Supreme Court Of Texas Answers Certified Questions Regarding Causation
A recent opinion from the Supreme Court of Texas provides guidance for Texas courts to interpret claimed exceptions to the concurrent-causation doctrine. Dillon Gage Inc. of Dallas v. Certain Underwriters at Lloyds Subscribing to Policy No. EE1701590, 636 S.W.3d 640 (Tex. 2021), reh’g denied (Jan. 28, 2022).
A dealer of gold coins purchased insurance to cover shipments of coins while in transit. The policy purchased by the dealer contained an “Invalid Payments Exclusion Clause” excluding loss “consequent upon” handing over property in exchange for a fraudulent payment. A thief opened an account with the dealer posing as a known gold buyer and provided a fraudulent check to order coins. After the check provisionally cleared, the dealer sent the coins to the address of the buyer and emailed tracking information to the email account provided by the thief. The thief immediately reached out to the shipper and rerouted the shipment to be picked up at a shipper’s store rather than delivered, which the shipper agreed to do despite instructions from the dealer not to grant reroute requests. Ultimately, the dealer recovered neither the coins nor the payment for the coins.
The dealer filed a claim with its insurer, which denied the claim under the policy’s Invalid Payments Exclusion Clause. The dealer sued its insurer alleging breach of contract and violations of the Texas Insurance Code. The insurer obtained summary judgment based on the Invalid Payments Exclusion Clause. The dealer appealed, and the Fifth Circuit certified the following questions to the Supreme Court of Texas: (1) whether the dealer sustained its loss “consequent upon” handing over the property against fraudulent checks, and if so, (2) whether the shipper’s allegedly negligent rerouting of the shipment is an independent cause of the loss under Texas common law.
The Supreme Court answered the first certified question in the affirmative, holding that the language “consequent upon” equates to “but for” causation, thus rejecting the dealer’s argument that a more stringent “substantial factor” causation analysis is warranted. The Court answered the second certified question in the negative, holding that the rerouting of the shipment of gold coins was a concurrent cause of the dealer’s loss because the thief induced the shipper to reroute the shipment using shipping information that the dealer provided to the thief, thus rejecting the dealer’s argument that the rerouting of the shipment was an independent cause of loss. Finding that the causes of loss were concurrent, the Court applied Texas’s concurrent-causation doctrine and found that no coverage existed under the policy for the dealer’s loss, which also precluded any right to recover damages for alleged violations under the Texas Insurance Code.
