Commonwealth Lloyd's Ins. Co. v. Thomas

• Decision Date: 15 January 1992
• Docket Number: No. 05-90-00785-CV,05-90-00785-CV
• Citation: 825 S.W.2d 135
• Parties: COMMONWEALTH LLOYD'S INSURANCE COMPANY, Appellant, v. Roy E. THOMAS and Margie Thomas, Appellees.
• Court: Texas Court of Appeals

Page 135

825 S.W.2d 135

COMMONWEALTH LLOYD'S INSURANCE COMPANY, Appellant, v. Roy E. THOMAS and Margie Thomas, Appellees.

No. 05-90-00785-CV.

Court of Appeals of Texas Dallas.

Jan. 15, 1992.

Rehearing Denied Feb. 13, 1992.

Robert D. Allen, David J. Schubert, and Thomas B. Alleman (on appeal only), Dallas, for appellant.

Timothy M. Fults and James N. Francis, Dallas, for appellee.

Before STEWART, THOMAS and MALONEY, JJ.

OPINION ON MOTION FOR REHEARING

MALONEY, Justice.

We overrule appellant's motion for rehearing. We grant appellees' motion for rehearing. We withdraw our opinion of September 13, 1991. The following is now the opinion of this Court.

Commonwealth Lloyd's Insurance Company appeals from a judgment rendered for Roy E. Thomas and Margie Thomas. The Thomases sued Commonwealth, alleging breach of the duty of good faith and fair dealing. Commonwealth asserts eight points of error. We sustain the sixth point of error complaining of the trial court's award of prejudgment interest. In all other respects, we affirm the trial court's judgment.

STATEMENT OF FACTS

In the early morning of February 2, 1981, fire destroyed the Thomases' house. The Thomases were out of the country when the fire occurred. Commonwealth was the insurer of the Thomases' home and its contents. Commonwealth hired Loss Research and Analysis, Inc. (LRA) to investigate the fire. LRA's report concluded that arson was the cause of the fire.

On May 4, 1981, Commonwealth rejected the Thomases' proofs of loss submitted for unscheduled property because of specified deficiencies. Commonwealth also informed the Thomases that it was "continuing to investigate other apparent policy violations concerning the true origin of the fire." The Thomases sued Commonwealth on the policy in Tarrant County. Commonwealth defended on grounds of arson and the Thomases' failure to substantially comply with the policy requirements. The Tarrant County jury found for the Thomases. The trial court rendered judgment for the Thomases on July 11, 1983. The appeals court affirmed the trial court's judgment. See Commonwealth Lloyd's Ins. Co. v. Thomas, 678 S.W.2d 278 (Tex.App.--Fort Worth 1984, writ ref'd n.r.e.).

The Thomases sued Commonwealth for breach of the duty of good faith shortly after the Supreme Court of Texas rendered its decision in Arnold v. National County Mutual Fire Insurance Co., 725 S.W.2d 165 (Tex.1987). A Dallas County jury found for the Thomases. The trial court rendered judgment for the Thomases. The judgment did not apportion the sum of money awarded to the Thomases. However, it is apparent from the record and the briefs that $708,800 is for actual damages, $2,000,001 for exemplary damages, and $1,000,637.60 for prejudgment interest.

After the trial court rendered judgment for the Thomases, Commonwealth timely filed a motion for judgment n.o.v. and a motion for new trial. More than thirty days after the judgment was signed, the Supreme Court of Texas issued its opinion in Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826 (Tex.1990). Commonwealth then filed an amended motion for judgment n.o.v. This amended motion asserted that the Thomases' claim was barred by the statute of limitations under Murray. The trial court denied all of Commonwealth's postjudgment motions.

THE EXPERT TESTIMONY

1. The Thomases' Experts

Expert witnesses testified for both Commonwealth and the Thomases. Gary Fye, the primary witness for the Thomases, was a fire and accident investigator. His background was in arson investigations. Fire insurance was his specialty. He testified from a review of the Tarrant County trial record, depositions, a copy of Commonwealth's claim file, and Commonwealth's claim manual.

Fye testified that Commonwealth suspected arson from the beginning. Commonwealth's entire investigation was outcome oriented--to make arson "stick in court." The day after the fire, the Tarrant County Fire Marshal told Melvin Babb John Henning, a fire investigator for State Farm Insurance, testified. He mistakenly investigated the Thomas fire. State Farm hired him to investigate a suspected arson fire in the general area of the Thomases' house. He went to the wrong fire. His investigation indicated an electrical fire that started in the utility room. It then traveled through the attic and burned down into the other areas. His conversations with eyewitnesses confirmed his findings.

Commonwealth's adjustor, that the fire was caused by an electrical short. Babb ignored the conversation. Commonwealth's investigators did not follow up on any of the information provided by eyewitnesses to the fire. If Commonwealth found any evidence subject to two interpretations, it took the position adverse to the Thomases and made no other inquiries. The Thomases had recently increased the insurance coverage on their home. If the adjustors had inquired, they would have found that the increase was done at their insurance agent's suggestion. They were underinsured, according to their agent. Also, the adjustors would have found that questionable aspects of a previous burglary claim were the result of an insurance adjustor incorrectly adding a column of figures.

The Tarrant County Fire Marshal's official conclusion was that the fire was of undetermined origin. However, Bobby Dyer, a Tarrant County deputy fire marshal, testified that he believed the fire was caused by a massive short in an area around the electrical panel box. According to Dyer, the fire spread from the electrical short to the attic, over the roof, and down into the living room.

Britt McManus, an investigator for LRA, called Dyer the day after the fire. McManus said he needed to begin his investigation immediately. Dyer told McManus that he had not finished his investigation. They arranged to meet the next day at the fire scene. When Dyer arrived at the fire scene, LRA was using a front-end loader to clear debris from the bedrooms. They already had removed debris from the garage. Dyer was unable to complete his investigation because the fire scene had been disturbed and evidence destroyed.

LRA asked Dyer to test some evidence, to file arson charges against the Thomases, and to ask the Thomases to take a lie detector test. He never tested the evidence or filed charges. Dyer stated that he would not use evidence that he could not prove was taken from the fire scene. He disregarded evidence of diesel fuel and petroleum distillate because his office had not collected the evidence.

Duane Selman, a fire investigator, testified in the Tarrant County trial. He testified in this trial through the Tarrant County statement of facts. Selman examined the slab at the fire. He also examined all photographs of the fire scene, all depositions that were related to the fire, and reports of the Tarrant County Fire Marshal. He talked with everyone that was present during the fire. He was convinced the fire originated in the wall behind the electrical panel box. When asked: "[W]as the diesel fuel in the bathtub there before the fire, during the fire, or after the fire," he answered: "It was after the fire."

2. Commonwealth's Experts

Melvin Babb, an adjustor for Commonwealth, contacted the Thomases' insurance agent to verify coverage. He learned that the Thomases had increased their homeowner's coverage the previous November. Three days after the fire, Kenneth Gibson of LRA told him that the fire was caused by arson. He also learned there were several suits pending against Roy Thomas, one of which involved a default on a debt. The adjustor that handled the previous theft loss for the Thomases called Babb and told him the earlier loss was questionable. Babb talked to a neighbor who said his wife smelled paint or paint thinner at the time of the fire. He found no evidence that the Thomases had anything to do with the fire.

Andrew Armstrong, a chemist, testified he examined the eight debris samples that LRA brought from the fire. Three of the eight samples tested positive for petroleum distillate. Armstrong understood that the H. Dustin Fillmore, a Fort Worth attorney with experience in insurance matters, reviewed materials regarding the Thomases' claim. He testified that the Thomases expressed a desire to tear down the structure when they were aware that an investigation was in progress. There was evidence that the Thomases were in financial distress. They had substantially increased their coverage the previous November. The house's security system was not armed at the time of the fire. ¹

three positive samples were from the Thomases' bathtub and living room area. He identified the material "found in the bathtub" as diesel fuel. He testified the "living room sample" was severely stressed or greatly evaporated. Armstrong identified the "living room sample" as being consistent with diesel. On cross-examination, he admitted it was also consistent with gun solvent, charcoal lighter fluid, kerosene, or paint thinner. He stated it was possible, but not likely, that the "living room sample" could be affected by fire fighting methods.

Robert M. Booker, the regional property supervisor for Commonwealth, testified that he visited the scene of the fire. He saw several areas of extensive burning, with areas of less extensive damage between the areas of extensive burning. He indicated that the LRA report, evidence of the Thomases' financial distress or his lack of access to financial records, the Thomases' refusal to take the deputy fire marshal's polygraph test, and the burglar alarm system being disarmed convinced him that the Thomases' claim should not be honored. Commonwealth never proved that the fire was arson.

Britt McManus of LRA testified he found indications the fire was intentionally set. He found evidence the fire originated in two distinct areas. He found no evidence of horizontal or interior involvement between the two areas. Samples were found that were determined to be diesel fuel. He saw evidence of electrical...