NEVADA FEDERAL DISTRICT COURT PREDICTS THE TEXAS SUPREME COURT WILL FORBID REIMBURSEMENT OF DEFENSE FEES FOLLOWING A UNILATERAL RESERVATION OF ...

Nevada Federal District Court Predicts The Texas Supreme Court Will Forbid Reimbursement Of Defense Fees Following A Unilateral Reservation Of The Right To Reimbursement

The Ohio Casualty Insurance Company v. Biotech Pharmacy, Inc. et al. adv.
U.S.D.C., District of Nevada, Case No. 2:05-CV-1214, RLH-PAL (D. NEV. 4-2-2008)

In the first decision nationally to expressly address an issue of Texas law, the Court predicted that the Texas Supreme Court would, consistent with its prior precedent, find that "a unilateral reservation of rights letter cannot create rights not contained in the insurance policy which include the right to seek reimbursement of defense fees where there was no potential for coverage". In previous cases, the Texas Supreme Court, following Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510, 515-16 (Wyo. 2000) found that a unilateral reservation of rights letter cannot create a right for an right for an insurer to seek reimbursement of settlement costs based on the logic of the Shoshone case which had expressly found that right extended to seek reimbursement of defense costs.

The Texas Supreme Court reaffirmed its earlier ruling in Matagorda finding in Excess Underwriters at Lloyd's, London v. Frank's Casing Crew & Rental Tools, Inc., No. 02-0730, ___S.W.3d___ ,2008 WL 274878, (Tex., Feb., 2008) that in Texas the same rule applied in a excess policy context.

The court denied a concurrent motion for reconsideration under FRCP rule 69 as moot in light of its finding vis-a-vis reimbursement. It had previously concluded that a 56(f) right to conduct discovery arose in determining whether a copyright infringement claim was based sufficiently on advertising to fall within the pertinent "advertising injury" coverage.

Gauntlett & Associates attorneys, David A. Gauntlett and Joseph S. McMillen represented Biotech Pharmacy, Inc.