Murray v. San Jacinto Agency, Inc.

MURRAY, Petitioner, Kay Debra AGENCY, INC.,

SAN JACINTO d/b/a/ al., Inc., Brokerage, et Respondents.

No. C-8299. Supreme of Texas. Court

April Rehearing Overruled Jan. husband, Murray.

dependent of her Alvin spring She filed for divorce married, however, through- she remained days Three year out the calendar 1984. divorce, Murray filed for her after husband drop her requested that ECISD and SJA coverage. from the insurance 1984, Murray In summer of learned Richard, Hall, Bryan Dennis L. H. El pancreatitis. developed that she had chronic Paso, petitioner. for coverage her sought She for treatment of Locker, III, Tidwell, Q. Walter A. Jack policy. condition under the health insurance Hollmann, Randal Patterson and Daniel J. request Due to her husband’s that she be Odessa, respondents. for program, SJA re- taken off the insurance verify coverage September on fused to GONZALEZ, Justice. verify coverage, refusal to es- 1984. This appeal This on involves limitations claims sentially coverage, Murray left a denial against duty an insurer for breach of the to obtain much-needed medical unable good dealing. faith and fair however, 15, 1985, treatment. March On Kay Murray brought that its denial was unwar- Debra this action SJA admitted (SJA) against Agency coverage San Jacinto Ec- ranted and reinstated retroactive and County Independent spring tor District School

(ECISD) alleging wrongful denial of insur- Murray against March filed suit SJA on coverage. ance SJA and ECISD moved 27, 1986, alleging only negligent denial of separately summary judgment. successfully was not Citation granted trial court ECISD’s motion for 21, 1987, January 10 months served until summary judgment ground on the Murray subsequently amended her later. governmental immunity precluded suit petition September plead 1987 to her against the school district. The trial court good faith claim for the first time.1 granted ground SJA’s motion on the Murray’s by suit was barred limitations. Commencement Limitations appeals The court of affirmed. 759 S.W.2d Murray’s presented The issue is whether Murray appeal did not as to ECISD good by limitations as faith claim is barred only summary judgment so address we a matter of law. The statute of limitations favor of SJA. We reverse the governing is set forth this cause of action doing, of the court of and in so Ann. in Tex.Civ.Prac. & Rem.Code modify holding the limitations announced in 1986): 16.003(a) (Vernon § County Arnold v. National Mut. Fire Ins. trespass person A must suit for Be- property to the estate or law, cause have modified the this cause we another, personal property, conversion of is remanded to the trial court in the inter- taking detaining personal property or justice. est of another, injury, entry personal forcible detainer, and detainer not forcible

Facts day the years than two after the later group a self-funded ECISD established cause of action accrues. program employ- medical insurance for its Thus, must determine the date Mur- dependents. pro- their Under this we ees and parties accrued. The premiums ray’s into a trust cause of action gram, paid ECISD the date this should be dispute for a fee. that was administered SJA 5,1984) (September plan coverage as a was denied Murray was covered under dealing, occasionally opin- used in this fair 1. “Good faith" is encompass duty good faith and ion to tort

the date admitted its SJA un- Murray’s good denial was We hold that (March 15, 1985). warranted claim accrued and limitations commenced wrongfully on the day denied recognized duty we of an (September 5, 1984). holding This com fairly insurer deal faith with ports with well-established in processing payment its insured See, e.g., other Ashley, authorities. S. Bad of claims and that breach duty of that is State-By-State Faith compensable 167; Liability: A tort. 725 Review S.W.2d at (1987) (one 4.05 expect see also Aranda v. N. would Insurance Co. a § of America, 210, (Tex.1988); 748 S.W.2d 212 first party case the insured’s faith bad Co., Chitsey Lloyds v. National Ins. 738 “cause of action accrues moment an 641, (Tex.1987). S.W.2d 643 We further pay insurer should a but fails to do held that limitations on a good faith claim moment, wrong so. At that the insurer’s begin underlying does not to run until the ful harm to conduct first causes the in finally contract claims are resolved. Ar- sured.”). nold, 725 S.W.2d at see also v. Street purposes application For of of statute 299, Appeals, Court Second of limitations, generally of a cause of action (Tex.1988). 302 accrues the time facts at when come into Murray underlying contends that her a existence which authorize claimant to resolved,” not “finally contract claims were judicial remedy. seek a Robinson v. Weav- run, did begin and limitations not to until er, 18, 19 Put an- 15, 1985, SJA admitted March that its way, generally other “a cause of action can 5, September 1984 denial of wrongful be said when the to accrue act argument unwarranted. This must fail. Moreno, effects 787 injury.” an S.W.2d at voluntarily admitted SJA that it had made Murray 351. was unable to obtain much- denying a mistake Under this needed because of medical attention SJA’s theory, if had never admitted cover- 5,1984 September and had denial sufficient age, the contract claim would never have good her day facts that to assert faith resolved,” “finally been and limitations (“A at claim. See 167 begun would never have to run. Such a duty cause of of the action breach result was not intended in Arnold. good dealing is faith and fair stated when plain Limitations afford statutes is no alleged it there reasonable legislature tiffs what the deems a reason ”). ... basis for denial of a claim present pro their able time to claims and having and the from tect defendants courts damage may The fact that continue to deal with cases in which search for period occur after for an extended denial impaired seriously by the loss truth be starting from prevent does not limitations evidence, disappear death or to run. Limitations commences when the witnesses, memories, fading disap ance of resulting in wrongful some dam act occurs or The pearance of documents otherwise. Crosland, age v. plaintiff. Atkins is to purpose of a statute (Tex.1967); 150, 417 153 First Nat. S.W.2d repose terminate point a and to establish Inc., Nu-Way Transports, 585 Bank Stores, Safeway Inc. v. stale claims. Cer 813, (Tex.Civ.App. S.W.2d 816 Worth — Fort 544, 710 545-546 Corp., S.W.2d tainteed 1979, n.r.e.). writ ref’d (Tex.1986); Sterling see also Moreno v. done, When, has insurance as SJA (Tex.1990); Inc., 787 S.W.2d 348 Drug, claim, jurisdictions company a other 111, denies Kubrick, 444 U.S. States United 356, good faith cause of 352, have decided that 117, L.Ed.2d 259 100 S.Ct. 62 See, of denial.2 action on the date (1979). accrues Sims, 1219, case, When, outright Co. 435 So.2d Ins. America this there is no unlike (Ala.1983). though, claim, Clearly, if an insur- a 1222 the exact date of accrual of denial of a along strings company an insured without ascer- ance action becomes more difficult to cause of claim, denying paying limitations will be question be a fact to be and should tain case-by-case tolled. See determined on basis. Safeco Co., 301, e.g., Metropolitan Frazier v. and in Ins. S.W.2d Hernandez v. Life 90, 103, Cal.App.3d .Rptr. 214 Cal Great American Ins. (1985); America (Tex.1971), Co. v. 95 to determine that limitations Safeco Sims, (Ala.1983). So.2d did not run until Arnold’s con- Court, Supreme Alabama in Farmers & finally Ar- tract claims were resolved. Merchants Bank v. Home Ins. nold’s contract claim was resolved with (Ala.1987), So.2d 831-832 determined favorable December that a cause of action for faith refusal bad later, year filed one His pay insurance benefits accrues when timely. was therefore held to be knowledge insured has actual of facts holding in Arnold is not Our limitations put which would a mind on no reasonable consistent with the rule that limitations possible tice of the existence of bad faith. the time facts come into commences at court, however, that, The went on to decide existence which authorize a claimant to law, as a matter of the bad faith cause of Robinson, judicial remedy. seek a 550 action in that case accrued on the date 19; Moreno, 787 S.W.2d at S.W.2d Id.; coverage insurance was denied. see Linkenhoger, 260 S.W.2d at 886. In Ar- Smith, also Mut. Ins. Co. v. 540 So.2d Alfa nold, it not clear the facts indicat- is when (Ala.1988). 691, 692-93 ing duty good a of the faith and breach dealing light. In fair came to the instant Arnold Modification of case, however, the insured had sufficient today Our decision modifies the limi remedy judicial facts to seek a on the date holding in in retro tations Arnold because coverage that was denied. spect scrutiny. it cannot withstand critical Moreover, incorrectly analogized Arnold Arnold, motorcyclist, in was reasoning in Linkenhoger, used jured involving in an accident an uninsured injury case.3 The which was Stowers by driver. Arnold was insured National producing party in a third event Stowers County policy Mutual under a that included party in first case is not the same as it is $10,- protection up “uninsured motorist” to party A third claim accrues case. Stowers known, Although specific no date is unreasonably fails to set- when the insurer coverage denial of occurred no later than policy against tle a claim the insured within 1974, month, June because in that Arnold injury producing The event is the limits. County sued both National and the unin underlying judgment policy in excess of sured motorist. Evidence before the trial at 887. Linkenhoger, limits. County court showed National was party A first such as Arnold relying opinion inexperienced on of an case, an insurer unrea- this accrues when lawyer investigation and did not conduct an sonably pay an insured under the fails to the merits of the claim. Ar to determine producing policy. event is judgment in ex nold obtained a favorable Note, Arnold v. denial of See policy in cess of the limit December 1977. County Mutual Fire Ins. Co.: National later, 1978, year Arnold One December Faith, 39 Adopts First-Party Bad Texas against claim National good filed his (1987). Limita- Baylor L.Rev. 853-854 years after County. This was over four party appropriately tions on a first nevertheless, held, denial. We two denial, not the date a begins to run at of limitations did not bar this year statute separate to determine under suit Arnold had filed the initial claim. Because the contract is resolved. “underlying” suit to determine cover age, analogized Linkenhoger to we Expiration Limitations Co., Fidelity Casualty 152 American & (Tex.1953), Murray’s claim is Whether barred over Tex. S.W.2d depends on Street, under the facts of this case part grounds on other ruled in indemnity insurer based on failure Co. v. American Indem- automobile 3. G.A.Stowers Furniture (Tex.Comm'n App.1929, accept settlement when de- nity to reasonable offer 15 S.W.2d 544 insured). (action against against fending holding approved) action an insured she interrupted running This give Murray opportunity will limitations. Murray peti- filed her original diligence serving citation show and if 27, 1986, tion March well within the successful, to assert her faith claim. two-year period. filing Mere Nagle, See Texas Real Estate Comm’n suit, however, not interrupt will the run- (Tex.1989). S.W.2d ning of diligence limitations unless due stated, For the reasons exercised in the issuance and service the court of is reversed this Riga Thomas, Mfg. citation. Co. cause is remanded the trial court. was Citation J., SPEARS, dissenting opinion, files a first issued Sep- and returned unserved RAY, joined by DOGGETT, MAUZY and tember Citation issued a second JJ. successfully January time and served on 21, 1987, period. outside the limitations SPEARS, Justice, dissenting. that, The court of appeals held as a matter law, Murray did not dil- exercise due I respectfully dissent. In Arnold v. Na- igence. We disagree with the court of County tional Mutual Fire appeals. (Tex.1987), this court S.W.2d con- question presented the sidered same as (SJA)

When a defendant has affirm here “that and held the statute limita- atively pleaded limitations, the defense of begin does not to run on a tions timely and when to serve failure the defen dealing and claim the underlying fair until shown, dant has been the burden to shifts finally are insurance contract claims re- explain plaintiff (Murray) delay. the to the This is solved.” 725 S.W.2d at 168. bind- 802, Phillips, See Liles v. ing and I continue to 1984, would ad- (Tex.App. writ ref 'd n.r. Worth — Fort here e.); to it. Williams v. Bank Houston-Citizens 434, (Tex.Civ. Trust & Arnold, reaching In our in decision we App. ref d writ Dist.] [14th — Houston analogized Linkenhoger to v. American n.r.e.). Tex. Casualty Fidelity & (1953), we held in S.W.2d 884 where a It is to reasonable assume that Mur did not begin Stowers suit that limitations ray, relying on concluded that her judgment to underlying run until the was the cause action accrued on date SJA this as final. The court now views its admitted denial unwarranted analogy implies that (March 15, “incorrect” and 1985); thus, she could have be failing by a simply court made mistake to diligence lieved that even if there was no difference a third- recognize the between interrupted and limitations was not until Linkenhoger as and a 21, 1987), party claim such (January the date of service her in first-party claim such as was involved timely. preparing In her claim would be However, it that the is clear court Arnold. response summary judg to the motion mistake; make we ex- simply did not ment, Murray have this could relied on running of recognized limi- pressly that the interpretation and thus would of Arnold the same in Arnold should be “as argue tations diligence felt to compelled not have at in cases.” 725 S.W.2d Stowers process. in the service of Thus, question ruled on the exact Arnold however, today, modifies Our decision rejected very court now before Murray’s so that Arnold argument now chooses that the court to day good faith commenced on the adopt. denied Her claim is there diligence only not Arnold but unless she exercised The court overrules fore barred more implicitly also the even re- serving we have modified overrules citation. Since law, cent Court we remand this case decision Street v. Second will (Tex.1988). Appeals, In justice trial Tex.R. 756 S.W.2d 299 interest court. Street, Linkenhoger to App.P. Corp. L.M.B. we reconsidered see also v. Gu that, renders final hold when a trial court recky, 501 S.W.2d judgment third-party’s on a try contract tiff to bad faith claim after contract may the insured immediately bring Thus, already litigated.). Stow- claim was though ers action even appeal the insured’s injury general based rule of accrual is a from the excess pending. is still rule, Moreover, not an absolute. the Rob- Nevertheless, part Street reaffirmed that decision itself was inson limited to medical of Linkenhoger which held that limitations misdiagnosis subsequent cases. In a medi- begin will not to run on the insured’s bad case, malpractice expressly recog- cal we faith claim until all have been ex- nized that Robinson was so limited and underlying hausted and “until the action strictly injury to refused adhere to the completely has been resolved.” 756 S.W.2d Krusen, based rule of accrual. Nelson v. Thus, limitations, purposes (Tex.1984). Thus, effectively rejected any rigid Street appli- controlling Robinson is not' in all even cation of the based rule accrual medical much eases less other areas such adopted practical and instead approach litigation. as insurance bad faith similar to the one announced in Arnold. explaining holding Street, our we An insured may bring a action Stowers analogized to Arnold reasoned upon “injury-produc- the occurrence of the public policy valid is served forc- “[n]o i.e., ing judg- the final trial court event” — ing an insured to an action which exceeding policy ment limits—but “an in- may ultimately prove unnecessary.” 756 sured who so wishes still wait” and implicitly recognized at 302. We begin limitations will run not on the unjust require that it is an insured to action until claim is com- pursue a action before he can de- Stowers pletely resolved. Id. any termine whether there is or ne- basis continuing prac- Rather than with this cessity doing Similarly, first-par- so. approach tical for bad-faith causes of ac- claims, ty unjust require bad faith it is tion, blindly the court adheres to a strict pursue the of action insured to cause injury based rule of though accrual as before he can determine whether there is so, exceptions. doing there were no it any necessity doing or so. basis Weaver, cites Robinson v. 550 S.W.2d 18 begin Limitations should to run when the (Tex.1977) proposition for the that a cause insured’s contract claim is final- of action accrues when facts that authorize ly resolved rather than when the claim is a claimant a judicial remedy to seek first initially wrongfully denied. Both Arnold certainly come into existence. While this is result, mandate this and it is a Street rule, general a fair statement of the there comports result that with common sense. exceptions, are and Robinson itself dis- It is not the mere denial of a claim that exception discovery cussed one such —the action; it gives rise to a bad faith cause of excep- rule. 550 S.W.2d at 20. Under this must a denial without a reasonable ba- be tion, a cause of action does not accrue at Often, sis. 725 S.W.2d at 167. injury existence, the time an comes into but suggestive the faith settle- evidence bad rather at the time the claimant discovers until dis- practices ment will not surface or, diligence, in the exercise of reasonable See, begun. covery complete or trial has is giving should have discovered the facts rise Security Fire e.g., v. National & Chavers to the cause of action. v. Mav- See Willis (Ala.1984) Co., 456 293 Casualty So.2d erick, (Tex.1988); 642 Gaddis claim, plaintiff (During trial of contract Smith, 577 learned that sole basis for insurer’s denial gives to an- Fraudulent concealment rise hearsay state- of claim was uncorroborated exception practical other such felon.); ment of a convicted Christian accrual. based rule of See Borderlon Co., P.2d 577 (Tex.1983); American Home Assurance Peck, also see (Okla.1977) (Plaintiff did not discover v. American Home Assurance Christian (Okla.1977) (Based faith until contract claim on insurer’s bad P.2d 899 jury.). By setting the denial fraudulently submitted to allegation that insurer had accrues, faith, a cause of action plain- date as the date concealed its bad court allowed requires Liability the court insureds to file lawsuits Stephen Faith which author they may Ashley expect” before even of the facts stated that “one would an know giving insured’s bad-faith cause of action to ac- rise to a cause of action. pay crue “the moment an insurer should By forcing bring the insured to his bad Ashley, fails to do so.” but S. Bad denied, faith action time claim is (1987). Liability 4.05 at Faith How- § presents the court the insured with a dilem- ever, Ashley made clear that this statement hand, ma. On the one if an insured does represented nothing more than ex- his own bring not his bad faith claim within two pectation immediately pre- in the because denial, years of the date he will face a ceding he sentence said: “There are no regardless limitations bar to his claim clearly raising cases the issue of when a any real ascer- whether he had basis for of action for faith accrues in a cause bad taining period. bad faith within that time first-party Perhaps case.” Id. at 147-148. hand, brings if On other an insured Stephen Ashley expected would have immediately bad faith claim order to majority it result now reaches but bar, avoid the limitations he has in effect Surely not this court held in Arnold. what a claim that later been forced to carry this court’s own should prove unnecessary. This result conflicts weight than “ex- more one commentator’s our and will result with decision Street pectation.” proliferation premature in a bad jurisdictions, As for the cases in other attempt lawsuits as insureds to avoid the they distinguishable inappo- are either possibility a limitations bar. It im- will Metropolitan site. Frazier v. Life pede expeditious settlement of contract Cal.App.3d Cal.Rptr. plaintiffs claims will now automati- because (1985) construction of a time involved the regardless of cally assert a bad faith claim contained provision within any there are facts to indicate Frazier did not address policy; insurance the denial was without some reasonable running limitations on a common-law basis. The Alabama faith cause of action. bad it is clear This is a bad result even when merely hold that a bad faith cause cases acted on the date of denial that the insurer gains insured when the action accrues faith. Both the insured the bad reasonably knowledge of facts which would protracted pretrial will face a dis- insurer faith, and that him to discover the bad lead faith claim. covery dispute on bad case. question of fact each this is a discovery when may allow broader Courts v. Home Merchants Bank Farmers and joined the con- the bad faith claim is with (Ala.1987); 825, 831-832 Ins. 514 So.2d See, Morris, e.g., tract claim. Sims, 435 Lunsford America v. Ins. Co. of Safeco (with (Tex.1988) a tort (Ala.1983); 1219, 1222 see also So.2d Alfa punitive damages, court claim that seeks (Ala. Smith, 540 So.2d 691 Mut. Co. net discovery allow of defendant’s noted, 1988). insured often already As delay worth). discovery phase will This long knowledge until af gain this will not underlying con- resolution of the insured’s claim has been denied. ter the delay will then tract and this is not inviolable. The rule of stare decisis hardship very economic about Schindler, See, e.g., Sanchez v. by purchase of the sought to avoid insured However, confronted when policy. “expectation” nothing more than the with authority inapposite powerfully persuasive and a few On what commentator of one I would rely justification jurisdictions, as majority does the from other decisions and to decisis reject the rule of stare deci- to adhere to stare its decision to choose only three precedent? court’s prior with follow this sis and to break Trim, v. Mobile Auto years past. three cases Hill faith cases it cites are See only bad (Tex.1987)(Gon Inc., one Supreme Court and Alabama from the (criticizing court for zalez, J., dissenting) appeals court. ease from a California Mag see also precedent); to follow Bad refusal addition, majority cites to book Bros., Inc., Ragsdale ro v. (Tex.1986) (Gonzalez, J., dissenting).

In accordance with I would hold Murray’s bad faith cause of action did not accure until contract “finally

claim was resolved.” Murray’s contract claim “finally was not resolved” until Agency San Jacinto acknowledged Therefore, on March

Murray was still two-year within the limita- period January tions 1987 when ser- vice of citation was made on San Jacinto Agency. Murray’s claim is not barred

limitations. I would reverse the

of the court of and remand the

cause to the trial court for trial on the Murray’s merits of cause of action. RAY, DOGGETT, JJ„ join MAUZY and in this dissent. WILSON, Petitioner,

Jesse DUNN, Respondent. Michael Donnell No. C-7796. Supreme Court of Texas.

Oct. Rehearing Overruled Jan. Worth, Prager, appeal Don Fort only, petitioner. Worth, Frye, D. respon-

Robert Fort dent.

OPINION

HECHT, Justice.

The district court in this case authorized papers upon substitute service of suit de- fendant without an affidavit or other evi- justifying required dence such service as 106(b) by Rule of the Texas Rules of Civil

Case Details

Case Name: Murray v. San Jacinto Agency, Inc.

Court Name: Texas Supreme Court

Date Published: Jan 23, 1991

Citation: 800 S.W.2d 826

Docket Number: C-8299

Court Abbreviation: Tex.