Huttleston v. Beacon Nat. Ins. Co.

• Decision Date: 08 January 1992
• Docket Number: No. 2-91-037-CV,2-91-037-CV
• Citation: 822 S.W.2d 741
• Court: Texas Court of Appeals
• Parties: Gary L. HUTTLESTON, Appellant, v. BEACON NATIONAL INSURANCE CO., Appellee.

Page 741

822 S.W.2d 741

Gary L. HUTTLESTON, Appellant, v. BEACON NATIONAL INSURANCE CO., Appellee.

No. 2-91-037-CV.

Court of Appeals of Texas Fort Worth.

Jan. 8, 1992.

Rehearing Overruled Feb. 5, 1992.

Walton, Brown, Walton, Seilheimer, & Reid, P.C., and Edwin J. Seilheimer, Granbury, for appellant.

Vial, Hamilton, Koch & Knox and J. Mark Hansen, Dallas, for appellee.

Before FARRIS, MEYERS and DAY, JJ.

OPINION

DAY, Justice.

This appeal involved the claims of a motorist arising under the uninsured/underinsured motorist coverage of his own insurance policy. ¹ On December 16, 1987, a truck being driven by Wade Riddle struck Huttleston's auto head-on. Huttleston's insurance policy, with Beacon National Insurance, provided for uninsured/underinsured coverage with policy limits of $100,000/$300,000. Riddle's liability coverage had a $100,000 limit on liability claims. Huttleston settled with Riddle for the full $100,000 of Riddle's liability insurance. He did not notify Beacon of this action or seek its consent before settlement became final. Huttleston released Riddle on July 13, 1988. This release and settlement violated the "consent to settle" exclusion in the Beacon policy. ²

Subsequent to this settlement, in September of 1989, the Texas Supreme Court decided the case of Stracener v. United Services Auto. Ass'n, 777 S.W.2d 378 (Tex.1989). In Stracener, the court changed the way policyholders determine their right to compensation under the underinsured motorist coverage of their policies. Before Stracener, in a case like Huttleston's, Riddle was not considered an "underinsured" motorist. After Stracener, Riddle could be considered underinsured if the limit on his liability policy was insufficient to compensate Huttleston for his actual damages. Thus, pursuant to the decision in Stracener, had Huttleston not violated the "consent to settle" provision of his policy, he would have a "new" right to recover under his underinsured motorist coverage from Beacon.

Huttleston then brought suit against Beacon on three grounds: breach of contract (based on the underlying policy), reformation of the policy, and violations of TEX.INS.CODE ANN. arts. 21.21, and 21.21, § 16 (Vernon Supp.1991). Beacon responded by asserting the consent to settle exclusion as an affirmative defense to such claims. Beacon subsequently moved for summary judgment on this ground. The trial court granted such motion and entered final judgment for Beacon on all of Huttleston's claims. This appeal followed.

In a summary judgment case, the issue on appeal is whether the movant met his burden for obtaining summary judgment by establishing that there exists no genuine issue of material fact and that he is entitled to judgment a matter of law. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979); TEX.R.CIV.P. 166a. The burden of proof is on the movant, and all doubts as to the existence of a genuine issue of material fact are resolved against the movant. Great American R. Ins. Co. v. San Antonio Pl. Sup. Co., 391 S.W.2d 41, 47 (Tex.1965). Therefore, we must view the evidence in the light most favorable to the non-movant. Id. In deciding whether there is a material fact issue precluding summary judgment, all conflicts in the evidence will be disregarded and the evidence favorable to the non-movant will be accepted as true. Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984); Farley v. Prudential Ins. Co., 480 S.W.2d 176, 178 (Tex.1972). Every reasonable inference from the evidence must be indulged in favor of the non-movant and any existing doubts must be resolved in the non-movant's favor. Montgomery, 669 S.W.2d at 311. The summary judgment will be affirmed only if the record on appeal establishes that the movant has conclusively proved all essential elements of the cause of action or defense as a matter of law. City of Houston, 589 S.W.2d at 678.

In his first point of error, Huttleston urges that the trial court erred in granting Beacon's motion for summary judgment. He claims that under the rationale of Stracener, the "consent to settle" exclusion should be declared invalid because it does not further the purposes of TEX.INS.CODE ANN. art. 5.06-1 (Vernon 1981), in this case because Huttleston could not have known (at the time he settled with the at-fault party) that the express language in his policy and the decisions of lower courts interpreting this language would be changed.

It is necessary to examine Stracener at this point to determine what effect, if any, this decision has upon the "consent to settle" exclusion involved in this case. In essence, Stracener held that a party's recovery under the underinsured provision of his policy cannot be offset by the recovery from the underinsured. The court explained the policy reasons supporting this interpretation as follows:

[U]nder the misinterpretation of the statute by some courts of appeals, insureds can never ascertain what, if anything, they have purchased. The availability of underinsured motorist insurance would be contingent upon numerous uncertainties including not only the limits of that coverage but also the limits of the tort-feasor's liability insurance, the extent of damages suffered by any other persons who may have been involved in the same accident and the amount of any settlements made with the liability insurance carrier. We doubt whether most Texas motorists understand that the amount of the coverage for which they are paying is only recoverable depending upon the limits of the liability coverage carried by the negligent driver and the peculiar facts of the particular accident ....

By purchasing this coverage along with basic liability coverage, the insured has expressed an intent not only to protect others from his or her own negligence but also to protect that person's own family and guests from the negligence of others. This intent and the purpose of the statute are frustrated under the courts of appeals' construction.... Those clauses in insurance policies which are not consistent with and do not further the purpose of article 5.06-1 are invalid.

Stracener, 777 S.W.2d at 383-84 (emphasis added).

Huttleston focuses on the highlighted language and asks us to render invalid, as a matter of law, any and all exclusionary provisions which would prevent recovery under TEX.INS.CODE ANN. art. 5.06-1 (Vernon 1981).

The Texas courts have consistently upheld the validity of the consent to settle exclusion relied upon by Beacon in this case. Ford v. State Farm Mut. Auto. Ins. Co., 550 S.W.2d 663, 665 (Tex.1977). See also Dairyland County Mut. Ins. Co. of Texas v. Roman, 498 S.W.2d 154, 159 (Tex.1973); Castorena v. Employers Casualty Co., 526 S.W.2d 680 (Tex.Civ.App.--El Paso 1975, writ ref'd n.r.e.); McClelland v. United Serv. Auto. Ass'n, 525 S.W.2d 271 (Tex.Civ.App.--Beaumont 1975, writ ref'd); Bauer v. Consolidated Underwriters, 518 S.W.2d 879 (Tex.Civ.App.--Houston [1st Dist.] 1975, writ ref'd n.r.e.); Grissom v. Southern Farm Bureau Casualty Ins. Co., 476 S.W.2d 448 (Tex.Civ.App.--Waco 1972, writ ref'd n.r.e.).

The supreme court in Dairyland stated that the purpose of the exclusion is to protect the insurance company's subrogation rights. The court held that the injured party's settlement with the at-fault party and his release of the at-fault party destroyed the insurance company's subrogation rights against that party. It is true, said the court, that the compromise settlement between the injured and the at-fault party involved payment of the full amount of the liability limits relating to bodily injury, but the release of that responsible party, individually, extinguished and precluded any further claims by the insurer (which would otherwise have had a subrogation claim). The insurer lost an opportunity that it would have possessed under the insurance contract to seek reimbursement from the responsible party, individually, as the underinsured motorist. The court went on to hold that the exclusion is not rendered unenforceable and is not against public policy, even though the injured party received the full policy limits under the responsible party's liability insurance policy. Dairyland, 498 S.W.2d at 159.

In Castorena v. Employers Casualty Company, 526 S.W.2d 680 (Tex.Civ.App.--El Paso 1975, writ ref'd n.r.e.), it was undisputed that the release or settlement with the responsible party's insurer was made without first obtaining the written consent of the Employer's Casualty Company, the injured party's insurer. Id. at 681. The court held that under similar, but not identical situations, it has been held that the insured is barred from recovery (citations omitted). The validity and legitimacy of this particular exclusion from uninsured motorist coverage was upheld in this case because it serves "to protect the company's subrogation rights against the uninsured motorist or any other person legally responsible for the insured's injuries." Citing Dairyland, 498 S.W.2d at 159, supra. The court held that the exclusionary clause (consent to settle clause) is valid and enforceable and does not deprive an insured of the protection required by article 5.06-1. Id. The Beaumont court in McClelland, 525 S.W.2d 271, was persuaded by the subrogation policy reasons as well. See also Bauer, 518 S.W.2d 879; Miller v. Hanover Ins. Co., 718 S.W.2d 429, 430 (Tex.App.--Eastland 1986, writ ref'd n.r.e.) (Insurer won summary judgment based on the "consent to settle" exclusion. The court relied on other cases [discussed infra ] that have upheld the validity of similar exclusions when considering uninsured motorist coverage.).

In Grissom, 476 S.W.2d 448, the court held that an uninsured motorist provision excluding coverage where insured, without written consent of insurer, makes a settlement with any person who may be legally liable was clear, and where the provision had been approved by the State Board of Insurance; that provision would be enforced as...