kurosky claimed never to have received the letter because his address is in 

Haltom City. It is undisputed that he was represented by the attorney whom 

Texas Farmers retained and paid. 

 

and Justice Gardner. The court, on its own motion of February 13, 2015, ordered 

this case reset with oral argument on March 17, 2015; assigned this case to a 

new panel, consisting of Justice Dauphinot, Justice Meier, and Justice Gabriel; 

and assigned the undersigned to author this opinion. On the appellants’ motion, 

submission was reset for April 14, 2015.
3

Both Rust and Texas Farmers moved for summary judgment. On 

January 12, 2010, the trial court granted Texas Farmers’s motion and denied 

Rust’s. The El Paso Court of Appeals affirmed the trial court’s judgment on 

April 20, 2011. See Rust v. Tex. Farmers Ins. Co., 341 S.W.3d 541 (Tex. App.—

El Paso 2001, pet. denied).

Meanwhile, in March 2010, Rust and Kurosky entered into an agreed final 

judgment against Kurosky for $300,000. The judgment states that it may not be 

enforced against Kurosky until Rust attempted to collect from his insurance. 

Texas Farmers claims that it had no prior knowledge of the agreed judgment and 

that it did not consent to an agreed judgment. 

After the 153rd District Court granted Texas Farmers’s summary judgment, 

but in the same month, Texas Farmers and Farmers Exchange filed a petition for 

declaratory relief in the 236th District Court. In September 2010, Texas Farmers 

and Farmers Exchange filed their first amended petition seeking a declaration 

that because Kurosky entered into an agreed judgment with Rust, he assumed 

an obligation at his own cost, and therefore Texas Farmers did not have a duty to 

defend Kurosky. Rust filed counterclaims in the 236th action for violations of the 

insurance code, for breach of the duty of good faith and fair dealing, and for a 

declaration that Texas Farmers had a duty to indemnify Kurosky. 

Texas Farmers and Farmers Exchange filed a joint motion for summary 

judgment. They filed a supplemental joint motion after the El Paso Court of 

Appeals affirmed the judgment of the 153rd District Court. They filed a second 
4

supplemental joint motion after Rust amended her counterclaims to include 

claims against Farmers Exchange and filed a response to their summary 

judgment motion. 

Rust filed a motion for partial no-evidence and traditional summary 

judgment. The motion stated, “This Motion is limited to the coverage provided by 

Farmers Insurance Exchange and is thus partial in nature,” and it sought 

summary judgment only on the issue that Kurosky’s Farmers Exchange umbrella 

policy covered Rust’s injuries. Rust requested indemnity for the amount of the 

agreed final judgment less the retained limit of $1,000. 

The trial court denied Texas Farmers and Farmers Exchange’s summary 

judgment motions and granted Rust’s motion. The trial court ordered that 

Famers Exchange pay Rust $299,000. The order granting Rust’s summary 

judgment motion, signed on February 14, 2013, stated, “This Order is intended to 

dispose of all claims and all parties and constitute a Final Judgment for all 

purposes.” 

Texas Farmers and Farmers Exchange filed a motion for new trial and a 

motion to correct, modify, or reform the judgment on March 11, 2013. Rust then 

nonsuited her counterclaims against Texas Farmers on April 16, 2013. The trial 

court granted the nonsuit the next day. It then denied Texas Farmers and 

Farmers Exchange’s post-judgment motion. Texas Farmers and Farmers 

Exchange then filed this appeal. 
5

Standard of Review

We review a summary judgment de novo. Travelers Ins. Co. v. Joachim, 

315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the 

light most favorable to the nonmovant, crediting evidence favorable to the 

nonmovant if reasonable jurors could, and disregarding evidence contrary to the 

nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp 

Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every 

reasonable inference and resolve any doubts in the nonmovant’s favor. 

20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). When both parties 

move for summary judgment and the trial court grants one motion and denies the 

other, the reviewing court should review both parties’ summary judgment 

evidence and determine all questions presented. Mann Frankfort, 289 S.W.3d at 

848; see Myrad Props., Inc. v. Lasalle Bank Nat’l Ass’n, 300 S.W.3d 746, 753 

(Tex. 2009). The reviewing court should render the judgment that the trial court 

should have rendered. Mann Frankfort, 289 S.W.3d at 848.

Discussion

Texas Farmers and Farmers Exchange bring twelve issues on appeal. 

Because the disposition of the appeal turns on the summary judgment rulings, 

we first address the issues concerning Rust’s summary judgment motion, then 

the motions filed by Texas Farmers and Farmers Exchange. See Mann 

Frankfort, 289 S.W.3d at 848. 
6

I. Rust’s summary judgment motion

Rust moved for partial summary judgment on no-evidence and traditional 

grounds. Rust’s motion noted that the motion was “limited to the coverage 

provided by Farmers Insurance Exchange,” that is, the umbrella policy. When a 

party moves for summary judgment under both rules 166a(c) and 166a(i), we will 

first review the trial court’s judgment under the standards of rule 166a(i). Ford 

Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). 

A. No evidence summary judgment

In Rust’s no-evidence section, she argued that there is no evidence that 

Farmers Exchange reserved its rights to rely on policy exclusions. 

After an adequate time for discovery, the party without the burden of proof 

may, without presenting evidence, move for summary judgment on the ground 

that there is no evidence to support an essential element of the nonmovant’s 

claim or defense. Tex. R. Civ. P. 166a(i). The motion must specifically state the 

elements for which there is no evidence. Id.; Timpte Indus., Inc. v. Gish, 

286 S.W.3d 306, 310 (Tex. 2009). The trial court must grant the motion unless 

the nonmovant produces summary judgment evidence that raises a genuine 

issue of material fact. See Tex. R. Civ. P. 166a(i) & cmt.; Hamilton v. Wilson, 

249 S.W.3d 425, 426 (Tex. 2008).

When reviewing a no-evidence summary judgment, we examine the entire 

record in the light most favorable to the nonmovant, indulging every reasonable 

inference and resolving any doubts against the motion. Sudan v. Sudan, 
7

199 S.W.3d 291, 292 (Tex. 2006). We review a no-evidence summary judgment 

for evidence that would enable reasonable and fair-minded jurors to differ in their 

conclusions. Hamilton, 249 S.W.3d at 426 (citing City of Keller v. Wilson, 

168 S.W.3d 802, 822 (Tex. 2005)). We credit evidence favorable to the 

nonmovant if reasonable jurors could, and we disregard evidence contrary to the 

nonmovant unless reasonable jurors could not. Timpte Indus., 286 S.W.3d at 

310 (quoting Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)). If 

the nonmovant brings forward more than a scintilla of probative evidence that 

raises a genuine issue of material fact, then a no-evidence summary judgment is 

not proper. Smith v. O’Donnell, 288 S.W.3d 417, 424 (Tex. 2009); King Ranch, 

Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030 

(2004).

Farmers Exchange attached to its response an affidavit from Toni 

Johnson, who averred that she mailed a reservation of rights letter to Kurosky on 

November 25, 2009. Attached to the affidavit was a copy of the letter. This is 

more than a scintilla of probative evidence that Farmers Exchange reserved its 

rights. See Commercial Union Ins. Co. of New York v. Rios, 473 S.W.2d 958, 

959 (Tex. Civ. App.—Amarillo 1971, no writ) (“[T]he rule apparently is that in the 

event the insured introduces evidence of non-receipt of notice of cancellation and 

the insurer presents evidence of mailing of notice, then no presumption in law 

prevails in either direction and a fact issue is presented for determination by the 

trier of the facts.”) (citing Sudduth v. Commonwealth Cnty. Mut. Ins. Co., 
8

454 S.W.2d 196, 197 (Tex. 1970)). No-evidence summary judgment was 

therefore not proper. See Smith, 288 S.W.3d at 424.

B. Traditional summary judgment

In Rust’s traditional summary judgment section of her motion, she argued 

that her accident fell under the coverage of the umbrella policy, that Farmers 

Exchange defended Kurosky without a reservation of rights, and that Farmers 

Exchange was therefore bound to the agreed final judgment into which Kurosky 

had entered. Farmers Exchange argued that by entering into the agreed final 

judgment, Kurosky violated the policy’s provisions, thereby relieving Farmers 

Exchange of any liability for Rust’s damages. Farmers Exchange further argued 

that it did not waive and were not estopped from asserting its policy defenses. 

Rust cited Gilbert Texas Const., L.P. v. Underwriters at Lloyd’s London, 

327 S.W.3d 118, 124 (Tex. 2010), which describes the burden shifting for 

insurance coverage:

Initially, the insured has the burden of establishing coverage 

under the terms of the policy. If the insured proves coverage, then 

to avoid liability the insurer must prove the loss is within an 

exclusion. If the insurer proves that an exclusion applies, the burden 

shifts back to the insured to show that an exception to the exclusion 

brings the claim back within coverage.

Id. (citations omitted). The insurer’s burden also applies to any other “avoidance 

or affirmative defense that the Texas Rules of Civil Procedure require to be 

affirmatively pleaded.” Tex. Ins. Code Ann. § 554.002 (West 2009). However, 

an insured’s failure to meet conditions precedent is not an affirmative defense on 
9

which Farmers Exchange bears the burden of proof. See Lidawi v. Progressive 

County Mut. Ins. Co., 112 S.W.3d 725, 729 & n.1 (Tex. App.—Houston [14th 

Dist.] 2003, no pet.) (citing Trevino v. Allstate Ins. Co., 651 S.W.2d 8, 11 (Tex.

App.—Dallas 1983, writ ref’d n.r.e.)). Rust, as the third-party beneficiary, still 

maintained the burden to show that the insured complied with the conditions 

precedent and terms of the policy. See State Farm Lloyds Ins. Co. v. 

Maldonado, 963 S.W.2d 38, 40 (Tex. 1998). A cooperation clause is a condition 

precedent to coverage. Progressive County Mut. Ins. Co. v. Trevino, 202 S.W.3d 

811, 816 (Tex. App.—San Antonio 2006, pet. denied). Likewise, other 

contractual requirements that certain actions be performed before suit may be 

brought against the insurer are conditions precedent. Centex Corp. v. Dalton, 

840 S.W.2d 952, 956 (Tex. 1992) (“A condition precedent is an event that must 

happen or be performed before a right can accrue to enforce an obligation.”).

1. Violations of the policy provisions

Under article VII, entitled “Conditions,” the umbrella policy contained the 

following provisions:

1. Duties After Occurrence, Claim or Suit.

. . . .

c. the insured must cooperate with us in the investigation, 

defense[,] and settlement of a claim or suit.

. . . . 

4. Suit Against Us. No action shall be brought against us:
10

a. unless you and any involved insureds have complied with 

the policy provisions; and

b. until an insured’s obligation has been determined by trial 

and final judgment or by agreement signed by us. 

By Kurosky’s own admission, he cooperated with Farmers Exchange until 

Farmers Exchange filed the declaratory judgment action. He then “decided to 

negotiate [his] own deal with Pamela Rust.” He averred, “Until Farmers filed suit 

against me, I had fully cooperated with them in my defense.” Rust repeats the 

admission in her motion for summary judgment, noting that Kurosky “cooperated 

with Farmers until it sued him.” 

On appeal, Rust asserts that Kurosky cooperated with Farmers Exchange 

because he “cooperated with the defense attorney representing him,” implying 

that the attorney was a stand-in for the insurance company. Rust makes the 

same argument regarding the policy language that an agreement be signed by

the insurance company: that Kurosky’s attorney was the agent of Farmers 

Exchange. We first note that Rust did not make this argument in the trial court, 

and thus it could not have been the basis upon which the trial court granted 

summary judgment. See State Farm Lloyds v. Page, 315 S.W.3d 525, 532 (Tex. 

2010) (stating that a court cannot grant summary judgment on grounds not 

presented in the motion). And even if she had, there is no evidence that 

Kurosky’s attorney was the agent of Farmers Exchange. 

Rust claims that Ranger County Mut. Ins. Co. v. Guin, 723 S.W.2d 656, 

659 (Tex. 1987), stands for her proposition that the defense attorney is the agent 
11

of the insurance company. But Rust misreads the case. Ranger states, “We 

held in Stowers that an insurer which, under the terms of its policy, assumes 

control of a claim, investigates the claim[,] and hires an attorney to defend the 

insured, becomes the agent of the insured and the attorney becomes the subagent of the insured.” Id. (citing G.A. Stowers Furniture Co. v. American 

Indemnity Co., 15 S.W.2d 544, 547 (Tex. Comm’n App. 1929, holding 

approved)). The language upon which Rust relies (“Ranger hired attorney Otto 

Ritter to represent Peden and Guin, so Mr. Ritter became their sub-agent.” Id.

(emphasis added)) refers to the hired attorney as the sub-agent of the insureds, 

not the insurer, as is clear by the use of “their” and not “its.”

In oral argument, Rust also referenced Bradt v. West, 892 S.W.2d 56, 76 

(Tex. App.—Houston [1st Dist.] 1994, writ denied), as authority for her argument 

that the attorney was acting as the agent of Farmers Exchange. Bradt actually 

says that the attorney is the agent of his client, which in this case is Kurosky, not 

Farmers Exchange. See id. (citing Gavenda v. Strata Energy, Inc., 705 S.W.2d 

690, 693 (Tex. 1986) (“The attorney’s acts and omissions within the scope of his 

or her employment are regarded as the client’s acts.”)). Bradt specifically states, 

“There is no attorney-client relationship between an insurer and an attorney hired 

by the insurer just to provide a defense to one of the insurer’s insureds.” Id. at 77 

(citing Empl’rs Cas. Co. v. Tilley, 496 S.W.2d 552, 558 (Tex. 1973) (holding that 

an attorney hired and paid by an insurance company for an insured “becomes 

the attorney of record and the legal representative of the insured, and as such he 
12

owes the insured the same type of unqualified loyalty as if he had been originally 

employed by the insured”)). The attorney signed the final agreed judgment as 

“Attorney for Defendant Frank Kurosky.” The attorney was acting for Kurosky 

and no one else. See Tilley, 496 S.W.2d at 558. Famers Exchange therefore 

cannot be bound to the agreed judgment through the principles of agency.

We also note that the record is completely devoid of evidence that there 

was any sort of trial from which the final judgment resulted. See U. Lawrence 

Boze’ & Associates, P.C. v. Harris Cnty. Appraisal Dist., 368 S.W.3d 17, 33 (Tex. 

App.—Houston [1st Dist.] 2011, no pet.) (“A ‘trial’ is a hearing in which the court 

hears and receives evidence.”). Rust does not make a direct argument that the 

judgment was the result of a trial, but she does attempt to distinguish the policy 

language from that in the cases cited by Farmers Exchange. See Maldonado, 

963 S.W.2d at 39–41; State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696 

(Tex. 1996).

In Maldonado, after State Farm did not accept a settlement offer from the 

plaintiff, Adelfa Maldonado, he and the insured defendant, Curtis Robert, entered 

into an agreement with one another before trial. 963 S.W.2d at 39. Robert’s 

insurance policy required that there be “an agreed settlement or a final judgment 

against an insured obtained after an actual trial.” Id. at 40. But at the bench trial, 

Robert’s insurance-hired attorney presented no evidence, did not cross-examine 

witnesses, and did not present opening or closing argument. Id. The supreme 

court held that the hearing was not an “actual trial” as required by the policy. Id. 
13

Robert therefore had not complied with the condition precedent to recovery, and 

he was prohibited from recovering under the policy. Id. at 41. In Gandy, the 

supreme court held, “In no event . . . is a judgment for plaintiff against defendant, 

rendered without a fully adversarial trial, binding on defendant’s insurer or 

admissible as evidence of damages in an action against defendant’s insurer by 

plaintiff as defendant’s assignee.” 925 S.W.2d at 714. 

Rust does not explain what she believes to be the difference between a 

“trial” as required by the umbrella policy and Maldonado’s “actual trial” or 

Gandy’s “fully adversarial trial.” We do not believe, however, that what difference 

there may be would take the present situation out of the purview of either 

Maldonado or Gandy. See Lawyers Lloyds of Tex. v. Webb, 137 Tex. 107, 110–

11, 152 S.W.2d 1096, 1097–98 (1941) (distinguishing the broad term “trial,” 

which “includes every step taken in the determination of the issues between the 

parties, and therefore includes the hearing on a motion for new trial,” from the 

narrower term “actual trial,” “the hearing in open court, leading up to the rendition 

of judgment”). As the insurer, Farmers Exchange was entitled to challenge the 

reasonableness of any settlement to which it was to be bound. See U.S. Aviation 

Underwriters, Inc. v. Olympia Wings, Inc., 896 F.2d 949, 955 (5th Cir. 1990) (“We 

remain persuaded, however, that the Texas Supreme Court would reach the 

same result we did in Rhodes and hold that the insurer which tenders a full 

defense under a reservation of rights agreement is not bound by an 

unreasonable settlement that is reduced to a consent judgment. In other words, 
14

such an insurer is not in privity with its insured for purpose of such a judgment.”); 

Transp. Ins. Co. v. Heiman, No. 05-95-00482-CV, 1999 WL 239917, at *5–6

(Tex. App.—Dallas Apr. 26, 1999, no pet.) (following Olympia Wings) (“Because 

the insured is generally the one seeking to recover the amount of the underlying 

judgment from the insurer and the insurer is only liable for damages that were 

reasonable, we think it clear that the burden of establishing reasonableness is on 

the party seeking to recover on the judgment.”). Normally, this is can be done by 

participation in settlement negotiations or in an adversarial trial. See Gandy, 

925 S.W.2d at 713 (“In a subsequent action by P against I, P’s damages are 

measured by the value of his claim against D. . . . If P and D settle after an 

adversarial trial, the value of P’s claim can be taken to be the amount of the 

judgment obtained.”). But by entering the agreed final judgment without 

Farmers Exchange’s participation or consent, Rust and Kurosky prevented 

Farmers Exchange from making any challenge to the reasonableness of the 

settlement. See id. (“But if settlement is before such a trial, an evaluation of P’s

claims becomes very difficult.”). There is no evidence that any party put on 

evidence in the trial court regarding the amount of Rust’s damages or the 

reasonableness of the agreed judgment. 

Kurosky’s testimony that he “negotiate[d] [his] own deal” establishes that 

he breached the insurance policy by agreeing that a judgment be taken against 

him without the consent of Farmers Exchange. Further, there is no evidence that 
15

the judgment was agreed to and signed by Farmers Exchange3 or that it recited 

an obligation determined by trial. Rust failed to show that the insured complied 

with the conditions precedent and terms of the policy. See Maldonado, 

963 S.W.2d at 40. 

2. Prejudice to Farmers Exchange 

Kurosky’s failure to comply with all conditions precedent does not relieve 

Farmers Exchange from liability for the underlying judgment unless it was 

prejudiced by the noncompliance. See Harwell v. State Farm Mut. Auto. Ins. Co., 

896 S.W.2d 170, 174 (Tex. 1995). Courts have held that an insurer’s inability to 

participate in the settlement of claims against it prejudices the insurer as a matter 

of law. See Rodriquez v. Tex. Farmers Ins. Co., 903 S.W.2d 499, 509 (Tex. 

App.—Amarillo 1995, writ denied) (holding that insurance was prejudiced as a 

matter of law when insured made agreement without insurance’s participation); 

see also Motiva Enters., LLC v. St. Paul Fire & Marine Ins. Co., 445 F.3d 381, 

386 (5th Cir. 2006) (“An insurer’s right to participate in the settlement process is 

an essential prerequisite to its obligation to pay a settlement. When, as in this 

case, the insurer is not consulted about the settlement, the settlement is not 

tendered to it[,] and the insurer has no opportunity to participate in or consent to 

the ultimate settlement decision, we conclude that the insurer is prejudiced as a 

 3

Rust even notes in her supplemental response to Texas Farmers and 

Farmers Exchange’s motion for summary judgment that Farmers Exchange was 

not a party to the prior suit. 
16

matter of law.” ) (applying Texas law). Kurosky settled the underlying lawsuit 

without giving Farmers Exchange the opportunity to participate or agree to the 

judgment, and Rust now attempts to bind Farmers Exchange to that judgment. 

Under these facts, Farmers Exchange was prejudiced by Kurosky’s breach of the 

policy conditions as a matter of law.

3. Waiver and estoppel

Rust argued that Farmers Exchange either waived or was estopped from 

asserting policy defenses against Kurosky because it failed to reserve its rights. 

When an insurer assumes an insured’s defense without declaring a reservation 

of rights or obtaining a non-waiver agreement, and with knowledge of facts 

indicating noncoverage, all policy defenses, including those of noncoverage, are 

waived, or the insurer may be estopped from raising them. Farmers Texas 

County Mut. Ins. Co. v. Wilkinson, 601 S.W.2d 520, 522 (Tex. Civ. App.—Austin 

1980, writ ref’d n.r.e.). 

As the supreme court explained,

[T]he doctrines of waiver and estoppel are frequently 

referenced together, but they are different. Waiver is the intentional 

relinquishment of a right actually known, or intentional conduct 

inconsistent with claiming that right. The elements of waiver include 

(1) an existing right, benefit, or advantage held by a party; (2) the 

party’s actual knowledge of its existence; and (3) the party’s actual 

intent to relinquish the right, or intentional conduct inconsistent with 

the right. Estoppel, on the other hand, generally prevents one party 

from misleading another to the other’s detriment or to the misleading 

party’s own benefit. 
17

Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008) (citations 

omitted). “Regardless of whether the courts have discussed the issue in terms of 

waiver or estoppel or both, they have generally required a showing that the 

insured was harmed by the insurer’s conduct of assuming the insured’s defense 

without a reservation of rights or non-waiver agreement.” State Farm Lloyds, Inc. 

v. Williams, 791 S.W.2d 542, 552 (Tex. App.—Dallas 1990, writ denied); see also

Rodriquez, 903 S.W.2d at 510 (stating in context of inadequate reservation of 

rights that “[e]stoppel requires a showing that the insured was prejudiced by the 

conduct of the insurer”). 

Farmers Exchange provided the affidavit of Toni Johnson, in which she 

states, 

Attached hereto is a true and correct copy of a reservation of 

rights letter which I prepared on November 19, 2009. The 

reservation of rights letter is from Texas Farmers Insurance 

Company and Farmers Insurance Exchange to Frank Kurosky. On 

November 25, 2009, I placed the reservation of rights letter in an 

envelope addressed to Frank Kurosky at 4325 Fossil Drive, Fort 

Worth, Texas 76117, affixed proper postage to the envelope, and

deposited the envelope in a United States Postal Service mailbox. 

The attached letter states, 

We are referring this matter to the law firm of Carnahan 

Thomas located at 1190 N. Carroll Ave., Southlake, Texas 76092. 

Mr. Jason Thomas will be given instructions to enter an appearance 

on your behalf and file a timely answer with the court. However, we 

are providing you with a qualified defense under a reservation of 

rights while we are investigating this matter to determine if coverage 

will apply. 
18

The letter was addressed to Kurosky at the address in Fort Worth. The address 

matched the address on both Kurosky’s homeowner’s policy and the umbrella 

policy.4

 

Kurosky acknowledged that Texas Farmers and Farmers Exchange 

retained counsel to defend him and that he allowed the attorney to represent him, 

but he testified, “At no time[] did I ever receive a reservation of rights letter from 

Farmers or ever agree to allow Farmers to defend me under a reservation of 

rights.” Rust claims that Kurosky’s statement in his affidavit is sufficient to show 

that Farmers Exchange “failed to carry its burden to show that it properly 

reserved its right to raise policy defenses.” 

However, as the party asserting waiver and estoppel, it was Rust’s burden 

to prove the elements of both defenses. See Enchilada’s Nw., Inc. v. L & S 

Rental Props., 320 S.W.3d 359, 365 (Tex. App.—El Paso 2010, no pet.) (citing 

Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d 834, 838 (Tex. 1968)

(“The party relying upon estoppel has the burden of proof, and the failure to 

prove any element is fatal.”)); In re State Farm Lloyds, Inc., 170 S.W.3d 629, 634 

(Tex. App.—El Paso 2005, no pet.) (“[Waiver] is an affirmative defense and the 

party asserting it bears the burden of proof.”).

 4

A previous homeowner’s policy in the record lists the address as Haltom 

City. That policy was replaced with the Fort Worth-addressed policy in 2007. 

There is no version of the umbrella policy in the record that lists Kurosky’s 

address as Haltom City. 
19

a. Waiver

As stated above, waiver is the intentional relinquishment of a known right. 

Ulico, 262 S.W.3d at 778. If a party’s conduct is consistent with claiming the 

right, it cannot be the basis for a waiver. Sun Exploration & Prod. Co. v. Benton, 

728 S.W.2d 35, 37 (Tex. 1987). When waiver is to be implied, it is the burden of 

the party benefitting from a showing of waiver to produce conclusive evidence 

that the opposite party made an unequivocal manifestation of its intent to no 

longer assert its right. G.H. Bass & Co. v. Dalsan Properties—Abilene, 

885 S.W.2d 572, 577 (Tex. App.—Dallas 1994, no writ); Fed. Deposit Ins. Corp. 

v. Attayi, 745 S.W.2d 939, 947 (Tex. App.—Houston [1st Dist.] 1988, no writ).

Farmers Exchange mailed a reservation of rights letter to Kurosky at the 

address on his policy. Kurosky accepted representation by the attorney provided 

to him. The supreme court has noted that it is customary to assume that 

acceptance of defense is implied consent to reservation of rights. See Excess 

Underwriters at Lloyd’s, London v. Frank's Casing Crew & Rental Tools, Inc., 

246 S.W.3d 42, 74 (Tex. 2008) (quoting W. Cas. & Sur. Co. v. Newell Mfg. Co., 

566 S.W.2d 74, 76 (Tex. Civ. App.—San Antonio 1978, writ ref’d n.r.e.) (“In 

practice in an insurance context, insureds often communicate acceptance of an 

offer by conduct, as in the case of an insured accepting a defense from an 

insurer that reserves its right to deny coverage. In such cases, the insured’s 

acceptance of the defense is an implied consent to the insurer’s reservation of 

the coverage issues, ‘even in the absence of an express consent or acceptance 
20

of the offer.’”). Thus, Farmers Exchange had no reason to believe from 

Kurosky’s acceptance of its defense that its offer had not been communicated. It 

then filed the declaratory action regarding coverage. None of these actions 

demonstrate an unequivocal intent to surrender its rights under the insurance 

policy, regardless of whether Kurosky ever received the letter. 

b. Estoppel

An essential element of estoppel is that the insured was prejudiced by the 

conduct of the insurer. Ulico, 262 S.W.3d at 778 (citing Johnson & Higgins of 

Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515–16 (Tex. 1998) (stating 

that equitable estoppel requires detrimental reliance on concealments or false 

representations); Am. Eagle Ins. Co. v. Nettleton, 932 S.W.2d 169, 174–75 (Tex. 

App.—El Paso 1996, writ denied) (citing Tilley, 496 S.W.2d at 560). That is, the 

insured must have changed his position for the worse by the fault of the insured. 

Britt v. Cambridge Mut. Fire Ins. Co., 717 S.W.2d 476, 481 (Tex. App.—San 

Antonio 1986, writ ref’d n.r.e.) (citing Wirtz v. Sovereign Camp W.O.W., 114 Tex. 

471, 477 268 S.W. 438, 441 (1925)). In the trial court and her brief on appeal, 

Rust made no argument that she or Kurosky had been prejudiced by Farmers 

Exchange’s actions.5

 Rust did not show that Kurosky did anything upon the 

mistaken belief that he was being unconditionally defended that he would not 

 5

When asked at oral argument, Rust stated that the prejudice was that 

Kurosky had no notice that Farmers Exchange would file the declaratory action 

seeking to establish lack of coverage.
21

have otherwise done. There is no evidence that Kurosky would have denied the 

proffered representation or that he was harmed by accepting it. Neither is there 

evidence that Kurosky would have defended himself differently. In fact, the 

evidence is that he negotiated his own settlement without any influence from 

Farmers Exchange. There is also no evidence of any injury resulting from any 

lack of notice of the reservation of rights. Thus, Farmers Exchange is not 

estopped from asserting its defenses. 

Considering the evidence in the light most favorable to the nonmovant, we 

hold that Rust did not conclusively establish all essential elements of her claim 

that Farmers Exchange must indemnify her for the amount of the agreed final 

judgment in the 153rd action. See Tex. R. Civ. P. 166a(a), (c); Mann Frankfort, 

289 S.W.3d at 848. Summary judgment was therefore improper on her claim. 

We sustain Texas Farmers and Farmers Exchange’s ninth issue. 

II. Texas Farmers and Farmers Exchange’s motions for summary judgment

In their tenth issue, Texas Farmers and Farmers Exchange challenge the 

denial of their motions for summary judgment. Texas Farmers and Farmers 

Exchange requested summary judgment on the following grounds:

1. They had no duty to defend Kurosky in the underlying lawsuit.

2. They had no duty to indemnify Kurosky as to the agreed final 

judgment.

3. Rust’s counterclaims against Texas Farmers were barred by res 

judicata.
22

4. Rust’s counterclaims against Farmers Exchange were without 

basis. 

Rust nonsuited all of her claims against Texas Farmers, the remaining claims 

against Farmers Exchange on which she did not seek summary judgment, and 

her requests for attorney’s fees. The determination of whether Texas Farmers 

and Farmers Exchange had a duty to defend Kurosky is now moot because there 

is a final judgment in that case and no party seeks attorney’s fees. See MidContinent Cas. Co. v. Safe Tire Disposal Corp., 2 S.W.3d 393, 395 (Tex. App.—

San Antonio 1999, no pet.) (dismissing as moot that part of appeal regarding 

duty to defend when the case had already settled); State Farm Mut. Auto. Ins. 

Co. v. Carmichael, No. 05-96-00990-CV, 1998 WL 122409, at *2 (Tex. App.—

Dallas Mar. 20, 1998, no pet.) (not designated for publication) (“Once the 

judgment in the underlying suit became final, State Farm’s duty to defend 

terminated and whether there was a duty to defend in the first instance became a 

moot issue.”). Thus, the only part of Texas Farmers and Farmers Exchange’s 

motions that we address is the ground that they had no duty to indemnify 

Kurosky as to the agreed final judgment.6

 6

Rust argues that we need not address Texas Farmers’s duty to indemnify 

because she dismissed her claims against it. However, at the time of the 

competing motions for summary judgment, Texas Farmers had a pending claim 

seeking a declaration that it had no duty to indemnify. Texas Farmers moved for 

summary judgment on its claim. In denying Texas Farmers and Farmers 

Exchange’s motions for summary judgment in full, the trial court ruled on that 

claim. See Fed. Deposit Ins. Corp. v. Lenk, 361 S.W.3d 602, 611 (Tex. 2012)

(stating that we may review the denial of a summary judgment motion when the 

trial court grants one competing motion and denies the other).
23

Just as it did in its response to Rust’s motion for summary judgment, 

Farmers Exchange argues that it does not have to indemnify Kurosky for the 

agreed final judgment because he breached the policy conditions. As explained 

above, Kurosky did violate the policy provisions, Farmers Exchange was 

prejudiced by the violations, and it did not waive and was not estopped from 

asserting the violations in its defense. Farmers Exchange therefore conclusively 

proved all essential elements of its claim that it does not have a duty to indemnify 

Kurosky. See Tex. R. Civ. P. 166a(a), (c). And because it has no duty to 

indemnify Kurosky, Rust, who stepped into Kurosky’s shoes, cannot recover 

against Farmers Exchange. See Maldonado, 963 S.W.2d at 40. Farmers 

Exchange was entitled to summary judgment on its claim.

Turning to Texas Farmers, we note that it was not the insurance company 

that issued the umbrella policy. Texas Farmers only issued the two 

homeowner’s policies. In the appeal of the 153rd action, the Amarillo Court of 

Appeals held that Rust could not recover under the policy covering the 4333 

Fossil Drive property. Rust, 341 S.W.3d at 551 (“Farmers showed that Rust 

could not recover under the bodily injury provisions of the 33–Fossil policy 

because she was an insured, and could not recover under the medical-payments 

provisions of the 33–Fossil policy as she was both a named insured and a 

resident of the property.”). 

As to the policy covering 4325 Fossil Drive, it contained the following 

provisions:
24

3. Duties after loss.

In case of an occurrence or claim for personal injury, an 

insured will perform the following duties:

. . . . 

c. cooperate with and assist us in any matter relating to a 

claim or suit;

. . . . 

5. Suit against us.

No action can be brought against us unless there has been full 

compliance with the terms and conditions of this policy. . . . We may 

not be sued under Coverage C (Personal Liability) until the 

obligation of the insured has been determined by final judgment 

after actual trial or by agreement signed by us. 

The same requirements that Kurosky cooperate and determine his obligation by 

either trial or an agreement signed by the insurer that we discussed in the 

umbrella policy are present in the 4325 Fossil Drive policy. For the same 

reasons Kurosky was barred from seeking indemnity from Farmers Exchange 

under the umbrella policy, he is likewise prohibited from seeking indemnity from 

Texas Farmers under the 4325 Fossil Drive policy. Texas Farmers was therefore 

entitled to summary judgment on its claim.

Considering the evidence in the light most favorable to the nonmovant, we 

hold that Texas Farmers and Farmers Exchange conclusively established all 

essential elements of their claim that they did not have a duty to indemnify 

Kurosky for the amount of the agreed final judgment in the 153rd action. 

See Tex. R. Civ. P. 166a(a), (c); Mann Frankfort, 289 S.W.3d at 848. They were 
25

therefore entitled to summary judgment on their claims, and we sustain their 

tenth issue. Because our disposition of the ninth and tenth issues is dispositive 

of the appeal, we do not need to reach their remaining issues. See Tex. R. App. 

P. 47.1.

Conclusion

Having sustained Texas Farmers and Farmers Exchange’s ninth and tenth 

issues, we reverse the trial court’s judgment and render judgment that Texas 

Farmers and Farmers Exchange have no duty to indemnify Kurosky for the 

agreed final judgment in the 153rd action and that Rust take nothing.

/s/ Lee Gabriel

LEE GABRIEL

JUSTICE

PANEL: DAUPHINOT, MEIER, and GABRIEL, JJ.

MEIER, J., dissents without opinion.

DELIVERED: July 2, 2015