Alvarado v. Old Republic Ins. Co.

• Decision Date: 28 August 1997
• Docket Number: No. 13-96-189-CV,13-96-189-CV
• Citation: 951 S.W.2d 254
• Parties: Steve ALVARADO, Homero Torres, and Alejandro Martinez, Appellants, v. OLD REPUBLIC INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 254

951 S.W.2d 254

Steve ALVARADO, Homero Torres, and Alejandro Martinez, Appellants, v. OLD REPUBLIC INSURANCE COMPANY, Appellee.

No. 13-96-189-CV.

Court of Appeals of Texas,

Corpus Christi.

Aug. 28, 1997.

Rehearing Overruled Nov. 6, 1997.

Dori Contreras Garza, McAllen, Adam Poncio, Cerda, Garriga & Poncio, San Antonio, Frank Herrera, Jr., Law Offices of Frank Herrera, San Antonio, for Appellants.

Lowell Denton, Charles H. Sierra, William McKamie, San Antonio, for Appellee.

Before SEERDEN, C.J., and FEDERICO G. HINOJOSA, Jr. and YANEZ, JJ.

OPINION

FEDERICO G. HINOJOSA, Jr., Justice.

This is an appeal from the grant of a summary judgment. By three points of error, appellants, Steve Alvarado, Homero Torres, and Alejandro Martinez, contend that issues of material fact exist, that appellee, Old Republic Insurance Company, did not sustain its burden of showing it was entitled to summary judgment, and that appellants' claims were not barred by res judicata, collateral estoppel, release, or accord and satisfaction. We affirm.

On March 15, 1989, appellants were traveling from Corpus Christi to Edinburg in a van owned by U.S. Home Corporation. They were injured when a vehicle traveling the wrong way on U.S. Highway 77 collided with the van. On or about May 9, 1989, appellants filed workers' compensation claims with Old Republic seeking medical and indemnity benefits. On May 29, 1989, ¹ Old Republic denied appellants' claims on the basis that they were not employees of its insured, U.S. Home. Appellants filed suit claiming breach of the duty of good faith and fair dealing.

Old Republic moved for summary judgment on the following grounds:

1) there was no breach of the duty of good faith and fair dealing as a matter of law because there was evidence showing appellants were not U.S. Home employees, thus there was a reasonable basis for denying appellants' claims;

2) the claims were barred by res judicata, collateral estoppel, release, and/or accord and satisfaction; and

3) there was no valid claim for actual damages, thus there was no basis in law for a claim for exemplary damages.

Appellants responded that (1) there was some evidence showing the absence of a reasonable basis to deny appellants' claims, (2) the claims were not barred, and (3) the claim for exemplary damages was valid. The trial court granted Old Republic's motion for summary judgment on February 28, 1996. This appeal followed.

By their first point of error, appellants contend that the trial court erred in granting summary judgment to Old Republic on appellants' claims of bad faith because there is a fact question concerning whether there was a reasonable basis for denying or delaying appellants' claims.

The rules related to the burden undertaken by a defendant seeking summary judgment are well-known. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471-72 (Tex.1991). The function of summary judgment is not to deprive a litigant of the right to a full hearing on the merits of any real issue of fact but to eliminate patently unmeritorious claims and untenable claims. See Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 931 (Tex.1952). A defendant who moves for summary judgment may meet the burden of showing that the plaintiff has no cause of action by either (1) negating at least one essential element of each theory of recovery, or (2) conclusively proving all the elements of an affirmative defense. Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex.1993); H.S.M. Acquisitions, Inc. v. West, 917 S.W.2d 872, 877 (Tex.App.--Corpus Christi 1996, writ denied). Once the movant establishes that it is entitled to summary judgment, the burden shifts to the nonmovant to show why summary judgment should be avoided. Casso v. Brand, 776 S.W.2d 551, 556 (Tex.1989); Neuhaus v. Richards, 846 S.W.2d 70, 77 (Tex.App.--Corpus Christi 1992), judgment set aside, 871 S.W.2d 182.

The trial court's order granting the motion for summary judgment does not state the specific grounds on which it was granted. Therefore, the summary judgment must be affirmed if the appellee sustains its burden of proof on any one of its theories. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993); Matlock v. Kittleman, 865 S.W.2d 543, 544 (Tex.App.--Corpus Christi 1993, no writ).

Appellants based their cause of action for breach of good faith and fair dealing on allegations that Old Republic had no reasonable basis for denying their claims. See Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987). In Universe Life Ins. Co. v. Giles, 950 S.W.2d 48 (Tex.1997), the Supreme Court articulated a new standard, declaring that an insurer acts in bad faith when denying or delaying payment of a claim if it should have been "reasonably clear" that the claim was covered. Id. at 54-56. The Court directed that the new standard should be applied by reviewing courts immediately, even though a case arose and was argued under the previous "no reasonable basis" standard. See State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex.1997) (applying new standard on same day of pronouncement).

Under the new standard, the proponent of a bad faith claim has the burden of proving that the insurer knew or should have known that it was reasonably clear that the claim was covered. As movant for summary judgment, the insurer may negate an essential element of the appellants' claim by showing that its liability was not reasonably clear, i.e., that there was a reasonable basis for believing a claim was not covered. See Nicolau, 951 S.W.2d at 446; Lyons v. Millers Casualty Ins. Co., 866 S.W.2d 597, 601 (Tex.1993); Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex.1988) (carriers retain right to deny invalid or questionable claims without being subject to bad faith liability for erroneous denial of a claim).

For purposes of eligibility for workers' compensation benefits, Texas law defines an employee as "a person, other than an independent contractor or the employee of an independent contractor, who is engaged in construction, remodeling, or repair work for the employer at the premises of the employer." TEX. LABOR CODE ANN. § 401.012(b)(2) (Vernon 1996). The meaning of the word "employee" is the same in the context of a common-law liability claim. Gulf States Underwriters of Louisiana, Inc. v. Wilson, 753 S.W.2d 422, 426 (Tex.App.--Beaumont 1988, writ denied); Northwestern Nat'l Life Ins. Co. v. Black, 383 S.W.2d 806, 810 (Tex.Civ.App.--Texarkana 1964, writ ref'd n.r.e.). An insurance carrier is liable for compensation only to employees of the insured company. TEX. LABOR CODE ANN. § 406.031 (Vernon 1996).

Old Republic contends it determined that appellants were independent contractors and not employees of its insured, U.S. Home, and for that reason appellants' claims for workers' compensation benefits were denied. We find this contention to be in the nature of an affirmative defense to the allegation of bad faith because Old Republic has no liability to parties not covered by workers' compensation insurance. TEX. LABOR CODE ANN. § 406.031 (Vernon 1996).

An independent contractor has been defined as any person who, "in the pursuit of an independent business, undertakes to do a specific piece of work for other persons, using his own means and methods, without submitting himself to their control in respect to all its details." Pitchfork Land & Cattle Co. v. King, 162 Tex. 331, 346 S.W.2d 598, 602-03 (Tex.1961); Duran v. Furr's Supermarkets, Inc., 921 S.W.2d 778, 786 (Tex.App.--El Paso 1996, writ denied); Hoechst Celanese Corp. v. Compton, 899 S.W.2d 215, 220 (Tex.App.--Houston [14th Dist.] 1994, writ denied). Therefore, although many factors, such as benefits, or training, or paycheck deductions for social security and taxes, may contribute to the determination of whether a person is an employee or an independent contractor, Compton, 899 S.W.2d at 221; Sherard v. Smith, 778 S.W.2d 546, 549 (Tex.App.--Corpus Christi 1989, writ denied), the fundamental factor is the right of control. Duran, 921 S.W.2d at 786; see Ross v. Texas One Partnership, 796 S.W.2d 206, 210-11 (Tex.App.--Dallas 1990), writ denied per curiam, 806 S.W.2d 222 (Tex.1991).

The standard test to determine whether one is acting in the capacity of an independent contractor or as an employee measures the amount of control that the employer exerts or has a right to exert over the details of the work. Newspapers Inc. v. Love, 380 S.W.2d 582, 591 (Tex.1964); Compton, 899 S.W.2d at 220. The same test applies whether the claim arises at common law or under workers' compensation. Thompson v. Travelers Indem. Co., 789 S.W.2d 277, 278 (Tex.1990). In determining the amount of control retained by the employer, a court is required to examine a number of factors including: 1) the independent nature of the worker's business; 2) the worker's obligation to furnish the necessary tools, supplies, and materials to perform the job; 3) the worker's right to control the progress of the work except as to final results; 4) the time for which he is employed; and 5) whether he is paid for time worked or by the job. Pitchfork Land & Cattle Co., 346 S.W.2d at 603; Industrial Indem. Exch. v. Southard, 138 Tex. 531, 160 S.W.2d 905, 906 (Tex.1942); Compton, 899 S.W.2d at 220. An "employer" must control not merely the end sought to be accomplished, but also the means and details of its accomplishment. Thompson, 789 S.W.2d at 278. Examples of the type of control normally exercised by an employer include when and where to begin and stop work, the regularity of hours, the amount of time spent on particular aspects of the work, the tools and appliances used to perform the work, and the physical method or manner of accomplishing the end result. Id. at 278-79.

After reviewing the record, we find the primary evidence on the issue of control in two conflicting statements provided by Esteban Alvarado. ² Esteban Alvarado gave Old Republic a...