Summary
**Key Topics:** Insurance coverage; duty to defend; reservation of rights; consent judgment; reasonableness of settlement; privity; collateral attack; evidentiary rulings on settlement evidence. **Holdings:** (1) Under Texas law, an insurer that tenders a qualified defense under a reservation of rights is not bound by the amount of a consent judgment entered between the insured and the injured party, and may challenge the reasonableness of the settlement. (2) The district court's finding that the insured aircraft was covered as a substitute vehicle was affirmed. (3) The district court did not abuse its discretion in admitting settlement evidence to show witness bias or in excluding the consent judgment itself, and the insurer waived objection to unobjected-to testimony.
Holdings
- An insurer that tenders a defense under a reservation of rights is not bound by an unreasonable consent judgment; the insurer is entitled to challenge the reasonableness of the settlement.
- The district court did not abuse its discretion in admitting settlement evidence to show bias, and USAU failed to preserve error regarding some testimony. The district court also did not abuse its discretion in excluding the consent judgment evidence.
Questions Presented
- Whether the district court erred in ruling that USAU was bound by the amount of the consent judgment entered against Olympia Wings in the state court action.
- Whether the district court erred in its evidentiary rulings regarding the coverage determination.
Disposition
vacated_and_remanded
Cases Cited (12)
- Rhodes v. Chicago Ins. Co., 719 F.2d 116 (5th Cir. 1983)(followed)
- Ideal Mutual Ins. Co. v. Myers, 789 F.2d 1196 (5th Cir. 1986)(followed)
- Employers Casualty Co. v. Block, 744 S.W.2d 940 (Tex. 1988)(distinguished)
- Ranger Insurance Co. v. Rogers, 530 S.W.2d 162 (Tex.Civ.App. 1975)(cited)
- Haught v. Maceluch, 681 F.2d 291 (5th Cir. 1982)(cited)
- Cole v. Elliott Equipment Corp., 653 F.2d 1031 (5th Cir. 1981)(cited)
- Belton v. Fibreboard, 724 F.2d 500 (5th Cir. 1984)(followed)
- Reichenbach v. Smith, 528 F.2d 1072 (5th Cir. 1976)(cited)
- Ramada Development Co. v. Rauch, 644 F.2d 1097 (5th Cir. 1981)(cited)
- Collins v. Wayne Corp., 621 F.2d 777 (5th Cir. 1980)(followed)
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