TRIAL COURT EXCEEDS JURISDICTION IN DETERMINING COVERAGE ISSUE IN TURNOVER ORDER & CORPUS CHRISTI COURT OF APPEALS CONDITIONALLY GRANTS MANDAMUS
In In re Farmers Insurance Exchange, 2014 WL 6804986 (Tex. App.- Corpus Christi, December 4, 2014), an underlying lawsuit alleged defamation, fraud, intentional infliction of emotional distress and interference with the possessory right of a child. Farmers disputed coverage but defended its insured, one of the two co-defendants in the underlying lawsuit, and filed a separate declaratory judgment action in the same court regarding the coverage questions. After a bench trial of the underlying lawsuit, the trial court rendered final judgment in the amount of $10,736,000 and held both defendants were jointly and severally liable. And in the same underlying lawsuit, the trial court then granted plaintiff's application for post-judgment relief, and signed a turnover order finding: 1) the losses claimed were covered by the Farmers policy, 2) Farmers was presented with the opportunity to settle for an amount within their policy limits but failed to do so and, as a result, 3) Farmers was liable for the full amount of the judgment. Farmers filed a petition for writ of mandamus.
The Corpus Christi Court of Appeals examined Texas law applicable to turnover orders (a procedural device allowing judgment creditors (i.e. successful plaintiffs) to reach assets of a judgment debtor (i.e. insured defendants) which, in this case, was the insured's insurance claims against Farmers for indemnity under his liability policy). The court found the order went too far in adjudicating the merits of the coverage suit. In doing so, the court concluded order was manifestly improper and exceeded the trial court's jurisdiction. Mandamus was conditionally granted directing the trial court to vacate its order regarding coverage. But, the opinion also noted the trial court still retained jurisdiction to address the issues raised in the separate coverage lawsuit.