LIBERTY MUTUAL INSURANCE COMPANY and Robert G. Garrett, Petitioners, v. GARRISON CONTRACTORS, INC., Respondent
No. 96-1013.
Supreme Court of Texas.
Argued Oct. 7, 1997. Decided April 14, 1998.
966 S.W.2d 482
I disagree with the Court that, under these circumstances, the covenants can be given a definite or certain meaning as a matter of law. Instead, because the covenants are subject to at least two reasonable interpretations regarding the ACC‘s authority to waive the prohibition on composition shingles, I would hold that the covenants are ambiguous and a fact issue exists on the intent of the parties. Because the restrictions are ambiguous as to the scope of the ACC‘s authority to waive the prohibition, I would not reach the issue of whether the Pilarciks properly received a waiver.
Accordingly, I would reverse the judgment of the court of appeals and remand the case to the trial court to resolve the factual issue on the parties’ intent and to determine, if necessary, whether the Pilarciks actually received a waiver from the ACC.
P. Michael Jung, W. Neil Rambin, Dallas, for Petitioners.
Wade C. Hudman, Odessa, Philip K. Maxwell, Austin, for Respondent.
The primary issue in this case is whether an insurance agent employed by an insurance company is a “person” under section 2(a) of Article 21.21 of the Insurance Code. The court of appeals held that Robert Garrett, a Liberty Mutual Insurance Company employee-agent, was a person under that provision, and accordingly subject to suit under section 16 of Article 21.21. We affirm.
I.
In 1986, the president of Garrison Contractors, Inc. contacted Robert Garrett to obtain an insurance quote on the company‘s workers’ compensation, general liability, and automobile liability insurance from Liberty Mutual Insurance Company. Garrett was a Liberty employee-agent whose duties included soliciting and obtaining insurance policy sales for Liberty as well as explaining policy provisions and premium calculations to customers.
After meeting with Garrett, Garrison purchased a three-year, multi-line insurance policy from Liberty. The policy featured a retrospective premium plan, in which a base premium is paid, then adjusted based on actual losses. If losses are less than expected, the insurer refunds part of the base premium. If losses are greater than expected, the insured owes additional premiums. During the policy period, Garrison paid both base premiums and retrospective premiums. When the policy period ended, Liberty billed Garrison $159,371.85 more in retrospective premiums. Garrison refused to pay and Liberty sued to collect the premiums. Garrison
The trial court granted Liberty and Garrett‘s motion for summary judgment on Garrison‘s counterclaim against Liberty and its third-party claim against Garrett. The trial court also granted Liberty‘s motion for summary judgment on its sworn account suit against Garrison.
The court of appeals affirmed Liberty‘s summary judgment, disallowing Garrison‘s claims for breach of the duty of good faith and fair dealing and breach of fiduciary duty. However, the court of appeals reversed the summary judgment for Liberty and Garrett against Garrison‘s DTPA and Insurance Code claims. The court of appeals held, in part, that material fact issues remained about the alleged policy misrepresentations, and that Garrison had a cause of action against Garrett individually on both the DTPA and Insurance Code claims.1 Finally, the court of appeals reversed the summary judgment on Liberty‘s sworn account claim because Garrison‘s summary judgment proof raised a fact issue on whether there was agreement between the parties regarding price due to the alleged misrepresentations.
We granted Liberty and Garrett‘s application for writ of error primarily to consider whether an insurance company employee is a “person” under section 2(a) of Article 21.21 of the Insurance Code.
II.
Our objective when we construe a statute is to determine and give effect to the Legislature‘s intent.
The purpose of Article 21.21 “is to regulate trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.”
“Person” means
any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.
We disagree. First, the legislative history of a 1985 amendment to Article 21.21 supports the conclusion that the term “person” is not limited to business entities. In the 1985 session, the Legislature modified section 16 of Article 21.21. That section had formerly provided a cause of action for unfair or deceptive insurance practices “against the company or companies engaging in such acts or practices.” Act of May 9, 1973, 63rd Leg., R.S., ch. 143, § 2(c), 1973 Tex. Gen. Laws 322, 338 (amended 1985) (current version at
The word “company” is commonly understood to mean “a business enterprise; firm.” AMERICAN HERITAGE DICTIONARY 384 (3d ed.1992). Thus, the Legislature‘s change of the word “company” to the term “person” is highly suggestive: if the Legislature intended the term “person” to have the narrow meaning that Liberty and Garrett would give it, this alteration would have been an empty gesture. The word “company” would have been broad enough to include the business entities that Liberty and Garrett contend are within the statutory definition. But we do not lightly presume that the Legislature may have done a useless act. Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex.1981).
Additionally, we have previously noted that the term “business of insurance” in Article 21.21 is “connected with and used with reference to a particular trade or subject matter.” Great American Ins. Co., 908 S.W.2d at 421 (citing
The Department‘s regulations reflect that position. The Department “is authorized to promulgate ... and enforce reasonable rules and regulations ... necessary in the accomplishment of the purposes” of Article 21.21.
It is the purpose of these sections to further define and state the standards that are necessary to prohibit deceptive acts or deceptive practices by insurers and insurance agents and other persons in their conduct of the business of insurance ... irrespective of whether the person is acting as insurer, principal, agent, employer, or employee, or in other capacity or connection with such insurer.
Liberty and Garrett maintain that some individuals, such as independent agents and brokers, are “persons” under Article 21.21, while individuals who are employed by insurance companies are not. If we were to accept that view, however, it would create anomalous results. An independent agent would be subject to suit under section 16 of Article 21.21 (and to enforcement action under sections 7 and 15) for misrepresenting a policy‘s terms, while an employee-agent would not.
Liberty and Garrett also assert that our reasoning in Allstate Insurance Co. v. Watson precludes a holding that insurance company employees are “persons” under Article 21.21. 876 S.W.2d 145 (Tex.1994). In Watson, we held that a third-party claimant lacked standing to sue her adversary‘s carrier under Article 21.21. Id. at 150. Watson, however, is simply inapposite because this case does not involve a third-party claim.
Liberty and Garrett next argue that section 23 of article 21.21 decides the issue here. Section 23 provides that “[t]hose civil penalties, premium refunds, judgments, compensatory judgments, individual recoveries, orders, class action awards, costs, damages, or attorneys’ fees which are assessed or awarded as provided in this Article shall be paid only from the capital or surplus funds of the offending insurance company.”
Finally, a number of other statutes define “person” similarly to Article 21.21. Like Article 21.21, these statutes first list an individual among the regulated class, followed by various types of legal entities, followed by the general catch phrase “any other legal entity.” See, e.g.,
We emphasize, however, that not every employee of an insurance company is a “person” under Article 21.21 and therefore subject to suit under section 16. To come within the statute, an employee must engage in the business of insurance. In this case, Garrett personally carried out the transaction that forms the core of Garrison‘s complaint. Garrett testified that his job responsibilities included soliciting and obtaining insurance policy sales and explaining policy terms to prospective buyers. He was also responsible for explaining premium calculations to consumers. Garrett was thus required to have a measure of expertise in the field, which was necessary to perform his job. Clearly, Garrett was engaged in the business of insurance. On the other hand, an employee who has no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor, does not engage in the business of insurance.
III.
Liberty and Garrett argue, finally, that the court of appeals erred in remanding Garrison‘s DTPA and Insurance Code claims and related defenses to Liberty‘s sworn account claim. We disagree. The court of appeals held that the trial court erred in granting summary judgment because Garrison raised a material fact issue on whether Liberty and Garrett misrepresented the policy terms. 927 S.W.2d at 300. Alternatively, Liberty and Garrett contend that the court of appeals remanded too much because it held that only one of Garrison‘s grounds for recovery under the DTPA and Insurance Code was viable.
Our decision in Coats controls our disposition of these points. In Coats, we held that an insurance company could be liable under the Insurance Code for its agent‘s affirmative representations about the policy. 885 S.W.2d at 99. Garrison presented summary judgment evidence creating a fact issue on whether Liberty and Garrett misrepresented the policy terms by telling Garrison that the retrospective premiums were subject to a cap. Because Liberty and Garrett did not establish their entitlement to judgment as a matter of law on Garrison‘s DTPA and Insurance Code claims and defenses, the court of appeals did not err in remanding.
***
We hold that section 16 of Article 21.21 provides a cause of action against insurance company employees whose job duties call for them to engage in the business of insurance. We also hold that the court of appeals properly remanded Liberty‘s sworn account claim and Liberty and Garrison‘s Insurance Code and DTPA claims to the trial court. Accordingly, we affirm the judgment of the court of appeals.
BAKER, Justice, joined by GONZALEZ, Justice, concurring and dissenting in part.
I agree with the Court‘s judgment except where the Court holds that an insurance1 company employee, acting within the course and scope of employment, can be individually liable under the Insurance Code. Therefore, I dissent in part.
I. BACKGROUND
After Garrison refused to pay a retrospective premium, Liberty sued to collect the premium. Garrison counterclaimed against Liberty and filed a third-party claim against Liberty‘s employee, Garrett. The court of appeals reversed a summary judgment for Liberty and Garrett. The court of appeals held, in part, that material fact issues remained about alleged policy misrepresentations, and that Garrison had a private cause of action against Garrett individually under the Insurance Code. We granted application for writ of error to decide whether an insurance company employee can be individually liable under the Insurance Code for acts in the course and scope of employment.
II. INSURANCE CODE CLAIMS AGAINST INSURANCE COMPANY EMPLOYEES
As the Court holds, we determine the Legislature‘s intent by the plain and common meaning of the statute‘s words. See Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d 937, 939 (Tex.1993). When a statute is clear and unambiguous, we enforce that clear meaning. See Monsanto, 865 S.W.2d at 939. We must also give full effect to all a statute‘s terms in context. See Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex.1994); RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex.1985). Here, the statute does not envision individual liability against insurance company employees.1
Article 21.21 allows a person harmed by unfair competition methods or unfair or deceptive acts or practices to sue “the person or persons engaging in such acts or prac
[a]ny individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.
Thus, for a “person” to have Insurance Code liability, the “person” must be a “legal entity engaged in the business of insurance.” See
Because article 21.21, section 2(a) limits liability to “legal entit[ies] engaged in the business of insurance,” it does not provide a cause of action against insurance company employees. See French v. State Farm Ins. Co., 156 F.R.D. 159, 163 (S.D.Tex.1994); Ayoub v. Baggett, 820 F.Supp. 298, 299 (S.D.Tex.1993); Arzehgar v. Dixon, 150 F.R.D. 92, 94-95 (S.D.Tex.1993). The Insurance Code‘s “focus and its reach go to the business entities that provide insurance, not the employees of those providers.” Ayoub, 820 F.Supp. at 299 (citing
Moreover, the term “legal entity” simply does not contemplate insurance company employees the way that it does insurance companies, independent agents, insurance brokers, independent adjusters, or independent life insurance counselors. See
Where the Legislature intended to impose personal liability under the Insurance Code, it has done so expressly. Article 21.02 provides:
Any person who solicits insurance on behalf on any insurance company ... without such company having first complied with the requirements of the laws of this State, shall be personally liable to the holder of any policy of insurance in respect of which such act was done for any loss covered by the same.
Of course, an insurer may be liable for its employees’ misrepresentations. See CelticLife Ins. Co. v. Coats, 885 S.W.2d 96, 98 (Tex.1994); Natividad v. Alexsis, Inc., 875 S.W.2d 695, 700 (Tex.1994); Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688, 693 (Tex.1979). A suit against an insurer alleging that the insurer‘s employee, acting in the scope of employment, committed wrongful acts under the Insurance Code, accomplishes the same goal as suing the employee: The insurer is the party responsible for damages caused by its employees’ acts within the scope of their employment. See Celtic Life, 885 S.W.2d at 98; Natividad, 875 S.W.2d at 700; see also Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 149 (Tex.1994) (“The obligations imposed by art. 21.21 of the Insurance Code and Vail are engrafted onto the contract between the insurer and insured....“).
Here, Garrison‘s insurance contract is with Liberty, not with Liberty‘s employee, Garrett. It is the contract that vests the insurer with exclusive control over its relationship with the insured. See Natividad, 875 S.W.2d at 696. As with its common law duties to the insured, the disputed statutory duties here begin and end with Liberty—“the buck stops with them.” Natividad, 875 S.W.2d at 698 n. 7. I would reverse the court of appeals and affirm the trial court‘s summary judgment for Garrett against Garrison‘s Insurance Code claim.
III. CONCLUSION
I would hold that a statutory cause of action under the Insurance Code does not exist against an insurance company employee for his or her acts in the course and scope of employment. Because the Court holds otherwise, I respectfully dissent.
TRINITY UNIVERSAL INSURANCE COMPANY and Southern County Mutual Insurance Company, Petitioners, v. Ronnie Dale BLEEKER, Respondent.
No. 97-0498.
Supreme Court of Texas.
Argued on March 5, 1998. Decided April 14, 1998.
Rehearing Overruled June 5, 1998.