TEXAS APPEALS COURT AFFIRMS JURY VERDICT AGAINST BROKER FOR FAILURE TO PROCURE INSURANCE FOR A LAKE TEXOMA RESORT
Last Wednesday, in Insurance Alliance v. Lake Texoma Highport, LLC, No. 05–12–01313–CV, 2014 WL 6466851, the Dallas appeals court affirmed the Grayson County trial court judgment against Insurance Alliance and the take-nothing judgment against Bowood Partners, Ltd.
Highport owns and operates a large marina located on Lake Texoma. The property includes boat docks, a service center, a fuel station, an administration building, and multiple restaurants and bars. In 2005, Highport hired Insurance Alliance to perform a risk assessment on Highport's property. After doing so, Insurance Alliance recommended that Highport get blanket insurance coverage, where one limit covers all losses, with no coinsurance penalties or sublimits and with replacement-cost coverage. Highport hired Insurance Alliance to obtain the recommended coverage for 2005 and again for 2006. In 2007, Insurance Alliance acted as Highport's broker again, and Highport sought $15 million blanket coverage. Several entities were involved in procuring the insurance policy. The insurance carrier was Lloyd's of London. Insurance Alliance used CRC Insurance Services Inc. as a middle broker. CRC's sister company, Southern Cross, hired Bowood, a London broker, to deal directly with Lloyd's.
In June 2007, during Highport's busy season, a flood damaged the marina, leaving some of its buildings completely submerged. After the flood, Highport learned it did not have the $15 million blanket coverage it thought it had. Instead, the marina was covered by a $15 million policy that had sublimits and coinsurance penalties. Highport sued its insurance broker, Insurance Alliance, and a London broker, Bowood Partners, Limited, asserting that the policy in place at the time of the flood was not the policy Highport had requested.
Highport's asserted various causes of action against Insurance Alliance and Bowood, including breach of contract, fraud, conspiracy, violations of the DTPA, and negligence. Highport's claims against these two defendants, and Insurance Alliance cross claims against Bowood, went to trial before a jury in April 2012. After a three-week trial, the jury found that Insurance Alliance agreed to procure for Highport an insurance policy with $15 million in blanket coverage, with no sublimits and no coinsurance and with replacement-cost coverage, and that Insurance Alliance failed to comply with that agreement. The jury also found that Insurance Alliance and CRC, but not Bowood, made negligent misrepresentations and engaged in an unfair or deceptive act or practice that was a producing cause of damages to Highport.
The jury found that the amount of coverage that would have been available under the policy to repair and/or replace property damaged in the flood, less the amount of coverage that was provided by the actual policy, was $8.3 million. The jury also determined that an additional $438,598 should have been available to reimburse Highport's business interruption damages under the policy. And, that Highport's reasonable attorney's fees for representation in its claims against Insurance Alliance in the trial court were $2,754,446, with additional amounts for representation on appeal.
After the verdict, Highport filed a Motion to Sign Judgment. At a hearing on the motion, the trial court indicated that if Highport elected to recover from Insurance Alliance on the contract, it was not entitled to recover against Bowood. Highport objected to being forced to elect. The trial court then stated that it would order judgment on Highport's breach of contract claim against Insurance Alliance because that claim afforded Highport the highest recovery. The court subsequently rendered judgment for Highport on its breach of contract claim against Insurance Alliance. The court ordered that Highport recover from Insurance Alliance $8,738,598, plus court costs, pre- and post-judgment interest, and attorney's fees. The court rendered a take-nothing judgment on Highport's claims against Bowood and on Insurance Alliance's claims against Bowood.
Insurance Alliance appealed the damage awards on sufficiency of the evidence grounds. And the Court found that there was more than a scintilla of evidence to support the jury's answers regarding property and business interruption damages.
In a second issue, Insurance Alliance argued the attorney's fee award must fail because Highport did not segregate its fees between Insurance Alliance and Bowood, and that contrary to the evidence, the jury assessed all the requested fees against Insurance Alliance. In response, Highport presented evidence that it segregated those fees related to claims for which attorney's fees are not recoverable. The Court found that Highport's claims against Insurance Alliance and Bowood arose out of the same transaction, and Highport had a single injury and that the jury could have determined that any fees Highport spent to get a final version of the policy from Bowood would have been incurred anyway to bring its claims against Insurance Alliance. The Court denied the second issue.
In its third issue, Insurance Alliance asserted that the evidence is legally and factually insufficient to support the jury's finding on the cross claim that Bowood was not liable to Insurance Alliance under the insurance code. The Court rejected this issue as well.
As cross-appellant, Highport contended it was entitled to its judgment against Insurance Alliance for breach of contract and to a judgment against Bowood for 10% of its damages on a negligence theory. Based on the jury's findings that Bowood was negligent and bore 10% of the responsibility for Highport's injury. At a hearing on the issue, the court asked Highport to elect and it did not, arguing it was entitled to recover from both Insurance Alliance and Bowood. After Highport refused, the trial court rendered the judgment that gave Highport its greatest recovery. It rendered judgment against Insurance Alliance on Highport's breach of contract claim and ordered that Highport recover $8,738,598, plus court costs, pre- and post-judgment interest, and attorney's fees from Insurance Alliance. The court rendered a take-nothing judgment on Highport's claims against Bowood. Relying on Birchfield v. Texarkana Mem'l Hosp., 747 S.W.2d 361, 367 (Tex.1987) the appellate court found where the prevailing party fails to make an election, the trial court should use the findings affording the greatest recovery and render judgment accordingly.