Automobile Ins. Co. of Hartford Connecticut v. Davila

• Decision Date: 28 February 1991
• Docket Number: No. 13-89-239-CV,13-89-239-CV
• Citation: 805 S.W.2d 897
• Parties: AUTOMOBILE INSURANCE COMPANY OF HARTFORD CONNECTICUT, Appellant, v. David DAVILA and Donna Davila, Appellees.
• Court: Texas Court of Appeals

Page 897

805 S.W.2d 897

AUTOMOBILE INSURANCE COMPANY OF HARTFORD CONNECTICUT, Appellant, v. David DAVILA and Donna Davila, Appellees.

No. 13-89-239-CV.

Court of Appeals of Texas Corpus Christi.

Feb. 28, 1991.

Rehearing Overruled March 28, 1991.

George C. Brin, San Antonio, Frank E. Weathered, Corpus Christi, for appellant.

Ramon Garcia, Catherine W. Smith, Edinburg, for appellees.

Before DORSEY, SEERDEN and BENAVIDES, JJ.

OPINION

DORSEY, Justice.

Automobile Insurance Company of North America, A Division of Aetna Life & Casualty (Aetna) appeals a jury verdict and trial court judgment awarding David and Donna Davila contractual and extracontractual damages for a wrongful denial of insurance benefits following a fire loss. By ten points of error, Aetna challenges the factual and legal sufficiency of the evidence to support the jury's verdict regarding good faith and fair dealing and deceptive trade practices, the admission and exclusion of evidence, and the jury charge. We reform the judgment of the trial court and, as reformed, affirm.

A portion of the Davilas' house burned in November, 1985. The police were at the house at the time the fire was discovered; the firemen arrived shortly thereafter. The Davilas made a damage claim against their insurance, which was held by Aetna. Aetna had its agent, Benny Triplett, and an independent investigator, Buddy Lavastida, review the fire scene and interview those persons present at the fire and had its attorney depose David and Donna. After considering the investigators' reports and the police and fire reports, on April 2, 1986, Aetna denied the claim on the basis that David had set the fire. The Davilas initiated a lawsuit seeking damages for unfair claims settlement. They brought suit for breach of contract, breach of the duty of good faith and fair dealing and violation of the Deceptive Trade Practices-Consumer Protection Act (DTPA). TEX.BUS. & COMM.CODE ANN. § 17.41 et seq. (Vernon 1987). The Davilas contended that Aetna had no reasonable basis for denying their claim and that Aetna failed to adequately investigate their claim. They also contended that Aetna had engaged in false, misleading, and deceptive acts and practices. A jury found for the Davilas on all counts and the trial court entered judgment based on the jury verdict, awarding the Davilas $333,008.22. Aetna does not appeal the jury findings regarding breach of contract. Aetna raises ten points of error related to the jury findings and evidence concerning the Davilas' DTPA and breach of good faith and fair dealing causes of action. We first address the points related to the DTPA.

DTPA

Jury questions seven through twelve, fifteen and sixteen relate to the Davilas' DTPA cause of action. By its tenth point of error, Aetna contends that none of these questions should have been submitted to the jury because the Davilas failed to plead and prove that proper and adequate notice was sent to Aetna in a timely manner pursuant to the DTPA. By points of error one and two, Aetna contends that the evidence is factually and legally insufficient to support the jury's answers to the jury questions.

We first address the question of notice so as to justify the submission of questions twelve, fifteen and sixteen. Section 17.505(a) of the DTPA provides that as a prerequisite to filing suit under the DTPA against any person, the consumer shall give written notice to the person at least thirty days before filing the suit. TEX.BUS. & COMM.CODE ANN. § 17.505(a) (Vernon 1987). ¹ This notice must advise the person of the consumer's specific complaint and the amount of actual damages and expenses, including attorney's fees, if any, reasonably incurred by the consumer in asserting the claim against the defendant. Id.

A DTPA plaintiff must plead notice. See Investors, Inc. v. Hadley, 738 S.W.2d 737, 741 (Tex.App.--Austin 1987, writ denied). When a DTPA defendant specifically denies notice, the plaintiff must prove that notice was given. See Id.; accord HOW Ins. v. Patriot Fin. Serv. of Texas Inc., 786 S.W.2d 533, 538 (Tex.App.--Austin 1990, no writ). However, when an answer to a DTPA suit asserts that the plaintiff failed to comply with the DTPA notice requirement and some evidence regarding notice is admitted at trial without objection and no question regarding notice is submitted to the jury, notice will be deemed pursuant to Tex.R.Civ.P. 279 in accordance with the judgment. Cielo Dorado Dev., Inc. v. Certainteed Corp., 744 S.W.2d 10, 10-11 (Tex.1988).

The Davilas' live trial pleading does not allege that any notice was provided to Aetna pursuant to the DTPA. Aetna specifically denied that it received any such notice. No issue on notice was submitted to the jury. Aetna did not object to the omission of an issue on notice in the charge. The transcript contains Aetna's requested issue regarding notice but there is no evidence in the record that this issue was presented to the trial court and that the trial court ruled on it. Hence, there is no evidence that the issue regarding notice was actually requested by Aetna. We have reviewed the record to determine whether there is sufficient evidence to support a deemed finding of notice and have determined that there is no evidence that the Davilas gave written notice to Aetna as required under the DTPA. Since there is no evidence to support a finding of notice, it will not be deemed found in such a manner to support the judgment. See Cielo, 744 S.W.2d at 11. Accordingly, we conclude that the Davila's failure to plead and prove the required DTPA notice is reversible error; therefore, the trial court erred in submitting the jury questions regarding the DTPA. We sustain Aetna's tenth point of error.

After reviewing the relevant authorities, we conclude that normally, the appropriate remedy would be to remand the case for a new trial on the DTPA cause of action with instructions to the trial court to abate the suit to allow the plaintiffs to comply with the notice requirement. ² See HOW at 538; accord Certainteed Corp. v. Cielo Dorado Dev., Inc., 733 S.W.2d 247 (Tex.App.--El Paso 1987), rev'd on other grounds, 744 S.W.2d 10 (1988). When, however, a party tries a case on alternative theories of recovery, and the jury returns favorable findings on both theories, the party is entitled to judgment on the theory entitling him to the greatest recovery. Boyce Iron Works v. S.W. Bell Tel., 747 S.W.2d 785, 787 (Tex.1988); Birchfield v. Texarkana Mem. Hosp., 747 S.W.2d 361, 367 (Tex.1987). In this case, although the Davilas brought suit on alternative theories of DTPA violations and breach of good faith and fair dealing, they did not plead for treble damages under the DTPA. Therefore, their recovery under either the DTPA or breach of good faith and fair dealing would have been the same. The Davilas recognized this: only one question regarding actual damages was submitted to the jury and answering this question was conditioned on finding either a breach of good faith and fair dealing or a violation of the DTPA.

When there are favorable jury findings on an alternative theory, a judgment can be upheld on that alternative theory once a DTPA theory is reversed on appeal. See Boyce Iron Works, 747 S.W.2d at 786-87. In this case, as discussed below, the judgment can be upheld on the jury findings regarding breach of good faith and fair dealing. Since, in this case, the judgment can be upheld by the jury findings regarding a breach of good faith and fair dealing and the measure of damages are the same under either cause of action, remand of the DTPA cause of action is not warranted.

Aetna's points of error one and two challenge the sufficiency of the evidence to support the jury findings regarding the Davilas' DTPA cause of action. Because we have held the DTPA issues should not have been submitted to the jury, these evidentiary points are moot. We decline to address them.

GOOD FAITH AND FAIR DEALING

The existence of a duty on the part of insurers to deal fairly and in good faith with their insureds was first stated in Arnold v. Nat. County Mut. Fire Ins. Co. 725 S.W.2d 165, 167 (Tex.1987). This duty is based on the special relationship which exists between an insurance company and its insured pursuant to a contract for insurance. Arnold, 725 S.W.2d at 167. The "special relationship" between the insured and insurer imposes a duty to investigate claims thoroughly and in good faith, and to deny those claims only after an investigation reveals there is a reasonable basis to do so. Viles v. Sec. Nat. Ins. Co., 788 S.W.2d 566, 568 (Tex.1990). In this special relationship, an insurance carrier is held to that degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business. Arnold, 725 S.W.2d at 167; G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544, 548 (Tex.Comm'n App.1929, holding approved).

A cause of action for breach of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay. Arnold, 725 S.W.2d at 167; see also Underwriters Life Ins. Co. v. Cobb, 746 S.W.2d 810, 814 (Tex.App.--Corpus Christi 1988, no writ). Whether there is a reasonable basis for denial must be judged by the facts before the insurer at the time the claim was denied. Viles, 788 S.W.2d at 567.

Aetna raises four points of error related to its cause of action for breach of good faith and fair dealing, three of which challenge the sufficiency of the evidence to support the jury findings regarding the elements of the cause of action and the award of damages. Also, Aetna challenges the propriety of the jury instruction regarding good faith and fair dealing, contending that an incorrect definition of the duty of good faith and fair dealing was submitted and that a...