State Farm Fire & Cas. Co. v. Gandy
| Decision Date | 06 July 1994 |
| Docket Number | No. 06-93-00055-CV,06-93-00055-CV |
| Citation | 880 S.W.2d 129 |
| Parties | STATE FARM FIRE & CASUALTY COMPANY, Appellant, v. Julie Kathleen GANDY, Individually and as Assignee of Ted Pearce, Appellee. |
| Court | Texas Court of Appeals |
Michael W. Huddleston, Cooper & Huddleston, Dallas, for appellant.
Carl David Adams, Law Offices of Carl David Adams, Dallas, for appellee.
Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.
State Farm Fire & Casualty Company appeals from a district court judgment awarding damages against it for failing to provide an adequate defense for its insured, Ted Pearce, in a lawsuit filed against Pearce by his stepdaughter, Julie Gandy. Gandy had sued Pearce for damages resulting from his sexual abuse of her over a long period of time. An agreed judgment was entered in that case, awarding damages against Pearce of some $6,000,000.00. Gandy gave Pearce a covenant not to execute on the judgment, and Pearce in turn assigned to Gandy all of his rights against State Farm. Gandy then filed this suit against State Farm to recover damages Pearce suffered because of State Farm's failure to adequately defend him in her suit. Based on jury findings of negligence and violations of the DTPA, 1 judgment was rendered for Gandy against State Farm for $202,000.00 plus fifteen percent attorney's fees and interest. The jury refused to find that State Farm was grossly negligent or that it acted knowingly or unconscionably. The trial court also rendered summary judgment that there was no coverage under Pearce's policy from State Farm for his conduct toward Gandy.
State Farm contends generally that there is legally and factually insufficient evidence to support the jury findings of DTPA violations, negligence, agency, damages, and attorney's fees. It also contends that the covenant to limit execution on the judgment to claims Pearce has against his insurer does not apply to it and that, if it does apply to State Farm, it extinguishes any liability of State Farm. State Farm also contends that the trial court committed error in refusing to submit its requested jury questions on Pearce's contributory negligence and comparative bad faith. We overrule these contentions and affirm the judgment.
Gandy sued Pearce, alleging that he had repeatedly abused her sexually over a period of several years, specifically on 325 separate occasions. During the time of the abuse, Pearce's home was insured by State Farm, and Gandy alleged that some of the acts occurred there. Pearce, thinking that his homeowner's insurance policy would cover his liability for any tortious acts committed by him at his home, notified State Farm of Gandy's suit, and asked that it defend him. While State Farm was considering what to do about Pearce's request, Pearce engaged E. Ray Andrews, an attorney who was defending him in the criminal prosecution that had been filed because of Gandy's allegations, to act as his attorney in Gandy's civil suit. Pearce knew that Andrews was strictly a criminal attorney and did not do civil trial work. Andrews had specialized in criminal law for over twenty-five years and is presently a district attorney. Andrews testified at the trial of this case that he had never practiced civil law and did not do civil trial work, and that he merely filed an answer for Pearce in Gandy's civil suit as a "friendship sort of deal" for Pearce.
State Farm wrote Pearce on February 11, 1991, that "[t]here is a question as to whether this company is obligated to defend or indemnify you" in the litigation filed by Gandy. The letter further advised Pearce that State Farm reserved the right to deny coverage if its investigation revealed a lack of coverage and that, in investigating the claim, it would "assume that it is acceptable for us to continue to handle the case on these terms."
Pearce testified that he discussed the matter orally with State Farm representatives, who told him that they believed State Farm would provide him a defense. The first written indication that State Farm had decided to do so is in the letter it mailed to both Andrews and Pearce on June 24, 1991, some six months after Gandy's suit was filed, in which State Farm advised that it had decided to defend Pearce but reserved its right to deny coverage. That letter reads as follows:
Please be advised that State Farm has made the decision to defend Ted Pearce under a Reservation of Rights. The coverage
questions we will continue to reserve are:
1. There is a question as to whether there was a policy in force on the date of the loss.
2. Coverage D, Section II Liability; shall not apply to bodily injury or property damage caused intentionally by or at the direction of the insured.
Additionally, the insuring agreement states:
"To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages."
To the extent that any attempt is made to impose liability on one spouse for the tort of the other, there may be no coverage.
Also, please be advised State Farm will be filing a Declaratory Relief Action, asking the court to resolve the issues of coverage in this matter.
If you have any questions with regards (sic) to the above, please feel free to contact Claim Representative Beckey Hukill at (214)250-5214.
Pearce testified in some detail about his understanding of the meaning of the June 24 letter and his difficulties in determining exactly what State Farm intended to do about providing him a defense. State Farm later sent another letter dated July 2, 1991, to Andrews, directing him to send his bills to State Farm. That letter reads as follows:
This letter is to inform you that I will be handling Mr. Ted Pearce's file in regards (sic) to the negligent (sic) allegations filed against him by Julie Kathleen Gandy.
You should direct your fee invoices to my attention for payment. Your fee invoices need to be itemized by date and activity, and calculated to the nearest tenth of an hour.
I request you keep me advised on the progress of the lawsuit from this point on. Please understand my only interest in this case is to work with you on the defense of Mr. Ted Pearce.
Please feel free to call me at any time to discuss the case.
Interrogatories in the Gandy suit were served on Pearce and improperly answered by Andrews. Gandy's counsel filed a motion to compel on August 2, 1991. A hearing was held. Pearce and Andrews failed to appear. Andrews filed a motion to withdraw as Pearce's attorney on August 22. In the meantime, the court had set September 30 as a hearing date for Gandy's motion for sanctions. Before that time, Pearce engaged a replacement attorney, Howard Pattison, to represent him in the suit. Pattison attended the September 30 hearing and convinced the judge to delay his ruling on sanctions. Pattison testified at this trial that he believed, based on previous counsel's unprofessional failures, that the defense could have survived the sanctions hearing. But Pearce, who had by this time concluded that State Farm had refused to do anything except pay Andrews' bills, decided to settle the case.
Pattison and Gandy's attorney fashioned an agreed judgment awarding Gandy actual and punitive damages of over $6,000,000.00, including interest and attorney's fees, against Pearce. The judgment was approved and rendered by the court solely on the agreement of counsel and without a trial or any evidence being presented. Contemporaneously with and in consideration for the judgment, Pearce assigned Gandy all of his rights in causes of action that he had or may have against State Farm or any other insurer, for negligence, bad faith, failure to defend, breach of warranty or fiduciary duty, as well as all other claims arising out of the acts and omissions of the insurers. Gandy executed, and the agreed judgment approved, a covenant to limit execution on the judgment in return for Pearce's assignment of his rights to Gandy. State Farm was not a party to the settlement discussions and was completely unaware of the agreed judgment until it received a copy of it in the mail.
In this case, Gandy sued State Farm in her status as the assignee of Pearce on the basis that State Farm failed to provide Pearce an adequate defense to her suit and for recovery on Pearce's insurance policy. Gandy also joined Andrews as a defendant, but she used Although the trial court rendered summary judgment that State Farm's policy did not cover the injuries to Gandy from Pearce's intentional acts, the jury found that State Farm was negligent in handling Pearce's defense and that the same negligent acts violated the DTPA by constituting false, misleading, and deceptive acts or practices. The jury also found that Andrews was the agent of State Farm with respect to Pearce's defense. The jury found Pearce's actual damages to be $200,000.00 and set attorney's fees at fifteen percent of that amount. Pursuant to the DTPA, the trial court added $2,000.00 to the damage award and rendered judgment accordingly.
him as a witness in her case against State Farm and nonsuited her cause of action against him on the morning he was scheduled to testify.
We first examine State Farm's contention that the jury's findings on Gandy's DTPA claims are not supported by the evidence. The DTPA claim was not based on the insurance contract. Rather, Gandy alleged that State Farm committed deceptive practices in statements made to Pearce about its relationship with Andrews, Pearce's first attorney, and in handling Pearce's defense in general.
In a review of the sufficiency of the evidence to support jury findings, we review the legal sufficiency of the evidence under the standard set out in Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965), and the factual sufficiency under the standard set out in In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661-62 (1951)...
To continue reading
Request your trial
-
State Farm Fire and Cas. Co. v. Gandy
...the defense properly. On a verdict that State Farm failed to do so, the court rendered judgment for Gandy. The court of appeals affirmed. 880 S.W.2d 129. We hold that Pearce's assignment to Gandy violated public policy and therefore conveyed her nothing. Because she had no right to recover ......
-
Maryland Ins. Co. v. Head Indus. Coatings and Services, Inc.
...from the judgment debtor, and that was the parties' intention when the judgment was taken." State Farm Fire & Casualty Co. v. Gandy, 880 S.W.2d 129, 138 n. 5 (Tex.App.--Texarkana 1994, writ granted). Equally applicable here is what Chief Justice Cornelius said in Gandy, "the courts are bein......
-
Willcox v. American Home Assur. Co.
...policy contained identical "legally obligated" language. 952 F.2d at 1496 n. 17. Indeed, even in State Farm Fire & Casualty Co. v. Gandy, 880 S.W.2d 129, 138-39 (Tex.App. — Texarkana 1994), writ granted (Nov. 3, 1994), the court, while soundly denouncing the covenant not to execute at issue......
-
In re Tutu Water Wells Contamination Litig.
...support of its contention. However, the only case that arguably supports a comparative bad faith defense is State Farm Fire & Casualty Co. v. Gandy, 880 S.W.2d 129 (Tex.Ct.App.1994), rev'd on other grounds,925 S.W.2d 696 (Tex.1996). In Gandy, a Texas appellate court held that the trial cour......