Bellefonte Underwriters Ins. Co. v. Brown, C-2797

Citation704 S.W.2d 742
Decision Date19 February 1986
Docket NumberNo. C-2797,C-2797
PartiesBELLEFONTE UNDERWRITERS INSURANCE COMPANY, et al., Petitioners, v. Leon BROWN, et al., Respondents.
CourtSupreme Court of Texas

R.B. Cousins, Thompson, Coe, Cousins & Irons, Royal H. Brin, Jr., Strasburger & Price, Dallas, for petitioners.

Newton B. Schwartz, Newton B. Schwartz, P.C., Houston, Guy Cade Fisher, Fisher & Cook, Austin, Charles E. Blackley, Judge, Co. Court at Law, New Braunfels, Al Schulman, Smith, Schulman, Rawitscher & Carnahan, Houston, for respondents.

ROBERTSON, Justice.

This appeal involves claims for breach of contract, tortious interference with contract, punitive damages, libel, attorney's fees and violation of the Texas Insurance Code. Our concern is with the award of punitive damages. The case was tried to a jury which found damages for breach of an insurance contract, but failed to find any damage resulting from the allegations of tortious interference with contract. Although the jury found no damages in tort, it did find an amount as punitive damages. The trial court included the award of punitive damages in its judgment and the court of appeals affirmed this award. 663 S.W.2d at 562. We hold it was error to award punitive damages in the absence of a finding of actual damages in tort and accordingly reverse this award.

Leon Brown is the owner of Houston Wiper and Mill Supply Company, an industrial rag recycling business in Jacinto City, Texas. His business was destroyed by fire on February 21, 1978.

For over 20 years, Brown had purchased fire insurance for his business from Avrohm Wisenberg. In some years Wisenberg obtained coverage for Brown through a single company, but in other years, such as 1978, it was necessary to divide the risk among several insurance companies. At the time of the fire, Brown's fire insurance coverage was divided among seven insurance companies, one of which was Bellefonte Underwriters Insurance Company.

The building in which Brown operated his business contained a wet sprinkler system designed to activate in case of fire. The building, however, was unheated and so it was Brown's practice to drain the sprinkler system when freezing weather was forecast. This practice was recommended by Wisenberg. Because freezing weather was forecast, the sprinkler system was drained on the evening preceding the morning of the fire.

Following the fire, all seven insurance companies initially agreed to accept Brown's proof of loss, but Bellefonte later changed its position concluding that Wisenberg had misrepresented the risk associated with insuring Brown's business. After Bellefonte refused to pay Brown's claim, it actively encouraged the other six insurance companies to deny Brown's claim also. In a Telex from Bellefonte to one co-insurer, Lloyd's of London, Bellefonte communicated its erroneous conclusion that Wisenberg had misrepresented the risk and suggested that all companies join in concert to deny Brown's claim. Despite this suggestion, the other insurance companies paid their part of Brown's claim.

After Bellefonte refused to pay his claim, Brown filed suit alleging breach of contract and, after discovering the aforementioned Telex, amended to include a claim for tortious interference with contract and a claim for punitive damages. Brown also joined Wisenberg as a defendant and Wisenberg, in turn, filed a crossaction against Bellefonte. The details of these claims are omitted because they are not material to Brown's claim for tortious interference with contract or his claim for punitive damages.

The cause was tried to a jury which found that Bellefonte had breached its contract. The jury also made the following findings regarding Brown's claim for tortious interference with contract: that Bellefonte sent a Telex to Lloyd's of London and other insurance companies which provided Brown's fire coverage; that the Telex was sent in an attempt to influence the other insurance companies to refuse Brown's claims; that the Telex was sent with the intent to injure Brown in his contractual relationships with the other participating insurance companies; that the Telex contained material misrepresentations injurious to Brown's property rights in his insurance contracts with the other insurance companies; and that the untrue representations by Bellefonte were willfully and maliciously made or were made in reckless disregard of the rights of Brown.

On the issue of actual damages, Special Issue 22 was submitted and answered as follows:

SPECIAL ISSUE NO. 22

What sum of money, if any, if paid now in cash, do you find from a preponderance of the evidence would fairly and reasonably compensate Leon Brown and Houston Wiper and Mill Supply Company for their damages, if any, taking into consideration the following elements of damages and none others:

1. Their loss of the actual benefits of their insurance policy with Bellefonte Underwriters Insurance Company?

Answer in dollars and cents, if any.

Answer: 300,964.00

2. Loss of profits in the past and any which they reasonably and probably will sustain in the future as the direct and proximate result of the nonpayment to them of insurance proceeds timely and in the full amounts due under said policies or policy?

Answer in dollars and cents, if any.

Answer: None

In addition the jury found that punitive damages of $1,000,000 should be awarded against Bellefonte. On these and other findings the trial court rendered judgment for Brown and ordered Bellefonte to pay damages of $1,300,964, plus attorney's fees, prejudgment interest and...

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6 books & journal articles
  • Other Workplace Torts
    • United States
    • James Publishing Practical Law Books Archive Texas Employment Law. Volume 2 - 2016 Part VI. Workplace Torts
    • July 27, 2016
    ...Ins. Co. v. Brown , 663 S.W.2d 562, 573-78 (Tex. App.—Houston [14th Dist.] 1983, writ granted), aff’d in part, rev’d in part, 704 S.W.2d 742 (Tex. 1986) (holding the insured’s breach of his insurance contract did not prevent a claim for tortious interference with that contract). On the othe......
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    • James Publishing Practical Law Books Archive Texas Employment Law. Volume 2 - 2017 Part VI. Workplace Torts
    • August 19, 2017
    ...Ins. Co. v. Brown , 663 S.W.2d 562, 573-78 (Tex. App.—Houston [14th Dist.] 1983, writ granted), aff’d in part, rev’d in part, 704 S.W.2d 742 (Tex. 1986) (holding the insured’s breach of his insurance contract did not prevent a claim for tortious interference with that contract). On the othe......
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    • James Publishing Practical Law Books Texas Employment Law. Volume 1 Part VI. Workplace torts
    • May 5, 2018
    ...Ins. Co. v. Brown , 663 S.W.2d 562, 573-78 (Tex. App.—Houston [14th Dist.] 1983, writ granted), aff’d in part, rev’d in part, 704 S.W.2d 742 (Tex. 1986) (holding the insured’s breach of his insurance contract did not prevent a claim for tortious interference with that contract). On the othe......
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    • United States
    • James Publishing Practical Law Books Archive Texas Employment Law. Volume 2 - 2014 Part VI. Workplace torts
    • August 16, 2014
    ...Ins. Co. v. Brown , 663 S.W.2d 562, 573-78 (Tex. App.—Houston [14th Dist.] 1983, writ granted), aff’d in part, rev’d in part, 704 S.W.2d 742 (Tex. 1986) (holding the insured’s breach of his insurance contract did not prevent a claim for tortious interference with that contract). On the othe......
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