Hermann Hosp. v. National Standard Ins. Co.

Decision Date20 July 1989
Docket NumberNo. 01-88-00854-CV,01-88-00854-CV
Citation776 S.W.2d 249
PartiesHERMANN HOSPITAL, Appellant, v. NATIONAL STANDARD INSURANCE COMPANY and American General Fire & Casualty Company, Appellees. (1st Dist.)
CourtTexas Court of Appeals

Mark Douglas Herbert, Sullins, Johnston, Rohrbach & Magers, Houston, for appellant.

Larry Funderburk and Kurt Groten, Funderburk & Funderburk, Houston, for appellees.

Before WARREN, COHEN and MIRABAL, JJ.

OPINION

WARREN, Justice.

This is an appeal from a summary judgment granted against appellant, Hermann Hospital.

Appellant sued appellees, alleging three causes of action: (1) misrepresentation and deceptive trade practices under art. 21.21 of the Texas Insurance Code; (2) negligent misrepresentation under Texas common law; and (3) estoppel. Appellees moved for summary judgment, based on the pleadings, which was granted by the trial court. On appeal, appellant contends that the trial court erred in granting summary judgment as to each of its causes of action.

On June 17, 1978, Jose Carreon was stabbed by a fellow worker while working for his employer, Cafeterias, Inc. d/b/a Romano Cafeteria # 7. He was taken to, and treated at, Memorial Hospital. In September 1978, Memorial Hospital sought to transfer Carreon to Hermann Hospital (appellant) for further care and treatment. Appellees paid Memorial for its services. Three months after Carreon was injured, on September 18 and 20, 1978, and prior to accepting the transfer of Carreon, appellant verified insurance coverage with appellees' agents, employees, or representatives for its care and treatment of Carreon. On September 20, 1978, after verifying coverage, appellant accepted the transfer of Carreon. Appellant again verified insurance coverage with appellees on October 16, 1978. Thereafter, later in October 1978, appellees denied that there was insurance coverage for the injury sustained by Carreon and refused to pay appellant for the expenses incurred. Appellant asserts that it relied on the representation of coverage in accepting the transfer of Carreon and that it incurred expenses of $217,444.90 in its care and treatment of Carreon.

Appellees dispute the nature of their communications with appellant, specifically, whether appellees advised appellant that Carreon had sustained a compensable injury or merely that he was an employee of its covered insured. Appellees contend that they never told appellant that the injury sustained by Carreon was a compensable injury, or that they would assume any responsibility for the consequent medical bills. Because this is an appeal from a summary judgment, evidence that favors the movant's position will not be considered unless it is uncontroverted. Great American Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex.1965).

Appellees moved for summary judgment contending that: (1) appellant did not have standing under the Deceptive Trade Practices--Consumer Protection Act, Tex.Bus. & Com.Code Ann., sec. 17.41 et seq. (Vernon Supp.1989) ("DTPA") or the Texas Insurance Code, art. 21.21 (Vernon 1981); (2) the misrepresentations made by appellees after the sale of the insurance policy to Carreon's employer are "post-loss" misrepresentations and therefore, are not actionable under art. 21.21; (3) there was no legal duty flowing from appellees to appellant; and (4) "estoppel," by itself, is not a viable cause of action.

A defendant who moves for summary judgment has the burden of showing, as a matter of law, that no material issue of fact exists as to the plaintiff's cause of action. Griffin v. Rowden, 654 S.W.2d 435, 435-36 (Tex.1983). This may be accomplished by showing that at least one element of each of the plaintiff's causes of action has been established conclusively against the plaintiff. Gray v. Bertrand, 723 S.W.2d 957 (Tex.1987). Once the defendant has negated, as a matter of law, such elements of plaintiff's cause of action, the plaintiff has the burden of introducing evidence that raises issues of fact with respect to the elements negated by the defendant's summary judgment evidence. Federated Dep't Stores, Inc. v. Houston Lighting & Power Co., 646 S.W.2d 509, 511 (Tex.App.--Houston [1st Dist.] 1982, no writ). As the summary judgment order does not state the specific grounds upon which it is granted, appellant must show that each of the independent arguments alleged in the motion is insufficient to support the order. Tilotta v. Goodall, 752 S.W.2d 160, 161 (Tex.App.--Houston [1st Dist.] 1988, writ denied).

We first address appellant's argument under the Texas Insurance Code, which requires us to decide whether appellant has standing to bring a cause of action, under art. 21.21, sec. 16(a) of the Texas Insurance Code Annotated. In its first point of error, appellant complains that the trial court erred in rendering summary judgment against it, and in dismissing its claim under the art. 21.21 of the Texas Insurance Code. Specifically, appellant argues that: (1) it is not required to establish "consumer" status to obtain standing under art. 21.21, as argued by appellees in their motion for summary judgment 1; (2) appellees' violations of art. 21.21 were actionable deceptive or unfair acts or practices; and (3) appellant has a private cause of action for appellees' violation of State Board of Insurance Rules and Regulations.

In its second amended petition, appellant asserted a cause of action against appellees for unfair or deceptive acts or practices pursuant to Tex.Ins.Code Ann. art. 21.21.:

Sec. 16(a) Any person who has been injured by another's engaging in any of the practices declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition and unfair and deceptive acts or practices in the business of insurance or in any practice defined by Section 17.46 of the Business and Commerce Code, as amended, as an unlawful deceptive trade practice may maintain an action against the company or companies engaging in such acts or practices.

(Emphasis ours). Appellant alleged that it was a corporation and argues that sec. 16(a) provides a remedy for "any person" injured by the conduct of one in the insurance business. Person is defined in section 2 of the Act:

Sec. 2. When used in this Act:

(a) "Person" shall mean any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance including agents, brokers, adjusters and life insurance counselors.

The Texas Supreme Court, in 1978, held that this statute does not require that the injured party be a person who is engaged in the business of insurance. Ceshker v. Bankers Commercial Life Ins. Co., 568 S.W.2d 128, 129 (Tex.1978). More recently, it held that the statute does not require the injured party be a consumer of goods or services before he can recover under this statute. Aetna Casualty & Surety Co. v. Marshall, 724 S.W.2d 770, 772 (Tex.1987). Nevertheless, appellees contend appellant has no standing, citing Chaffin v. Transamerica Ins. Co., 731 S.W.2d 728 (Tex.App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.), in which the court found no authority for extending the construction of "person" beyond one who is either an insured or a beneficiary of the policy. We find that case distinguishable on its facts.

In Chaffin, the owners of two townhomes, damaged during a rainstorm, sued the sub-contractor that waterproofed the townhome roofs, for negligence, after the sub-contractor's insurance company had denied coverage. Before the summary judgment was granted, the insurance company admitted no reason existed for its denial of coverage, and over three years from the date of loss, paid the plaintiffs the limit of the sub-contractor's liability policy. The suit against the sub-contractor was dismissed, but the plaintiffs continued their suit against the insurance company for wrongful denial and tortious handling of the property claim. The suit was to recover the unnecessary litigation costs incurred by plaintiffs and interest on the money borrowed to repair the property until the settlement was had. Under these facts, the court of appeals found no reason to extend standing to the plaintiffs under the Insurance Code, as it did not find Texas authorities that recognized a cause of action for the type of damages being sought, and because Texas law prohibits joinder of, or a direct action against, a tortfeasor's insurance company until after the injured party has secured a judgment against the insured. Chaffin, 731 S.W.2d at 731-732.

This is not the case before us now. Hermann Hospital is not suing on an insurance policy or for the wrongful denial of payment under Romano's worker's compensation insurance policy. It is suing for the damages it suffered by relying on the representations of coverage allegedly made by appellees. The supreme court has held that misrepresentations as to coverage and benefits are precisely the sort of conduct that give rise to a cause of action under this section. Aetna, 724 S.W.2d at 772. We find that as a practical matter, the relationship between insurance companies and providers of health care is a direct one, with the health care provider acting in reliance on the representations of coverage made by the carriers. Hospitals and other health care providers must, and do, rely upon the insurance carriers representations of coverage in making their decisions regarding admission of potential patients. If insurance coverage and benefits can be verified, the hospital will usually accept an assignment of benefits to insure it is paid for any services rendered. If insurance coverage and benefits cannot be verified, or if no coverage exists, the medical provider can then make alternative financial arrangements. To insulate the insurance carriers from...

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2 books & journal articles
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