R&M Mixed Beverage Consultants, Inc. v. Safe Harbor Benefits, Inc.

• Citation: 578 S.W.3d 218
• Decision Date: 12 June 2019
• Docket Number: No. 08-17-00054-CV,08-17-00054-CV
• Parties: R&M MIXED BEVERAGE CONSULTANTS, INC., Appellant, v. SAFE HARBOR BENEFITS, INC., USG Insurance Services, Inc., Ryan Specialty Group Services, LLC, and/or Ryan Specialty Group, LLC, Appellees.
• Court: Court of Appeals of Texas

578 S.W.3d 218

R&M MIXED BEVERAGE CONSULTANTS, INC., Appellant,

v.SAFE HARBOR BENEFITS, INC., USG Insurance Services, Inc., Ryan Specialty Group Services, LLC, and/or Ryan Specialty Group, LLC, Appellees.

No. 08-17-00054-CV

Court of Appeals of Texas, El Paso.

June 12, 2019

ATTORNEY FOR APPELLANT: Hon. Robert L. Blumenfeld, Mendel Blumenfeld PLLC, 5809 Acacia Circle, El Paso, TX 79912.

ATTORNEYS FOR APPELLEES: Hon. Levon G. Hovnatanian, Martin, Disiere & Jefferson, L.L.P., 808 Travis, 20th Floor, Houston, TX 77002, Hon. Christopher Charles White, Lewis Brisbois Bisgaard & Smith LLP, 2100 Ross Avenue, Suite 2000, Dallas, TX 75201, Andrew L. Johnson, Thompson, Coe, Cousins & Irons, LLP, One Riverway, Suite 1400, Houston, TX 77056.

Before McClure, C.J., Rodriguez, and Palafox, JJ.

OPINION

GINA M. PALAFOX, Justice

Appellant, R&M Mixed Beverage Consultants, Inc. (R&M), is a Texas Corporation that owns and operates several bar and grill establishments including Mavericks Bar & Grill (Mavericks), located in El Paso, Texas. R&M filed third-party petitions against Safe Harbor Benefits, Inc. (Safe Harbor), USG Insurance Services, Inc., (USG), Ryan Specialty Group Services, LLC and/or Ryan Specialty Group, LLC (collectively, Ryan Specialty Group), which it named as successors to entities including WKF&C Agency Inc., WKF&C Agency, Inc. of Texas, and WKF&C Agency (collectively, WKFC), asserting a claim of negligence coupled with violations of the Texas Insurance Act and the Texas Deceptive Trade Practices Act (DTPA). Collectively, the Appellees here only include Safe Harbor, USG, Ryan Specialty Group, LLC, and Ryan Specialty Group Services, LLC (Appellees or third-party defendants), as the WKFC entities were never served with process and are not parties in this suit.¹ On appeal, R&M challenges the trial court's order granting summary judgment in its entirety in favor of Appellees. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The Purchase of the Policy

Richard Chavez and his brother Raymond ("Mike") Chavez owned and operated R&M with Richard serving as President and Mike serving as vice-president. Along with other duties, Richard assumed responsibility for procuring liquor liability protection for the bar and grills that R&M operated. In 2006, he approached Victoria Weir, an agent for Appellee Safe Harbor, to assist him in obtaining insurance coverage. Although Safe Harbor could not write a policy directly, Weir contacted a wholesale broker, Appellee USG, to assist with procuring a policy for R&M. In December 2006, R&M purchased its first liquor liability policy from First Mercury, a surplus lines company, which it then renewed a year later.

Before the policy expired in December of 2008, R&M asked for a new quote, and at that time, Safe Harbor again contacted USG, which then contacted WKF&C Agency, a managing general underwriter, which then contacted Indemnity Insurance of DC Group (Indemnity) from whom it received a quote for coverage along with financial information and disclosures about the company. The information indicated that Indemnity had received an "A-" rating from A.M. Best, a well-known rating company, which placed Indemnity in the "excellent" category, among other companies rated. The information also described Indemnity as being licensed to operate in various states, including Texas, by respective departments of insurance.

In addition, Safe Harbor provided R&M with written notice that Indemnity was registered with the State as a Risk Retention Group (RRG), which under Texas law, meant it did not participate in the Texas insolvency guaranty fund. Safe Harbor further informed R&M that an RRG is a "non-traditional market," and R&M needed to be "aware of certain information about this market." Through a series of transactions involving the Appellees, and formerly owned entities such as WKF&C, R&M purchased a liquor liability policy issued by Indemnity.

On December 18, 2008, Richard Chavez signed an "acknowledgment" stating that he understood that the "coverage written [was] not subject to the protection and benefits of the state guaranty associations," and that R&M had agreed to hold Safe Harbor and WKF&C harmless with respect to "any future loss, damage, expense, or other financial risk and/or any other dispute that may arise relative" to its placement of coverage with Indemnity.

As well, the policy itself contained a notice stating that: "Insurance Insolvency guaranty funds are not available for your risk retention group."

Thereafter, R&M renewed its policy with Indemnity in 2009 and 2010, through the same series of transactions as before, thereby obtaining coverage through December 2010. With each renewal, R&M received the same information as before about Indemnity's rating with A.M. Best and the nature of its operations. At renewal, Indemnity had received an "A-" rating from A.M. Best. Once issued, the policy itself contained a notice that Indemnity continued operating as an RRG in the issuing state.

The Dram Shop Lawsuits and Indemnity's Liquidation

In September 2011, two different customers who were served liquor at Mavericks were involved in separate accidents. In July of 2012, victims of the first accident filed a lawsuit against the driver who had been served liquor at Maverick's, and against R&M under the Dram Shop Act. A year later, a similar suit was filed by the victims of the second accident. Initially, Indemnity proceeded to defend R&M in both suits by contracting and paying attorneys to enter appearances and defend against all allegations asserted. By April of 2014, however, circumstances changed after Indemnity suffered a precipitously-occurring financial calamity that resulted it its eventual liquidation, not only causing attorneys representing R&M to withdraw and leave R&M to defend itself, but also exposing it to liability without insurance coverage. The record indicates that A.M. Best had downgraded Indemnity's rating on September 24, 2013, when it issued a revision indicating that Indemnity had suffered a "precipitous decline" in its capitalization structure. At that time, the rating agency placed Indemnity "under review," and downgraded its rating to a "B." The revision stated that it still had faith in Indemnity's ability to address its capitalization issue given its history and expertise in the insurance industry, but further warned that another "negative rating action may occur if capital levels do not continue to support the ratings and if compliance does not improve."

In addition, on July 26, 2013, the Insurance Commissioner of the State of Delaware, where Indemnity was incorporated, filed a Liquidation Petition, seeking entry of a Liquidation and Injunction Order, in light of Indemnity's financial issues. Following an investigation, the Commissioner determined that Indemnity's financial situation had not improved, and that its financial condition was so "unsound" and "impaired" that any further transaction of insurance as a going concern posed a hazard to its policy holders. Therefore, on November 7, 2013, a court of chancery in the State of Delaware issued a Rehabilitation and Injunction Order, enjoining Indemnity from conducting any additional business and appointed the Insurance Commissioner as a receiver to conduct business on behalf of Indemnity and to take control of its assets. On April 10, 2014, the court entered a "Liquidation and Injunction Order," indicating that the Commissioner had uncovered several areas of "high concern" regarding Indemnity's financial viability, and information indicating that Indemnity's principal, Jeffrey B. Cohen, had engaged in possible fraudulent conduct.² The court concluded that Indemnity was unable to develop a Rehabilitation Plan to remediate and correct its financial issues, and that liquidation was in order, thereby requiring that all insurance policies issued by Indemnity be cancelled, and that anyone holding a policy had the right to file a claim with the receiver on or before January 16, 2015 for any losses incurred.³

The Third-Party Lawsuits and the Motions for Summary Judgment

After Indemnity became insolvent and its lawyers withdrew from the litigation, R&M filed its initial third-party petition, in March of 2015, against Safe Harbor and USG. Months later, in July 2015, R&M supplemented to add WKF&C, and its related entities, Ryan Specialty Group, LLC, and Ryan Specialty Group Services, LLC (collectively, the Ryan Specialty Group).⁴ In its supplemental petition, R&M alleged that WKF&C was a division, component, or subsidiary of the Ryan Specialty Group, and these entities provided insurance related services pertaining to the series of transactions that included Safe Harbor and USG, which led to R&M's purchase of the Indemnity insurance policy at issue in this case. R&M asserted a variety of allegations against the third-party defendants, contending that they had made misrepresentations and/or had failed to disclose material information with regard to R&M's purchase of the Indemnity policy; that they were negligent in their actions or omissions; and that they had engaged in violations of the Texas Deceptive Trade Practices Act (DTPA), and the Texas Insurance Code. After a period of discovery, the Ryan Specialty Group filed motions for summary judgment against all claims asserted by R&M. The trial court subsequently entered an order granting summary judgment in its entirety in favor of Ryan Specialty Group, LLC, and Ryan Specialty Group Services, LLC. Thereafter, USG and Safe Harbor filed traditional and no-evidence motions for summary judgment challenging all claims asserted against it. Issuing a final judgment, the trial court granted the motions for summary judgment filed by USG and Safe Harbor, which effectively disposed of all parties and all claims. This appeal followed.

DISCUSSION

STANDARD OF REVIEW

On appeal, we review a trial court's order granting both no-evidence and traditional motions for summary judgment de novo. See Border Demolition &...