XAVIER RODRIGUEZ, District Judge.
On this day, the Court considered Plaintiff Penn-America's motion for summary judgment (Docket Entry No. 57), Third Party Defendant Stoltz & Company's motion for summary judgment (Docket Entry No. 54), and Third Party Defendant Texas All Risk General Agency's motion for summary judgment (Docket Entry No. 58). Defendant Zertuche has not filed a motion for summary judgment on his claims. Having considered the motions, all responses and replies thereto, the relevant authority, and the evidence, all three motions for summary judgment are GRANTED IN PART AND DENIED IN PART.
Penn-America issued Commercial Lines Policy Number PAC6449156, effective February 6, 2008 to February 6, 2009, to Marcos Zertuche. The Policy covered an apartment building at 502 San Pedro Avenue, San Antonio, Texas 78212. The Policy provided general liability insurance for the Property with limits of $1,000,000 per occurrence and $2,000,000 in the aggregate; property insurance for the Property with limits of $264,000 in building coverage on an actual cash value basis, subject to a $1,000 deductible; and business income coverage up to $40,000. Stoltz & Company was the agent that Zertuche used to find and obtain the Policy.
The premiums on the Policy were due on a monthly basis. Zertuche's check for the October 2008 premium was returned for insufficient funds. On October 9, 2008, Texas All Risk, on behalf of Penn-America, mailed a Notice of Cancellation to Zertuche, advising that the Policy would be cancelled effective October 20, 2008, for nonpayment of the premium. Texas All Risk, as the underwriter on the Policy, processed Zertuche's monthly premium payments.
On October 21, 2008, Zertuche's Secretary Lisette Briano called the 1-800 number listed on the TAR invoice regarding the possibility of reinstating the Policy. Briano was informed that the Policy would be reinstated if Zertuche sent a cashier's check for $259.45, along with a statement verifying no loss in the interim, by overnight mail. Zertuche followed the instructions and mailed the $259.49 check and no loss statement via UPS overnight courier service. TAR mailed a notice to Zertuche on October 23, 2008 indicating that it had applied the payment to the Policy, but that the Policy remained cancelled effective October 20, 2008. Zertuche apparently never received this letter. Zertuche did not make any premium payments in November or December of 2008.
On January 27, 2009, a fire destroyed the Property. Zertuche reported the Loss to Penn-America on or about January 28, 2009. Penn-America began conducting an investigation which ultimately concluded that the Policy had been cancelled for non-payment of premium. On February 1, Zertuche received a refund check from Texas All Risk, dated January 29, 2009 for $399.11.
On June 11, 2009, Plaintiff Penn-America Insurance Company ("Penn") filed a Complaint against Defendant Marcos Zertuche, seeking a declaratory judgment that (1) the Policy was cancelled effective October 20, 2008, and (2) Penn had no duty to indemnify Zertuche for any losses resulting
Penn filed a motion for summary judgment on September 13, 2010.
Stoltz filed a motion for summary judgment on August 24, 2010 on all claims asserted against it by Zertuche, arguing that Zertuche had presented no evidence of any misrepresentations or promises made by Stoltz regarding the policy or the insurable interest at issue, that it was under no duty to contact Zertuche following the cancellation of the Policy, and that it is not an "insurer" under § 542.058 of the Texas Insurance Code.
TAR also filed a motion for summary judgment on September 13, 2010 on all of Zertuche's claims, arguing that Zertuche had presented no evidence of any alleged misrepresentation or promise that the Policy
Summary judgment is appropriate if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict in favor of the nonmoving party. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Hamilton v. Segue Software Inc., 232 F.3d 473, 477 (5th Cir. 2000). A fact is "material" if its resolution in favor of one party might affect the outcome of the case. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Wyatt v. Hunt Plywood Co., Inc., 297 F.3d 405, 409 (5th Cir.2002).
The burden is on the moving party to show that "there is an absence of evidence to support the nonmoving party's case." Freeman v. Tex. Dep't of Criminal Justice, 369 F.3d 854, 860 (5th Cir.2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Once the moving party meets its initial burden, the nonmoving party "must . . . set out specific facts showing a genuine issue for trial." FED. R. CIV. P. 56(e); Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir.1994). To avoid summary judgment, the nonmoving party must adduce admissible evidence that creates a fact issue concerning the existence of every essential component of that party's case and unsubstantiated assertions of actual dispute will not suffice. Thomas v. Price, 975 F.2d 231, 235 (5th Cir.1992). The opposing party cannot establish a genuine issue of material fact by resting on the mere allegations of the pleadings. Hulsey v. State of Texas, 929 F.2d 168, 170 (5th Cir.1991). The Court reviews all facts in the light most favorable to the nonmoving party. First Colony Life Ins. Co. v. Sanford, 555 F.3d 177, 181 (5th Cir.2009).
Zertuche alleges the following claims against Penn, Stoltz, and TAR:
These claims fall into four categories: (1) claims arising from the alleged misrepresentation that the Policy would be reinstated upon submission of the outstanding back payment; (2) claims arising from the dispute over whether Zertuche had an insurable interest in the Property; (3) claims arising from the alleged failure of the insurer parties to notify Zertuche that the Policy was cancelled; and (4) claims arising out of the contractual rights and obligations under the Policy between Penn and Zertuche.
Zertuche alleges that the three insurer parties were negligent in misrepresenting that the Policy would be reinstated upon Zertuche's remittance of the back payment. In relation to this alleged misrepresentation, Zertuche asserts claims for common law negligence, violation of Texas Insurance Code § 541.061,
The DTPA authorizes suit where a consumer, including an insured, has relied in detriment on a false or misleading representation, and his reliance was a producing cause of damages. Brown & Brown of Texas v. Omni Metals, Inc., 317 S.W.3d 361, 387 (Tex.App.-Houston [1st Dist.] 2010, pet. filed) (citing Home Shield, Inc. v. Kortz, 2000 WL 1262617, at *3 (Tex.App.-Houston [1st Dist.] 2000, pet. dism'd) (mem. op., not designated for publication)); see TEX. BUS. COMM. CODE ANN. § 17.46(b). In order to prove that the misrepresentation was an unlawful deceptive trade practice in violation of § 17.46(b), Zertuche must prove that he relied on the misrepresentation to his detriment. Section 541.151 of the Texas Insurance Code authorizes a private action by an insured for damages caused by violations of DTPA violations, as well as for violations of § 541.051 of the Code. TEX. INS. CODE. ANN. § 541.151(1),(2).
Texas common law also recognizes a cause of action for negligent misrepresentation:
Brown & Brown, 317 S.W.3d at 388 (quoting RESTATEMENT (SECOND) OF TORTS § 552 (1977)). In order to recover, the misrepresentation must have been the cause of the plaintiff's damages, and the plaintiff must have been justified in relying on it. Id. at 388-389. The cause element is met if the misrepresentation was a substantial factor in bringing about the plaintiff's injury, and the injury was a foreseeable result of the misrepresentation. Id. at 389 (citing City of Gladewater v. Pike, 727 S.W.2d 514, 517 (Tex.1987)). The misrepresentation need not be the only cause of the injury, and circumstantial evidence is sufficient to prove causation. Id. (citing Havner v. E-Z Mart Stores, 825 S.W.2d 456, 458-59 (Tex.1992)).
Zertuche's complaint alleges that his secretary was informed by a representative of TAR that the Policy would be reinstated if Zertuche sent a cashier's check for $259.45, along with a statement verifying no loss in the interim, by overnight mail.
The evidence also indicates that TAR mailed a notice to Zertuche on October 23, 2008 indicating that it had applied the payment to the Policy but that the Policy remained cancelled effective October 20, 2008.
Zertuche represents that if the back payment had been returned or if he had been told by any insurer party that the Policy remained cancelled despite his sending the back payment, then he would have "taken whatever steps were necessary to maintain insurance on the property."
TAR argues that the alleged statement to Ms. Briano that "to reinstate the policy Zertuche needed to deliver a premium payment of 259.45 and a no loss statement," is "merely a correct description of conditions precedent to reinstatement" and thus "would not constitute a promise to reinstate the policy or a representation that the policy would be or had been reinstated."
Because issues of material fact remain as to the truth of the statement, Zertuche's reliance, and causation, summary judgment is denied to TAR on these claims. No evidence before the Court indicates that Stoltz was in any way involved in the alleged misrepresentation. Accordingly, summary judgment is granted for Stoltz on these claims.
Penn's potential liability for claims arising from the alleged misrepresentation turns on whether it is vicariously liable for TAR's actions on agency principles. With regard to the Texas Insurance Code claims, the Code specifically defines who qualifies as an agent for the purpose of attributing liability for violations of code provisions. See TEX. INS. CODE ANN.
Penn's liability for the DTPA and common law negligence claims turns on whether TAR was acting in the actual or apparent scope of its authority as Penn's agent when it made the alleged misrepresentation. An insurer may be liable for the misconduct of its agent that falls within both the actual and the apparent scope of the agent's authority. Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 98-99 (Tex. 1994). "Since the principal has selected the agent to act in a venture in which the principal is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions." Id. at 99 (quoting Standard Distributors v. FTC, 211 F.2d 7, 15 (2d Cir.1954)). Apparent authority exists when a reasonably prudent person would conclude from the principal's conduct that the agent had the requisite authority. Biggs v. United States Fire Ins. Co., 611 S.W.2d 624, 629 (Tex.1981); Guthrie v. Republic Nat'l Ins. Co., 682 S.W.2d 634, 637 (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.). Penn does not seem to dispute that TAR was its agent, and in fact analyzes its potential liability for the alleged misrepresentation as if TAR was its agent and could bind it for liability purposes.
Penn moves for summary judgment that Zertuche has no insurable interest in the Property because he is not the title owner, and thus he could not make a claim under the Policy even if it had not been cancelled.
It is not required to have legal title in a property in order to have an
The evidence before the Court suggests that the Property is owned either by Zertuche's mother as an individual, or by Zertuche Enterprises, but in either case for use and benefit of the Zertuche Enterprises partnership. In his deposition, Zertuche testified both that the Property is owned by the family partnership, Zertuche Enterprises, and that title to the property was in the name of his mother, Irma Zertuche.
TAR and Stoltz also move for summary judgment on Zertuche's claims relating to the alleged misrepresentation of his insurable interest, arguing that Zertuche's damages were not caused by any alleged misrepresentations regarding his insurable interest.
In order to recover under the Texas Insurance Code and the DTPA, the alleged misrepresentation must have been a "producing cause" of the damages. TEX. BUS. & COMM.CODE § 17.50(a); Provident Am. Ins. Co. v. Castaneda, 988 S.W.2d 189, 192-93 (Tex.1998). A producing cause is "an efficient, exciting, or contributing cause, which in a natural sequence, produced injuries or damages." Union Pump Co. v. Allbritton, 898 S.W.2d 773, 775 (Tex. 1995) (quoting Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179 (Tex.1995); Rourke v. Garza, 530 S.W.2d 794, 801 (Tex.1975)). Unlike with proximate cause, foreseeability of the injury is not a required element of producing cause. Union
Under the Texas definition of producing cause, any alleged misrepresentations made about Zertuche's insurable interest would be a producing cause of his damages. Had there been no Policy in place, Zertuche would never have been able to make a claim in the first place. If Zertuche had been instructed that he had no insurable interest at the time he purchased the Property, then he may not have relied on his understanding, mistaken or otherwise, that he had coverage, and therefore would not have suffered the injury of receiving no coverage for the destruction of the Property. Because there is an issue of material fact as to whether Zertuche had an insurable interest and whether any alleged misrepresentation caused his injuries, summary judgment is denied to all three insurer parties on these claims.
Zertuche alleges that the insurer parties were negligent in "failing to follow their established custom and practice to notify Zertuche of the cancellation of the policy in question and the failure of his compliance with their demands to effect reinstatement."
Texas law recognizes two common law duties that insurance agents have to insureds: (1) to use reasonable diligence to place the requested insurance coverage, and (2) to inform the insured if unable to obtain such coverage. Webb v. UnumProvident Corp., 507 F.Supp.2d 668, 683 (W.D.Tex.2005) (citing May v. United Servs. Ass'n of Am., 844 S.W.2d 666, 669 (Tex.1992)). In addition, the facts and circumstances surrounding an agent's or a broker's dealing with an insured may give rise to additional duties beyond those two. Webb, 507 F.Supp.2d at 683 (citing Kitching v. Zamora, 695 S.W.2d 553, 554 (Tex. 1985)).
The existence of any such duty depends on the facts surrounding the relationship between the insured and the agent or broker. Webb, 507 F.Supp.2d at 683-684. A long-term relationship with high levels of trust is necessary to establish that a "special relationship" exists warranting the imposition of a higher duty of care. See Webb, 507 F.Supp.2d at 684-85 (holding there was a reasonable basis to conclude that a state court would impose a duty where agent and insured had a fourteen year business relationship, agent knew of insured's serious preexisting condition and her related need for disability benefits, agent was aware of content of insured's medical records and reports, and agent was aware that disability insurer had a history of wrongfully denying claims). Because such a special relationship is rare, many Texas courts have neglected to impose such a broader duty.
Here, the evidence before the Court establishes that there is no basis for imposing a higher duty on any of the Defendants based on any alleged relationship with Zertuche. Zertuche used Stoltz to find insurance coverage for only one of the approximately twelve properties he manages for Zertuche Enterprises, as well as his office building and his personal automobile.
Zertuche's contact with TAR was significantly more involved than that with Stoltz, however, it still falls short of the level that would impose a higher duty on TAR. The evidence indicates that Zertuche failed to make several premium payments over the life of the Policy.
Finally, Zertuche has presented no evidence that he had any direct contact with Penn America throughout the life of the Policy, let alone sufficient contact to create any suggest that Penn had any duty to contact Zertuche based on past custom and practice. Accordingly, summary judgment is also granted to Penn on this claim.
Penn moves for a declaratory summary judgment that it had cancelled the Policy for nonpayment of premium prior
It is undisputed that Zertuche's October 2008 premium installment payment check was returned for insufficient funds.
The evidence indicates that Penn cancelled the Policy in accordance with all applicable laws and regulations. The Texas Insurance Code and the Policy itself both require that 10 days notice be given to the insured before cancellation of the Policy. TEX. INS. CODE. ANN. §§ 551.053, 551.104(e). The Code also requires that notice be sent to the first named insured as well as the mortgagee of the property. TEX. INS. CODE. ANN. §§ 551.053, 862.055; Standard Fire Ins. Co. v. United States of America, 407 F.2d 1295, 1300 (5th Cir.1969). Zertuche has presented no evidence to dispute that notice was properly issued ten days before the cancellation, to both Zertuche as named insured and IBC as mortgagee.
The only remaining issue is whether the doctrines of waiver or estoppel apply to prevent Penn from enforcing its cancellation of the Policy. Under Texas law, "any act, declaration, or course of dealing by the insurer, with knowledge of the facts constituting a cause of forfeiture or breach of a condition in the policy, which dealings recognize and treat the policy as still in force, and leads the insured to regard himself as protected, will amount to a waiver of the forfeiture ... Thus the insurer will be estopped to insist upon the forfeiture ..." Preferred Risk Mut. Ins. Co. v. Rabun, 561 S.W.2d 239, 240 (Tex. Civ.App.-Austin 1978, writ dism'd). An insured must prove three elements to establish that an insurer has waived forfeiture: (1) the insurer has knowledge of the facts constituting forfeiture, (2) the forfeiture is complete and absolute, and (3) an unequivocal act on the insurer's part that recognize the continuance of the policy, or is wholly inconsistent with forfeiture. Id. at 242-243 (citing Bailey v. Sovereign Camp, W.O.W., 116 Tex. 160, 286 S.W.2d 456, 457 (1926)).
Zertuche argues that Penn accepted a late payment from Zertuche, and therefore was prohibited from forfeiting the Policy due to late payment or non-payment of the premium.
Notably, the requirement of an unequivocal act makes this standard for waiver or estoppel of an insurer's rights distinct and somewhat more difficult to establish than that required to separately establish liability based on the alleged misrepresentation by the insurer's agent.
Furthermore, after the alleged October 21, 2008 conversation with TAR's representative, there is no evidence that Zertuche attempted to discover any further information regarding whether or not the Policy was cancelled. After sending in his past due October premium payment, Zertuche did not follow up with any insurer party to confirm the status of cancellation or reinstatement.
Penn argues that it cannot be liable for breach of contract for failing to provide coverage, because it had properly cancelled the Policy prior to the time of loss.
Zertuche claims that the Defendants unreasonably delayed payment of his claim in
It is undisputed that Penn is the insurer on the Policy, and thus it is subject to the prompt payment provision contained in § 542.058. However, as noted, the Court has determined that Penn had no duty to pay for the damage caused to the Property, because the Policy was no longer in force by the date that the fire occurred. Accordingly, summary judgment is also granted to Penn on this claim.
Zertuche also alleges that Penn was negligent in supervising its agents. A person or entity conducting activity through an agent may be liable if he negligently supervises the agent or fails to make proper regulations regarding the activities performed by the agent in his agency capacity. Great American Life Ins. Co. v. Lonze, 803 S.W.2d 750, 753 (Tex.App.-Dallas 1990) (citing RESTATEMENT (SECOND) OF AGENCY § 213 (1958)). The Court has already concluded that Penn may be vicariously liable for the negligence of Stoltz and TAR on agency principles. However, negligent supervision of agents is a separate cause of action, and liability can be established only if all the requirements of a negligence tort are independently present. RESTATEMENT (SECOND) OF AGENCY § 213(c). There is no evidence before the Court of any additional duty to give instructions or otherwise supervise either TAR or Stoltz, or any failure of such duty. Accordingly, summary judgment is granted to Penn on this claim.
In accordance with the foregoing, summary judgment on all three motions is GRANTED IN PART and DENIED IN PART. Summary judgment is GRANTED to Stoltz and DENIED to TAR and Penn on claims arising from the alleged misrepresentation that the Policy would be reinstated upon submission of the outstanding back payment. Summary judgment is also GRANTED to Penn on Zertuche's claim that Penn negligently supervised its agents. Summary judgment is DENIED to Penn, Stoltz, and TAR on all claims arising from the dispute over whether Zertuche had an insurable interest in the Property. Summary judgment is GRANTED to Penn, Stoltz, and TAR on all claims arising from the alleged failure of the insurer parties to notify Zertuche that the Policy was cancelled. Summary judgment is GRANTED to Penn on Penn's declaratory judgment that it owes no duty to indemnify Zertuche, on Zertuche's breach of contract claim and, and Zertuche's claim that Penn violated the prompt payment statute of the Texas Insurance Code.
It is so ORDERED.
TEX. INS. CODE. ANN. § 541.051 (West 2009).
