TEXAS REMAINS A “NO DIRECT ACTION” STATE

In re Essex Insurance Company
Texas Supreme Court, No. 13-1006 (November 20, 2014)
Per Curiam (Opinion)
Invoking its long-standing rule that “an injured party cannot sue the tortfeasor’s insurer directly until the tortfeasor’s liability has been finally determined by agreement or judgment,” the Texas Supreme Court granted mandamus requiring dismissal of such an action. Zuniga sued San Diego Tortilla (SDT) for personal injuries he suffered while working at SDT’s factory. Essex, SDT’s liability insurer, agreed to defend SDT under a reservation of rights, but denied any duty to indemnify based on the policy’s employee exclusion. (Zuniga insisted he was an independent contractor and thus not covered by the exclusion.) Essex rejected Zuniga’s offer to settle the claim within policy limits, and Zuniga amended his petition to add a claim for declaratory judgment on Essex’s duty to indemnify. When the trial court denied Essex’s motion to dismiss Zuniga’s claims, the insurer sought mandamus relief. The Supreme Court reiterated that the “no direct action” rule applies to requests for declaratory relief just as it does to suits for money damages. It therefore held the trial court had not correctly applied the law and “mandamus relief is appropriate to spare the parties and the public the time and money spent on fatally flawed proceedings.”

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