Insurance; Procedure; Litigation: Commercial

El Nagger Fine Arts Furniture, Inc. v. Indian Harbor Insurance Company

Houston-1 – 1/11/07 – 01-05-01069-CV

Justice Jennings

Res judicata did not bar suit against insurer.

P-furniture company sued various defendants, a construction company & insurance companies/agents for damages it sustained in the course of building a furniture store. Allegations include fraud and Insurance Code violations. It also sought declaratory relief against another insurer, Great American Insurance Company of New York, regarding Great American’s liability under another insurance policy that identified P as the named insured. In regard to D-Indian Harbor Insurance Company, P alleged that Great American and various other insurers, including Indian Harbor, issued policies containing “other insurance provisions” relevant to “the responsibility and coverage owed.” P joined Indian Harbor and these other insurers for declaratory relief concerning co-insurance “and other insurance responsibilities between the respective defendants…” Prior to initiation of this suit, P filed a separate suit against the builder, Traxel , and was awarded over $2 million for construction defects. Traxel was an additional named insured under a commercial general liability policy issued by Indian Harbor. During the pendency of that action, Indian Harbor filed a federal declaratory judgment action concerning its duty to defend or indemnify Traxel and obtained a default judgment against Traxel; Indian Harbor did not join P in that suit. Indian Harbor then filed a summary judgment motion in the instant suit, alleging that P’s request for a determination of Indian Harbor’s obligations under its policy in the instant suit should be dismissed based on the fact that it has already been determined that it has no obligation to Traxel under the policy. The trial court rendered summary judgment for Indian Harbor. Held: Reversed and remanded. A declaratory judgment action brought by an insurer is only binding upon a 3^rd party beneficiary to a liability insurance policy if property joined as a party to such action. P was not joined in the federal declaratory judgment action and was not required to intervene in the federal declaratory judgment action in order to avoid any res judiciata effect form the declaratory judgment.