© 2015 The Texas Lawbook.
By Natalie Posgate
(Sept. 16) – A Houston appeals court ruled Tuesday that a lower trial court must consider whether an insurance company breached its duty to a former Superior Offshore International executive when it refused to provide certain coverage the executive claimed was included in the director-and-insurer policy.
The alleged coverage involved expenses former Superior Chief Financial Officer Roger D. Burks incurred while defending the disgorgement of his compensation that trustees and investors sought from him after Superior filed for bankruptcy in 2008.
The bankruptcy proceedings and derivative investor lawsuits both claimed that Burks, among other former Superior executives, illegally profited off of the Houston-based energy offshore services company while it was in a dire financial situation.
Legal experts involved in the case contend the opinion could significantly affect C-level executives of troubled Texas energy companies, as low oil prices drive their corporations into bankruptcy, bringing creditors and investors at their doorsteps – and, inevitably, demanding executive compensation as a recovery of assets.
Houston attorney Stephen Knight, a lawyer for the insurer, XL Specialty Insurance Company, could not immediately be reached for comment.
In a 20-page opinion, the appeals court sided with Burks’ arguments that it was ambiguous whether the terms of the settlements he made with the bankruptcy committee involved disgorgement, which under Texas law is uninsurable (and was one of XL’s core claims).
Thus, Harris County District Judge Michael Landrum, who originally tossed out Burk’s $2 million breach of fiduciary duty claims, must consider them.
“We discern a genuine issue of material fact on whether Burks’s settlement was for disgorgement and therefore ‘uninsurable under the law’ of Texas, and we find no Texas authority precluding coverage for such a settlement as a matter of law,” wrote Justice Sharon McCally. “Therefore, we hold that the trial court erred by granting summary judgment to XL on this ground.”
Johns’ law partner, Joseph Marrs, also worked on the case for Mr. Burks. Both attorneys practice at Johns Marrs Ellis & Hodge.
Knight, who practices at Chamberlain, Hrdlicka, White, Williams & Aughtry in Houston, was joined by colleague Daniel Knight and New York lawyers Alexis Rogoski and Edward Carleton of Skarzynski Black in representing XL.
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