Stumph v. Dallas Fire Insurance Co.

• Decision Date: 21 December 2000
• Citation: 34 S.W.3d 722
• Parties: (Tex.App.-Austin 2000) Stan Stumph, d/b/a Concrete Concepts/Dallas Fire Insurance Company, Appellants v. Dallas Fire Insurance Company/Stan Stumph, d/b/a Concrete Concepts, Appellees NO. 03-99-00606-CV
• Court: Texas Court of Appeals

Page 722

34 S.W.3d 722 (Tex.App.-Austin 2000)

Stan Stumph, d/b/a Concrete Concepts/Dallas Fire Insurance Company, Appellants v. Dallas Fire Insurance Company/Stan Stumph, d/b/a Concrete Concepts, Appellees

NO. 03-99-00606-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

December 21, 2000

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT NO. 96-10442, HONORABLE CHARLES F. CAMPBELL JR., JUDGE PRESIDING

[Copyrighted Material Omitted]

Before Justices Jones, Kidd and Yeakel

Lee Yeakel, Justice

This appeal arises from a dispute between Stan Stumph, doing business as Concrete Concepts, ("Stumph") and Dallas Fire Insurance Company ("Dallas Fire") over insurance coverage. Stumph initiated this litigation by filing suit in district court seeking damages resulting from Dallas Fire's refusal to defend and indemnify Stumph in a previous suit filed against him. A jury found in Stumph's favor and awarded him damages. Stumph appeals the district court's denial of his motion for judgment on the verdict seeking treble damages. Dallas Fire appeals the award of actual damages. We will modify the district-court judgment to award Stumph two times his actual damages in addition to the actual damages awarded by the district court¹ and affirm the judgment as modified.

FACTUAL AND PROCEDURAL BACKGROUND

Stumph is the sole proprietor of Concrete Concepts. In late 1992, Stumph purchased a commercial general-liability insurance policy from Dallas Fire (the "first policy"). The first policy was purchased through Dallas Fire's local recording agent, Don Harvey ("Harvey").² Harvey owned Emerald Insurance, an independent agency which marketed general-liability, automobile, and workers-compensation insurance for several insurance companies. In 1991, Harvey and Dallas Fire entered into an agency agreement naming Harvey a local recording agent for Dallas Fire. However, by the terms of the agency agreement, Harvey had no authority to bind Dallas Fire to any insurance risks.

The policy was to be in effect from November 17, 1992 through November 17, 1993 and specifically excluded coverage for any liability stemming from "completed operations." Stumph made a down payment on the policy's premium and financed the remainder through a premium finance company, to whom he sent monthly payments. The premium finance company forwarded the payments to Harvey. Harvey was to send the payments, minus a commission, to Dallas Fire. Dallas Fire did not receive Stumph's payments and eventually discovered that Harvey had not forwarded payments on other accounts as well. On July 14, 1993, Dallas Fire suspended its agency agreement with Harvey.

Shortly after Harvey's suspension, Dallas Fire sent a cancellation notice to Stumph, stating that his policy would be canceled on July 26, 1993 for "non-pay agent to co." Upon receiving the cancellation notice, Stumph called Harvey. Harvey told Stumph to continue making payments as usual and that this "had to be a paperwork mix-up." Stumph then called Dallas Fire and spoke to Liz Jennings, an "underwriter" at Dallas Fire. Stumph and Jennings disagree on the contents of their conversation. Stumph claims that Jennings told him that there must have been a "mix-up," Harvey was a "good man," Stumph should continue to make payments to Harvey and should keep his canceled checks, and Jennings would call him if he needed to send the checks to her or if there was a "problem." Jennings claims that she told Stumph to send the canceled checks to her at that time so Dallas Fire could reinstate the policy if the cancellation was in error. The parties agree that Stumph did not send the canceled checks to Dallas Fire and that Dallas Fire never reinstated the policy.

In August Stumph received confirmation from the premium finance company that his premium for the first policy had been paid in full. The confirmation reflects that copies were sent to Dallas Fire and Emerald Insurance, though Dallas Fire claims not to have received a copy.

In November Stumph contacted Harvey about renewing the policy. Several days after their conversation, Harvey delivered to Stumph a policy similar to the first policy (the "renewal policy"). With the renewal policy, however, Stumph made monthly premium payments directly to Harvey and not to the premium finance company. The "renewal policy" given to Stumph by Harvey was a copy of the first policy, with different effective dates and a different policy number. Unknown to Stumph, the renewal policy was neither issued nor approved by Dallas Fire.

In January 1994 Stumph contracted with Byram Properties ("Byram") to perform concrete repairs to a parking garage.³ As a result of Stumph's work, several vehicles parked on a floor below the one where Stumph worked were damaged by falling pieces of concrete or white chemical deposits. In September, Byram sued Stumph for breach of contract and violations of the Deceptive Trade Practices Act (the "DTPA"). See Tex. Bus. & Com. Code Ann. §§ 17.41-.63 (West 1987 & Supp. 2000). Stumph requested Dallas Fire to defend and indemnify him in connection with the Byram suit. Dallas Fire declined and informed Stumph that he did not have a valid policy of insurance with Dallas Fire and Harvey was no longer Dallas Fire's agent. Upon inquiry to the Texas Department of Insurance, Stumph learned that there had been 366 fraud complaints filed against Harvey.

Stumph ultimately settled the suit with Byram for $14,500. As a result of defending Byram's suit, Stumph incurred approximately $6,000 in attorney's fees. Stumph then brought this suit in district court against Dallas Fire for breach of contract and violations of the insurance code and the DTPA by virtue of Dallas Fire's refusal to defend and indemnify Stumph in the Byram suit. See Tex. Ins. Code Ann. art. 21.21, § 16 (West Supp. 2000); Tex. Bus. & Com. Code Ann. § 17.50 (West Supp. 2000). The jury returned a verdict for Stumph. Stumph filed a motion for judgment on the verdict that included a request that the district court award him twice the actual damages found by the jury. See Tex. Ins. Code Ann. art. 21.21, § 16. Dallas Fire filed a motion for judgment non obstante veredicto. See Tex. R. Civ. P. 301. The district court rendered judgment for Stumph for his actual damages, attorney's fees, and prejudgment interest. By five issues, Dallas Fire appeals, asserting that, as a matter of law, it could not be bound by Harvey's actions, the Byram claim was not covered by the first policy and therefore could not be covered by the renewal policy, and there was insufficient evidence to support the jury's findings against it. Stumph appeals the district court's refusal to treble his actual damages.

DISCUSSION

Unfair Insurance Practices

By its first issue, Dallas Fire argues that the renewal policy was not valid as a matter of law.⁴ Dallas Fire asserts that it canceled Stumph's first policy, making a renewal impossible, and by law it was not bound by the acts of Harvey. Dallas Fire directs this Court to its agency agreement with Harvey that expressly denied Harvey authority to bind Dallas Fire.⁵

Stumph responds that the district-court judgment is supportable on any one of the following theories: (1) Harvey had actual authority to bind Dallas Fire; (2) Harvey had apparent authority, created by Liz Jennings in her telephone conversation with Stumph, to bind Dallas Fire; (3) Dallas Fire, through Jennings' actions, engaged in unfair insurance practices; or (4) Dallas Fire, through Jennings' actions, violated the DTPA.⁶ Because we hold that Dallas Fire's actions alone support the district-court judgment, we need not address whether Harvey was Dallas Fire's agent. See Tex. R. App. P. 47.1.

Although Dallas Fire is correct that construction of an insurance policy is a matter of law,⁷ an insurer may be responsible for damages to an insured when the insurer has engaged in unfair insurance practices or violated the DTPA, even though no coverage existed under the policy. See Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96 (Tex. 1994); Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688 (Tex. 1979).

In Celtic Life Insurance Co. v. Coats, the supreme court held an insurer liable for the misrepresentations of one of its agents that the insured was "covered" for up to one million dollars in psychiatric benefits, when the policy actually covered only $10,000. After Coats's son received psychiatric treatment, Celtic Life paid but $10,000 of the $27,000 claimed. Celtic Life argued that because the agent who had made the misrepresentation did not have actual authority to bind the company, the insurer could not be held liable to the insured. The court determined that the agent did have the requisite authority. See Coats, 885 S.W.2d at 99. The jury was asked whether Celtic Life's agent had made any misrepresentations that were a producing cause of damages to Coats. Id. The jury answered yes, and Coats recovered the full amount of his son's psychiatric expenses. Id. at 100.

In Royal Globe Insurance Co. v. Bar Consultants, Inc., a local recording agent for Royal Globe represented to the insured that coverage was provided for damage caused by vandalism. Bar Consultants, 577 S.W.2d at 689. When Royal Globe later denied a vandalism claim on the ground that the claim was not covered under the policy, the insured sued under the DTPA and article 21.21 of the insurance code alleging damages as a result of the pre-loss misrepresentation. Id. at 690. The supreme court held that the actions of the agent amounted to a violation of both statutes, and Bar Consultants recovered the cost of the repairs that Royal Globe represented were covered as damages. Id. at 694.

This Court has also held an insurer liable for engaging in unfair insurance practices and awarded damages, even though coverage did not exist under its policy. See State Farm Fire & Cas. Co. v. Gros, 818 S.W.2d 908 (Tex. App.--Austin 1991, no writ). The Groses held a...