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At a Glance:
Seger v. Yorkshire Insurance Co., Ltd.
June 17, 2016
503 S.W.3d 388
Texas Supreme Court
Published Opinion

Seger v. Yorkshire Insurance Co., Ltd.

Supreme Court of Texas.

Roy SEGER, et al., Petitioners,


YORKSHIRE INSURANCE CO., LTD., and Ocean Marine Insurance Co., Ltd, Respondents

NO. 13–0673


Argued September 3, 2015




Rehearing Denied December 2, 2016


Attorneys & Firms

John T. Smithee, Templeton Smithee Hayes Heinrich & Russell LLP, Amarillo, TX, for Petitioners.

Charles R. ‘Skip’ Watson Jr., Lawrence Matthew Doss, Mullin Hoard & Brown, LLP, Lubbock, TX, for Respondents.

George S. Christian, Texas Civil Justice League, Austin TX, for Amicus Curiae parties.


JUSTICE GREEN delivered the opinion of the Court.

After a tragic accident, a deceased derrick hand’s parents sued the company that owned the drilling rig upon which the fatal accident occurred. The drilling company demanded that its commercial general liability (CGL) insurers defend it in the litigation. The insurers refused based on lack of coverage. The parents obtained a judgment against the drilling company, the company assigned its rights against the insurers to the parents, and the parents brought a Stowers action. The evidence is legally insufficient to support the jury’s finding that the deceased worker was not a leased-in worker; in fact, the evidence is conclusive that he was a leased-in worker under the definition given by the court of appeals. Coverage is therefore precluded as a matter of law. Because the coverage issue is dispositive, we do not address the damages issue. We affirm the court of appeals’ judgment that the parents take nothing, but on different grounds.

I. Facts and Procedural Background

Randall Seger (Randy) died in 1992 while working on a hydraulic-lift drilling rig that suddenly collapsed. At the time of the accident, Randy was employed by Employer’s Contractor Services, Inc. (ECS), an oilfield service company. As an employee of ECS, Randy provided services to Diatom Drilling Co., L.P., which owned the drilling rig. ECS’s president and founder, Cynthia Gillman, was also Diatom’s general partner.

Diatom was insured under a CGL policy issued by fifteen offshore insurers, including lead insurers Yorkshire Insurance Co. *393 and Ocean Marine Insurance Co. (collectively, the CGL Insurers). The “cover note” for Diatom’s policy identified Diatom and ECS as the insureds, provided a maximum of $500,000 of coverage for any one bodily injury accident or occurrence, and contained a “condition” “Excluding Leased–In Employees/Workers.” The policy also excluded employees, but included independent contractors, and provided that the CGL Insurers “shall have the right and duty to defend any suit against the insured seeking damages.”

A. The Wrongful Death Action

The CGL Insurers were promptly notified of Randy’s death, but Randy was erroneously referred to as a Diatom employee. The CGL Insurers did not investigate the incident and apparently conducted no inquiry or review of the policy to determine coverage. Rather, the CGL Insurers’ strategy was to “keep a low profile” as they “[did] not wish to encourage any suit papers.” Randy’s parents, Roy Seger and Shirley Faye Hoskins (the Segers), ultimately brought a wrongful death action against Diatom and its partners in 1993, but the suit sat dormant for years.

In October 1998, the Segers made their first offer to settle the case within policy limits for $500,000. Diatom forwarded the offer to the CGL Insurers and made its first demand that the CGL Insurers provide a defense and settle the case within the policy limits. The CGL Insurers denied that Randy’s death was a covered occurrence, notified Diatom that two of the CGL Insurers had become insolvent and therefore the demand exceeded policy limits, and refused to provide a defense or settle the case. In June 1999, the Segers made a second settlement offer within coverage limits, offering to accept $368,190 to “resolve all claims and all pending litigation arising out of the death of Randy Seger.” The CGL Insurers rejected that offer. With a trial setting looming, Diatom made a second demand for a defense, asking the CGL Insurers to “come in and accept defense and acknowledge coverage on our behalf and settle the case within the policy limits.” In June 2000, Diatom repeated that demand. The Segers made a third settlement offer prior to the March 2001 trial, offering to accept $250,000 to “resolve all pending litigation between the parties.” The CGL Insurers again declined to accept the settlement offer.

Before trial, the Segers nonsuited Diatom’s individual partners, leaving Diatom as the only defendant. Diatom’s counsel then withdrew from the case, claiming that Diatom was “unable to pay attorney fees.”

At trial, Diatom appeared only through Gillman, its general partner, who is not a lawyer and had been subpoenaed to appear as a witness. Diatom did not announce ready when the proceeding was called, presented no opening or closing argument, offered no evidence, and did not cross-examine any witnesses. Gillman testified and was excused after her testimony. The CGL Insurers, despite having notice of the trial, elected not to attend or participate. The Segers presented evidence to prove both Diatom’s liability and damages. After a full day of hearing evidence, the trial court found Diatom liable for Randy’s death and awarded the Segers $15 million, plus interest.

Following entry of the judgment, Gillman contacted the CGL Insurers and inquired about what they intended to do. Receiving no answer, Diatom assigned to the Segers “any and all claims and causes of action” against the CGL Insurers, but reserved Diatom’s right to recover its attorney’s fees incurred in the underlying suit. In exchange, the Segers agreed to release Diatom’s partners from any personal *394 liability, even though they had already been nonsuited.

B. The Stowers Action

The Segers filed a Stowers Insurers). The Segers filed a nonsuit as to the other CGL Insurers.

The Stowers action.

The Stowers Insurers’ negligence and causation, and the trial court directed verdict as to damages based on the underlying judgment against Diatom. In April 2006, the trial court entered a $37,213,592.01 final judgment in favor of the Segers.

C. The Stowers Action Appeals

In the first appeal, the Seger I, so we do the same.

*395 The Id. at 283.

D. The Stowers Action on Remand

On remand, the Stowers Insurers appealed.

E. The Present Stowers Appeal

The Seger II, so we do the same.

II. The Stowers Issue

A Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 849 (Tex.1994).

Although the parties’ focus has been on damages and whether the underlying trial was fully adversarial, the Segers cannot be entitled to any id. at 848 (“We start with the proposition that an insurer has no duty to settle a claim that is not covered under its policy.”).

A. Coverage

The Segers argue that the Stowers cause of action, the Segers had the burden to prove that Randy was an independent contractor or other third party. To fully understand the coverage issue in this case, a more detailed factual background is helpful, so that is where we begin.

1. Diatom’s Insurance

Diatom could not afford workers’ compensation insurance for all of its employees. As an alternative to purchasing workers’ compensation insurance, Gillman established an arrangement under which ECS—a company she created—employed the drilling workers and, as Diatom’s independent contractor, provided those workers to Diatom. Neither Diatom nor ECS furnished workers’ compensation insurance for the drilling workers.4 Diatom instead purchased a Lloyd’s-of-London-type CGL policy spread among fifteen insurers (the CGL Insurers), including Yorkshire and Ocean Marine (the Stowers Insurers).5

Diatom’s CGL policy provided a maximum of $500,000 coverage for any one bodily injury accident or occurrence. In the policy’s “General Liability Standard Provisions,” “bodily injury” is defined as “bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death.” The policy expressly excludes “bodily injury to any employee of the Insured arising out of and in the course of his employment by the *397 Insured.” Although a common CGL policy endorsement excludes liability for injury to independent contractors, see Certain Interested Underwriters at Lloyd’s, London v. Stolberg, 680 F.3d 61, 64 (1st Cir.2012), Diatom’s CGL policy expressly covered liability for injury to independent contractors.6 Diatom’s policy itself did not address leased-in workers, but the cover note to Diatom’s CGL policy, which identified both Diatom and ECS as insureds, contained the following “condition”: “To cover the Assured’s Legal Liability to Third Parties as per American C.G.L. Form L6395a ... Excluding Leased-in Employees/Workers.”

2. Leased–In Exclusion

Diatom’s CGL Policy does not define leased-in employees or workers. The parties agree that, when the policy was written in 1992, there was no generally accepted definition of “leased-in worker” or “leased-in employee.” At that time, Texas had not yet adopted the Staff Leasing Services Act, which regulates the employee-leasing market. See TEX. LAB. CODE §§ 91.001–.062).

The employee-leasing market expanded in the late 1980s and early 1990s because of the rapid increase in the cost of workers’ compensation insurance. See Jill Williford, TEX. LAB. CODE § 406.033(a) (prohibiting employers that opt out of the workers’ compensation system from asserting certain common law defenses to an employee’s claim for damages resulting from personal injury or death within the course and scope of employment). This was accomplished by creating a contract through which the staff leasing agency became an independent contractor to the business. Then, because the workers were not employees of the business, they could not recover the benefits of the workers’ compensation system from the business. See id. § 406.122(a).

Most CGL policies have provisions that exclude coverage for claims that would otherwise be covered under workers’ compensation insurance, which is required in most states.7 Steven P. Perlmutter, Id. at 88–90. CGL policies were never meant to cover claims by employees against their employers. 9A STEVEN PLITT ET AL., COUCH ON INSURANCE § 129:11 (3d ed.2016).

When employee leasing became more popular in the 1980s and 1990s, the question arose of whether liabilities to “leased workers” were covered under CGL policies. Perlmutter, supra, at 762. That question turns on whether the leased worker could be considered an employee under the policy; if so, then the insured’s liability to the worker is excluded. Id. at 762–63. Most CGL policies now include some kind of express leased worker exclusion. Id. at 763. As mentioned above, though, Diatom’s policy does not include a definition of “leased-in employee/worker.”

The court of appeals addressed the coverage issue in two related appeals, reaching the same conclusion: Diatom’s CGL policy excluded claims brought on behalf of leased-in workers. Seger I, 279 S.W.3d at 767. In its determination, the court looked to dictionary definitions of “leased,” “worker,” and “in” to conclude, in two opinions, that the cover note condition:

unambiguously excludes from coverage all claims for a named insured’s liability for bodily injury or property damage brought by or on behalf of persons that perform work for the insured under an agreement with another allowing temporary use of the worker, even though the leased worker would not be an employee of insured.

Seger I, 279 S.W.3d at 767.

3. Prior Coverage Determination

The Diatom Drilling Co. was dictum and, therefore, was not binding on the trial court.

*399 This Court has defined dictum as: “An opinion expressed by a court, but which, not being necessarily involved in the case, lacks the force of an adjudication; ... an opinion of a judge which does not embody the resolution or determination of the court, and made without argument, or full consideration of the point.” R.R. Comm’n v. Aluminum Co. of Am., 380 S.W.2d 599, 601 (Tex.1963)).

When determining whether a statement is dictum, we look to the language and structure of the opinion as we did in Id.

Here, the court of appeals was reviewing a summary judgment order. Id.

Based on the language of the opinion and the surrounding circumstances, we cannot say that the court of appeals held that Randy was a leased-in worker. This *400 is not a case similar to Grigsby, 153 S.W. at 1126. Accordingly, we hold that the statement was obiter dictum and had no precedential value. The issue of coverage was therefore properly before the jury.

4. Burden of Proof

Our inquiry into the coverage issue, however, does not end there. The Segers argue that the burden rests on the Block, 744 S.W.2d at 944 (“[T]he time of the insured’s damages is a precondition to any coverage rather than an exception to general coverage.”).

A Stowers claim was met). Accordingly, the Segers, as Diatom’s assignees, had the burden to prove that Diatom was covered for Randy’s death under its CGL policy. The only coverage element at issue here is whether the injury was incurred by a person whose injuries are covered by the policy.

5. The Segers’ Initial Coverage Burden

Although it was an element essential to recovery, the Segers did not request, and the trial court did not submit, a jury question on the Segers’ initial coverage burden as to whether Randy was a person whose injuries or death were covered under Diatom’s CGL policy.9 Instead, the Segers rely on the trial court’s implied finding to support their coverage argument. In its judgment, the trial court concluded that, based on the jury’s answers,10 the Segers’ claim was covered by Diatom’s CGL policy. The trial court’s judgment can be supported only by a finding that Randy was an independent contractor or other third party.

“When a court makes fact findings but inadvertently omits an essential element of a ground of recovery or defense, the presumption of validity will supply by implication any omitted unrequested element that is supported by evidence.” Burnett v. Motyka, 610 S.W.2d 735, 736 (Tex.1980)) (“[W]here no findings of fact or conclusions of law are filed or requested, it will be implied that the trial court made all the necessary findings to support its judgment.”). The Segers’ failure to request a jury question on Randy’s status as a third party or independent contractor is not fatal to their claims.

*402 We note that the Segers only pled coverage generally, alleging that Randy’s death was a covered occurrence under the terms of the policy, “and all other requirements of coverage were met.” While the Segers never explicitly alleged that Randy was a third party, the Segers’ general pleading is sufficient in this case because we “construe the pleadings liberally” in favor of coverage when reviewing a Gehan Homes, Ltd. v. Emp’rs Mut. Cas. Co., 146 S.W.3d 833, 838 (Tex.App.–Dallas 2004, pet. denied) (“The insurer’s duty to defend arises when a third party sues the insured on allegations that, if taken as true, potentially state a cause of action within the terms of the policy.”); PLITT, supra, at § 129:1 (“[C]ommercial general liability insurance policies provide for broad coverage generally.”); Perlmutter, supra, at 764 (noting that CGL policies are “designed to cover an employer’s liability to third persons for the negligence of its agents, servants, and employees”). Here, Cynthia Gillman, acting on behalf of Diatom and ECS, procured the CGL policy. The policy lists the insureds as “Diatom Drilling Company” and “Employer Contractor Services, Inc.” The policy does not include employees of Diatom or ECS as insureds—in fact it expressly excludes bodily injury to employees from coverage—and Randy is not otherwise included as a “person[ ] insured” as described in the policy. Therefore, because Randy was not a party to the insurance policy, he is necessarily a third party. See Third Party, BLACK’S LAW DICTIONARY 1708 (10th ed. 2014) (“Someone who is not a party to a lawsuit, agreement, or other transaction but who is usu[ally] somehow implicated in it....”). Therefore, the policy covers Diatom’s liabilities to Randy unless one of the policy exclusions applies.

6. The Stowers Insurers’ Exclusion Burden

a. Enforcement by the Stowers Insurers

To recover under a Stowers Insurers are unauthorized insurers.

Under TEX. INS. CODE § 101.201(b).

Under Chapter 981 of the Insurance Code, to be an eligible surplus lines insurer, the insurer must provide proof of authorization to write insurance from its domiciliary state or country to the Texas Department of Insurance, must maintain at least $15 million in capital and surplus,12 and “must comply with all applicable nationwide uniform standards adopted by this state.” TEX. INS. CODE §§ 981.051(a), .057(a), .066. Additionally, “[a]n agent licensed by this state may not issue or cause to be issued an insurance contract with an eligible surplus lines insurer unless the agent possesses a surplus lines license issued by the department.” Id. § 981.202.

Despite the Segers’ arguments to the contrary, the Stowers Insurers also presented evidence that Diatom procured the CGL policy from a licensed surplus lines agent.

As recognized by the court of appeals in id. § 101.201(b).

The id. § 101.201(a).

The Segers argue that because the policy is “unenforceable” by the Stowers plaintiffs to write them out of insurance policies.

When interpreting a statute, “[w]e look first to the ‘plain and common meaning of the statute’s words.’ ” section 101.201(a) restricts an insurer’s ability to enforce a policy when the insurer is unauthorized, but the section still allows the insured to enforce the contract to obtain “the full amount of a claim or loss under the terms of the contract.” Id. § 101.201(a). Therefore, while the policy is unenforceable as to the insurer under certain circumstances, the insured is still able to enforce the policy under the terms of the contract. Id.

A voidable policy or agreement is one that “can be affirmed or rejected at the option of one of the parties.” Voidable Contract, BLACK’S LAW DICTIONARY 398 (10th ed.2014); see Urrutia v. Decker, 992 S.W.2d 440, 443 (Tex.1999).

To protect the insured’s rights under the policy it bargained for, we have held in *406 similar situations that the insured may elect to either rescind or enforce a policy that is unenforceable by the insurer. See, e.g., Dairyland Cty. Mut. Ins. Co. of Tex. v. Roman, 498 S.W.2d 154, 158 (Tex.1973) (holding that while a contract is voidable at the election of a minor, the minor “is not entitled to enforce portions that are favorable to him and at the same time disaffirm other portions that he finds burdensome. He is not permitted to retain the benefits of a contract while repudiating its obligations.”).

The principle we set out in Urrutia, 992 S.W.2d at 443.

We reject the Segers’ arguments that Stowers Insurers may plead and prove that the policy exclusions, as terms of the contract, preclude coverage as a matter of law.

b. Application of Exclusions

At trial, the jury found that Randy was neither a leased-in worker nor an employee of Diatom. First, we consider the jury’s finding that Randy was not an employee of Diatom.18 When reviewing the legal sufficiency of the evidence, we consider whether the evidence at trial would enable a reasonable and fair-minded *407 juror to reach the verdict in question. City of Keller, 168 S.W.3d at 827.

Evidence is legally insufficient “when (a) there is a complete absence of evidence of a vital fact, (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact is no more than a scintilla, or (d) the evidence conclusively establishes the opposite of the vital fact.”

Id. at 862.

Here, the jury was instructed, in Instruction Osterberg, 12 S.W.3d at 55.

Based on the instruction provided to the jury in this case, we hold that the evidence was legally sufficient to support the jury’s finding that Randy was not an employee of Diatom. Both parties presented testimony and evidence that Randy was an employee of ECS. Because the jury was not instructed on alter ego, it was entitled to disregard the Stowers Insurers’ evidence and argument that ECS really operated as the alter ego of Diatom, and find that Randy was not Diatom’s employee.

Next, we review the jury’s finding that Randy was not a leased-in worker. The Instruction No. 6 of the jury charge.

When a party properly preserves error by objecting to an erroneous definition used in the jury charge, we measure the legal sufficiency of the evidence *408 against the definition that should have been used in the charge. Id. at 525.

While trial courts have wide discretion in determining the necessity of explanatory instructions and definitions in the jury charge, the trial court must give definitions of legal and other technical terms. See Standley, 367 S.W.3d at 350.

When an appellate court remands a case to the trial court, the trial court “has no authority to take any action that is inconsistent with or beyond the scope of that which is necessary to give full effect to the appellate court’s judgment and mandate.” TEX. R. APP. P. 61.1 (standard for reversible error).

Because those additional definitions were unnecessary, we apply only the court of appeals’ ultimate definition to our legal sufficiency review: A leased-in worker is a person who performs work for the insured under an agreement with another allowing temporary use of the worker, even though the leased worker would not be an employee of the insured.19 St. Joseph Hosp., 94 S.W.3d at 530–31.

The Stowers Insurers have presented conclusive and undisputed evidence that Randy was working at the Diatom drilling site when the accident occurred.

Both parties also presented conclusive and undisputed evidence of the existence of “an agreement with another allowing temporary use of the worker.” The Segers argue that for Randy to be a leased-in worker, there would need to be a lease between ECS and Diatom, but that is not what the definition given by the trial court required. The definition required only that there be an agreement between the insured and the entity providing the worker for temporary use of that worker. The Segers entered that agreement into evidence at trial.20 The agreement, titled “Contract for Personnel Services,” was signed by Gillman twice, both as the general partner of Diatom and as the president of ECS. The lawyer for Diatom prepared the agreement in December 1990 as a way for Gillman and Diatom to have workers on Diatom’s drilling rigs without having to pay for workers’ compensation.21

The express terms of the agreement offered into evidence show that the agreement was only for the temporary use of personnel. The agreement states that ECS would “provide Diatom with all necessary personnel for the operation of one or more drilling rigs in accordance with the needs of Diatom.” Under these terms, ECS would provide Diatom with workers only “as needed” depending on Diatom’s project. If Diatom was raising an oil rig, ECS would send out derrick hands, tool pushers, and other necessary personnel to raise the rig. Not every worker was necessary for every stage of Diatom’s drilling business, so the use of each worker was only temporary. The evidence shows that Randy was hired by ECS on March 18, 1991, and worked on seven rigs for Diatom before his death in July 1992.22 Randy was a temporary worker on each of those *410 seven rigs because his services as a derrick hand would not be needed unless Diatom entered into a new drilling contract for a similar project.

Finally, the last section of the definition, “even though the leased worker would not be the employee of the insured,” has also been proven by conclusive and undisputed evidence from both parties. The Segers produced Randy’s employment file with ECS and the agreement between ECS and Diatom, which stated that the workers would be the employees of ECS and not Diatom. In addition, they produced testimony from Gillman and two experts that Randy was an employee of ECS. The Stowers Insurers also produced testimony that Randy was an employee of ECS.

The Segers argue that Randy could not be a leased-in worker because, as an employee of ECS, he was an independent contractor. In support, they produced testimony from several witnesses and pointed to the agreement between Diatom and ECS in which ECS is referred to as an “independent contractor” to Diatom. However, under the definition at issue, even if Randy were an independent contractor to Diatom through his employment at ECS, he would still be considered a “leased-in worker” under the policy.23

The undisputed evidence in the record clearly shows that the elements of the court of appeals’ definition were met. The evidence in the record is legally insufficient to support the jury’s verdict because “the evidence conclusively establishes the opposite” of the fact vital to the verdict. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 903 (Tex.2004). Accordingly, the evidence is legally insufficient to support the jury’s finding that Randy was not a leased-in worker.

III. Conclusion

Because the evidence is legally insufficient to support a jury verdict to the contrary, we hold that Randall Seger was a leased-in worker as a matter of law. The Segers’ claimed loss was therefore excluded from coverage under the CGL policy and their Maldonado, 963 S.W.2d at 41–42.



The court of appeals issued an opinion on April 30, 2007, but the court later granted the Segers’ motion for rehearing and issued a substitute opinion on June 20, 2007. Seger I, 279 S.W.3d at 759.


The court of appeals issued an opinion on May 2, 2007, but the court later granted Diatom’s and ECS’s motion for rehearing and issued a substitute opinion on August 17, 2007. Diatom Drilling Co., 280 S.W.3d at 279.


Shirley Hoskins died while the Stowers action was on remand. The trial court ordered that Don Hoskins, as independent executor of Shirley Hoskins’s estate, be substituted in her place and that Roy Seger be substituted as administrator of Randy’s estate.


Instead of workers’ compensation insurance, ECS purchased an accident, death, and dismemberment policy to cover its employees in the event of an accident. Diatom did maintain workers’ compensation insurance for a few employees, to satisfy the requirement of some customers that Diatom provide a certificate of workers’ compensation coverage. The record is undisputed that Randy was not covered by any such policy.


Yorkshire assumed 16.472 percent of the coverage under the CGL policy, and Ocean Marine assumed 10 percent. Diatom Drilling Co., 280 S.W.3d at 280.


After the policy was issued, the CGL Insurers’ representative confirmed: “If they mean independent contractors ... [they] are covered in this policy.”


Texas and Oklahoma are currently the only states to allow private employers to opt out of the workers’ compensation system. See Howard Berkes & Michael Grabell, Opt–Out Plans Let Companies Work Without Workers’ Comp, NPR (Oct. 14, 2015),


The TEX. R. APP. P. 33.1(a).


In the jury charge, the trial court instructed the jury that it would “later determine if the Seger claim was covered under the Diatom CGL Policy.”


It is unclear what the trial court meant because there were no jury questions on the Segers’ initial coverage burden. But, because the jury found that the leased-in worker exclusion did not apply, we can conclude only that the trial court determined that the Segers satisfied their initial coverage burden.


An insurer may not “do an act that constitutes the business of insurance ... except as authorized by statute.” TEX. INS. CODE § 101.102(a). To be authorized to write insurance in Texas, the insurer must have a certificate of authority obtained from the Department of Insurance. Id. §§ 801.051(a), .052. “The certificate of authority must state the specific kinds of insurance authorized under the certificate.” Id. § 801.052.


The minimum surplus and capital requirement “does not apply to alien surplus lines insurers listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department, National Association of Insurance Commissioners.” TEX. INS. CODE § 981.057(b).


See id. § 981.004(a)(1) (“An eligible surplus lines insurer may provide surplus lines insurance only if: ... the full amount of required insurance cannot be obtained, after a diligent effort, from an insurer authorized to write and actually writing that kind of insurance in this state.”).


See id. § 981.101(b) (“A surplus lines document must state, in 11–point type, the following: This insurance contract is with an insurer not licensed to transact insurance in this state and is issued and delivered as surplus line coverage under the Texas insurance statutes. The Texas Department of Insurance does not audit the finances or review the solvency of the surplus lines insurer providing this coverage, and the insurer is not a member of the property and casualty insurance guaranty association created under Chapter 462, Insurance Code. Chapter 225, Insurance Code requires payment of a ______ (insert appropriate tax rate) percent tax on gross premium.”).


See id. § 981.101(c)(4), (5) (“A surplus lines document must show: ... the name and address of ... the insured[,] ... the insurer[,] and ... the insurance agent who obtained the surplus lines coverage[ ] and[,] if the direct risk is assumed by more than one insurer[,] the name and address of each insurer....”).


See id. § 981.211(a) (“A surplus lines agent must make a reasonable effort to determine the financial condition of an eligible surplus lines insurer before placing insurance with that insurer.”).


See id. § 981.210 (“A surplus lines agent may not place surplus lines coverage with an insurer unless: (1) the insurer meets the eligibility requirements of [this Chapter]....”).


While the jury’s finding on whether Randy was Diatom’s employee was not appealed, we must consider the coverage issue, which subsumes the employee determination. See TEX. R. APP. 38.1(f) (explaining that “[t]he statement of an issue or point will be treated as covering every subsidiary question that is fairly included”).


It should be noted, however, that this definition of “leased-in worker” applies only to the facts of this case based on the holdings of the court of appeals’ opinions in Diatom Drilling Co. We do not suggest that the definition of “leased-in worker” used in this case should be applied in any other case.


The Stowers Insurers also presented evidence of an agreement between Diatom and ECS through the testimony of one of the Segers’ expert witnesses.

Q: The ECS contract that we’re just talking about, that’s an agreement between ECS and Diatom, isn’t it?

A: It is.

Q: And it’s an agreement between ECS and Diatom to perform work for the insure[d]. True?

A: It is.


At the same time, the lawyer also incorporated ECS as a provider of personnel services for Diatom.


The evidence in the record is unclear on whether Randy was continuously employed by ECS from March 1991 until his death.


During trial, the Segers asked one of their experts, Jay Thompson, if under the dictionary definitions of the words “lease,” “worker,” and “in,” Randy could be considered a leased-in worker. Mr. Thompson answered that Randy, in his opinion, would not be a leased-in worker or employee of Diatom. However, Mr. Thompson was not provided with the definition of “leased-in worker” that was required as a result of the court of appeals’ opinions. See Id. Because Mr. Thompson’s testimony regarding Randy’s status as a leased-in worker relied on an incorrect definition, it is unreliable, and therefore, no evidence.

End of Document