Opinion
Civil Action No. 3: 03-CV-2916-B.
April 29, 2005
MEMORANDUM ORDER
Before the Court are two Motions for Summary Judgment (docs. 65 50), filed by Third Party Defendants Homer Cowan ("Cowan") and Davis-Dyer-Max, Inc. ("DDM"). Because Defendants have failed to raise a genuine issue of material fact regarding any of their causes of action against Cowan and DDM, the Court GRANTS the Motions.
I. BACKGROUND FACTS
Defendants Olga Maya ("Maya") and Angel Soriano ("Soriano") worked in a catering truck owned by Sunshine Catering. (Defs.' Orig. Ans. Countercl. ¶ 43(1)) Maya was injured when the deep fryer in the back of the truck allegedly exploded and covered her with hot grease. ( Id.) Maya brought suit in Texas state court (the "state court litigation") against Soriano, Sunshine Catering, Jolly Chef Express, Inc., and Randy Elledge. ( Id. at ¶ 43(2)) Pursuant to several insurance policies issued to Sunshine Catering and Jolly Chef, Employers Mutual Casualty Company ("EMC") and EMCASCO Insurance Company (collectively, the "Insurance Companies") provided a defense on behalf of Sunshine Catering, Jolly Chef, and Elledge, but not Soriano. ( Id. at ¶ 43(3)) EMC and EMCASCO settled the case for $40,000 on behalf of all of the defendants except Soriano. ( Id. at ¶ 43(7))
On September 10, 2003, Maya proceeded to trial against Soriano, who had retained his own counsel, and the court awarded her over $700,000. ( Id. at ¶ 43(8)) Soriano then assigned all of his claims against the Insurance Companies to Maya in exchange for her covenant not to execute the judgment against him. ( Id. at ¶ 43(9))
II. PROCEDURAL HISTORY
The Insurance Companies filed the instant suit on December 4, 2003, seeking a declaration that the insurance policies did not provide for a duty to defend or indemnify Soriano for Maya's injuries. (Pls.' First Am. Compl. ¶ 38) Maya and Soriano answered and made counterclaims for breach of contract, violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, breach of the duty of good faith and fair dealing, breach of the Stowers duty, and negligence. Maya and Soriano also joined Homer Cowan ("Cowan"), Davis-Dyer-Max, Inc. ("DDM"), and the law firm of Thompson, Coe, Cousins Irons ("Thompson Coe") as Third Party Defendants. Cowan is a claims specialist and an employee of EMC (Cowan Sec. Decl. ¶ 2), DDM is the insurance agent and producer who assisted in underwriting and binding coverage regarding the insurance policies at issue (Max Decl. ¶ 3), and Thompson Coe provided legal counsel for the Insured Companies during the state court litigation. The Court dismissed the claims against Thompson Coe following a Motion to Dismiss. Cowan and DDM each filed a motion for summary judgment which are now before the Court. The parties have briefed the issues, and the Court turns to the merits of its decision.
III. ANALYSIS
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Hart v. Hairston, 343 F.3d 762, 764 (5th Cir. 2003). In a motion for summary judgment, the burden is on the movant to prove that no genuine issue of material fact exists. Provident Life Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir. 2001). To determine whether a genuine issue exists for trial, the court must view all of the evidence in the light most favorable to the non-movant, and the evidence must be sufficient such that a reasonable jury could return a verdict for the non-movant. See Chaplin v. NationsCredit Corp., 307 F.3d 368, 371-72 (5th Cir. 2002). The Court will now address the arguments of the parties.A. Homer Cowan
Cowan moves for summary judgment on all of the third party claims brought against him by Defendants. It is undisputed that Cowan was a senior claims specialist for EMC and has knowledge of the claims brought in the state court litigation. (Cowan Sec. Decl. ¶¶ 2-3)
1. Breach of Contract
Cowan moves for summary judgment on Defendants' claim for breach of contract on the ground that Cowan had no contractual relationship with Defendants. (Cowan's Br. p. 6) The existence of a contract between the parties is essential to a breach of contract action. Frazin v. Hanley, 130 S.W.3d 373, 376 (Tex.App.-Dallas 2004, no pet.) (listing elements of a breach of contract action). Defendants respond with the conclusory statement that Cowan "stands in the same position and owes the same duties" as the Insurance Companies. (Defs.' Br. p. 4) Defendants offer no evidence or legal authority to support their assertion that an employee is liable for its employer's alleged breach of contract. The evidence demonstrates that Cowan was not a party to the insurance policies, and thus, could not have breached them. (DDM App. pp. 5, 213) Without evidence of a contract, Defendants have not created a genuine issue of material fact regarding their breach of contract claim. Therefore, the Court GRANTS Cowan's Motion for Summary Judgment on Defendants' breach of contract claim.
2. Texas Insurance Code Violations
Cowan next moves for summary judgment on Defendants' claims for violations of the Texas Insurance Code. According to Defendants' Third Party Claims, Cowan violated the Texas Insurance Code in the following ways:
A. By failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under a policy;
B. By failing to adopt and implement reasonable standards for prompt investigation of claims arising under a policy;
C. In failing to attempt, in good faith, to effectuate prompt, fair and equitable settlement of claims submitted in which liability is reasonably clear; and
D. By compelling the policy holders or beneficiaries thereof to initiate suit to recover amounts or benefits due under a policy of insurance.
(Defs.' Orig. Ans. Countercl. ¶ 49 [listing subparts of TEX.INS.CODEANN. § 542.003(b) (Vernon 2004)]) Cowan argues that Defendants have not shown that he was under any duty to perform the above acts. The Court first notes that the Texas Supreme Court has held that Article 21.21 of the Texas Insurance Code (now Chapter 541 of the Texas Insurance Code) does not create a cause of action by a third party against an insurance company. Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 149-50 (Tex. 1994). Thus, any direct claim under former Article 21.21 by Maya must be dismissed. Defendants also fail to present any evidence that Cowan was responsible for the alleged violations that occurred or that he had any ability to settle the claims at issue. See TEX. INS. CODEANN. § 542.003 (creating unfair settlement practice claims against insurers (emphasis added)). The only evidence identified is an affidavit of Jim Beggs, Soriano's state court counsel, which indicates Cowan was at a mediation of the state court litigation, but nothing more. (Beggs Aff. ¶ 5) Therefore, because there is no evidence or legal argument that Cowan was responsible for the listed Insurance Code violations, the Court GRANTS Cowan's Motion for Summary Judgment on Defendants' claims under the Texas Insurance Code.
3. Texas Deceptive Trade Practice Act Violations
Cowan also moves for summary judgment on Defendants' claims for violations of the Texas Deceptive Trade Practices Act ("DTPA"), TEX. BUS. COM. CODE ANN. §§ 17.01 et seq. (Vernon 2002 Supp. 2004), on the ground that Defendants have no evidence that Cowan made false or misleading statements or warranties. (Cowan's Br. pp. 7-8) Defendants respond by again pointing to the affidavit of Jim Beggs. (Defs.' Br. p. 5) Beggs' affidavit, however, only states that Beggs had a conversation with Cowan and asked him for coverage under the insurance policies. (Beggs' Aff. ¶ 5) The affidavit makes no mention of any statement by Cowan, and no other evidence is offered by Defendants. As such, Defendants have failed to raise an issue of material fact as to whether Cowan made false or misleading statements or warranties. Therefore, the Court GRANTS Cowan's Motion for Summary Judgment on Defendants' claims for violations of the DTPA.
4. Breach of Duty of Good Faith and Fair Dealing
Cowan further moves for summary judgment on Defendants' claim for breach of the duty of good faith and fair dealing on the ground that he owed no such duty to Defendants. (Cowan's Br. p. 8) The Texas Supreme Court has held that the duty of good faith and fair dealing owed between insurance companies and insureds does not apply to agents of the insurance company who are not parties to the insurance contract. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 698 (Tex. 1994). Indeed, the Court declared that the duty owed by insurance companies is "non-delegable." Id. As such, Cowan, as the claims adjuster who was not a party to the insurance contract, owed no duty of good faith and fair dealing to Maya or Soriano, and the Court GRANTS Cowan's Motion for Summary Judgment on that count.
5. Stowers Claim
Cowan moves for summary judgment on Defendants' claim that Cowan violated the duty created by the Texas Supreme Court in G.A. Stowers Furniture Company v. American Indemnity Company, 15 S.W.2d 544 (Tex.Com.App. 1929). Pursuant to Stowers, an insurer has a duty to settle when (1) the claim against the insured is within the scope of coverage; (2) the demand is within policy limits; and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it. State Farm Lloyd's Ins. Co. v. Maldonado, 963 S.W.2d 38, 41 (Tex. 1998). The Stowers duty, however, is imposed only on insurers and not on any other party. Ecotech Int'l, Inc. v. Griggs Harrison, 928 S.W.2d 644, 649 (Tex.App.-San Antonio 1996, writ denied). Because Cowan is not an insurer, he owes no Stowers duty to Defendants. Therefore, the Court GRANTS Cowan's Motion for Summary Judgment on Defendants' claim for violation of the Stowers duty.
6. Negligent Investigation
Finally, Cowan moves for summary judgment on Defendants' claim that Cowan was negligent in his investigation of the facts of the underlying events. Cowan argues that he did not have a duty to investigate the claims. (Cowan Br. pp. 8-9) Defendants make no responsive argument on this point. The Court finds that both the Fifth Circuit and Texas state courts have indicated that, absent a contractual duty, insurance agents owe no investigative duty to the insured. Bui v. St. Paul Mercury Ins. Co., 981 F.2d 209, 210 (5th Cir. 1993) (dismissing negligence claims against insurance investigator because there was no duty under Texas law or the insurance contract); Dagley v. Haag Eng'g Co., 18 S.W.3d 787, 790-91 (Tex. App — Houston[14th Dist] 2000, no pet.) (finding engineering company did not owe duty to insured to investigate claim); see also Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 916-17 (Tex.App.-Dallas 1997, writ denied). Without a duty to investigate, there can be no negligence. Therefore, the Court GRANTS Cowan's Motion for Summary Judgment on Defendants' claim of negligent investigation.
B. Davis-Dyer-Max, Inc.
DDM also moved for summary judgment on all of the third party claims raised by Defendants, and many of its arguments and Defendants' response are similar to Cowan's. The Court will address each cause of action in turn.
1. Breach of Contract
DDM moves for summary judgment on Defendants' breach of contract claims on the ground that it is not a party to any of the insurance policies. (DDM's Br. p. 6) Defendants' response is that the insurance policies state that "we" will provide coverage and never excludes DDM from the "we." (Defs.' Br. pp. 5-6) The insurance policy relied upon by Defendants, however, specifically defines "we" as "the Company providing this insurance." (DDM's App. p. 22) The insurance policy identifies DDM as the Producer ( Id. at p. 5), but EMC and EMCASCO are the companies providing the insurance. As such, Defendants have failed to produce evidence that DDM was a party to the insurance policies at issue. Thus, for the same reasons discussed in Cowan's Motion for Summary Judgment ( see Section III.A.1, supra), the Court GRANTS DDM's Motion for Summary Judgment on Defendants' breach of contract claim because there is no evidence a contract existed between Defendants and DDM. 2. Texas Insurance Code Violations
DDM next moves for summary judgment on Defendants' claim that DDM violated several provisions of the Texas Insurance Code. Specifically, DDM states that Defendants have no evidence that DDM made any sort of misrepresentation to them. (DDM Br. p. 7) DDM further produced evidence that no one at DDM had any contact with Defendants prior to the instigation of this suit. (Max Decl. ¶¶ 6-7 /DDM App. p. 2) Without evidence that DDM took any action with respect to coverage and the state court litigation, the Defendants cannot raise a fact issue as to whether DDM violated the Texas Insurance Code. As such, the Court GRANTS DDM's Motion for Summary Judgment on Defendants' Texas Insurance Code claims.
Defendants' allegations against DDM regarding the Texas Insurance Code are identical to those Defendants made against Cowan. (Defs.' Orig. Ans. Countercl. ¶ 49).
Similar to their response to Cowan, Defendants make the conclusory allegation that DDM "stands in the same position and owes the same duties" as the Insurance Companies. (Defs.' Br. p. 4) Again, Defendants offer no evidence or argument in support of this statement, other than their claim that DDM is a party to the insurance policies, which the Court has rejected.
3. Texas Deceptive Trade Practices Act Violations
As noted above, there is no evidence presented by Defendants that anyone at DDM made a statement or took any action with respect to Defendants. Indeed, DDM put on evidence to the contrary. (Max. Decl. ¶¶ 6-7/Def. App. p. 2) Thus, for the same reasons discussed in Cowan's Motion for Summary Judgment ( see Section III.A.3, supra), the Court GRANTS DDM's Motion for Summary Judgment on Defendants' DTPA claims.
4. Breach of Duty of Good Faith and Fair Dealing
As discussed above, the duty of good faith and fair dealing is non-delegable and does not apply to insurance agents who are not parties to the insurance contract. Natividad, 875 S.W.2d at 698. Therefore, because DDM is not a party to the insurance contracts at issue, DDM does not owe a duty of good faith and fair dealing to Defendants, and the Court GRANTS DDM's Motion for Summary Judgment on that count.
5. Stowers Claim
Defendants' Stowers claim against DDM also fails for the same reason it failed against Cowan. Because the Stowers duty only applies to insurers, Ecotech Int'l, 928 S.W.2d at 649, and there is no evidence that DDM was an insurer in this case, Defendants' claim must be dismissed. Therefore, the Court GRANTS DDM's Motion for Summary Judgment on Defendants' Stowers claim.
6. Negligent Investigation
Finally, DDM moves for summary judgment on Defendants' claim for negligent investigation. DDM's argument is similar to Cowan's on this point, and Defendants' response is the same. As noted above, courts have held that, absent a contractual duty, there is no duty to investigate owed by an insurance agent to an insured. Bui, 981 F.2d at 210; Dagley, 18 S.W.3d 790-91. Therefore, the Court GRANTS DDM's Motion for Summary Judgment on Defendants' claim for negligent investigation.
III. CONCLUSION
Because Defendants' have failed to create a genuine issue of material fact regarding any of their third party claims against Cowan and DDM, the Court GRANTS Cowan's and DDM's Motions for Summary Judgment and DISMISSES Defendants' claims against them.SO ORDERED.