Volume VI, No. 3

June 20, 2006

The Texas Supreme Court issued four significant opinions last month. The Court continued its conservative views by restricting possible causes of action except in the area of legal malpractice, in which case the Court created a new basis for establishing liability of attorneys. In Belt v. Oppenheimer, et. al., the Court expanded the potential liability of estate-planning attorneys by holding that such attorneys can be sued by the personal representative of an estate if the actions of the estate-planning attorney resulted in an increase in the tax liability of the estate. The Court’s opinion in Evanston Insurance v. Atofina Petrochemicals determined the insurance coverage available to an additional insured under an excess policy. In Shupe v. Lingafelter the Court found that the failure of a trial court to submit a negligence entrustment issue was harmless as the jury did not find any liability against the defendant which is a necessary prerequisite to finding negligent entrustment. Finally, in Kroger Texas Ltd. Partnership v. Suberu, the Court severely restricted potential claims of malicious prosecution and intentional infliction of emotional distress.

I. THE PERSONAL REPRESENTATIVE OF AN ESTATE CAN SUE THE DECEDENT’S ATTORNEYS FOR LEGAL MALPRACTICE

The Court in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc. (decided May 5, 2006), ruled that the personal representative of an estate can sue the decedent’s attorneys for legal malpractice. This holding is a modification of the principle established in Barcelo v. Elliot, 923 S.W. 2d 575 (Tex. 1996) that non-client beneficiaries of an estate cannot sue the decedent’s attorney for legal malpractice.

A. FACTS OF CASE

The decedent, David Turk, hired the law firm of Oppenheimer, Blend, Harrison & Tate, Inc., to prepare his will and provide advice on asset management of his estate. After Mr. Turk’s death, his Estate was assessed over $1.5 million in taxes that the executors of the Estate claimed could have been avoided by competent estate-planning. The executors of the Estate then brought suit against the law firm due to the alleged negligence of the law firm in drafting the will and providing asset management for the will.

B. A LEGAL MALPRACTICE CLAIM SURVIVES THE DEATH OF THE DECEDENT

The Court first acknowledged that Texas does not allow non-client beneficiaries to bring legal malpractice claims against the decedent’s attorneys concerning the method of distribution of the decedent’s property in a will. However, the Court noted that the personal representative in this case brought a claim alleging economic loss to the Estate rather than a claim involving "bickering" among the beneficiaries over how the property of the Estate was divided. As such, a claim for economic loss survives the death of a decedent, for which a legal malpractice claim can be brought:

...we hold that legal malpractice claims alleging pure economic loss survive in favor of a deceased client’s estate, because such claims are necessarily limited to recovery for property damage.

The Court pointed out that damages sought in this case - increased tax liability- did not accrue until after the decedent’s death. Nevertheless, the negligence which resulted in the tax liability occurred when the will was drafted which was obviously at a time that the decedent was alive:

...if the injury occurs during the client’s lifetime, a claim for estate-planning malpractice survives the client’s death.

C. ANALYSIS OF CLAIM

The Court’s opinion in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., expands the liability of estate-planning attorneys, who previously were insulated from liability for claims brought by beneficiaries of an estate. The effect of the opinion in this case is that if the personal representative of an estate can prove that any action taken by the estate-planning attorney caused an increased tax liability of the estate a possible claim for legal malpractice could result.

II. A CONTRACT REQUIRING A SUBCONTRACTOR TO PROCURE ADDITIONAL INSURANCE FOR A CONTRACTOR DOES NOT DETERMINE THE SCOPE OF COVERAGE SINCE THE INSURANCE POLICY STANDS ON ITS OWN TERMS REGARDING COVERAGE

In Evanston Insurance v. Atofina Petrochemicals (decided May 5, 2006), the Texas Supreme Court considered the scope of insurance coverage in an excess policy required under a third party contract entered into by one of ATOFINA’s contractors who was obligated to provide such coverage for ATOFINA. The Texas Supreme Court held that the scope of the excess policy is no broader than the underlying primary insurance. Because the primary insurance excluded coverage for ATOFINA’s sole negligence, the excess policy also excluded coverage for ATOFINA’s sole negligence.

A. FACTS OF THE CASE

This case arises out of a refinery accident whereby an employee of a subcontractor, Triple S, who was hired to perform maintenance and construction at ATOFINA’s refinery, was killed. The deceased’s family sued ATOFINA and Triple S. ATOFINA’s primary carrier through its designation as an additional insured under Triple S’ policy, Admiral Insurance, tendered its $1 million of insurance. ATOFINA then filed a declaratory judgment action against Evanston Insurance, the excess carrier for Triple S, which also designated ATOFINA as an additional insured. ATOFINA alleged that Evanston Insurance improperly denied ATOFINA’s claim for coverage under the excess policy.

ATOFINA then settled the wrongful death litigation for $6.75 million. Since $1 million was tendered by Admiral, ATOFINA sought $5.75 million from Evanston. Evanston moved for summary judgment in the declaratory judgment action claiming that Admiral’s primary policy excluded coverage for ATOFINA’s concurrent or sole negligence. The trial court granted Evanston’s summary judgment but the Court of Appeals reversed and remanded. Evanston appealed to the Texas Supreme Court who granted the petition.

B. RELEVANT THIRD PARTY CONTRACTUAL PROVISIONS

The subcontract between Triple S and ATOFINA required Triple S to indemnify ATOFINA against personal injuries and property losses sustained during the performance of the contract unless those losses were attributable to ATOFINA’s concurrent or sole negligence. Additionally, Triple S agreed to add ATOFINA as an additional insured under its insurance policies. In that regard, Triple S added ATOFINA as an additional insured under its primary insurance policy with Admiral Insurance and with its excess policy with Evanston Insurance. The additional insurance clause under the primary policy by Admiral had an exclusion for liability arising out of ATOFINA’s sole negligence.

Under Evanston’s excess policy, "insured" was defined two ways. First, under Section III.B.5, an insured was defined as:

any person or organization who is insured under a policy of "underlying insurance." The coverage afforded such insured under this policy would be no broader than the underlying insurance except for this policy’s Limits of Insurance. (emphasis added)

Secondly, section III.B.6 defined "insured" as:

[a] person or organization for whom [Triple S] agreed to provide insurance as is afforded by this policy; but that person or organization is an insured only with respect to operations performed by [Triple S] or on Triple S’ behalf or facilities owned or used by [Triple S].

ATOFINA qualified as an insured under both Sections III.B.5 and B.6.

C. THE SCOPE OF COVERAGE OF THE EXCESS POLICY IS DETERMINED BY THE SCOPE OF COVERAGE OF THE PRIMARY POLICY

The Texas Supreme Court was confronted with two definitions of "insured" under the excess policy with Section III.B.6 being the broader of the two clauses. Additionally, ATOFINA wanted to enforce the additional insurance clause of the third party contract that did not have a "sole cause" exception. The Supreme Court refused to apply the broader definition of "additional insured" under the third party contract. The Court chose to enforce Section III.B.5 that stated that the excess policy coverage would be no broader than the primary policy coverage. Since the primary policy had an exclusion for sole cause, that exclusion would apply.

However, sole cause had not been determined by the trial court. Accordingly, the Court remanded the case to the trial court to determine if ATOFINA’s sole negligence resulted in the wrongful death of the Triple S employee.

D. ANALYSIS OF OPINION

The significance of this case is that third party contractual terms do not determine coverage under an additional insured scenario. Therefore, the terms of the insurance policy stand on their own. The Supreme Court further noted that the insured may have exposure for not having provided the correct coverage but that did not change the fact that an insurance policy’s terms determine the scope of coverage.

III. A MALICIOUS PROSECUTION CLAIM REQUIRES THAT THE PLAINTIFF PROVE THAT THE DEFENDANT LACKED PROBABLE CAUSE FOR FILING A CRIMINAL CHARGE AGAINST THE PLAINTIFF

Following the acquittal on a shoplifting charge, the plaintiff brought suit against Kroger for malicious prosecution and intentional infliction of emotional distress in Kroger Texas Ltd. Partnership v. Suberu (decided May 5, 2006). The trial court entered judgment on the jury verdict in favor of the plaintiff. Kroger appealed. The Supreme Court reversed and rendered the judgment against Kroger holding that (1) the evidence did not establish lack of probable cause, an element of malicious prosecution, and (2) the evidence did not establish extreme and outrageous conduct, an element of intentional infliction of emotional distress.

A. FACTS OF CASE

Theresa Suberu went to a Kroger grocery store in Garland to purchase medication. Suberu was leaving the store when Kellie Wier, the front-end manager, yelled "Stop!". According to Wier, Suberu was pushing a grocery cart full of unsacked goods. Suberu, however, testified that she has never used a cart to shop for groceries and did not have one that evening. Police officers arrived and the officers arrested Suberu and walked her out of the store in handcuffs.

After a jury acquitted her on misdemeanor theft charges, Suberu filed suit against Kroger, alleging malicious prosecution and intentional infliction of emotional distress. The trial court rendered judgment on the jury’s verdict, which found in Suberu’s favor on both claims and awarded $500 in actual damages for expenses in defending the prosecution, $28,000 for past and future mental anguish, and $50,500 in exemplary damages based on the malicious prosecution claim. The jury awarded no exemplary damages for intentional infliction of emotional distress.

B. A PLAINTIFF IN A MALICIOUS PROSECUTION CASE MUST PROVE THAT THE DEFENDANT LACKED PROBABLE CAUSE AND HARBORED MALICE TOWARD HER

The court held the requirement that the plaintiff prove malice in a malicious prosecution case guards against a jury’s natural inclination to punish those who, through error but not malevolence, commence criminal proceedings against a person who is ultimately exonerated. The court recognized that while it has long recognized a cause of action for those subjected unjustifiably to criminal proceedings, it also made clear that the cause of action for malicious prosecution must sometimes yield to society’s greater interest in encouraging citizens to report crimes, real or perceived.

The probable cause element of the plaintiff’s malicious prosecution claim "asks whether a reasonable person would believe that a crime had been committed given the facts as the complainant honestly and reasonably believed them to be before the criminal proceedings were instituted." The Court stated that there is a presumption that the defendant acted reasonably and had probable cause to initiate criminal proceedings. To rebut this presumption the plaintiff must produce evidence that the motives, grounds, beliefs, or other information upon which the defendant acted did not constitute probable cause.

Because probable cause is presumed, Suberu was required to produce evidence that Kroger initiated her prosecution on the basis of information or motives that did not support a reasonable belief that she was guilty of shoplifting. Finding that there was no such evidence, the Court reversed and rendered Suberu’s malicious prosecution claim.

C. THE CONDUCT OF KROGER’S EMPLOYEES IN HAVING THE PLAINTIFF ARRESTED AND PROSECUTED WAS NOT "EXTREME AND OUTRAGEOUS" TO JUSTIFY THE PLAINTIFF’S CLAIM FOR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

The Court was also unimpressed with the plaintiff’s claim of intentional infliction of emotional distress. The Court first stated that in order to sustain a verdict for intentional infliction of emotional distress, the plaintiff must prove that the defendant’s conduct was "extreme and outrageous." However, the Court noted that:

Meritorious claims for intentional infliction of emotional distress are relatively rare precisely because human conduct, even that which causes injury to others, cannot be fairly characterized as extreme and outrageous.

After reviewing the evidence, the Court concluded that Suberu did not prove that Kroger insisted on prosecuting her while knowing she was innocent. As such, the Court reversed and rendered Suberu’s malicious prosecution claim.

D. ANALYSIS OF OPINION

The Kroger opinion shows the continued pattern of the Supreme Court to restrict claims of plaintiffs. In this case the court placed the burden squarely on the plaintiff to prove the "lack" of probable cause in a malicious prosecution case. As probable cause is a subjective state of mind, a plaintiff will be hard pressed to prove the absence of probable cause in the mind of the defendant. The Court also found that the ultimate proof of the plaintiff’s innocence does not give rise to a claim for intentional infliction of emotional distress.

IV. OMISSION OF JURY QUESTION AS TO "NEGLIGENT ENTRUSTMENT" WAS HARMLESS ERROR DUE TO NO FINDING OF NEGLIGENCE AGAINST DRIVER

In Shupe v. Lingafelter (decided May 5, 2006), the Texas Supreme Court held that a trial court’s omission of a jury question as to "negligent entrustment" was a harmless error. The Court therefore affirmed the take-nothing judgment entered by the trial court.

A. FACTS OF CASE

In 2004, plaintiff Lingafelter was involved in a multi-vehicle accident on Highway 67 near the Brazos River Bridge. A delivery truck pulling a wide load came to a stop at the narrow bridge, causing traffic to back up behind the delivery truck. As a result of the traffic jam, a pick-up truck rear-ended a van. The pick-up truck then swerved into oncoming traffic causing a tractor trailer driven by Shupe to lose control and strike a vehicle driven by the plaintiff. Lingafelter was allegedly injured as a result of the accident.

As expected, Lingafelter then sued several parties, including Shupe and Shupe’s employer, Midwest Coast Transport, d/b/a MCT. In addition to other causes of action, Lingafelter alleged that MCT negligently entrusted the tractor trailer to Shupe.

Lingafelter proceeded to trial against the driver of the pick-up truck, Shupe and MCT. Lingafelter requested an instruction from the court that "negligence" be defined as follows:

As to MCT negligence means entrusting a vehicle to an incompetent or reckless driver if the entrustor knew or should have known that the driver was incompetent or reckless. Such negligence is a proximate cause of a collision if the negligence of the driver to whom the vehicle was entrusted is a proximate cause of the collision.

The trial court denied the plaintiff’s request to include this instruction in the jury charge and instead submitted the usual definitions of negligence, ordinary care, proximate cause, sole proximate cause, and sudden emergency. The jury found that Shupe and MCT were not negligent in causing the accident, and further found that the driver of the pick-up truck was 100% negligent. The jury answered "$0.00" (zero dollars) in response to the questions regarding Lingafelter’s damages.

B. FAILURE TO SUBMIT INSTRUCTION ON NEGLIGENT ENTRUSTMENT AS TO EMPLOYER WAS HARMLESS ERROR AS JURY FOUND THAT DRIVER WAS NOT NEGLIGENT

To prevail under a negligent entrustment theory a plaintiff must prove that the driver was negligent on the occasion in question and the driver’s negligence proximately caused the accident. In this case, the Supreme Court noted that the jury failed to find Shupe negligent in response to the general negligence question. As such, the Court held that the negative finding to the general negligence question negated the unsubmitted negligent entrustment issue as a matter of law. By reviewing the jury’s answers to other questions, the Court found that the submission of a negligent entrustment instruction would not have altered the verdict in any respect. Therefore, the Court affirmed the judgment of the trial court that the plaintiff take nothing.

C. ANALYSIS OF OPINION

Whether error is committed in the inclusion or omission of jury instructions/definitions will depend upon the ultimate verdict. Therefore, it is the better practice to insure that all proper instructions/ definitions are requested. Should the trial court deny the requested instructions/definitions the attorney should make sure the record properly reflects the requests.