State Farm Lloyds Ins. Co. v. Maldonado

Decision Date18 September 1996
Docket NumberNo. 04-93-00046-CV,04-93-00046-CV
Citation935 S.W.2d 805
PartiesSTATE FARM LLOYDS INSURANCE COMPANY, Appellant, v. Adelfa MALDONADO and Curtis D. Robert, Appellees.
CourtTexas Court of Appeals

Paul Dodson, White, Huseman, Pletcher & Powers, Corpus Christi, for Appellant.

Anthony F. Constant, Law Offices of Anthony F. Constant, Corpus Christi, L.H. Warburton, Jr., Perkins, Oden, Warburton, McNeill, Adami & Paisley, Alice, for Appellees.

Before the court en banc.



CHAPA, Chief Justice.

The panel opinion dated December 30, 1994, is withdrawn and the following opinion is substituted therefor. Appellees' amended second motion for rehearing en banc is granted. Appellees' motion for rehearing (to the panel) is denied as moot. Appellant's motion for rehearing, having been considered en banc on the court's own motion, is denied.


Adelfa Maldonado sued Curtis Robert, Sr. for defamation because of statements made by Robert accusing Maldonado of being a thief and a prostitute. Maldonado had previously worked for Robert as a bookkeeper. The trial court rendered judgment in favor of Maldonado for $2,000,000 plus $127,672.35 in prejudgment interest. Robert and Maldonado then brought the present suit against State Farm seeking recovery for negligence and gross negligence, violations of the Insurance Code, breach of contract, and breach of the duty of good faith and fair dealing. After a jury trial, the trial court rendered judgment awarding Maldonado $1,536,355.70 1 plus three times the interest on the prior judgment dating from September 18, 1992, until State Farm pays the policy limit of $300,000. The court awarded Robert $6,156,355.92. 2

State Farm raises twelve points of error, complaining of insufficiency of the evidence to support the jury's answers to the liability and damage issues, error in the jury charge, and error in the calculation of damages. We modify and affirm in part, and reverse and render in part.


At the times relevant to this appeal, Robert was insured by State Farm. The applicable policy covers personal injury damages caused by an offense arising out of Robert's business as a certified public accountant. "Personal injury" includes injury arising out of slander. The policy excludes coverage for personal injury arising from slanderous statements made with knowledge of their falsity and personal injury "[f]or which the insured has assumed liability in a contract or agreement." The policy prohibits Robert from settling any claim against him without State Farm's permission. State Farm indicated to Robert at the outset of the litigation process, that it was handling his defense and that he should not become involved in the process. State Farm hired an attorney, Roland Leon, to defend Robert against Maldonado's claims. It also informed Robert of its reservation of rights due to some questions about coverage, including whether Robert made the statements with knowledge of their falsity and whether the statements arose from his business.

Attorney Leon testified at the trial of the present case that the underlying case against Robert was very serious due to the nature of the accusations he made about Maldonado (that she was a thief and a prostitute) and the fact that he published these accusations to highly respected and credible members of the community. Robert then made a bad case even worse by attempting to fabricate evidence that Maldonado had stolen from him. He manufactured a story in which Maldonado stole hundred dollar bills that had been marked with the initials of Robert's friend, John Swain. Robert conveniently still had possession of five marked bills. Handwriting experts who examined the bills determined that the initials were not written by John Swain. One expert concluded that he could not rule out Robert as having written the initials.

In Leon's opinion, the case against Robert, which had appeared bad from the start, became hopeless on October 28, 1991, when the parties took the depositions of Judge Terry Canales and his wife. Both Judge Canales and his wife testified that Robert had made the slanderous remarks about Maldonado. Judge Canales also testified that those remarks had influenced his decision not to consider Maldonado for appointment to the position of county auditor. It appears from the record that attorneys for both sides realized at least by October 28, 1991, that if the case went to trial, Robert would lose and Maldonado would likely be awarded damages in excess of the policy limits of $300,000. All of Robert's causes of action against State Farm stem from State Farm's failure to settle the suit with Maldonado. Our inquiry, then, must focus on the conduct of the parties in seeking settlement.

On September 25, 1991, Leon, the attorney provided to Robert by State Farm, strongly recommended that State Farm settle with Maldonado. Leon predicted that Robert would lose at trial and that a jury would award more than the $300,000 policy limits. On October 2, Maldonado's attorney, Stephen Boyd, spoke with Zeke Barrera, a State Farm claims specialist, during a deposition break. Barrera asked Boyd what it would take to settle the case, and Boyd responded that it would take $300,000 from State Farm plus $1,000,000 from Robert's own pocket. Boyd asserted at trial that he also informed State Farm that his demand for $1.3 million would expire in thirty days. On October 30, Leon informed Robert that Maldonado had made a demand in excess of his policy limits and advised Robert to seek the advice of his personal attorney.

On October 31, State Farm made a written offer to settle for $50,000. Boyd regarded this offer as a joke and refused to respond. On November 11, Boyd wrote to Leon extending his demand for $1.3 million until November 15. Leon faxed this demand to State Farm on the morning of November 12. 3

On November 15, Leon, Robert, and Robert's personal attorney, Richard Stone, met with Boyd to work out an agreement to protect Robert's personal assets. Prior to the 5:00 deadline, the four engaged in discussions about how to structure the settlement. In the meantime, Leon communicated with State Farm via telephone from Boyd's office regarding whether State Farm would accept the settlement offer. Once the deadline passed without acceptance by State Farm, Robert entered an agreement to pay Maldonado $1,000,000 from his own pocket and to assign his suit against State Farm to Maldonado. Maldonado agreed not to execute against any of Robert's personal assets except for insurance policies. Robert and Maldonado further agreed that Robert would be reimbursed $1,000,000 from any recovery against State Farm, and the two would split any remaining recovery evenly. A written agreement was signed prior to trial on November 25, and was modified in writing on May 1, 1992. The modified agreement states that Robert does not assign his causes of action against State Farm. Robert entered these agreements on the advice of his personal attorney, Stone, and his State Farm assigned attorney, Leon.

After the November 15 deadline had passed, State Farm asked Boyd for an extension of time to consider his offer. State On November 25, Robert gave Boyd a check for $1,000,000. The parties then proceeded to trial before the court. Leon testified that this was not a "full-blown" adversarial trial; he did not make any opening statement, cross-examine any witnesses, or offer any evidence for fear that he might jeopardize Robert's agreement with Maldonado. Maldonado introduced proof that Robert had published slanderous statements about her that caused her damages in the amount of $2,000,000. The trial court rendered judgment for that amount plus interest. Maldonado and Robert then brought the present excess-judgment suit against State Farm. Maldonado sought State Farm's $300,000 policy limits plus statutory penalties for failure to pay promptly after liability had become reasonably clear. Robert sought tort and statutory damages from State Farm for negligent and bad-faith failure to settle or attempt to settle the defamation case.

Farm was considering the offer, but because of the structure of the company, it was necessary to forward recommendations to settle from the local Corpus Christi office to a regional office in Austin to the home office in Bloomington. In any event, Boyd refused to extend the deadline. On November 22, State Farm offered its $300,000 policy limits. Boyd declined the offer.

The trial court submitted each of these theories of liability to the jury. The jury found in favor of Maldonado and Robert on each theory, though it refused to find gross negligence or to assess exemplary damages.


In considering a "no evidence" or legal sufficiency point, we consider only the evidence favorable to the decision of the trier of fact and disregard all evidence and inferences to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965). If there is any evidence of probative force to support the finding, the finding will be upheld. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex.1989).

In considering a factual sufficiency point, we assess all the evidence and reverse for a new trial only if the challenged finding is so against the great weight and preponderance of the evidence as to be manifestly unjust. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951).


In point of error one, State Farm contends that the court erred in rendering judgment for Maldonado because there is legally or factually insufficient evidence to support the jury's finding that State Farm...

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