Cruz v. Liberty Mut. Ins. Co.

• Decision Date: 14 April 1993
• Docket Number: No. 6-92-035-CV,6-92-035-CV
• Citation: 853 S.W.2d 714
• Parties: Roque CRUZ and Rosaura Cruz, Individually and as Next Friends for Rosibel Cruz, Alvaro Cruz and Perla Evelyn Cruz, Minor Children, Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 714

853 S.W.2d 714

Roque CRUZ and Rosaura Cruz, Individually and as Next Friends for Rosibel Cruz, Alvaro Cruz and Perla Evelyn Cruz, Minor Children, Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellee.

No. 6-92-035-CV.

Court of Appeals of Texas Texarkana.

April 14, 1993.

Rehearing Denied May 18, 1993.

Lawrence L. Mealer, Dallas, for appellants.

C. Douglas Calvert, Haynes and Boone, Dallas, for appellee.

Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.

OPINION

BLEIL, Justice.

Roque Cruz and Rosaura Cruz, individually and as next friends of Rosibel Cruz, Alvaro Cruz and Perla Evelyn Cruz, minors, appeal a summary judgment in favor of Liberty Mutual Insurance Company. The Cruzes claim that the summary judgment was improper because there existed fact questions about whether Liberty Mutual was prejudiced because it had no notice of the Cruzes' suit against Metropolitan Transportation Company and whether the policies of insurance naming Metropolitan had been cancelled. We hold that the policies had not been cancelled and that there was a fact question about whether Liberty Mutual was prejudiced by not being notified of the Cruzes' suit against Metropolitan. We reverse the judgment of the trial court.

In reviewing a summary judgment, we follow certain guidelines: 1) the movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; 2) in deciding whether there is a material fact issue, evidence favoring the nonmovant is taken as true; and 3) every reasonable inference is indulged in favor of the nonmovants and any doubts resolved in their favor. Nixon v. Mr. Property Management, 690 S.W.2d 546, 548-49 (Tex.1985); TEX.R.CIV.P. 166a. With these standards in mind, we now turn to the summary judgment evidence.

Before April 1986, Metropolitan was a wholly owned subsidiary of the Las Colinas Corporation, itself wholly owned by Southland Financial Corporation. Metropolitan was a named insured under two insurance policies issued by Liberty Mutual to Southland. The first was a comprehensive automobile policy and the second was an umbrella excess policy. The primary policy contained provisions which are particularly relevant to the questions on this appeal. One provision pertains to cancellation, in the following manner:

This policy may be cancelled by the named insured by mailing to the company written notice stating when thereafter the cancellation shall be effective. This policy may be cancelled by the company by mailing to the named insured at the address shown in this policy, written notice stating when not less than ten days thereafter such cancellation shall be effective.

This cancellation provision was later amended concerning the type of notice that Liberty Mutual was to give the named insureds to read as follows:

In consideration of the premium charged, it is understood and agreed that the company will provide ninety (90) days advance written notice to the named insured of the company's intent to cancel this policy or make any material change in coverage; except in the event of non-payment of premium the company will furnish ten (10) days advance written notice of cancellation.

Another provision, dealing with the insured's giving notice of loss, provides that:

As respects bodily injury liability and property damage liability, unless the company is prejudiced by the insured's failure to comply with the requirement, any provision of this policy requiring the insured to give notice of action, occurrence or loss, or requiring the insured to forward demands, notices, summons or other legal process, shall not bar liability under this policy.

On April 4, 1986, Las Colinas executed a stock purchase agreement with Robert W. Smith transferring all ownership in Metropolitan to Smith. The agreement provided that Metropolitan would no longer be covered under Southland's insurance. Liberty Mutual learned of the sale on April 10, 1986. Liberty Mutual did not send either the ten-day or the ninety-day written notice of cancellation of coverage to Metropolitan as required by the policies.

On April 17, 1986, the driver of one of Metropolitan's taxicabs lost control, and the taxicab struck the three Cruz children, who were walking to school on the sidewalk. The accident report reflected the existence of a Liberty Mutual comprehensive automobile policy. The Cruzes retained an attorney who wrote Liberty Mutual, referred to the policy by number and requested a reply.

The Cruzes sued Metropolitan and obtained a default judgment on May 20, 1987. The Cruzes forwarded the judgment to Liberty Mutual, which did not respond. The Cruzes then sued Liberty Mutual, under an assignment of causes of action from Metropolitan, alleging negligence, violations of the Insurance Code and the Deceptive Trade Practices and Consumer Protection Act, and breach of the duty of good faith and fair dealing. They also asserted a breach of contract claim.

The Cruzes filed a motion for partial summary judgment, seeking a determination that Metropolitan's coverage under the Liberty Mutual policies was not cancelled in accordance with the terms of the policies and was therefore still in effect at the time of the accident.

Liberty Mutual also filed a motion for summary judgment asserting that, even if coverage was not cancelled, it had not been given proper notice of the Cruzes' suit against Metropolitan and, therefore, there was no coverage for Metropolitan's liability. The trial court denied the Cruzes' motion for partial summary judgment and granted Liberty Mutual's motion for summary judgment.

Liberty Mutual contends that its failure to receive notice of the suit against Metropolitan...