Source: http://ace-insurance-litigation.com/ace-ina-litigation/case/liberty-mutual-fire-insurance-company-v-ace-american-insurance-company-et-al
Timestamp: 2019-04-23 04:37:36+00:00

Document:
]A. The Coverage Of The ACE Policy Is Primary.
11. The Underlying Defendants had custody of and were using the vehicle involved in the accident with the express consent and permission of ACE's insured, Methodist Hospital. The Underlying Defendants therefore qualify as insureds under both the Liberty Mutual and ACE policies.
12. The Liberty Mutual and ACE commercial auto policies contain identical "other insurance" clauses, which provide in pertinent part: For any covered "auto" you own, this Coverage Form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance.
When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis. Thus, each policy provides primary coverage for vehicles owned by the insured and excess coverage for non-owned vehicles when other collectible insurance is available. The "pro-rata" clause applies only if both policies provide either primary or excess coverage. See American Nat'l County Mut. Ins. Co. v. Travelers Indem. Co., 2010 WL 2541975, slip op. at * (S.D. Tex. June 22, 2010) ("When two car-insurance policies cover the same accident, Texas courts find no conflict between one policy's excess clause and another's pro-rata clause. Texas courts do not equitably prorate defense costs. Instead, they respect the contracts and enforce the excess clause."). Because ACE's insured, Healthtrust/Methodist Hospital, owned the shuttle bus the Underlying Defendants were using to conduct the Hospital's shuttle bus operations, ACE's coverage is primary and Liberty Mutual's coverage is excess for the Underlying Defendants. As the primary carrier, ACE had a duty to defend the entire suit if any of the claims in the Underlying Suit fell within ACE's coverage. See Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 495-96 (Tex. 2008) ("The duty to defend is not negated by the inclusion of claims that are not covered; rather, it is triggered by the inclusion of claims that might be covered."); Harken Exploration Co. v. Sphere Drake Ins., 261 F.3d 466, 474 (5th Cir. 2001); Lafarge Corp. v. Hartford Cas. Ins. Co., 61 F.3d 389, 395 (5th Cir. 1995). Because its coverage is excess, Liberty Mutual has no duty to defend or indemnify the Underlying Defendants until the limits of the ACE policy are exhausted.
B. Because ACE Has A Duty To Defend The Underlying Defendants, Liberty Mutual Is Entitled To Recover Its Defense Costs.
13. As the excess carrier for the Underlying Defendants, Liberty Mutual has a right of contractual and equitable subrogation against the primary carrier that should have assumed defense of the Underlying Defendants. See, e.g., American Centennial Ins. Co. v. Canal Ins. Co., Defendants, Liberty Mutual is also entitled to recover its attorney's fees under Texas Civil Practice and Remedies Code section 38.001(8) as subrogee of the Underlying Defendants.
14. A claim for defense costs is a "first-party" claim for purposes of the prompt payment statute. Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 20 (Tex. 2007) ("the prompt-payment statute, formerly article 21.55, and now codified as sections 542.051-.061 of the Texas Insurance Code, may be applied when an insurer wrongfully refuses to promptly pay a defense benefit owed to the insured"). A prompt payment claim combines an insurer's contractual and statutory liability into one cause of action. Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614, 621 (Tex. App.-Fort Worth 2005, no pet.). Because ACE breached its contract by refusing to accept the tender of the Underlying Defendants' defense, ACE is liable to Liberty Mutual for the 18% penalty on the defense costs Liberty Mutual has incurred in protecting the interests of the Underlying Defendants in the Underlying Suit.
5. Such other and further relief to which Liberty Mutual may be entitled whether at law or in equity."

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