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Mess in Texas: Insurer Recoupment of Settlement Payments
The Texas Supreme Court unanimously has held that an insurer may recover from its own insured monies advanced by the insurer to settle an uncovered liability claim ' though the justices sharply divided on the rationale. The case, Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc., No. 02-0730 (Tex. May 27, 2005), picks up the cudgels on this issue from the California Supreme Court's opinion in Blue Ridge Ins. Co. v. Jacobsen, 22 P.3d 313 (Cal. 2001) and seemingly abandons the prior decision in Texas Ass'n of Counties County Gov't Risk Mgmt. Pool v. Matagorda County, 52 S.W.3d 128 (Tex. 2000), which had cast substantial doubt on the viability of an insurer-recoupment claim, at the time seeming to bring Texas in line with Massachusetts on this issue. See Med. Malpractice Joint Underwriting Ass'n of Massachusetts v. Goldberg, 680 N.E.2d 1121 (Mass. 1997). Frank's Casing also parts company with the recent holding of the Illinois Supreme Court in General Agents Insurance Company Of America, Inc. v. Midwest Sporting Goods Company, 828 N.E.2d 1092 (Ill. March 24, 2005), which had rejected a carrier's claim for recoupment of defense costs, though on a basis that would bar recoupment of settlement or indemnity payments, too.
In Frank's Casing, the insured was involved in a serious case, resulting in a $7.5 million settlement. The insurers had previously offered to pay roughly two-thirds of this amount without a right of recoupment against the insured; the insured rejected this proposal, and the insurers paid the full sum and sought recovery from the insured of the entire amount.
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The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
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