Certain Underwriters at Lloyd's v. Smith

• Decision Date: 05 December 2002
• Docket Number: No. 14-00-00391-CV.,14-00-00391-CV.
• Citation: 93 S.W.3d 657
• 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

93 S.W.3d 657

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.).

December 5, 2002.

On Appeal from the 333rd District Court, Harris County, Joseph J. Halbach, Judge.

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

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

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

ORDER

PER CURIAM.

This Court issued its original opinions in this case on April 25, 2002. The parties filed a joint motion to abate the appeal and remand the case to the trial court for approval of a settlement involving the minor. We granted the motion and abated the appeal.

On September 23, 2002, the parties filed a joint motion to dismiss their respective appeals because the case has been settled and the trial court has approved the settlement. See TEX.R.APP. P. 42.1. On October 3, 2002, this Court granted the motion. In our opinion of October 3, 2002, dismissing the appeal, we ordered the judgment of April 25, 2002 vacated, but we did not withdraw the Court's opinions issued on April 25, 2002. See TEX.R.APP. P. 42.1(c) (in dismissing a proceeding, the court of appeals will determine whether to withdraw any opinion it has already issued).

On October 9, 2002, Angela M. Smith filed a motion for rehearing asking that the Court vacate and withdraw its opinions of April 25, 2002. On November 15, 2002, National Convenience Stores, Inc. and Certain Underwriters at Lloyd's, London filed a response to the motion for rehearing, taking no position on whether the Court should withdraw its opinions. We grant Angela M. Smith's motion.

Accordingly, we order the Majority, Concurring, and Dissenting Opinions issued April 25, 2002, in this case withdrawn.

BRISTER, C.J., dissenting.

SCOTT BRISTER, Chief Justice, dissenting on order withdrawing opinions.

This case presents facts almost identical to those in Tamez v. Certain Underwriters at Lloyd's, London, 999 S.W.2d 12 (Tex. App.-Houston [14th Dist.] 1998, pet. denied). After six months of drafting, this court was prepared to issue three opinions on April 25, 2002: a majority opinion by Justice Fowler following Tamez, a dissenting opinion by Justice Seymore finding Tamez wrongly decided, and my concurring opinion that follows as an appendix.

A few days before issuance, appellees' counsel notified the court that the parties had reached an agreement to settle the case. Because a minor was involved, they could not settle the case without court approval. See TEX.R. CIV. P. 44; Byrd v. Woodruff, 891 S.W.2d 689, 705 (Tex.App.-Dallas 1994, writ dism'd agr.). This did not occur until four months later. The appeal was not rendered moot merely because a settlement was pending. See Castano v. American Tobacco Co., 84 F.3d 734, 737 n. 3 (5th Cir.1996) (refusing to grant motion to dismiss due to pending settlement). Accordingly, our opinions issued as scheduled.

Appellees' counsel now requests that we withdraw our opinions. See TEX.R.APP. P. 42.1(c). As discussed in the appendix, I believe the very faulty reasoning of Tamez is being used to create a mass tort. Under these circumstances, the court does a disservice to the public and the law by exercising its discretion to withdraw the decisions in this case. See TEX.R.APP. P. 47.4(b) & (c) (calling for publication if an opinion "involves a legal issue of continuing public interest" or "criticizes existing law"). Thus, I respectfully dissent.

APPENDIX

CONCURRING OPINION

As the trial judge whose summary judgment was reversed by this Court in Tamez v. Certain Underwriters at Lloyd's, London, 999 S.W.2d 12 (Tex.App.-Houston [14th Dist.] 1998, pet. denied), I confess I remain unconvinced. I agree an employer must show an "insurable interest" in its employees; I disagree that term should be limited to the meaning it had in 1942. Perhaps in 1942, companies never expected to spend a dime when employees died on the job, except for "key men." If so, those days are over. Nevertheless, because Tamez governs this appeal short of en banc consideration, see O'Connor v. First Court of Appeals, 837 S.W.2d 94, 96 (Tex.1992) (stating decision of panel constitutes decision of the whole court unless court chooses to hear case en banc), I reluctantly concur.

Following its bankruptcy filing in 1991, National Convenience Stores, Inc. ("NCS") opted out of the Texas workers compensation system because of high premiums. Instead, NCS obtained liability insurance totaling $75 million to cover employee claims. This coverage included a deductible of $250,000 per claim. Rather than leaving this risk uncovered, NCS obtained a policy payable in that amount upon accidental death in the course of employment of any of its officers or employees.

In Tamez, a panel of this Court punished NCS for its prudence by requiring it to forfeit the entire policy benefit of $250,000 (even though it had already paid more than that to the Tamez family),¹ not to mention all premiums, and pay the plaintiffs' attorney's fees and interest as well. The panel found NCS had no insurable interest in the lives of its service-level employees because (1) the Texas Insurance Code was silent on the matter, and (2) it did not fit a 1942 definition of the term. I believe neither reason is persuasive, as set forth below.

The Expansion of Insurable Interests

This is not the first time Texas has brought up the rear in insurance practices. Texas was the last state that strictly limited insurable interests to the boundaries of the common law. See Kennedy v. Laird, 503 S.W.2d 664, 665 (Tex.Civ.App.-Houston [1st Dist.] 1973, no writ). With some resistance from the courts,² the Texas Legislature has repeatedly expanded insurable interests far beyond those limits:

• In 1921, the Legislature gave corporations and partnerships an insurable interest in their officers, stockholders, or partners. See TEX. INS.CODE art. 3.49.

• In 1931, the Legislature allowed members of fraternal societies to bestow an insurable interest on any person or business by simply naming them as beneficiary. See id. art. 10.01 et seq.; Castillo v. Canales, 141 Tex. 479, 485-86, 174 S.W.2d 251, 254 (1943).

• In 1953, the Legislature granted the same broad power to all insureds to name any beneficiary they chose. TEX. INS.CODE art. 3.49-1, §§ 1, 2.

• In 1999, the Legislature declared that anyone (person or corporation) had an insurable interest in anyone else by simply obtaining their written consent. Id. art. 3.49-1, § 3.

There is no question the Legislature may expand the scope of insurable interests, or even discard the requirement altogether. Long ago, the United States Supreme Court (in a conflicts case arising out of Texas's restrictive concept of insurable interests) held that each state may choose to define insurable interests according to its own public policies. See Griffin v. McCoach, 313 U.S. 498, 504, 61 S.Ct. 1023, 1026, 85 L.Ed. 1481 (1941). Because the Texas Legislature has the power to declare the state's public policy, its pronouncements on insurable interests are binding on Texas courts. Castillo, 174 S.W.2d at 253.

The Opposite of "Liberal Construction"

With respect to its insurable interest enactments, the Legislature has declared they should be "liberally construed to effectuate [their] purposes," and are "not to be limited or restricted by previous declarations or holdings of the Courts of Texas defining the term insurable interest." TEX. INS.CODE art. 3.49-1, § 5. As the Tamez panel noted, this "intimates that the only limitations on insurable interest are those found in the statute." Tamez, 999 S.W.2d at 17. But that is not at all what the panel did.

The Texas Insurance Code does not require insurable interests generally, or state whether corporations have an insurable interest in the lives of service-level employees. Because of this silence, the Tamez panel held that pre-existing caselaw applied. In other words, unless the statute expressly bestows an insurable interest, that term is limited by previous court decisions. Definitionally, this is the exact opposite of "liberal construction."

See BLACK'S LAW DICTIONARY 313 (6th ed.1990) (defining "strict construction" as "construction of a statute or other instrument according to its letter, which recognizes nothing that is not expressed . .").

We can be quite sure this is not what the Legislature intended — not in the 1950s (when it disavowed prior caselaw), and not in the 1990s. Five months after Tamez, the Legislature amended the Insurance Code to declare that an insurable interest is created by written consent of the person whose life is insured. See TEX. INS.CODE art. 3.49-1, § 3. Before 1999, that person also had to be the buyer of the insurance. In applying the same rule when a thirdparty bought the insurance, the Legislature said it intended "to clarify existing law and practice" and not "to alter or modify" pre-existing law.³ Act 1999, 76th Leg., R.S., ch. 438, § 2, 1999 Tex. Gen. Laws 2817. This makes two points of legislative intent quite clear: (1) insurable interests extend beyond those expressly listed in the Insurance Code, and (2) when our legislators demanded liberal construction, they...