Bailey v. Kemper Cas. Ins. Co.

• Decision Date: 11 July 2002
• Docket Number: No. 06-01-00149-CV.,06-01-00149-CV.
• Citation: Bailey v. Kemper Cas. Ins. Co., 83 S.W.3d 840 (Tex. App. 2002)
• Parties: Carl BAILEY, Individually and on Behalf of all Others Similarly Situated, Appellants, v. KEMPER CASUALTY INSURANCE COMPANY, et al., Appellees.
• Court: Texas Court of Appeals

83 S.W.3d 840

Carl BAILEY, Individually and on Behalf of all Others Similarly Situated, Appellants, v. KEMPER CASUALTY INSURANCE COMPANY, et al., Appellees.

No. 06-01-00149-CV.

Court of Appeals of Texas, Texarkana.

Submitted April 25, 2002.

Decided July 11, 2002.

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John R. Mercy, Mercy, Carter, Tidwell & Elliott, LLP, Texarkana, James A. Holmes, Wellborn, Houston, Adkison, Mann, Sadler & Hill, L.L.P., Henderson, for appellant.

Troy A. Hornsby, Miller, James, Miller & Hornsby, LLP, Texarkana, Veronica Carmona Czuchna, Jordan & Carmona, PC, Austin, for appellee.

Before GRANT, ROSS, and CORNELIUS,^* JJ.

OPINION

Opinion by Justice GRANT.

Both parties appeal the order of the trial court granting class certification under TEX.R. CIV. P. 42(b)(2) and denying such certification under TEX.R. CIV. P. 42(b)(4) regarding Carl Bailey's action against numerous associated insurance companies (Kemper) for negligence, breach of contract, violation of the Texas Insurance Code, and declaratory judgment, seeking declaratory relief and statutory penalties.

Bailey contends the trial court erred in failing to find that common issues of law and fact predominate over questions affecting only individual members, thus denying certification under Rule 42(b)(4).

Kemper presents eight issues on cross appeal. Kemper contends the trial court erred in certifying a class under a class definition proposed after the class certification hearing. Next, Kemper contends the trial court erred by certifying a fundamentally defective class definition. Further, Kemper contends the trial court erred in including a trial plan that is insufficient and fatal to the class certification. Kemper also contends the trial court erred in finding that Bailey met the requirements of commonality, typicality, and adequate representation. Finally, Kemper contends the trial court erred in finding that Kemper has acted or refused to act on grounds generally applicable to the class and that declaratory relief predominated the monetary relief sought.

Bailey purchased a standard Texas personal automobile liability insurance policy from appellee American Motorist Insurance Company (AMICO), a member of the Kemper Insurance Companies in 1999. In accordance with TEX. INS.CODE ANN. art. 5.06-3 (Vernon Supp.2002), the policy insured Bailey, members of his household, and passengers in his covered vehicles against medical expenses, lost earnings, and certain household expenses through coverage part B2 entitled "Personal Injury Protection (PIP)." Bailey selected a coverage limit of $5,000 per person. The policy included the customary "Assignment of Benefits" provision that read "Payments for medical expenses will be paid directly to a physician or other health care provider if we receive a written assignment signed by the covered person to whom such benefits are payable."

On November 29, 2000, Bailey suffered bodily injuries in a motor vehicle accident, resulting in lost wages and medical expenses. On December 18, 2000, AMICO received a request for payment from Dr. Charles Williams at East Texas Orthopedic Clinic, which alleged that Bailey's PIP benefits had been assigned in writing to Dr. Williams. Bailey does not dispute that he had executed an assignment of benefits form at Dr. Williams's request in connection with unrelated treatment in 1998, but contends that he did not intend for the assignment to apply to future treatment or charges. Bailey had comprehensive health insurance in effect at the time of his accident and intended for Dr. Williams to be paid by his health insurance carrier. AMICO issued the PIP payment to Dr. Williams on the same date Dr. Williams requested payment. Kemper did not receive the assignment before issuing payment and did not request a copy until Bailey's counsel contacted Kemper. The day after Dr. Williams submitted his request to AMICO, December 19, 2000, Bailey submitted an application for PIP benefits to AMICO by way of correspondence.

Bailey brought suit individually and on behalf of Kemper's many insureds from whom Kemper misdirected PIP benefits by naming health care providers as sole or additional payees on benefit checks. Bailey alleged negligence in failing to use ordinary care to ensure that PIP beneficiaries received timely payment of benefits to which they were contractually entitled and by failing to implement policies and procedures to comply with the Texas law and the terms of their policies. Bailey alleged Kemper breached contract in failing to make payment of PIP benefits directly and solely to the covered person. Bailey also alleged violation of the Texas Insurance Code by failing to make payment within sixty days of receipt of all items, statements, and reports reasonably requested and required under Article 21.55, Section 3(f), and by failing to properly issue payment when due under Article 5.06-3(d)(3). TEX. INS.CODE ANN. art. 21.55, § 3(f) (Vernon Supp.2002). Bailey sought a judicial declaration regarding the rights of the parties to the insurance agreement stating that both the insurance policy and the PIP statute require Kemper to issue payment of PIP benefits directly to the coverage beneficiary in the absence of a writing signed by that person and delivered to Kemper before the payment of benefits directing or consenting to payment directly or solely to the health care provider. Bailey also sought to recover the statutory damages, interest, and attorney's fees provided for in Articles 5.06-3 and 21.55 of the Texas Insurance Code. TEX. INS.CODE ANN. arts. 5.06-3, 21.55 (Vernon Supp. 2002). Bailey requested class certification under both TEX.R. CIV. P. 42(b)(2) and 42(b)(4).

Bailey's request for class certification was granted in part and denied in part. The trial court denied class certification under Rule 42(b)(4), but granted certification under 42(b)(2) for the purposes of adjudicating Bailey's claims for declaratory and injunctive relief. Texas Rule of Civil Procedure 42(d) provides that when appropriate, an action may be brought or maintained as a class action with respect to particular issues. The trial court did not certify the class for the purpose of adjudicating Bailey's claims regarding negligence breach of contract, or violation of the Texas Insurance Code Articles 21.55, Section 3(f) and 5.06-3(d)(3). The issues on appeal regarding the propriety of granting certification under Texas Rule of Civil Procedure 42(b)(2) and denying certification under Rule 42(b)(4) are thus limited to Bailey's claims for declaratory and injunctive relief.

Standard of Review

This is an interlocutory appeal. Our jurisdiction over an appeal from an interlocutory order certifying or refusing to certify a class under Texas Rule of Civil Procedure 42 is provided by TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(3) (Vernon Supp.2002).

We review the decision of the trial court in certifying or refusing to certify the class for abuse of discretion. See Hi-Lo Auto Supply, L.P. v. Beresky, 986 S.W.2d 382, 386 (Tex.App.-Beaumont 1999, no pet.). A trial court abuses its discretion only if it "fails to properly apply the law to the undisputed facts or acts arbitrarily, unreasonably, or without reference to any guiding principles." Henry Schein, Inc. v. Stromboe, 28 S.W.3d 196, 200-01 (Tex. App.-Austin 2000, pet. dism'd w.o.j.). In conducting this review, we must view the evidence in the light most favorable to, and indulge every presumption in favor of, the trial court's action. Entex v. City of Pearland, 990 S.W.2d 904, 909 (Tex.App.-Houston [14th Dist.] 1999, no pet.). An appellate court may not substitute its judgment for that of the trial court, even if it would determine the issues differently than the trial court. Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146, 149 (Tex.App.-Austin 1995, writ dism'd w.o.j.).

The party seeking class certification has the burden to establish its right to a class action. See St. Louis Southwestern Ry. Co. v. Voluntary Purchasing Groups, Inc., 929 S.W.2d 25, 30 (Tex.App.-Texarkana 1996, no writ). The movant must demonstrate that an identifiable class exists and is susceptible to precise definition. Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex.2000); Charlie Thomas Courtesy Leasing, Inc. v. Taylor, 44 S.W.3d 684, 687 (Tex.App.-Houston [14th Dist.] 2001, no pet.). The movant must also establish that (1) the class is so numerous the joinder of all members is impracticable, (2) there are issues of law or fact common to the class, (3) the claims and defenses of the representative parties are typical of those of the class, and (4) the representative parties will fairly and adequately represent the interests of the class. TEX.R. CIV. P. 42(a).

In addition, the party seeking class certification must establish that the suit falls within at least one of four enumerated categories of actions. TEX.R. CIV. P. 42(b)(1)-(4). Rule 42(b)(2) provides for class treatment when "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole ... " Rule 42(b)(4) provides for class treatment when "the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." The rules allow suits to be maintained as class actions, when appropriate, only with regard to particular issues or to be divided among subclasses. TEX.R. CIV. P. 42(d). To sustain the burden, the movant must show some facts to support certification. Voluntary Purchasing Groups, Inc., 929 S.W.2d at 30-31.

Rule 42(c)(1) provides in part, "As soon as practicable after the commencement...