CNA Ins. Co. v. Scheffey
| Citation | 828 S.W.2d 785 |
| Decision Date | 31 March 1992 |
| Docket Number | No. 6-91-081-CV,6-91-081-CV |
| Parties | CNA INSURANCE COMPANY, Appellant, v. Eric SCHEFFEY, M.D., Appellee. |
| Court | Court of Appeals of Texas |
Ross Citti, Mills, Shirley, Eckel, Bassett, Houston, Richard A. Simpson, Ross, Dixon & Masback, Washington, D.C., John R. Mercy, Atchley, Russell, Waldrop, Hlavinka, Texarkana, for appellant.
W. James Kronzer, Law Offices of W. James Kronzer, James R. Spradlin, Spradlin, Mulloy, Rose, Best, Spradlin, Houston, C.L. Ray, Austin, for appellee.
Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.
CNA Insurance Company 1 appeals a judgment for approximately $34 million in damages rendered against it because it did not pay Eric Scheffey, M.D., promptly and fairly for medical treatment he gave to CNA insureds, and because it disparaged Scheffey's professional reputation by making false and misleading representations of fact. 2 CNA raises several issues that require our determination on appeal. We must resolve whether defensive matters were improperly excluded from evidence, whether Scheffey has standing to sue under the insurance code, and whether a motion to recuse the trial court judge was properly denied. 3 We resolve these issues in favor of CNA and reverse.
CNA is the workers' compensation insurance carrier for various employers. Scheffey is an orthopedic surgeon who practices medicine in Harris County. Scheffey's practice includes treatment of injured workers whose employers provided workers' compensation insurance coverage through CNA.
On July 10, 1989, Scheffey filed a slander and libel action in which he claimed that CNA employees falsely spread information that Scheffey had been arrested for selling cocaine and that this information had adversely affected his medical practice. Just before trial, Scheffey filed an amended petition in which he abandoned his claim for slander and libel and raised new claims. He claimed that he was a third-party beneficiary and consumer under the policies of insurance that CNA issued to employers; that CNA had exercised bad faith in the settlement of claims and had failed to pay and settle claims which he submitted after treatment of workers whose employers carried workers' compensation insurance with CNA; and that CNA had breached its contract of insurance with the insured companies and the companies' workers, which also amounted to a breach of contract with Scheffey. Scheffey also maintained that CNA violated various insurance rules and regulations and Article 21.21 of the Insurance Code, 4 entitled Unfair Competition and Unfair Practices; that CNA violated several provisions of the Texas Deceptive Trade Practices Act 5 by engaging in false, misleading or deceptive acts or practices; and that it breached various express or implied warranties and engaged in an unconscionable course of action, all of which were producing causes of damages to Scheffey.
We first consider whether defensive matters were erroneously excluded from evidence. Scheffey's suit was premised on an allegation that CNA employees had falsely informed others that Scheffey had been arrested for selling cocaine, which disparaged Scheffey's professional reputation as a physician and caused severe economic loss to his medical practice. CNA's defensive theory was that Scheffey's own personal and professional misconduct, rather than the conduct of any of CNA's employees, caused Scheffey's professional reputation and business to suffer. Also, it sought to show that, based on known facts, the CNA employees did not act in bad faith when they may have commented that Scheffey had sold cocaine.
Ordinarily, the exclusion of evidence is a matter within the discretion of the trial court. Champlin Oil & Refining Co. v. Chastain, 403 S.W.2d 376, 389 (Tex.1965). Here, however, the trial court excluded most of the evidence which was offered to establish CNA's defenses. 6
The trial court ruled inadmissible all evidence about events relating to Scheffey before June 28, 1989, when CNA employee Julie Lar reportedly told one of Scheffey's employees that Scheffey had been arrested for selling cocaine. In effect, the trial court ruled that none of Scheffey's actions before that date were relevant to his reputation or medical practice.
It is unnecessarily cumbersome to look at each instance in which the trial court excluded evidence. 7 In most instances, the trial court improperly excluded relevant evidence, although some of the errors may not have been preserved procedurally. However, we look at the trial court's numerous evidentiary rulings. 8 Time after time the court ruled, in effect, that no evidence about matters touching Scheffey's professional or personal life or reputation which occurred before CNA allegedly disparaged his reputation late in June 1989 was relevant to his claim for damages. The trial court excluded all such evidence.
In this regard the trial court held an erroneous view of the evidence. Relevant evidence is defined as any evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. TEX.R.CIV.EVID. 401. 9 All relevant evidence is admissible, except as otherwise provided by the constitution, by statute or by rules prescribed by the Texas Supreme Court. TEX.R.CIV.EVID. 402. The excluded evidence generally is logically relevant to an analysis of the cause of Scheffey's damages and their extent. It also is relevant to the mental state of CNA's employees. 10 On appeal, Scheffey's attorney concedes that the excluded evidence may well have some logical relevance.
Scheffey's appellate attorney maintains, however, that CNA failed to preserve this issue for review and also that the trial court may have excluded this evidence pursuant to TEX.R.CIV.EVID. 403 on the basis of unfair prejudice. We have already indicated that we decline to address specifically each item of evidence offered or to examine in detail the manner in which each item was offered. In announcing that all matters before June 1989 would be excluded from evidence, the court indicated an erroneous view of the law. 11 In many evidentiary rulings, the trial court effectively prevented CNA from presenting its defense. CNA preserved error for review in the trial court's exclusion of relevant evidence.
The trial court has the discretion to exclude evidence on the basis of unfair prejudice, despite its logical relevance. First Southwest Lloyds Ins. v. MacDowell, 769 S.W.2d 954, 958 (Tex.App.--Texarkana 1989, writ denied); Missouri-Kansas-Texas R.R. Co. v. Alvarez, 703 S.W.2d 367, 370 (Tex.App.--Austin 1986, writ ref'd n.r.e.). TEX.R.CIV.EVID. 403 specifically provides that relevant evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice. Scheffey's attorney argues on appeal that, while some of CNA's evidence may have been admissible, it was properly excluded by the court, because in the exercise of its discretion it determined that the probative value was substantially outweighed by the danger of unfair prejudice.
Determining whether the trial court may have performed a Rule 403 balancing analysis and excluded evidence because its probative value was outweighed by the danger of unfair prejudice might be accomplished by considering one of the items of excluded evidence--a newspaper story featured on the front page of The Houston Post, entitled "Surgeon arrested for drugs 5 days after patient died." 12 This article dealt with Scheffey's legal and professional problems and obviously would tend to damage a professional's practice. This public account in a major newspaper in the area of Scheffey's practice is probative because it tends to show that causes other than the conduct of CNA employees may have led to a decline in Scheffey's reputation and medical practice. Furthermore, it bears on the intent of CNA's employees in conversations about Scheffey's cocaine problems. We thus see acute probative value on the one hand. On the other, there is, of course, prejudice to Scheffey, but nothing to indicate unfair prejudice. 13
It is difficult to imagine that a trial court would not abuse its discretion if, upon balancing pursuant to Rule 403, it determined that the probative value of evidence like that which was excluded, which bears on the crux of the case, was outweighed by a danger of unfair prejudice. However, the simple answer is that, here, the trial court never performed any balancing of values as envisioned by Rule 403. Nowhere is there an indication that otherwise admissible evidence was excluded because of a danger of unfair prejudice. The trial court clearly excluded this type of evidence because of its erroneous belief that such evidence is not relevant and in so doing abused its discretion. We decline to determine whether the trial court properly balanced competitive values when the record so plainly demonstrates that the trial court performed no balancing analysis as envisioned by Rule 403.
Reversible error does not usually occur in connection with evidentiary rulings unless an appellant demonstrates that the whole case turns on the particular evidence excluded or admitted. Texaco, Inc. v. Pennzoil, Co., 729 S.W.2d 768, 837 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.), cert. dism'd, 485 U.S. 994, 108 S.Ct. 1305, 99 L.Ed.2d 686 (1988). The trial court permitted Scheffey to put on evidence that his personal and professional reputation had been damaged and that he had suffered severe economic damages as a result of willful and malicious conduct by CNA employees. The court did not permit CNA to defend itself with evidence showing that other factors in Scheffey's past may have caused part or all of any damages suffered by Scheffey or that the CNA employees acted in good faith in saying...
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