Westchester Fire Ins. v. Admiral Ins.
| Decision Date | 02 December 2004 |
| Docket Number | No. 2-01-227-CV.,2-01-227-CV. |
| Citation | 152 S.W.3d 172 |
| Parties | WESTCHESTER FIRE INSURANCE COMPANY, Appellant, v. ADMIRAL INSURANCE COMPANY, Appellee. |
| Court | Texas Court of Appeals |
Murphy, Mahon, Keffler & Farrier, L.L.P.; Thomas G. Farrier, Fort Worth; Bollinger, Ruberry & Garvey; Michael S. Knippen, Mark F. Wolfe, Brian C. Bendig, Chicago, IL, for Appellant.
Baker & McKenzie; Robert D. Allen and Linda M. Dedman, Dallas, for Appellee.
Before the court en banc.
After en banc reconsideration and oral argument granted on appellee Admiral Insurance Company's (Admiral) motion for rehearing, we withdraw our prior opinion and judgment dated June 26, 2003 and substitute the following. See TEX.R.APP. P. 49.1, 49.3, 49.7.
This case involves a Stowers action by an excess insurance carrier — the insured's equitable subrogee — against the insured's primary carrier for the negligent failure to settle an insurance claim within policy limits. See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 547 (Tex.Com.App.1929, approved). Appellant Westchester Fire Insurance Company (Westchester), the excess insurance carrier, challenges the trial court's directed verdict for Admiral, the primary carrier, and the partial summary judgment upon which it was based. We reverse the partial summary judgment in part, and reverse the directed verdict, and remand the case for trial.
In 1994 PeopleCare Heritage Western Hills, Inc. (PeopleCare), the owner of Heritage Western Hills Nursing Home, had a primary policy of professional medical liability insurance with Admiral with limits of $1,000,000 per occurrence and an excess policy with Westchester with limits of $10,000,000 per occurrence. Beulah Cagle was a patient at Heritage Western Hills. In December 1994, Beulah and her daughter Lola Cagle sued PeopleCare for negligence, gross negligence, fraud, and violations of the Texas Deceptive Trade Practices Act (DTPA) arising out of PeopleCare's treatment of Beulah from January through May 1994. See TEX. BUS. & COM.CODE ANN. §§ 17.01-.854 (Vernon 2002 & Supp.2004-05).
After a bench trial, the trial court found that PeopleCare was negligent and grossly negligent in its treatment of Beulah and that it knowingly misrepresented the nature of Beulah's injuries to Lola. In findings of fact and conclusions of law, the trial court found that Beulah was entitled to compensatory damages, plus prejudgment interest, and that Lola was entitled to mental anguish damages, treble damages, attorneys' fees, and prejudgment interest under the DTPA. The compensatory damages awarded to the Cagles exceeded Admiral's policy limits. The trial court then scheduled a hearing on exemplary damages.1 Before the hearing, PeopleCare settled the Cagles' suit for an amount exceeding the Cagles' compensatory damages, with Admiral tendering its policy limits, less defense costs and PeopleCare's deductible, and Westchester contributing the remainder.
Westchester then filed suit against (a) Admiral, alleging, among other things,2 that Admiral negligently failed to settle the Cagles' claims against PeopleCare within the limits of the primary insurance policy, and (b) Gardere & Wynne, L.L.P., the law firm that represented PeopleCare in the Cagle suit, for negligence in defending the suit. Before trial, the trial court granted Admiral a rule 166a partial summary judgment, holding that
insurance coverage for punitive damages, now and at the time in question, violates the public policy of the State of Texas. Accordingly, coverage for punitive damages under the Admiral insurance policy is void.... [T]his court [also] finds that the award of damages and attorneys' fees for knowing misrepresentation under the DTPA were not covered by the Admiral insurance policy.
Since Westchester Fire's Stowers recovery, if any, only extends to claims that were within the scope of the Admiral policy's coverage, its recovery is limited to [Beulah] and Lola Cagle's actual damages.
TEX.R. CIV. P. 166a. Thus, the court held that Westchester's recovery of damages from Admiral, if any, would be limited to the amount of the Cagles' compensatory damages that exceeded Admiral's settlement contribution.3
Before Admiral completed its case-in-chief, Westchester settled with Gardere & Wynne for an amount greater than the amount by which the Cagles' compensatory damages exceeded Admiral's settlement contribution. Accordingly, on Admiral's motion, the trial court granted Admiral a directed verdict on the ground that Admiral was entitled to a credit in the amount of Gardere & Wynne's settlement with Westchester, and the amount of the credit exceeded the damages Westchester could recover from Admiral. See TEX. CIV. PRAC. & REM.CODE ANN. §§ 33.012, 33.014 (Vernon 1997).
In a single point on appeal, Westchester challenges the directed verdict on the ground that the trial court erred in granting the partial summary judgment for Admiral that limited the amount of damages Westchester could recover from Admiral to compensatory damages because Westchester contends punitive damages were covered under Admiral's policy at the time the Cagle case was settled.4 Westchester does not challenge the directed verdict independently of the partial summary judgment; therefore, in reviewing Westchester's arguments on appeal, we will address only whether the trial court erred in granting partial summary judgment on Westchester's Stowers claim. Likewise, Westchester does not challenge the directed verdict to the extent that it denied Westchester recovery from Admiral for amounts attributable to treble damages and attorneys' fees awarded to Lola Cagle for PeopleCare's deceptive trade practices violations on the basis that those damages were not within coverage of the Admiral policy. Consequently, we do not address whether the partial summary judgment was proper as to those damages.
Westchester contends that the trial court erroneously relied on a federal case construing Texas law in determining that insurance coverage for punitive damages at the time the Cagle cause of action arose or was settled was void as against public policy. In addition, Westchester claims the trial court erred in not relying on several Texas court of appeals cases holding that punitive damages were insurable in Texas at the time the Cagle cause of action arose or when the case settled. Westchester further claims that the trial court erroneously relied upon the "volunteer doctrine" in granting the partial summary judgment, averring that this case turns upon whether in 1995 Westchester had a good faith, reasonable belief that punitive damages were insurable in Texas at the time the Cagles' cause of action arose or when the case settled.
Questions of law are appropriate matters for summary judgment. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex.1999). A defendant is entitled to summary judgment if the summary judgment evidence establishes, as a matter of law, that at least one element of a plaintiff's cause of action cannot be established. Elliott-Williams Co. v. Diaz, 9 S.W.3d 801, 803 (Tex.1999). When reviewing a summary judgment granted on specific grounds, this court can affirm the summary judgment only if the ground on which the trial court granted relief is meritorious. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625-26 (Tex.1996). However, if a party preserves other grounds presented in the summary judgment motion that were not ruled on by the trial court, a court of appeals must also consider any other grounds that the trial court did not rule on. Id. at 626. To preserve these grounds, the party must raise them in the summary judgment proceeding and present them in an issue or cross-point on appeal. Id. at 625-26.
The motion for partial summary judgment that was granted in Admiral's favor did not raise Westchester's voluntariness as a challenge to Westchester's right to be equitably subrogated to PeopleCare. And nowhere in the partial summary judgment does the trial court state that Westchester's payment of the settlement funds was voluntary. In addition, before filing the motion for partial summary judgment upon which the trial court's directed verdict was based, Admiral filed a separate motion for partial summary judgment that specifically challenged Westchester's right to equitable subrogation based on the volunteer doctrine. The record does not contain any order granting or denying this motion, but an entry on the trial court's docket sheet indicates the following: "Admiral's MSJ — denied because fact question on volunteer payment (reasonable belief rule)." Moreover, the trial judge stated that the basis for the directed verdict was his prior ruling that Admiral's policy did not provide coverage for either punitive damages or Lola's DTPA damages; he did not say the directed verdict was based on the volunteer doctrine. Thus, it appears that the trial court denied summary judgment on that ground, and Admiral concedes this in its brief. We address the voluntariness issue only because it was raised and ruled on at trial and because Westchester has discussed it on appeal and at oral argument on rehearing en banc.
Westchester contends that the trial court's partial summary judgment is incorrect because it was erroneously based on the volunteer doctrine. Relying on Keck, Mahin & Cate v. National Union Fire Insurance Co. of Pittsburgh, PA, 20 S.W.3d 692 (Tex.2000), Westchester contends that in 1995 it had a reasonable, good faith belief that insurance coverage for punitive damages did not violate public policy and that it had no choice but to settle the portion of the Cagle claim attributable to punitive damages, regardless of whether punitive damages were actually covered under its policy and Admiral's policy at that time. Thus Westchester argues that it should not be precluded from...
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