St. Paul Ins. Co. v. Rakkar

Decision Date06 July 1992
Docket NumberNo. 05-91-00369-CV,05-91-00369-CV
PartiesThe ST. PAUL INSURANCE COMPANY, Appellant, v. Sudeep S. RAKKAR, M.D., Appellee.
CourtTexas Court of Appeals

Phillip W. Gilbert, Tony Nicholas, Jr., Dallas, J. Hampton Skelton, Austin, for appellant.

David K. Wilson, Roger D. Sanders, Sherman, for appellee.

Before LAGARDE, KINKEADE and WIGGINS, JJ.

OPINION

LAGARDE, Justice.

The St. Paul Insurance Company appeals the $247,938 judgment rendered against it in favor of Sudeep S. Rakkar following a jury trial. St. Paul brings nineteen points of error on appeal generally contending that the trial court erred in: (a) awarding extra-contractual damages; (b) trebling the extra-contractual damages; (c) awarding breach-of-contract damages; (d) trebling the breach-of-contract damages; (e) awarding prejudgment interest at the rate of ten percent instead of six percent; and (f) trebling the prejudgment interest. We sustain the ninth and twelfth points contending that there is no evidence to support the jury's finding that St. Paul acted knowingly. We also sustain the eighteenth point contending that the prejudgment interest rate for the $60,000 contract damages should be six percent. Accordingly, we reverse the trial court's judgment awarding treble damages and render judgment, on the jury's verdict, on Rakkar's common-law cause of action. We further modify the judgment to provide a six-percent prejudgment interest rate for the $60,000 contract damages.

FACTUAL BACKGROUND

Rakkar owned a house in Jewett, Texas. On August 27, 1988, after the tenants who had been living in the house vacated the property, Rakkar travelled the four hours from his home in Whitesboro, Texas, to Jewett to inspect the property with the real estate agent who helped him manage the property. Rakkar planned to grill some hot dogs for his dinner, spend the night in the house, and return to Whitesboro the next day. With this plan in mind, Rakkar bought hot dogs, a small hibachi-type grill, lighter fluid, and obtained some charcoal. He also bought a bottle of drinking water because the water at the house had been shut off. When he got to the house, he opened the windows to air out the house and started the air conditioner. Because the grass around the house was tall and dry, he decided to light the grill in the kitchen and then carry it onto the patio after clearing a space for the grill on the patio. Rakkar set the grill on the kitchen floor. After lighting the grill, he had begun to work on the ceiling fan when his real estate agent arrived. She told Rakkar that she smelled something "hot," and Rakkar showed her the hibachi grill sitting on the kitchen floor. She told him that he should move it outside because the heat from the grill could burn the linoleum flooring. After declining Rakkar's invitation to join him for a hot dog, the real estate agent left. Rakkar decided to take the grill onto the patio. When he bent over the coals, he passed out. When he awoke five or six minutes later, the grill was overturned near the base of the cabinets, the coals were scattered over the kitchen floor, and the cabinets were on fire. Rakkar ran to the sink, but no water came out. Rakkar then ran to his neighbors to get assistance, but they were not at home. He then drove the half mile to the marina and called the fire department, which was fifteen to twenty miles away. By the time the fire truck arrived, the house was completely engulfed in flames. The house burned to the ground.

The next day, Rakkar telephoned his insurance agent and reported the loss. On September 1, Rakkar met with Mike Williams, a special investigator with St. Paul. Williams questioned Rakkar about the fire and the surrounding circumstances and asked Rakkar to send him a written statement concerning how the fire occurred. Rakkar did so, and Williams received the statement on September 9. Williams also promised to send Rakkar a proof-of-loss form within two weeks. When Rakkar had not received the proof-of-loss form for nearly one-and-a-half months, he wrote Williams asking why St. Paul had not sent the form and when it was going to send one. Only then did St. Paul send Rakkar the proof-of-loss form, which he completed and returned to St. Paul by November 9.

After receiving Rakkar's sworn proof-of-loss form, St. Paul told Rakkar that it would notify him by January 15 of its decision whether to pay or deny the claim. St. Paul, however, waited until January 23 to tell Rakkar that it was denying the claim because:

the facts of the loss, the results of St. Paul's good faith investigation, and [Rakkar's] own sworn testimony overwhelmingly indicate that the claim is the result of an intentionally set, incendiary fire, and that all facts point to no other reasonable conclusion but that either ... Rakkar, or an individual acting at his direction, both set the fire and precipitated its spread by use of flammable liquids throughout the structure.

St. Paul promised to pay off the mortgagee of the property. Because St. Paul did not pay off the mortgagee immediately, Rakkar continued to pay his monthly mortgage payments. When St. Paul had not paid the mortgagee by April 19, almost four months after St. Paul had told Rakkar that it would pay the mortgage, Rakkar paid off the $40,000 mortgage himself and took an assignment from the mortgage company of its rights to the insurance payment from St. Paul. Although St. Paul requested a pay-off quote from the mortgagee on February 16, which was returned to St. Paul on February 28, and St. Paul wrote a check to the mortgagee for the full amount on March 10, St. Paul's attorney failed to send the check to the mortgagee until after Rakkar had paid the mortgage. 1 The mortgagee returned the check, uncashed, to St. Paul. When St. Paul learned that Rakkar had an assignment from the mortgagee for the insurance proceeds, St. Paul still refused to pay Rakkar.

INSURER'S RELIANCE ON OPINIONS OF ARSON INVESTIGATORS

In the first three points of error, St. Paul contends that its reliance on its arson investigators in denying the fire-loss claim immunized it from extra-contractual liability as a matter of law and that there was no evidence showing that it did not rely on the investigators.

In addressing a legal sufficiency or no-evidence challenge, we must consider only the evidence and inferences, viewed in their most favorable light, which support the jury's finding, and we must disregard all evidence and inferences to the contrary. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987); Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex.1986). If there is more than a scintilla of evidence to support the finding, the no-evidence challenge fails. Stafford, 726 S.W.2d at 16. When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983); Seideneck v. Cal Bayreuther Assocs., 451 S.W.2d 752, 755 (Tex.1970). However, if the evidence supplies some reasonable basis for differing conclusions by reasonable minds as to the existence of a vital fact, then there is some evidence. Kindred, 650 S.W.2d at 63. Alternatively, in addressing a matter-of-law question, the reviewing court examines the record for evidence that supports the finding while disregarding all evidence to the contrary. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). If there is no evidence to support the finding, the reviewing court examines the entire record to determine whether the proposition contrary to the finding has been conclusively established. Id.

As St. Paul notes in its brief, an insurer's reliance on its investigator must be reasonable. Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex.1988). In this case, however, the evidence raises fact questions concerning both the reasonableness of St. Paul's reliance on its investigators and whether St. Paul actually relied on those investigations. Tom West, the fire investigator, concluded that the fire was intentionally set with flammable liquids. West based his conclusion on an examination of the spalling patterns in the concrete foundation, on the presence of hydrocarbon rings on the foundation, on the fire chief's narration of his interview with Rakkar, and on the findings of Dr. Armstrong, the chemist who examined the samples West took from the house. At the end of his report, West made the following comment:

After thoroughly examining the fire scene, it is my opinion that if the insured accidentally dropped the charcoal grill in the kitchen area on the concrete slab floor with linoleum flooring, the fire would have remained small and would not have spread rapidly throughout the structure until Mr. Rakkar could have had time to go obtain help to extinguish the fire. With the evidence found at the fire scene, there is no way that the charcoal grill being dropped caused this fire.

This comment fails to take into consideration the written statement Rakkar gave St. Paul in which he stated that, when he came to after passing out, the "[c]abinets were on fire. The pit was near the base of the cabinets," which suggests that one or more of the coals rolled up against the cabinets and set them on fire. Nor does West's comment take into consideration the fact that Rakkar was not certain how long he passed out (although he thought that it was only five or six minutes) or the fact that it took him another fifteen to twenty minutes to summon help. West's report cites no facts to support the conclusion that Rakkar could have summoned help to extinguish the fire. No mention is made in the report of how long it took Rakkar to summon help. West's report also contains inconsistencies between his conclusion that the fire was intentionally set using flammable liquids and Dr. Armstrong's failure to...

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