HAYNES, Circuit Judge:
After a jury verdict against it, OneBeacon Insurance Company ("OneBeacon") appeals the judgment, including the district court's denials of OneBeacon's motion for judgment as a matter of law, renewed motion for judgment as a matter of law, and motion for new trial. In addition, T. Wade Welch & Associates (the "Welch Firm") and T. Wade Welch ("Welch") cross-appeal the district court's denial of its motion for entry of judgment.
Finding no error, we AFFIRM.
Since the mid-1990s, the Welch Firm has represented DISH Network Corporation ("DISH") in over 400 different matters. The Welch Firm eventually became DISH's go-to litigation counsel, handling the majority of DISH's litigation, except for patent cases and small-claims cases. In or around 2003, DISH hired the Welch Firm to defend it in a suit brought against DISH by Russian Media Group ("RMG") (the "RMG Litigation") in federal court in Connecticut. Ross Wooten served as the
In 2005, RMG served discovery on DISH. Wooten did not respond to RMG's discovery requests within the time limit, believing that he and RMG's counsel, David Golub, had orally agreed to extend the response deadline. Golub later moved to compel Wooten to respond to the pending discovery requests. Wooten did not respond to the motion. On February 23, 2006, the Connecticut district court entered a discovery order (the "discovery order") requiring DISH to respond to all of RMG's requests by March 16, 2006.
Wooten responded to RMG's requests for admissions and interrogatories and soon thereafter produced roughly 5,000 pages of documents to RMG. Wooten did not, however, have DISH verify the responses at this time. Further, a number of Wooten's responses to interrogatories promised a later supplement that would identify, by Bates number, applicable documents relevant to the interrogatory. Wooten believed that he had complied with his discovery obligations at that time.
On November 20, 2006, Welch, on behalf of the Welch Firm, completed an application for insurance with Westport Insurance Company ("Westport"). The application asked the following question:
Welch responded "No." The application also asked, "[i]n the past five years, has any action been taken against any lawyer proposed for this insurance for disbarment, suspension, reprimand, or other disciplinary action?" Welch responded "No." The application also stated, "All claims will be excluded that result from any acts, circumstances or situations known prior to the inception of coverage being applied for, that could reasonably be expected to result in a claim."
On December 20, 2006, Welch represented to OneBeacon that the statements made in the Westport application would be deemed made to OneBeacon and that all statements were true as of December 20, 2006. He also stated that he was "not aware of any claims against the Insured or circumstances, Incidents, disputes or fee problems that may give rise to a claim against the Insured, other than those disclosed in the application."
OneBeacon issued a claims-made
The policy defined wrongful act as "any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services." The definition included "personal injury arising out of [the insured's] conduct relating to the delivery of professional legal services."
Two months after the effective date of the 2006-07 policy, Golub filed a motion seeking sanctions (the "Sanctions Motion") for Wooten's failure to comply with the court's February 2006 discovery order, citing his "blatant failure to respond fully and properly to [RMG's] discovery requests." Golub identified three deficiencies in Wooten's discovery responses: his failure to provide verifications, Bates number references to documents that responded to certain interrogatories, and certain categories of additional documents. He requested "death penalty" sanctions against DISH, which would deem RMG's three primary claims established and preclude DISH from challenging RMG's damages evidence.
Wooten later testified that at this point he still believed he could work the discovery dispute out and avoid sanctions. Indeed, there was evidence presented at trial that had Wooten addressed the deficiencies or attempted to resolve the dispute with Golub, he might have avoided sanctions altogether and would have avoided severe sanctions: Golub testified that death penalty sanctions were "unheard of in Connecticut" and that he believed "there was never going to be sanctions issued here." The magistrate judge held a hearing on the motion for sanctions on July 12, 2007, and the same day, entered an order granting RMG's motion for death penalty sanctions (the "Sanctions Order"). Wooten did not tell DISH or the Welch Firm about the Sanctions Order.
On December 6, 2007, Welch completed a renewal application for malpractice insurance with OneBeacon, this time using OneBeacon's application form. The application asked:
Welch answered "No" to both questions. OneBeacon renewed the policy for the period December 20, 2007, through December 20, 2008 (the "2007-08 policy"). The 2007-08 policy had the same prior-knowledge exclusion as the 2006-07 policy.
Wooten filed objections to the magistrate judge's order, but the district court affirmed the Sanctions Order in February 2008. Welch first learned of the order from another associate at the firm; Welch then informed DISH's general counsel of the order. Welch reached out to Wooten for information regarding the order, but Wooten resigned from the firm. DISH replaced the Welch Firm with another firm in August
In April 2008, the Welch Firm advised OneBeacon that DISH had a potential malpractice claim relating to the RMG Litigation. OneBeacon responded with a reservation of rights and a request to be notified if the Welch Firm received a formal demand from DISH. On June 4, 2008, the Welch Firm informed OneBeacon that RMG was demanding in excess of $105,800,000 to settle the underlying lawsuit. OneBeacon began formally treating the matter as a claim at this point but had not yet begun an investigation. In December 2010, DISH requested that OneBeacon make its policy limits available for a potential settlement with RMG.
OneBeacon later sent Welch an "investigative" reservation-of-rights letter, which was followed by a supplemental reservation-of-rights letter. The prior-knowledge exclusion was identified as a potential policy defense in the latter letter. Counsel for the Welch Firm sent OneBeacon a report concluding that DISH's claim against the Welch Firm was "a potentially high exposure claim" and that "Wooten clearly committed malpractice." One estimate of RMG's damages exceeded $25 million.
On June 14, 2011, DISH offered to settle and release the Welch Firm in exchange for OneBeacon's policy limits. DISH did not offer to release Wooten in this letter. Counsel for the Welch Firm wrote OneBeacon on June 27, 2011, formally requesting that OneBeacon settle DISH's claims against the Welch Firm for an amount within the Welch Firm's policy limits. OneBeacon responded on August 5, 2011, declined DISH's settlement offer, and noted that "it [was] uncertain whether any damages were actually caused by [the Welch Firm]."
OneBeacon then rescinded the Welch Firm's insurance policy, and on August 22, 2011, filed the instant suit for declaratory judgment, seeking to rescind the policy or obtain a declaration that the prior-knowledge exclusion barred coverage. The Welch Firm counterclaimed, asserting violations of the common law Stowers duty
The parties filed motions for summary judgment in early 2014, including cross-motions for summary judgment with respect to the policy's prior-knowledge exclusion.
The case was tried to a jury. After the Welch Firm rested, OneBeacon moved for judgment as a matter of law, which the court denied. The jury returned a verdict in favor of DISH and the Welch Firm on every question. Specifically, the jury found that OneBeacon had not shown that a reasonable attorney, given Wooten's knowledge in December 2006, could have reasonably expected his actions to result in a malpractice claim; that OneBeacon had not proved its claim for rescission; that OneBeacon knowingly violated Chapter 541 of the Texas Insurance Code; and that OneBeacon was grossly negligent in violating its Stowers duties. The jury verdict provided for damages to the Welch Firm equal to the malpractice judgment (approximately $12.5 million) plus $8 million in past and future lost profits, $5 million in exemplary damages, and $7.5 million in additional damages for OneBeacon's knowing violation of the Texas Insurance Code. The district court partially remitted the jury's award, requiring the Welch Firm to elect between the $5 million award for gross negligence and the $7.5 million for the knowing violation of the Texas Insurance Code. OneBeacon filed a renewed motion for judgment as a matter of law under Rule 50(b) and a motion for new trial under Rule 59. The district court denied both.
OneBeacon timely appealed, contending that the district court erred in holding that (1) OneBeacon was not entitled to judgment as a matter of law based upon the prior-knowledge exclusion, (2) DISH's June 14, 2011, letter was a valid Stowers demand, (3) additional damages were proper under Chapter 541 of the Texas Insurance Code, and (4) there was competent evidence of the Welch Firm's lost profits. The Welch parties cross-appealed, contending that the district court erred in requiring Welch to elect between the jury's $5 million award for gross negligence and its $7.5 million award for the knowing violation of the Texas Insurance Code.
Our review of a jury's verdict is "especially deferential." SMI Owen Steel Co. v. Marsh U.S.A., Inc., 520 F.3d 432, 437 (5th Cir. 2008) (quoting Flowers v. S. Reg'l Physician Servs., Inc., 247 F.3d 229, 235 (5th Cir. 2001)). We review the denial of a motion for judgment as a matter of law de novo but apply the same legal standard as the district court. Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 498 (5th Cir. 2012). A litigant cannot obtain judgment as a matter of law "unless the facts and inferences point `so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary conclusion.'" Id. (quoting Flowers, 247 F.3d at 235). We also draw all reasonable inferences in the light most favorable to the verdict and cannot substitute other inferences that we might regard as more reasonable. Westlake Petrochems., L.L.C.
The jury is "free to choose among reasonable constructions of the evidence." United States v. Ramos-Cardenas, 524 F.3d 600, 605 (5th Cir. 2008). Thus, we "cannot reverse a denial of a motion for judgment as a matter of law unless the jury's factual findings are not supported by substantial evidence, or if the legal conclusions implied from the jury's verdict cannot in law be supported by those findings." Am. Home Assurance Co. v. United Space All., LLC, 378 F.3d 482, 488 (5th Cir. 2004). Nevertheless, "[i]n reviewing an award of damages, we review all issues of law de novo." Nero v. Indus. Molding Corp., 167 F.3d 921, 929 (5th Cir. 1999).
Any argument made in a renewed motion for judgment as a matter of law under Rule 50(b) must have been previously made in a motion for judgment as a matter of law under Rule 50(a). See Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 398 n.1, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006); see also Flowers, 247 F.3d at 238 ("If a party fails to move for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) on an issue at the conclusion of all of the evidence, that party waives both its right to file a renewed post-verdict Rule 50(b) motion and also its right to challenge the sufficiency of the evidence on that issue on appeal.").
We review a district court's denial of a motion for new trial for an abuse of discretion. See McCaig v. Wells Fargo Bank (Tex.), N.A., 788 F.3d 463, 472 (5th Cir. 2015). "The district court abuses its discretion by denying a new trial only when there is an `absolute absence of evidence to support the jury's verdict.'" Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 881 (5th Cir. 2013) (quoting Seidman v. Am. Airlines, Inc., 923 F.2d 1134, 1140 (5th Cir. 1991)). If the evidence is legally sufficient, we must find that the district court did not abuse its discretion in denying a motion for new trial. See Cobb v. Rowan Cos., Inc., 919 F.2d 1089, 1090 (5th Cir. 1991); see also Whitehead v. Food Max of Miss., Inc., 163 F.3d 265, 269 (5th Cir. 1998) (explaining that it is "far easier" to show a district court should have granted a motion for judgment as a matter of law than it is to show a district court abused its discretion by not granting a new trial).
OneBeacon argues that the district court erred in denying its motion and renewed motion for judgment as a matter of law based on the policy's prior-knowledge exclusion. Specifically, OneBeacon asserts that the district court incorrectly concluded that the prior-knowledge exclusion, if applied as written, would render the policy's retroactive coverage illusory. Accordingly, OneBeacon contends the district court also erred in adopting the Welch Firm's proposed interpretation of the prior-knowledge exclusion.
The district court concluded, as a matter of law, that OneBeacon's interpretation of
The district court could not apply the literal policy language because of the extreme overbreadth of the wrongful act definition used in the exclusion: "any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services." On its face, this covers every single thing an attorney does or does not do, wrongful or not. As written, then, the exclusion renders the coverage illusory and is facially absurd. Indeed, OneBeacon concedes that the exclusion requires some modification, it simply disagrees with the district court's approach.
The exclusion in the context of this policy must be directed at a "wrongful act" reasonably likely to lead to a malpractice claim. Under the undisputed facts of this case, at the relevant time of December 20, 2006, the evidence supports the conclusion that Wooten's "wrongful acts," had they been rectified, would not have resulted in the sanctions that ensued and, thus, would not have supported the kind of recovery that the policy insured against (recovery for malpractice). At this point, he was merely under an order to provide discovery. Such discovery orders are lamentably par for the course in litigation and even Wooten's opponent, Golub, agreed that had Wooten complied before Golub filed the motion in February 2007, death penalty sanctions, which were very rare, would not have resulted. Wooten would not receive the motion seeking or the order granting Golub's request for death penalty sanctions from the magistrate judge until February and July 2007, respectively. Furthermore, evidence was presented that Wooten could likely have cured his mistake almost until the date of the magistrate court's July 2007 hearing. In the face of this evidence, OneBeacon, which bears the burden of proving an exclusion applies, cannot prevail as a matter of law on a contrary view. Crose v. Humana Ins. Co., 823 F.3d 344, 348 (5th Cir. 2016).
For these reasons, we affirm the district court's orders denying OneBeacon's motion and renewed motion for judgment as a matter of law based on the policy's prior-knowledge exclusion.
OneBeacon next challenges the district court's ruling that DISH's June 14, 2011,
Under Stowers, in certain circumstances, insurers may be liable for negligently failing to settle within policy limits claims made against their insureds. Tex. Farmers Ins. Co. v. Soriano, 881 S.W.2d 312, 314-15 (Tex. 1994); G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 547 (Tex. Comm'n App. 1929, holding approved). The Stowers duty is activated by a settlement demand when "three prerequisites are met: (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). The demand must also offer to release fully the insured in exchange for a sum equal to or less than the policy limits. Id. at 848-49.
OneBeacon argues that to be a "true" Stowers demand, the offer to settle must offer to release all insureds (here the Welch Firm and Wooten). The Texas Supreme Court has not spoken directly on this issue. However, we have. In Travelers Indemnity Co. v. Citgo Petroleum Corp., 166 F.3d 761, 764 (5th Cir. 1999), we held that, when faced with a settlement demand over a policy with multiple insureds, an insurer fulfilling its Stowers duty "is free to settle suits against one of its insureds without being hindered by potential liability to co-insured parties who have not yet been sued."
Instead of following Citgo, OneBeacon urges us to follow a recent Texas appellate decision in which the court found no valid Stowers demand where only the insured employer and not the employee (an additional insured) would have been released. Patterson v. Home State Cty. Mut. Ins. Co., No. 01-12-00365-CV, 2014
Next, OneBeacon challenges the jury's award of additional damages on the ground that OneBeacon "knowingly" violated Section 541.060 of the Texas Insurance Code, contending that the district court erred in permitting this issue to go to the jury.
Chapter 541 of the Texas Insurance Code forbids an insurer from "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of... a claim with respect to which the insurer's liability has become reasonably clear." TEX. INS. CODE § 541.060(a)(2)(A). To have acted "knowingly," OneBeacon must have acted with actual awareness of the falsity, unfairness, or deceptiveness of the act that made it liable under Chapter 541. See St. Paul Surplus Lines Ins. Co., Inc. v. Dal-Worth Tank Co., Inc., 974 S.W.2d 51, 54 (Tex. 1998). "`Actual awareness' does not mean merely that a person knows what he is doing; rather, it means that a person knows that what he is doing is false, deceptive, or unfair. In other words, a person must think to himself at some point, `Yes, I know this is false, deceptive, or unfair to him, but I'm going to do it anyway.'" Id. at 54-55.
OneBeacon contends that it declined to settle the DISH claim because it believed that the prior-knowledge exclusion in the policy precluded coverage for the loss resulting from Wooten's malpractice. To the extent it was wrong about coverage, OneBeacon argues that its mistake was reasonable because even the district court concluded that the (patently overbroad) prior-knowledge exclusion, as written, would preclude coverage.
However, the Welch Firm points to contradictory evidence supporting the jury's finding. For example, OneBeacon's contemporaneous written explanation for its rejection of DISH's demand, which made no mention of any belief that OneBeacon had valid coverage defenses, belies OneBeacon's current argument that it relied on the prior-knowledge exclusion. Furthermore, DISH's expert testified that OneBeacon's conduct was not that of a reasonable insurer acting prudently, but was an instance of prohibited "post-claim" underwriting, which he defined as occurring when "the insurance company realizes that they have a problem, and they desperately look for a way to avoid paying the claim. And what they'll do is they'll try to search for a morsel of evidence that they can
Although OneBeacon can point to evidence that it believed it had coverage defenses in order to rebut the suggestion that OneBeacon knowingly engaged in false, deceptive, or unfair practices, the jury was free to disregard that evidence and credit the testimony of DISH's expert. The evidence does not point so strongly and overwhelmingly in OneBeacon's favor that reasonable jurors could not have reached a different conclusion. See Flowers, 247 F.3d at 235. Accordingly, the district court did not err in entering judgment on the jury's award of additional damages on the ground that OneBeacon "knowingly" violated Section 541.060 of the Texas Insurance Code.
OneBeacon next challenges the jury's award of $8 million in past and future lost profits to the Welch Firm. Specifically, OneBeacon argues that there was no competent evidence for the jury to come to this conclusion.
In its Rule 50(b) motion, OneBeacon moved for renewed judgment as a matter of law on the Welch Firm's lost profits claim. As to this claim, however, OneBeacon did not move for judgment as a matter of law before the jury's verdict in its Rule 50(a) motion. We have held that a party cannot "renew" a motion it never made. In re Isbell Records Inc., 774 F.3d 859, 868-69 (5th Cir. 2014); Flowers, 247 F.3d at 238 ("If a party fails to move for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) on an issue at the conclusion of all of the evidence, that party waives both its right to file a renewed post-verdict Rule 50(b) motion and also its right to challenge the sufficiency of the evidence on that issue on appeal.").
In its cross-appeal, the Welch Firm challenges the district court's denial of its motion for entry of judgment for failing to include the jury's award for exemplary
Under the one satisfaction rule, Texas law limits recovery to one satisfaction per injury. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991), modified on other grounds in Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006). Therefore, Texas law may force plaintiffs to elect the recovery they prefer if they receive a jury verdict with more than one assessment of damages. Kish v. Van Note, 692 S.W.2d 463, 467-68 (Tex. 1985). However, when "awards of additional damages and punitive damages [are] based upon separate jury findings and upon different acts," a plaintiff may be entitled to both such damages. Berry Prop. Mgmt., Inc. v. Bliskey, 850 S.W.2d 644, 665-66 (Tex. App. — Corpus Christi 1993, writ dism'd by agr.); see also Tompkins v. Cyr, 202 F.3d 770, 787 n.11 (5th Cir. 2000); Birchfield v. Texarkana Mem'l Hospital, 747 S.W.2d 361, 367 (Tex. 1987) (holding that separate awards of exemplary damages require that the verdict include "separate and distinct findings of actual damages").
Berry elucidates this distinction. In Berry, Juli Bliskey lived in a townhome managed by Berry Property Management Incorporated ("Berry"). 850 S.W.2d at 651. An intruder broke into her apartment while she was asleep, using a key to her unit. Id. The intruder sexually assaulted Bliskey. Id. She sued Berry, asserting a negligence claim and a claim under the Texas Deceptive Trade Practices Act ("DTPA"). Id. Each claim was based on a different act by Berry: the negligence claim was based on lacking safety procedures, which allowed the intruder to obtain a copy of Bliskey's key, whereas the DTPA claim was based on Berry's failure to provide Bliskey with a statutorily-required night latch for her door. Id. at 654, 658. The jury awarded Bliskey compensatory damages resulting from Berry's negligence and from Berry's deceptive conduct under the DTPA. Id. at 664. In addition, it awarded Bliskey common law exemplary damages, as well as additional DTPA damages. Id.
The court of appeals determined that the one satisfaction rule applied and allowed Bliskey to receive only one recovery for her compensatory damages because she only suffered one injury. Id. at 666. However, because "Berry engaged in two different acts" the court of appeals held that "the trial court did not err in awarding Bliskey both common law exemplary damages and statutory additional damages." Id. at 665.
The Welch Firm argues that, like in Berry, the jury found that OneBeacon violated two claims — Chapter 541 and the common law Stowers doctrine — such that it is entitled to the separate jury awards of both additional and exemplary damages. In support, the Welch Firm argues each claim entails distinct forms of culpability and injury.
AFFIRMED.
Like in Citgo, the instant situation differs from the facts of Soriano in that here, OneBeacon faced multiple insureds rather than a claimant and an insured. In Citgo, we rejected the same argument OneBeacon makes here to distinguish Soriano that "an insurer owes a higher duty to its insured than it does to claimants." Citgo, 166 F.3d at 765-68.