Opinion
No. 05-05-00373-CV
Opinion Issued June 13, 2005.
Original Proceeding from the 192nd Judicial District Court, Dallas County, Texas, Trial Court Cause No. 03-02847-K.
Writ of Mandamus Granted.
Before Justices WRIGHT, O'NEILL, and LANG.
MEMORANDUM OPINION
In this original proceeding, relator Allstate Texas Lloyd's asserts the trial court abused its discretion in denying its motion to sever and abate. We agree and conditionally grant the writ.
BACKGROUND
Amos Cupp purchased a homeowner's insurance policy from Allstate. Cupp was the only named insured. The policy prohibits Allstate's joinder as a co-defendant with its insured in any suit. The policy also provides that no action involving coverage for personal liability of the insured can be brought against Allstate "until the obligation of the insured has been determined by final judgment or agreement." Cupp made a claim under the policy for foundation damage caused by a plumbing leak. Cupp provided Allstate with an estimate for repair of the foundation and Allstate paid Cupp the full amount requested. Allstate also agreed to pay further cosmetic repairs if Cupp submitted an estimate of costs.
After receiving Allstate's payment for repairs, but before the remainder of the claim was settled, Cupp entered into a contract to sell the house to real parties in interest Clarence and Helen Peek. An addendum to the contract provided that Cupp was to repair the foundation completely and to make other repairs to the satisfaction of the Peeks. After closing on the sale of the house, the Peeks contacted Allstate and requested additional funds to repair the house. Allstate denied the request.
The Peeks sued Cupp alleging breach of contract, deceptive trade practices, negligence, and breach of warranty. In amended petitions, the Peeks asserted claims against Allstate, alleging they are direct or third party beneficiaries of its insurance policy with Cupp. The Peeks alleged Allstate agreed to pay for foundation repairs and have refused to honor that agreement. The Peeks sued Allstate for breach of contract, deceptive trade practices, and breach of the insurance code. Allstate filed a motion to sever the claims against it from the claims between the Peeks and Cupp. An associate judge denied the motion to sever. Allstate appealed the ruling to the trial court judge. The trial court judge denied the appeal, thus, effectively denying the motion to sever and abate. Allstate then filed this original proceeding alleging the trial court abused its discretion in denying the motion to sever and abate because the policy at issue and the rules of civil procedure prohibit its joinder in a suit against its insured.
STANDARD OF REVIEW
In an original proceeding, our review is based on the record presented by relator and real party in interest. Tex.R.App.P. 52.7. We review the trial court's decision under an abuse of discretion standard. Liberty Nat'l. Fire Ins. Co v. Akin, 927 S.W.2d 627, 629 (Tex. 1996) (orig. proceeding). A trial court's error in applying or analyzing the law is an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding).
SEVERANCE AND ABATEMENT
Allstate asserts that it is entitled to severance and abatement under the terms of its homeowner's policy with Cupp because that is the only contract under which it has any obligation to pay for repairs to the house. The Peeks respond that they are not suing Allstate under the homeowner's policy; therefore, the terms of the policy do not control. The Peeks claim they sued Allstate for breach of its promise, on which the Peeks relied, to repair the foundation of the house. The Peeks assert they relied on Allstate's promises before they purchased the house, and Allstate ratified those promises by dealing directly with them after the purchase.
In the last filed petition before the ruling, the Peeks alleged they have the capacity to sue Allstate because they are "direct beneficiaries and/or third-party beneficiaries to the insurance policy made the basis of this suit and entitled to all rights and benefits afforded by the law and the insurance policy in issue." The petition asserted claims for breach of contract, and violations of the deceptive trade practices act (DTPA) and insurance code. The record contains two petitions filed after the trial court's ruling that assert the Peeks' capacity to sue as "direct beneficiaries and/or third-party beneficiaries to Allstate's contractual obligations to repair the home, particularly its foundation. [The Peeks] are entitled to all rights and benefits afforded by the law pursuant to Allstate's breach of its contractual obligations to [the Peeks] including, without limitation, breach of the insurance policy at issue." To their claims for damages for breach of contract, and for violations of the DTPA, and insurance code, the Peeks added a claim that Allstate ratified its obligation to repair the foundation so it waived its "defense regarding same." Contrary to their assertion before this Court, the Peeks' suit against Allstate specifically and affirmatively seeks damages from Allstate because of its obligations under the homeowner's insurance policy with Cupp. Even the Peeks' pleadings filed after the ruling on the motion to sever, still seek to enforce the insurance policy. A third party beneficiary to an insurance policy "steps in to the shoes" of the insured and is bound by the conditions of the policy. Stonewall Ins. Co v. Modern Exploration, Inc., 757 S.W.2d 432, 434-35 (Tex.App.-Dallas 1988, no writ). The Peeks cannot claim the right to recover damages as "direct or third-party beneficiaries" to the insurance policy so as to avoid its obligations.
The Peeks also seek attorney's fees under chapters 37 and 38 of the Texas Civil Practice and Remedies Code. Chapter 37 pertains to declaratory judgment actions. The Peeks make no request for a declaratory judgment. The only provision under which the Peeks could claim attorney fees under chapter 38 is for breach of an oral or written contract.
Thus, all of the Peeks' claims involving the insurance policy must be severed and abated under the terms of the policy. Because Peeks' claims that Allstate is obligated to pay for repairs apart from the policy are inextricably intertwined with its obligations under the policy, all of the Peeks' claims against Allstate must be severed and abated. We conclude the trial court abused its discretion in not severing and abating all claims against Allstate from the claims asserted against Cupp. Because we have concluded Allstate is entitled to severance and abatement under the terms of the policy, we need not decide whether Allstate is entitled to severance and abatement under the rules of civil procedure.
ADEQUATE REMEDY AT LAW
In its petition for writ of mandamus, Allstate asserts it does not have an adequate remedy at law for the wrongful denial of the motion to sever and abate. We agree. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding).
CONCLUSION
We conditionally grant the writ of mandamus. We order the trial court to vacate its order signed March 16, 2005 denying Allstate's motion to sever and abate. We order the trial court to enter an order granting the motion to sever and abate. We order the trial court to file a certified copy of its order in compliance with this opinion and order within thirty days of the date of this opinion and order. Should the trial court fail to comply, the writ will issue.