Star Insurance Company v. Granite State Insurance Company

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
STAR INSURANCE COMPANY,
Plaintiff,
vs .
GRANITE STATE INSURANCE
COMPANY,
Defendant.
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§ 	CIVIL ACTION NO. 4:25-CV-01125
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ORDER
Pending before this Court is Plaintiff Star Insurance Company' s ("Star Insurance") Motion
to Bifurcate and Partial Stay (Doc. No. 27) and Defendant Granite State Insurance Company' s
("Granite State") Motion for Stay Pending Resolution of Underlying Lawsuit (Doc. No. 28). Star
Insurance requests this Court to bifurcate the defense-related and indemnification-related claims
and to stay the indemnification-related claims. Granite Star requests this Court to stay all claims
until the underlying litigation, Lopez v. Military Highway Water Supply Corp. , No. 2016-DCL-
07014, in the 445th Judicial District Court of Cameron County, Texas, is resolved. Upon close
review of the pleadings and relevant legal standards, the Court DENIES Star Insurance's Motion
to Bifurcate (Doc. No. 27) and GRANTS Granite State' s Motion for Stay (Doc. No. 28).
I. 	Factual Background
This is an insurance coverage dispute. Both Star Insurance and Granite State are insurance
carriers for the Military Highway Water Supply Corporation ("MHWSC" ). (Doc. No. 27 at 1). In
2016, MHWSC was sued in Cameron County, Texas for personal injuries, property damage, and
wrongful deaths allegedly caused by the exposure of toxic substances in the water supply. (Id.) .
United States District Court
Southern District of Texas
ENTERED
May 08, 2026
Nathan Ochsner, Clerk
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Star Insurance has provided defense costs for MHWSC in the litigation, but Granite State contends
that the litigation falls outside the scope of the insurance agreement. (Id. at 2). Star Insurance
brought this case against Granite State to (1) seek a declaration that Granite State owes MHWSC
a defense in the underlying lawsuit, (2) a determination that Granite State owes Star Insurance for
its proportionate share of the defense costs in the underlying lawsuit, (3) a declaration that Granite
State is obligated to indemnify MHWSC in the underlying lawsuit, and (4) a determination that
Granite State owes Star Insurance its proportionate share of the settlement costs in the underlying
lawsuit. (Id.) .
According to the Parties, the underlying lawsuit has reached a "preliminary settlement
agreement," but there are still additional tasks required to reach the full and final resolution. (Id.
at 3). The Parties agree that the indemnification-related claims should be stayed until the
underlying lawsuit reaches finality. (Doc. Nos. 27 , 28). Nevertheless, Star Insurance and Granite
State disagree as to whether the defense-related claims in this case should be bifurcated and
continue during the pendency of the underlying lawsuit. The Court addresses those arguments
below.
II. 	Legal Standard
Under Federal Rule of Civil Procedure 42(b), "[fJor convenience, to avoid prejudice, or to
expedite and economize, the court may order a separate trial of one or more separate issues, claims,
crossclaims, counterclaims, or third-party claims." A motion to bifurcate under the federal rules is
a matter within the sole discretion of the trial court. Nester v. Textron, Inc., 888 F.3d 151 , 162 (5th
Cir. 2018). "[T]he two primary factors to be considered in determining whether to order separate
trials are efficient judicial administration and potential prejudice." Divine Restoration Apostolic
Church v. Nationwide Mut. In s. Co ., 2010 WL 1064727, at *2 (S.D. Tex. 2010). Separation of
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issues for separate trials is "not the usual course that should be followed." McDaniel v. Anheuser-
Busch, Inc., 987 F.2d 298, 304 (5th Cir. 1993).
III. 	Analysis
As the Parties have agreed to stay the indemnification-related claims during the pendency
of the underlying lawsuit, this Court need only determine whether to bifurcate the defense-related
claims and allow those claims to proceed. The Court recognizes that it is well-established that the
duties to defend and indemnify are "distinct and separate" under Texas law. Jamestown Ins. Co.,
RRG v. Reeder, 508 Fed. App'x 306, 310 (5th Cir. 2013) (quoting D.R. Horton-Tex. , Ltd. V
Markel Int '! Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009)). These "distinct and separate" claims do
not have to be concurrently resolved. See, e.g., Nautilus Ins. Co. v. Home Remedy Servs., No. 4:09-
CV-3508, 2011 WL 13130886, at *8 (S.D. Tex. May 31, 2011) (resolving the duty to defend claim
but 	staying 	the 	indemnification 	claim 	until 	the 	resolution 	of the 	underlying 	litigation).
Nevertheless, even though those claims can proceed independently of one another, the Court must
determine whether the requested bifurcation would avoid prejudice and/or increase judicial
efficiency.
First, Star Insurance argues that bifurcating the defense-related and indemnification-related
claims would increase judicial efficiency because, as the Parties agree, the indemnification-related
claims can only be determined upon the resolution of the underlying lawsuit. (Doc. No. 27 at 6).
Star Insurance argues that because the defense-related claims are able to stand alone, those claims
should be bifurcated into a separate action and permitted to continue during the pendency of the
underlying lawsuit. On the other hand, Granite State argues that bifurcation would do the exact
opposite. It argues that bifurcation "would instead introduce significant inefficiency, costs, and
prejudice" into this otherwise straightforward insurance dispute. Granite State argues that the
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defense-related 	and 	indemnification-related 	claims 	should 	be 	litigated 	together 	to 	avoid
duplicative discovery, separate mediations, and separate trials.
Second, Star Insurance argues that the bifurcation would avoid prejudice. It argues that so
long as the underlying lawsuit remains pending, it continues to defend MHWSC without the
support of Granite State. Star Insurance argues that it "has paid more than a million dollars in
defense costs for its insured while Granite [State] has sat on the sidelines." (Doc. No. 29 at 5) .
Granite States, on the other hand, contends that Star Insurance would not be prejudiced by a stay
of this entire lawsuit because "the duty-to-defend costs at issue are neither urgent nor ongoing
here," 	as "Star 	[Insurance] 	already 	incurred the 	defense-related 	costs for 	which it seeks
reimbursement from Granite State" and is only seeking "retroactive contribution." (Doc. No. 28 at
7-8).
On balance, the Court finds the staying the entire litigation would be the most efficient way
to resolve this dispute. While the Court recognizes that Star Insurance alleges that it has covered a
disproportionate amount of the defense fees in the underlying lawsuit, the parties in the underlying
lawsuit have reached and filed a Rule 11 agreement. Under the Texas Rules of Civil Procedure,
the agreement serves as a "preliminary settlement agreement" and has effectively notified the court
that the parties "intend to enter and execute a formal settlement agreement" upon the completion
of certain outstanding tasks. See (Doc. No. 27-1) (Declaration of Keith Hutchins). Given that the
full resolution of the underlying lawsuit seems to be in the near future, the Court does not find that
any potential prejudice to Star Insurance outweighs the judicial economy of handling these claims
together.
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IV. 	Conclusion
For the foregoing reasons, Star Insurance's Motion to Bifurcate (Doc. No. 27) is DENIED.
Granite Star' s Motion to Stay (Doc. No. 28) is GRANTED. This case is hereby STAYED and
administratively closed pending the full and final resolution of Lopez v. Military Highway Water
Supply Corp., No. 2016-DCL-07014, in the 445th Judicial District Court of Cameron County,
Texas. The Parties are directed to notify this Court within ten days of the full and final resolution
of the underlying lawsuit.
It is so ordered.
~
Signedonthisthe_{_dayofMay2~) ~
Andrew S. Hanen
United States District Judge
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