A federal court in Texas dismissed an insurer’s claim based on the Texas Insurance Code in a lawsuit seeking settlement contribution from a non-participating excess insurer. Starnet Ins. Co. v. Fed. Ins. Co., 2016 WL 5957620 (W.D. Tex. Oct. 12, 2016).

The underlying claim involved the blowout of a well drilled by the insured, resulting in surface pollution to surrounding property owned by a third party. The clean-up expenses were allocated to the insured’s working interest in the well, which was arguably covered by the insured’s policies. The excess insurer, however, refused to pay the claim because it alleged that its policy was not excess to the insurer’s primary policy. The primary insurer paid the excess insurer’s portion of the claim in exchange for a release and subrogation agreement. The paying insurer then sued the excess insurer for violating Chapters 541 and 542 of the Texas Insurance Code.

The excess insurer filed a motion to dismiss based on the primary insurer’s lack of standing under the Insurance Code. The court acknowledged that claims under Chapter 541 cannot be assigned from an insured to an insurer. The court also held that the insurer could not bring suit under Chapter 542 because the Texas Legislature explicitly restricted the Chapter’s scope to first-party claims. Because the insurer was seeking to recover money paid to indemnify a third party, it was not a first-party claim. Therefore, the insurer was not making a claim as defined by Chapter 542 and lacked subject matter jurisdiction to bring suit against the excess insurer.