In re Foremost County Mutual Ins. Co.

• Decision Date: 11 August 2005
• Docket Number: No. 09-05-122 CV.,09-05-122 CV.
• Citation: 172 S.W.3d 128
• Parties: In re FOREMOST COUNTY MUTUAL INSURANCE COMPANY and Jim Doland.
• Court: Texas Supreme Court

172 S.W.3d 128

In re FOREMOST COUNTY MUTUAL INSURANCE COMPANY and Jim Doland.

No. 09-05-122 CV.

Court of Appeals of Texas, Beaumont.

Submitted May 19, 2005.

Decided August 11, 2005.

E. John Gorman, Bradford W. Irelan, Irelan Hargis PLLC, Houston, for relators.

E. Hart Green, Weller, Green, Toups & Terrell, LLP, Beaumont, for real party in interest.

Before McKEITHEN, C.J., GAULTNEY and HORTON, JJ.

OPINION

PER CURIAM.

This mandamus proceeding arises from an insurance company's denial of a fire loss claim made under a homeowner's insurance policy. The company denied the policyholder's claim after he refused to submit to an examination under oath. The company sought an abatement of the underlying suit to obtain the examination. After the trial court denied the company's plea in abatement, the company petitioned this Court for a writ of mandamus. The primary questions we must resolve are whether the trial court abused its discretion in refusing to abate the case and whether relators have an adequate appellate remedy. For the reasons stated below, we conditionally grant the writ of mandamus.

Foremost County Mutual Insurance Company insured Kenneth Whitney's mobile home and its contents through a "mobilowner's policy." A fire destroyed Whitney's mobile home and Foremost ultimately denied Whitney's claim. Whitney filed suit against relators, Foremost and Jim Doland (jointly referred to as "Foremost"). In his petition against the company, Whitney alleges breach of contract and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act ("DTPA"); against Doland, Whitney alleges DTPA violations. Foremost contends that Whitney's suit is improper because he failed to comply with the policy's conditions precedent that required him to submit to an examination under oath ("EUO") prior to filing suit.

In the first two weeks after a fire destroyed Whitney's mobile home on November 25, 2003, several events occurred. Whitney notified Foremost about the loss on the day of the fire. The next day, November 26, Doland inspected the site and Whitney authorized the release of his financial and employment records. On December 8, 2003, thirteen days after the fire, Foremost sent Whitney a "reservation-of-rights" letter stating that "a potential coverage issue" existed and reserving Foremost's right to assert all terms and provisions of the policy. The letter further disclaimed Foremost's intent to waive any of its rights or defenses and explained that Foremost's "preliminary investigation in conjunction with cause & origin experts indicate the fire cause may not be of a[n] accidental nature. Please note the investigation of this loss is continuing." In its letter, Foremost also asked Whitney to fully cooperate with the Company's investigation.

In January 2004, Foremost continued its investigation. On January 9, 2004, approximately six weeks after the fire, Foremost told Whitney it was still investigating and requested that Whitney provide additional documents, namely "the completed property summary sheets along with any receipts for additional living expense." Around January 22, 2004, Doland received the final report from the cause and origin investigator and a report from investigators reviewing Whitney's financial status. From those reports, Doland concluded that arson may have been the cause of the fire and that Whitney, because of his proximity to the fire, was the most likely suspect. Doland requested his supervisor to approve the taking of Whitney's EUO.

In February, Foremost began its attempts to schedule Whitney's EUO. On February 17, 2004, Foremost's outside counsel asked Whitney directly for his EUO. On February 26, 2004, after learning that Whitney had retained counsel, Foremost's outside counsel asked Whitney's counsel for assistance in scheduling the EUO. Whitney refused and informed Foremost that it had waived its right to obtain the examination.

After Whitney declined to cooperate, Foremost ultimately denied coverage and Whitney filed suit. Because the trial court denied Foremost's plea in abatement, Foremost filed its petition for writ of mandamus. Foremost contends the trial court abused its discretion by not abating the underlying suit to allow Foremost to examine Whitney under oath as provided by the policy's conditions precedent. Foremost further contends that it has no adequate remedy by appeal.

The policy includes the following paragraphs:

PART IV — CONDITIONS

All obligations of the Company under this policy are subject to the performance by the Insured of the following conditions:

A. General Conditions Applicable to Both Parts of the Policy

. . .

4. Assistance and Cooperation. The Insured and any person interested in or claiming any benefit under this policy shall cooperate with the Company and, upon the Company's request, assist in making settlements, in the conduct of suits, and in enforcing any right of contribution, indemnity or recovery against any person or organization who may be liable for any injury, damage or loss with respect to which insurance is afforded under this policy.

5. Proof of Loss. The Insured or someone in his behalf shall file proof of loss with the Company within 91 days after the occurrence of the loss, unless such time is extended in writing by the Company and upon the Company's request, exhibit the damaged property to duly authorized representatives of the Company, and submit to and subscribe examinations under oath conducted by anyone designated by the Company, produce for the Company's examination all pertinent papers, documents and records (or certified copies thereof, if originals be lost), permitting copies thereof to be made by or on behalf of the Company all at such reasonable times and places as the Company from time to time may designate. . . .

. . .

8. Action Against the Company. No payment shall be due by the Company under this policy and no action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this policy, nor until 30 days after proof of loss is filed and that amount of loss is determined as provided in this policy. . . .

When we interpret an insurance policy, we employ the rules of contract construction. American Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.2003). "If policy language is worded so that it can be given a definite or certain legal meaning, it is not ambiguous and we construe it as a matter of law. . . ." Schaefer, 124 S.W.3d at 157(citations omitted). If a contract is not ambiguous, the words used in the contract are to be given their ordinary meaning. See Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984). For an event to constitute a "condition precedent" under a contract, the contract must provide that the event shall "happen or be performed before a right can accrue to enforce an obligation." Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex.1992).

Paragraph IV A. 5. of Whitney's insurance policy provides that a claimant, upon the company's request, shall "submit to and subscribe examinations under oath conducted by anyone designated by the Company. . . ." Paragraph IV A. 8. provides that "no action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this policy. . . ." (emphasis added). These policy provisions clearly require Whitney to provide an EUO upon the Company's request and to do so before filing suit. Policy terms requiring a policyholder to submit to an EUO before filing suit are valid as we previously determined in State Farm General Ins. Co. v. Lawlis, 773 S.W.2d 948, 949 (Tex.App.-Beaumont 1989, no writ). See also Philadelphia Underwriters' Agency v. Driggers, 111 Tex. 392, 238 S.W. 633 (1922).

However, Whitney argues that Foremost waived its right to obtain his EUO because Foremost's request was untimely. Whitney contends that Foremost was required to tell him it wanted an EUO within fifteen days after Foremost received notice of his claim. Whitney bases his waiver argument on article 21.55 of the Texas Insurance Code ("Code") as well as certain policy provisions.

Article 21.55 of the Texas Insurance Code, entitled, "Prompt Payment of Claims," requires that, within fifteen days of receiving a claim notice, an insurer shall: "(1) acknowledge receipt of the claim; (2) commence any investigation of the claim; and (3) request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant. Additional requests may be made if during the investigation of the claim such additional requests are necessary." Tex. Ins. Code Ann. art. 21.55 (Vernon Supp.2005).

The plain language of the statute negates Whitney's "fifteen day" waiver argument. Under the statute, the company may request additional information after the fifteen day period expires. While the company must begin investigating a claim and request initially required information from the claimant within fifteen days of receiving a claim notice, the statute also allows the company to request additional information that becomes necessary during the course of the investigation. Thus, Whitney's argument ignores the statutory language allowing the insurer to make additional requests for information "if during the investigation of the claim such additional requests are necessary." Art. 21.55 § 2(a)(3).

The EUO's usefulness is not at issue as Whitney does not contest that it would have assisted the investigation. Foremost contends it reasonably determined it needed more information, namely the EUO, to finish investigating Whitney's claim. In addition, Foremost asserts it decided to seek an EUO after the final cause and origin report made it necessary to rule out Whitney as a suspect. Logically, Whitney's EUO would provide information pertinent to this determination.

Whitney's waiver...