Opinion
NO. 01-16-00610-CV
09-07-2017
MELANIE HOEL, INDIVIDUALLY AND AS NEXT FRIEND OF HER MINOR CHILDREN Z.H. AND J.H., Appellant v. OLD AMERICAN COUNTY MUTUAL FIRE INSURANCE CO. AND AMWINS SPECIALTY AUTO, INC. D/B/A STATEWIDE CLAIMS SERVICE, Appellees
On Appeal from the 269th District Court Harris County, Texas
Trial Court Case No. 2015-58515
MEMORANDUM OPINION
Appellant Melanie Hoel appeals from a final take-nothing summary judgment entered in favor of appellees Old American County Mutual Fire Insurance Co. and AMWINS Specialty Auto, Inc. d/b/a Statewide Claims Service. Hoel filed the lawsuit to recover the amount of a default judgment entered in her favor against a driver insured by Old American. Because Old American and Statewide were prejudiced as a matter of law by the insured's failure to comply with the notice provisions of his insurance policy, we affirm.
Background
Melanie Hoel and her two minor children were involved in a car accident with Manuel Martinez Salinas. At the time of the accident, Salinas was listed as an insured driver on an automobile insurance policy issued by Old American. Old American had contracted with Statewide "to handle claims made under insurance policies" it issued.
Hoel, individually and as next friend for her children, sued Salinas seeking damages for injuries sustained as a result of the accident. Salinas did not answer the suit. The trial court entered a default judgment against him in the amount of $39,443.15.
After Hoel obtained the default judgment, she filed this suit against Old American and Statewide as an "intended beneficiary" of Salinas's auto insurance policy. Hoel asserted breach of contract by Old American and Statewide because they refused to pay the amount of the judgment in the underlying lawsuit against Salinas.
After answering the suit, Old American and Statewide moved for traditional summary judgment, raising three arguments why they should not be held liable under the insurance policy. They asserted that they were not liable as a matter of law because: (1) they were prejudiced by Salinas's failure to comply with the notice and cooperation provisions of his insurance policy; (2) under the policy, an actual trial, rather than a default judgment, is necessary for them to be liable; and (3) Statewide was not named as an insurer under Salinas's policy. Old American and Statewide attached evidence to their motion including a copy of the insurance policy and an affidavit from a Statewide litigation adjuster who handled the claim. In the affidavit, the adjuster described his attempts to contact Salinas about the underlying lawsuit. The adjuster averred that at no time did Salinas "ever contact . . . Statewide about the claim or underlying lawsuit," "forward a copy of the suit papers for the underlying suit to Statewide," "request a defense in the underlying lawsuit," or "cooperate in the defense of the underlying lawsuit."
Hoel filed a response to the motion for summary judgment. She argued that Old American and Statewide were not prejudiced by Salinas's failure to notify them of the underlying lawsuit or the default judgment. Hoel attached numerous exhibits to her response including several letters between Statewide and her counsel. In these letters, Hoel's counsel informed Old American and Statewide that he was representing her and her children with respect to the accident. The letters demonstrated settlement negotiations that took place between Statewide and Hoel prior to her filing suit against Salinas. In addition, Hoel attached copies of faxes she sent to Statewide before and during the underlying lawsuit, notifying it that she had filed suit and intended to seek a default judgment against Salinas. These faxes included copies of the petition, motion for default judgment, and the final judgment against Salinas. Hoel also attached a letter she received from Statewide which indicated that it was denying coverage to Salinas because he had failed to notify it of the lawsuit.
Without specifying the grounds upon which it relied, the trial court granted Old American and Statewide's motion for summary judgment. Hoel appealed.
Analysis
On appeal, Hoel argues that the trial court erred by granting summary judgment because Old American and Statewide could not establish that they were prejudiced as a matter of law based on Salinas's failure to comply with the notice provisions of his insurance policy. Hoel does not dispute that Salinas failed to give the required notice or cooperate with Old American and Statewide during the underlying suit.
To prevail on a traditional Rule 166a(c) summary-judgment motion, a movant must prove that there is no genuine issue regarding any material fact and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Little v. Tex. Dep't of Criminal Justice, 148 S.W.3d 374, 381 (Tex. 2004). A defendant may prevail by traditional summary judgment if it conclusively negates at least one essential element of a plaintiff's cause of action. IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004). A movant seeking traditional summary judgment on an affirmative defense has the initial burden of establishing entitlement to judgment as a matter of law by conclusively establishing each element of its affirmative defense. See Chau v. Riddle, 254 S.W.3d 453, 455 (Tex. 2008); TEX. R. CIV. P. 166a(b)-(c). A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).
If the movant meets its burden, the burden then shifts to the nonmovant to raise a genuine issue of material fact precluding summary judgment. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. See Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007). On appeal, we review de novo a trial court's summary-judgment ruling. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). In our review, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).
Because the trial court's order in this case does not specify the grounds for its summary judgment, we must affirm the summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. See Provident Life and Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003).
Old American and Statewide argued in their motion for summary judgment that they are not liable to Hoel as a matter of law because Salinas failed to comply with the notice and cooperation provisions in his insurance policy. They rely upon the following language in the policy:
PART E — DUTIES AFTER AN ACCIDENT OR LOSS
A. We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and of any witnesses. If we show that your failure to provide notice prejudices our defense, there is no liability coverage under the policy.
B. A person seeking any coverage must:
An insurer has no duty to defend or to indemnify an insured unless the insured forwards suit papers and requests a defense in compliance with the policy's notice-of-suit conditions. See Nat'l Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 606-10 (Tex. 2008); Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 174-75 (Tex. 1995). Compliance with a notice provision is a condition precedent to an insurer's liability on the policy. See Hudson v. City of Hous., 392 S.W.3d 714, 725-26 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). But the insured's failure to notify the insurer does not absolve the insurer from an underlying judgment unless the lack of notice prejudices the insurer as a matter of law. See id. at 727.1. Cooperate with us in the investigation, settlement or defense of any claim or suit.
2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
Hoel argues that Old American and Statewide could not establish that they were prejudiced as a matter of law by Salinas's failure to comply with the notice provisions because they had both actual notice of the suit against him and ample time to defend him. She relies upon this court's decision in Struna v. Concord Insurance Services, Inc., 11 S.W.3d 355 (Tex. App.—Houston [1st Dist.] 2000, no pet.), to support this contention. But the relevant aspects of Struna have been abrogated by subsequent decisions of the Supreme Court of Texas and of this court.
Old American and Statewide rely upon three cases decided after Struna, including National Union Fire Insurance Co. of Pittsburgh, PA v. Crocker, 246 S.W.3d 603 (Tex. 2008), Hudson v. City of Houston, 392 S.W.3d 714 (Tex. App.—Houston [1st Dist.] 2011, pet. denied), and Jenkins v. State and County Mutual Fire Insurance Co., 287 S.W.3d 891 (Tex. App.—Fort Worth 2009, pet. denied). In Hudson, this court distinguished the Struna holding, and held that in light of the subsequent holding by the Supreme Court of Texas in Crocker, an insurer's actual knowledge of a claim or suit does not preclude a showing of prejudice as a matter of law. See Hudson, 392 S.W.3d at 727, 728 n.11. Thus, we must determine whether Old American and Statewide proved prejudice as a matter of law in spite of their actual knowledge of Hoel's suit against Salinas. See id. at 727.
In Hudson, Shawn Hudson's son was killed by a garbage truck driven by a City of Houston employee, Gilda Green. Id. at 717. Hudson and several others filed suit against Green and the city. Id. The city answered the suit, but Green did not. Id. Hudson took a $3.5 million default judgment against Green and then nonsuited his claims against the city. Id. He then sued the city again asserting claims as the assignee of Green. Id. at 718. Green was insured by the city, and Hudson alleged that the city had a duty to indemnify her in the original lawsuit. Id. at 718-19. In response, the city filed a motion for summary judgment. Id. In one of its summary-judgment grounds, the city argued that Green had failed to give it notice of the first lawsuit or request a defense in that suit. Id. at 719-20. The trial court granted the city's motion, and Hudson appealed. Id. at 719.
On appeal, this court first analyzed whether the city had a duty to defend or to indemnify Green despite her failure to give it notice of Hudson's suit, even though it had actual knowledge of that suit because it was a named party. Id. at 724-27. Initially, this court noted that Crocker explained that '"notice and delivery-of-suit-papers provisions in insurance policies serve two essential purposes: (1) they facilitate a timely and effective defense of the claim against the insured and, more fundamentally, (2) they trigger the insurer's duty to defend by notifying the insurer that a defense is expected.'" Id. at 726 (quoting Crocker, 246 S.W.3d at 610). The court concluded that even though the city knew Hudson had sued Green, had defended itself in that suit, and was aware of the default judgment before the judgment became final, it had no duty to defend or to indemnify Green because she did not give it notice of the suit or request a defense. Id.
Next, the court analyzed whether the city was prejudiced as a matter of law as a result of Green's failure to provide notice of Hudson's suit against her. Id. at 727-29. In making this determination, the court again relied upon Crocker and also the opinion of the Fort Worth Court of Appeals in Jenkins. Id.
In Jenkins, an insurer, State and County Mutual Fire Insurance Company, had actual knowledge of an underlying suit against its insured, Lemmon, because it had defended another insured in that same suit. 287 S.W.3d at 893-94. Lemmon never provided State and County Mutual with notice of suit, and Jenkins, the plaintiff, took a default judgment against him. Id. The court considered whether State and County Mutual's actual knowledge of the suit prevented it from later claiming prejudice as a matter of law by the insured's failure to provide notice of suit. Id. at 895-98. The court concluded that:
Because [Lemmon] never gave State and County any notice of the suit, never complied with the State and County's policy's relevant notice provisions, never furnished it copies of any relevant papers as required by the policy, and never in any manner requested a defense from State and County, State and County owed no duty to defend [Lemmon], was prejudiced by the default judgment [Jenkins] took against [Lemmon], and was entitled to rely on its policy provisions precluding coverage on the basis of such noncompliance. We therefore hold that the trial court did not err by granting a traditional summary judgment in State and County's favor . . . .Id. at 899.
Similar to the holding in Jenkins, this court in Hudson concluded that the city, acting as a private insurer, was entitled to rely on the notice-of-suit provisions of the relevant city ordinance, and that it was prejudiced as a matter of law by the default judgment Hudson took against Green. 392 S.W.3d at 728-29. In reaching this conclusion, the court stated that "[w]hen determining an insurer's claim that it was prejudiced as a matter of law, the crucial inquiry is whether the insurer's ability to defend against the claim has been irreparably impaired by an insured's failure to comply with a notice-of-suit provision." See id. at 728 (citing Blanton v. Vesta Lloyds Ins. Co., 185 S.W.3d 607, 612 (Tex. App.—Dallas 2006, no pet.)). The court held that when an insurer had not received notice from its insured, a default judgment against the insured prejudiced the insurer as a matter of law for several reasons. Id. at 728-29. By failing to comply with the notice provisions and to request a defense, the insured deprived the insurer of its ability to answer and to defend against a plaintiff's claims, to conduct discovery, and to fully litigate the merits of the claims. Id. at 729. Additionally, a default judgment is generally prejudicial because '"[b]efore default judgment, an insurer can escape liability for a covered claim if the plaintiff fails to meet its burden of proof,' but, '[a]fter a default judgment, . . . an insurer can no longer defend against the underlying claim unless it first meets a new burden of proof on new issues."' Id. (quoting Coastal Ref. & Mktg., Inc. v. U.S. Fid. & Guar. Co., 218 S.W.3d 279, 287-88 (Tex. App.—Houston [14th Dist.] 2007, pet. denied)).
In this case, as in Hudson and Jenkins, the insured's failure to comply with the notice-of-suit provisions resulted in the plaintiff, Hoel, taking a default judgment against him. See id. at 728-29; Jenkins, 287 S.W.3d at 898-99. Like the City of Houston in Hudson, Old American and Statewide were entitled to rely on the notice-of-suit provision. See Hudson, 392 S.W.3d at 729; Jenkins, 287 S.W.3d at 899. Further, by failing to comply with the notice provisions and failing to request a defense, Salinas deprived Old American and Statewide of their ability to answer and to defend against Hoel's claims, to conduct discovery, and to fully litigate the merits of the claims. See Hudson, 392 S.W.3d at 729; Jenkins, 287 S.W.3d at 899; Md. Cas. Co. v. Am. Home Assurance Co., 277 S.W.3d 107, 117 (Tex. App.—Houston [1st Dist.] 2009, pet. dism'd). Additionally, once the default judgment was rendered against Salinas, Old American and Statewide no longer could defend against Hoel's tort claims unless they first met a new burden of proof on new issues. See Hudson, 392 S.W.3d at 729; Coastal Ref. & Mktg., Inc., 218 S.W.3d at 287-88.
Consistent with this court's opinion in Hudson, we conclude that Salinas's failure to notify Old American and Statewide of the underlying lawsuit and the resulting default judgment against him prejudiced them as a matter of law. See Crocker, 246 S.W.3d at 609-10; Hudson, 392 S.W.3d at 729; Jenkins, 287 S.W.3d at 899. Therefore, the trial court properly granted summary judgment in favor of Old American and Statewide. See Crocker, 246 S.W.3d at 609-10; Hudson, 392 S.W.3d at 729; Jenkins, 287 S.W.3d at 899. Accordingly, we overrule Hoel's challenge to the trial court's grant of summary judgment in favor of Old American and Statewide.
Conclusion
We affirm the judgment of the trial court.
Michael Massengale
Justice Panel consists of Chief Justice Radack and Justices Keyes and Massengale.