Hudspeth v. Enter. Life Ins. Co., 01–10–00672–CV.

• Decision Date: 01 December 2011
• Docket Number: No. 01–10–00672–CV.,01–10–00672–CV.
• Citation: 358 S.W.3d 373
• Parties: Bernice HUDSPETH, Appellant, v. ENTERPRISE LIFE INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

358 S.W.3d 373

Bernice HUDSPETH, Appellant,

v.ENTERPRISE LIFE INSURANCE COMPANY, Appellee.

No. 01–10–00672–CV.

Court of Appeals of Texas, Houston (1st Dist.).

Dec. 1, 2011.

Craig A. Welscher, The Welscher Law Firm, Houston, TX, for Appellant.

Bradley E. McLain, Katherine L. Killingsworth, Oliver B. Krejs, Settlepou, Dallas, TX, for Appellee.

Panel consists of Chief Justice RADACK and Justices BLAND and HUDDLE.

OPINION

SHERRY RADACK, Chief Justice.

This case involves a dispute over a credit disability insurance policy underwritten by defendant/appellee Enterprise Life Insurance Company that plaintiff/appellant Bernice Hudspeth purchased when she bought a new car from defendant Sterling McCall Chevrolet–Toyota, Inc. The vehicle and insurance were financed through defendant Toyota Motor Credit Corporation.

We reverse and remand in part and affirm in part.

BACKGROUND

On July 5, 2003, Hudspeth purchased a 2003 Toyota Camry from Sterling McCall Toyota. In conjunction with that purchase, she also bought a disability insurance policy for $1,254.87 to cover her car payments in the event of her disability. The total insurance amount was $33,022.00 (the total amount of the monthly payments under the installment contract) with an effective date of July 5, 2003, and a scheduled termination date of July 19, 2008. It was a “reducing” policy, meaning that the value of the insurance declined when each car payment was made reducing the balance owed on the vehicle.

A. Contract Provisions

The back of the credit insurance contract contains the following provision defining disability in a section entitled “DISABILITY INSURANCE COVERAGE”:

TOTAL DISABILITY: means Disability resulting from sickness or injury and which begins while the coverage is in force and causes the insured to be unable to perform the usual and customary duties of the Insured's current occupation at the time disability occurs. The definition changes after twelve (12) consecutive months of Total Disability and requires that the insured be unable to perform the duties of any occupation for which the insured is reasonably qualified by education, training or experience. The Company will not pay disability benefits on the Insured's behalf unless a doctor of medicine or osteopathy who is licensed by the State Board of Medical Examiners certifies the Insured's Total Disability to the Company. The insured will be required to give the Company written proof of continuing Total Disability at monthly intervals in order to justify the continuing payment of benefits. (emphasis added)

The following provisions related to specific claim procedures are included in a section entitled “RULES FOR FILING A DISABILITY CLAIM”:

NOTICE OF CLAIM: Written notice of the Insured's claim must be furnished within 20 days after the loss occurs or as soon as reasonably possible.

CLAIM FORMS: The Company will furnish a claim form for filing proof of loss within 15 days, upon request. If a claim form is not received within 15 days, the claimant may submit written proof of disability signed by a licensed physician including the date and cause of the total disability to the Company.

PROOF OF LOSS: Written proof of loss must be furnished to the Company within 90 days. Any subsequent written proof of the continuation of the disability must be furnished to the insurer at such intervals as the insurer may reasonably require. Failure to furnish such proof within the time required shall not [illegible] nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than one year from the time proof is otherwise required. (emphasis added)

The following provision setting forth the conditions under which coverage will terminate is located in a section entitled “GENERAL PROVISIONS”:

WHEN INSURANCE STOPS: All insurance under this certificate shall terminate on the earliest of the following dates: (a) on the scheduled expiration date; (b) on the date the debt is prepaid, renewed, amended, or refinanced; (c) the debt is transferred to another debtor; (d) the collateral is repossessed; (e) a judgment is filed against you with respect to the debt; (f) we receive a written request from you to cancel the coverage; or (g) upon payment of death benefits. Termination due to these events shall be without prejudice to any claim incurred prior to the termination. If the loan is paid off prior to the expiration date and the Debtor is still totally disabled and under the continuous care of a licensed physician, benefits will continue and be paid to the debtor until the debtor is released to return to work or to the expiration date of coverage, whichever comes first. Upon termination of a continuing claim within the originally scheduled term of insurance, a refund shall be made of any then unearned premium.

B. Hudspeth's Disability Claim

In September 2005, Hudspeth was diagnosed with cancer in her stomach, colon, and throat. At that time, she worked in the human resources department at Advance Controls, and had health insurance through her employer. Following surgery for her cancer, she was unable to return to work, lost her health insurance, and was referred to Ben Taub hospital for county-provided care.

Hudspeth first called Enterprise to put them on notice of her disability in September 2005, the day after her surgery. Enterprise did not send her a claim form in response to that call, but did send her one in November after she made a follow-up call.

In November 2005, she submitted her claim form, along with documentation from her physician and employer as requested by Enterprise. In response, she received a December 6, 2005 letter from Enterprise indicating that her benefits had been approved and explaining that she would need to file a completed continuing claim form each month. The letter further explained that future benefits would not be processed without the monthly claim form and admonished that if the claim form was not fully completed, processing of future benefits might be delayed. On the same day, Enterprise forwarded an initial $935.65 benefits check to Toyota to cover the period from October 11, 2005 through November 30, 2005.

In December 2005, Hudspeth sent Enterprise an incomplete continuing claim form and called to explain that she did not have a doctor and was unable to get the medical verification part of the form completed. Her inability to get a doctor's certification in that timeframe was related to her transfer from private health care to the county-provided services. While she started the process of trying to be seen by a county physician immediately after her discharge from the hospital in September 2005, she was unable to secure an appointment until February with a county primary care physician.¹

The county doctor who Hudspeth saw for the first time in February would not sign the continuing disability form because she was unfamiliar with Hudspeth as a patient. She first wanted to run diagnostic tests on Hudspeth to understand her condition, evaluate the stage of her cancer, and assign her to an oncologist. Hudspeth was required to do more county paperwork, and was unable to get the tests the doctor ordered performed until March 2006. In April 2006, she saw an oncologist for the first time, and he signed her continuing disability form on April 11,2006.

In January and February 2006, Hudspeth kept Enterprise informed by phone about the status of her attempts to get the continuing disability form signed. On February 27, 2006, Enterprise sent her a letter reminding her that her monthly continuation claim form had not been submitted and stating that “If we do not hear from you within 15 days, we will assume you do not wish to pursue further disability benefits and your claim file will be closed.” In response, Hudspeth called Enterprise to let them know that she would not be able to see a doctor until April 2006. In a letter dated March 30, 2006, Enterprise informed Hudspeth that it had not received a continuing claim form for more than 50 days and that her claim file was closed. It also stated, “Should you have any additional information that would cause us to reconsider our position, please send it to the address below.” A blank continuing-claim form was enclosed with the letter. Pursuant to instructions received during her last phone call with Enterprise, once Hudspeth got the form signed in April, she faxed a copy to Enterprise and mailed the original.

After Hudspeth submitted this April claim form and documentation, she did not hear from Enterprise until she received a letter dated June 7, 2006 stating that Enterprise had “reviewed [her] claim for insurance benefits,” but that her claim was denied because “[c]overage was cancelled prior to the date of loss.” She immediately called Enterprise, and someone told her that her case would have to be discussed at an upcoming meeting where a decision would be made and that someone would get back to her. Hudspeth was never contacted by Enterprise, but she continued calling them through September 2006 to try to get resolution. She also called Toyota for help. Enterprise never made a payment under Hudspeth's policy after the initial one in December 2005. Eventually, Toyota Motor Credit repossessed Hudspeth's vehicle in April 2007 for nonpayment of the note.

Hudspeth testified that, between November 2005 and April 2006, she corresponded with Enterprise at least twice a month to keep it apprised of her situation, and Enterprise never indicated to her that her policy would be cancelled. She was instead told to get the paperwork in as soon as possible.

C. The Lawsuit, Pre–Trial Summary Judgments, and Settlements

Hudspeth sued Enterprise, Toyota Motor Credit Corporation, and Sterling McCall Toyota (collectively, defendants) on March 8, 2008 for (1) breach of contract, (2) negligence, (3) DTPA...