Southern County Mut. Ins. v. Surety Bank

• Decision Date: 23 October 2008
• Docket Number: No. 2-07-185-CV.,2-07-185-CV.
• Parties: SOUTHERN COUNTY MUTUAL INSURANCE, Appellant, v. SURETY BANK, N.A., Individually and d/b/a Surety Premium Finance, Appellee.
• Court: Texas Court of Appeals

270 S.W.3d 684

SOUTHERN COUNTY MUTUAL INSURANCE, Appellant, v. SURETY BANK, N.A., Individually and d/b/a Surety Premium Finance, Appellee.

No. 2-07-185-CV.

Court of Appeals of Texas, Fort Worth.

October 23, 2008.

Wilson, Elser, Moskowitz, Et Al, Lee L. Cameron, Jr., Dallas, for Appellant.

Cantey & Hanger, L.L.P., David F. Chappell, Fort Worth, for Appellee.

PANEL: CAYCE, C.J.; HOLMAN and McCOY, JJ.

OPINION

JOHN CAYCE, Chief Justice.

This is the second time we have considered this unearned premium refund case. After this court reversed a summary judgment for appellee Surety Bank, N.A., individually and d/b/a Surety Premium Finance ("Surety Bank") in the first appeal,¹ the trial court, on remand, again granted summary judgment for Surety Bank. Appellant Southern County Mutual Insurance ("Southern County") again appeals, asserting that Surety Bank received all the refund it was entitled to. We affirm.

Background

In our earlier opinion, we provided a comprehensive statement of the relevant facts.² We repeat here only those facts pertinent to our review in this appeal.

In March 2001, Scotts Temple, a church in Houston, obtained an automobile insurance policy (the "Policy") through its agent, United National Insurance Agency ("United National"), from insurer Southern County. United National did not deal directly with Southern County, but obtained the policy through Southern County's managing agent, U.S. Risk Underwriters, Inc. ("U.S. Risk"). Coverage was bound on March 29, 2001, and the total gross premium for the Policy was $45,999.

On April 6, 2001, Surety Bank entered into a premium finance agreement ("PFA") with Scotts Temple and United National, under which Surety Bank would finance $34,293, a portion of the total premium, while Scotts Temple was obligated to pay the rest of the premium, $11,706, by down payment. In the PFA, Scotts Temple and United National expressly warranted that this down payment had already been made by Scotts Temple. Scotts Temple, however, did not make the down payment. U.S. Risk did.³

Through the PFA, Scotts Temple assigned to Surety Bank "as security for the total amounts payable [under the PFA] any and all unearned premiums and dividends which may become payable under the [Policy]." Also through the PFA, Scotts Temple appointed Surety Bank its "attorney-in-fact ... with full authority upon any default to cancel [the Policy] ... and receive all sums resulting therefrom."

On April 13, 2001, Surety Bank issued a check for $34,293 to U.S. Risk. That same day, Surety Bank sent Southern County a notice of financed premium. Southern County acknowledges receiving this notice.

Scotts Temple did not pay any installments due to Surety Bank under the PFA.⁴ Pursuant to the PFA, on May 4, 2001, Surety Bank provided Scotts Temple notice of its intent to cancel the Policy, and on May 15, 2001 canceled the Policy, less than two months after it had taken effect. Surety Bank sent a notice of cancellation to Southern County, placing Southern County on notice that unearned premiums must be returned to Surety Bank within sixty days of the date of cancellation.

Instead of sending the total unearned premiums, which amounted to $38,685, to Surety Bank, Southern County sent $31,721.70, which represented the unearned premiums minus the unearned commissions of U.S. Risk and United National, to U.S. Risk.⁵ U.S. Risk added $3,094.80, its unearned commission at the time of cancellation, to the amount Southern County had sent U.S. Risk, then took out for itself $7,133.60, claiming that this amount was its pro rata share of the portion of unearned premium it paid when Scotts Temple failed to make the down payment. U.S. Risk then sent the remaining balance, $27,682.90, to Surety Bank.

Surety Bank sued Southern County⁶ to recover the difference between the total unearned premiums and the amount it received from U.S. Risk, claiming that under Texas law and the terms of the Policy and the PFA, it was entitled to receive the total amount of unearned premiums. Surety Bank moved for summary judgment, which the trial court granted. Southern County appealed.

In February 2006, we reversed the summary judgment and remanded the case to the trial court, holding that, because the summary judgment record did not contain the Policy or any other evidence establishing the terms of the Policy regarding the return of unearned premiums, a fact issue existed concerning whether Southern County had breached the Policy.⁷ We reasoned that, without the Policy, neither this court nor the trial court could determine what part of the unearned premiums became payable to Scotts Temple upon the Policy's cancellation.⁸

On remand, both parties filed motions for summary judgment. This time, a copy of the Policy was part of the summary judgment evidence. Paragraph A(5) of the "Common Policy Conditions" form states what Southern County's obligations are regarding unearned premiums if the Policy is cancelled:

A. CANCELLATION AND RENEWAL

5. If this policy is cancelled, [Southern County] will send the first Named Insured any premium refund due. The refund will be pro rata subject to the policy minimum premium. The cancellation will be effective even if [Southern County] ha[s] not made or offered a refund.

...

E. PREMIUMS

The first Named Insured shown in the Declarations:

...

2. Will be the payee for any return premiums [Southern County] pay[s].

It is undisputed that the "first Named Insured" is Scotts Temple.

On May 25, 2007, the trial court denied Southern County's motion for summary judgment and granted summary judgment for Surety Bank. The judgment awarded Surety Bank $11,002, the difference between the total unearned premiums ($38,685) and the amount Surety Bank received from U.S. Risk ($27,682.90). The judgment also awarded Surety Bank pre- and post-judgment interest and $62,000 in attorney's fees. This second appeal followed.

Standard of Review

A plaintiff is entitled to summary judgment on a cause of action if it conclusively proves all essential elements of the claim.⁹ When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor.¹⁰

When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review both parties' summary judgment evidence and determine all questions presented.¹¹ The reviewing court should render the judgment that the trial court should have rendered.¹²

Analysis

As in the first appeal, the parties' dispute centers on whether Southern County made a proper refund of unearned premiums. In one issue, Southern County argues that it was not required to refund to Surety Bank the down payment portion of the unearned premiums because Scotts Temple never paid the down payment. Surety Bank, on the other hand, asserts that Southern County was obligated under the Policy, the PFA, and applicable statutes and regulations to send all unearned premiums to Surety Bank and that Southern County breached its contract (the Policy) by instead sending the unearned premiums to U.S. Risk.

Interpretation of insurance contracts in Texas is governed by the same rules of construction as other contracts.¹³ When construing a contract, the court's primary concern is to give effect to the written expression of the parties' intent.¹⁴ This court is bound to read all parts of a contract together to ascertain the agreement of the parties.¹⁵ Terms used in the policy will be given their plain, ordinary, and generally accepted meanings, unless it appears from the policy itself or by usage that the parties intended to use the words in a special or technical sense.¹⁶

Under the PFA, Scotts Temple assigned to Surety Bank and gave Surety Bank a security interest in Scotts Temple's right to receive "any and all unearned premiums ... which may become payable under [the Policy]." We concluded in the first appeal that this meant Surety Bank "stood in the shoes" of Scotts Temple for purposes of Surety Bank's entitlement to receive unearned premiums.¹⁷ In other words, whatever Scotts Temple, in the absence of the PFA, would have been entitled to, Surety Bank was now entitled to.

The unresolved question on remand was "what part of the unearned premium became payable to Scotts Temple upon the Policy's cancellation."¹⁸ Because the Policy was not part of the summary judgment record in the first appeal, we could not determine the answer to this question. Now, we can.

The Policy provides that upon cancellation, Southern County "will send the first Named Insured any premium refund due." The Policy further provides that the "first Named Insured ... [w]ill be the payee for any return premiums we pay." The "first Named Insured" is Scotts Temple. This language is clear and unambiguous: if the Policy is cancelled, Southern County is obligated to return unearned premiums to Scotts Temple.

But this does not end the inquiry. Southern County asserts that Scotts Temple cannot receive a "refund" for premiums that it did not pay. This means, according to Southern County, that Surety Bank cannot complain about not receiving all unearned premiums, since it can only recover to the extent Scotts Temple could recover, and Scotts Temple cannot receive a "refund" for the down payment it never made. We reject this argument.

First, Southern County's position would prove too much. It is true that, ordinarily, to "refund" is to "pay back," which implies that the refund should go to the one who paid.¹⁹ But "refund" does not have such a cribbed meaning in this context.²⁰ If Southern County's proposed construction of "refund" were correct, that is, if Scotts Temple was not entitled to a "refund" of the down payment because it did not make that down payment, then Scotts Temple likewise would not be entitled to a refund of the amount financed by Surety Bank, since Scotts Temple did not pay...