FORT WORTH COURT OF APPEALS UPHOLDS ORDER CONVEYING INSURED’S CAUSES OF ACTION AGAINST INSURER TO INSURED’S JUDGMENT CREDITOR

The Second Court of Appeals in Fort Worth last Thursday affirmed a turnover order of all of a defunct construction company’s causes of action against its insurance company to a judgment creditor, permitting the judgment creditor to pursue claims against the insurer in a companion action in federal court.  In D & M Marine, Inc. v. Turner, No. 02-12-00399-CV, 2013 WL 4106365 (Tex. App.—Fort Worth Aug. 15, 2013), the court of appeals considered a challenge by the construction company, which argued that the unasserted legal claims were not properly subject to turnover, and that the specific turnover mechanism was improper and void.  The outcome would affect the creditor’s right to participate in a pending action in federal court that had been brought by Mid-Continent Casualty Company, the construction company’s liability carrier, which had defended the underlying state court suit but was seeking a judicial declaration that it had no duty to defend or indemnify the construction company.

The primary issue substantively addressed in the court of appeals’ opinion was whether the insured’s causes of action against its insurer could be turned over to the judgment debtor.  The court agreed that they could.  Specifically, the insured’s causes of action did not fall under an exception to the broad applicability of the turnover statute, because there was no evidence that the insured was satisfied with the insurer’s representation.  Other courts had held that where there is specific evidence that a turnover order would “drive a wedge between a satisfied client and his insurance company,” public policy would prohibit such an order.  Here, the construction company failed to demonstrate that it did not want to be indemnified by Mid-Continent. 

The remaining substantive appellate issue — whether the turnover order could directly convey the causes of action, or if a designated constable, sheriff, or receiver was required to be involved — was waived.  The construction company did not present this argument to the trial court, so the appellate court was without authority to void the turnover order based on this alleged procedural flaw.