Nationwide Mut. Ins. Co. v. Crowe

Decision Date27 May 1993
Docket NumberNo. A14-92-01270-CV,A14-92-01270-CV
Citation857 S.W.2d 644
PartiesNATIONWIDE MUTUAL INSURANCE COMPANY, Appellant, v. Bessie CROWE, Individually and as Next Friend of John Louis Crowe, Appellees. (14th Dist.)
CourtTexas Court of Appeals

Jeffery Lee Hoffman, Cynthia Keely Timms, Houston, for appellant.

Robert B. Langston, Houston, for appellees.

Before J. CURTISS BROWN, C.J., and ELLIS and LEE, JJ.

OPINION

J. CURTISS BROWN, Chief Justice.

This is a bad faith insurance case. Appellees, Bessie Crowe and her minor son, John Louis, filed this suit alleging that appellant, Nationwide Mutual Insurance Company (Nationwide) was negligent and breached its duty of good faith and fair dealing in failing to pay workers compensation death benefits. A jury found in favor of appellees and awarded each appellee $10,000.00 in actual damages. The jury also found that Nationwide acted with conscious indifference to the rights of appellees and awarded each appellee $500,000.00 in punitive damages. Nationwide appeals, raising nine points of error. We affirm.

John Wayne Crowe worked as a plumber for Chaparral Plumbing. On October 22, 1988, Mr. Crowe suffered a heart attack while installing a water heater at a job site. He was taken to Spring Branch Hospital where he underwent emergency heart surgery and died that day. Mr. Crowe was survived by his wife, Bessie, and his son, John Louis. Nationwide's adjustor, Deborah Tanksley, learned of Mr. Crowe's death on October 25, 1988, when she contacted the policy holder, Chaparral. Nationwide received the Employer's First Report of Injury or Illness (E-1) no later than October 31, 1988. On January 12, 1989, seventy-three days after receiving the E-1, Nationwide formally denied appellees' claim for workers compensation death benefits. Nationwide's denial was based solely on Mr. Crowe's death certificate. The notice of controversion stated that there was no evidence that Mr. Crowe's death was in the course of his employment and that Nationwide was continuing its investigation.

In its first point of error, Nationwide contends there is no evidence to support the submission of jury question two regarding proximate cause. Nationwide's point of error is moot and not a proper subject for appeal because no judgment was rendered on the jury's answer to question two. Jury questions one and two asked whether Nationwide was negligent in timely failing to either pay benefits or controvert the claim and whether that negligence proximately caused appellees' mental anguish. See TEX.REV.CIV.STAT.ANN. art. 8306 § 18a(a) (Vernon Supp.1990), repealed by Act of January 1, 1991, 71st Leg., 2nd C.S., ch. 1, § 16.01(7), 1991 Tex.Gen.Laws 1, 114. The jury found in favor of appellees on both questions. In their Motion To Disregard Certain Findings On Jury Questions & Amended Motion For Judgment On The Verdict, appellees requested the trial court to disregard the jury's answers to questions one and two and to enter judgment on the jury's findings with respect to the breach of good faith and fair dealing. The trial court's final judgment recites that appellees' motion was granted and awards recovery to appellees only on the bad faith and exemplary damages findings in questions three, four, five, six, and eight. Thus, Nationwide's complaint about question two does not support grounds for reversal of the judgment. See Ponton v. Munro, 818 S.W.2d 865, 867 (Tex.App.--Corpus Christi 1991, no writ). We overrule point of error one.

In its second point of error, Nationwide contends that the trial court erred in overruling its motion for directed verdict because there was no breach of the duty of good faith and fair dealing as a matter of law. Texas law recognizes the duty of an insurer to deal fairly and in good faith with its insured in the processing and payment of claims. Arnold v. Nat'l County Mutual Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987). That duty applies in the workers compensation context. Aranda v. Ins. Co. of North America, 748 S.W.2d 210, 212-13 (Tex.1988). A workers compensation claimant who asserts that a carrier has breached the duty of good faith and fair dealing by refusing to pay or delaying payment of a claim must establish: (1) the absence of a reasonable basis for denying or delaying payment of the benefits of the policy, or in other words, that a reasonable insurer under similar circumstances would not have delayed or denied the claimant's benefits, and (2) that the carrier actually knew, or based on its duty to investigate, should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim. See Id. at 213 (emphasis in original). A carrier maintains the right to deny invalid or questionable claims and is not subject to liability for an erroneous denial of a claim. Id. Whether there is a reasonable basis for denial is judged by the facts before the insurer at the time the claim is denied. Viles v. Security Nat'l Ins. Co., 788 S.W.2d 566, 567 (Tex.1990).

Nationwide first contends that the Industrial Accident Board's (IAB) denial of appellees' claim based on the hearing examiner's finding that Mr. Crowe's death was not in the course of employment conclusively establishes that Nationwide's denial was reasonable. In support of its contention, Nationwide points out that the trial court "expressly found" in admitting the Award of the Board that the information presented to the IAB was "virtually identical" to the information upon which Nationwide based its denial. While the trial court stated that the hearing examiner's files and Nationwide's files were "substantially identical" as of the time of the denial, it also stated that the hearing examiner's findings as contained in the Award of the Board was only "some evidence" of whether the denial was reasonable. There is nothing in the record to reflect what was contained in the IAB's file or what the hearing examiner considered in denying appellees' claim. In the absence of such evidence, we cannot say that the trial court incorrectly concluded that the IAB's findings were not conclusive. Moreover, the hearing examiner's determination was made post-denial and, thus, its probative value, if any, was limited. See Id.

Nationwide also contends that the death certificate was a reasonable basis for denying appellees' claim as a matter of law. A dispute about whether there was any reasonable basis to support the denial of a claim is an issue for the jury. See State Farm Lloyds v. Polasek, 847 S.W.2d 279, 284 (Tex.App.--San Antonio 1992, n.w.h.) 1 ; see also Nat'l Union Fire Ins. v Dominguez, 793 S.W.2d 66, 70 (Tex.App.--El Paso 1990, writ granted). Here, there is conflicting evidence about whether the death certificate alone was a reasonable basis for denying appellees' claim. The death certificate listed the immediate cause of death as: (1) cardiogenic shock due to, or as a consequence of, (2) massive myocardial infarction due to, or as a consequence of, (3) severe coronary artery disease. Nationwide's own district claims manager, Steven Dansevich, testified that it was not proper procedure in most cases to deny a claim solely on the basis of information in a death certificate. Appellees' experts testified that the death certificate standing alone was not a reasonable basis for denying the claim. Nationwide's expert and Ms. Tanksley's supervisor both testified to the contrary. Nationwide points out that the death certificate did not specify whether Mr. Crowe suffered an "injury at work" even though there was a space provided for such a designation. Nationwide contends that the omission meant that Mr. Crowe's treating physicians determined that his death was not work-related. Even if the death certificate had specified an "injury at work," it would not have shed additional light on facts already known to Ms. Tanksley or on the critical issue of whether Mr. Crowe's on-the-job activities might have been a contributing cause of his death. That determination required at least some investigation. At the time of denial, Ms. Tanksley knew that: (1) Mr. Crowe suffered a heart attack on the job while installing a water heater in an attic; (2) he left a wife and a young child; (3) he was taken to Spring Branch Hospital where he died after emergency surgery; (4) Dr. Levine and Dr. Mandviwala were treating physicians; and (5) there were two friends or relatives, Oscar Calhoun and Haddie Smith, who witnessed the incident. Ms. Tanksley did not investigate any of these facts or sources of information. A directed verdict is improper if there is any evidence of probative value which raises a material fact issue. Qantel Business Sys. v. Custom Controls, 761 S.W.2d 302, 303 (Tex.1988). There was more than enough evidence to support submission of the bad faith issue to the jury and the trial court properly overruled Nationwide's motion for directed verdict. We overrule point of error two.

In its third, fourth, and fifth points of error, Nationwide contends that the evidence is legally and factually insufficient to support the jury's finding that Nationwide acted with conscious indifference. Exemplary damages are recoverable against an insurance company for a breach of its duty of good faith and fair dealing under the same principles allowing recovery of those damages in other tort actions. Arnold, 725 S.W.2d 168 (citing Trenholm v. Ratcliff, 646 S.W.2d 927, 933 (Tex.1983)). A breach of the duty of good faith and fair dealing in itself is insufficient to support a finding of exemplary damages. Nat'l Fire Ins. v. Valero Energy Corp., 777 S.W.2d 501, 511 (Tex.App.--Corpus Christi 1989, writ denied). To award exemplary damages, the jury must find that the insurance company acted with conscious indifference. Aetna Casualty and Sur. Co. v. Joseph, 769 S.W.2d 603, 607 (Tex.App.--Dallas 1989, no writ). That is, the jury must find that the insurance company acted with "that...

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