Opinion
EP-05-CA-110-FM.
January 13, 2006
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
On this date, the Court considered "Defendant's Motion of Summary Judgment" [Rec. No. 15], "Plaintiff's Response to Defendant's Motion for Summary Judgment" [Rec. No. 16] and "Defendant's Reply to Plaintiff's Response to Motion for Summary Judgment" [Rec. No. 20] filed in the above captioned cause. After careful consideration of the motion, response, and applicable law, this Court is of the opinion that "Defendant's Motion of Summary Judgment" [Rec. No. 15] should be GRANTED.
I. FACTUAL AND PROCEDURAL HISTORY
On January 28, 2001, Plaintiff Ramy Asfahani ("Plaintiff"), a resident of El Paso, Texas, was involved in a car accident while he was a passenger in a vehicle operated by Robert Mitchell, Jr. ("Mitchell"). Mitchell was returning from the Ski Apache ski resort when he lost control of the vehicle. Plaintiff was ejected from the vehicle and suffered injuries. Plaintiff was airlifted to Sierra Medical Center in El Paso where he received medical care. Plaintiff was protected against loss caused by bodily injury and property damage resulting from the ownership, maintenance, or use of, including but not limited to uninsured/underinsured motor vehicle by a policy of insurance issued by State Farm Mutual Automobile Insurance Company ("Defendant"). At the time of the accident, Plaintiff was a minor and was insured through his father Habib R. Asfahani's underinsured motorist injury policy.
Defendant initially issued Policy No. P18-0260-A25-43J to Habib R. Asfahani on January 10, 1994. [Rec. No. 15, App. A, Ex. A]. The policy contained liability limits in the amount of $100,000 per person and $300,000 per occurrence. The policy also contained uninsured/underinsured motorist ("UM/UIM") limits of $100,000 per person and $300,000 per occurrence. On January 22, 3001, six days before Plaintiff's accident, Habib Asfahani requested the liability limits be increased from $100,000 per person to $500,000 per person. [Rec. No. 15, App. A, Ex. B]. However, Habib Asfahani did not request a change in the limit for his UM/UIM coverage, which remained at $100,000 per person. [Rec. No. 15, App. A].
In April 2003, after reaching a settlement with the driver responsible for the accident, Plaintiff made a formal claim for UM/UIM benefits under the State Farm policy his father, Habib Asfahani carried on the family vehicles. On May 18, 2004, Plaintiff, through his attorney, made a demand for the $100,000 UM/UIM coverage limit in full settlement of his underinsured motorist claims. In response, State Farm offered $120,000. According to the Defendant, it made the settlement offer in excess of the policy's UM/UIM limit because "due to a mistake at the adjusting level, State Farm thought the UM/UIM limits would automatically increase to the liability limits unless State Farm had a signed request for lesser limits. Thus, the Claims' adjuster and her supervisor believed the underinsured motorist coverage limit to be $500,000 at the time of the accident." [Rec. No. 15, pgs. 2-3].
Plaintiff subsequently made a demand for $500,000 and Defendant increased its offer to $170,000. The parties were unable to reach an agreement on the value of Plaintiff's claim. Defendant later sent Plaintiff a payment of $120,000 on the UM/UIM claim as an "impasse payment." Because Defendant argues that the policy's UM/UIM motorist coverage limit at the time of Plaintiff's accident was $100,000 per person, Defendant asserts it paid $20,000 more than the applicable UM/UIM limit.
Defendant is not seeking the repayment of the $20,000 it mistakenly overpaid.
Through "Plaintiff's Original Petition and Jury Demand," Plaintiff brings this action seeking relief against Defendant for breach of the insurance contract and insurance "bad faith" for failing to pay under the policy when "liability was reasonably clear." [Rec. No. 1, Ex. A-1] Defendant answered on March 14, 2005 and removed the suit to this Court based on diversity jurisdiction on March 31, 2005. [Rec. No. 1]. Defendant now moves for summary judgment pursuant to FED. R. CIV. P. 56(c). [Rec. No. 15].
II. STANDARD FOR SUMMARY JUDGMENT
Summary judgment is appropriate where the facts and law as represented in the pleadings, affidavits and other summary judgment evidence show that no reasonable trier of fact could find for the nonmoving party as to any material fact. FED. R. CIV. P. 56; Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative Database Sys. v. Morales, 990 F.2d 217 (5th Cir. 1993). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Props, Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25). If the movant fails to meet its initial burden, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
If the movant does meet its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998). A party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings unsupported by specific facts presented in affidavits opposing the motion for summary judgment. FED. R. CIV. P. 56(e); Lujan, 497 U.S. at 888; Hightower v. Texas Hosp. Ass'n, 65 F.3d 443, 447 (5th Cir. 1995).
In determining whether genuine issues of fact exist, "[f]actual controversies are construed in the light most favorable to the nonmovant, but only if both parties have introduced evidence showing that a controversy exists." Lynch, 140 F.3d at 625; see also Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992). However, in the absence of any proof, the Court will not assume that the nonmoving party could or would prove the necessary facts. Lynch, 140 F.3d at 625. A party must do more than simply show some "metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991).
III. ANALYSIS
This case involves a breach of contract claim and a breach of the duty of good faith and fair dealing claim brought by the insured on an insurance policy issued by Defendant. Defendant asserts the following three grounds entitles it to summary judgment:
1. The summary judgment evidence conclusively established that there has been no breach of the insurance contract. 2. Asfahani cannot establish the existence of an element essential to his `bad faith' claim on which he bears the burden of proof at trial; namely, that State Farm breached the insurance contract. 3. If this Court determines that a fact question exists as to whether Asfahani is entitled to recover on the contract, State Farm is still entitled to summary judgment on the extracontractual claims as State Farm has already paid $120,000 on a claim that has a limit of $100,000 under the applicable policy.
[Rec. No. 15, pg.s 3-4].
A. Breach of Contract Claim
Plaintiff readily admits in his summary judgment response that "[i]f the per person UM/UIM limit for this policy is $100,000, then State Farm has not breached its contract in the sense that it as paid more than the coverage in this case. However, if the policy limits are $500,000, then summary judgment is not proper and this case should go forward on all claims." [Rec. No. 16, pg. 3]. Plaintiff argues that the evidence demonstrates that there is a legitimate dispute as to the amount of UM/UIM coverage which precludes summary judgment in this case.
Plaintiff relies on two main fact issues regarding the UM/UIM coverage limits. First, Plaintiff argues that the State Farm adjuster assigned to this claim, Ms. Kristi Sunstrom, initially believed that the UM/UIM policy limits were $500,000 rather than $100,000. Therefore, Defendants offer of more than the applicable $100,000 UM/UIM coverage limit is evidence of the "true limits of the policy in question." [Rec. No. 16, pg. 4]. According to Plaintiff, the affidavit of Jeffrey Cluff establishes that after receiving a demand to settle this claim in the amount of $100,000 from Plaintiff, the claims adjuster called "Mr. Cluff and informed him that he was mistaken regarding the amount of UM/UIM coverage. Ms. Sunstrom unequivocally and affirmatively stated that the UM/UIM limits for the policy in question was $500,000." [Rec. No. 16, pg. 4].
Second, Plaintiff argues that Defendant has provided sworn and verified answers to interrogatories which further support Plaintiff's claim that the UM/UIM limits for the policy in issue is $500,000. Interrogatory number three found in "Defendant's Answers and Objections to Plaintiff's Interrogatories" requests "the dates of coverage, policy number, claim number, and the names of every insured, type of coverage, together with the amount of coverage for each type of coverage contained therein for Plaintiff, Ramy Asfahani." [Rec. No. 16, Ex. C]. Defendant responded to this interrogatory in part by stating that "during the course of the subject claim, Defendant's increased the uninsured/underinsured motorist limits to $500,000 per person." [Rec. No. 16, Ex. C]. Plaintiff asserts that because Defendant has not amended its answer, the "admissions provided by Defendant provide more than ample evidentiary support, to at the very least, create conflicting evidence which precludes summary judgment in this case." [Rec. No. 16, pg. 5].
After careful consideration, the Court is of the opinion that the summary judgment evidence establishes the Defendant's contractual limit of liability for an UM/UIM motorist claim was $100,000 per person. Therefore, because Defendant was not contractually obligated to pay more than $100,000 on Plaintiff's underinsured motorist claim, Defendant could not have breached the contract by offering, and eventually making a payment of, more than the $100,000 which was contractually obligated. Plaintiff has produced no competent summary judgment evidence to contradict Mr. Scott Herridge's affidavit that establishes: 1) Habib Asfahani never requested the UM/UIM limits on Habib Asfahani's policy to be increased above the $100,000 per person and $300,000 per occurrence as stated in the contract; 2) the coverage limits never were increased above that level; and 3) that Habib Asfahani never paid premiums for UM/UIM coverage in an amount greater than $100,000 per person and $300,000 per occurrence.
Defendant's mistaken belief that the policy in question provided a higher UM/UIM coverage limit does not require Defendant now to extend the higher coverage to the Plaintiff. See, e.g., Texas Farmers Ins. Co. v. McGuire, 744 S.W.2d 601 (1988), (holding "[t]he doctrine of estoppel cannot be used to create insurance coverage when none exists by the terms of the policy."). The policy language thus controls. There is no evidence to create any issue of fact controverting that the actual UM/UIM coverage limits available to Ramy Asfahani at the time of Plaintiff's accident were $100,000 per person/$300,000 per occurrence. The fact that a mistake was made after the formation of the contract unrelated to its formation cannot operate to alter the contract.
Plaintiff's next argument that Defendant's answer to Interrogatory 3 creates a genuine issue of material fact fails because the interrogatory response is in fact a correct statement. The subject answer stated the following: "During the course of the subject claim, Defendant increased the uninsured/underinsured motorist limits to $500,000 per person." [Rec. No. 16, Exh. C, pg. 4]. This admission does nothing to save Plaintiff's case, for it is an accurate statement because Defendant's claims adjuster handling the accident, albeit incorrectly, did increase the UM/UIM limits to $500,000. As Defendant pointed out in its reply to Plaintiff's response to summary judgment, "this `increase' is merely a post-loss occurrence based on State Farm's mistaken post-loss belief and cannot create coverage where none otherwise existed." [Rec. No. 20, pg. 3]. Similar to the preceding discussion of estoppel, even if Defendant's interrogatory mistakenly stated that the coverage limit was $500,000, its response cannot operate to nullify the contract agreed to by the parties.
Plaintiff's summary judgment response included an affidavit of Habib Asfahani which states that the signature was not his own that appeared on a May 10, 2001 form acknowledging the $100,000 per person/$300,000 per occurrence coverage limits on his policy. Defendant argues that this is proof that Habib Asfahani acknowledged that his UM/UIM coverage limit was in fact $100,000 per person/$300,000 per occurrence. Habib Asfahani's affidavit asserting that the signature contained on the form was not his only creates a question of fact as to whether he signed the form and not as to the UM/UIM limit on January 28, 2001. Habib Asfahani's affidavit fails to contradict Scott Herridge's affidavit which establishes: 1) Habib Asfahani never requested the UM/UIM coverage limits be increased above the $100,000 per person/$300,000 per occurrence level as set out in the declaration page of the policy then in force [Rec. No. 15, App. A, Ex. A]; 2) the coverage limits were never actually increased above that level; and 3) the premiums paid by Habib Asfahani were not for coverage in an amount more than $100,000 per person/$300,000 per occurrence.
The Form is entitled "Acknowledgment of Coverage Selection or Rejection." [Rec. No. 15, Ex. C, App. A].
B. Bad Faith Claim
The Court, having decided that there is no evidence to create any issue of fact as to the breach of contract, must now examine Plaintiff's claim of "bad faith." In Texas, a claim alleging a breach of the duty of good faith and fair dealing is a cause of action distinct from a contract action stemming from the same facts and circumstances of a denial or delay of insurance benefits. Viles v. Security Nat'l Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990). An insurer breaches its duty of good faith and fair dealing by failing to settle a claim where the insurer knew or should have known that it was reasonably clear the claim was covered. State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997); Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 54 (Tex. 1997). The Court having decided that the Plaintiff was only entitled to $100,000 in UM/UIM coverage and that amount was in fact paid, Defendant had a reasonable basis to not pay the requested $500,000. Because Defendant acted with a reasonable basis in paying Plaintiff $120,000, it is entitled to summary judgment on the Plaintiff's claim of a violation of the duty of good faith and fair dealing.
Further, according to Texas case law, there can be no claim for bad faith when an insurer has promptly denied a claim that is, in fact, not covered. Republic Ins. Co. v. Stoker, 903 S.W. 338, 341 (Tex. 1995). Similarly, as in the case at bar, when an insurer pays the full per person UM/UIM limit that the insured is entitled to, there can be no "bad faith." See also, O'Malley v. United States Fidelity Guar. Co., 776 F.2d 494, 500 (5th Cir. 1985) (holding that recovery on the bad faith claim would was not possible unless plaintiff prevailed on his coverage claim). Therefore, as a matter of law, Defendant did not violate the common law duty of good faith and fair dealing and Defendant is entitled to summary judgment on Plaintiff's "bad faith" claim.
IV. CONCLUSION
The Court today concludes that the summary judgment evidence establishes that Defendant has not breached the insurance contract, for Defendant's contractual limit of liability for an UM/UIM claim was $100,000. Because State Farm was not contractually obligated to pay above the policy limit, Defendant has not acted in bad faith or breached the duty of good faith and fair dealing. Accordingly, Defendant is entitled to summary judgment on all of Plaintiff's claims against it.
IT IS THEREFORE ORDERED that the "Defendant's Motion of Summary Judgment" [Rec. No. 15] is hereby GRANTED.