696 S.W.2d 60 | Tex. App. | 1985
ON MOTION FOR REHEARING
Our previous opinion is withdrawn and the following is substituted.
In four separate suits, numerous property owners sued the Texas Catastrophe Property Insurance Association in a district court of Travis County, Texas, alleging causes of action on property-insurance contracts written by the association.
The fundamental and determinative issue on appeal is whether the Legislature, in its enactment of the Catastrophe Property Insurance Pool Act (the “Act”),
THE CATASTROPHE PROPERTY INSURANCE POOL ACT
The general purpose of the Act is to effectuate the writing of windstorm, hail, and fire insurance in certain portions of the State where property owners would otherwise, as a practical matter, be unable to secure such insurance, owing to the location of their property in areas prone to such hazards and a resulting reluctance in insurers to contract with them for insurance protection (§ 1). In its substantive parts, the Act creates a legal entity named the “Texas Catastrophe Property Insurance Association,” a defendant below. The members of the association constitute a “pool” to which “all property insurers authorized to transact property insurance in the State” shall belong, except as they are excused by other provisions of law (§ 4). The association is empowered by the Act to write contracts of insurance in its own name and may appear before the State Board of Insurance in regard to such material matters as premium rates, risk classifications, rules, rating plans, and changes therein (§§ 5(a), 8). The profits and losses on the association’s insurance contracts are apportioned pro-rata among the members of the pool according to a prescribed formula (§ 5(c)). Members of the pool may themselves voluntarily write similar insurance in the hazard-prone areas and thereby reduce their participation in the writings of the association (Id.). The business of the association is governed by a board of directors, selected by the members, under a plan formulated by the board to provide more particularly for the assessment and recoupment of losses (§ 5(b)). The Act empowers the State Board of Insurance to “issue any orders which it considers necessary to carry out the purposes of this Act,” including rate orders and orders establishing the forms of policies issuable by the association in evidence of the terms of its contracts with property owners to whom the insurance protection is sold (§ 5A(a)).
The theme of the statute is that the association shall conduct its business as any ordinary insurer having the power to enter into insurance contracts in the State at premium rates and on policy forms established by the State Board of Insurance. We conclude, in consequence, that the association is empowered, like any insurer under the common law, to deny coverage on an owner’s claim. Even though that power is not expressly given the association by the terms of the Act, it is clearly implied. (It is alleged by the plaintiffs that the association denied coverage under its contracts with the plaintiffs, in breach thereof, entitling them to compensatory damages for the breach.)
Section 9 of the Act is entitled “Appeals.” It is primarily from the terms of this section that one may arguably be permitted an inference that the Legislature intended that the State Board of Insurance would adjudicate an insured’s claim on an insurance contract written by the association, even though the Act is absolutely silent as to such essential matters as: (1) the criteria or standards by which the Board’s adjudication shall be made; (2) the factual determinations upon which any legal criteria or standards shall depend; and (8) any remedy awardable by the Board if it be determined that the association is liable on or for breach of its insurance contract.
Section 9 does provide for both administrative review and judicial review of controversies; however, the nature of the reviewable controversies is not specified beyond what may be implied by the rather inexact word “aggrieved.” The Board’s power of administrative review extends to “appeals” taken to the Board by an insured or an insurer “aggrieved by an act, ruling or decision of the Association,” or by the association in the event it is “aggrieved” by any action of the Board. With respect to judicial review, the section provides that the association or a person “aggrieved” by an order or decision of the Board may
THE ASSOCIATION’S THEORY THAT THE DISTRICT COURT LACKED SUBJECT-MATTER JURISDICTION
The association’s theory that the district court was without jurisdiction over the plaintiffs’ causes of action is this: in any suit brought under authority of § 9 of the Act, the State Board of Insurance must be named a defendant, for that is the express requirement of article 1.04(f) of the Insurance Code; and the suit must be brought within 30 days of the date the Board’s decision in the case becomes final and ap-pealable, for that is the express requirement of § 19(b) of the Administrative Procedure and Texas Register Act,
In the present case, the plaintiffs sued the association in a district court of Travis County within 80 days of the Board’s final decision. They alleged that the association had wrongfully refused to pay the owners’ claims for property losses resulting from a hurricane, which losses they alleged were compensable under the insurance contracts. Their petition also averred that the plaintiffs requested “a trial de novo review of a decision of the State Board of Insurance,” which decision had validated the association’s denial of the plaintiffs’ claims. The plaintiffs’ original petition did not, however, designate the Board as a defendant nor did they request issuance and service of citation upon the Board. The record reflects that the plaintiffs, by their first amended original petition, eventually did join the Board as a defendant, but this pleading was filed after the 30-day period stated in APTRA § 19(b).
From the foregoing circumstances the association contends that the district court’s potential jurisdiction under § 9 of the Act was never invoked, until too late, by a pleading filed in compliance with the conditions imposed by the other two statutes.
DISCUSSION AND HOLDINGS
We start with the constitutional rule that one may not unreasonably be denied access to the courts for adjudication of his common-law cause of action. Tex. Const.Ann. art. I, § 13 (1984); Lebohm v. City of Galveston, 154 Tex. 192, 275 S.W.2d 951, 954 (1955). That constitutional provision prohibits the Legislature’s arbitrary withdrawal of all legal remedies from one having a cause of action well-established at common law, as in a suit for breach of contract. The Legislature may, as it did in its enactment of the Workers’ Compensation Act, avoid arbitrariness and a consequent transgression of the Constitution by providing a reasonable substitute for the legal rights and duties prescribed by the common law, and attendant common-law remedies, which it may abolish.
Whether the new statutory rights and obligations are (1) unknown in the common law or (2) reasonable substitutes for common-law rights and obligations that are abolished by the Legislature, that body may establish a statutory right of action and remedy to enforce the new rights and obligations. Then it may be said:
[t]he rights to be enforced, and all the remedies provided therefor, are purely statutory, as distinguished from the common-law rights and remedies_
(Emphasis added). Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084, 1087 (1926). If such be the case, then the following rule is applicable:
The general rule is that where the cause of action and remedy for its enforcement are derived not from the common law but from the statute, the statutory provisions are mandatory and exclusive, and must be complied with in all respects or the action is not maintainable.
Id. Thus, in the present case, if the rights and obligations declared upon in the plaintiffs’ petition, and the remedy requested by them, be “purely statutory,” then it may be supposed that they were required to comply with the statutory requirements that they designate the State Board of Insur-anee as a defendant within the 30 days allowed, and when they failed in that regard, their suits were properly subject to dismissal by the district court. But such is not the case.
The contracts declared upon by the plaintiffs are in the form of an ordinary insurance contract such as the Board approves in other areas of insurance. The material rights, obligations and remedies of necessity derive from the contract terms and not from any statute. Nothing in the Act purports to provide a system of rights, duties and remedies as a substitute for the rights, duties and remedies imputed by the common law to the contracts authorized therein. Nothing in the Act purports to abolish these common-law rights, duties and remedies. The silence of the Act, in this respect, literally leaves the parties to whatever rights, duties and remedies exist at common law under their contracts.
Moreover, nothing in the Act suggests a power in the Board to adjudicate these common-law rights and duties, or award a common-law remedy for their enforcement, unless these traditionally judicial functions are assigned to the Board by implication from the word “aggrieved,” as used in § 9 of the Act. But such implications are forbidden, for the Board possesses no inherent power, but only the powers expressly conferred upon it “in unmistakable terms.” Key Western Life Ins. Co. v. State Board of Insurance, 163 Tex. 11, 350 S.W.2d 839, 848 (1961); Board of Insurance Com’rs v. Guardian Life Ins. Co., 142 Tex. 630, 180
It has not been suggested to us that a reason even exists for the Legislature’s placing in the Board an original power to adjudicate all or any incidental part of the parties' rights and obligations under the contracts in question — such as a benefit to be obtained by not by-passing something within the Board’s specialized field. On the other hand, the nature of any controversy about whether coverage for a loss exists under the terms of the contract is one plainly, inherently, and unquestionably judicial, of a kind courts have adjudicated from time immemorial.
If the Legislature intended to delegate to the Board a power to determine such a controversy, the Board’s power would not aptly be described as quasi-judicial. The modifier would be inapt, for the power so delegated would be plainly and simply an original judicial power, there being in the Act no provision for a new system of statutory rights, obligations, and attendant remedies to be administered by the Board. And the Act does not even purport to assign to the Board an original and exclusive power to determine some incidental matter upon which judicial relief would depend. See Foree v. Crown Central Petroleum Corporation, 431 S.W.2d 312 (Tex. 1968).
What the Act would do, under the interpretation advanced by the association, is transfer to the Board from the judicial department a power to determine originally and in a binding manner, after hearing, all aspects of a common-law cause of action on a class of contracts, under common-law principles, ultimately to award a common-law remedy. The statute would thus be unconstitutional as an attempt to confer upon an administrative agency a power assigned to the judicial department under the Constitution. Tex. Const.Ann. art. V, § 1 (1985); Board of Water Engineers v. McKnight, 111 Tex. 82, 229 S.W. 301 (Tex. 1921); City of Houston v. Lurie, 148 Tex. 391, 224 S.W.2d 871 (Tex.1949). But, in any event, the words of the statute will not permit even the strained inferences and assumptions such an interpretation requires.
Therefore, we interpret the word “aggrieved” to encompass only those controversies involving statutory rights and obligations under the Act, some of which may impinge upon an insured under a policy written by the association.
It is obvious that we disagree with the holding and opinion in Rowden v. Tex. Catastrophe Prop. Ins. Ass’n, 677 S.W.2d 83 (Tex.App.1984, writ ref’d n.r.e.). That decision and holding rest upon the stated premise that an insured’s cause of action and remedy under his contract, written by the association, derive solely from the Act itself, and not from the common law. Under this premise, it is sufficient then to say that “the statutory provisions are mandatory and exclusive and must be complied with in all respects or the action is not maintainable.” Id. at 87. We disagree with the premise, for the reasons set forth at length above. This premise necessitates inferences that are, in our view, wholly unjustified by the words of the Act; and such inferences are, in any event, forbidden to be made in such cases. Key Western Life Ins. Co. v. State Board of Ins., supra. These inferences would, in addition, raise serious questions about the constitutionality of a statute that purports by implication to abolish a common-law cause of action on a contract without substituting a reasonably sufficient statutory substitute, the substitute being in this case totally a matter of speculation, for no system of rights and obligations whatever is set forth in the Act and no certain and specific remedy is even implied. They would raise other due-process questions about the fundamental fairness of a statute that requires an insured to litigate his contract claim in a distant administrative forum, far from the place of the loss and attendant witnesses. They would raise equal-protection questions when insureds under similar competing policies are not subjected to the same burdens, though paying a competitive premium for their insurance coverage. {See § 5A(a) of the Act.) They would raise constitutional questions relative to the vagueness of a statute containing no criteria or standards to govern the Board’s quasi-judicial determinations, and other constitutional questions as well. It is in our view sufficient
It is also obvious that we disagree with the holding and opinion in Texas Catastrophe Property Ins. v. Miller, 625 S.W.2d 343 (Tex.Civ.App.1981, writ dism’d). That holding and decision rest upon the doctrine of exhaustion of administrative remedies. The applicability of this doctrine depends, however, upon a premise that the Board has jurisdiction to adjudicate an insured’s common-law cause of action and award a common-law remedy or that the insured’s common-law rights and the insurer’s common-law obligation have been abolished by the Act in lieu of a statutory system of rights and obligations administered by the Board. These alternative premises are only silently assumed in the Miller decision, but they are indispensable to the exhaustion doctrine. We disagree with them for the reasons stated above.
In summary, we hold that the Act confers upon the Board no power to determine an insured’s common-law cause of action for breach of a contract written by the association and no power to make an incidental finding necessary to judicial determination of such a cause of action; that the Board’s act purporting to make any such determination is void; that the hearing and determinative powers given the Board in the Act confer power only in regard to administrative controversies arising under the Act; and that the trial court consequently had jurisdiction of the plaintiffs’ common-law causes of action for an alleged breach of their insurance contracts by the association. We therefore reverse the judgment below and remand the causes for trial.
. The plaintiffs are: (1) Council of Co-Owners of SAIDA II Towers Condominium Association, (2) Council of Co-Owners of SAIDA Towers I Condominium Association, and (3) Council of Co-Owners of Sea Island Towers Condominium Association, each of which is an unincorporated association of persons; and (4) Glenn McGehee, d/b/a Ocean Palm Center and Ocean Palm International, Inc.
One of the defendants in the suits is the Texas Catastrophe Property Insurance Association, an entity created by the provisions of the Catastrophe Property Insurance Pool Act, Tex.Ins.Code Ann. art. 21.49 (1981 & Supp.1984). The other defendant is the State Board of Insurance, an agency charged by the statute with the administration of its provisions.
The members of the Texas Catastrophe Property Insurance Association are insurers authorized to write property insurance in the State. As discussed in the text of the opinion, membership is compulsory as a general rule. The general statutory scheme is one of providing for the assignment of undesirable risks among all the members, on terms stated in the statute, so that the insurance may be obtained by property owners when they could not otherwise do so. Similar schemes are set up, for similar purposes, in other statutes. See, e.g., Tex.Rev.Civ. Stat.Ann. art. 6701h (1977 & Supp.1985) (assigned-risk plan for motor vehicle liability insurance); Tex.Ins.Code Ann. art. 5.76 (1981) (The Texas Workers’ Compensation Assigned Risk Pool).
. Tex.Ins.Code Ann., supra.
. Tex.Rev.Civ.Stat.Ann. art. 6252-13a (Supp. 1985) (“APTRA").
. At the time of contracting with the plaintiffs, the association had a different idea about the applicability of the 30-day requirement of AP-TRA § 19(b), as did the Board in approving the form of contract or "policy.” Under the heading, "Basic Conditions,” the policy form approved by the Board, issued by the association, and now sued upon by the plaintiffs, provides as follows:
No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within two years and one day next after cause of action accrues.
(Emphasis added). Nothing in the policy suggests the necessity of initial adjudication by the Board and, of course, the two-year contractual period impliedly excludes the 30-day provision of APTRA § 19(b), the term “cause of action" having plain reference to the accrual of a cause of action on the contract, as on any other contract. And even though dealing with the matter of suits on the policy, it nowhere indicates that such suits must be brought in Travis County, "and not elsewhere,” in the words of art. 1.04(f) of the Insurance Code.
.We reject the association’s contention that naming the Board as a defendant was a "jurisdictional element of the plaintiffs’ causes of action,” even if they were "purely statutory." While Mingus v. Wadley, infra, requires compliance with all statutory requirements, when they are mandatory and exclusive, and the cause of action is "purely statutory," this test is literally satisfied when the trial court has jurisdiction of the subject matter of the plaintiffs suit, under his allegations, and the only unmet requirement is that he join another party defendant. The rationale is, of course, that after the filing of the "purely statutory” cause of action, the "ordinary
. When the Legislature does create a cause of action and remedy for its enforcement, these are regarded as merely cumulative of the common-law cause of action and remedy, unless the statute negatives the latter. Juneman v. Franklin, 57 Tex. 411, 3 S.W. 562 (1887). Repeal of the common-law action and remedy by implication is not favored, and requires a clear repugnance between the right of action and remedy created by statute as against those existing at common law. Thouvenin v. Rodrigues, 24 Tex. 468 (1859). See also Hamilton County v. Garrett, 62 Tex. 602 (1884).
.Because such statutory causes of action for judicial review are so routinely authorized in reference to the decisions of administrative agencies, it is perhaps too easy to assume that all controversies between individuals, when they have an administrative aspect, fall within the scope of administrative determination and judicial review in such a statutory cause of action. The Supreme Court of Texas has rejected the assumption repeatedly. See, e.g., Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26, 344 S.W.2d 411 (Tex.1961) (whether sand-fracturing operation would constitute common-law trespass to injury of adjoining landowner was subject to judicial determination in first instance, even though regulatory aspects thereof lay within the jurisdiction of Texas Railroad Commission); Foree v. Crown Central Petroleum Corp., supra (plaintiffs' suit for unjust discrimination by common carriers of crude oil determinable in district court even without an administrative
Appellee contends that the railroad commission was without power to determine the validity of the contract between Rau and Joe Amberson. This contention we think is correct. The powers granted and duties conferred upon the railroad commission by the act in question are very ample as regards the granting of certificates of convenience and necessity, and the regulation of those engaged in the traffic. We find nothing in the act, however, which attempts to confer any power upon the commission to adjudicate the contractual rights of individuals. This is aside from any constitutional question which might be involved if such power were attempted to be conferred.
Id. at 416 (emphasis added). The same may be said of the Act and the powers it confers, and does not confer, upon the State Board of Insurance.
. For example, an insured may invoke the hearing and determinative powers of the Board in controversies involving the decision of the association to seek revocation of the designation of his area as a "catastrophe area” or one in which fire and explosion insurance is no longer "reasonably unavailable”; or the structure of risk classifications and attendant premiums; or the association’s decision that his property is not insurable under the Act. Similarly, an insurer may invoke the Board’s powers in such matters as the level of mandatory reserves it is required to maintain for catastrophes or the assessments made against such insurer under the association’s operating plan. These matters do not involve common-law rights and obligations. They are "purely statutory” rights and obligations under the Act, being unknown in the common law.
. If it may be said in this case that the plaintiffs’ rights and remedies are “purely statutory," because they derive "solely” from the Act, or that they must submit their controversy to adjudication by the State Board of Insurance because they have a statutory right to a hearing when
