Simpson v. GEICO General Ins. Co., 01-94-00977-CV

Decision Date05 October 1995
Docket NumberNo. 01-94-00977-CV,01-94-00977-CV
Citation907 S.W.2d 942
PartiesDavid SIMPSON, Appellant, v. GEICO GENERAL INSURANCE COMPANY, Appellee. (1st Dist.)
CourtTexas Court of Appeals

Scott A. Woods and Mark W. Long, Houston, for Appellant.

James F. Keegan, Houston, for Appellee.

Before TAFT, COHEN and MIRABAL, JJ.

OPINION

TAFT, Justice.

Appellant, David W. Simpson, appeals from a take-nothing summary judgment granted in favor of appellee, GEICO General Insurance Company (GEICO). Simpson sued GEICO, his uninsured-underinsured motorist carrier, for injuries sustained in an accident. GEICO declined coverage because, even though Simpson obtained GEICO's permission to settle with the uninsured-underinsured motorist tortfeasor, Simpson did not obtain GEICO's permission before settling his claim against non-motorist tortfeasors. This appeal involves interpretation of statutory subrogation rights, the "settlement-without-consent" exclusion, and the "right-to-recover-payment" clause of an automobile insurance policy.

Summary of Facts

On October 30, 1990, Simpson was a passenger in Shane Hecker's automobile when it collided with Janet Klumb's car. Simpson sued Klumb for personal injuries sustained in the accident. Simpson also sued T.L. James & Company (James) and Safety Lights Sales and Leasing (Safety Lights) for negligent manufacture and maintenance of barricades at a construction area near the accident site. Klumb, James, and Simpson were insured. 1

Simpson settled his personal injury claim against Klumb, with GEICO's permission, for $50,000. However, GEICO did not receive notice of and did not consent to Simpson's $4,000 settlement with James or Simpson's $1,500 settlement with Safety Lights.

Simpson sued GEICO, his own insurer, after it denied his request for underinsured motorist coverage. GEICO moved for summary judgment on the basis that Simpson failed to comply with the settlement-without-consent exclusion, right-to-recover-payment clause, and recoupment clause of TEX.INS.CODE ANN. art. 5.06-1 (Vernon 1981 & Supp.1995). Without stating reasons, the trial court granted the summary judgment. Simpson filed a motion for new trial, arguing that recent Texas supreme court authority required GEICO to prove prejudice when asserting the settlement-without-consent exclusion. The court denied his motion.

Point of Error

In a single point of error, Simpson complains the trial court erred in granting summary judgment in favor of GEICO because he complied with the terms and conditions of his insurance policy. He specifically argues that (1) consent is required only for settlements with the uninsured or underinsured motorist, not for other tortfeasors; (2) subrogation rights of the insurer are only against uninsured or underinsured motorists, not other tortfeasors; (3) GEICO failed to prove prejudice; and (4) the right-to-recover payment clause is ambiguous.

Standard of Review

A defendant is entitled to summary judgment when the summary judgment proof establishes, as a matter of law, that there is no genuine issue of material fact about one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970). If a defendant moves for summary judgment based on an affirmative defense, the defendant must establish that there is no genuine issue of material fact as to each element of the defense and that the defendant is entitled to summary judgment as a matter of law. City of Houston v. Clear Creek Basin, 589 S.W.2d 671, 678 (Tex.1979).

When a trial court's order does not specify the grounds relied upon for its ruling, the summary judgment may be affirmed on any meritorious theory advanced in the motion. Insurance Co. of N. Am. v. Security Ins. Co., 790 S.W.2d 407, 410 (Tex.App.--Houston [1st Dist.] 1990, no writ). On appeal, this Court must view the evidence in the light most favorable to the nonmovant and resolve all doubts in the nonmovant's favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

In interpreting an insurance policy, we construe all parts of the document together, giving effect to the intent of the parties. Gaulden v. Johnson, 801 S.W.2d 561, 563 (Tex.App.--Dallas 1990, writ denied). A contract is ambiguous only when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). We must interpret insurance policies liberally in favor of the insured, especially when dealing with exceptions and limitations. Kelly Assocs., Ltd. v. Aetna Casualty & Sur. Co., 681 S.W.2d 593, 596 (Tex.1984).

The determination of whether terms are ambiguous is a question of law. Gaulden, 801 S.W.2d at 564. Once the document is found to be ambiguous, the interpretation of the document is a question of fact. Coker, 650 S.W.2d at 394-95. Thus, when an instrument contains an ambiguity, summary judgment is improper. Id. at 394.

Settlement-without-consent

Simpson argues that he does not need GEICO's permission to settle claims with non-motorists. GEICO contends that permission to settle with any tortfeasor is required by the settlement-without-consent exclusion.

a. The Policy

The text of the uninsured-underinsured motorist coverage section provides:

INSURING AGREEMENT

We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person, or property damage, caused by an accident.

The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the uninsured motor vehicle.

Any judgment for damages arising out of a suit brought without our written consent is not binding on us. If we and you do not agree as to whether or not a vehicle is actually uninsured the burden of proof as to that issue shall be on us.

....

EXCLUSIONS

A. We do not provide Uninsured/Underinsured Motorists Coverage for any Person:

....

2. If that person or the legal representative settles the claim without our consent.

The scope of the words "the claim" is in dispute. GEICO argues that this refers to a claim against any tortfeasor arising from the same accident. Simpson argues that the claim refers only to a claim against an uninsured-underinsured motorist.

b. Interpretation

Though this is a case of first impression in Texas, the Supreme Court of Kansas addressed the identical issue in Bartee v. R.T.C. Transp., Inc., 245 Kan. 499, 781 P.2d 1084, 1097 (1989). In Bartee, the injured persons filed claims under their uninsured-underinsured motorist coverage due to the insolvency of the negligent driver. Id. 781 P.2d at 1086. The appellants also sought to recover from the turnpike authority and a construction company doing work on the turnpike, for the dangerous road conditions which contributed to the accident. Id. at 1085. Appellants then settled the claim against the two non-motorist tortfeasors and appellants' insurance company denied recovery under the uninsured-underinsured coverage, alleging violation of the settlement-without-consent clause of the policy. Id. at 1096. On appeal, the Supreme Court of Kansas identified one of the issues as "whether the settlement of plaintiffs with third-party tortfeasors precludes their claim against Kansas Fire & Casualty for uninsured motorist coverage...." Id. at 1097.

After analyzing the settlement-without-consent and right-to-recover clauses along with the Kansas recoupment statute, the court held that the settlement did not preclude appellants' claim. 2 Id. The court reasoned that appellants' settlement with the third-party tortfeasors did not interfere with the insurance company's ability to receive compensation for the tortious conduct of the uninsured motorist. The court further explained, "The public policy purpose behind the uninsured motorist provisions is to require compensation of innocent persons who are injured by the tortious conduct of an uninsured motorist. The third-party tortfeasors here were not the reason that Kansas Fire & Casualty is being required to compensate plaintiffs under their uninsured motorist coverage...." Id. at 1099. The court found that settlement-without-consent exclusions are limited to settlements that jeopardize the ability of the insurer to recover from the tortfeasor causing the insurer to provide uninsured motorist coverage. Id.

We agree with the Kansas court's analysis and hold that the settlement-without-consent exclusion is inapplicable to non-motorist tortfeasors, James and Safety Lights.

GEICO's Statutory Subrogation Rights

GEICO argues that any ambiguity within the policy is clarified by the statute providing for uninsured or underinsured motorist coverage. The statutory subrogation or recoupment clause provides, in part:

In the event of payment to any person under any coverage required by this Section [Uninsured or Underinsured Motorist Coverage] and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury, sickness or disease, or death for which such payment is made....

TEX.INS.CODE ANN. art. 5.06-1, § 6 (Vernon Supp.1995) (emphasis added).

The purpose of uninsured-underinsured motorist coverage is the protection of persons who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles. Stracener v. United Servs. Auto. Ass'n, 777 S.W.2d 378, 382 (Tex.1989). In other words, uninsured-underinsured motorist coverage substitutes for liability insurance normally available to injured persons. See id. Those insurance policy clauses which are not consistent with and do not further the purpose of article 5.06-1 are invalid. Id. at 384.

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