Daimlerchrysler Insurance Company v. Apple, No. 01-05-01115-CV (Tex. App. 10/25/2007)

• Decision Date: 25 October 2007
• Docket Number: No. 01-05-01115-CV.,01-05-01115-CV.
• Parties: DAIMLERCHRYSLER INSURANCE COMPANY, Appellant, v. JACK APPLE, JR. and GREENSPOINT DODGE OF HOUSTON, INC., Appellees.
• Court: Texas Court of Appeals

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DAIMLERCHRYSLER INSURANCE COMPANY, Appellant, v. JACK APPLE, JR. and GREENSPOINT DODGE OF HOUSTON, INC., Appellees.

No. 01-05-01115-CV.

Court of Appeals of Texas, First District, Houston.

Opinion issued October 25, 2007.

On Appeal from the 295th District Court, Harris County, Texas, Trial Court Cause No. 2002-14943.

Panel consists of Justices TAFT, JENNINGS, and ALCALA.

OPINION

ELSA ALCALA, Justice.

In this insurance coverage dispute, appellant, DaimlerChrysler Insurance Company (Daimler), appeals from a judgment for breach of contract that awarded appellee, Greenspoint Dodge of Houston, Inc. (Greenspoint), $2,034,203.20 and attorney's fees.¹ The judgment is the result of the trial court's grant of partial summary judgment in favor of Greenspoint on the grounds that Daimler breached its duty to indemnify and to defend Greenspoint, and a jury trial on the amount of damages resulting from that breach. The trial court also awarded an alternative judgment, applicable if the breach of contract judgment is reversed on appeal, in favor of Greenspoint for an unfair or deceptive act or practice. In its first four issues that concern the breach of contract judgment, Daimler contends the trial court erred by rendering partial summary judgments that Daimler had a duty to indemnify Greenspoint under the insurance policies and that Daimler must indemnify Greenspoint for punitive damages. In its fifth through seventh issues that pertain to the alternative judgment, Daimler contends that there is no evidence of extra-contractual damages and no evidence that Daimler engaged in a deceptive or fraudulent act.

We conclude that the trial court did not err by granting summary judgment in favor of Greenspoint on Daimler's duty to indemnify and that public policy does not prevent the indemnification of punitive damages in this case. We therefore affirm.

Background

Greenspoint had insurance policies with Daimler for the period from August 1, 1998 to August 1, 1999, that were extended to October 11, 1999. The primary policy contained a Commercial General Liability (CGL) coverage part and Garage coverage part that was modified by an endorsement entitled "Broadened Coverage—Garages" ("broadened garage" coverage or endorsement). The limit for personal injury coverage under both the CGL and the Garage coverages of the primary policy was $1 million. The second policy, which had a $5 million limit for personal injury coverage, was the Commercial Umbrella Liability (Umbrella) policy that was triggered if (1) the primary policy did not cover an occurrence, or (2) an occurrence under the primary policy was in excess of $1 million. The policies required Daimler to defend and indemnify Greenspoint for claims for "personal injury," defined in the policies to include oral publication of material that slanders or libels a person. However, the policies excluded coverage for publication of material done by or at the direction of the insured with knowledge of its falsity.

Greenspoint made a claim under the policies after Noe Martinez, Greenspoint's inventory control manager, brought suit against Greenspoint. Martinez claimed that James Sparks, Greenspoint's controller, Mort Hall, the general manager, and Jamie Mouton, the used car sales manager, made racist and defamatory remarks about Martinez to third parties and ultimately fired him. Although Martinez was told that his position was being eliminated, he later found out that Hall's nephew replaced him as the inventory control manager. Martinez filed suit in January 2000 against Greenspoint, Sparks, Hall, Mouton, and Jack Apple Jr., Greenspoint's owner and chief executive officer. A court ordered Martinez's lawsuit to binding arbitration.

After a hearing, the arbitration panel issued an opinion and a final award. The arbitration panel ruled against Martinez on his claims for negligence, discrimination, and retaliation, and in his favor on his claims for defamation and intentional infliction of emotional distress. In its opinion, the panel found that "Martinez was defamed." The panel explained, "A statement is defamatory if the words tend to injure a person's reputation, exposing the person to public hatred, contempt, ridicule, or financial injury." The panel also found that the respondents orally published statements accusing Martinez of criminal activity, which is defamatory per se. The panel, "by way of example," found that the following defamatory statements were made:

• Mr. Satterfield and Mr. Holland both testified that Mr. Mouton told them that Mr. Martinez was a "thieving spic beaner" or "thieving Mexican";

• Mr. Holland and Mr. Hinojosa both testified that Mr. Mouton told them that the FBI was investigating Mr. Martinez;

• Mr. Satterfield testified that Mr. Mouton told him that Mr. Martinez was involved in the "Mexican connection" and federal agents were after Mr. Martinez for a murder investigation;

• Mr. Satterfield and Mr. Hinojosa testified that Mr. Sparks told them that Mr. Martinez was involved in the theft of cars from Greenspoint Dodge;

• Mr. Hinojosa was told by Mr. Mouton not to get involved with Mr. Martinez and the "Mexican connection"; and

• Mr. Holland testified that heard [sic] Mr. Hall talked about getting "rid of that thieving Mexican" when the context clearly referred to Mr. Martinez.

The panel emphasized that there was other evidence of "defamation by the Respondents," and that the above "statements, and others, made by the Respondents were plainly defamatory." The panel also found that "Respondents acted with actual malice at the time they communicated the defamatory statements" and that the Respondents "actually knew their statements to be false at the time of communication." (Emphasis in original).

Regarding Martinez's claim for intentional infliction of emotional distress, the panel noted that to prove intentional infliction of emotional distress, Martinez had to show:

(1) a person acted intentionally or recklessly; (2) the conduct was extreme and outrageous; (3) the person's actions caused another person's emotional distress; and (4) the emotional distress suffered by the other person was severe.

The panel found that "the Respondents intentionally slandered Mr. Martinez knowing, at the time, that their accusations of criminal conduct were untrue." The panel said, "This case is well `outside the scope of an ordinary employment dispute and into the realm of extreme and outrageous conduct.'"

"Respondents" in the arbitration panel's opinion were Greenspoint, Apple, Sparks, Hall, and Mouton. The panel imposed joint and several liability on Greenspoint and the individual Respondents by considering the factors outlined by the supreme court in GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 611-16 (Tex. 1999).² In its opinion, the panel stated,

In particular, we considered (and rejected) the possibility that the individual Respondents acted out of personal animosity. We also find that the individual Respondents were vice-principals of Greenspoint Dodge at the time of the events.

In a section entitled "Allocation of Liability," the arbitration panel specifically stated that a corporation is liable for its agents who engage in defamation if the agents are vice-principals, and then found Greenspoint, Apple, Sparks, Hall, and Mouton jointly and severally liable for the actual damages and assessed separate amounts for each of them for the punitive damages. The arbitration panel awarded Martinez $994,361 in total actual damages, plus $1,150,000 in punitive damages.

Daimler provided a defense to Greenspoint during the arbitration proceedings, under a Reservation of Rights. One of the issues on which Daimler reserved its rights was the issue of whether certain employees of Greenspoint had made defamatory statements about Martinez with knowledge of their falsity. On November 13, 2001, two days after the arbitration panel issued its final award, Daimler informed Greenspoint and Apple that it would no longer defend them and would not indemnify them for the award against them. Daimler interpreted the arbitration panel's findings as not requiring the defense or indemnification of Greenspoint due to the determination that the arbitration panel found that statements were made with knowledge of their falsity. However, Daimler continued to provide a defense for Greenspoint and Apple until January 7, 2002, when the district court confirmed most of the arbitration panel's award.

The district court ordered judgment in favor of Martinez and against Greenspoint, Sparks, and Mouton, holding them jointly and severally liable for $994,361 in total actual damages, in accordance with the award by the panel of arbitrators.³ Also in accordance with the arbitration panel's award, the court ordered punitive damages for $500,000 against Greenspoint, $ 50,000 against Sparks, and $50,000 against Mouton. The court, however, vacated all of the arbitration panel's awards that were assessed against Apple and Hall.⁴

After entry of the judgment, Daimler refused to continue to defend Greenspoint in any further proceedings. Without the assistance of Daimler, Greenspoint filed a multimillion dollar bond to stay the judgment, defended garnishment actions, and retained counsel to file an appeal.⁵ While the appeal was pending, Greenspoint settled all of the claims against it for $1,750,000 and dismissed the appeal.

Believing that Daimler breached its duties under the two insurance policies, Greenspoint filed claims for breach of contract, unfair or deceptive practices or acts in violation of former article 21.21 of the Texas Insurance Code,⁶ violations of the Deceptive Trade Practices-Consumer Protection Act ("DTPA"),⁷ breach of the duty to settle, negligence, and conversion. Greenspoint attached to its petition copies of the CGL policy⁸ and the Umbrella policy.⁹

Partial Summary Judgment for the CGL and Umbrella Policies

Daimler filed its motion for summary judgment, asserting that (1...