Guthrie v. Republic Nat. Ins. Co.

• Decision Date: 21 November 1984
• Docket Number: No. 01-84-276-CV,01-84-276-CV
• Citation: 682 S.W.2d 634
• Parties: Damon L. GUTHRIE, Appellant, v. REPUBLIC NATIONAL LIFE INSURANCE COMPANY, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 634

682 S.W.2d 634

Damon L. GUTHRIE, Appellant, v. REPUBLIC NATIONAL LIFE INSURANCE COMPANY, Appellee.

No. 01-84-276-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Nov. 21, 1984.

Rehearing Denied Dec. 20, 1984.

Russell G. Burwell, Simpson & Burwell, Texas City, for appellant.

Wade Williams, Mills, Shirley, McMicken & Eckel, Galveston, for appellee.

Before BULLOCK, BASS and DUGGAN, JJ.

OPINION

BULLOCK, Justice.

Damon Guthrie appeals from a trial court judgment rendered on a jury verdict, awarding him nothing from the appellee for alleged violations of the Tex.Ins.Code Ann. art. 21.01 et seq. (Vernon 1981). We affirm.

In late 1977, the appellant's employer, Seabrook Shipyards, became dissatisfied with its Blue Cross/Blue Shield group health insurance policy, and sought another insurance carrier. Seabrook came into contact with John Cronin, an independent insurance agent who solicited policies for several insurance companies, including the appellee. Seabrook's business manager testified that she told Mr. Cronin that Seabrook wanted an insurance policy identical to the Blue Cross/Blue Shield policy, especially regarding coverage for previously existing conditions. The appellant contended that the Blue Cross/Blue Shield policy did not limit such coverage. Mr. Cronin presented a proposal for insurance prepared by the appellee; this proposal was silent regarding pre-existing conditions limitations. Apparently relying on Mr. Cronin's representations that the appellee would cover any previously existing conditions completely, Seabrook applied for insurance with the appellee. Seabrook never dealt directly with the appellee prior to this resultant dispute; all contacts regarding the policy were with Mr. Cronin.

The appellee prepared a policy consistent with the proposal, and Cronin presented it to Seabrook. Seabrook accepted this policy, which originally had a limitation of $1,000.00 for previously existing conditions. A letter that accompanied the policy, and that all parties agree became part of the policy, raised this limitation to $10,000.00 for those employees whom Seabrook had covered under Blue Cross/Blue Shield. There is no evidence in the record that Seabrook challenged this coverage.

The appellant's wife incurred medical bills of approximately $21,000.00 before the date that the appellee's policy became effective. The appellee paid $10,000.00 of these bills, and denied the remainder of the claim.

The appellant never sued Mr. Cronin or joined him in this action, alleging instead only that the appellee was liable for Cronin's misrepresentations under the provisions of Tex.Ins.Code Ann. art. 21.21 (Vernon 1981) and Texas State Board of Insurance Regulation No. 18663. The jury found that Mr. Cronin had misrepresented the policy but that the appellee had not, and the trial court then rendered judgment for the appellee.

The appellant presents four points of error, comprising three general arguments:

That the trial court improperly refused to attribute Cronin's misrepresentations to the appellee, as statutory and common law require, and improperly refused to submit a special issue regarding agency to the jury (Points of Error 1, 2);

That the evidence is factually insufficient to support the jury's finding that the appellee made no misrepresentations to Seabrook (Point of Error 3); and

That the trial court improperly found the insurance policy to be unambiguous (Point of Error 4).

The appellant offered testimony at trial that, he claims, established Cronin as either an employee of the appellee or an agent acting with actual or apparent authority to bind the appellee. The appellant contends that specific statutory and regulatory provisions required the trial court to attribute Cronin's misrepresentations to the appellee. Alternatively, the appellant argues that the trial court should have submitted a special issue regarding agency to the jury.

The appellee claims that the Insurance Code specifically exempts it from any liability for Cronin's misrepresentations, because this policy was a life insurance policy, or that the statutory provisions that the appellant relies on are not applicable in the instant case. The appellee also contends that the evidence failed to demonstrate a factual dispute upon which to justify or require the submission of the special issue.

In order to evaluate the parties' claims properly, we first turn to the specific statutes and common law doctrines involved.

Tex.Ins.Code Ann. art. 21.04 (Vernon 1981) states:

Any person who shall solicit an application for insurance upon the life of another shall in any controversy between the assured and his beneficiary and the company issuing any policy upon such application be regarded as the agent of the company, and not the agent of the assured, but such agent shall not have the power to waive, change or alter any of the terms or conditions of the application or policy.

Other statutory and regulatory provisions are also pertinent to this dispute. Article 21.21, sec. 3 prohibits deceptive trade practices in the insurance industry. Article 21.21, sec. 4(1) defines deceptive trade practices to include the misrepresentation of policy terms. Article 21.21, sec. 8 grants a private cause of action to an individual who is the victim of a deceptive trade practice. Finally, Texas State Board of Insurance Regulation No. 18663 also prohibits deceptive trade practices, including misrepresentations, in the solicitation of insurance policies.

[A] soliciting agent of an insurance company has no power or authority to make a contract on behalf of the company or to waive the terms of the policy.

International Security Life Insurance Co. v. Finck, 496 S.W.2d 544, 546 (Tex.1973). A soliciting agent, whose authority is limited to receiving and forwarding applications for insurance, cannot bind the insurer for his misrepresentations. Dugan v. General Accident Fire & Life Assurance Corp., 421 S.W.2d 717, 719 (Tex.Civ.App.--Houston [14th Dist.] 1967, writ ref'd n.r.e.). It is clear, therefore, that the common law in this state does not permit a soliciting agent to bind the insurance carrier by his actions.

Absent actual authority, the insurance agent can bind the insurer only if the agent had apparent authority to act for the carrier.

The rights of the parties to a contract of insurance are to be determined primarily with a view to the agent's apparent authority, unrestricted by the instructions of the principal which are not shown to have been known by or communicated to the insured [emphasis in the original].

Employers Casualty Co. v. Winslow, 356 S.W.2d 160, 167-168 (Tex.Civ.App.--El Paso 1962, writ ref'd n.r.e.).

In order for an insurance agent to have the necessary apparent authority, the carrier must confer that apparent authority by committing actions that, either intentionally or negligently, would induce a third person to believe the agent to have the authority he claims to have. Brachett v. Universal Life Insurance Co., 488 S.W.2d 584, 586 (Tex.Civ.App.--Beaumont 1972, no writ).

One determines apparent authority by looking to the acts of the principal, the appellee herein, to see if those acts would lead a reasonably prudent person using diligence and discretion to suppose that the agent had the authority he purported to exercise. Biggs v. United States Fire Insurance Co., 611 S.W.2d 624, 629 (Tex.1981). One should look only at the acts of the principal; representations made by the agent of his authority have no effect. Southwest Title Insurance Co. v. Northland Building Corp., 552 S.W.2d 425, 428 (Tex.1977). Also, the principal must either have affirmatively held the agent out as possessing the authority or must have knowingly and voluntarily permitted the agent to act in an unauthorized manner. Douglass v. Panama, Inc., 504 S.W.2d 776, 778-779 (Tex.1974).

Furthermore, although an insurance agent acts for the carrier in delivering the policy and in collecting the premium, he acts for the insured, the appellant in the instant case, in making the application for insurance and in processing the policy. Don Chapman Motor Sales Inc. v. National Savings and Insurance Co., 626 S.W.2d 592, 597 (Tex.App.--Austin 1981, writ ref'd n.r.e.).

Tex.Rule Civ.P. 277 provides in pertinent part:

In all jury cases the court may submit said cause upon special issues without request of either party, and, upon request of either party, shall submit the cause upon special issues controlling the disposition of the case that are raised by the written pleadings and the evidence in the case, except that, for good cause subject to review or on agreement of the parties, the court may submit the same on a general charge.

A special issue is unnecessary when the evidence conclusively establishes facts in question. T.A. Manning & Sons, Inc. v. Ken-Tex Oil Corp., 418 S.W.2d 324, 326 (Tex.Civ.App.--Austin 1967, writ ref'd n.r.e.); Employers Casualty Co. v. Winslow, 356 S.W.2d at 170.

With these concepts in mind, we now consider the parties' arguments on this point of error.

We agree with the appellant that art. 21.04 of the Insurance Code does not apply here. The policy for which Seabrook negotiated was clearly a group health insurance policy with incidental life benefits; thus, art. 21.04 does not release the appellee from any liability for Cronin's misrepresentations.

The evidence establishes, as a matter of law, that Cronin was merely a soliciting agent, and thus had no actual authority to bind the appellee. Although various individuals referred to Cronin as a "writer," "broker," and "independent agent," the context of the record conclusively establishes that Cronin was merely an independent soliciting agent representing several insurance companies. Thus, the only statutory question is whether art. 21.21 allows us to attribute liability for Cronin's misrepresentations of this policy to the appellee.

We held that art. 21.21 does not permit attribution of...