Opinion ID: 1383123
Heading Depth: 2
Heading Rank: 4

Heading: Excess Carrier as a Volunteer

Text: KMC contends that National is not entitled to equitable subrogation because National voluntarily settled the case against Granada. KMC submits that had National thoroughly investigated the underlying claim it would have discovered that its excess policy did not provide coverage for the Wolf Point claim. If National was indeed under no obligation to indemnify its insured, KMC reasons, subrogation would not be available. We disagree. An insurer who pays a thirdparty claim against its insured is not a volunteer if the payment is made in good faith and under a reasonable belief that the payment is necessary to its protection. See Arkwright-Boston Mfrs. Mut. Ins. Co. v. Aries Marine Corp., 932 F.2d 442, 447 (5 th Cir.1991). In the context of equitable subrogation, Texas courts have been liberal in their determinations that payments were made involuntarily. Argonaut Ins. Co. v. Allstate Ins. Co., 869 S.W.2d 537, 542 (Tex.App.Corpus Christi 1993, writ denied). An excess insurer's payment to settle a suit against the insured has been said to be presumptively involuntary for subrogation purposes. See id. at 543. KMC's position is contrary to our liberal application of the reasonable belief rule. Adopting it would significantly increase potential conflicts of interest between insureds and their insurers. If an insurance company's right to subrogation could be challenged by the wrongdoer on the grounds that the policy did not actually provide coverage, it would necessarily be in the company's interest to litigate all questionable claims with its insured. The effect of ignoring the reasonable belief rule, therefore, is to discourage insurance companies from paying or settling disputed claims and thereby force insureds more often into litigation with their insurers. 1 WINDT, supra § 10.10 at 150-51. KMC's conception of the volunteer doctrine is bad public policy, and we decline to adopt it.