In re Republic Lloyds, 14-02-01208-CV.
| Citation | 104 S.W.3d 354 |
| Decision Date | 08 May 2003 |
| Docket Number | No. 14-02-01208-CV.,14-02-01208-CV. |
| Parties | In re REPUBLIC LLOYDS, Thomas Beno d/b/a Beno & Associates, Thomas Beno, and Doug Wallace, Relators. |
| Court | Court of Appeals of Texas |
Darrin Walker, Kingwood, John Steven Mostyn, Houston, for respondent.
Panel consists of Justices YATES, ANDERSON and FROST.
In this original proceeding, relators Republic Lloyds, Thomas Beno d/b/a Beno & Associates, Thomas Beno, and Doug Wallace, seek a writ of mandamus ordering the trial court to vacate its order denying their Motion for Severance, or, alternatively Motion for Separate Trials, and Motion for Abatement. We deny the petition for writ of mandamus.
In July of 2002, the real party in interest, James Fuller, along with Amanda Gonzales, brought suit against relators. In their petition, Fuller and Gonzales alleged they submitted a claim to Republic Lloyds under their homeowners policy for damages to their residence caused by water leaks. Republic Lloyds assigned the claim to Thomas Beno & Associates, who, in turn, assigned the claim to Thomas Beno and Doug Wallace for adjustment. According to the petition, Republic Lloyds wrongfully denied the claim. Fuller and Gonzales specifically alleged claims against Republic Lloyds for breach of contract, violations of the Texas Insurance Code, violations of the DTPA, and breach of the duty of good faith and fair dealing. The allegations against Beno & Associates, Thomas Beno, and Doug Wallace were limited to violations of the Texas Insurance Code.
After filing an answer asserting a general denial, relators filed a Motion for Severance, or, alternatively Motion for Separate Trials, and Motion for Abatement. In that motion, relators argued that severance of the breach of contract claim from the extra-contractual claims is necessary and proper because: first, more than one cause of action was asserted, the breach of contract claim is the proper subject of an independent suit, and the breach of contract claim is not so intertwined with the extra-contractual claims as to involve the same identical facts and issue; second, severance is necessary to promote judicial economy and avoid unnecessary costs and delays; and third, severance is necessary to avoid the possibility of irreconcilable conflicts between the interests of the parties. Fuller and Gonzales filed a response to the motion in which they argued that severance is not proper or necessary because: (1) the breach of contract claim and the extra-contractual claims are not severable and should be tried together; (2) severance is properly denied when an insurance company has not offered to settle the entire claim; (3) most of the evidence produced in this litigation will be admissible on both the breach of contract and extra-contractual claims; (4) claims made under article 21.55 of the Texas Insurance Code cannot be severed; and (5) Republic Lloyds, Beno & Associates, Beno, and Wallace failed to carry the burden of proof to establish their entitlement to severance.
An oral hearing was held on November 8, 2002. At the hearing, relators argued that a settlement offer had been made on the entire breach of contract claim. In support of this argument, relators offered into evidence a Sworn Statement in Proof of Loss executed by Fuller and Gonzales and a check issued by relators for the full amount referenced on the sworn statement. In response, Fuller and Gonzales argued that the check covered only the undisputed plumbing leak claim, not the foundation damage claim, and thus, relators had not made an offer to settle the entire claim. On November 11, 2002, the trial court signed an order denying the motion for severance. Relators sought relief by filing this petition for writ of mandamus.
In this proceeding, relators argue the trial court abused its discretion in refusing to sever the breach of contract claim from the extra-contractual claims. Relators contend they are entitled to mandamus relief because when an insured asserts a claim for breach of contract and extra-contractual claims for unfair settlement practices and the insurer has offered to settle the disputed contract claim, the trial court abuses its discretion by refusing to sever. Relators point out that they issued a check to Fuller and Gonzales for the full amount of the breach of contract claim as shown by the Sworn Statement in Proof of Loss. Relators argue the unambiguous language in the sworn statement establishes that the settlement offer covered the entire claim. Moreover, even if relators dispute that the foundation damage was covered by the policy, it would not prevent them from tendering a check in settlement of the entire claim, including the disputed portion.
In response to the arguments by relators, Fuller1 contends severance is not required because relators did not offer to settle the entire breach of contract claim. In the absence of a settlement offer on the entire claim, Fuller argues, severance is not required. As to relators' argument that the sworn statement and the check prove an offer of settlement on the entire contract claim, Fuller claims these documents, at best, raise a fact issue. Because factual disputes are within the trial court's discretion, he argues, mandamus is inappropriate.
Mandamus is an extraordinary remedy available only in limited circumstances. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex.2001). A court should issue mandamus only to correct a clear abuse of discretion or the violation of a legal duty when there is no other adequate remedy at law. Id.; In re Daisy Mfg. Co., 17 S.W.3d 654, 658 (Tex.2000). The courts of this state have recognized that appeal is inadequate to correct a trial court's erroneous refusal to grant a severance when an insurer proves it will be unduly prejudiced by such refusal. See, e.g., Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 628 (Tex.1996); State Farm Mut. Automobile Ins. Co. v. Wilborn, 835 S.W.2d 260, 261 (Tex.App.-Houston [14th Dist.] 1992, orig. proceeding). Thus, in this case, we need only determine whether the trial court clearly abused its discretion.
A trial court clearly abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992). When the trial court's decision rests on the resolution of factual issues or matters committed to the court's discretion, "[t]he relator must establish that the trial court could reasonably have reached only one decision." In re Rangel, 45 S.W.3d 783, 786 (Tex.App.-Waco 2001, orig. proceeding) (quoting Walker 827 S.W.2d at 839-40). This burden is a heavy one. Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex.1994). If the trial court has held an evidentiary hearing and has resolved disputed issues of fact, we may not substitute our judgment on the facts for that of the trial court. Dallas Morning News v. Fifth Court of Appeals, 842 S.W.2d 655, 660 (Tex.1992); Rangel, 45 S.W.3d at 786 (citing Walker, 827 S.W.2d at 839). In other words, an appellate court may not deal with disputed matters of fact in an original mandamus proceeding. Hooks v. Fourth Court of Appeals, 808 S.W.2d 56, 60 (Tex. 1991); Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 714 (Tex.1990); Shell Oil Co. v. Smith, 814 S.W.2d 237, 241 (Tex.App.-Houston [14th Dist.] 1991, orig. proceeding).
On the other hand, our review of a trial court's determination of the legal principles controlling its ruling is much less deferential. Walker, 827 S.W.2d at 840. A trial court has no "discretion" in determining what the law is or applying the law to the facts. Id. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion, and may result in the issuance of an extraordinary writ. Id.
Insurance coverage claims and bad faith claims, by their nature, are independent. Akin, 927 S.W.2d at 629 (citing Viles v. Security Nat'l Ins. Co., 788 S.W.2d 566, 567 (Tex.1990)). In most circumstances, however, an insured may not prevail on a bad faith or other extra-contractual claim without first proving the insurer breached the contract. Akin, 927 S.W.2d at 629 (citing Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex.1995); Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 17 (Tex.1994)). Several courts of appeals, including this court, have held that when the insurer has made an offer to settle the contract claim, a severance of the tort and contract claims is required to avoid undue prejudice to the insurer in its defense of the coverage dispute. See e.g., Mid-Century Ins. Co. v. Lerner, 901 S.W.2d 749, 752-53 (Tex.App.-Houston [14th Dist.] 1995, orig. proceeding); Northwestern Nat'l Lloyds Ins. Co. v. Caldwell, 862 S.W.2d 44, 46-47 (Tex.App.-Houston [14th Dist.] 1993, orig. proceeding); F.A. Richard & Assocs. v. Millard, 856 S.W.2d 765, 767 (Tex.App.-Houston [1st Dist.] 1993, orig. proceeding); State Farm Mut. Automobile Ins. Co. v. Wilborn, 835 S.W.2d 260, 262 (Tex.App.-Houston [14th Dist.] 1992, orig. proceeding). The rationale of these cases is that, ordinarily, offers of settlement of a coverage dispute are inadmissible on the contract claim, but may nevertheless be admissible on the tort claims to rebut evidence of bad faith. Akin, 927 S.W.2d at 629. In Akin, the supreme court specifically concurred with these decisions. 927 S.W.2d at 630.
Severance of claims under the Texas Rules of Civil Procedure rests within the sound discretion of the trial court. Id. at 629 . The...
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