Chitsey v. National Lloyd's Ins. Co.
| Decision Date | 30 October 1985 |
| Docket Number | No. 14230,14230 |
| Parties | Ronald CHITSEY, Appellant, v. NATIONAL LLOYD'S INSURANCE COMPANY, et al., Appellees. |
| Court | Texas Court of Appeals |
Joe K. Longley, Mark L. Kincaid, Longley & Maxwell, Austin, for appellant.
David M. Moore, Wilson, Grosenheider & Burns, Austin, for appellees.
Before SHANNON, C.J., and BRADY and GAMMAGE, JJ.
ON MOTION FOR REHEARING
The opinion of the Court in this cause handed down on August 28, 1985, is withdrawn and the following opinion is substituted therefor.
Appellant Ronald Chitsey sued National Lloyd's Insurance Company and a local insurance agency in the district court of Travis County. After trial to a jury, the district court rendered judgment that Chitsey take nothing. This Court will reverse the take-nothing judgment and remand the cause for entry of judgment.
Chitsey purchased from National Lloyd's a fire policy insuring against loss to a duplex located at 5107 Leralynn in Austin. The face amount of the coverage was $16,000.00. The policy provided that upon loss the insurer would pay those sums necessary to repair the duplex with material of like kind and quality. On January 9, 1981, a fire occurred at the duplex. Chitsey and the insurance company were unable to agree as to the sum of money required to repair the building.
Chitsey then sued National Lloyd's asserting (1) breach of the insurance contract; (2) unfair insurance practices in violation of the Texas Insurance Code and State Board of Insurance regulations; and (3) breach of the insurance company's "duty of good faith and fair dealing." Over objection, the district court permitted National Lloyd's to file a trial amendment denying coverage. The insurance company's denial of coverage was predicated upon a provision of the policy purporting to "void" the policy if the insured willfully concealed or misrepresented any material fact or circumstance concerning the insurance.
The district court submitted the cause to the jury by thirty-one issues. The jury found, among other things, that:
(1) the cost of repairing the duplex was $16,000.00;
(2) National Lloyd's engaged in an unfair practice in handling the claim by "failing to use due diligence in determining the amount of [Chitsey's] loss";
(3) National Lloyd's breached "its duty of good faith and fair dealing" in its handling of the insurance claim which was a proximate cause of Chitsey's damages;
(4) Chitsey willfully concealed or misrepresented a material fact to the insurance company concerning the vacancy of the property and his intentions concerning his plans for the property at 5107 Leralynn.
Chitsey moved to disregard the jury's answer that he concealed his intentions concerning his plans for the property at 5107 Leralynn and for judgment predicated upon the remainder of the jury's verdict. The district court overruled the motion and rendered judgment that Chitsey take nothing.
By many points of error Chitsey attacks the rendition of judgment based upon the jury's finding that he willfully concealed a material fact from the insurance company in that he did not reveal his intentions concerning his plans for the property. By point of error six, Chitsey complains that the district court erred in overruling his motion to disregard the jury's answer to special issue number twenty-three because there was no evidence to support that answer. Special issue twenty-three provided:
Do you find from a preponderance of the evidence, whether before or after the loss in question, Ron Chitsey willfully concealed or misrepresented any material fact to National Lloyds Insurance Company, which was relied on by National
Lloyds Insurance Company in any of the following ways:
(1) Vacancy of the property in question;
(2) His intentions concerning his plans for the property in question.
Answer "We do" or "We do not".
Chitsey argues that the judgment must be reversed because there was no evidence that any concealment or misrepresentation was relied upon by National Lloyd's. An insurer must prove, among other things, that it relied upon the insured's concealment or misrepresentation before the insurer may avoid policy coverage. Mayes v. Massachusetts Mutual Life Ins. Co., 608 S.W.2d 612 (Tex.1980).
In considering a "no evidence" point, the reviewing court must reject all evidence contrary to the finding and consider only the facts and circumstances which tend to support that finding. Renfro Drug Co. v. Lewis, 149 Tex. 507, 235 S.W.2d 609 (1950).
On January 12, 1981, three days after the fire, Chitsey gave notice of the claim to the local insurance agency which, in turn, sent a property loss notice to National Lloyd's. From the information in the property loss notice, National Lloyd's set a $4500.00 "reserve," an arbitrary figure of the possible extent of the loss. On January 16, James F. Nash, a National Lloyd's claims adjuster came to Austin and inspected the fire damage to the duplex. He and Chitsey personally discussed and disagreed upon the extent of damages. Chitsey claimed that the duplex was a total loss and demanded payment of $16,000.00. Nash, on the other hand, thought the structure could be repaired and for less money. Nash admitted that he believed, at the time of the visit, that the origin of the fire was suspicious. Nash further testified that Chitsey related to him that the fire marshal had told Chitsey that the fire had been set intentionally. After talking to Chitsey, Nash visited with the fire marshal on the same day. The fire marshal told Nash that the fire was caused by arson. He also related that Chitsey planned to build condominiums on the duplex site. An agent of the local insurance agency told Nash on February 4, 1981, that Chitsey had previously asked for a quote for coverage on a twelve unit condominium project.
In its brief and at oral argument, National Lloyd's emphasized that Chitsey failed to answer its letters or questions, thereby concealing his intentions for the property by his failure to respond. An inspection of these documents reveals, however, that such papers had little bearing on his intentions.
On January 16, Nash prepared a handwritten statement for Chitsey's signature. The proposed statement contained nothing concerning Chitsey's plans or intentions for the property. Chitsey refused to sign the statement stating that he had been advised not to sign anything. Also Nash tendered, and Chitsey refused to sign, a non-waiver agreement. The proposed non-waiver agreement made no reference to Chitsey's plans for the property.
On January 20, Nash sent a series of ten questions to Chitsey, which questions were prefaced with a reminder that "the policy provides that you must cooperate and furnish information requested and submit to questioning." Question six inquired: "Is it true you were planning to demolish these two buildings in order to build apartments or condominiums?" Question six demonstrates, of course, that National Lloyd's knew or had a good notion that Chitsey had such plans. Chitsey responded to this question, and most of the others, by marking it "N/A."
After receiving the incomplete answers, Nash and his supervisor, Charles M. Tindell, reviewed the questions and answers. Tindell edited the questions to include several new ones, but he deleted question six. On February 2, National Lloyd's sent Chitsey the new list of questions which did not include any inquiry into Chitsey's intentions or plans for the property. The thrust of the questions was directed at determining the vacancy, past tenants, and furnishings of the duplex. On February 4, Nash With respect to his plan to build condominiums, Chitsey filed his application to change zoning of the property with the Austin Planning Commission on October 3, 1979. The Commission approved this on September 3, 1980. Prior to writing the policy, a National Lloyd's inspector visited the property on March 26, 1980, for the routine "new business" inspection to determine the market value coverage limits. One of the two photographs taken by the inspector and attached to his report plainly shows a sign attached to a tree in the front yard regarding a proposed zoning change. This fact was also noted in the inspector's report. Accordingly, National Lloyd's possessed this information before it wrote the coverage. On cross-examination regarding the pictures and report, adjuster Nash responded:
sent Chitsey a letter stating that he needed the answers to the questions and that National Lloyd's was "reserving its rights under the policy to investigate." By the specific terms of the policy of insurance which provided that the insured submit to questioning under oath, Chitsey was not obligated to answer either set of questions
Q. So, Mr. Chitsey wasn't keeping anything from anybody, was he, about his possible seeking a zoning change to do something else with the property at some point in time?
A. That's correct.
Q. And you have it right here in your files; am I correct?
A. That's correct.
From the above summary of the facts, it is plain that National Lloyd's knew of the zoning request change before or at the time of issuance of the policy. The insurance company also learned of such request through the fire marshal and through discussions with a local agent. National Lloyd's knew immediately after the fire that probably someone had set the fire. It is also plain that Chitsey had no obligation to sign any of the documents or answer the questions sent him.
National Lloyd's did not plead arson as a defense, nor did it ever accuse Chitsey of burning the property. As a matter of fact, National Lloyd's pre-trial investigation was only directed toward two sources of dispute--vacancy of the duplex and the amount of damages from the loss. The amount of damages was the principal issue at trial. It was not until after the close of evidence that National Lloyd's tendered and obtained...
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