     Case: 11-10892       Document: 00512136596         Page: 1     Date Filed: 02/06/2013




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                         February 6, 2013
                                       No. 11-10892
                                                                           Lyle W. Cayce
                                                                                Clerk



PRIDE TRANSPORTATION, a Utah Corporation

                                                  Plaintiff-Appellant,

versus

CONTINENTAL CASUALTY COMPANY, an Illinois Corporation;
LEXINGTON INSURANCE COMPANY,

                                                  Defendants-Appellees.




                   Appeals from the United States District Court
                        for the Northern District of Texas
                                  No. 4:08-CV-7




Before DAVIS, JONES, and SMITH, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*


       Pride Transportation (“Pride”) appeals a summary judgment for its pri-
mary and excess insurers, Continental Casualty Company (“Continental”) and

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                      No. 11-10892

Lexington Insurance Company (“Lexington”), alleging that the insurers breached
their contracts by failing to continue to defend and indemnify Pride after settling
a claim, against an employee, that had exhausted the policies. In addition, Pride
alleges that the insurers’ handling of the settlement violated Texas Insurance
Code Section 541.060. Because Pride failed to raise a genuine issue of material
fact as to either claim, we affirm.


                                             I.
       In October 2006, in Wise County, Texas, Krystal Harbin, a driver for
Pride, struck Wayne Hatley’s pickup truck when Hatley slowed down for a dust
cloud caused by a gravel spill. The impact caused Hatley to collide with a crane
truck; he was severely injured and is a paraplegic with limited use of his upper
extremities.
       Pride is a large-fleet interstate motor carrier headquartered in Utah. It
carried a primary insurance policy issued by Continental with a limit of
$1 million and an excess policy with Lexington for $4 million. Harbin was
named as an additional insured on both policies, which covered defense and
indemnity until funds were exhausted by payments of judgments or settlements.


                                             II.
       Hatley and his wife sued Harbin and Pride, among others, in state court
in Wise County for negligence, seeking damages for medical expenses, loss of
earnings, physical impairment, disfigurement, pain and mental anguish, loss of
household services, and loss of consortium. As the primary insurer, Continental
stepped in to defend Pride and Harbin and began investigating the accident.1


       1
         While discovery was ongoing, the assigned adjuster left Continental. All business
related to the Hatley claim was routed to the Case Unit Manager in the interim month before
                                                                               (continued...)

                                             2
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                                        No. 11-10892

       Harbin’s counsel estimated the value of the case as $8-10 million, and
Pride’s counsel acknowledged the “real possibility” that liability was over
$5 million. Hatley’s medical expenses alone exceeded the primary policy limits.
The Hatleys’ counsel had recently won jury verdicts in Wise County for over
$25 million in similar cases; and the insured parties recognized that there was
a risk of high jury verdicts in that forum. Counsel, representing both Pride and
Harbin at the time, reported to Continental in January 2007 that it might be
worthwhile to seek an early settlement, although more investigation was
needed.
       During Harbin’s April 2007 deposition, it became clear that she had falsi-
fied her driver logs to avoid restrictions on the hours she could work.2 That fact
caused concern for increased exposure to liability. Pride’s separate counsel
admitted that Harbin would be a bigger target for liability than would Pride. In
about May 2007, Lexington told Pride that the claim might exceed the excess
policy’s limits.
       In June 2007, Harbin received a settlement demand from the Hatleys for
the total of the policies, $5 million (the “Harbin Settlement”); in exchange for
that sum, the Hatleys would release Harbin from liability. The Hatleys’ demand
expressly noted that Pride was not included in the Settlement.3 Relatedly, Har-
bin would remain exposed to any cross-claims for indemnity pursued by Pride.
The deadline to accept the demand was July 20, 2007.
       Because the sum was larger than the primary policy, Continental had to


       1
        (...continued)
a new adjuster was hired.
       2
           At this point, Continental assigned separate counsel to Harbin and Pride.
       3
        The demand stated, “This demand shall in no way release Plaintiffs’ claims asserted
against Pride Transport either for its direct negligence or for its responsibility under the
respondeat superior or statutory employer doctrine.”

                                               3
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                                       No. 11-10892

tender the $1 million to Lexington in order for Lexington to respond to the
demand. Pride requested that Continental complete the tender, hoping that
would allow Lexington to seek a counter-offer. Continental tendered on July 17,4
after which Lexington took control of the defense and asked the Hatleys’ counsel
to consider a settlement that included Pride; the Hatleys refused.
       Pride opposed accepting the Harbin Settlement and asked Lexington to
put a formal counter-offer in writing for a release of both insureds for $5 million.
Lexington informed Pride and Harbin that a counter-offer would need to be
agreed to by both insured parties. Harbin rejected that proposal and demanded
Lexington accept, which it did on July 20.
       The insurers notified Pride that, because the policies were exhausted, they
would withdraw their defense of Pride.5 On August 28, Lexington sued in the
United States District Court for the Northern District of Texas (the “Northern
District”) for a declaratory judgment regarding its coverage obligations to Pride.
       On August 30, Pride filed a cross-claim for indemnity against Harbin in
the Hatleys’ underlying suit.6 On August 31, Pride sought a declaratory judg-
ment in Utah state court that the insurers had an ongoing duty to defend and
indemnify it in that case. The declaratory-judgment action was removed to Utah

       4
        Continental continued its defense of Pride until the tendered funds were paid to the
Hatleys.
       5
         In January 2009, the Hatleys and Pride settled. Pride agreed to pay the Hatleys
$2 million, with additional payments conditioned on Pride’s recovery against the product-
manufacturer defendants and the insurers. The Hatleys’ total settlement recovery from all
defendants, including Harbin and Pride, was slightly less than $9 million. The Harbin Settle-
ment was the largest settlement.
       6
         Pride non-suited the claim against Harbin two months later. In about February 2009,
Pride filed a new indemnity claim in Wise County against Harbin. In March 2009, Pride gave
Harbin $10,000 for the assignment of all claims Harbin might have against the insurers (but
did not release Harbin from any indemnity claims by Pride). Pride then filed an additional
claim against Continental and Lexington as Harbin’s assignee, for refusing to indemnify Har-
bin against Pride’s cross-claims. That case was removed to the Northern District, where it has
been stayed.

                                              4
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                                       No. 11-10892

federal court, then transferred to the Northern District in January 2008.
      Lexington and Continental counter-claimed.7 Pride’s amended complaint
alleged breaches of contract, fiduciary duty, good faith and fair dealing, and vio-
lation of the Texas Insurance Code. The district court granted summary judg-
ment for the insurers, denied Pride’s Federal Rule of Civil Procedure 59(e)
motion to alter or amend, and granted Continental’s motion to alter or amend
for attorney’s fees.
      Pride appeals the summary judgment, arguing that there is a genuine
issue of material fact whether the insurers (1) breached their contracts by failing
to continue to defend and indemnify Pride after the Harbin Settlement
exhausted the policies and (2) violated Section 541.060 of the Texas Insurance
Code by their handling of the Settlement. Pride also appeals the dismissal of its
motion to alter or amend.


                                            III.
      “We review a summary judgment de novo, applying the same standard as
the district court.” United States ex rel. Jamison v. McKesson Corp., 649 F.3d
322, 326 (5th Cir. 2011). Summary judgment is appropriate where, viewing the
evidence in the light most favorable to the nonmovant, “there is no genuine dis-
pute as to any material fact and the movant is entitled to judgment as a matter
of law.” FED. R. CIV. P. 56(a); Songer v. Dillon Res., Inc., 618 F.3d 467, 471 (5th
Cir. 2010). Furthermore, “it is an elementary proposition, and the supporting
cases too numerous to cite, that this court may affirm the district court’s judg-
ment on any grounds supported by the record.”8
      This case is in federal court on diversity jurisdiction, so Texas substantive

      7
          Lexington dismissed its declaratory-judgment action.
      8
        Palmer v. Waxahachie Indep. Sch. Dist., 579 F.3d 502, 506 (5th Cir. 2009) (citing
United States v. Dunigan, 555 F.3d 501, 508 n.12 (5th Cir. 2009)).

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                                        No. 11-10892

law governs. Packard v. OCA, Inc., 624 F.3d 726 (5th Cir. 2010). This court
looks to the decisions of the Texas Supreme Court to determine Texas law, and
where that court has not ruled, the panel “must determine, to the best of our
ability, what the highest court of the state would do.”9 Although the decisions
of the intermediate state courts of appeals are not binding precedent in this
regard, they can be instructive. Am. Int’l Specialty Lines Ins. Co. v. Rentech
Steel, L.L.C., 620 F.3d 558, 566 (5th Cir. 2010).
       Insured parties have limited recourse against insurers in Texas for the
handling of third-party insurance claims. There is no duty of good faith and fair
dealing owed to the insured in this context—common law duties are limited to
contractual obligations and the Stowers10 duty to accept a reasonable settlement
demand.11 In Texas, an insurer is liable under Stowers for rejecting a demand
where
       (1) the claim against the insured is within the scope of coverage,
       (2) the demand is within the policy limits, and (3) the terms of the
       demand are such that an ordinarily prudent insurer would accept
       it, considering the likelihood and degree of the insured’s potential
       exposure to an excess judgment.

Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex. 1994). “[A] Stow-
ers settlement demand must propose to release the insured fully in exchange for
a stated sum of money.” Id. at 848.
       In Farmers Insurance Co. v. Soriano, 881 S.W.2d 312, 315 (Tex. 1994), the


       9
         Packard, 624 F.3d at 730 (quoting United Teacher Assocs. Ins. Co. v. Union Labor Life
Ins. Co., 414 F.3d 558, 566 (5th Cir. 2005)).
       10
            Stowers Furniture Co. v. Am. Indemnity Co., 15 S.W.2d 544 (Tex. 1929).
       11
         Med. Care Am., Inc. v. Nat’l Union Fire Ins. Co., 341 F.3d 415, 425 (5th Cir. 2003)
(citing Md. Ins. Co. v. Head Indus. Coatings & Servs., Inc., 938 S.W.2d 27, 28 (Tex. 1996)
(superseded in part by statute)); see also Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236
S.W.3d 765, 776 (Tex. 2007); Taylor v. Allstate Ins. Co., 356 S.W.3d 92, 97–98 (Tex. App.SS
Houston [1st Dist.] 2011, pet. denied).

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                                   No. 11-10892

court concluded “that when faced with a settlement demand arising out of multi-
ple claims and inadequate proceeds, an insurer may enter into a reasonable
settlement with one of the several claimants even though such settlement
exhausts or diminishes the proceeds available to satisfy other claims.” The rea-
sonableness of the settlement is determined “considering solely the merits of the
[settled claim] and the potential liability of its insured on [that] claim.” Id. at
316. In Travelers Indemnity Co. v. Citgo Petroleum Corp., 166 F.3d 761 (5th Cir.
1999), we interpreted Texas law to extend Soriano to cases with multiple insured
defendants; we held that “an insurer is not subject to liability for proceeding, on
behalf of a sued insured, with a reasonable settlement . . . once a settlement
demand is made, even if the settlement eliminates . . . coverage for a co-insured
as to whom no Stowers demand has been made.” Id. at 768.
      The insurer cannot be liable for failing to settle remaining claims “unless
there is evidence that either (1) [the insurer] negligently rejected a demand from
the [claimant] within policy limits; or (2) the [initial settlement demand] was
itself unreasonable.” Soriano, 881 S.W.2d at 315. The test for whether the set-
tlement was unreasonable invokes the same standard as did Stowers: “that a
reasonably prudent insurer would not have settled the [initial] claim when con-
sidering solely the merits of [that] claim and the potential liability of its insured
on the claim.” Id. at 316.
      The parties agree that the insurers did not reject any demands for Pride
or Harbin. Instead, this case involves the insurers’ liability for accepting a
demand. Although the Stowers duty imposes liability on insurers who reject rea-
sonable demands covered under their policies, we decline to use this case, as
Pride wishes, to extend the Stowers duty to impose liability on insurers for
accepting demands.
      Pride’s common-law claims thus must rest on the insurers’ contractual
duties. The parties do not dispute that the insurers are absolved of their duty

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                                        No. 11-10892

to defend an insured party once the policy has been exhausted by judgments or
settlements; nor do they gainsay that the insurers have a contractual right to
settle claims as they deem appropriate.12 The parties also agree that the Harbin
Settlement exhausted both policies.
       The dispute at the heart of Pride’s breach-of-contract claim is that the
insurers’ acceptance of the Harbin Settlement was unreasonable in violation of
the policies and that, as a result, the insurers were never dismissed from their
contractual duties to defend Pride. Notably, Pride does not contend that the Set-
tlement was per se unreasonable because the Insurers settled for Harbin and not
Pride.13 Instead, Pride attempts to distinguish the instant case from Citgo and
Soriano, in which the reasonableness of the other insured’s settlement was
undisputed.14 Pride asserts that the reasonableness of the Settlement is a ques-
tion of fact for a jury and not appropriate for summary judgment.
       Pride focuses on Stowers, arguing that the Settlement was not a valid
Stowers demand, so the insurers lose their defense for accepting. Pride asserts
that, in the absence of a safe harbor, the reasonableness of the Settlement,
which left Harbin and Pride open to further liability, presents a question of fact.
Though the insurers likely would have faced Stowers liability had they rejected


       12
          Continental’s policy states that “[w]e may investigate and settle any claim or ‘suit’
as we consider appropriate.” Lexington’s policy states that “[w]e will defend any suit against
the Insured alleging liability insured under the provisions of this policy . . . but we will have
the right to make such investigation and negotiation and settlement of any claims or suits as
may be deemed expedient by us.”
       13
         See Citgo, 166 F.3d at 768; see also Am. States Ins. Co. of Tex. v. Arnold, 930 S.W.2d
196, 202 (Tex. App.SSDallas 1996, writ denied).
       14
          See, e.g., Citgo, 166 F.3d at 768 (“Once this settlement had exhausted the policy lim-
its, the provisions of the policy terminated Travelers’ duties under the contract, including its
duties to Citgo as a co-insured. Since Travelers was entitled—indeed apparently required—to
settle the initial claim against its insured, and since Citgo has not alleged that the settlement,
standing alone, was unreasonable, we find that the decision to settle on behalf of Wright con-
stituted reasonable performance of the contract as a matter of law.”).

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                                       No. 11-10892
the Hatleys’ demand, see Soriano, 881 S.W.2d at 315, this court does not need
to determine whether there was a valid Stowers demand.
       “Under Soriano and the explicit language of the policy, [the insurers] had
a right to settle when [they were] presented with a demand within [their] policy
limits.” Citgo, 166 F.3d at 768. Because Pride does not allege that the insurers
negligently rejected a demand that included Pride, the insurers can be liable to
Pride only if the Harbin Settlement was unreasonable. See Soriano, 881 S.W.2d
at 315. “To be unreasonable, [Pride] must show that a reasonably prudent
insurer would not have settled the [Harbin] claim when considering solely the
merits of the [Harbin] claim and the potential liability of its insured on the
claim.” Id. at 316.
       Pride’s only argument that the Harbin Settlement is unreasonable rests
on the residual liability Harbin faces in an indemnity claim by Pride. That argu-
ment fails to create an issue of fact on reasonableness, because the Lexington
policy explicitly exempts claims or suits brought by one insured against
another.15 “[A]n insurer has no duty to settle a claim that is not covered under
its policy.” Garcia, 876 S.W.2d at 848. This court also interpreted Texas law in
St. Paul Fire & Marine Ins. Co. v. Convalescent Services, Inc., 193 F.3d 340, 345
(5th Cir. 1999), rejecting the notion “that the insurer has a duty to consider
claims that are excluded from coverage when making its determination of
whether a settlement is reasonable.”
       In the absence of liability on the part of Harbin to her former employer,
Pride fails to create an issue of fact as to the reasonableness of the Settlement.
See Citgo, 166 F.3d at 765. Because of the likelihood and degree of potential
exposure to excess judgment for Harbin, the Settlement was reasonable as a



       15
       Although a full release is required to trigger a Stowers demand, we need not deter-
mine whether the Settlement satisfies, or even if it is required to satisfy, that prerequisite.

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                                        No. 11-10892
matter of law and did not result in a breach of the insurance contracts.16 The
evidence showed that Harbin falsified her driver logs in order to make deliveries
on time; Wayne Hatley was a paraplegic with limited use of his upper extremi-
ties and facing lifetime medical costs over $4 million; the Hatleys’ lawyer had
obtained jury verdicts of about $25 million in Wise County for similar accidents;
and counsel for Pride and Harbin had estimated a case value exceeding the
insurance coverage. As the district court stated, “Stowers-duty bound or not, the
insurers’ acted reasonably in accepting the Hatleys’ demand despite the fact that
Pride remained exposed.” Pride Transp. v. Cont’l Cas. Co., 804 F. Supp. 2d 520,
530 (N.D. Tex. 2011).


                                              IV.
       “A motion to alter or amend the judgment under Rule 59(e) must clearly
establish either a manifest error of law or fact or must present newly discovered
evidence and cannot be used to raise arguments which could, and should, have
been made before the judgment issued.”17 We generally review for abuse of dis-
cretion the denial of a Rule 59(e) motion. Schiller, 342 F.3d at 566.
       Pride filed a Rule 59(e) motion to alter or amend after the grant of sum-
mary judgment, asserting that the district court erred in its failure to consider,
as part of the reasonableness inquiry, the terms of the Settlement that expressly
excluded Pride’s liability for Harbin’s conduct. Pride relies on an opinion from




       16
         Continental also argues that it cannot be liable for the Settlement, because it had no
control after tendering its policy limits to Lexington. Because there is no fact issue as to the
reasonableness of the Settlement, we do not need to address Continental’s liability as a pri-
mary insurer.
       17
         Schiller v. Physicians Res. Grp., Inc., 342 F.3d 563, 567 (5th Cir. 2003) (internal quo-
tations omitted) (citing Rosenzweig v. Azuriz Corp., 332 F.3d 854, 863–64 (5th Cir. 2003)).

                                               10
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                                    No. 11-10892
the Southern District of Texas18 that was decided after the instant summary
judgment was granted. Without deciding whether that decision is persuasive
authority, we note that nothing in Tristar suggests that the district court a quo
denied Pride’s motion based on “an erroneous view of the law or on a clearly
erroneous assessment of the evidence.” Ross v. Marshall, 426 F.3d 745, 763 (5th
Cir. 2005).
         Tristar is similar to the present case in that it involved an insurer that
settled on behalf of some of the insureds, exhausting the policy and leaving
Tristar without coverage. Unlike the Hatleys, however, the plaintiffs in the
underlying lawsuit in Tristar made an initial demand that would have released
all the defendants, including Tristar. Tristar, 2011 WL 2412678, at *1. After
rejecting the first demand, the insurers accepted a second offer that released all
the insureds except Tristar. Id. The court denied summary judgment as to the
insurer’s Stowers liability for rejecting the first demand. Considering not just
the terms of the initial demand but also the accepted demand, the court held
that the reasonableness of the first demand was a disputed question of fact. Id.
at *4.
         Pride seeks to rely on Tristar for the proposition that, when determining
reasonableness in cases involving multiple insured parties, this court should
consider the demand’s terms regarding the liability of all insured parties. Unlike
the plaintiffs in Tristar, however, the Hatleys never made a settlement demand
that included Pride, nor is the instant case about the insurers’ Stowers liability
for rejecting a demand. The district court did not abuse its discretion in denying
Pride’s motion to alter or amend.




         18
        Am. W. Home Ins. Co. v. Tristar Convenience Stores, Inc., No. H-10-3191, 2011 WL
2412678 (S.D. Tex. June 2, 2011).

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                                              V.
       Pride contends that the district court erred in granting summary judgment
for the insurers on Pride’s claim under Section 541.060(a)(2) of the Texas Insur-
ance Code § 541.060(a)(2), which makes it “an unfair method of competition or
an unfair or deceptive act or practice in the business of insurance” to “fai[l] to
attempt in good faith to effectuate a prompt, fair, and equitable settlement” of
a claim. Pride alleges that the insurers violated their statutory duty of good
faith and fair dealing by not settling Harbin’s liability to Pride.
       The good-faith duty under Section 541.060 is triggered only where “(1) the
policy covers the claim, (2) the insured’s liability is reasonably clear, (3) the
claimant has made a proper settlement demand within policy limits, and (4) the
demand’s terms are such that an ordinarily prudent insurer would accept it.”
Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 77 S.W.3d 253,
255 (Tex. 2002) (interpreting a previous version of the statute). Texas imported
the common-law standard from Stowers, holding that, unlike many jurisdictions,
“in Texas, the common law imposes no duty on an insurer to accept a settlement
demand in excess of policy limits or to make or solicit settlement proposals.”
Id. at 261.
       We can assume arguendo that the Harbin Settlement triggered duties
under Section 541.060: The policies covered the Hatleys’ claim against Harbin;
Harbin’s liability was reasonably clear; the demand was within the policy limits
of $5 million;19 and as determined already, the terms of the Harbin Settlement
were such that an ordinarily prudent insurer would accept them.20 The question


      19
         Continental argues that it is not liable under Section 541.060 because the demand
was not within the primary policy limit of $1 million. We decline to determine whether Con-
tinental would be exempted from liability as the primary insurer, because we hold neither
insurer to have violated its statutory duty.
      20
           We note that under Pride’s theory, Section 541.060 would not be triggered as to the
                                                                                (continued...)

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                                      No. 11-10892
is whether Pride raised an issue of material fact as to the insurers’ good-faith
effort to effect a prompt, fair, and equitable settlement.
       As to Lexington, Pride only speculates, without evidence, that Lexington’s
sole mission was to extricate itself from the case as quickly as possible. “In
short, conclusory allegations, speculation, and unsubstantiated assertions are
inadequate to satisfy the nonmovant’s burden.”21
       Pride attempts to create an issue of fact as to Continental’s good faith by
offering that the claim was without a claims adjuster for a month, and Contin-
ental did not immediately tender its policy limits to Lexington. Neither of these
facts is sufficient to defeat summary judgment. Although there was a month
during which a permanent adjuster was not assigned to the Hatleys’ claims, the
unit manager at Continental handled all interim claims resulting from the acci-
dent, and the Hatleys did not make a demand until after the adjuster had been
replaced. As for the date of Continental’s tender to Lexington on July 17,
2007SSbefore the deadlineSSPride offers no evidence that Continental was acting
in bad faith. To the contrary, Continental produced evidence that it was prepar-
ing the defense and completing due diligence until the tender.
       The summary judgment is AFFIRMED.




       20
         (...continued)
Harbin Settlement, because Pride argues the demand’s terms were not reasonable so as to cre-
ate a Stowers demand. See Rocor, 77 S.W.3d at 262 (adopting the Stowers standards to apply
to Section 541.060).
       21
         Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc)
(superseded by statute on other grounds).

                                            13
