National County Mut. Fire Ins. Co. v. Johnson
| Citation | 829 S.W.2d 322 |
| Decision Date | 08 April 1992 |
| Docket Number | No. 3-90-212-CV,3-90-212-CV |
| Parties | NATIONAL COUNTY MUTUAL FIRE INSURANCE COMPANY and Consumers County Mutual Insurance Company, Appellants, v. Randall JOHNSON, Appellee. |
| Court | Court of Appeals of Texas |
James Ludlum, Jr., Austin, for appellants.
Tom Davis, Austin, for appellee.
Before POWERS, JONES and SMITH, JJ.
Does a family-member exclusion in an automobile insurance policy contravene the public policy set forth in the Texas Safety Responsibility Act, 1 which requires liability insurance coverage for all damages that may arise out of the operation of a motor vehicle? In a declaratory action suit, the trial court answered "yes." We agree and will affirm the trial court's judgment.
In 1988, Randall Johnson was driving his Ford LTD when he struck another automobile from the rear. Johnson's wife was riding with him and was injured in the collision. Some months later, Mrs. Johnson filed suit against her husband, alleging that his negligence caused her injuries. Mr. Johnson forwarded the petition and citation to his insurance company, National County Mutual Fire Insurance Company ("National County"), with a demand for a full and unconditional defense to the suit.
National County rebuffed that demand and informed Johnson that it would not unconditionally defend him. Rather, its defense would be subject to a reservation of its rights to deny coverage and payment of any judgment rendered against him. National County argued that "Endorsement 575," a family-member exclusion in its policy, worked to deny coverage for this particular claim. 2
Notwithstanding the exclusionary clause in his insurance contract, Johnson advised National County that he would not accept any reservation of its rights and repeated his demand for a full and unconditional defense. He demanded coverage and defense because (1) the Safety Responsibility Act requires that an owner's automobile liability policy pay "all sums which the insured shall become legally obligated to pay," and (2) abrogation of interspousal immunity in Texas made him potentially liable to his wife. Johnson then filed a declaratory judgment action, requesting the district court to declare the rights and legal relations arising between the parties as a result of the insurance policy. National County filed its counterclaim for declaratory relief, asking the court to determine whether Endorsement 575 is valid under Texas law.
The trial court found the family-member exclusion invalid. It declared that Endorsement 575(1) conflicts with the Safety Responsibility Act; (2) enjoys no rational justification supporting its adoption by the State Board of Insurance; (3) contravenes the public policy of the State of Texas; and (4) does not in any way serve the interests of the people of Texas. Accordingly, the trial court rendered judgment for Johnson and decreed that National County was liable for his coverage and defense under the policy.
National County appeals, bringing six points of error attacking: (1) the court's exercise of subject matter jurisdiction; (2) the court's failure to join the Insurance Board as a party; (3) the court's finding that the exclusion does not serve the public policy of the State of Texas or the interests of its citizens; and (4) the court's award of attorney's fees.
Jurisdiction. In its first point of error, National County challenges the court's exercise of subject-matter jurisdiction in declaring the rights of the parties under the insurance contract. National County asserts that Johnson was required to pursue administrative relief before the State Board of Insurance ("the Board"), which enacted Endorsement 575, before challenging the validity of this exclusion in a declaratory judgment action. We find this argument unpersuasive.
An interested party under a written contract whose rights and legal relations are at issue may solicit the court to resolve questions of construction or validity arising under the contract. Tex.Civ.Prac. & Rem.Code Ann. § 37.004(a) (1986). Whether an insurer has a duty to defend presents a justiciable question suitable for a declaratory judgment action. See, e.g., Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 332 (Tex.1968); Colony Ins. Co. v. H.R.K., Inc., 728 S.W.2d 848, 852 (Tex.App.1987, no writ). Johnson brought suit to determine that very issue. The trial court properly exercised jurisdiction to determine whether National County had a duty to provide a defense under the policy.
National County directs us to article 5.11 of the Texas Insurance Code, which states, "Any policyholder ... shall have the right to a hearing before the Board on any grievance occasioned by the approval or disapproval by the Board of any ... endorsement." Tex.Ins.Code Ann. art. 5.11(a) (1981 & Supp.1992). National County reads article 5.11 to require that Johnson seek a hearing from the Board before proceeding with a declaratory action. We do not. In McDonel v. Agan, 353 S.W.2d 485 (Tex.Civ.App.1962, writ dism'd), we held that article 5.11 does not vest the Board of Insurance with jurisdiction over disputes between third parties arising from the enforcement or application of the rules and regulations of the Board. Id. at 488. We rejected the claim that article 5.11 gives the policyholder the right to a hearing before the Board on any dispute that arises over an endorsement established under the terms of the insurance contract:
The statute contains no language intimating that the Board is vested with jurisdiction of disputes between third parties arising from the enforcement or application of the rules and regulations of the Board.
Our understanding of article 5.11 has not changed. Johnson is not challenging the Board's action in approving the endorsement. Rather, he is complaining of his insurer's refusal to defend him because of the policy exclusion. A declaratory judgment action was a proper method for determining Johnson's legal rights under the insurance contract. We overrule National County's first point of error.
Necessary Party. In its second point of error, National County claims that Johnson erred by failing to join the Board as a necessary party to the litigation. Having held that the Board has no jurisdiction over third party disputes arising from enforcement of the Board's rules, we decline to hold that the Board is a "necessary" party. In any event, National County did not raise this issue at trial and thus failed to preserve the point for review on appeal. Tex.R.App.P.Ann. 52(a) (Pamph.1992). The second point of error is overruled.
Public Policy. National County argues that family-member exclusions are permissible and do not violate the public policy underlying the Safety Responsibility Act. In its third, fourth and fifth points of error, National County asserts that the trial court erred in holding that Endorsement 575 violates Texas public policy as set forth in the Act.
The Safety Responsibility Act requires all operators of motor vehicles in Texas to carry liability insurance that "shall pay on behalf of the insured ... all sums which the insured shall become legally obligated to pay as damages arising out of the ownership, maintenance or use of [a] motor Because there is no legislative history, the language of the Act becomes our guide. See Seay v. Hall, 677 S.W.2d 19, 25 (Tex.1984) (). The terms of the Act strongly suggest that its primary purpose is to mandate compulsory liability insurance coverage for any damages an insured may incur "arising out of the ownership, maintenance or use of [a] motor vehicle."
vehicle." 3 (Emphasis added). To determine whether National County's 4 family-member exclusion is inconsistent with this statute, we must first examine the public policy underlying the Act in general and section 21(b) in particular
Because Texas has abolished intrafamily tort immunity in certain cases and interspousal tort immunity in all cases, an individual may become liable to a family member for damages arising from his or her negligence. See Jilani v. Jilani, 767 S.W.2d 671 (Tex.1988) (); Price v. Price, 732 S.W.2d 316 (Tex.1987). We hold the comprehensive language of the Safety Responsibility Act, encompassing "all sums which the insured shall become legally obligated to pay," requires mandatory liability insurance to cover this potential liability. By excluding coverage for an insured's family members, Endorsement 575 violates the plain mandate of the Act.
"When the legislature specifies a particular extent of insurance coverage, any attempt to void or narrow such coverage is improper and ineffective." Uniguard Sec. Ins. Co. v. Schaefer, 572 S.W.2d 303, 307 (Tex.1978) (citing Westchester Fire Ins. Co. v. Tucker, 512 S.W.2d 679 (Tex.1974)). Past attempts by the State Board of Insurance to narrow a legislatively prescribed scope of coverage have been invalidated. See, e.g., Stracener v. United Serv. Auto. Ass'n, 777 S.W.2d 378, 384 (Tex.1989); American Liberty Ins. Co. v. Ranzau, 481 S.W.2d 793, 797 (Tex.1972). Endorsement 575 represents a similar attempt by the Board to narrow coverage and is therefore invalid.
Despite the Act's clear mandate to cover "all sums which the insured shall become legally obligated to pay," National County argues that an insurer should be able to exclude family members because nothing in the Act expressly prohibits a family-member exclusion in an insurance contract. We disagree. First, the Legislature expressly authorized two exceptions to coverage in section 21(e); family members is not one of them. We presume that if the Texas Legislature had intended to exclude family members from required liability coverage, it could have done so. We refuse to insert an exclusion not...
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