Lead Opinion
OPINION ON REHEARING
On March 20, 2008, a panel of this Court reversed the trial court’s judgment and rendered judgment that appellee Omni Metals, Inc. take nothing by its claims. Omni did not file a motion for rehearing, but instead filed a motion for en banc reconsideration. We treated the motion for en banc reconsideration as a motion for rehearing, granted rehearing, and withdrew the March 20, 2008 opinion and judgment and issued our December 17, 2009 opinion and judgment in their place. Appellants Brown & Brown of Texas and Transcontinental Insurance Company filed motions for rehearing and rehearing en banc. We now grant appellants’ motions for rehearing, withdraw our December 17, 2009 opinion and judgment, and issue this opinion and judgment in their place, clarifying our December 17, 2009 opinion. Thus, the appellants’ motions for en banc reconsideration are rendered moot and are dismissed. See Brookshire Bros., Inc. v. Smith,
This case is on appeal from a trial court judgment in favor of Omni, a buyer and seller of steel coils. Port Metal Processing, Inc. (Port Metal) stored steel belonging to Omni, processed that steel into coils, and temporarily stored the finished coils for Omni. Port Metal purchased insurance from appellant Transcontinental Insurance Company (Transcontinental), originally through the Russell Lee Jacobe Insurance Agency (Jacobe). Jacobe was acquired on November 1, 1994 by Poe & Brown of Texas, Inc. (Poe & Brown), which is now known as appellant Brown & Brown of Texas, Inc. (Brown & Brown).
The underlying proceeding on which this action is based is a suit for damages arising from a fire that occurred on December 5, 1995 damaging Omni’s steel stored in a facility operated by Port Metal. The trial
The case was tried against Brown & Brown, Poe & Brown’s successor, and Transcontinental before a jury beginning on October 11, 2005. It was submitted to the jury on theories of negligent misrepresentation and unfair or deceptive acts or practices under former article 21.21 section 16 of the Texas Insurance Code and section 17.46(b) of the Texas Deceptive Trade Practices Act (DTPA). The trial court rendered judgment on the jury verdict in favor of Omni on November 28, 2005. Defendants Transcontinental and Brown & Brown timely appealed.
On appeal, Brown & Brown raises four issues. It contends that (1) the evidence is factually and legally insufficient to establish (a) that it made a negligent misrepresentation or engaged in unfair or deceptive acts under the DTPA, (b) that the representation caused Omni’s damages, (c) that Omni justifiably relied on Poe & Brown’s misrepresentations, and (d) that Poe & Brown acted knowingly; (2) the DTPA does not apply to Omni because Omni is not a consumer under the DTPA or an insured or third party beneficiary under Port Metal’s Transcontinental insurance policy; (3) attorney’s fees incurred in another lawsuit and awarded Omni in this suit are not recoverable as damages; and (4) the trial court erred in not giving it a proper credit for a $1,660,000 settlement in the other lawsuit.
Transcontinental raises seven issues. It contends that (1) Transcontinental could not be liable for representations made by Poe & Brown (a) when Omni presented no evidence that any representation of Poe & Brown was made with the actual or apparent authority of Transcontinental and (b) when Omni failed to submit a separate issue in the charge on Brown & Brown’s actual or apparent authority and obtain a jury finding; (2) the evidence establishes as a matter of law that Transcontinental is not liable for Poe & Brown’s actions in sending certificates of insurance to Omni; (3) Omni’s misrepresentation claim is not viable, as a matter of law, because (a) no one at Omni read the certificates of insurance, (b) the certificates disclaimed any representation regarding coverage, (c) a statement made by Poe & Brown to Port Metal’s president, Blake McKnight, in 1993 regarding coverage of Omni’s product was not made to Omni, and (d) Port Metal’s president had no authority to act for Transcontinental in representing to Omni that its metal was covered by Port Metal’s bailee policy; (4) Omni was not entitled to recover attorney’s fees of $740,000 for pursuing a tort action against the starters of the fire; (5) the jury’s award of additional damages of $1,080,000 awarded Omni on its DTPA claims against Transcontinental are erroneous because Transcontinental had no contact with Omni and there is no evidence Transcontinental knew of any wrongful act, as required for recovery of additional damages; (6) the trial court erred in not giving a $1,660,000 settlement credit to Transcontinental that Omni received from third parties; and (7) the trial court erred in not admitting evidence of a prior federal judgment in Transcontinental’s favor. In its own issues (3) and (4),
We modify the judgment of the trial court and, as modified, affirm.
PROCEDURAL HISTORY
Port Metal’s warehouse burned down on December 5, 1995, and Omni lost $2,600,000 in steel stored at Port Metal. Transcontinental, Port Metal’s insurer, denied coverage for damages to Omni’s steel on the ground that Port Metal’s “all risk” bailee policy was subject to an exclusion for goods stored at Port Metal for more than sixty days for which Port Metal received a storage fee. Omni paid storage fees to Port Metal. Omni filed suit against Port Metal and defendants it alleged were responsible for the fire, namely Electrical Wire & Cable Company, Inc., Electrical Redesign Company, Lighting Surplus, Harry Schubeck, Jr., and Textron, Inc. It subsequently added Poe & Brown, Port Metal’s insurance agent, and Transcontinental, Port Metal’s insurer. Omni settled separately with the original defendants for a total of $1,660,000. Omni spent $740,000 on attorney’s fees that were not legally recoverable prior to settlement.
Omni’s suit against Transcontinental and Poe & Brown was severed from the claims against the settling defendants. In the severed suit, Omni raised claims against Transcontinental and Poe & Brown for negligent misrepresentation and violations of section 17.46(b) of the DTPA
In the original appeal of this case prior to trial on remand, the Fourteenth Court of Appeals made a number of holdings pertinent to the instant appeal. It held that Poe & Brown voluntarily disclosed to Omni that Port Metal had bailee insurance which covered “all risks,” and, therefore, that Poe & Brown had a duty to disclose the storage fee exclusion, of which it was aware but Omni was not. Id. at *3-4. The Court also held that a fact issue existed as to “whether [Poe & Brown] misrepresented coverage because, under the circumstances, the ‘all risk’ certificate of insurance was false and misleading.” Id. at *4-5. The Court further held that a fact issue existed as to whether Poe & Brown could be held liable to Omni if it misrepresented coverage to Port Metal by telling Port Metal’s president that the policy would cover “[product owned by my customers for processing in-located in my facility.” Id. at *8.
The court also refused Poe & Brown’s and Transcontinental’s request that it hold
In addition, the court refused to hold that Omni could not sue on the basis of its reliance on misrepresentations made by Poe & Brown to Port Metal and repeated by Port Metal to Omni. Id. Observing that “[cjertain persons, other than the direct recipient of a misrepresentation can sue for negligent misrepresentation,” the Fourteenth Court held that the evidence raised a fact issue as to whether Poe & Brown misrepresented coverage to Port Metal. Id. at 7-8 (citing cases and Restatement (Second) of Torts § 552(2) (1977)). In response to Poe & Brown’s argument that Omni had a duty to read the policy itself, the court held, “Omni’s failure to read the policy does not support the granting of summary judgment.” Id. at *8. In other words, the court held that Omni Metals had no legal duty to read the policy. The court further held that Omni was not prevented from bringing its DTPA claims through article 21.21 section 16(a) of the Insurance Code by lack of consumer status. Id. at *9.
The court refused to address Transcontinental’s argument that Omni could not recover against Transcontinental and Poe & Brown attorney’s fees of $740,000 it had incurred in pursuing a tort action against the third parties allegedly responsible for starting the fire because the issue was not included in the motion for summary judgment. Id. at *10. The court likewise refused to address the issue of Poe & Brown’s actual or apparent authority to act as Transcontinental’s agent because it was not presented in the motion for summary judgment. Id. The court remanded the case for trial. Id.
THE TRIAL
The trial began on October 11, 2005. The evidence at trial comported with, and elaborated upon, the summary judgment evidence. It showed that Omni was a customer of Port Metal, a steel processing company; that Omni stored steel coils at the Port Metal warehouse; and that Port Metal charged Omni a storage fee on steel coils left at the warehouse longer than 60 days.
Blake McKnight, Port Metal’s president, testified that he asked Danny Sparks, then an agent for Jacobe and later an agent for Poe & Brown, to insure the Port Metal warehouse and its inventory, including steel that Port Metal’s customers were storing at the warehouse. However, the original policy, written in 1992, excluded from coverage property held in storage for which a storage charge was made, as did the 1993, 1994, and 1995 renewals. McKnight read the 1992 policy and asked Sparks about the exclusion for stored property. Sparks told him the exclusion did not apply to property stored like Omni’s at Port Metal. McKnight testified that he did not read the 1995 insurance policy in effect at the time of the fire.
Sparks testified that, by June 1993, he knew the policy did not provide the coverage he promised because he knew Port Metal was charging a storage fee to its customers like Omni. However, he did not explain to McKnight, to Port Metal, or to any of Port Metal’s customers that the insurance policy excluded the steel Port
Omni’s president, Arthur Tomes, spoke on several occasions with Port Metal’s president, McKnight, and inquired whether Omni’s steel at Port Metal’s warehouse was insured. McKnight assured him it was. Omni also requested and received certificates of insurance from Jacobe and later from Poe & Brown to document Port’s Metal’s insurance coverage for Omni’s steel to provide to Omni’s secured lender. Sparks delivered the certificates to Omni knowing that Omni wanted the certificates to make sure that all its steel at Port Metal was covered. The 1993 certificate sent by Sparks to Omni noted the $3,000,000 bailee liability policy issued by Transcontinental. It also contained the statement, typed by Sparks, that Port Metal’s insurance coverage “INCLUDES PROPERTY OF OTHERS IN CUSTODY OF INSURED.” Sparks admitted at trial that this was “untrue.” In 1994 and 1995, Sparks delivered insurance certificates to Omni containing the representation that the insurance covered “All Risk.” Brown & Brown’s expert testified at trial that the certificates were “misleading.” Each of the certificates contained the following disclaimer: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES DESCRIBED BELOW.”
Tomes, Omni’s president, testified at trial that he did not “personally read and review every single certificate of insurance that came across to Omni” and that he did not ask for or “actually receive the insurance policy rather than the certificate of insurance” because the company “would think that the certificate of insurance would be adequate to cover what we needed.” He “just look[ed] at ‘all risks.’ ” The certificates confirmed what McKnight had told him, and he saw nothing on the certificates that gave him any reason to doubt what McKnight had told him. The certificates were also reviewed by Debbie Hiner at Omni and then forwarded to Omni’s secured lender as proof that the steel was insured. Tomes testified that “they were satisfied too.”
On December 5, 1995, the warehouse caught fire and $2,600,000 million worth of Omni’s steel was ruined. The same day, Sparks approached Port Metal’s president, McKnight, and told him, “If anybody asks you, don’t mention the word ‘storage.’ ” Sparks also telephoned another of Omni’s customers, Mike Lykos, and told him “please do not mention the word ‘storage.’”
Following the trial, the jury found the following:
1. Transcontinental and Poe & Brown made negligent misrepresentations on which Omni justifiably relied.
2. Damages for the negligent misrepresentations of $704,267 (value of steel), $370,964.72 (expenses in*373 curred in selling the steel), and $740,000 (attorney’s fees incurred by Omni in the lawsuit against the parties who caused the fire).
3. Transcontinental and Poe & Brown engaged in an unfair or deceptive act that damaged Omni.
4. Damages for the unfair or deceptive act of $704,267 (value of steel), $370,964.72 (expenses incurred in selling the steel), and $740,000 (attorney’s fees incurred by Omni in the lawsuit against the parties who caused the fire).
5. Transcontinental and Poe & Brown knowingly engaged in their conduct.
6. Treble damages for the knowing conduct of $1,620,000 for Poe & Brown and $1,080,000 for Transcontinental.
7. Attorney’s fees of $161,050.07 (preparation and trial), $50,000.00 (appeal to court of appeals), and $25,000.00 (appeal to supreme court).
8. Transcontinental’s and Poe & Brown’s negligence caused the injury.
9. Transcontinental was 40% responsible and Poe & Brown 60% responsible.
The trial court entered judgment on the jury verdict on November 28, 2005. In the judgment, it also awarded Poe & Brown and Transcontinental a settlement credit against (1) the $704,267 awarded Omni by the jury for “the value of the loss less any amounts Omni received from the sale of the steel or from Transcontinental” and (2) the $370,964.72 awarded Omni by the jury for “reasonable and necessary expenses incurred in attempting to sell the steel”; and (3) $169,213.61 for prejudgment interest on the principal of (1) and (2) from December 13, 1996 through April 13, 1999. The total amount of the settlement credit was thus $1,244,445.33. The judgment expressly excluded from the settlement credit the $740,000 awarded Omni by the jury as economic damages for “the amount of reasonable and necessary attorneys’ fees and expenses incurred by Omni in a previous suit where Omni was required to prosecute the previous suit as a consequence of Defendants’ -wrongful conduct.”
The instant appeal follows from the trial court’s November 28, 2005 judgment.
DISCUSSION
A. Law of the Case Doctrine
Because this case comes to us on appeal after remand from reversal of summary judgment by the Fourteenth Court of Appeals, we consider, as a preliminary matter, the “law of the case” doctrine. That doctrine is defined as “that principle under which questions of law decided on appeal to a court of last resort will govern the case throughout its subsequent stages.” Loram Maint., Inc. v. Ianni,
Here, the Fourteenth Court of Appeals issued a number of rulings on the legal issues presented by the parties’ motions for summary judgment. The case was subsequently tried in reliance on those rulings and a verdict rendered from which this appeal is taken. Therefore we will follow the law of the case established by the Fourteenth Court of Appeals unless we conclude that, in some respect, it is clearly erroneous.
B. Omni’s Failure to Submit Issue and Obtain Jury Finding on Poe & Brown’s Authority to Act as Transcontinental’s Agent
In its first issue, Transcontinental argues that Omni failed to submit a separate issue on agency in the charge and failed to obtain a separate jury finding on Poe & Brown’s actual or apparent authority to act as its agent.
The jury charge did not contain a separate issue on Poe & Brown’s status as an agent of Transcontinental. However, the charge instructed the jury that “[ajuthority for another to act for a party must arise from the party’s agreement that the other act on behalf and for the benefit of the party” and that, if so authorized, “that other party is also authorized to do whatever else is proper, usual, and necessary to perform the act expressly authorized.” It also instructed the jury that “[ajpparent authority exists if a party (1) knowingly permits another to hold himself out as having authority or, (2) through lack of ordinary care, bestows on another such indications of authority that lead a reasonably prudent person to rely on the apparent existence of authority to his detriment. ...”
Jury questions 1 and 3 then asked the jurors whether “one or more of the Defendants made a negligent misrepresentation on which Omni Metals, Inc. justifiably relied” or “engage[dj in any unfair or deceptive act or practice that caused damages to Omni Metals.” The questions asked the jurors to respond separately for Poe & Brown and for Transcontinental. The damages questions similarly requested separate answers for each defendant. Transcontinental did not object to the instructions, and it did not object to the failure to submit a separate agency question. The judgment awarded actual damages, attorney’s fees, and costs jointly and severally against Poe & Brown and Transcontinental. It also awarded additional damages of $1,620,000 against Brown & Brown f/k/a Poe & Brown and of $1,080,000 against Transcontinental.
1. Waiver
Texas Rule of Civil Procedure 274 requires that “[a] party objecting to a charge must point out distinctively the objectionable matter.... Any complaint as to a question, definition, or instruction ... is waived unless specifically included in the
Because there was no objection to the charge as submitted, we hold that Transcontinental failed to preserve error with respect to the inclusion of an instruction on actual and apparent authority in the jury charge and that its complaint is waived. Even if the issue were not waived, however, we would not find error.
2. Omission of an Element of the Charge
Texas Rule of Civil Procedure 279, governing omissions from the charge, provides, in relevant part:
Upon appeal all independent grounds of recovery or of defense not conclusively established under the evidence and no element of which is submitted or requested are waived. When a ground of recovery or defense consists of more than one element, if one or more of such elements necessary to sustain such ground of recovery or defense, and necessarily referable thereto, are submitted to and found by the jury, and one or more of such elements are omitted from the charge, without request or objection, and there is factually sufficient evidence to support a finding thereon, the trial court, at the request of either party, may after notice and hearing and at any time before the judgment is rendered, make and file written findings on such element or elements in support of the judgment. If no such written findings are made, such omitted element or elements shall be deemed found by the court in such manner as to support the judgment....
Tex.R. Civ. P. 279.
Under Rule 279, “[w]hen a question is omitted which constitutes only a part of a ground of recovery, and other questions referable to that ground are submitted and answered, the omitted elements are deemed found in support of the judgment if no objection is made and they are supported by some evidence.” Ins. Co. of N. Am. v. Morris,
Here, the actual or apparent authority of Poe & Brown to act as the agent of Transcontinental is one of the elements of a finding of Transcontinental’s liability for negligent misrepresentation and deceptive trade practices under the DTPA and the Insurance Code. We hold that, by
We overrule Transcontinental’s first issue.
C. Poe & Brown’s Authority to Act as Transcontinental’s Agent
In its second issue, Transcontinental argues that the evidence was both legally and factually insufficient to support the jury’s answers to questions number 1, 2, 8, and 9, finding Transcontinental hable for misrepresentation and violations of the DTPA. It argues that even if Poe & Brown’s agency status is deemed found, Poe & Brown was a soliciting agent and that a soliciting agent “does not have authority to alter the policy via representations, and thus, the insurer has no liability as a matter of law where the agent issues a certificate of insurance that misstates coverage.”
1. Standard of Review of Legal and Factual Sufficiency of the Evidence
In a legal sufficiency, or “no-evidence” review, we determine whether the evidence would enable reasonable and fair-minded people to reach the verdict under review. City of Keller v. Wilson,
The jury is the sole judge of witnesses’ credibility; it may choose to believe one witness over another, and a reviewing court cannot impose its own opinion to the contrary. Wilson,
2. Evidence of Agency
It is established law that
an insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority. This rule is based on notions of fairness: “since the principal has selected the agent to act in a venture in which the principal is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions.”
Celtic Life Ins. Co. v. Coats,
Whether an agency relationship exists is usually a question of fact, and circumstantial evidence may be used to establish agency and the extent of the agent’s authority. Pitman,
Transcontinental argues that Poe & Brown was a soliciting agent without power to make a contract on behalf of Transcontinental. However, the record reflects that Poe & Brown was Transcontinental’s local recording agent. The High Performance Agency Agreement (the Agreement) between Transcontinental and Poe & Brown gave Poe & Brown explicit authority “[t]o bind, execute and issue the kinds of insurance contracts and bonds to which this Agreement applies ....” In addition, both Robert Pryor, Transcontinental’s “Authorized Agent,” and Sparks testified that Poe & Brown acted as Transcontinental’s agent. The Agreement expressly grants Poe & Brown
Reviewing the record evidence in the light most favorable to Omni and indulging every reasonable inference in its favor, we hold that the evidence is legally sufficient to show that Poe & Brown was Transcontinental’s local recording agent and that it therefore had the actual authority to sell Transcontinental insurance policies. We further hold that Transcontinental knowingly permitted Poe & Brown and Poe & Brown’s agents “to hold [themselves] out as having authority” to provide certificates of insurance for Transcontinental insurance products to its insureds and third parties and to make representations about the scope of insurance coverage to them or, at the very least, that Transcontinental “bestow[ed] on [Poe & Brown] such indications of authority” with respect to such actions that would “lead a reasonably prudent person to rely on the apparent existence of authority to his detriment.” See Merrell Dow,
Considering and weighing all the evidence, we hold that the implied finding that Poe & Brown was Transcontinental’s local recording agent with the authority to provide certificates of insurance and to make representations about the scope of insurance coverage is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Arias,
We overrule Transcontinental’s second issue.
D. Omni’s Standing to Maintain DTPA — Texas Insurance Code Claims
In its second issue, Brown & Brown argues that Omni lacked standing to bring a claim under the DTPA, specifically under subsections 17.46(b)(5) and (12) of the Texas Business and Commerce Code, under which Omni’s DTPA claims were submitted to the jury in Question 3 of the jury charge. See Tex. Bus. & Com.Code Ann. § 17.46(b)(5), (12). Transcontinental argues that “Omni did not purchase or seek to purchase the policy” and therefore it is not a consumer under the DTPA, as required for standing under section 17.46(b)(5), nor does Omni fall within the scope of “persons” permitted to bring DTPA claims under section article 21.21 section 16(a). Brown & Brown acknowledges that consumer status is not required to bring a claim under subsection 17.46(b)(12).
Former article 21.21 section 16(a) of the Insurance Code provided that “any person who has sustained actual damages caused by another’s engaging in an act or practice declared in Section 4 of this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice specifically enumerated in a subdivision of Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices.” Former Tex. Ins.Code art. 21.21, § 16(a), (b) (emphasis added). The section required that, “[t]o maintain an action for
Section 17.46(b) of the Business and Commerce Code, which has not been reco-dified, provides, in relevant part:
(b) ... the term “false, misleading, or deceptive acts or practices” includes, but is not limited to, the following acts:
[[Image here]]
(5) representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have ...
[[Image here]]
(12) representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law[.]
Tex. Bus. & Com.Code Ann. § 17.46(b) (Vernon Supp.2009).
Section 17.50(a) of the DTPA, generally governing standing to bring a DTPA claim, provides:
(a) A consumer may maintain an action where any of the following constitute a producing cause of economic damages or damages for mental anguish:
*380 (1) the use employment by any person of a false, misleading, or deceptive act or practice that is:
(A) specifically enumerated in a subdivision of Subsection (b) of Section 17.46 of this subchapter; and
(B) relied on by a consumer to the consumer’s detriment[.]
Tex. Bus. & Com.Code Ann. § 17.50(a) (Vernon Supp.2009) (emphasis added).
1. Omni’s Consumer Status Under § 17.46(b)(5)
Brown & Brown acknowledges that former article 21.21, section 16(a) of the Insurance Code did not incorporate the “consumer” standing requirement of section 17.50(a) of the DTPA unless the terms of the specific subsection under which a claim was pled required consumer status. See former Tex. Ins.Code art. 21.21, § 16(a). However, it argues that, in Crown Life Insurance Co. v. Casteel, the Texas Supreme Court held that a plaintiff must prove consumer status to bring a DTPA claim for the misrepresentation of “goods or services” under subsection 17.46(b)(5) and that Omni does not qualify as a consumer under the DTPA, i.e., as one “who seeks or acquires by purchase or lease, any goods or services.”
Our disposition of this issue is controlled by the law of the case. With respect to Omni’s consumer status, the Fourteenth Court of Appeals stated in Omni Metals:
Omni brought its DTPA-based claims through article 21.21 of the Insurance Code. Tex. Ins.Code ann. art. 21.21, § 16(a) (Vernon Supp.2002). Article 21.21, section 16(a), provides a cause of action for “unlawful deceptive trade practiee[s]” defined under the laundry list of DTPA section 17.26(b). Article 21.21 does not require consumer status to bring a DTPA-based cause of action. Crown Life Ins. Co. v. Casteel,22 S.W.3d 378 , 386 (Tex.2000). “But if the terms of a subsection of DTPA section 17.46(b) require consumer status, then consumer status is required to bring an action under article 32.21 for its violation.” Id.
Omni pleaded violations of DTPA section 17.46(b)(5), (7), (12), and (23). By their terms, subsections (5), (7), and (23) require consumer status. Id. at 387. However, subsection (12) does not require consumer status. Id. Because consumer status is not required, the trial court erred in granting summary judgment on Omni’s claim for violation of DTPA section 17.46(b)(12).
For the remaining DTPA provisions pled by Omni, we must determine whether consumer status requires direct purchase or lease of services from Poe & Brown. “Privity of contract with a defendant is not required for the plaintiff to be a consumer.” Amstadt v. U.S. Brass Corp.,919 S.W.2d 644 , 649 (Tex.1996). Further, “[t]he consumer does not have to be the actual purchaser of the insurance in order to be classified as a consumer under the DTPA.” HOW Ins. Co. v. Patriot Fin. Serv. of Texas, Inc.,786 S.W.2d 533 , 539 (Tex.App.-Austin 1990), overruled on other grounds by Hines v. Hash,843 S.W.2d 464 (Tex.1992). Accordingly, Omni is not denied consumer status by lack of privity with Poe & Brown. The trial court erred in granting summary judgment on this ground....
Brown & Brown also argues that Omni does not qualify as a “person” entitled to make a claim under former article 21.21 section 16(a) of the Insurance Code because Omni was not an “insured or third party beneficiary” of Port Metal’s insurance policy. Brown & Brown acknowledges that “any person” damaged by another’s engaging in a practice specifically enumerated in subsection 17.46(b) as a deceptive practice can bring a cause of action under that subsection. However, it argues that “[s]everal Texas courts ... have construed the term ‘any person’ as used in [former Texas Insurance Code article] 21.21 § 16(a) to mean only the insured or a third party beneficiary and have held that only an insured or third party beneficiary to a policy have standing to bring a [DTPA-Texas Insurance Code] claim.”
It is well established that an insurer’s misrepresentation regarding coverage is actionable under the Texas Insurance Code and the DTPA against agents and companies. See Mem’l Hosp. Sys. v. Northbrook Life Ins. Co.,
In Aetna Cas. & Sur. Co. v. Marshall, the Texas Supreme Court held that “[s]ection 16 of article 21.21 makes actionable any violation of [Texas Business and Commerce Code section] 17.46.”
This Court, following Marshall, has likewise held that privity of contract is not required for the imposition of a legal duty under article 21.21, section 16. Hermann Hosp.,
Hermann Hospital is not suing on an insurance policy or for the wrongful denial of payment under [its patient’s] worker’s compensation insurance policy. It is suing for the damages it suffered by relying on the representations of coverage allegedly made by appellees. The supreme court has held that misrepresentations as to coverage and benefits are precisely the sort of conduct that give rise to a course of action under this section. Aetna,724 S.W.2d at 772 . We find that as a practical matter, the relationship between insurance companies and provides of health care is a direct one, with the health care provider acting in reliance on the representations of coverage made by the carriers. Hospitals and other health care providers must, and do, rely upon the insurance carriers representations of coverage in making their decision regarding admission of potential patients. If insurance coverage and benefits can be verified, the hospital will usually accept an assignment of benefits to insure it is paid for any services rendered. If insurance coverage and benefits cannot be verified, or if no coverage exists, the medical provider can then make alternative financial arrangements. To insulate the insurance carriers from liability leaves the medical care provider without recourse against the party causing its damage, if it acts in reliance on the representation of coverage. Had the insurance carrier not falsely or negligently provided information, appellant could have sought alternative means to ensure that it received payment for service before rendering them.
Id.
The exact same reasoning applies in this case, in which Omni sought a representation from Poe & Brown that its steel stored at Port Metal was insured for use in its business dealings, specifically including reassurance that its steel was protected by insurance and an assurance for its lender that the lender’s collateral was protected. Had Poe & Brown not falsely represented that Omni’s steel was covered by insurance, Omni could have protected its own interests and those of its lenders either by notifying Port Metal of the gap in the coverage extended by its bailee policy, so that Port Metal could cure the defect in coverage, or by procuring coverage of its own, and it would not have suffered the $3,000,000 loss it did suffer as a result of Poe & Brown’s false assurance that “all risks” were covered by the policy.
Brown & Brown, however, cites to a string of authorities that it contends support its position, including Tamez v. Certain Underwriters at Lloyd’s, London,
We find these cases distinguishable. Each involved third party claimants under an insurance policy where the insurer had not made any representation directly to the third party upon which that party relied. See Tamez,
Unlike the plaintiffs in each of the foregoing cases, who brought claims of fraud and deceptive statements against insurers based on alleged misrepresentations and bad faith actions under a contract to which they were neither parties nor third party beneficiaries, Omni bases its claims upon false and misleading representations about a third party’s insurance coverage made to it by the insurer’s agent for its use in its business relations and upon which Omni detrimentally relied to its pecuniary loss. Omni thus falls squarely within the scope of persons entitled to sue for damages under the plain language of former article 21.21, section 16(a).
We overrule Brown & Brown’s second issue.
E. Negligent Misrepresentation and Unfair and Deceptive Acts
In its first issue, Brown & Brown argues that the evidence is legally and factually insufficient to establish that (a) Poe & Brown made a negligent misrepresentation and engaged in an unfair or deceptive act; (b) the representation caused Omni’s damages; (c) Omni justifiably relied on Poe & Brown’s misrepresentation; and (d) Poe & Brown acted knowingly.
In its third issue, Transcontinental similarly argues that Omni’s misrepresentation claim is not viable because (a) no one at Omni read the certificates of insurance; (b) the certificates disclaimed any representation regarding coverage; (c) there is no evidence that Sparks’s comment to Port Metal’s president, McKnight, regarding the purpose of the storage charge exclusion was conveyed to anyone at Omni; and (d) McKnight had no authority to act for Transcontinental when he stated to Omni’s president, Tomes, that Omni’s stored steel was covered by Port Metal’s bailee policy.
The third and fourth of Transcontinental’s contentions — that Sparks’s comment to Port Metal regarding the purpose of the storage charge exclusion and McKnight’s statements to Tomes about coverage are not actionable against Transcontinental— are not supported by any argument or authority and are therefore waived. See Tex.R.App. P. 38.1(i). We address the remaining issues together as questions of the legal and factual sufficiency of the evidence to support Omni’s negligent misrepresentation and deceptive trade practices claims.
1. Appellants’ Negligent Misrepresentation
In the first part of its first issue, Brown & Brown argues that the evidence is legally and factually insufficient to support Omni’s misrepresentation claim and its claims under former article 21.21 of the Texas Insurance Code and subsections 17.46(b)(5) and (12) of the DTPA. Specifically, it contends that the evidence is insufficient to support the jury’s answers to Jury Question 1, in which the jury was asked whether Poe & Brown made a negligent misrepresentation, and Jury Question 3, in which the jury was asked whether Poe & Brown engaged “in any unfair or deceptive act or practice that caused damages to Omni Metals.”
The charge defined “unfair or deceptive act or practice” to mean “1) representing that goods or services had or would have
a. Appellants ’ Duty to Disclose
Brown & Brown argues that, of the four communications made to Omni concerning Port Metal’s bailee insurance, three were made by Jacobe and only one by Poe & Brown, which subsequently acquired Ja-cobe and has itself since been acquired by Brown & Brown. Thus, it alleges, the only communication between Poe & Brown and Omni was the 1995 certificate of insurance delivered to Omni by Poe & Brown, which stated that Port Metal had a $3,000,000 “All Risk” “Bailee Liability” policy from Transcontinental. The bailee policy stated that the insurer, Transcontinental, “will pay for ‘loss’ ... from any of the Covered Causes of Loss,” which it defined as “RISKS OF DIRECT PHYSICAL ‘LOSS’ ... except those causes of loss listed in the Exclusions.” Brown & Brown argues that, “[a]s a matter of law, Poe & Brown’s certificate of insurance does not make a false representation by accurately describing the bailee policy as an ‘All Risk’ policy.” It refers us to State Farm County Mutual Insurance Co. v. Moran,
In Omni Metals, the Fourteenth Court of Appeals recited the elements of negligent misrepresentation, namely, that (1) a representation was made by a defendant in the course of business; (2) the defendant supplied false information for the guidance of others in their business; (3) the defendant failed to exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation.
In the prior appeal of this case, the Fourteenth Court of Appeals pointed out that a misrepresentation need not be an affirmative misrepresentation of fact. It stated, “Where there is a duty to speak, silence may be as misleading as a positive misrepresentation of existing facts.” Omni Metals,
Omni argued that Poe & Brown had a duty to disclose under Hoggett scenarios three and four. Id. at *4. The Fourteenth Court of Appeals agreed. Id. Omni had argued that Poe & Brown should have revealed the storage fee exclusion to correct impressions left by earlier certificates of insurance. Id. The court observed that the summary judgment evidence showed that the earliest certificate of insurance provided to Omni, for Port Metal’s 1992-93 bailee policy, stated that “coverage includes property of others in custody of
Omni also contended that, under the circumstances, the “all risk” certificate of insurance was a partial disclosure that conveyed a false impression and was therefore false under Hoggett scenario four. Id. The Fourteenth Court of Appeals again agreed. Id. It stated:
We conclude that the evidence shows Poe & Brown understood it was answering Omni’s question, “Is my property at Port Metal’s facility covered?” At that time, Poe & Brown knew that Port Metal wanted to cover all property of its customers, was aware of the storage exclusion in the policy, and knew that Port Metal was charging its customers a storage fee. Despite this knowledge, the certificate of insurance was its only answer, a partial answer, to Omni’s question. The certificate verified “all risk” bailee liability coverage with a $3,000,000 limit. In deposition, Poe & Brown’s corporate representative admitted that the term “all risk” did not really cover all possible risks and was possibly confusing. Thus, taken in the light most favorable to Omni, the all risk designation left a false impression under the circumstances.
Id. The court held, “Accordingly, there is a fact issue whether appellees met their duty under Hoggett scenario four.” Id.
In its second issue in Omni Metals, Omni argued that a fact issue existed as to whether Poe & Brown had misrepresented coverage “because, under the circumstances, the ‘all risk’ certificate of insurance was false and misleading.” Id. Poe & Brown made the same argument it makes here — that the certificate could not be considered a misrepresentation as a matter of law — and it relied upon the same authority, North American Shipbuilding, in support of its argument. Id. at *5. The Fourteenth Court of Appeals addressed Poe & Brown’s argument at length and found North American Shipbuilding to be distinguishable “for several reasons.” Id.
The court stated:
First, the “all risks” representation in that case was found in the insurance policy, not just in two words on a certificate: “[this policy] insures against all risks of physical loss or damage to the Vessel ... except as herein provided.”930 S.W.2d at 831 . Second, an exclusion for faulty workmanship was also fully delineated in the same document. In comparison, the certificate sent to Omni did not set for the storage exclusion. Third, the defendants in N. Am. Shipbuilding did not communicate the “all risk” policy clause in response to a specific inquiry. In contrast, Poe & Brown provided the “all risk” certificate in response to Omni’s inquiry for confirmation that its steel was covered while at Port Metal. Fourth, in N. Am. Ship*386 building, the insured failed to provide summary judgment proof that the insurer misrepresented the coverage to include faulty workmanship. The summary judgment proof here reveals that appellees told Port Metal that the storage exclusion did not apply.
Id. The court followed Black v. Victoria Lloyds Insurance, 797 S.W.2d 20 (Tex.1990), in holding that a fact issue existed concerning misrepresentation of liability insurance coverage for personal use when an insurance company represents that “complete ... insurance” has been provided when it has not. Omni Metals,
We adopt the Fourteenth Court of Appeals’ statement of the law and apply the law of the case.
At trial, the jury was asked in Question 1 whether Poe & Brown made a negligent misrepresentation. In Question 3, it was asked whether Poe & Brown had engaged “in any unfair or deceptive act or practice that caused damages to Omni Metals.” It responded ‘yes’ to both questions. We consider, therefore, whether the evidence is legally and factually sufficient to support the jury’s findings.
The facts presented to the jury in this case comport with the facts presented to the Fourteenth Court of Appeals in the summary judgment evidence. See id. at *1-2. The unrebutted evidence shows that the bailee policies issued to Port Metals contained an exclusion for stored goods. Port Metals was concerned about insuring all of the steel stored with it. Its president, McKnight, read the 1992 policy and asked its insurance agent, Sparks, about the exclusion. Sparks assured him the exclusion did not apply to the steel stored at Port Metal, and McKnight conveyed this information to Omni. Indeed, Omni’s president, Tomes, asked McKnight on several occasions whether Omni’s steel stored at Port Metal’s warehouse was insured and was assured by him that it was.
Omni’s bank required that Omni request certificates of insurance from Jacobe and later Poe & Brown to document Port’s Metal’s coverage, and Omni did. Sparks delivered the certificates to Omni knowing that Omni wanted the certificates to provide to its secured lender to show that all of its steel at Port Metal was covered by insurance. Despite knowing that Port Metal relied upon him to obtain coverage for all of its customers’ steel, as well as knowing, from at least June 28, 1993, that Port Metal received revenues from its customers of $6,000 a month for storage fees, and knowing, by at least July of 1993, that Port Metals’ bailee policy excluded from coverage goods “for which a storage charge is made,” Sparks did nothing to inform Port Metal or its customers of the exclusion. Rather, he typed into the 1993 certificate on Port Metal’s $3,000,000 bail-ee policy that he delivered to Omni the statement that Port Metal’s bailee policy “INCLUDES PROPERTY OF OTHERS IN CUSTODY OF INSURED,” a statement Sparks admitted was “untrue.” He then delivered two more “All Risk” certificates to Omni without mentioning the exclusion.
We overrule the first part of Brown & Brown’s first issue.
b. Justifiable Reliance and Causation
In the second and third parts of its first issue, Brown & Brown argues that the evidence is legally and factually insufficient to establish that a representation by Poe & Brown caused Omni’s damages. Brown & Brown contends that there is no evidence that Omni read Poe & Brown’s 1995 certificate of insurance before the 1995 fire and that, as a matter of law, Omni Metals could not detrimentally rely on the term “all risk” in the certificate of insurance to mean that its steel cods were covered under Port Metal’s bailee policy or that the policy would have “no conditions, no terms, no exclusions” limiting coverage. Transcontinental argues in the first and second parts of its third issue that no one at Omni read the certificates. Both Brown & Brown and Transcontinental also argue that the fact that the certificates contained a disclaimer is conclusive evidence of a lack of justifiable reliance.
“Under the DTP A, a consumer may bring an action when he has relied to his detriment on a false or misleading representation, and the reliance is a producing cause of damages.” Am. Home Shield, Inc. v. Kortz, No. 01-99-00380-CV,
In addition, Texas has long recognized the tort of negligent misrepresentation as described in section 552 of the Restatement (Second) of Torts and its application to professionals. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests,
One who, in the course of his business, profession or employment, or in any transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Id. at 791 (emphasis added) (quoting Restatement (Second) of Torts § 552 (1977) and applying section to define scope of duty of attorney to non-client to whom he has made representation); see Sloane,
Under this law, “[i]t is well settled that even though one does not have a duty to act, if one acts voluntarily, he must do so with due care and is generally liable for negligence.” Great Am. Mortgage,
However, liability is limited to the loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance [one] intends to supply the information or knows that the recipient intends to supply it; and (b) through reliance upon it in a transaction that [one] intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
Id. at 794 (quoting Restatement (Second) of Torts § 552(2)) (emphasis added).
In determining whether the justifiable reliance element of negligent misrepresentation is met, the court must consider the nature of the relationship between the professional, his client, and the nonclient. See McCamish,
The misrepresentation must have been the cause in fact of the plaintiffs damages. The damages recoverable for a negligent misrepresentation are those necessary to compensate the plaintiff for the pecuniary loss to him of which the misrepresentation is the legal cause, including, inter alia, “pecuniary loss suffered ... as a consequence of the plaintiffs reliance on the misrepresentation.” Sloane,
(1) Legal Sufficiency of the Evidence of Justifiable Reliance and Causation
Brown & Brown argues that because Tomes, Omni’s president, testified that he did not specifically recall reading the certificates of insurance, “the evidence is legally and factually insufficient to support the cause in fact and reliance elements of Omni’s claims.” Brown & Brown also argues that “Omni could not have justifiably or reasonably relied on the term ‘All Risk’ to mean that all of its steel coils were covered/ under Port Metal’s policy or that the policy would have ‘no conditions, no terms, no exclusions’ limiting coverage” because of the disclaimer in the certificate that “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES DESCRIBED BELOW.” Transcontinental likewise argues that the fact that the certificates contain a disclaimer is conclusive evidence of a lack of justifiable rebanee.
We construe Brown & Brown’s and Transcontinental’s argument to be that Omni could not justifiably rely on Poe & Brown’s representation that Port Metal had an “all risk” bailee pohey; rather, Omni was barred by the disclaimer as a matter of law from relying on appellants’ representation of coverage of “all risks” in the certificate of insurance, and it had a legal duty to read the policy referenced in the certificate of insurance to determine the scope of any exclusions. Because Omni did not ask for and read the policy, the evidence was legally insufficient to support its negligent misrepresentation and DTPA claims under the Insurance Code.
We hold that the law of the case again controls. In Omni Metals, in response to Omni’s appeal of the summary judgment entered against it, Poe & Brown and Transcontinental argued, as they do here, that Omni had a duty to read the policy itself. Reversing the summary judgment, the Fourteenth Court of Appeals pointed out that “[c]ertain persons, other than the direct recipient of a misrep
The Fourteenth Court of Appeals specifically rejected the argument that the disclaimer on the certificate of insurance put Omni on notice that there could be exclusions that would prevent its stored steel from being covered by Port Metal’s “all risk” bailee policy and that it placed on Omni a duty of due diligence to read the bailee policy to determine the extent of Port Metal’s coverage. The court stated,
[Issuance of a certificate of insurance [the 1993 certificate] without disclosure of additional information about the storage fee exclusion and issuance of another certificate [the 1995 certificate], coupled with the circumstances under which it was sent to Omni and the assurances of coverage to Port Metal, give rise to causes of action for misrepresentation. We reject appellees’ arguments that, as a matter of law, issuance of an insurance certificate does not create a duty; presence of disclaimers precludes the creation of a false impression; no duty to disclose arises because there is no duty to explain policy exclusions to an insured; and the use of “all risk” cannot convey a false impression.
Id. at *7. Adopting the law of the case, we hold that Omni’s negligent misrepresentation and DTPA claims were not barred as a matter of law by the failure of its president to read every word in the certificate of insurance or to request and read the policy to determine whether its steel was excluded from coverage.
Our conclusion is not changed by the cases relied upon by Brown & Brown to support its claim. In none of its cases was there a direct misrepresentation to the plaintiff or any evidence that the plaintiff received and relied upon a false or misleading representation. See Rocky Mountain Helicopters, Inc. v. Lubbock County Hosp. Dist.,
Moreover, Poe & Brown’s delivery of the requested certificate to Omni and its failure to correct information regarding coverage that it knew to be incorrect caused Omni not to take other steps to assure the coverage of its steel stored at Port Metal. This is essentially the same scenario as in Hermann Hospital, in which we opined,
To insulate the insurance carriers from liability leaves the [third-party plaintiff to whom coverage was misrepresented for use in its business dealings] without recourse against the party causing its damage, if it acts in reliance on the representation of coverage. Had the insurance carrier not falsely or negligently provided information, appellant could have sought alternative means to ensure that it received payment for service before rendering them.
Finally, our holding that Omni justifiably relied on Poe & Brown’s false representations and that those representations caused it pecuniary damages is not changed by Brown & Brown’s and Transcontinental’s reliance on new authority since Omni Metals was decided, namely the Southern District of Texas’s construction of Texas law in TIG Insurance Co. v. Sedgwick James,
In Via Net I, the named insured, Corporate Express, Inc., purchased two commercial general liability (CGL) insurance policies from Lumbermens Mutual Casualty Company for itself and its subsidiaries, Policies 300 00 and 300 01.
One of Via Net’s customers was Safety Lights Sales & Leasing, Inc. (Safety Lights). In March 1996, Safety Lights demanded that it be added as an additional insured to Via Net’s insurance policy in order for Via Net to remain a vendor with Safety Lights. See id. As evidence that it had been added as an additional insured, Safety Lights requested a certificate of general and auto liability insurance from Via Net, and it further required that the certificate “evidence ‘waiver of subrogation and additional insured in favor of Safety Lights Company.’ ” Id. at 594-95. CEDS’s insurance agency, Sedgwick, issued a certificate to Safety Lights under Policy 362 00 listing Via Net and USDS as the insureds. Id. The certificate stated, “Certificate holder is added as additional insured re: general liability.” Id. at 595. The certificate contained the same disclaimer as in this ease. Safety Lights did not ask for or seek to read Policy 362 00 to which the certificate of insurance referred. See id. at 598. Policy 362 00 did not provide for additional insureds.
Subsequently, an employee of Via Net was injured while delivering a steel plate to Safety Lights. He sued Safety Lights under various theories, including violations of the Texas Insurance Code, the DTPA, negligence, misrepresentation and fraud, claiming that Lumbermens should provide coverage under Policy 362 00. The United States District Court rejected Safety Light’s claim that it was entitled to coverage under Policy 362 00. The court held that a “certificate of insurance will not suffice to create insurance coverage if such coverage is precluded by the terms of the policy.” Id. at 597 (citing Wann v. Metropolitan Life Ins. Co.,
After its unsuccessful federal suit to recover as an additional insured under the Lumbermens policy, Safety Lights sued Via Net in Texas state court for breaching
We decline to extend the reasoning in Via Net I and Via Net II regarding the due diligence obligations of a person claiming to be entitled to insurance proceeds as a party to an insurance contract to persons bringing claims under the Texas Insurance Code alleging negligent misrepresentation and violations under the DTPA based on false representations of the contents of insurance policies by insurance agents and companies upon which the plaintiff relied in its business dealings and which caused the plaintiff to suffer economic damages. In Via Net I, the relevant holding was that a party claiming to be entitled to insurance coverage as an additional insured under an insurance policy, and therefore claiming to be in contractual privity with the insurance company, cannot rely on a certificate of insurance to extend more coverage than is actually conveyed by the policy itself, any more than the named insured can. Rather, a party claiming to be an additional insured is held to the same burden as the named insured of reading the policy to ascertain its right to coverage. See Via Net II,
It is well established that, unlike a party to an insurance contract claiming to be an insured and therefore entitled to recover insurance proceeds, a party to whom a third party’s insurance agent has made misrepresentations regarding the extent of the third party’s insurance coverage for use in the business dealings of the recipient has no duty of due diligence to seek out and read the third party’s insurance policy and to verify its terms and conditions in order to maintain a suit for misrepresentation and deceptive acts and practices against the agent and his principal under the Insurance Code and the DTPA. See Omni Metals,
The only requirement for a party seeking to hold liable the principal of an insurance agent who made a false representation about coverage is that the recipient look to the acts of the principal “to see if those acts would lead a reasonably prudent person using diligence and discretion to suppose that the agent had the authority he purported to exercise.” Shandee,
We hold that Omni had no legal duty to obtain and read Port Metal’s bailee insurance policy or to verify its terms in order to maintain its suit for misrepresentation and violations of the DTPA under article 21.21 of the Insurance Code. We therefore address whether the evidence was factually sufficient under the circumstances of this case to show that Omni justifiably relied on Poe & Brown’s misrepresentations.
(¾) Factual Sufficiency of the Evidence of Reliance and Causation
Here, at Omni’s request, Sparks, a Poe & Brown insurance agent, delivered certificates of insurance stating that Omni’s steel stored at Port Metal was covered under Port Metal’s “all risk” bail-ee insurance policy. Sparks knew the request was made so that Omni could provide the certificate to its secured lender to prove that its steel was insured. Sparks also knew by mid-1993 that Port Metal charged Omni a storage fee for its metal stored at Port Metal, that goods for which Port Metal charged a storage fee were excluded by the terms of the bailee policy, and that that information was not contained on any of the certificates. Rather, the information on each of the certificates was, by Sparks’ own admission, “untrue” and, by Poe & Brown’s expert’s admission “misleading.”
While Tomes, Omni’s president, testified at trial that he did not “personally read
Considering the evidence in the light most favorable to the jury’s verdict, we hold that the evidence would enable reasonable and fair-minded people to find that Omni justifiably relied on Poe & Brown’s negligent misrepresentation and that the negligent misrepresentation caused Omni’s pecuniary damages, and therefore the evidence in support of these elements of Omni’s claim was legally sufficient. See Wilson,
We overrule the third part of Brown & Brown’s first issue and Transcontinental’s third issue.
c. Poe & Brown’s Knowledge
Brown & Brown also argues in its first issue that the evidence is legally and factually insufficient to support the jury’s finding that Poe & Brown “knowingly” engaged in an unfair or deceptive act or practice, as required for an award of additional damages of up to three times actual damages under former article 21.21. See former Tex. Ins.Code art. 21.21, § 16(b)(1). Brown & Brown contends that it sends out thousands of certificates of insurance a week nationwide and that “[o]ther than Poe & Brown’s 1995 certificate sent to Omni less than two (2) months before the December 5, 1995 fire, there is absolutely no evidence of any other communication between Omni and Poe & Brown.”
The charge tracked the language of the DTPA in defining “knowingly” as
actual awareness, at the time of the conduct, of the falsity, deception, or unfairness of the conduct in question or actual awareness of the conduct constituting a failure to comply with a warranty. Actual awareness may be inferred where objective manifestations indicate that a person acted with actual awareness.
See Tex. Bus. & Com.Code Ann. § 17.45(9). Actual awareness “means that a person knows that what he is doing is false, deceptive, or unfair” and does it anyway. St. Paul Surplus Lines v. Dal-Worth Tank Co.,
Here, the evidence shows that Sparks, Poe & Brown’s agent, knew by at least July, 1993 that Port Metal’s bailee policy excluded from coverage goods for which a storage charge was made. He also knew from approximately the same time that Port Metal received revenues from its customers of $6,000 a month for storage fees. He knew that Port Metal relied on him to obtain coverage for all of its customers’ steel. Sparks also knew that Omni stored its steel at Port Metal and that Omni’s request for a certificate of insurance was for the purpose of providing its secured lender assurance that the steel stored at Port Metal was covered by Port Metal’s bailee policy. When Sparks sent the requested certificate to Omni stating that it covered “all risks,” Sparks knew that representation was false and misleading. Indeed, on the day of the fire two months later, Sparks advised both Port Metal and one of its customers not to mention the word “storage” to anyone. None of this evidence is controverted.
Considering the evidence in the light most favorable to the jury’s verdict, we hold that the evidence would enable reasonable and fair-minded people to find that Sparks, an insurance agent with Poe & Brown, knew that his representations to Omni that Port Metal’s insurance policy covered “all risks” was false and misleading and that he knew Omni would rely on the false information to satisfy its own and its secured lender’s concerns that the steel be insured. Thus we hold that the evidence in support of Poe & Brown’s knowledge of its misrepresentation was legally sufficient to support the jury’s finding. See Wilson,
We overrule Brown & Brown’s first issue and Transcontinental’s third issue.
F. Additional Damages Awarded Omni
In its fifth issue, Transcontinental argues that additional damages of $1,080,000 awarded Omni against Transcontinental are erroneous because Transcontinental had no contact with Omni and there is no evidence Transcontinental knew of any wrongful act, as required for an award of additional damages. On rehearing, Transcontinental re-urges and elaborates upon its argument from its original brief that an agent’s knowledge cannot be attributed to its principal under the DTPA and the Texas Insurance Code.
Former article 21.21, section 16 of the Insurance Code permitted an award of additional damages of up to three times actual damages “[i]f the trier of fact finds that the defendant knowingly committed the acts complained of.” Former Tex. Ins. Code art. 21.21, § 16(b)(1) (current version at Tex. Ins.Code Ann. § 541.152(b)). In its answer to question 3, the jury found that both Poe & Brown and Transcontinental had committed an unfair or deceptive act or practice by either “(1) representing that goods or services had or would have characteristics that they did not have; or (2) representing that an agreement confers or involves rights that it did not have or involve.” In its answer to Question 5, the jury found that both defendants engaged in this conduct “knowingly.” In its answer to Question 6, the jury found that Omni should be awarded $1,620,000 against Poe & Brown and $1,080,000 against Transcontinental because their conduct was committed knowingly. The issue presented by
The assessment of additional damages under former article 21.21, section 16 of the Insurance Code is not dependent on rules of common-law negligence but on the existence of corporate knowledge and therefore may be taken against a principal based solely upon the vicarious or imputed knowledge or intent of its agent. Maryland Ins. Co. v. Head Indus. Coatings & Servs., Inc.,
In Royal Globe, the supreme court addressed “whether a misrepresentation about coverage afforded by a policy of insurance, made by the insurance company’s local recording agent, is a deceptive trade practice [and insurance code violation] under Texas statutes for which the insurance company as principal is liable for treble damages.”
In Celtic, the supreme court reaffirmed the principle that “[a]n insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority.”
In Maryland Ins. Co., the court, applying standard doctrines of agency under circumstances very similar to those in this case, held that “[t]he knowledge of the agent is the knowledge of the company itself’ and that, therefore, the plaintiff “was entitled to a determination as a matter of law that the violation of the Insurance Code had been done knowingly.”
Here, Sparks, an agent for Poe & Brown, Transcontinental’s local recording agent, falsely represented that Port Metal’s Transcontinental “All Risks” bailee policy covered Omni’s steel stored at Port Metal. Sparks testified that he made a mistake by selling a policy that did not provide coverage to all Port Metal’s customers because of the storage exclusion; he understood that Omni wanted the certificates to make sure that its steel at Port
We hold that, in knowingly misrepresenting the scope of Port Metal’s bailee coverage, Sparks was acting within the scope of his duties as a Poe & Brown agent, and therefore his representations and the knowledge of their falsity are both attributable to Poe & Brown, his principal. In turn, Poe & Brown’s knowledge of the falsity can be attributed to Transcontinental, its principal, which had appointed Poe & Brown as its recording agent with authority to make representations about the terms of the insurance policies it sold.
On rehearing, Transcontinental cites as support for its argument that Sparks’s knowledge of the falsity of his representations cannot be attributed to Transcontinental the Texas Supreme Court’s opinion in Dalr-Worbh Tank and two intermediate appellate court opinions, The Woodlands Land Dec. Co., L.P. v. Jenkins,
Because both Sparks and Poe & Brown were acting within the scope of their authority in representing that Port Metal’s “All Risks” bailee policy covered Omni’s stored steel, we hold that both Poe & Brown and Transcontinental could be held liable to Omni for damages under the DTPA and the Insurance Code. The jury found that the representations were false and that both Poe & Brown and Transcontinental acted “knowingly,” and we have held that evidence in the record is sufficient to support these finding under both legal and factual sufficiency standards. Therefore, we hold that the trial court did not err in entering judgment on the verdict finding Transcontinental liable for additional damages for knowingly misrepresenting the coverage provided by Port Metal’s bailee insurance policy in violation of the Insurance Code and the DTPA.
We overrule Transcontinental’s fifth issue.
G. Attorney’s Fees and Costs Incurred in Prior Litigation
In its fourth issue, Transcontinental argues that Omni may not recover attorney’s fees of $740,000 it incurred in pursuing a separate tort action against the third parties responsible for starting the fire. In its third issue, Brown & Brown joins in
After the fire in which its steel at Port Metal was damaged, Omni filed suit against Port Metal and the parties it alleged were responsible for the fire, Electrical Wire & Cable Company and others. Omni subsequently amended its pleadings to name Poe & Brown and Transcontinental as defendants. On January 9,1998, the trial court entered its Supplemental Order on Severance, severing all actions against Poe & Brown and Transcontinental from the actions against the parties allegedly responsible for the fire. The instant appeal is taken from the severed action against Poe & Brown and Transcontinental. Omni contends that the litigation against the alleged responsible parties was prior litigation for which an equitable exception against wrongdoers applies that permits recovery of its attorney’s fees.
Omni acknowledges that the general rule in Texas is that “attorney’s fees may not be recovered from an opposing party unless such recovery is provided for by statute or by contract between the parties.” Travelers Indem. Co. v. Mayfield,
Subsequent to Turner, this Court and other Texas courts of appeals have held that “equitable principles may allow the recovery of attorney’s fees and other litigation expenses ‘where a party was required to prosecute or defend the previous suit as a consequence of the “wrongful act” of the defendant.’ ” Massey v. Columbus State Bank,
Here, the trial court awarded Omni its attorney’s fees incurred in an earlier stage of the instant litigation, which was brought initially against the parties allegedly responsible for the fire and to which appellants were added. After the settlement of Omni’s claims against the other defendants, Omni’s suit against Poe & Brown and Transcontinental was severed into a separate cause of action and tried and is now the subject of this appeal. The litigation for which fees were awarded can thus not properly be styled “prior litigation.” Rather, it is a suit for recovery of fees incurred in the original cause of action from which this suit was severed after settlement of the causes of action brought against the other parties. Thus, the award violates the prerequisites for recovery of attorney’s fees in the absence of a contractual or statutory provision set out in Turner, namely that the plaintiff must have incurred attorney’s fees in the prosecution or defense of a prior action and that the litigation must have involved a third party and must not have been brought against the defendant in the same action in which the fees are sought. Turner,
We sustain Transcontinental’s fourth issue.
H. Settlement Credit
In its sixth issue, Transcontinental argues that the trial court erred in not giving it the full $1,660,000 settlement credit that Omni received from the settling defendants. In its fourth issue, Brown & Brown joins in and adopts Transcontinental’s argument as its own. Specifically, Transcontinental argues that it is entitled to a credit for the full amount of the settlement under the one satisfaction rule. Omni argues that Transcontinental is not entitled to the full settlement credit because a non-settling tort-feasor may claim a credit only for damages for which all tortfeasors are jointly hable.
The trial court’s judgment granted Poe & Brown and Transcontinental settlement credit against (1) the $704,267 awarded Omni by the jury for “the value of the loss less any amounts Omni received from the sale of the steel or from Transcontinental”; (2) the $370,964.72 awarded Omni by the jury for “reasonable and necessary expenses incurred in attempting to sell the steel”; and (3) $169,213.61 for prejudgment interest on the principal of (1) and (2) from December 13, 1996 through April 13, 1999. The total amount of the settlement credit granted was $1,244,445.33.
Transcontinental argues that it should have been granted a settlement credit for the entire amount of the settlement, $1,660,000. It argues that a dollar for dollar settlement credit is applied first to past damages and prejudgment interest that have accrued on the damages as of the time of the settlement. It states that
Transcontinental argues that Omni’s total recovery, after subtracting the $740,000 in attorney’s fees damages and the $1,080,000 in additional damages, which Transcontinental contends were not properly recoverable against it, should have been $1,412,554.78, consisting of the $1,075,231.72 granted it as a settlement credit for past damages, plus $175,690.06 in accrued prejudgment interest at the time of the settlement, plus attorney’s fees of $161,000 through trial, and costs of $633.00. Transcontinental argues that Poe & Brown was held jointly liable for these amounts. Therefore, since the total amount of recoverable damages was $1,412,554.78 after adjustments for the improper award of additional damages and past attorneys fees, Transcontinental argues that it is entitled to a settlement credit for the entire $1,660,000. Since the amount of the credit it contends it is due exceeds the total amount of the judgment against it, Transcontinental argues that judgment should be had in its favor.
Omni agrees that Transcontinental was entitled to a settlement credit for actual damages awarded by the jury for the loss on its steel inventory and the expenses of mitigating the damages, together with prejudgment interest on those amounts calculated through the date of the original settlements, April 13, 1999. But it contends that Transcontinental is not entitled to settlement credit for the $740,000 awarded as damages for litigation expenses Omni incurred in prior litigation due to Transcontinental’s and Poe & Brown’s wrongful actions and that Transcontinental is not entitled to a credit for the additional damages assessed against it for its knowing participation in violations of the DTPA and Insurance Code. It observes that “Texas law does not provide for such a credit.” See Tex. Civ. Prac. & Rem.Code Ann. § 33.002 (Vernon 2003).
The Texas Supreme Court has held that “[ujnder the one satisfaction rule, the non-settling defendant may only claim a credit based on the damages for which all tort-feasors are jointly liable.” Crown Life Ins. Co. v. Casteel,
Here, Poe & Brown and Transcontinental were found jointly liable for actual damages of $704,267 for the value of the steel and $370,964.72 for mitigation damages; $740,000 in prior litigation attorney’s fees; and $161,050.07 in attorney’s fees, plus $50,000 for appeal to the Court of Appeals and $25,000 for appeal to the Supreme Court of Texas. The trial court awarded Poe & Brown a total settlement credit of $1,244,445.33, which did not include the $740,000 for prior attorneys fees. We have held that the $740,000 was improperly awarded to Omni. We have also held that the additional damages of $1,620,000 and $1,080,000 awarded Omni for Poe & Brown’s and Transcontinental’s violations of the DTPA were properly assessed separately against Poe & Brown and Transcontinental respectively and are not subject to settlement credit. See Tex. Civ. Prac. & Rem.Code Ann. § 33.002; Maryland Ins. Co.,
I. Admissibility of Prior Federal Judgment
In its seventh issue, Transcontinental argues that the trial court erred in not admitting evidence of a prior federal judgment in Transcontinental’s favor over Omni’s hearsay and irrelevance objections. Transcontinental states that it “sought to introduce this evidence to show that it could not have ‘knowingly’ refused to pay any amounts Omni was claiming, because a federal court had long ago ruled that it had no liability, even to its own insured, Port Metal.”
The general rule in Texas is that a judgment in another cause finding a fact in issue in a case at bar is not admissible. Davis v. Zapata Petroleum Corp.,
Here, Transcontinental has failed to show that the prior federal judgment was admissible. We hold that the trial court did not err in excluding it.
We overrule Transcontinental’s seventh issue.
CONCLUSION
We modify the judgment to deduct the $740,000 in attorney’s fees damages awarded appellee Omni Metals, Inc. from appellants Transcontinental Insurance Company and Brown & Brown of Texas, Inc.
We affirm the judgment of the trial court as modified.
Notes
. Tex Bus. & Com Code Ann. § 17.46(b) (Vernon Supp.2009).
. The relevant insurance provisions at issue in this case are found in former article 21.21 of the Insurance Code. See Act of April 25, 1957, 55th Leg., R.S., ch. 198, 1957 Tex. Gen. Laws 401, 401, amended by Act of May 10, 1973, 63rd Leg., R.S., ch. 143, § 2, 1973 Tex. Gen. Laws 322, 335 and Act of June 8, 1995, 74th Leg., R.S., ch. 414, § 13, 1995 Tex. Gen. Laws 26-27 (hereinafter "former Tex. Ins.Code art. 21.21”). The legislature has since repealed those provisions and enacted new provisions incorporating the content of the repealed provisions. See Act of May 20, 2003, 78th Leg., R.S., ch. 1274, §§ 2, 26(a)(1), 26(1)(10), 2003 Tex. Gen. Laws 3611, 3641, 4138 (current version at Tex. Ins.Code Ann. §§ 541.001-.454 (Vernon 2009)).
. This issue was raised by Transcontinental in its briefing on appeal in Omni Metals v. Poe & Brown, but it was not addressed by the Fourteenth Court of Appeals because it was not presented in the motion for summary judgment. Omni Metals, Inc. v. Poe & Brown of Texas, Inc., No. 14-00-01081-CV,
. Former article 21.21 section 16(a) and (b) of the Insurance Code provided:
Sec. 16. (a) any person who has sustained actual damages caused by another’s engaging in an act or practice declared in Section 4 of this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice specifically enumerated in a subdivision of Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices. To maintain an action for a deceptive act or practice enumerated in Section 17.46(b), Business & Commerce Code, a person must show that the person has relied on the act or practice to the person's detriment.
(b) In a suit filed under this section, any plaintiff who prevails may obtain:
(1) the amount of actual damages plus court costs and reasonable and necessary attorneys’ fees. If the trier of fact finds that the defendant knowingly committed the acts complained of, the trier of fact may award not more than three times the amount of actual damages!)]
Former Tex. Ins.Code art. 21.21, § 16 (emphasis added).
Current section 541.151 of the Insurance Code similarly provides for a private cause of action for damages against an insurer for acts (1) defined by section 541.051 through section 541.061 of the Code as "an unfair method of competition or an unfair or deceptive act or practice in the business of insurance” or (2) "specifically enumerated in Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice if the person bringing the .action shows that the person relied on the act or practice to the person’s detriment.” Tex. Ins.Code Ann. § 541.151 (Vernon 2009). Under current section 541.051 of the Insurance Code, it is "an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to ... make, issue, or circulate or cause to be made, issued, or circulated [a] ... statement misrepresenting with respect to a policy issued ... (A) the terms of the policy [or] (B) the benefits or advantages promised by the policy....” Tex. Ins.Code Ann. § 541.051 (Vernon 2009).
. With respect to Safety Lights' Insurance Code and DTPA claims, the court acknowledged that "Section 4 of Article 21.21 of the Texas Insurance Code and Section 17.46 of the DTPA prohibit the making of any statement misrepresenting the terms of any insurance policy.” TIG Ins. Co. v. Sedgwick James,
. Although this issue was raised in Omni Metals, it was not addressed by the Fourteenth Court of Appeals because it was not part of the parties’ motion for summary judgment.
Dissenting Opinion
dissenting on rehearing.
While I vote to grant both motions for rehearing, I do not agree with the relief granted by the Court. I, therefore, respectfully dissent from the Court’s judgment for the reasons set out in my December 17, 2009 dissenting opinion on motion for en banc reconsideration.