Bailey v. Progressive County Mut. Ins. Co.

• Decision Date: 07 June 2002
• Docket Number: No. 05-01-00822-CV.,05-01-00822-CV.
• Citation: 78 S.W.3d 708
• Parties: Brent BAILEY and Heather Bailey, Appellants, v. PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

78 S.W.3d 708

Brent BAILEY and Heather Bailey, Appellants, v. PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Appellee.

No. 05-01-00822-CV.

Court of Appeals of Texas, Dallas.

June 7, 2002.

Heather Bailey, Haynes and Boone, L.L.P., Dallas, for appellants.

Reagan M. Brown, Fulbright & Jaworski, Houston, for appellee.

Before Justices JAMES, O'NEILL, and FRANCIS.

OPINION

Opinion by Justice O'NEILL.

Appellants Brent and Heather Bailey appeal a summary judgment granted in favor of appellee Progressive County Mutual Insurance Company (Progressive). In three points of error, the Baileys generally contend the trial court erred in granting summary judgment in favor of Progressive. For the following reasons, we reverse the trial court's judgment and remand for further proceedings consistent with this opinion.

In 1999, the Baileys purchased a new 2000 Lexus for $31,587. Progressive insured the Baileys' vehicle under a standard personal auto policy. Pursuant to the policy, Progressive agreed to "pay for direct and accidental loss" to the vehicle. The policy also contained the following limit of liability:

Our limit of liability for loss will be the lesser of the:

1. Actual cash value of the stolen or damaged property;

2. Amount necessary to repair or replace the property with other of like kind or quality;

3. Amount stated in Declarations of this policy.

About two months after the Baileys purchased the vehicle, the vehicle was involved in a serious accident. Progressive, initially estimating the cost of repairs at $6,466.04, elected to repair the vehicle. However, Progressive significantly underestimated the cost of repairs, which ultimately surpassed $18,000. Despite the repairs, the market value of the vehicle after repairs was over $9,000 less than its market value before the accident. Progressive refused the Baileys' request for the diminution in value to the automobile. The Baileys subsequently sued Progressive asserting it failed to repair or replace their property with other of like kind and quality. The Baileys also alleged claims for DTPA and Insurance Code violations. Progressive filed a motion for summary judgment asserting that it complied with its obligations under the contract because (1) it paid the amount necessary to "repair or replace the property with other of like kind or quality" and (2) diminished value is not recoverable under the policy. The trial court granted Progressive's motion for summary judgment. This appeal followed.

The standard for reviewing a trial court's granting of summary judgment is well settled. A movant for summary judgment must establish there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt: Co., 690 S.W.2d 546, 548 (Tex.1985). A defendant moving for summary judgment must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) conclusively establish each element of an affirmative defense. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979).

Insurance policies are contracts and are subject to the same rules of construction applicable to all contracts. Tex. Farmers Ins. Co. v. Murphy, 996 S.W.2d 873, 879 (Tex.1999); Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 740 (Tex. 1998). Thus, our primary goal is to give effect to the intent of the parties as expressed in the agreement. Balandran, 972 S.W.2d at 741. If, after applying the rules of construction, a policy is subject to two or more reasonable interpretations, we must resolve the uncertainty by adopting the construction that most favors the insured. Id.; Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991). In particular, we must adopt the construction of a limitation on liability urged by the insured so long as the construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent. See Nat'l Union, 811 S.W.2d at 555.

Here, the Baileys contend Progressive breached the insurance policy because it failed to repair or replace their vehicle with other of "like kind and quality." Specifically, the Baileys assert the repairs performed did not restore their vehicle to its former condition because the value of the vehicle after repairs was significantly less than the value of the vehicle before the accident. In its motion for summary judgment, Progressive asserted that irrespective of the post-repair value of the vehicle, it complied with its obligation under the policy because it fully repaired all damages subject to repair and the Baileys were not complaining of the adequacy of those repairs. Progressive's argument is premised on its contention that it was not required to restore the vehicle to any particular value.

Progressive's position is directly contrary to this Court's opinion in Fidelity & Casualty Co. of New York v. A.H. Underwood, 791 S.W.2d 635 (Tex.App.-Dallas 1990, no pet.). In Fidelity, the insurer elected to repair a flood-damaged vehicle, but the value of the vehicle after repairs was substantially less than the value of the vehicle before repairs. The policy language concerning the insurer's limitation of liability was nearly identical to the language at issue here. Specifically, the language concerning repairs stated the insurer would pay "what it would then cost to repair or replace such covered automobile or part thereof with' other of like kind and quality...." We interpreted this language as requiring the insurer to restore a vehicle to "substantially the same value as that of the vehicle prior to the loss." Fidelity, 791 S.W.2d at 641; see Auto. Underwriters of Am. v. Radford, 293 S.W. 869 (Tex.Civ. App.-Dallas 1927), aff'd, 299 S.W. 852 (Tex. Com.App.1927). More recently, the Beaumont Court of Appeals relied on Fidelity and a long history of Texas cases to reach a similar result. See Schaefer v. Am. Mfrs. Mut. Ins. Co., 65 S.W.3d 806 (Tex. App.-Beaumont 2002, no pet. h.); see also Superior Pontiac Co. v. Queen Ins. Co. of Am., 434 S.W.2d 340, 342 (Tex.1968); Northwestern Nat'l Ins. Co. v. Cope, 448 S.W.2d 717, 719 (Tex.Civ.App.-Corpus Christi 1969, no writ); Smith v. Am. Fire & Cas. Co., 242 S.W.2d 448, 453-54 (Tex. Civ.App.-Beaumont 1951, no writ). Therefore, in this case, Progressive was required to conclusively establish that it repaired the Baileys' vehicle to substantially the same value as it was prior to the loss.¹ In its motion for summary judgment, Progressive made no attempt to make the requisite showing. Consequently, we conclude the trial court erred in granting Progressive's motion for summary judgment on this ground.

In reaching our conclusion, we are aware the Houston Fourteenth Court of Appeals reached a different result in Carlton v. Trinity Universal Insurance Co., 32 S.W.3d 454 (Tex.App.-Houston [14th Dist.] 2000, pet. denied) and Smither v. Progressive County Mutual Insurance Co., 76 S.W.3d 719 (Tex.App.-Houston [14th Dist.] 2002, no pet. h.). In Carlton, the court held "where an insurer has fully, completely, and adequately `repaired or replaced [the vehicle] with other of like kind and quality,' any reduction in market value due to factors that are not subject to repair or replacement cannot be deemed a component part of the cost of repair or replacement." Carlton, 32 S.W.3d at 465. According to the Carlton court, a car could be "fully, completely, and adequately" repaired as long as all damage that could be repaired was repaired. The court acknowledged the concept of repair necessarily must mean repair to a former condition, but concluded that no concept of value was associated with that condition. Id. at 464. In Smither, the Fourteenth Court reaffirmed its construction of the policy language and opined that the construction urged by the insured (and the construction we reaffirm today) ignores the policy language. See Smither, 76 S.W.3d at 723-24.

Because the Fourteenth Court's conclusion conflicts with our prior opinion in Fidelity and the weight of Texas authority on the issue, we decline to follow it. See Fidelity, 791 S.W.2d at 643; Schaefer, 65 S.W.3d at 809-10; see also Superior Pontiac Co., 434 S.W.2d at 342; Northwestern Nat'l Ins. Co., 448 S.W.2d at 719; Smith, 242 S.W.2d at 453-54. Further, contrary to the Fourteenth Court's suggestion, our interpretation of the policy does not ignore the policy language. The policy language requires the insurer to "repair or replace" the property with other of like "kind and quality" and thus to restore the vehicle to its former condition. Deciding a vehicle's former condition includes some reference to its value does not ignore the policy language, but rather gives effect to it as well as the reasonable expectation of car owners.²

Further, the Fourteenth Court purports to distinguish Fidelity and other prior Texas case law that is contrary to its conclusion based on whether the insured was challenging the "adequacy" of repairs. However, an insured who contends his vehicle was not repaired to substantially the same condition and value as it was prior to the loss is necessarily challenging the overall adequacy of repairs. That it might be impossible for such repairs to be made, and thus impossible for the insurer to restore the vehicle to its previous condition, should not relieve the insurer of its obligation under the...