PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Appellant, v. Hector Raul TREVINO and Mario Moyeda, Appellees.
No. 04-05-00113-CV
Court of Appeals of Texas, San Antonio.
June 28, 2006.
Rehearing Overruled July 31, 2006.
202 S.W.3d 811
Opinion by KAREN ANGELINI, Justice.
In Moseley, the Fort Worth Court of Appeals considered the merits of the defendants’ appeal of an order that granted the defendants’ motion for statutory sanctions in part (attorney‘s fees and costs) but denied the defendants’ motion to dismiss with prejudice and instead granted the plaintiffs’ subsequent oral motion for a nonsuit without prejudice. See id. at 831. Recognizing that “a trial court has no authority to grant a nonsuit without prejudice or voluntary dismissal of a medical liability claim when the 180-day time period has expired and a provider has filed a motion to dismiss with prejudice as a statutorily authorized sanction,” id. at 834, the Fort Worth Court of Appeals held “the trial court erred in granting [the plaintiffs‘] oral motion for al nonsuit and abused its discretion in denying [the defendants‘] motion for dismissal with prejudice.” Id. at 835. As the court recognized, “[t]he language of the statute compels this conclusion; otherwise the directive to claimants to either timely file their reports or to timely voluntarily nonsuit their claims would be superfluous.” Id. at 834. In so doing, the court implicitly recognizes that, although the appeal presented only one point of dispute between the parties—whether the nonsuit should have been with or without prejudice—that one point of dispute “preserved a live controversy” and vested the court with jurisdiction to decide the appeal. So it is here.
In my view, the panel‘s opinion in this appeal incorrectly decides an important issue of appellate jurisdiction and invites future abuse of the statutory scheme for the handling of health care liability claims by permitting a plaintiff who fails to comply with the 180-day deadline to control whether a defendant may appeal an order denying any part of the statutorily-mandated sanctions. I therefore requested en banc consideration of this appeal. A majority of the court has voted to deny en banc consideration. I dissent.
Larry J. Goldman, Michelle M. Copeland, Adami, Goldman & Shuffield, Inc., Michael J. Murray, Sharon E. Callaway, Crofts & Callaway, P.C., San Antonio, for appellant.
Eugene D. Stewart, Knickerbocker, Heredia, Jasso & Stewart, P.C., Eagle Pass, for appellees.
Sitting: SARAH B. DUNCAN, Justice, KAREN ANGELINI, Justice, SANDEE BRYAN MARION, Justice.
OPINION
Opinion by KAREN ANGELINI, Justice.
In this appeal, we are presented with the issue of whether the cooperation clause of an automobile insurance policy, which requires an insured to cooperate with his defense, is a condition precedent to coverage under the policy. Because we hold that the cooperation clause is a condition precedent, we reverse and render.
BACKGROUND
This appeal concerns a personal injury lawsuit brought in Maverick County by Hector Raul Trevino and Mario Moyeda against Alejandro Alvarado, a driver covered by automobile insurance issued by Progressive County Mutual Insurance Company (“Progressive“). In this Maverick County lawsuit, Trevino and Moyeda obtained a post-answer default judgment against Alvarado. Although Alvarado had timely notified Progressive that he had
After obtaining the default judgment against Alvarado, Trevino and Moyeda filed this action against Progressive, arguing that by virtue of the judgment against Alvarado, they had become judgment creditors of Alvarado and thus, had standing to bring a claim directly against Progressive as third-party beneficiaries of the insurance policy. In their petition, Trevino and Moyeda pled that all conditions precedent to bringing the suit had been satisfied. Progressive, however, in its answer, denied that all conditions precedent had been satisfied: “Alejandro Alvarado and Plaintiffs, as judgment creditors, have failed to comply with the cooperation clause contained in the policy of insurance.”
The case was tried to the bench. At trial, Trevino and Moyeda introduced three exhibits: the default judgment in the underlying case; the Progressive insurance policy; and Progressive‘s responses to Trevino and Moyeda‘s request for admissions. Trevino and Moyeda‘s attorney also testified with regard to attorney‘s fees. At the conclusion of Trevino and Moyeda‘s evidence, Progressive orally moved for judgment, arguing that satisfac
Progressive then requested findings of fact and conclusions of law, which the trial court later entered. Among its findings, the trial court found that Alvarado “did not unreasonably refuse to cooperate in the investigation, settlement, or defense of the underlying litigation” and that the “defense of the underlying litigation by [Progressive] was not prejudiced by any failure of Alejandro Alvarado to cooperate.” In its conclusions of law, the trial court determined that Alvarado had “not materially breach[ed] the subject insurance policy” and that Trevino and Moyeda were entitled to recover directly from Progressive on the judgment in the underlying suit for an amount capped by the limit imposed by the insurance policy. Progressive moved to modify the judgment and alternatively for a new trial, attacking the legal and factual sufficiency of the evidence to support these findings. The trial court denied the motions, and Progressive brought this appeal.
We must first consider whether the cooperation clause of an automobile insurance policy, which requires an insured to cooperate with his defense, is a condition precedent to coverage under the policy. This issue is a question of law that we review de novo. See Utica Nat‘l Ins. Co. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex.2004) (insurance policies are controlled by rules of interpretation and construction generally applicable to contracts); MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex.1999) (interpretation of an unambiguous contract is a question of law, which is reviewed de novo).
According to Progressive, the cooperation clause of the policy is a condition precedent. In contrast, Trevino and Moyeda argue that the clause is a covenant. In interpreting whether the cooperation clause is a condition precedent or a covenant, we look to general principles of contract interpretation. See Utica, 141 S.W.3d at 202. “A condition precedent may be either a condition to the formation of a contract or to an obligation to perform an existing agreement.” Hohenberg Bros. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976); see II Deerfield Ltd. v. Henry Bldg., Inc., 41 S.W.3d 259, 264 (Tex.App.-San Antonio 2001, pet. denied). As such, a condition precedent may “relate either to the formation of contracts or to liability under them.” Hohenberg Bros., 537 S.W.2d at 3. “Conditions precedent to an obligation to perform are those acts or events, which occur subsequently to the making of a contract, that must occur before there is a right to immediate performance and before there is a breach of contractual duty.” Id.; Deerfield, 41 S.W.3d at 264. Although no words in particular
In Harwell v. State Farm Mutual Automobile Insurance Co., 896 S.W.2d 170, 173-74 (Tex.1995), the supreme court reiterated that “‘[c]ompliance with the notice of suit provision is a condition precedent to the insurer‘s liability on the policy.‘” Id. at 173-74 (quoting Weaver v. Hartford Acc. & Indem. Co., 570 S.W.2d 367, 369 (Tex.1978)). In that case, the notice of suit provision provided the following:
We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and of any witnesses. If we show that your failure to provide notice prejudices our defense, there is no liability coverage under the policy. A person seeking coverage must:
- Cooperate with us in the investigation, settlement or defense of any claim or suit.
- Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
Id. at 173 (emphasis added). In Harwell, the supreme court held that the notice of suit provision contained within subpart (2) was a condition precedent. Id. at 173-74. It would, therefore, follow that under Harwell, the cooperation clause contained within subpart (1) would also be a condition precedent.
Here, the cooperation clause of the policy issued by Progressive is almost the same:
PART E—DUTIES AFTER AN ACCIDENT OR LOSS
GENERAL DUTIES
A. We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and of any witnesses. If we show that your failure to provide notice prejudices our defense, there is no liability coverage under the policy.
B. A person seeking any coverage must:
- Cooperate with us in the investigation, settlement, or defense of any claim or suit.
- Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
- Submit, as often as we reasonably require, to physical exams by physicians we select. We will pay for these exams.
- Authorize us to obtain:
- medical reports which are reasonably related to the injury or damages asserted; and
- other pertinent records.
- When required by us:
- submit a sworn proof of loss.
- submit to an examination under oath.
(emphasis added). Other than its formatting, the language in Progressive‘s policy is identical to that in Harwell. Therefore, applying Harwell, we hold that the cooperation clause is a condition precedent.
Because the cooperation clause is a condition precedent to coverage under the policy, Trevino and Moyeda had the burden of showing satisfaction of that condition. See id. at 173-74 (noting that insurer‘s obligation depends upon proof that all conditions precedent have been performed); see also Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex.1998) (explaining that a “party seeking to recover under a contract bears the burden of proving that all conditions precedent have been satisfied“);
Even though there was no evidence that the condition precedent of cooperation was satisfied, Progressive will not escape liability unless it was prejudiced by the lack of cooperation. See Harwell, 896 S.W.2d at 173-74 (explaining that even though condition precedent was not satisfied, insurer does not escape liability unless it was prejudiced). Prejudice may be established either as a matter of fact or as a matter of law. Compare Harwell, 896 S.W.2d at 174 (holding that prejudice existed as a matter of law), with Struna v. Concord Ins. Servs., Inc., 11 S.W.3d 355, 359 (Tex.App.-Houston [1st Dist.] 2000, no pet.) (holding that summary judgment was improperly granted because the summary judgment evidence raised a material fact issue as to prejudice).
In Harwell, the supreme court held that “[t]he failure to notify an insurer of a default judgment against its insured until after the judgment has become final and nonappealable prejudices the insurer as a matter of law.” Harwell, 896 S.W.2d at 174. In doing so, the supreme court reasoned that had the insurer “received notice, it could have undertaken [the insured]‘s defense and minimized its insured‘s liability.” Id. Therefore, the court concluded that the insured‘s failure to notify the insurer of the suit prejudiced it as a matter of law. Id.
Trevino and Moyeda argue that the “evidence clearly supports the finding by the trial court that Alejandro Alvarado did not unreasonably refuse to cooperate in the defense of the underlying litigation.” For support, Trevino and Moyeda point to a telephone call that Progressive received from Carol Alvarado, Alejandro Alvarado‘s wife. In the recorded message, Carol Alvarado stated the following:
“Hello. This is Carol Alvarado calling, and I‘m calling in response to a letter of March 17, 2003, that I just received that‘s postmarked April 16, 2003. I‘m speaking on behalf of my husband because I‘m his guardian. He‘s had more problems since this accident of April 17th and the reason I‘m calling is, as far as we‘re concerned, you can just go ahead and deny coverage for that accident; that would be fine with us if you just deny coverage with regard to the lawsuit. Just inform the parties that you‘re denying coverage, send us a copy of the letter, and I mean that‘s fine. We
have—we having nothing that they can—there‘s nothing that they can do to us by suing us because, well, you know, we‘re pretty well judgment proof anyway, and my husband is injured. I, myself, have cancer, so we just don‘t have the resources, the energy to be involved in this at all. I don‘t have a phone. I can‘t call you back, so just go ahead and deny coverage with regard to that accident of that day, April 17, 2001. I‘m speaking on behalf of my husband as his guardian and that‘s fine with us. Thanks.”
Trevino and Moyeda argue that this telephone call shows that Alvarado did not unreasonably refuse to cooperate. We disagree. The telephone call is evidence that Alvarado wholly failed to cooperate and that the Alvarados wanted Progressive to “deny coverage” because they were “pretty much judgment proof.”2 Additionally, there is other evidence in the record showing that Progressive was denied the ability to meaningfully defend Alvarado. Although the pleadings themselves were not admitted into evidence, there was testimony to the effect that Alvarado filed pro se pleadings in the underlying case. He did so even though Progressive had hired an attorney to represent him and that attorney had already filed an answer on his behalf. Indeed, not only did Alvarado file a pro se answer, but he also filed a pro se counterclaim. And, according to Trevino and Moyeda‘s attorney, the pro se counterclaim was frivolous and filed in bad faith.3 The evidence at the hearing also showed that Alvarado was adamant that a third vehicle caused the accident and that Progressive not pay any money on the claim.3
Given Alvarado‘s lack of cooperation with his defense, his filing of a pro se answer and frivolous counterclaim despite having counsel hired by Progressive to represent him, his adamancy about Progressive not paying on the claim, and his guardian‘s telephone message indicating that Alvarado did not intend “to be involved in this at all,” the attorney hired by Progressive was simply not permitted to appear on Alvarado‘s behalf in court. See In re Users Sys. Servs., Inc., 22 S.W.3d 331, 335 (Tex.1999) (orig.proceeding) (noting that a client can discharge an attorney at any time, with or without cause and without notifying the court);
TEXAS MOTOR VEHICLE SAFETY RESPONSIBILITY ACT
Trevino and Moyeda argue in the alternative that even if Alvarado failed to comply with the cooperation clause, the judgment should still be affirmed because the cooperation clause violates the Texas Motor Vehicle Safety Responsibility Act, codified in the Texas Transportation Code. Trevino and Moyeda emphasize that the 1995 amendments to this Act were intended to protect injured members of the public and that the cooperation clause violates this intent. For support, they point to section 601.073(c) of the Texas Transportation Code:
The liability of the insurance company for the insurance required by this chapter becomes absolute at the time bodily injury, death, or damage covered by the policy occurs. The policy may not be canceled as to this liability by an agreement between the insurance company and the insured that is entered into after the occurrence of the injury or damage. A statement made by or on behalf of the insured or a violation of the policy does not void the policy.
The language of
The liability of the insurance company with respect to the insurance required by this Act shall become absolute whenever injury or damage covered by said motor vehicle liability policy occurs; said policy may not be canceled or annulled as to such liability by any agreement between the insurance company and insured after the occurrence of the injury or damage; no statement made by the insured or on his behalf and no violation of said policy shall defeat or void said policy.
See Act of June 28, 1951, 52d Leg., R.S., ch. 498, § 1 et seq., 1951 Tex. Gen. Laws 1210, 1220-21. Between 1951 and 1981, article 6701h was amended at least seven times, but none of those amendments altered the language of section 21(f)(1).4 During that time period, Texas courts recognized that if an insured did not comply with conditions precedent, an insurance company would not be liable. See, e.g., Dairyland County Mut. Ins. Co. v. Roman, 498 S.W.2d 154, 157-58 (Tex.1973); Members Mut. Ins. Co. v. Cutaia, 476 S.W.2d 278, 278 (Tex.1972); Employers Cas. Co. v. Mireles, 520 S.W.2d 516, 518 (Tex.Civ.App.-San Antonio 1975, writ ref‘d n.r.e.).
Trevino and Moyeda argue that the 1995 amendments abolished policy defenses.
However, the Legislature‘s codification of section 601.073(c) of the Transportation Code did not materially modify the existing statutory language. Compare
Indeed, recently, in a similar case involving the failure of an insured to provide notice of suit, we were asked to consider whether “the ‘no coverage’ provision is void us against public policy.” Villarreal v. Tex. Farmers Ins. Co., No. 04-04-00446-CV, 2005 WL 2138174, at *1 (Tex. App.-San Antonio Sept. 7, 2005, pet. denied). We held that this provision has been “upheld under established Texas law
Finally, interpreting
CONCLUSION
Because Trevino and Moyeda failed to present any evidence of cooperation and because Progressive was prejudiced as a matter of law, Trevino and Moyeda cannot recover from Progressive. See Harwell, 896 S.W.2d at 175-76; see also State Farm Lloyds Ins. Co. v. Maldonado, 963 S.W.2d 38, 41-42 (Tex.1998). We, therefore, reverse the judgment of the trial court and render a take-nothing judgment in favor of Progressive.
Dissenting opinion by SANDEE BRYAN MARION, Justice.
SANDEE BRYAN MARION, Justice, dissenting.
I agree with the majority that the cooperation clause is a condition precedent to coverage under the policy. I also agree with the majority that the cooperation clause does not violate the Texas Motor Vehicle Safety Responsibility Act. However, I disagree with the majority‘s conclusion that a telephone call from the insured‘s wife to Progressive supports a finding that the “lawyer hired by Progressive established prejudice as a matter of law is premised on the majority‘s conclusion that ‘the attorney hired by Progressive was simply not permitted to appear on Alvarado‘s behalf in court.’ ” Therefore, I respectfully dissent.
Progressive bore the burden of establishing it was prejudiced by Alvarado‘s lack of cooperation. See Struna v. Concord Ins. Servs., Inc., 11 S.W.3d 355, 360 (Tex.App.-Houston [1st Dist.] 2000, no pet.). The majority‘s determination that Progressive established prejudice as a matter of law is premised on the majority‘s conclusion that “the attorney hired by Progressive was simply not permitted to appear on Alvarado‘s behalf in court.” Nothing in the record supports this conclusion. In her telephone message, Carol Alvarado did not request that the attorney withdraw. She asked only that Progressive deny the claim. Alvarado‘s “adamancy” that Progressive not pay the claim is not inconsistent with the position taken by most defendants in personal injury lawsuits. Also, Progressive withdrew its representation only a few short days before the scheduled trial date, and there is no evidence in the record that Progressive suffered prejudice, up to that point in time, due to Alvarado‘s desire to deny the claim. Because Progressive had withdrawn its representation of Alvarado shortly before the default judgment was rendered, it cannot now, after the fact, point to the default judgment as establishing prejudice.
For these reasons, I would affirm the trial court‘s judgment.
KAREN ANGELINI
JUSTICE