Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.

• Decision Date: 14 April 1998
• Docket Number: No. 96-1013,96-1013
• Citation: 966 S.W.2d 482,41 Tex. Sup. Ct. J. 637
• Parties: 41 Tex. Sup. Ct. J. 637 LIBERTY MUTUAL INSURANCE COMPANY and Robert G. Garrett, Petitioners, v. GARRISON CONTRACTORS, INC., Respondent
• Court: Texas Supreme Court

Page 482

966 S.W.2d 482

41 Tex. Sup. Ct. J. 637

LIBERTY MUTUAL INSURANCE COMPANY and Robert G. Garrett, Petitioners, v. GARRISON CONTRACTORS, INC., Respondent

No. 96-1013.

Supreme Court of Texas.

Argued Oct. 7, 1997.

Decided April 14, 1998.

P. Michael Jung, W. Neil Rambin, Dallas, for Petitioners.

Wade C. Hudman, Odessa, Philip K. Maxwell, Austin, for Respondent.

SPECTOR, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, HECHT, ENOCH, OWEN, ABBOTT and HANKINSON, Justices, join.

The primary issue in this case is whether an insurance agent employed by an insurance company is a "person" under section 2(a) of Article 21.21 of the Insurance Code. The court of appeals held that Robert Garrett, a Liberty Mutual Insurance Company employee-agent, was a person under that provision, and accordingly subject to suit under section 16 of Article 21.21. We affirm.

I.

In 1986, the president of Garrison Contractors, Inc. contacted Robert Garrett to obtain an insurance quote on the company's workers' compensation, general liability, and automobile liability insurance from Liberty Mutual Insurance Company. Garrett was a Liberty employee-agent whose duties included soliciting and obtaining insurance policy sales for Liberty as well as explaining policy provisions and premium calculations to customers.

After meeting with Garrett, Garrison purchased a three-year, multi-line insurance policy from Liberty. The policy featured a retrospective premium plan, in which a base premium is paid, then adjusted based on actual losses. If losses are less than expected, the insurer refunds part of the base premium. If losses are greater than expected, the insured owes additional premiums. During the policy period, Garrison paid both base premiums and retrospective premiums. When the policy period ended, Liberty billed Garrison $159,371.85 more in retrospective premiums. Garrison refused to pay and Liberty sued to collect the premiums. Garrison counterclaimed against Liberty and filed a third-party claim against Garrett. Claiming that Liberty and Garrett misrepresented the retrospective premium terms, Garrison alleged common-law bad faith, breach of fiduciary duty, DTPA violations, and Insurance Code violations.

The trial court granted Liberty and Garrett's motion for summary judgment on Garrison's counterclaim against Liberty and its third-party claim against Garrett. The trial court also granted Liberty's motion for summary judgment on its sworn account suit against Garrison.

The court of appeals affirmed Liberty's summary judgment, disallowing Garrison's claims for breach of the duty of good faith and fair dealing and breach of fiduciary duty. However, the court of appeals reversed the summary judgment for Liberty and Garrett against Garrison's DTPA and Insurance Code claims. The court of appeals held, in part, that material fact issues remained about the alleged policy misrepresentations, and that Garrison had a cause of action against Garrett individually on both the DTPA and Insurance Code claims. ¹ Finally, the court of appeals reversed the summary judgment on Liberty's sworn account claim because Garrison's summary judgment proof raised a fact issue on whether there was agreement between the parties regarding price due to the alleged misrepresentations.

We granted Liberty and Garrett's application for writ of error primarily to consider whether an insurance company employee is a "person" under section 2(a) of Article 21.21 of the Insurance Code.

II.

Our objective when we construe a statute is to determine and give effect to the Legislature's intent. TEX. GOV'T CODE § 312.005; Mitchell Energy Corp. v. Ashworth, 943 S.W.2d 436, 438 (Tex.1997). We accomplish that purpose, first, by looking to the plain and common meaning of the statute's words. See Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937, 939 (Tex.1993). We must also view a statute's terms in context and give them full effect. See Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex.1994); RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex.1985). A statute's legislative history may also be helpful in divining the Legislature's intent. Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No. 1, 908 S.W.2d 415, 422 (Tex.1995). Finally, we bear in mind the "old law, the evil, and the remedy." TEX. GOV'T CODE 312.005.

The purpose of Article 21.21 "is to regulate trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined." TEX. INS.CODE art. 21.21, § 1(a) (emphasis added). Section 3 of Article 21.21 prohibits any person from engaging in deceptive trade practices in the insurance business, and section 16 provides a private cause of action against a person that engages in an act or practice declared in section 4 of the article to be unfair or deceptive. Id. § 16(a). In addition, the Texas Department of Insurance and the attorney general are authorized to take enforcement actions against any person who engages in deceptive acts or practices. See id. §§ 6, 7, 15.

"Person" means

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.

Id. § 2(a) (emphasis added). Liberty and Garrett contend that the definition only reaches business entities, and not the entities' employees; employees, they contend, do not engage in the business of insurance, but engage in their employer's business. They argue that no purpose is served by including employees like Garrett in the definition of "person" because an insurance company will always be liable for its employees' activities in the course and scope of employment. See Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 98 (Tex.1994) (citing Royal Globe Ins. Co. v. Bar Consultants, 577 S.W.2d 688, 693-94 (Tex.1979)).

We disagree. First, the legislative history of a 1985 amendment to Article 21.21 supports the conclusion that the term "person" is not limited to business entities. In the 1985 session, the Legislature modified section 16 of Article 21.21. That section had formerly provided a cause of action for unfair or deceptive insurance practices "against the company or companies engaging in such acts or practices." Act of May 9, 1973, 63rd Leg., R.S., ch. 143, § 2(c), 1973 Tex. Gen. Laws 322, 338 (amended 1985) (current version at TEX. INS.CODE art. 21.21, § 16) (emphasis added). The Legislature amended section 16 to provide a cause of action against "a person or persons" engaging in unfair or deceptive practices, rather than "a company or companies." Act of March 19, 1985, 69th Leg., R.S., ch. 22, § 3, 1985 Tex. Gen. Laws 395 (current version at TEX. INS.CODE art. 21.21, § 16).

The word "company" is commonly understood to mean "a business enterprise; firm." AMERICAN HERITAGE DICTIONARY 384 (3d ed.1992). Thus, the Legislature's change of the word "company" to the term "person" is highly suggestive: if the Legislature intended the term "person" to have the narrow meaning that Liberty and Garrett would give it, this alteration would have been an empty gesture. The word "company" would have been broad enough to include the business entities that Liberty and Garrett contend are within the statutory definition. But we do not lightly presume that the Legislature may have done a useless act. Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex.1981).

Additionally, we have previously noted that the term "business of insurance" in Article 21.21 is "connected with and used with reference to a particular trade or subject matter." Great American Ins. Co., 908 S.W.2d at 421 (citing TEX. GOV'T CODE § 312.002(b)). Therefore, the Legislature has instructed us to assign the term "the meaning given by experts in the particular trade, subject matter, or art." TEX. GOV'T CODE § 312.002(b). In this case, the Department of Insurance has appeared as an amicus curiae. The Department's expertise in the insurance trade is unquestionable: it was "created to regulate the business of insurance in this state." TEX. INS.CODE art. 1.01A(b). The Department maintains that an insurance company employee may engage in the business of insurance, and therefore, may be a "person" under Article 21.21.

The Department's regulations reflect that position. The Department "is authorized to promulgate ... and enforce reasonable rules and regulations ... necessary in the accomplishment of the purposes" of Article 21.21. TEX. INS.CODE art. 21.21, § 13(a). Exercising that power, the Department has adopted section 21.1 of Title 28 of the Texas Administrative Code. That rule provides:

It is the purpose of these sections to further define and state the standards that are necessary to prohibit deceptive acts or deceptive practices by insurers and insurance agents and other persons in their conduct of the business of insurance...irrespective of whether the person is acting as insurer, principal, agent, employer, or employee, or in other capacity or connection with such insurer.

28 TEX. ADMIN. CODE § 21.1 (West 1997) (emphasis added).

Liberty and Garrett maintain that some individuals, such as independent agents and brokers, are "persons" under Article 21.21, while individuals who are employed by insurance companies are not. If we were to accept that view, however, it would create anomalous results. An independent agent would be subject to suit under section 16 of Article 21.21 (and to enforcement action under sections 7 and 15) for misrepresenting a policy's terms, while an employee-agent would not. That result is contrary to the Legislature's intent to comprehensively regulate and...