Republic Western Ins. Co. v. State

• Citation: 985 S.W.2d 698
• Decision Date: 04 March 1999
• Docket Number: No. 03-98-00235-CV,U-H,03-98-00235-CV
• Parties: REPUBLIC WESTERN INSURANCE COMPANY;aul Co. of Texas, Inc.; andaul International, Inc., Appellants, v. STATE of Texas and Dan Morales, Attorney General, Individually and in his Official Capacity, Appellees.
• Court: Court of Appeals of Texas

Page 698

985 S.W.2d 698

REPUBLIC WESTERN INSURANCE COMPANY; U-Haul Co. of Texas Inc.; and U-Haul International, Inc., Appellants, v. STATE of Texas and Dan Morales, Attorney General Individually and in his Official Capacity, Appellees.

No. 03-98-00235-CV

Court of Appeals of Texas Austin.

March 4, 1999.

Michael Klein, Fulbright & Jaworski, L.L.P., Austin, for Appellants.

John M. Hohengarten, Asst. Atty. Gen., Finacial Litigation Division, Austin, for Appellees.

Before Justices JONES, B.A. SMITH and YEAKEL.

BEA ANN SMITH, Justice.

This is an interlocutory appeal from an order granting a temporary injunction. Appellants U-Haul of Texas, Inc. ("U-Haul") and Republic Western Insurance Company brought a declaratory judgment action against appellees, the State of Texas and Dan Morales, Attorney General, individually and in his official capacity (collectively "the State"). Appellants sought a declaration that they were not acting in violation of article 1.14-1 of the Texas Insurance Code by offering various moving-related insurance packages to U-Haul's customers. The State counterclaimed against U-Haul and Republic Western and filed a third-party action against appellant U-Haul International, Inc. ("UHI"), seeking to enjoin U-Haul's practice of selling these packages to its customers. The trial court issued a temporary injunction against appellants, who now seek review of that order. We will affirm the trial court's order.

FACTUAL AND PROCEDURAL BACKGROUND

Since 1962, U-Haul of Texas has been in the business of renting self-moving equipment, including cargo trucks, trailers, and trailer hitches, as well as self-storage space. U-Haul offers its rental customers three "Safe Protection" insurance packages: "Safemove," "Safetow," and "Safestor." These packages apply respectively to the rental of moving equipment, towing equipment, and storage spaces. Safemove and Safetow consist of a collision damage waiver ("CDW") ¹ and limited additional-insured protection for cargo damage, ² medical expense, and accidental death. ³ Safestor provides additional- The insurance component for all three products is underwritten by appellant Republic Western, an insurance company licensed and authorized to write insurance in Texas. ⁵ For many years, Republic Western has issued a master insurance policy to U-Haul, allowing U-Haul to add its customers as additional insureds. When a U-Haul customer decides to purchase insurance, she initials the rental contract set out on the back of the rental agreement and pays U-Haul the applicable premium. The customer's payment goes solely to Republic Western. UHI assists U-Haul in marketing the packages to U-Haul's customers by providing counter-top writing mats and brochures that are displayed at all U-Haul centers.

insured protection against various dangers posed to items while stored in U-Haul storage facilities. ⁴

After investigating U-Haul and Republic Western in July 1997, the Attorney General's office sent a letter demanding that U-Haul representatives "with settlement authority" appear at a meeting with personnel from the Attorney General's office and the Texas Department of Insurance to "resolve matters of potential litigation involving trade and insurance practices in Texas." The parties met but were unable to reach a settlement. Later, the Attorney General's office issued separate Civil Investigative Demands ("CIDs") to U-Haul and Republic Western. Those appellants responded by filing a declaratory judgment action against the State, requesting a declaration that their activities did not violate the Insurance Code. The State counterclaimed, seeking a temporary injunction against U-Haul and Republic Western and adding a third party action against UHI.

Following the hearing on the State's application for a temporary injunction, the trial court found that U-Haul, UHI, and Republic Western were each engaged in the unauthorized business of insurance in violation of article 1.14-1 of the Texas Insurance Code. Tex. Ins.Code Ann. art. 1.14-1 (West Supp.1999). The trial court further determined that U-Haul was acting as an unlicensed local recording agent for Republic Western in violation of article 21.14 of the Insurance Code. Id. art. 21.14. Pursuant to authority granted by article 1.14-1, ⁶ the court issued an order enjoining U-Haul and UHI from, inter alia, advertising or selling Safemove, Safetow, Safestor or any other insurance products. This Court subsequently granted appellants' Emergency Motion to Stay Temporary Injunction. See Republic Western Ins. Co. v. State, No. 3-98-235-CV (Tex.App.--Austin May 15, 1998) (written order not designated for publication).

Appellants challenge the temporary injunction by raising four issues on appeal. First, they assert that by selling the additional-insured protection packages, U-Haul and Republic Western are not engaged in the "unauthorized business of insurance" prohibited by article 1.14-1 of the Insurance Code. Second, they argue that U-Haul is not acting as an unlicensed local recording agent for Republic Western under article 21.14 of the Insurance Code. Third, appellants claim that the State is not entitled to a temporary injunction under either article 1.14-1 or article 21.14. Finally, appellants allege that the order granting the State injunctive relief is void because it is vague, overly broad, and lacks specific findings to support it.

DISCUSSION

Ordinarily, the "abuse of discretion" standard of review applies to a trial court's order granting or denying a temporary injunction. See 2300, Inc. v. City of Arlington, 888 S.W.2d 123, 126 (Tex.App.--Fort Worth 1994, no writ); Valenzuela v. Aquino, 763 S.W.2d 43, 44 (Tex.App.--Corpus Christi 1988, no writ). In the instant case, however, the legislature has specified that the trial

                court is required to order injunctive relief, if requested, upon determining that a party has violated article 1.14-1.   See Tex.  Ins.Code Ann. art. 1.14-1, § 3(f) (West Supp.1999) ("On application for injunctive relief and a finding that a person is violating or threatening to violate any provision of this Article, the district court shall grant the injunctive relief and the injunction shall be issued without bond.").  Because the mandatory language of section 3(f) appears to remove the trial court's discretion in determining whether injunctive relief is proper, the issue is whether appellants' conduct violates article 1.14-1.  We will apply a de novo standard of review to this pure question of law.  See State Farm Lloyds v. Kessler, 932 S.W.2d 732, 735 (Tex.App.--Fort Worth 1996, writ denied)
                

Unauthorized Insurance Business

The heart of the present dispute is whether U-Haul violates article 1.14-1 of the Insurance Code by offering the "Safe Protection" packages to its rental customers. We begin by examining the text of the statute. Section 3(b) of article 1.14-1 states: "No person or insurer shall directly or indirectly do any of the acts of an insurance business set forth in this Article except as provided by and in accordance with the specific authorization of statute." Tex. Ins.Code Ann. art. 1.14-1, § 3(b) (West Supp.1999). Section 2(a) includes the following acts within the meaning of "doing an insurance business":

1. The making of or proposing to make, as an insurer, an insurance contract.

...

4. The receiving or collection of any premium ... or other consideration for any insurance or any part thereof.

5. The issuance or delivery of contracts of insurance to residents of this state or to persons authorized to do business in this state.

6. Directly or indirectly acting as an agent for or otherwise representing or aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, ... or delivery of policies or contracts, ... or in any other manner representing or assisting a person or insurer in the transaction of insurance with respect to subjects of insurance resident, located or to be performed in this state.

Id. art. 1.14-1, § 2(a).

Appellants urge that article 1.14-1 does not apply to their conduct, arguing that the statute was enacted solely to ensure that personal jurisdiction can be validly asserted against out-of-state insurers that defraud Texas residents through mail-order solicitations. They claim that while U-Haul may have been acting as an "unauthorized insurance agent" as defined by article 21.02, the State is attempting to make U-Haul's activities fit under article 1.14-1 solely to take advantage of that section's relatively severe penalty provisions, which were added by amendment in 1985: ⁷ up to $10,000 for each violation and for each day of violation under article 1.14-1, compared with a single penalty of between $500 and $1000 for violating article 21.02. Tex. Ins.Code Ann. art. 1.14-1, § 3(d), art. 21.02-1 (West Supp.1999). Appellants assert that the State attempts to turn article 1.14-1 into a "nuclear weapon" by applying its threat of heavy penalties in a way the legislature never intended. The State responds that the plain language of article 1.14-1 makes the statute applicable to appellants' conduct, and argues that its broad provisions indicate that the legislature intended a wider interpretation than appellants acknowledge.

The parties dispute the standard of statutory construction applicable to this case. Our objective when we construe a statute is to determine and give effect to the legislature's intent. See Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex.1998) (citing Tex. Gov't Code Ann. § 312.005 (West Supp.1999), and Mitchell Energy Corp. v. Ashworth, 943 S.W.2d 436 The State claims that U-Haul's acts of soliciting rental customers to purchase insurance and collecting premiums for Republic Western violate subsections 1, 4, 5, and 6. We agree. U-Haul collects insurance premiums and...