Whatley v. City of Dallas

• Decision Date: 03 August 1988
• Docket Number: No. 05-87-00620-CV,05-87-00620-CV
• Citation: 758 S.W.2d 301
• Parties: Ronnie WHATLEY, Appellant, v. CITY OF DALLAS, Texas, Appellee.
• Court: Texas Court of Appeals

Page 301

758 S.W.2d 301

Ronnie WHATLEY, Appellant, v. CITY OF DALLAS, Texas, Appellee.

No. 05-87-00620-CV.

Court of Appeals of Texas Dallas.

Aug. 3, 1988.

Rehearing Denied Sept. 30, 1988.

Bertran T. Bader, III, Dallas, for appellant.

Robert S. Dickey, Dallas, for appellee.

Before DEVANY, STEWART and HECHT, JJ.

HECHT, Justice.

Thrice now Ronnie Whatley has sued the City of Dallas to recover damages for a violation of his civil rights which occurred over a decade ago when Dallas police officer John Vito Del Gaudio used excessive force in arresting him. In this the latest of the three cases Whatley asserts the claim, assigned to him by Del Gaudio, that the City, under its self-administered liability protection plan, wrongly refused to defend Del Gaudio in Whatley's original civil rights action. By this claim Whatley seeks to recover the excess of his judgment against Del Gaudio in the civil rights action over the maximum benefits already paid by the City under its liability protection plan. The trial court rendered judgment on a jury verdict for the City.

We hold that:

--The City wrongly refused to defend Del Gaudio against Whatley's civil rights claim;

--Although the City's refusal to defend Del Gaudio was wrongful, there is no valid claim in this case that the City acted in bad faith, or that it negligently failed to settle Whatley's civil rights claim against Del Gaudio;

--Because there is no proof of bad faith or negligent failure to settle on the part of the City, and because Whatley covenanted not to enforce against Del Gaudio individually the judgment awarding Whatley damages, Whatley cannot recover from the City for its wrongful refusal to defend Del Gaudio damages awarded against Del Gaudio in excess of the benefits provided by the City under its liability protection plan; and

--Whatley's action on Del Gaudio's wrongful refusal to defend claim is not barred by limitations.

Consequently, we affirm the judgment of the trial court.

I

On the evening of May 2, 1977, Whatley was arrested and severely beaten by Dallas police officer Del Gaudio. Whatley has sued the City of Dallas three times to recover damages caused by Del Gaudio's use of excessive force in arresting him. The essentially undisputed facts material to this appeal derive from the conduct of this litigation.

Whatley I

Whatley first sued the City, along with its police chief and officer Del Gaudio, on March 22, 1979, for damages resulting from Del Gaudio's violation of his civil rights. Whatley was unable to locate Del Gaudio to serve him with citation until May 2, 1981. After being served with suit papers, Del Gaudio tendered defense of Whatley's action against him to the City under its self-administered liability protection plan. The City refused to defend Del Gaudio on the grounds that Whatley's claim was not covered by the plan.

Prior to trial, Whatley settled with Del Gaudio. Their agreement called for Del Gaudio to stipulate that he had negligently used excessive force in subduing and arresting Whatley, to appear for a deposition, and to deposit $2,000 in escrow to be paid to Whatley in the event Whatley recovered nothing against the City and police chief. For his part, Whatley promised never to attempt to enforce against Del Gaudio individually any judgment obtained against him. Del Gaudio fully performed his obligations under the settlement agreement.

Having stipulated liability, Del Gaudio did not appear for trial. In a trial on liability issues only, a jury found for the City and police chief. In a separate, non-jury trial on damage issues, the trial court found that Whatley had suffered actual damages of $125,000 and incurred reasonable and necessary attorney fees of $17,500. The trial court on May 11, 1982, rendered judgment for the City and police chief on the verdict, and for Whatley against Del Gaudio for the total sum of $142,500.

Whatley II

Whatley then filed a second action against the City for payment of his $142,500 judgment against Del Gaudio from benefits afforded by the City's self-administered liability protection plan, contending that his civil rights claim against Del Gaudio in Whatley I was covered by the plan. The trial court granted Whatley summary judgment against the City for $100,000, the maximum benefits offered under the plan. That judgment was affirmed on appeal. City of Dallas v. Whatley, 754 S.W.2d 233 (Tex.App.--Dallas 1984).

Whatley III

To recover the $42,500 unpaid balance of his judgment against Del Gaudio, Whatley took an assignment of Del Gaudio's claim against the City for wrongfully refusing to defend him in Whatley I, ¹ in exchange for the release of the $2,000 Del Gaudio deposited in escrow for Whatley under their settlement agreement in Whatley I. In the written assignment Whatley reaffirmed that he would never attempt to enforce the Whatley I judgment against Del Gaudio individually ² and stated that he would seek satisfaction of that judgment only from the City and its self-administered liability protection plan.

Whatley then filed this third suit against the City on May 2, 1985, alleging, as Del Gaudio's assignee, that the City's refusal to defend Del Gaudio was both a breach of contract and negligence. The case was tried before a jury, who found that the City was negligent in failing to defend Del Gaudio in Whatley I, but that such negligence was not the proximate cause of damage to Del Gaudio. The record reveals no discussion of Whatley's breach of contract claim by the trial court or counsel. The only jury issue requested or submitted pertaining to such claim was one inquiring as to reasonable attorney fees which Whatley sought only in connection with his contract claim. The trial court denied Whatley's motion for judgment non obstante veredicto and rendered judgment for the City on the verdict.

II

Before addressing the parties' points of error, we find we must analyze the issues which appear to be raised by their arguments.

A

An insurer's duty to defend its insured is ordinarily a contractual undertaking defined by the insurance policy. See Goswick v. Employers' Cas. Co., 440 S.W.2d 287, 290-291 (Tex.1969); see also Employers Nat'l Ins. Corp. v. Zurich Am. Ins. Co., 792 F.2d 517, 519 n. 1 (5th Cir.1986); Annotation, Consequences of Liability Insurer's Refusal to Assume Defense of Action Against Insured Upon Ground That Claim Upon Which Action Is Based Is Not Within Coverage of Policy, 49 A.L.R.2d 694, 711-716 (1956). In this case the City, having assumed administration of its own liability protection plan, is cast in the role of an insurer, and the terms of insurance are contained in a City Council resolution adopting that plan. The City does not contest its role as equivalent to an insurer, nor does it contend that its self-administered plan should be viewed any differently than a liability insurance policy. Accordingly, we treat the City in this case as an insurer under an ordinary liability policy.

Whether the City assumed the obligation to defend Del Gaudio against claims like Whatley's depends upon the terms of the City Council resolution adopting a self-administered liability protection plan. The relevant portions of that resolution state:

WHEREAS, the City of Dallas recognized the need of the officers and employees of the City whose duties are directly or indirectly connected with law enforcement to have liability protection from damages because of negligent acts, error, or omissions, and

WHEREAS, by council resolution ... the City was authorized to provide such liability protection through insurance coverage, and

WHEREAS, due to the appreciable increase in premiums proposed by the insurance company, it has been determined that the City can more economically provide the same liability protection under a self-administered plan, and

WHEREAS, it is recommended that the City Manager not renew the police professional liability insurance policy and that such coverage be provided by a self-administered plan. Now, therefore:

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DALLAS:

SECTION 1. That the City Manager be authorized to provide the officers and employees of the City of Dallas whose duties are directly or indirectly connected with law enforcement professional liability protection from damages because of negligent acts, errors, or omissions relating to their employment under a self-administered plan to the same extent as is now provided in policy of insurance acquired by the City ... a copy of [which is] filed with this resolution.

* * * SECTION 4. That the City Attorney shall provide all legal representation in accordance with the City Charter.

(Emphasis added.) The policy attached to the resolution stated, in part:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of negligent acts, errors or omissions of the insured ... to which this policy applies, and the company shall have the right and duty to defend any suit against the Insured seeking damages on account of ... Personal Injury ..., even if any of the allegations of the suit are groundless, false or fraudulent....

"Personal Injury" means ... assault and battery ... or deprivation of any rights, privileges, or immunities secured by the Constitution and laws of the United States of America ... for which law enforcement officers may be held liable to the party injured in an action at law, suit in-equity, or other proper proceeding for redress; However, no act shall be deemed to be, or result in Personal Injury unless committed in the regular course of [sic] duty by the Insured....

(Emphasis added.)

The City originally refused to defend Del Gaudio on the grounds that his conduct made the basis of Whatley's complaint was not covered by the plan. Specifically, the City took the position that Del Gaudio's alleged wrongful conduct was intentional, not negligent, was outside the course of his employment, and was contrary to...