Certain Underwr. at Lloyd's London v. Smith

• Decision Date: 25 April 2002
• Docket Number: No. 14-00-00391-CV.,14-00-00391-CV.
• Citation: 77 S.W.3d 859
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S LONDON, C.M. Owen, P.M. Donner, D.W. Sear, T.W. Brien, J.D. Lloyd, P.W. Murrell, M.J. Davis, J.H. Davies, R.A. Lissenden, R.J.H. Payne, J.M. Donner, D.R. Neil, V.W. Broad, A.P. Targett, A.J. Avery, P.G. Butler, P.J.M. Battle, R.J. Dackombe, J.W. Dendy, R.D. Hazell, J.B. Hose, J.P. Tilling, S.J. Burnhope, J.S. Darling, R.J. Morse, G.A. Morese, G.A. Argent, G.M. Chichester, D.A. Thomas, S.D. Chappel, B.P.D. Kellett, A.F. Whitbread, P.A. Minter, T.G. Green, B.P. Bartell, P.E. Holland, J.H. Bristow, and National Convenience Stores, Inc., Appellants/Cross-Appellees, v. Angela M. SMITH, Individually and As Next Friend of Brandon William Hendrix, A Minor, Appellees/Cross-Appellants.
• Court: Texas Court of Appeals

77 S.W.3d 859

CERTAIN UNDERWRITERS AT LLOYD'S LONDON, C.M. Owen, P.M. Donner, D.W. Sear, T.W. Brien, J.D. Lloyd, P.W. Murrell, M.J. Davis, J.H. Davies, R.A. Lissenden, R.J.H. Payne, J.M. Donner, D.R. Neil, V.W. Broad, A.P. Targett, A.J. Avery, P.G. Butler, P.J.M. Battle, R.J. Dackombe, J.W. Dendy, R.D. Hazell, J.B. Hose, J.P. Tilling, S.J. Burnhope, J.S. Darling, R.J. Morse, G.A. Morese, G.A. Argent, G.M. Chichester, D.A. Thomas, S.D. Chappel, B.P.D. Kellett, A.F. Whitbread, P.A. Minter, T.G. Green, B.P. Bartell, P.E. Holland, J.H. Bristow, and National Convenience Stores, Inc., Appellants/Cross-Appellees, v. Angela M. SMITH, Individually and As Next Friend of Brandon William Hendrix, A Minor, Appellees/Cross-Appellants.

No. 14-00-00391-CV.

Court of Appeals of Texas, Houston (14th Dist.).

April 25, 2002.

Dan K. Horn, Irving, Daryl G. Dursum, Houston, Edward C. Mainz, San Antonio, John M. Weaver, Irving, for appellants.

Jeff Joyce, Michael D. Myers, Scott M. Clearman, Houston, for appellees.

Panel consists of Chief Justice BRISTER and Justices FOWLER and SEYMORE.

MAJORITY OPINION

WANDA McKEE FOWLER, Justice.

This is an appeal and cross-appeal by National Convenience Stores, Inc. and Certain Underwriters at Lloyd's, London, from summary judgment rulings and a bench trial. Appellants challenge (1) the award to appellee of the proceeds of an insurance policy National Convenience Stores held on the lives of its employees, (2) the court's findings at the bench trial on attorney's fees and the applicability of Texas Insurance Code article 21.55, and (3) prejudgment interest. Lloyd's additionally argues that it should not be held jointly and severally liable for the award. Appellee/cross-appellant challenges the trial court's summary judgment in favor of Lloyd's that article 21.55 was not applicable to her claims. We affirm in part and reverse and remand in part.

FACTS

National Convenience Stores, Inc. ("NCS") owned and operated "Stop `N Go" convenience stores in Texas and elsewhere in the United States. On December 4 1991, William Smith, an NCS employee, was killed while in the course and scope of employment at an NCS convenience store. NCS had purchased an accidental death insurance policy from Certain Underwriters at Lloyd's, London ("Lloyd's") that provided that Lloyd's would pay NCS $250,000 upon the accidental death of any NCS Texas employee killed during the course and scope of employment with NCS. NCS was not a worker's compensation subscriber. After William Smith's death, NCS submitted a claim and was paid $250,000 in proceeds. Angela M. Smith, William Smith's widow, subsequently learned of this payment.

PROCEDURAL HISTORY

After learning that NCS was paid the insurance benefits, Angela M. Smith, individually and as next friend of Brandon William Hendrix, a minor ("Smith"), sued Lloyd's and others to recover the $250,000.¹ Lloyd's brought NCS into the suit as a third-party defendant, and Smith amended her pleadings to seek the insurance proceeds from all defendants.

Smith also moved for partial summary judgment asking the court to declare her entitled to recover the insurance proceeds arising from her husband's death. The trial court granted Smith's motion, entering a partial summary judgment in her favor. The trial court also granted summary judgment in favor of Lloyd's on Smith's claims of breach of contract, conversion, money had and received, and conspiracy. Lloyd's motion for summary judgment with respect to Smith's claim under Texas Insurance Code article 21.55 was taken under advisement and never ruled on before trial.

Ultimately, the trial judge conducted a bench trial on Smith's claim for attorney's fees under the Declaratory Judgment Act and the applicability of Texas Insurance Code article 21.55, and signed a judgment awarding Smith the policy benefit of $250,000, attorney's fees of $87,5000, and prejudgment interest of $119,013.70. The defendants were held jointly and severally liable for the relief granted.

In support of the judgment, the trial court issued findings of fact and conclusions of law, including the following findings of fact:

16. Were Tex. Ins.Code art. 21.55 to apply in this case, the court would award interest as damages pursuant to Tex. Ins.Code art. 21.55 § 6. Such an award would include interest as damages at an annual rate of 18%, simple interest, beginning to accrue November 27, 1995. As of the date of the court's judgment, the amount would equal $181,602.73.

17. An award under Tex. Ins.Code art. 21.55 § 6 would also include an award of attorneys' fees in an amount that would leave the plaintiffs with the $250,000 policy benefit and the $181,602.73 interest as damages after payment to their counsel under the contingent fee employment contract. The award of attorneys' fees under these constraints would equal $232,401.47, increasing to $287,735 if this matter is appealed.

The trial court's conclusions of law included the following: (1) an award to Smith of $87,500 in attorney's fees under Tex. Civ. Prac. & Rem.Code § 37.009 was reasonable, necessary, just and equitable; (2) Lloyd's was entitled to judgment on Smith's claims for damages and attorney's fees under Texas Insurance Code article 21.55 because article 21.55 was not applicable to the action; (3) Lloyd's, NCS, and the other defendants were jointly and severally liable for the $250,000 policy benefit and attorneys' fees of $87,500; and (4) pursuant to Tex. Civ. Prac. & Rem Code § 37.003, 37.004, 37.009, and 37.011, Smith was entitled to recover the policy benefit and attorneys' fees from the defendants jointly and severally.

On appeal, appellant NCS raises 14 issues (not including subparts). NCS's first ten issues relate to the trial court's holding that NCS did not have an insurable interest in the life of William Smith and that Smith was entitled to the $250,000 insurance proceeds. In raising these issues, NCS asks this panel to reconsider this court's prior decision in Tamez v. Certain Underwriters at Lloyd's, London, 999 S.W.2d 12 (Tex.App.-Houston [14th Dist.] 1998, pet. denied), involving several of the same defendants and the same insurance policy. NCS's eleventh and twelfth issues challenge the trial court's award of attorney's fees based on the Declaratory Judgment Act, Smith's failure to segregate the attorney's fees, and the legal and factual sufficiency of the fee award. In its thirteenth and fourteenth issues, NCS complains that the trial court should not have awarded prejudgment interest, and alternatively, that prejudgment interest was improperly awarded under Texas Finance Code section 302.002, and should have been calculated under the common law as provided in Johnson & Higgins of Texas v. Kenneco Energy, Inc., 962 S.W.2d 507 (Tex.1998).

Lloyd's brings three issues. In the first two issues, Lloyd's challenges the trial court's judgment holding it jointly and severally liable for the award of the $250,000 insurance proceeds, attorney's fees, and prejudgment interest. In the third issue, Lloyd's argues, as does NCS, that NCS has an insurable interest in the lives of its employees.

Cross-appellant Smith brings a single issue complaining of the trial court's finding that Texas Insurance Code article 21.55 is not applicable to her claims.

We will address the claims of each party in turn, concluding with Smith's cross-appeal.

NCS'S LIABILITY

1. Insurable Interest and the Applicability of Collateral Estoppel

While the present case was pending in the trial court, this court issued its decision in Tamez v. Certain Underwriters at Lloyd's, London, 999 S.W.2d 12 (Tex.App.-Houston [14th Dist.] 1998, pet. denied), a case involving a nearly identical fact situation and claims against NCS and Lloyd's for the insurance policy proceeds under the same policy at issue here. In Tamez, a different panel of this court reached three conclusions: (1) the plaintiffs had standing to seek the policy proceeds; (2) NCS has no insurable interest in the life of its employees; and (3) NCS recovered benefits from the policy in violation of article 3.51-6, section 3 of the Texas Insurance Code. Id. at 15-21. The Tamez court also found that there was no contractual relationship between Lloyd's and the plaintiffs giving rise to the duty of good faith and fair dealing. Id. at 21.² The Texas Supreme Court denied the defendants' petition for review, and, at about the same time the defendants filed their briefs, denied a motion for rehearing.³

NCS contends that this court should reconsider its decision that NCS lacks an insurable interest in the lives of its employees for the following reasons: (1) NCS has a unique relationship with its Texas employees and incurs substantial expenses for work-related deaths, so there is a clear and rational business purpose for having the insurance policy; (2) NCS has a right to enforce the Lloyd's policy as a surplus lines policy under Texas Insurance Code article 1.14-2, section 9, to which Texas Insurance Code article 3.51-6 is not applicable; (3) the Lloyd's policy is not a group policy under article 3.51-6, but a surplus lines policy enforceable as a manuscript policy pursuant to article 1.14-2, section 9; and (4) alternatively, if article 3.51-6 is applicable, the trial court misapplied the "person insured" language.

Lloyd's joins in NCS's argument. It asserts that (1) Texas Insurance Code article 3.49-1 mandates that the doctrine of insurable interest be liberally construed, and (2) the named beneficiary of a life insurance policy has an insurable interest in the life of another to the extent the beneficiary suffers actual pecuniary loss if the insured person dies. Additionally, Lloyd's asserts that third parties like Smith lack standing to assert that the named beneficiary lacks an insurable interest with regard to the person whose life has been insured.

In response, Smith argues that this court's opinion in Tamez decided these issues; therefore, collateral estoppel bars ...