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American Guarantee and Liability Insurance Company v. Ace American Insurance Co.

United States District Court, S.D. Texas, Houston Division

September 11, 2019




         The Court submits the following Findings of Fact and Conclusions of Law pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure.

         I. BACKGROUND

         This case concerns a primary insurer's duty to accept settlement offers within its insurance layer. Specifically, this case is brought by a secondary insurer who contends that the primary insurer should have accepted a settlement offer within the limits of the primary insurer's coverage.

         Plaintiff American Guarantee and Liability Insurance company ("AGLIC," also referred to as "Zurich") filed suit against Defendant ACE American Insurance Company ("ACE," also referred to as "Chubb") on February 9, 2018, seeking relief under Texas state law. (Doc. No. 1).

         1. This Court ruled on dispositive motions on May 23, 2019. The Court denied ACE's Partial Motion for Summary Judgment (Doc. No. 24) and granted AGLIC's Partial Motions for Summary Judgment (Doc. Nos. 22, 46). The Court decided that all three settlement offers at issue in this case were unconditional, within ACE's policy limits, and included offers for full release. The Court also found that AGLIC did not have an obligation to mitigate damages. After the Court ruled on the dispositive motions, the parties settled AGLIC's breach of contract claims.

         2. On June 17, 2019, this Court commenced a bench trial on AGLIC's state insurance law claims under Stowers Furniture Co. v. American Indent. Co., 15 S.W.2d 544 (Tex. Comm'n App. 1929). Over the course of the five-day trial, the Court received exhibits and heard sworn testimony. Having considered the exhibits, testimony, and oral arguments presented during the trial, post-trial filings, and having considered the applicable law, the Court sets forth the following Findings of Fact and Conclusions of Law.


         The Insurance Plans

         3. AGLIC and ACE both insured The Brickman Group Ltd., LLC ("Brickman"), a landscaping company. Brickman's insurance included a $500, 000 deductible/self-insured retention ("SIR"), a $2, 000, 000 primary business auto policy issued by ACE, a $10, 000, 000 excess policy issued by AGLIC to immediately follow the ACE policy, and a $40, 000, 000 excess policy issued by Great American Insurance Company ("Great American") to follow the AGLIC policy. (Tr. 987, 992; Skogstrom Depo).

         The Underlying Lawsuit

         4. On Friday, May 16, 2014, Mark Braswell ("Braswell") hit the back of a Brickman landscaping truck while riding his bicycle and sustained fatal head injuries. The accident took place on a sunny afternoon in the 18400 block of North Bridgeland Lake Parkway in Cypress, Texas. (Pl Exh. 32).

         5. Braswell's immediate survivors include his mother Sandra Braswell, his wife of twenty years Michelle Braswell, his 13-year-old son Matthew Braswell, and his 9-year-old daughter Mary Braswell. (Pl Exh. 49).

         6. Braswell's survivors filed suit against Brickman and the driver of the Brickman truck, Guillermo Bermea, in Cause No. 2015-38679, Michelle Lynn Braswell, et. Al. v. The Brickman Group, Ltd., LLC in the 127th Judicial District Court of Harris County, Texas (the "Underlying Lawsuit"). (Pl Exh. 36).

         7. Richard Mithoff represented the plaintiffs in the Underlying Lawsuit. (Tr. 429; Mithoff Live). Andrew Leibowitz and Bo Berry of the Berry Firm in Dallas represented Brickman and Bermea in the investigation and lawsuit. (Tr. 200; Leibowitz Depo).

         Insurance Company Personnel

         8. In January 2016, Gabriel Adamo ("Adamo") took over responsibility for the file on behalf of ACE. (Tr. 98; Adamo Depo). Adamo's immediate supervisor was Robert Albin ("Albin"), an ACE Assistant Vice-President. Albin was supervised by Russell Smith ("Smith"), an ACE Vice-President. (Tr. 49; Adamo Depo).

         9. AGLIC received notice of the accident and Underlying Lawsuit in January 2016. Terese Kerrigan ("Kerrigan") assumed responsibility for the file on behalf of AGLIC. (Tr. 402, 411; Kerrigan Live).

         10. When Kerrigan and Adamo became involved, Brickman's third-party administrator, ESIS, had primary responsibility for adjustment of the claim. The ESIS representative working on the claim was Cheryl Nowak ("Nowak"). (Tr. 180; Nowak Depo). Denise Skogstrom ("Skogstrom") was Brickman's Claim Manager.

         Internal Assessments of Liability and Damages

         11. Nowak requested that defense counsel prepare a pre-trial report to help the carriers with their evaluation and prepare for mediation. (Tr. 189-192; Nowak Depo). She asked that this include a verdict search of related cases in the venue to help determine the anticipated verdict range. (Tr. 190-191; NowakDepo).

         12. In July 2016, Brickman tendered its remaining SIR to ACE through its third-party administrator, ESIS. At that point, ACE took over handling Brickman and Bermea's defense and settlement negotiations. (Tr. 277-278; Kerrigan Live).

         13. In defense counsel's view, they had a very strong liability case. (Tr. 922; Berry Depo). The defense theory was that Braswell was responsible for the accident because he was not paying attention when he was cycling. (Tr. 154-155; Adamo Depo). In support of this theory, the defense had evidence that Braswell's injury was to the top of his head, not to his face. His helmet had also cracked down the middle. This indicates that his head was down and, therefore, he was not looking ahead of him for obstacles. (Tr. 301; Kerrigan Live). The mark that Braswell's helmet made on the Brickman truck also supported this theory. (Tr. 722; Kerrigan Live). The physical evidence was very compelling for the defense. (Tr. 862; Leibowitz Depo).

         14. The known weaknesses in the defense case included the fact that the Brickman driver, Bermea, would testify that, although it was legal, he thought it was dangerous to park in an active lane of travel on that road. (Tr. 145-146; Adamo Depo). The defense did not put on any evidence to explain why Brickman allowed trucks to stop on the road. (Tr. 454; Mithoff Live).

         15. Bermea was also inconsistent in his recollection of how long he had stopped on the road; he initially said that the truck was parked for four to five minutes, but in his deposition said one to two minutes. The plaintiffs at trial argued that the truck was stopped for less than twenty seconds. (Tr. 295; Kerrigan Live). This dispute strengthened the plaintiffs' "stop short theory" that Bermea suddenly stopped to pull over to do some work and Braswell hit the truck because he didn't have enough time to react. (Tr. 296; Kerrigan Live).

         16. Relatedly, there were no cones out around the Brickman truck at the time of the accident, and there was dispute about whether flashers were on. (Tr. 432; Mithoff Live; Tr. 940; Berry Depo (stating that he had hard evidence that the flashers were on)). Again, this supported the stop short theory because the plaintiffs could argue that, had the truck been stopped for a few minutes, the driver would have had time to put cones out before the accident occurred. (Tr. 432-433; Mithoff Live).

         17. Another known substantial weakness was the fact that Braswell and his family were very sympathetic. (Tr. 186; Nowak Depo (testifying that sympathetic damages were a known factor that led to potential exposure from the early stages of ESIS's claim investigation); (Tr. 202-203; Leibowitz Depo). At trial, the plaintiffs presented testimony from two former fire chiefs about Braswell's commitment to service, his love of family, and his bravery. (Tr. 438; Mithoff Live). The plaintiffs also presented testimony about the day of the accident and the trauma to the family. (Tr. 441; Mithoff Live; PI. Exh. 229). Braswell and his wife were firefighters and triathletes. Braswell was a Captain with the City of Houston Fire Department and Assistant Chief with the Cy-Fair Volunteer Fire Department. (Pl Exh. 49). He had been recognized as a hero for rescuing a double amputee from a burning building. (Tr. 438; Mithoff Live).

         18. Braswell's wife and children sought counseling after Braswell's death. (Pl Exh. 109). His daughter Mary started cutting herself in October 2015, attempted to overdose, and spent a week in a mental health hospital in 2016. Mary blamed herself for her father's death because he was en route to pick her up from school when the accident occurred. After the accident, she left letters for her deceased father at a tree near the accident site. (Tr. 441; MithoffLive).

         19. The trial judge and plaintiffs' counsel were also known weaknesses. Leibowitz testified that the trial judge "tended to favor the plaintiff side and more than likely close rulings would go against us." (Tr. 204; Leibowitz Depo). He testified that Mithoff "would represent his clients very well and do an excellent job, and be one of the better trial attorneys in Harris County." (Tr. 206; Leibowitz Depo).

         20. Leibowitz prepared a Case Summary and Evaluation on August 10, 2016 (the "August Memo"). In the August Memo, Leibowitz estimated the range of potential verdict to be between $6, 000, 000 and $8, 000, 000. He said that the plaintiffs' expert put economic damages between $2.85 million and $3, 365 million, which was "certainly reasonable." He stated:

Based upon all the foregoing, we believe this is a defensible case on behalf of Brickman. We believe that it is likely that the jury will find that Defendants were not negligent. However, even if a jury were to find that Defendants were negligent, we believe that a jury would find a significant amount of contributory negligence on the part of Mr. Braswell with a very good chance of Plaintiffs negligence exceeding 50%. As you know, if a jury were to determine that Plaintiffs contributory negligence exceeded 50% he would be barred from any recovery. At this time, we believe that if we tried this case 10 times that we would get a finding of no negligence on behalf of Defendants or a verdict where Plaintiffs negligence exceeds 50%, 7 out of 10 times. If Plaintiff s negligence does not exceed 50%, we believe that in most cases a jury would find Plaintiffs negligence to be in the range of 30-50%.

         Leibowitz concluded that the case had a settlement value in the range of $l, 250, ...

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