Opinion ID: 1774526
Heading Depth: 4
Heading Rank: 2

Heading: contingency coverage

Text: Kenneco's claim for breach of the alleged agreement to secure contingency coverage is not barred by collateral estoppel. The issue sought to be litigated in this action, as framed by the submitted jury question, is: Did Johnson & Higgins and Kenneco (Armada) agree on November 30, 1982, that Johnson & Higgins would secure for Kenneco's (Armada's) benefit `contingency coverage'? The jury found that such an agreement was made and awarded Kenneco $412,273.66. Kenneco's cause of action for breach of an agreement to secure contingency coverage is not collaterally estopped because, in contrast to their consideration of whether J & H agreed to secure lost profits coverage, the federal courts never addressed whether an agreement was made to secure contingency coverage. It is undisputed that Brown went to J & H to obtain back up insurance in the event the Brazilian underwriters failed to pay on a claim. It is also undisputed that Anderson told Brown such coverage could be triggered by the policy's already existing contingency coverage. The federal district court found that the contingency coverage did not apply because: (1) the sale was not back-to-back C.I.F., and (2) the London underwriters did not waive the coverage requirements. Armada Supply, 665 F.Supp. at 1051, 1067. Thus, the district court's finding that the policy's contingency coverage did not apply to the sale does not preclude a finding by the jury in the state action that Anderson agreed to secure contingency coverage. Collateral estoppel is not proper because the issue decided in the federal action is not identical to the issue Kenneco litigated as a basis for the contingency coverage breach of contract claim in the state court. See Getty Oil, 845 S.W.2d at 802. Similarly, the ultimate issues in Kenneco's state action were neither expressly nor necessarily adjudicated in the federal action nor were the federal court findings inconsistent with the state court findings. See Tarter v. Metropolitan Sav. & Loan Ass'n, 744 S.W.2d 926, 928 (Tex.1988). The federal courts never decided whether J & H agreed to secure contingency coverage. Kenneco's assertions in the federal courts regarding contingency coverage were mainly that events after the November 30 meeting ( e.g., the underwriters' receiving and retaining premiums for contingency coverage) resulted in a waiver of the back-to-back C.I.F. requirement. Armada Supply, 665 F.Supp. at 1061-63, 1067-68, 1061 ([Kenneco] claims that during the course of later events the London underwriters waived the requirement of the cover note.). In contrast, the jury question in the state action focused only on whether J & H agreed on November 30 to secure coverage. The issue of whether J & H mistakenly billed Kenneco for premiums after the London underwriters disputed coverage is not identical to whether Anderson agreed on November 30 to secure contingency coverage. Further, the federal district court's statements regarding the state of knowledge of both parties as to the nature of the sale from Kenneco to Sun ( i.e., that it was not back-toback C.I.F.) should not support collateral estoppel. These statements were not affirmed on appeal and were not essential to the district court's holdings that the sale was not covered and that the back-to-back C.I.F. requirement was not waived. Not every fact finding in the district court's opinion may be afforded preclusive effect. To allow such broad preclusion would eviscerate the requirement that the finding be essential to the judgment in the prior suit. Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, at 818-19 (Tex.1984); Eagle Properties, 807 S.W.2d at 721-22. In federal court, Kenneco argued that the C.I.F. back-to-back requirement was not a material term of the cover note and that the underwriters waived the requirement because they retained the contingency premium. The district court made three inquiries that were essential to its holding of no contingency coverage: (1) whether the back-toback C.I.F. requirement of the cover note was a material term; (2) if so, whether it was satisfied; and (3) if not satisfied, whether the London underwriters waived that requirement by accepting and retaining the premium. The district court concluded that it was a material term, it was not satisfied, and that it was not waived. Although the district court stated that Anderson understood Brown to say that the sale was back-to-back C.I.F. and that Kenneco did not affirmatively state until December 1992 that the sale to Sun was delivered, what Brown said and what Anderson knew or understood regarding the sale to Sun were not essential to the district court's holding. Armada Supply, 665 F.Supp. at 1061-62. Regarding Kenneco's claim that the underwriters waived the requirement of the cover note because they received and retained the `contingency' premium, the district court made two alternative holdings. Id. at 1067. First, it concluded that waiver could not rewrite the requirements of the policy. Id. Then, it stated, In any event, the evidence does not support the conclusion that the London underwriters waived their objections to coverage through retention of a premium. Id. The district court's statement that it appears that Johnson & Higgins did not clearly understand the situation and mistakenly billed Armada for a premium for contingency coverage, id. at 1062, was not essential in its evaluation of whether the conduct of the underwriters resulted in waiver. The district court focused on the fact that the London underwriters reserved decision on the contingency coverage, did not waive their position after J & H billed Kenneco for premiums, and plainly denied coverage when the facts were fully known. Id. at 1067-68. Thus, J & H's billing actions did not affect the London underwriters' position. If J & H's act of billing Kenneco was irrelevant to the determination of no waiver, surely J & H's state of mind in so doing was also irrelevant. Simply put, the facts relevant to the contingency claims in this case were not identical to the facts decided in the federal case and were not essential to the federal court's holding. Therefore, the contingency coverage breach of contract claim is not collaterally estopped.