St. Paul Ins. Co. v. Rahn, 1936

• Decision Date: 30 June 1982
• Docket Number: No. 1936,1936
• Court: Texas Court of Appeals
• Parties: ST. PAUL INSURANCE COMPANY, Appellant, v. Janis RAHN, Appellee, and Richard M. NOVIGROD, Appellant, v. ST. PAUL INSURANCE COMPANY, Appellee.

Page 276

641 S.W.2d 276

ST. PAUL INSURANCE COMPANY, Appellant, v. Janis RAHN, Appellee, and Richard M. NOVIGROD, Appellant, v. ST. PAUL INSURANCE COMPANY, Appellee.

No. 1936.

Court of Appeals of Texas Corpus Christi.

June 30, 1982.

Rehearing Denied Sept. 23, 1982.

Ann C. Livingston and Thomas H. Crofts, Jr., Groce, Locke & Hebdon, San Antonio, Richard G. Roth and Edmund K. Cyganeiwicz, Brownsville, for appellant.

Thomas G. Sharpe, Jr., Brownsville, for appellee.

Before NYE, C.J. and UTTER and KENNEDY, JJ.

OPINION

KENNEDY, Justice.

This is a suit to enforce a consent judgment entered into between Janis Rahn, an appellee in this Court, and Richard M. Novigrod, an appellant, against St. Paul Insurance Company, which holds the position of appellant as to Rahn and appellee as to Novigrod. A detailed recitation of the background facts is necessary.

Richard Novigrod is the president and an executive officer of the Bazaar Corporation of Brownsville. The Bazaar Corporation owns a number of vehicles to which Mr. Novigrod has access. In October, 1976, these included a 1974 Chevrolet pickup truck which was insured by St. Paul. In early October, 1976, Mr. Novigrod left the pickup with a mechanic to have some work done on it. He was later notified by the mechanic that the truck was ready. Mr. Novigrod went to the garage in a 1971 Ford LTD automobile, another of Bazaar's vehicles planning to leave that car (coverage of which was not included in the policy here in issue) for repair and pick up the truck. Upon his arrival, he was informed that the Chevrolet truck required further attention. However, one of the owners of the garage supplied him with a Honda motorcycle to use in the interim.

Approximately one week later, on Sunday, October 10, Mr. Novigrod was involved in an accident while operating the motorcycle. The collision occurred when an automobile driven by Jose Gomez failed to yield the right of way. Riding on the motorcycle with Mr. Novigrod at the time of the accident was his friend, Janis Rahn, who sustained serious injuries. Ms. Rahn instituted suit against Gomez, and Bazaar Corporation and Mr. Novigrod, individually and jointly. Her claim against Gomez was settled. St. Paul was informed by Mr. Novigrod of the suit pending against him; however, St. Paul refused to provide him a defense.

On May 18, 1979, a consent judgment was signed wherein Bazaar Corporation and Mr. Novigrod agreed to the following:

1. Paying Ms. Rahn the sum of $4,700.00 as a full and final settlement of any claims against them;

2. Allowing Ms. Rahn to take a judgment against Bazaar Corporation in the amount of $650,000.00, with Ms. Rahn agreeing not to execute this judgment against the corporation's assets but only against its insurance carrier.

Ms. Rahn's amended pleadings sought $750,000.00 in damages from Novigrod and Bazaar Corporation. St. Paul filed a petition to intervene in the suit, accompanied by motions to set aside the judgment and for a new trial. The trial court allowed the motions to be filed, heard the motion to intervene and dismissed the motions. St. Paul appealed the denial of these motions to this Court but failed to properly perfect its appeal. The appeal was dismissed. 586 S.W.2d 701 (Tex.Civ.App.1979).

The instant suit was initiated by Ms. Rahn against St. Paul to enforce the consent judgment. St. Paul brought a third party claim against Novigrod for indemnity, to which Novigrod filed a counter-claim. Trial was to a jury. A judgment was entered whereby Ms. Rahn recovered $640,000.00 from St. Paul, and St. Paul and Novigrod each took nothing in their claims against each other. St. Paul is appellant herein concerning the judgment in favor of Ms. Rahn, and appellee regarding Novigrod's counter-claim. St. Paul has not appealed the take nothing judgment in its third party claim for indemnity against Novigrod. In other words, there are two appeals presently before us, each of which will be addressed separately.

The policy issued by St. Paul to Bazaar Corporation, the one here sued upon, expressly provided that injured parties to whom the insured becomes liable may proceed directly against the insurer for satisfaction so long as certain conditions are met. One such condition is that the liability of the insured must arise from a judgment after "actual trial" or from a written agreement to which the insurer, the insured, and the injured person are all party. It is St. Paul's position that the first judgment was not entered after an "actual trial"; therefore, liability cannot be established by Ms. Rahn.

Before the injured third party's right of action against the insurer arises, either the "actual trial" or the "written agreement" conditions must be met. Great American Insurance Co. v. Murray, 437 S.W.2d 264, 265 (Tex.1969). However, it is well settled that an insurer cannot insist upon compliance with the conditions of its policy under which it agrees to provide a defense and furnish liability coverage after it has been given the opportunity to defend and wrongfully refuses to do so. Gulf Insurance Co. v. Parker Products, Inc., 498 S.W.2d 676, 679 (Tex.1973); Womack v. Allstate Insurance Co., 156 Tex. 467, 296 S.W.2d 233, 236 (1957). However, in order to constitute such a waiver, the insurer's refusal to supply a defense when notified of the suit must be erroneous. Gulf Insurance Co. v. Parker Products, Inc., supra.

An insurer's duty to defend its insured is determined by the allegations in the petition filed against the insured when considered in light of the policy provisions without reference to the truth or falsity of such allegations, and without reference to legal determinations thereof. Argonaut Southwest Insurance Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973); Heyden Newport Chemical Corp. v. Southern General Insurance Co., 387 S.W.2d 22, 24 (Tex.1965). The insurer, then, can make its decision with respect to the furnishing of a defense based wholly on the allegations contained in the pleadings filed against its insured. In her original petition against Novigrod, Rahn alleged that she was injured while a passenger upon a motorcycle "owned and operated by Richard Novigrod." (Emphasis supplied).

The policy provides coverage for two types of vehicles: "owned" vehicles and "temporary substitute" vehicles. An "owned" vehicle is defined by the policy as:

"An automobile which is owned by the named insured and described in the Schedule; or an automobile ownership of which is newly acquired by the named insured during the policy period, provided it replaces an owned vehicle as defined ... above...."

The policy continues:

" '[T]emporary substitute automobile' means an automobile not owned by the named insured or any resident of the same household, while temporarily used with the permission of the owner as a substitute for any owned automobile when withdrawn from normal use for servicing or repair because of its breakdown, loss or destruction...." (Emphasis supplied).

In ascertaining whether the allegation by Rahn in her suit against Novigrod that he "owned" the motorcycle indicates the existence of such facts as will give rise to a duty to furnish a defense, reference must be had to those allegations in light of the definitions given above. By the very definition of the term "temporary substitute automobile," it is apparent that the allegation in Rahn's petition eliminates that as a potential area of liability. While the jury, in response to the only special issue submitted, determined that the motorcycle was, in fact, a "temporary substitute" as defined in the policy, that finding, made subsequent to the institution of the lawsuit by Rahn against Novigrod, had no bearing upon the allegations made in the suit based on which St. Paul was permitted to deny or extend coverage. Argonaut Southwest Insurance Co. v. Maupin, supra; Heyden Newport Chemical Corp. v. Southern General Insurance Co., supra.

We, therefore, must determine whether Rahn's petition indicates that the motorcycle might have been an "owned automobile" as the policy defines that term. It is perfectly obvious upon even a casual inspection of the policy that no motorcycle was included among the four vehicles described in the Schedule of Owned Vehicles attached to the policy. However, we are not prepared to say that the motorcycle might not have been an "owned" vehicle by virtue of it having replaced another vehicle listed in the Schedule. It has been held that:

"Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is potentially, a case under the complaint within the coverage of the policy. Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in the insured's favor." Heyden Newport Chemical Corp. v. Southern General Insurance Co., supra, 387 S.W.2d at 26 (emphasis supplied); Fort Worth Lloyds v. Garza, 527 S.W.2d 195, 199 (Tex.Civ.App.--Corpus Christi 1975, writ ref'd n.r.e.).

At the time the policy was issued, Bazaar Corporation was the only named insured. By endorsement six months prior to the accident, the policy was amended so as to include Richard Novigrod as a named insured as well. It is St. Paul's contention, without citing us to any authority in support thereof, that a vehicle acquired by one named insured could not replace a vehicle owned by the other named insured. We fail to see the logic in this position. We hold, therefore, that the allegations in Rahn's petition stated a cause of action that could potentially have come within the coverage of the liability policy sufficient to compel the insurer to provide a defense, and that St. Paul's refusal to do so was wrongful. Insistence upon compliance with the...