[00:00:01] Speaker 02: Next matter before us today is, oh, sorry. [00:00:25] Speaker 02: MVT Services versus Great West Casualty, 23-2078. [00:00:38] Speaker 04: May it please the court, counsel? [00:00:41] Speaker 04: My name is Dan Worker. [00:00:42] Speaker 04: I represent Great West Casualty Company in this matter. [00:00:46] Speaker 04: If it pleases the court, I'd like to reserve three minutes for rebuttal of time permits. [00:00:50] Speaker 02: And again, that will be your responsibility. [00:00:54] Speaker 04: Yes, ma'am. [00:00:56] Speaker 04: This case involves a coverage dispute in which the district court awarded extra contractual damages [00:01:03] Speaker 04: on the basis that there were consequential damages associated with a breach of duty to defend on behalf of my client, Great West. [00:01:14] Speaker 04: The Texas law in this case is very clear that absent a claim for bad faith, extra contractual damages are not available in the case. [00:01:24] Speaker 04: It's undisputed in this case that Great West paid its full policy limits, provided a defense when requested at the end to MVT [00:01:34] Speaker 04: and exhausted its limits in settlement of that case. [00:01:38] Speaker 04: Two issues of damages were claimed as consequential damages in this case, which we think is clear error in the case, and it's governed by a de novo standard of review because it's an improper application of the law. [00:01:52] Speaker 04: In that regard, I think applying Texas law to this case on that issue where the bad faith case was dismissed shortly before trial is conclusive on the issue [00:02:04] Speaker 04: And those damages need to be reversed in this case. [00:02:07] Speaker 04: So we're asking the court to overturn the award of those consequential damages that the court entered, as well as the attorney fees portion of that case. [00:02:16] Speaker 02: Here the district court made some findings. [00:02:20] Speaker 02: One was that Great West's wrongful denial of coverage precluded the timely assertion of the exclusive remedy defense and drastically enlarged MVT's exposure [00:02:34] Speaker 02: in the Parada litigation. [00:02:36] Speaker 02: And the second is the gross negligence claim that would have remained could have been settled within the policy limits. [00:02:46] Speaker 02: You have to convince us that those findings are clearly erroneous, don't you? [00:02:52] Speaker 04: First of all, Your Honor, with regard to the de novo standard, if the court finds that the only damages that are allowable are policy limits [00:03:02] Speaker 04: once we honor our duty to defend and the reimbursement of reasonable attorney's fees for the defense of that case. [00:03:09] Speaker 04: So right before trial, we didn't offer judgment with regard to the $49,000 of claimed expense of attorney's fees plus interest, which was not accepted. [00:03:21] Speaker 04: And we paid our full policy limit in settlement of that case. [00:03:26] Speaker 04: We were defending a bad faith case in the district court in New Mexico. [00:03:31] Speaker 04: and we prevailed on that issue on summary judgment. [00:03:35] Speaker 04: That issue was conceded, so it's our position in this case, your honor, that under a de novo standard of review, this court applying Texas law cannot find that they could ward extra contextual damages above and beyond our policy limit, which is what the district court did in this case. [00:03:55] Speaker 04: If the court wants to consider this as a contraquantual bridge contract case, [00:04:01] Speaker 04: We believe that the law is very clear in insurance coverage cases. [00:04:05] Speaker 04: In a contract, you're only obligated to pay the policy limits of that contract. [00:04:11] Speaker 04: You're not obligated to pay extra contractual damages unless you acted in bad faith. [00:04:18] Speaker 04: Here, clear ruling by the district court that there was no bad faith. [00:04:23] Speaker 04: It was our position. [00:04:24] Speaker 04: The case should have ended at that point on summary judgment. [00:04:28] Speaker 04: It didn't. [00:04:29] Speaker 04: The court felt that [00:04:31] Speaker 04: there were consequential damages associated with this breach of contract, and that they were foreseeable. [00:04:37] Speaker 04: And there was an issue of fact, according to the court, on whether or not those damages were foreseeable to allow an award of consequential damages stemming from a breach. [00:04:49] Speaker 04: Again, it's our position, Your Honor, that the law is very clear on that issue, that absent any bad faith conduct, those damages cannot be awarded. [00:04:58] Speaker 04: To answer your question, Your Honor, [00:05:01] Speaker 04: During the course of that trial, on this country court of damage issue, there were two elements of damages, as the court pointed out. [00:05:08] Speaker 04: The first element of damage was reimbursement of a $250,000 SIR, a self-insured retention, under the criminal force through policy. [00:05:19] Speaker 04: For the court's indulgence, that policy was taken out by NVT in January of 2013, before this accident even occurred. [00:05:29] Speaker 02: It doesn't matter. [00:05:30] Speaker 02: I mean, everybody agrees your policy covered the accident. [00:05:34] Speaker 04: Well, Your Honor, there was a dispute as to whether or not that policy was in effect at the time of the accident. [00:05:41] Speaker 03: You're not contesting that now, are you? [00:05:44] Speaker 04: Your Honor, at the end of the case, when this issue of this timing of when that policy expired under Texas law was brought to Great West attention, it was two weeks before trial. [00:05:58] Speaker 04: Great West. [00:05:59] Speaker 03: But you'd already, you were on notice of all the facts with respect to your denial. [00:06:06] Speaker 03: You knew the law as good as they did and they tendered it and you denied it. [00:06:11] Speaker 04: That is correct. [00:06:11] Speaker 03: So we don't, I mean, you don't get to say, well, you know, really we just figured it out two weeks before trial. [00:06:17] Speaker 03: I mean, you've got to live with the data. [00:06:20] Speaker 03: And we did, Your Honor. [00:06:21] Speaker 04: You denied it. [00:06:21] Speaker 04: We did, Your Honor. [00:06:22] Speaker 04: We acknowledged coverage and we paid our policy limits in defense. [00:06:26] Speaker 04: of the MVT in that case. [00:06:28] Speaker 03: So the answer to my original question was you're not disputing that there was coverage. [00:06:34] Speaker 04: We acknowledge that there was coverage for that loss based on the circumstances presented to us at that time. [00:06:41] Speaker 04: Yes. [00:06:41] Speaker 02: Well, there was coverage from the time of the accident. [00:06:45] Speaker 02: We did not dispute that fact. [00:06:49] Speaker 02: OK. [00:06:49] Speaker 02: And you wrongfully denied it until two weeks before trial. [00:06:55] Speaker 04: We accepted defense two weeks before trial when it was retendered to Great West. [00:06:59] Speaker 04: Yes, Your Honor, we did. [00:07:01] Speaker 02: And at that time, the district court said that it was too late to try to assert a workers' comp defense. [00:07:12] Speaker 04: Yes, let's talk about the timing of the assertion of that defense. [00:07:16] Speaker 02: Without your policy, they didn't have such a defense. [00:07:22] Speaker 04: They did have a defense, and in fact, Your Honor, before we acknowledge coverage two weeks before trial, they did raise that defense. [00:07:31] Speaker 04: Before Great West retracted its denial in the case, they raised the defense. [00:07:36] Speaker 04: They raised the defense before they put us on notice and followed a declaratory judgment action on this timing issue as to when our policy expired. [00:07:46] Speaker 04: So the fact that there is no policy, I think if you look at the record in the case, [00:07:52] Speaker 04: their counsel, Silverman, who put in place this ERISA plan, the non-subscriber agreement that they were operating on, that created the sister company, OEP, where they transferred their employees so that they wouldn't have to pay a work-out premium instead of taxes. [00:08:10] Speaker 04: He acknowledged that they could raise that defense even if they didn't have a policy. [00:08:16] Speaker 04: He acknowledged that they could have both a work-out policy. [00:08:20] Speaker 02: Yes, Your Honor, we did. [00:08:22] Speaker 02: And the district court made findings of that. [00:08:25] Speaker 04: Correct. [00:08:26] Speaker 02: And conclusions of law. [00:08:28] Speaker 02: Correct. [00:08:28] Speaker 02: Okay, findings of fact, they've got to be clearly erroneous for you to overturn them here. [00:08:35] Speaker 02: Right. [00:08:35] Speaker 02: Some of those findings of fact are very difficult for you in advancing your position because the district court found that the reason they didn't assert the defense was because of your wrongful denial. [00:08:50] Speaker 02: that if they had asserted the defense before two weeks before trial, they could have used it, and that, as a result, they incurred substantially more damage. [00:09:04] Speaker 04: That were the rulings by the court, Your Honor, with regard to the findings of fact. [00:09:10] Speaker 04: I suggested to the court those were conclusions and opinion, and they were not facts. [00:09:15] Speaker 04: The substantial evidence in this case, the factual record, [00:09:19] Speaker 02: Okay, so if you're challenging it because it's not supported by substantial evidence, that means you acknowledge it's a fact and that you're trying to claim it's clearly erroneous. [00:09:31] Speaker 04: I believe that there were not facts that met that burden of proof and the court erred in finding those factual findings when in reality they were speculation, they were conclusory, they were self-serving statements, and they were not issues of fact. [00:09:47] Speaker 04: The facts in the case established that NVT set its own course with regard to this legal strategy of defending negligence cases in Texas. [00:09:59] Speaker 04: Before the loss, they transferred all of their employees to OEP. [00:10:03] Speaker 02: They set up a... And I think this is completely irrelevant. [00:10:07] Speaker 02: Whether they were gonna transition to a different insurance structure is absolutely irrelevant to [00:10:15] Speaker 02: the issue before this court, which is your policy covered this accident. [00:10:20] Speaker 02: And you denied coverage, and they went to trial without asserting a workers' comp defense. [00:10:28] Speaker 04: Which was based on the legal strategy that they had put in place before. [00:10:32] Speaker 03: So let's talk about that. [00:10:34] Speaker 03: So I go to you, and I say, this is work comp. [00:10:39] Speaker 03: I want you to pick up the defense and indemnify me. [00:10:44] Speaker 03: And you say, [00:10:45] Speaker 03: Sorry, you have no coverage. [00:10:49] Speaker 03: Go to Crum and Forrester. [00:10:52] Speaker 03: So I go to Crum and Forrester. [00:10:54] Speaker 03: If I go to them and say, hey, this is a work comp case that has been wrongfully denied, but I want you to pick up the defense and assert those defenses for me, what is Crum and Forrester going to say? [00:11:09] Speaker 04: But those are not the facts. [00:11:10] Speaker 04: Go back. [00:11:12] Speaker 04: Go back. [00:11:14] Speaker 04: With all due respect, Your Honor, the facts are they went to crime enforcer first, and they had intended to invoke that policy, because that was their legal strategy of defending these negligence claims. [00:11:25] Speaker 04: They said from the very beginning, this is not a workout claim. [00:11:28] Speaker 04: Because that's the legal structure that they set up. [00:11:31] Speaker 04: They were defending those cases in Texas as not having employees, as a legal strategy to avoid liability if they were their own employees. [00:11:41] Speaker 04: You know, they sent them to another company arguing that they were independent contractors. [00:11:46] Speaker 04: And they bought this policy to protect them for those work-related injuries under an ERISA plan. [00:11:52] Speaker 04: And that was there from the defense that they raised all throughout the underlying litigation. [00:11:57] Speaker 04: Until the point they got a $12 million demand in that case. [00:12:01] Speaker 04: And at that point, they sought out additional coverage under the Great West policy to protect them to pay for a settlement in the case. [00:12:12] Speaker 02: So, hey, you made all these arguments to the district court, and the district court ruled against you making factual findings that, unless you can show me they're clearly erroneous, preclude you taking a different position here, factually. [00:12:32] Speaker 04: Well, again, I mean, reverting back, Your Honor, that they can't award those consequential damages because they're extra contractual. [00:12:38] Speaker 02: That's a legal argument. [00:12:39] Speaker 02: Correct. [00:12:40] Speaker 04: With regard to the factual argument, it is our position that they didn't establish facts. [00:12:46] Speaker 04: They established speculation, self-serving testimony, and it was contradicted by the overwhelming weight of evidence in the case. [00:12:57] Speaker 04: So there is clear error under that standard under the law. [00:13:03] Speaker 04: We believe that it warrants reversal for that reason. [00:13:07] Speaker 04: I have two minutes left at the court. [00:13:10] Speaker 04: I could address some of those questions if you'd like. [00:13:12] Speaker 02: Thank you. [00:13:23] Speaker 01: Your honors, and may the please of the court, my name is Chance Fletcher. [00:13:26] Speaker 01: I am appearing here on behalf of MVT, the Appellees. [00:13:31] Speaker 01: The core of this dispute turns on two factual findings by the district court, which were reviewed for clear error. [00:13:38] Speaker 01: First, MVT would have diverted the simple negligence claim, had Great West accepted coverage properly in 2013. [00:13:47] Speaker 01: Second, the remaining gross negligence claim would have been resolved for less than $1 million. [00:13:52] Speaker 01: Both of those findings are supported by sufficient evidence in the record. [00:13:56] Speaker 01: Great West merely points to contrary evidence and attempts to retry this case on appeal. [00:14:00] Speaker 01: The court should reject that, and I would like to clarify two or three statements made by my friend on the other side. [00:14:08] Speaker 01: First, as far as Texas law is concerned, they concede in their blue brief, quote, uninsured can recover damages in excess of limits and defense fees with a showing either that the claim could have been resolved for the policy limits or that faith. [00:14:33] Speaker 01: So with respect to the legal argument, I believe that they have already conceded that in their blue brief. [00:14:39] Speaker 01: Second, there was some disclarity about whether there's a dispute about coverage being in effect on the day of this accident. [00:14:50] Speaker 01: There is a stipulation in this record. [00:14:53] Speaker 01: You can find that at Supplemental Appendix 1-147 that says, [00:15:01] Speaker 01: that stipulates that there was a coverage effect on the day of this accident. [00:15:08] Speaker 01: Third, with respect to raising the defense, the exclusive remedy defense without coverage, as Your Honors noted in the opening argument, we did not assert that defense and the district court found that we did not assert that defense because Great West told us that we were a non-subscriber. [00:15:32] Speaker 01: that we tendered the defense to Great West. [00:15:35] Speaker 01: They immediately emailed us back and said, you don't have coverage under us. [00:15:40] Speaker 01: There was a follow-up conversation where they said the same thing, and they confirmed that in their formal denial. [00:15:46] Speaker 01: And as far as clear error, it is our position that I believe they also concede that these factual findings are reviewed for clear error in the reply brief. [00:15:55] Speaker 01: You can find those at Great Brief page eight and Great Brief page 12. [00:16:02] Speaker 01: And respectfully, Your Honors, I believe that those things resolve this case. [00:16:05] Speaker 01: But if Your Honors have any questions, I'd. [00:16:08] Speaker 03: What is the evidence supporting the two key factual findings that you started your argument with? [00:16:16] Speaker 01: Yes. [00:16:17] Speaker 01: So first, that the exclusive remedy defense would have been invoked, say, for the denial, the wrongful denial. [00:16:25] Speaker 01: So Great Rest told us, before we answer, [00:16:32] Speaker 01: So one of their arguments in their brief is that we filed this answer before their denial. [00:16:38] Speaker 01: But the district court found, and there's evidence supporting in the record, testimonial evidence, and also documentary evidence, that they told us about two weeks before that, the email, and then there was a follow-up conversation on November 6th, which I believe was six days before we answered, that they communicated to us that they would deny. [00:17:02] Speaker 01: that they're going to deny. [00:17:03] Speaker 01: They don't think there's any coverage. [00:17:05] Speaker 01: So as a result of that, we have our lead attorney in the case, for most of the case, Skip Worth, who testified, quote, that he absolutely would have invoked the exclusive remedy defense. [00:17:19] Speaker 01: The district court found that to be credible testimony, and I don't see any meaningful evidence in the record. [00:17:28] Speaker 01: To the contrary, we also have testimonial evidence [00:17:31] Speaker 01: Steve Blanco, another attorney helping out on the case that said the exclusive remedy defense was not invoked because we were told that we were non-subscribing. [00:17:52] Speaker 02: Well, there was a second fact, too. [00:17:55] Speaker 01: Oh, yes. [00:17:56] Speaker 01: And the second fact, I apologize. [00:17:57] Speaker 02: And that was, I think, essentially that you could have settled within the policy limits. [00:18:03] Speaker 01: Yes. [00:18:04] Speaker 01: And I believe there's clear and sufficient evidence to support that in the record. [00:18:08] Speaker 01: We have the lead attorney for most of the case testifying that he assigned approximately $3 to $5 million to the simple negligence claim only. [00:18:16] Speaker 03: I mean, isn't that speculative, though? [00:18:19] Speaker 03: I mean, how do you establish that through an attorney saying, oh, I didn't give that any weight? [00:18:24] Speaker 01: Yes. [00:18:24] Speaker 01: I think that there's evidence in the record that it's not speculative. [00:18:28] Speaker 01: You can find this at Supplemental Appendix 3, around 460. [00:18:33] Speaker 01: Skipper testified that he personally investigated the facts of this case. [00:18:38] Speaker 01: He looked at the trucking logs. [00:18:41] Speaker 01: He looked at the truck. [00:18:42] Speaker 01: all the information that could possibly come in at trial. [00:18:45] Speaker 01: And he said, I determined that there's just no evidence that anyone did anything knowingly. [00:18:50] Speaker 01: There's no gross negligence. [00:18:51] Speaker 01: We also have testimony that the internal counsel, Silverman, did the exact same thing and then assigned that there's zero potential liability for gross negligence. [00:19:01] Speaker 01: You can find that testimony around subpoena three, 345. [00:19:06] Speaker 01: and thereabouts. [00:19:08] Speaker 03: What was the contrary evidence to that? [00:19:10] Speaker 03: What did Great Western come forward with to say that that's not right, that gross negligence claim was hanging out there and scaring everyone? [00:19:21] Speaker 01: In my view, they say basically two things in their blue brief. [00:19:27] Speaker 01: The first is that it's this switching to non-subscriber argument, which I don't believe is particularly relevant to this. [00:19:36] Speaker 01: And then the second thing is they say that Robert Skipworth testified that he suggested to NVT that they might be underinsured for purposes of the product litigation because he valued the case between three and five million dollars. [00:19:47] Speaker 01: That's at the lubricate of 25. [00:19:49] Speaker 01: But as I just explained, if you read that testimony, it's very clear that he is assigned that value to the simple negligence claim only. [00:19:57] Speaker 01: He says that explicitly in trial. [00:19:59] Speaker 01: The district court credited that evidence and found that the claim is going to be resolved for less than a million dollars. [00:20:05] Speaker 03: Okay, so neither of those things implicate the gross negligence aspect of the case. [00:20:10] Speaker 01: That's correct. [00:20:17] Speaker 02: If your honors do not have any further questions, I'm happy to rest on the papers for the... Well, what about the attorney's fees, the challenge to the attorney's fees here? [00:20:30] Speaker 01: Yes. [00:20:31] Speaker 01: So there's a couple of elements to the challenge fee. [00:20:35] Speaker 01: The attorney's fees that are awarded by the district court or the attorney's fees for Steve Blanco that... As I understand the attorney's fees that are awarded by the district court, the only [00:20:47] Speaker 02: objection to the amount is if we were to reverse on some of the claims, but there's not any objection to the specific amount or the way it was calculated. [00:20:57] Speaker 02: Am I correct about that? [00:20:59] Speaker 01: I believe you're exactly correct about that, Your Honor, and I also would just note that [00:21:05] Speaker 01: The appendix didn't even include the order that awarded these attorney's fees. [00:21:10] Speaker 01: So under the rules of the court, I think that you don't even have to consider the question, even if you were to reverse on anything else. [00:21:18] Speaker 02: Okay. [00:21:18] Speaker 02: So I was focused on Mr. Blanco. [00:21:21] Speaker 01: Oh, on Mr. Blanco. [00:21:22] Speaker 01: Great. [00:21:23] Speaker 01: So on Mr. Blanco, there's a couple of different issues on Mr. Blanco. [00:21:27] Speaker 01: First, there's a stipulation, again, in the pretrial order saying that Great West, quote, by denying coverage, Great West lost its ability to control, influence, or object to the manner in which MBT chose to staff the defense. [00:21:42] Speaker 01: The district court based its finding that Blanco fees were entitled to reimbursement on that stipulation and on basically the, go ahead, Your Honor. [00:21:52] Speaker 02: Well, I mean, what if they went out and hired 30 lawyers? [00:21:55] Speaker 02: I mean, were there no limits on that stipulation? [00:21:59] Speaker 01: Your Honor, I think that the law recognizes a reasonability limitation. [00:22:02] Speaker 01: However, I do not think that that reasonability limitation is argued in their blue brief. [00:22:08] Speaker 01: They do make an argument that says the case law only requires them to retain one lawyer. [00:22:13] Speaker 01: That argument's completely unsupported by any law in their blue brief. [00:22:18] Speaker 01: I'm not sure what law there is for that. [00:22:23] Speaker 01: There, of course, is, in insurance law, a limitation of reasonability, but there just wasn't a challenge to whether it was reasonable. [00:22:30] Speaker 01: And the district court found that these were reasonable and necessary attorney's fees, as a matter of fact, which also would have to be challenged in a reasonable challenge to those fees. [00:22:43] Speaker 02: I don't see any further questions. [00:22:45] Speaker 01: Your Honors, I respectfully ask that this court affirm the judgment of the district court in remand for award of appellants attorney's fees. [00:22:52] Speaker 01: Thank you. [00:22:58] Speaker 04: I'll do it in reverse order. [00:23:00] Speaker 04: With regard to the fees, we did contest them on reasonableness, and we asked the court to look at the amount of recovery compared to the amount that they spent. [00:23:09] Speaker 04: And they, in fact, reduced their own attorney's fees because they were pursuing this bad faith claim during the entirety of the litigation, which incurred a lot of our defense with regard to the case. [00:23:20] Speaker 00: Mr. Fulcher, why don't you address this proposition that you said that absent bad faith, extra contract damages are not allowed under Texas law. [00:23:32] Speaker 00: And as argued, that's only half of the possibilities. [00:23:37] Speaker 00: The other half is that it could have been resolved for policy limits. [00:23:41] Speaker 04: No, let's take it out of context. [00:23:42] Speaker 04: We were citing the bad faith standard, so there's two types of bad faith. [00:23:47] Speaker 04: Bad faith failure to settle, so there would have to be a demand made within our policy limit in which we rejected the demand and not paid it, and then there was an extra contractual award, bad faith extra contractual, we would have to pay that damage. [00:24:01] Speaker 04: The second component is bad faith denial in the case, which they never brought or pursued, and the court never found that we didn't have a bona fide coverage dispute, which would result in a bad faith denial. [00:24:16] Speaker 04: So under either scenario, the facts didn't support any bad faith on the part of Great West to open up its limits. [00:24:24] Speaker 04: So as a matter of law, the court should reverse the finding of those consequential damages that exceed our policy limits. [00:24:31] Speaker 00: So you're saying the proposition that it could have been resolved for policy limits is embedded into the other bad faith. [00:24:42] Speaker 04: only if there's a demand to settle and that's the problem that they have in the gross negligence case and their proposition of the court's finding that we could have, if they would have raised work comp exclusivity at the beginning of the case, that the plaintiff's attorney would have settled the case for a million dollars. [00:25:00] Speaker 04: The evidence in the trial was, according to Skipworth, plaintiff's counsel said he'd never take a million dollars to settle the case. [00:25:09] Speaker 04: There was never a demand made by plaintiff's counsel. [00:25:12] Speaker 03: Well, he might if he knew he was facing a work comp. [00:25:17] Speaker 04: The gross negligence is an exception. [00:25:19] Speaker 04: And he had already prevailed at the end of the trial on that issue. [00:25:23] Speaker 04: That case was going to a jury. [00:25:25] Speaker 04: And there was evidence, if you look at the record, Silverman admits that this plaintiff's counsel got a gross negligence award under factually similar circumstances to the underlying case where [00:25:38] Speaker 04: The employee fell asleep driving the car, the truck, and there was evidence that the company didn't train well. [00:25:47] Speaker 04: And those rewards were sustained in those cases on gross negligence standard. [00:25:52] Speaker 04: And that's in the record. [00:25:53] Speaker 02: Your time is up. [00:25:54] Speaker 04: Thank you. [00:25:56] Speaker 02: Thank you, counsel. [00:25:57] Speaker 02: We will take this matter under advisement.