Policy Coverage Must be Established in a Stowers Cause of Action
A recent Texas Supreme Court case established that the judgment creditor must prove coverage prior to any consideration of whether a judgment arose out of a trial.
In Seger v. Yorkshire Insurance Co., Randall Seger died while working on a hydrolic lift on a drilling rig which malfunctioned and collapsed. Mr. Seger was working for Employer’s Contractor Services. Inc. (ECS). Randy provided services to Diatom Drilling Company through his employment with ECS. Mr. Seger’s parents sued Diatom as it owned the drilling rig. The company requested that a commercial general liability insurer handle the litigation. Yorkshire Insurance was among many of the offshore insurer’s. Diatoms policy insured ECS and Diatom, but excluded “Leased In Employees”. The policy excluded employees, but not independent contractors. At the trial court level, the jury returned a favorable verdict in the parent’s favor. The court of appeals reversed the trial courts judgment and rendered a take nothing judgment. The Texas Supreme Court affirmed the appellate court decision on concurrent grounds.
The Texas Supreme Court focused on the elements to prove a Stowers claim. To prove a Stowers claim the insured must prove 1. The claim is within the coverage of the policy 2. A demand must be made within policy limits 3. And the demand was one that an ordinary, prudent insurer would have accepted it, looking at the insured’s potential exposure to an excess judgment. Am. Physicians Ins. Exch. v. Garcia, 876 S.W. 2d 842, 849. In a stowers action, the insured has the burden to prove coverage. Gilbert Tex. Construct., L.P. v. Un-derwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010). It is up to the Insurer to prove that the loss falls within an exclusion. Id.
In this case the Court determined that there was no coverage to establish coverage for the specific occurrence. To come to this conclusion the Court determined the legal sufficiency of the evidence by examining the jury instruction. A jury instruction is proper when it “1. assists the jury, 2. accurately states the law, and 3. finds support in the pleadings and evidence.” Union Pac. R.R. Co. v. Williams, 85 S.W. 3d 162,166 (Tex. 2002). Evidence that proves the opposite of a “vital fact to the verdict” deems the record legally insufficient. In this case, the Segers did not request a jury question on coverage despite the necessity to establish coverage. Additionally, the insurers properly objected to the definition of “leased in worker” and proposed their own version of the instruction. The trial court rejected this instruction. The Supreme Court explained that the court of appeals’ definition of “leased in worker” was met by Randall Seger, and binding on the trial court. The Court’s analysis determined that even if Randall Seger was referred to as an independent contractor, he would still be considered a “leased in worker” under the policy terms. As a result, he would be excluded from the CGL policy. The Texas Supreme Court ruled that Mr. Seger was a leased-in worker as a matter of law, which was a specific exclusion under Diatom’s CGL policy. Because there was no coverage under the policy, the stowers cause of action fails. The court explains that the coverage issue is dispositive and thus damages will not be addressed.