American Nat. Life Ins. Co. of Texas v. Montgomery

• Decision Date: 19 August 1982
• Docket Number: No. 09,09
• Citation: 640 S.W.2d 346
• Parties: AMERICAN NATIONAL LIFE INSURANCE COMPANY OF TEXAS, Appellant, v. Viola P. MONTGOMERY, Appellee. 82 022 CV.
• Court: Texas Court of Appeals

Page 346

640 S.W.2d 346

AMERICAN NATIONAL LIFE INSURANCE COMPANY OF TEXAS, Appellant, v. Viola P. MONTGOMERY, Appellee.

No. 09 82 022 CV.

Court of Appeals of Texas Beaumont.

Aug. 19, 1982.

Rehearing Denied Sept. 16, 1982.

Lawrence L. Germer, Mark Beaman, Orgain, Bell & Tucker, Beaumont, for appellant.

Randolph L. Delay, Corpus Christi, for appellee.

OPINION

KEITH, Justice.

Defendant below appeals from an adverse judgment which followed a jury verdict. Plaintiff recovered judgment for actual damages trebled, plus attorney's fees, in her suit based upon misrepresentations of a local soliciting agent for the life insurance company. Suit was maintained under the provisions of the Deceptive Trade Practices-Consumer Protection Act, Tex.Bus. & Comm.Code Ann. Sec. 17.50 (Supp.1982), and Tex.Ins.Code Ann. art. 21.21 (1981).

Although presented in many different forms, there are only two principal questions:

1. Is a life insurance company liable for oral misrepresentations made by its soliciting agent as to the conditions under which the company will issue a policy of life insurance pursuant to a written application received by the agent?

2. Do the oral misrepresentations made by its soliciting agent as to the conditions under which the company will issue a policy of life insurance pursuant to a written application create liability under the Deceptive Trade Practices Act upon the company?

For the reasons set out hereinafter, we answer each of the questions in the negative.

At all times material to this suit, Terry Cauthen was a soliciting agent for defendant, a domestic life insurance Company. On May 23, 1979, he contacted Donald L. Montgomery and wife, Viola P. Montgomery, regarding the purchase of a policy of life insurance to provide for the payment of a mortgage upon their new home in the event of the untimely death of Mr. Montgomery. The parties agreed upon a ten-year decreasing term policy of life insurance upon Montgomery's life. An application for a policy was filled out and signed by Montgomery and he also signed the conditional receipt form prepared by Cauthen. Mrs. Montgomery's check for the first premium, $111.15, was delivered to Cauthen and cashed by defendant on June 6.

Cauthen sent the application and the check to defendant but heard nothing for some time from his company until he was asked to expedite the medical report of Montgomery's physician as to the applicant's health. This date was not fixed firmly, Cauthen's estimate being the "end of June, first of July." Cauthen telephoned Mrs. Montgomery to enlist her aid in securing the report. She agreed to help but no report was sent by the physician.

Even after the death of Mr. Montgomery on July 21, 1979, Cauthen thought that there was coverage since he had not received notice to the contrary. ¹ He so told Mrs. Montgomery and her son who advised him of the death of Mr. Montgomery. Cauthen's attempt to deliver defendant's refund check (dated August 9) accompanied by a release, was rejected by plaintiff.

Dr. Gerald Lange, Mr. Montgomery's physician, testified by deposition saying that Montgomery had high blood pressure when examined several months before the application for insurance was signed but that it had been controlled by medications. He was not asked nor did he explain why he did not respond to defendant's request for medical information which was found in his file.

Two special issues as to misrepresentations ² made by Cauthen were answered in favor of plaintiff, and her actual damages, submitted without an accompanying instruction, were fixed at the sum of $40,000. After overruling defendant's motion for judgment non obstante veredicto, the Court entered judgment for the plaintiff which trebled the damage finding and included attorney's fees.

Defendant challenges the legal and factual sufficiency of the evidence to support the judgment. Since both types of points are before us, we must address the no evidence points first. Glover v. Texas General Indemnity Co., 619 S.W.2d 400, 401 (Tex.1981). And, in passing upon the "no evidence" points, we must review the record in the light most favorable to the jury findings, considering only the evidence and inferences which support them and rejecting the evidence and inferences contrary to the findings. Williams v. Bennett, 610 S.W.2d 144, 145 (Tex.1980).

Defendant presents two basic contentions supporting its position that the oral representations of Cauthen will not support the judgment. The first is that the evidence "conclusively established that Terry Cauthen was an independent contractor ... [and] [t]here is absolutely no evidence in the record which negates Mr. Cauthen's status as an independent contractor ...."

The factual basis for this contention is firmly established since the written contract was admitted without objection and no one offered any evidence at variance with the instrument. ³ The written agreement authorized Cauthen "to solicit applications" for insurance on behalf of defendant, and contained a lengthy paragraph specifically establishing the independent contractor relationship. ⁴ Another provision prohibited the agent from making "any alterations, modifications or endorsements or otherwise alter the Company's obligations thereunder ...."

Defendant asserts that the provisions of the contract, unchallenged under this record, are valid and binding under the authority of Newspapers, Inc. v. Love, 380 S.W.2d 582, 590 (Tex.1964). For additional authorities in accord with the holding in Love, supra, see those cited in Bogard v. Highlands Ins. Co., 601 S.W.2d 957 (Tex.Civ.App.--El Paso 1980, no writ). The written contract between defendant and Cauthen negated the existence of the master-servant relationship and, there being no evidence showing a different relationship, established Cauthen's status as an independent contractor. Continental Insurance Co. v. Wolford, 526 S.W.2d 539, 542 (Tex.1975).

Soliciting agents for life insurance companies have been held to be independent contractors by several authoritative cases. See, e.g., American National Insurance Co. v. Denke, 128 Tex. 229, 95 S.W.2d 370, 376 (1936); Burt v. Lochausen, 151 Tex. 289, 249 S.W.2d 194, 196 (1952); International Security Life Ins. Co. v. Henderson, 455 S.W.2d 200, 201 (Tex.1970); Webb v. Justice Life Ins. Co., 563 S.W.2d 347, 348 (Tex.Civ.App.--Dallas 1978, no writ).

It is a general rule that a contractee is not answerable for the acts of an independent contractor. Siratt v. City of River Oaks, 305 S.W.2d 207, 209 (Tex.Civ.App.--Fort Worth, 1957, writ ref'd). See also, Abalos v. Oil Development Co. of Texas, 544 S.W.2d 627, 631 (Tex.1976); Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex.1964); J.A. Robinson Sons, Inc. v. Ellis, 412 S.W.2d 728, 735 (Tex.Civ.App.--Amarillo 1967, writ ref'd n.r.e.); H.M.R. Construction Co. v. Wolco of Houston, Inc., 422 S.W.2d 214, 216 (Tex.Civ.App.--Houston [14th Dist.] 1967, writ ref'd n.r.e.).

Plaintiff does not address defendant's contention that Cauthen's independent contractor status insulates it from the vicarious liability imposed upon defendant under D.T.P.A. Thus, plaintiff has failed to recognize the application of the fundamental rule that every plaintiff in a tort action must prove the existence of a duty and a violation of that duty as a prerequisite to recovery. Abalos v. Oil Development Co. of Texas, supra (544 S.W.2d at 631). Under the authorities cited, we sustain defendant's first point of error that there was no evidence that Cauthen was an agent whose misrepresentations could be imputed to defendant so as to create liability under D.T.P.A.

Defendant also contends that it is not liable, again as a matter of law, because Cauthen was a soliciting agent without authority to make representations--or misrepresentations--as to the effective date of coverage. The evidence is undisputed that Cauthen was a soliciting agent as that term is defined in Tex.Ins.Code Ann. art. 21.04 (1981); ⁵ and, under the statute, he was without power to "waive, change or alter any of the terms or conditions of the application or policy." See and cf. Blanton v. John Hancock Mutual Life Ins. Co., 345 F.Supp. 168, 171 (N.D.Tex.1971), aff'd, 463 F.2d 421 (5th Cir. 1972).

Mr. Montgomery signed the application for the insurance policy twice, the first being on the application itself, while the second signature certified that he had read the front and back of the conditional receipt which had been detached from the application. No one was in position to testify that Mr. Montgomery actually read the conditional receipt form, although he did sign it and the record shows that he was "very careful in his business dealings." The receipt contained this language:

"Temporary coverage provided herein, if any, shall TERMINATE on the date the policy applied for (or short term insurance, if any) becomes effective or upon the expiration of 45 days from the date of this receipt, whichever date is earlier.... No representative of the Company except the President, a Vice President or the Secretary has the authority to waive any provision or condition of this receipt or to alter or amend it in any way."

The receipt was dated May 23, 1979, and Mr. Montgomery died of a coronary occlusion on July 21, 1979, fifty-nine days after the issuance of the temporary receipt, without a policy having issued.

Defendant relies upon language used by the late Justice Denton in International Security Life Insurance Co. v. Finck, 496 S.W.2d 544, 546 (Tex.1973):

"It is the settled law of this State that a soliciting agent of an insurance company has no power or authority to make a contract on behalf of the company or to waive the terms of the policy." (citations omitted)

The fraudulent representations made by the soliciting agent in the Finck Case, supra, upon which punitive damages were based, were found to be "beyond Cochrell's authority to make." (Id.) The same rule must be applied in this...