Group Hosp. Services, Inc. v. Daniel

• Decision Date: 31 December 1985
• Docket Number: No. 13-84-467-CV,13-84-467-CV
• Citation: 704 S.W.2d 870
• Parties: GROUP HOSPITAL SERVICES, INC. and Group Life & Health Insurance Company, Appellants, v. Linda DANIEL, Appellee.
• Court: Texas Court of Appeals

Page 870

704 S.W.2d 870

GROUP HOSPITAL SERVICES, INC. and Group Life & Health Insurance Company, Appellants, v. Linda DANIEL, Appellee.

No. 13-84-467-CV.

Court of Appeals of Texas Corpus Christi.

Dec. 31, 1985.

Opinion on Motion to Reverse

and Remand Feb. 6, 1986.

David H. Brown, Houston, Leo Salzman, Harlingen, for appellants.

E.R. Fleuriet, Harlingen, Russell McMains, Corpus Christi, for appellee.

Before UTTER, KENNEDY and SEERDEN, JJ.

OPINION

UTTER, Justice.

Appellee brought suit against appellants for breach of contract, fraud, negligence, gross negligence and violations of the Texas Insurance Code and the DTPA. ¹ The jury awarded appellee the unpaid medical bills, $125,000.00 for mental anguish, $21,000.00 for attorneys fees, and $10,000,000.00 for punitive damages. We Reverse and Remand.

Appellee is a chronic allergy sufferer. From the record there appears to be very few substances to which appellee is not allergic. In May of 1982, after years of apparently unsuccessful allergy treatments by a local allergy specialist in Harlingen, Texas, appellee was referred to the Environmental Care Unit (ECU) at the Carrollton Hospital in Dallas, Texas. The ECU is a somewhat controversial allergy treatment facility where allergies are identified by isolation of the patient from other factors in the patient's environment. Appellee was a beneficiary under a group health insurance policy issued by appellant to appellee's husband. Before undergoing treatment at the ECU, appellee called appellant's customer service number. She spoke briefly with an unidentified customer representative who told her the treatment was covered. Appellee then called appellants' customer service representative again, a few minutes later and added that the treatment would cost around $10,000.00. She was again assured by the customer representative that the treatment was covered.

In July of 1982, appellee went to Dallas to begin treatment. At the time of her admission to the ECU her insurance coverage was again verified, this time by an employee of the Carrollton Hospital. Appellee spent thirty-one days in the ECU. Upon completion of the treatment, Carrollton Hospital billed appellants $9,970.55. This claim was initially paid by appellants. The physicians who treated appellee in the ECU submitted a separate bill to the appellants in the amount of $5,019.55. Appellants rejected the doctors' claim and then sought reimbursement from appellee on part of the hospital's claims which appellants had already paid. The total amount of doctor and hospital bills rejected by appellants amounted to $12,118.68.

After making demand on appellee for reimbursement for amounts already paid, appellants turned the matter over to a collection agency. Ultimately, appellee was able to work out a pay off of the disputed claims. Subsequently, appellee, after notice to appellants brought this suit which resulted in a jury verdict in her favor.

Appellants' first, third and eighth points of error challenge the legal and factual sufficiency of the evidence to support the jury's finding of fraud. In response to special issues 6 through 11 the jury found that appellants recklessly represented to appellee that they would pay for the medical services in question. However, in response to special issue 12 the jury found that at the time such representation was made, the speaker did not know the representation was false.

We find sufficient evidence to support the jury's findings. Appellants argue further [that even if there is sufficient evidence to support the jury's findings of fraud] these findings will not support an award of punitive damages and mental anguish. It is appellants' position that the requisite scienter necessary for punitive damages is established only where the speaker has knowledge of the falsity; i.e., intends to deceive or makes a malicious statement or makes the statement with conscious indifference to the rights of the plaintiff. See Ware v. Paxton, 359 S.W.2d 897, 899 (Tex.1962). Appellants argue that since the jury refused to find in special issue No. 12 that the representations made by the appellants to appellee were made with knowledge of their falsity a mere finding of recklessness will not support punitive damages and mental anguish.

In a fraud case, a finding that the deception was done with the intent to harm or with conscious indifference to the rights of others will support an award of exemplary damages. Trenholm v. Ratcliff, 646 S.W.2d 927, 933 (Tex.1983); Burk Royalty Co. v. Walls, 616 S.W.2d 911 (Tex.1981); Dennis v. Dial Finance & Thrift Co., 401 S.W.2d 803 (Tex.1966). Clearly under the facts of this case the act of appellants in verifying appellee's coverage without making further inquiry into the nature of appellee's treatment, especially where the policy contained numerous exclusions, was a reckless act. However, the question of whether this misrepresentation was made with the intent to injure appellee or with conscious indifference to appellee's rights remains. When the jury refused to find that the statement was made with knowledge of its falsity it precluded a finding that the statement was made with the intent to injure appellee. No issue was submitted to the jury on whether the statements were made with conscious indifference to appellee's rights. This leaves the question of whether the finding that the statement was made recklessly establishes the necessary intent. The question is really not one of semantics, but rather of subjective intent.

"Generally, in order to recover exemplary damages, the plaintiff must show that the offending party acted intentionally, willfully or with a degree of gross negligence which approximated a fixed purpose to bring about the injury of which plaintiff complains." International Armament Corp. v. King, 674 S.W.2d 413 (Tex.App.--Corpus Christi 1984), aff'd, 686 S.W.2d 595 (Tex.1985).

The mere fact that an act is intentional or is legally wrongful will not support an award of punitive damages. The act must be intentionally wrongful, or must be motivated by ill will and a desire to injure the other party. Fraudulent or grossly reckless conduct may sometimes justify a finding of such motivation. The Texas Supreme Court in Chastain v. Koonce, 700 S.W.2d 579 (1985) reiterated its definition of gross negligence as follows:

In Burk Royalty Co. v. Walls, 616 S.W.2d 911, 920 (Tex.1981), this court defined gross negligence as:

[T]hat entire want of care which would raise the belief that the act or omission complained of was the result of a conscious indifference to the right or welfare of the person or persons to be affected by it.

We also wrote:

What lifts oridinary negligence into gross negligence is the mental attitude of the defendant; that is what justifies the penal nature of the imposition of exemplary damages. The plaintiff must show that the defendant was consciously, i.e., knowingly, indifferent to his rights, welfare and safety. In other words, the plaintiff must show that the defendant knew about the peril, but his acts or omissions demonstrated that he didn't care.

Where there is an honest difference of opinion as to the interpretation or the legal effect of a contract, the sincere pursuit of a claimed legal right under that contract by one of the parties cannot form the basis of an award of punitive damages. Kilgore Federal Savings & Loan Assoc. v. Donnelly, 624 S.W.2d 933 (Tex.App.--Tyler 1981, writ ref'd n.r.e.); Scurlock Oil Co. v. Joffrion, 390 S.W.2d 526 (Tex.Civ.App.--Tyler 1965, no writ); Cantrell v. Broadnax, 306 S.W.2d 429 (Tex.Civ.App.--Dallas 1957, no writ); Upham Gas Co. v. Smith, 247 S.W.2d 133 (Tex.Civ.App.--Fort Worth 1952, no writ); Pacific Finance Corp. v. Gilkerson, 217 S.W.2d 440 (Tex.Civ.App.--Beaumont 1948, writ ref'd n.r.e.); Security State Bank of Tahoka v. Spinnler, 78 S.W.2d 275 (Tex.Civ.App.--Amarillo 1935, no writ).

Appellants' act is akin to what is termed a negligent misrepresentation by the authors of the Restatement of Torts. See, Restatement (Second) of Torts § 425 et seq and § 552 et seq (1977). Appellants paid approximately three thousand dollars of appellee's medical and doctor bills. This payment by appellants demonstrated that appellants recognized that appellee was at least partially covered by her policy with appellants. There is insufficient evidence to support any implied finding that the statements on the part of appellants' service representatives were known by the speaker to be false and made with wrongful scienter that will support a recovery of punitive damages. The present case does not include the aggravating circumstances necessary to support the findings of the punitive damages. The evidence shows at most that the appellants' employees acted carelessly and will not support a finding of willfullness, wantonness or malice. See Corpus Christi National Bank v. Lowry, 662 S.W.2d 402 (Tex.App.--Corpus Christi 1983, no writ).

The jury's findings on the fraud issues are therefore legally insufficient to support the award of punitive damages. Appellants' first, third and eighth points of error are sustained.

Appellants' second point of error is multifarious. The first part of the point of error is merely the factual counterpart of the legal issues raised in the first point of error. These questions are adequately addressed in our treatment of appellants' first point of error. In the second part, the appellants argue that there was an irreconcilable conflict between the jury's answers to special issues 1, 2 and 4 and the special issues discussed under appellants' first point of error. Special issues 1, 2 and 4 appear to be appellants' defensive issues concerning the necessity of services performed on appellee at the ECU and which were all answered adversly to appellants' contentions. We find no conflict between the jury's response to these issues and the subsequent findings by the jury of fraud, violation of the DTPA and acts of...