Service Finance v. Adriatic Ins. Co.
| Decision Date | 02 May 2001 |
| Docket Number | No. 10-99-027-CV,10-99-027-CV |
| Parties | (Tex.App.-Waco 2001) SERVICE FINANCE, Appellant v. ADRIATIC INSURANCE COMPANY, ET AL., Appellees |
| Court | Texas Court of Appeals |
Before Chief Justice Davis, Justice Vance, and Justice Gray
Service Finance filed suit against Adriatic Insurance Company and its surplus lines agent American Recreational Markets, Inc. (collectively, "Appellees") to recover unearned premiums and premium receipts taxes on three cancelled insurance policies for which Service Finance had provided premium financing. Service Finance alleges breach of express or implied contract and violation of article 24.17 of the Insurance Code. Service Finance also seeks a declaration of Appellees' liability under the Uniform Declaratory Judgments Act. The parties tried the matter before the court, which rendered judgment that Service Finance take nothing by its suit.
Service Finance presents eleven issues on appeal. In several of these issues, Service Finance contends that it established as a matter of law that:
it provided notice to Adriatic of its premium finance agreements on all of the policies at issue;
Appellees violated article 24.17 of the Insurance Code;
it had contracts with Appellees;
the policyholders in this case had contracts with Appellee American Recreational Markets ("ARM");
all conditions precedent to any refund under the policies had been satisfied;
Appellees breached their contractual duties to refund the unearned premiums due under the policies; and
it is entitled to prejudgment interest and attorney's fees.
In most of these issues, Service Finance also contends that the court's findings to the contrary are against the great weight and preponderance of the evidence.
In other issues, Service Finance contends that the court erred in concluding: that Adriatic had no obligation to directly refund any unearned premiums; that article 24.17 of the Insurance Code does not create a separate cause of action; that the lack of an express contract between ARM and the policyholders is irrelevant because ARM was Adriatic's agent; that the two-year statute of limitations applies to a suit for a refund of unearned premiums; and that this is a conversion case rather than a breach-of-contract case.
Adriatic is a Louisiana insurance company not licensed to sell insurance in Texas. Adriatic sells insurance policies in Texas through surplus lines agents such as Appellee American Recreational Markets ("ARM"). During the pertinent time period, George and Brenda Brown operated an unincorporated premium finance company under the name Service Finance.
On September 26, 1985, Leonard Wallsten applied with Colonial Insurance Agency for the purchase of an Adriatic policy through Capitol of Texas Surplus Lines ("COT"). Service Finance provided financing for the premiums. Wallsten's premium finance agreement gives Service Finance "a security interest in unearned premiums and loss payments on the insurance policy being purchased." It also contains the following power of attorney:
POWER OF ATTORNEY--NOTICE TO INSURER
This is to inform you and to certify that the premium for this policy(ies) has been financed and to further state that in recognition of the several possibilities which might cause my inability or failure to pay any insurance premium installment when due, I do irrevocably make, constitute, and appoint SERVICE FINANCE, 3333 NORTH 19TH STREET, P.O. BOX 5398, WACO, TEXAS 76708 (hereinafter called LENDER) and its assigns my true and lawful attorney for me to cancel and collect all return premiums on the above listed insurance policy(ies); and Lender and its assigns is further authorized and empowered to execute all necessary written instruments, lost policy releases, and notices in connection therewith and to do whatever is necessary in the cancellation of such policy(ies).
Service Finance received the finance agreement from Colonial on October 8 and sent a $1,275.00 check to COT on October 10 to pay the premiums and taxes for the Wallsten policy. COT forwarded these payments and Wallsten's policy application to ARM.
Service Finance sent a cancellation notice to Colonial and COT "effective" January 13, 1986 advising that Wallsten was delinquent on his premium installments and asking that his policy be cancelled in accordance with the power of attorney contained in the premium finance agreement. Adriatic issued a notice of cancellation on April 25 showing May 7 to be the effective date of cancellation. ARM sent a copy of this notice to Service Finance together with a refund worksheet indicating the pro rata and short-rate refunds which would apply to the Wallsten policy. The worksheet indicates the pro rata refund to be $783.02 and the short-rate refund to be $624.13.1
Adriatic credited ARM's account current with $754.00 due to the cancellation.2 ARM issued a refund check in the amount of $603.20 to Service Finance on May 30.3 Service Finance corresponded with ARM and Adriatic on several occasions thereafter asserting that it was entitled to an additional refund. Service Finance contends that it is entitled to the pro rata refund of $783.02 rather than the $603.20 refund which it received.
On November 15, 1985, J. R. Davis signed a premium finance agreement identical to Wallsten's with Hargrave Insurance Agency. The total premium on this policy was $9,128.42, of which Davis financed $5,978.00. The agreement grants the same security interest and power of attorney to Service Finance. Service Finance received the Davis agreement on December 9 and sent a $5,978.00 check to COT for premiums and taxes on that same date.
Davis signed a second premium finance agreement with Hargrave on December 9. This contract has terms identical to those in the agreements described above. Davis financed $5,539.00 of his total premium of $8,217.65 in this contract. Service Finance received the December 9 contract on December 30 and sent a $5,539.00 check to COT for premiums and taxes on that same date.
Adriatic sent a cancellation notice to Davis and COT on January 26, 1986 cancelling Adriatic policy number CX00868 effective February 9. Brenda Brown testified that Service Finance received a copy of this notice on March 6. This notice contains a refund worksheet indicating a pro rata refund of $12,498.34 and a short rate refund of $10,650.85.4
Service Finance sent a cancellation notice to Hargrave, COT, ARM, and Adriatic "effective" April 4 informing them that Davis was delinquent on his premium installments under the December 9 contract and requesting cancellation of policy number CX00868. Service Finance sent a second cancellation notice to Hargrave, COT, ARM, and Adriatic "effective" April 11 informing them that Davis was delinquent on his premium installments under the November 15 contract and again requesting cancellation of policy number CX00868.5
Service Finance sent letters to ARM on April 17, 1986 and to Adriatic on January 6, 1987 requesting a cancellation refund on the Davis contracts. Adriatic returned the unearned premiums by crediting ARM's account current with $12,035.00. ARM has not refunded any of this money to Service Finance, which contends that it is entitled to the pro rata refund of $12,498.34.
Eddie Blanchard signed an identical premium finance contract with insurance agent Carl D. Baker on February 24, 1986. Like the other contracts, Blanchard's gives Service Finance a security interest in unearned premiums and a power of attorney. Service Finance received the Blanchard contract on March 6 and sent a $310.00 check directly to Adriatic for premiums and taxes on the same date with notice of the premium finance contract. Adriatic returned the check and informed Service Finance that it should remit payment to ARM, which it did on March 26.
Service Finance sent a cancellation notice to Baker and Adriatic "effective" July 11, 1986 informing them that Blanchard was delinquent on his premium installments and requesting cancellation of the policy. Adriatic issued a notice of cancellation on July 28 showing August 9 to be the effective date of cancellation. ARM sent Service Finance a $198.00 refund check dated August 29. Service Finance notified Adriatic and ARM by letter dated October 6 that it believed the premium refund was calculated incorrectly and asked that they provide their "figures" for determining the amount of the refund. Adriatic responded in an October 14 letter that the short-rate refund of $198.00 "plus applicable taxes" was applicable to the Blanchard policy. Adriatic included a refund worksheet indicating a pro rata refund of $254.43 and a short-rate refund of $205.62.6 Service Finance contends that it is entitled to a refund of the $7.62 in unearned premium receipts taxes in addition to the $198.00 refund it has already received.
On an appeal from a judgment rendered in a bench trial, we review the court's findings of fact in the same manner as jury findings. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Lucas v. Texas Dep't of Protective & Regulatory Servs., 949 S.W.2d 500, 502 (Tex. App.--Waco 1997, pet. denied). When an appellant asserts that there is no evidence to support an adverse finding on which the appellant had the burden of proof, we construe the issue as an assertion that the contrary was established as a matter of law. See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989); La Grange v. Nueces County, 989 S.W.2d 96, 99-100 (Tex. App.--Corpus Christi 1999, pet. denied); Ex parte Thomas, 956 S.W.2d 782, 786 n.5 (Tex. App.--Waco 1997, no pet.). We first search the record for evidence favorable to...
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