Crown Life Ins. Co. v. Casteel

• Citation: 43 Tex. Sup.Ct. J. 348,22 S.W.3d 378
• Decision Date: 27 January 2000
• Docket Number: No. 98-0218,98-0218
• Parties: (Tex. 2000) Crown Life Insurance Company, Petitioner v. William E. Casteel, Respondent
• Court: Texas Supreme Court

Page 378

22 S.W.3d 378 (Tex. 2000)

Crown Life Insurance Company, Petitioner v. William E. Casteel, Respondent

No. 98-0218

IN THE SUPREME COURT OF TEXAS

Argued November 19, 1998.

Decided January 27, 2000.

On Petition for Review from the Court of Appeals for the Third District of Texas

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Justice Abbott delivered the opinion for a unanimous Court.

We overrule Casteel's Motion for Rehearing and grant in part Crown Life's Motion for Rehearing. We withdraw our opinion dated July 1, 1999, and substitute the following.

William E. Casteel sold insurance policies as an independent agent of Crown Life Insurance Company. One of the policies sold by Casteel led to a lawsuit by policyholders against Casteel and Crown. In that lawsuit, Casteel filed a cross-claim against Crown. In this appeal from that lawsuit, we consider several issues: (1) whether Casteel, who alleges that he has been injured by the unfair and deceptive practices of Crown, has standing to sue Crown under Article 21.21 of the Texas Insurance Code; (2) whether that standing extends to Article 21.21 claims that allow recovery for Deceptive Trade Practices Act violations; and (3) whether the inclusion of invalid theories of liability submitted to the jury in a single broad-form question constitutes harmful error.

We hold that Casteel does have standing to sue Crown under Article 21.21; but Casteel does not have standing under Article 21.21 to allege DTPA-based claims that require consumer status by their terms. We also hold that submitting invalid theories of liability in a single broad-form jury question is harmful error when it cannot be determined whether the jury based its verdict on one or more of the invalid theories. We affirm in part, reverse and render judgment in part, vacate in part, and reverse and remand in part the judgment of the court of appeals.

I

Between 1986 and 1989, Casteel sold Modified Vanishing Premium ("MVP") policies as an agent for Crown. The MVP policies provided that substantial premiums be paid over a short period of time, after which the premiums would "vanish" and the policy would carry itself through fruition by the reinvestment of policy dividends. Crown provided Casteel with information about how the policies worked, and Casteel provided biographical information on prospective clients to Crown. Crown then produced illustrations tailored to the proposed insureds, which Casteel presented as part of his sales packages. Many of Casteel's clients who purchased MVP policies were friends from his church.

Casteel's clients began complaining about the MVP policies in 1990. The premiums had not vanished as Casteel had represented and, in some cases, never would. In the case of Randall and Sandra Ferguson, Casteel sold an MVP policy that would pay $5,000,000 to the survivor in the event that one of them died. Based on Crown's projections, Casteel had initially informed them that the premiums would total approximately $91,520 before vanishing, but the Fergusons later discovered that the premiums would never vanish and could total as much as $800,000. The Fergusons sued Casteel and Crown alleging DTPA, Article 21.21, and common-law causes of action.

Casteel filed a cross-claim against Crown alleging violations of Article 21.21, which included claims based on DTPA provisions incorporated in Article 21.21. Casteel also brought common-law claims for negligence, gross negligence, breach of fiduciary duty, breach of a duty of good faith and fair dealing, fraud, and constructive fraud. Crown moved for summary judgment on Casteel's claims, and the trial court granted partial summary judgment in Crown's favor on the common-law causes of action. Casteel's Article 21.21 claims, including those based on the DTPA, proceeded to trial with the Fergusons' claims.

With regard to the Fergusons' claims, the jury found that both Crown and Casteel had engaged in unfair or deceptive acts or practices that were a producing cause of damages to the Fergusons. The jury found that Crown had committed the alleged wrongful acts knowingly and was ninety-nine percent responsible for the Fergusons' damages, while Casteel, who was found not to have acted knowingly, bore only one percent of the responsibility. On Casteel's claims against Crown, the jury found that Crown had knowingly engaged in false, misleading, unfair, or deceptive acts or practices that were a producing cause of damages to Casteel. The jury awarded Casteel $400,000 for past lost income, $1,000,000 for future lost income, $6,000,000 for past mental anguish, and $100,000 for future mental anguish. Additionally, the jury awarded Casteel attorney's fees in the amount of forty percent of his recovery.

Following trial, Crown and the Fergusons settled. Under the settlement terms, the Fergusons assigned their rights against Casteel to Crown, so that Crown now stands in place of the Fergusons for purposes of this appeal. Crown moved for judgment notwithstanding the verdict on Casteel's claims. The trial court rendered judgment that Casteel take nothing against Crown, holding that Casteel was neither a "person" as defined under Article 21.21, nor a "consumer" under the DTPA, and therefore lacked standing to bring suit under those statutes. The court dismissed the Fergusons' claims against Crown with prejudice due to their settlement. The court rendered judgment on the verdict with respect to the Fergusons' claims against Casteel, holding Casteel individually liable for the Fergusons' actual damages, attorney's fees, and prejudgment interest in the amount of $1,366,983.

The court of appeals held that Casteel was a "person" with standing to sue Crown under Article 21.21, but that Casteel did not have standing to sue under the incorporated DTPA provisions because he was not a "consumer." 3 S.W.3d 582, 593. The court of appeals reversed and rendered judgment in favor of Casteel in the amount of $1,400,000 for lost past and future income. Id. at 597. The court held, however, that Casteel was not entitled to the $6,100,000 in mental anguish damages awarded by the jury because there was legally insufficient evidence to support the award. Id. at 597. In addition, the court remanded the case to the trial court for further proceedings on the issues of settlement credit application, calculation of prejudgment interest, and attorney's fees. Id. at 597. The rest of the judgment, including partial summary judgment in favor of Crown on Casteel's common-law claims, was affirmed. Id. at 597.

II

Crown initially challenges Casteel's recovery under Article 21.21 of the Insurance Code. At the time that Casteel's claims against Crown arose, Article 21.21, section 16(a) provided:

Any person who has sustained actual damages as a result of another's engaging in an act or practice declared in Section 4 of this Article . . . to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice defined by Section 17.46 of the Business & Commerce Code, as amended, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices.

Act of Mar. 19, 1985, 69th Leg., R.S., ch. 22, 3, 1985 Tex. Gen. Laws 395, 395, amended by Act of May 19, 1995, 74th Leg., R.S., ch. 414, 13, 1995 Tex. Gen. Laws 2988, 3000 (current version at Tex. Ins. Code art. 21.21, 16(a)). Thus, to assert a cause of action under Article 21.21, Casteel must be (1) a "person," as defined by Article 21.21, section 2(a), and (2) injured by another's acts or practices declared to be unfair or deceptive by either (a) Article 21.21, section 4, or (b) DTPA section 17.46. Id.; see Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 147 (Tex. 1994). Casteel alleged that he was injured by Crown's "unfair or deceptive acts or practices" defined by Article 21.21, section 4, and by certain deceptive trade practices prohibited by DTPA section 17.46(b), as those claims are incorporated within Article 21.21. We must initially determine whether Casteel, as an insurance agent, is a "person" with standing to sue Crown under Article 21.21. Additionally, we consider whether Casteel must also be a "consumer" to have standing to recover under Article 21.21 for incorporated DTPA violations.

A. Standing for Claims Arising under Article 21.21

Crown challenges the court of appeals' holding that Casteel, as Crown's agent, is a "person" with standing to sue under Article 21.21, section 16(a). Crown argues that the court of appeals erred by relying too heavily on the plain language of Article 21.21 and too little on the Insurance Code's purpose. Crown acknowledges that the statute's plain language grants a cause of action to "any person" injured by another's deceptive acts or practices in the business of insurance, and that "person" is defined broadly as "any individual, corporation, association, partnership, . . . and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors." Tex. Ins. Code art. 21.21, 2(a) (emphasis added). Despite this language, Crown argues that standing is limited to "persons relying on sales practices when buying policies, and the insureds and beneficiaries under those policies -- not the agents selling policies." This, Crown asserts, is because Article 21.21 has two specific, discrete purposes: (1) to protect insurance companies and their agents from "unfair methods of competition," and (2) to protect the public from "unfair or deceptive acts or practices." Crown argues that "agents" were included in the section 2(a) definition of "person" only to provide them a cause of action under section 16(a) for "unfair methods of competition," but not for other "unfair and deceptive acts or practices," such as alleged by Casteel. See Tex. Ins. Code art. 21.21, 16(a).

The primary rule in statutory interpretation is that a...