RZQ, L.L.C., HAMEED QURAISHI, M.D., RAFATH QURAISHI, M.D., AADAM QURAISHI, M.D., AND ADVANCED MEDICAL IMAGING, L.L.C. v. MCCLELLAND AND HINE, INC.
NUMBER 13-19-00471-CV
COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI – EDINBURG
April 15, 2021
Bеfore Chief Justice Contreras and Justices Longoria and Tijerina
On appeal from the 389th District Court of Hidalgo County, Texas. MEMORANDUM OPINION
Memorandum Opinion by Chief Justice Contreras
In this appeal concerning issuance of a commercial surplus lines insurance policy, appellants RZQ, L.L.C. (RZQ), Hameed Quraishi, M.D., Rafath Quraishi, M.D., Aadam
I. BACKGROUND
MHI is a surplus lines insurance agent based in San Antonio.2 In 2011, appellants hired Felipe Farias, an insurance agent, to obtain property and liability coverage for their medical offices and equipment in Brownsville, Weslaco, McAllen, and Edinburg. Farias contacted MHI underwriter Wendy O‘Brien, who, in turn, contacted Dave Pulley, an underwriter with Insurance Exchange Brokerage Services (IEBS), an unlicensed surplus lines insurer and an affiliate of Prime Insurance Company (Prime). On May 18, 2011, Pulley provided a written “Indication Quote” to O‘Brien. O‘Brien then аltered the quote by removing Pulley‘s and IEBS‘s names and contact information, by adding her own name and contact information and that of MHI, and by changing the annual premium amount. O‘Brien forwarded the altered quote to Farias, and appellants accepted it.
IEBS sent a binder to MHI on June 3, 2011. See
It is undisputed that neither the quote nor the binder indicated that, as part of the proposed policy with Prime, appellants would be required to agree to forum-selection and choice-of-law clauses. It is also undisputed that MHI did not advise appellants of the existence of those clauses in the Prime policy.
On June 22, 2011, a storm caused damages to appellants’ office and equipment in McAllen. Appellants submitted a claim to Prime asserting they had incurred over $1.4 million in property damages from the storm, including the loss of an $800,000 MRI machine. A dispute arose, and Prime refused to pay the claim. In June of 2013, appellants sued Prime and other defendants3 in Hidalgo County, Texas, for breach of contract, negligence, and violations of the Texas Deceptive Trade Practices Act (DTPA) and the Texas Insurance Code. Appellants alleged that Prime failed to pay “reasonable and necessary benefits” as the policy required; misrepresented a material fact or policy provision; and failed to effectuate a prompt, fair, and equitable settlement of their storm damage claim. See
Prime moved to dismiss appellants’ suit on grounds that the policy contained a mandatory forum selection clause requiring any suit arising from thе policy to be brought in Utah.4 The trial court denied Prime‘s motion to dismiss, and Prime filed a petition for
On June 3, 2015, appellants filed an amended petition adding MHI as a defendant on claims of breach of contract, breach of fiduciary duty, negligence, and fraudulent inducement. Appellants argued MHI breached its agreement and its duties by, among other things, “failing to procure a commercial insurance policy in accordance with the quote and binder.” They claimed that the binder (as “altered” by O‘Brien) violated the insurance code because it was a “surplus lines document” but did not include a mandatory statutory disclaimer; did not state the name and address of the “true” insurer; and did not state the “coverage, conditions, and term of the insurance.” See
MHI filed a motion for traditional and no-evidence summary judgment in March 2016, arguing that appellants’ claims are barred by the law of the case doctrine due to our 2014 opinion in the mandamus proceeding. MHI also argued: (1) appellants’ breach of contract claim fails because no contract existed between appellants and MHI and there is no evidence of breach; (2) appellants’ negligence and fiduciary duty claims fail because there was no evidence MHI, as an agent or broker, breached any duty to appellants; and (3) appellants’ fraud claim fails because they did not assert MHI made any misrepresentations about the coverage provided under the Prime Policy.
Appellants filed a response to the motion alleging that the law of the case doctrine does not apply because there has been no direct appeal in the case. Appellants further contended that there is more than a scintilla of evidence to support their claims. In support, they attached an affidavit by appellant Hameed Quraishi stating that MHI issued a quote which “сreated a false impression” because it “did not disclose restrictive enforcement of rights and remedies provisions, including, but not limited to a Utah forum selection clause and Utah choice of provision.” Quraishi averred that “I would not have had an opportunity to discover the forum selection clause until the commercial insurance policy was delivered after coverage was bound.” Quraishi stated that appellants would not have accepted the quote if MHI had made “a full disclosure” concerning the forum selection and choice of law clauses. He also stated that MHI “failed to promptly deliver”
The trial court granted MHI‘s summary judgment by written order on January 24, 2016, but later vacated that order and granted appellants’ motion to file a supplemental summary judgment response. Appellants did so in 2017, attaching additional evidence, including excerpts of deposition testimony by a Prime corporate representative, Jaime Gustafson, stating that it was “MHI‘s responsibility” to “distribute the quote, binder and policy documentation” to appellants, and that MHI would have been familiar with Prime‘s forms and thus would have known about the forum selection and choice of law clauses in the policy. According to Gustafson, a “Policy Receipt Form and Coverage Conditions Summary” was attached to the policy which set forth the subject forum selection and choice of law clauses and stated:
TO THE PRODUCER AND INSURED: Coverage provided under the Policy refеrenced below is expressly conditioned upon you (the “Insured“) reviewing and properly executing and returning this Policy Receipt Form and Coverage Conditions Summary (“Form“) to us (the “Insurer“) within 10 days of receipt of the Policy.
Gustafson stated that it was “the broker‘s responsibility” to get the form signed by the insured, and yet appellants did not sign and return the form. Appellants’ supplemental response also included deposition testimony by an MHI supervisor, Leslie Ann Lloyd, stating that it appeared from an internal email that MHI had not yet received a copy of the policy as of August 25, 2011.
The trial court granted MHI‘s summary judgment motion, and this appeal followed.5
II. DISCUSSION
By a single issue on appeal, appellants contend the trial court erred in granting summary judgment for MHI. We construe the issue as comprising three sub-issues: (1) summary judgment was improper on law of the case grounds; (2) summary judgment was improper on limitations grounds; and (3) summary judgment was improper on no-evidence grounds. We address each in turn.
A. Standard of Review and Applicable Law
A summary judgment motion may be brought on traditional or no-evidence grounds. A movant for traditional summary judgment has the burden to establish that no
We review summary judgments de novo. Scripps NP Operating, LLC v. Carter, 573 S.W.3d 781, 790 (Tex. 2019). “Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal.”
B. Law of the Case
MHI contended in its amended summary judgment motion that the law of the case, as set forth in our 2014 ruling on appellants’ mandamus petition, compels a ruling in its favor. By its first sub-issue on appeal, appellants argue the trial court erred if it granted
Under the law of the case doctrine, “a decision rendered in a former appeal of a case is generally binding in a later appeal of the same case.” Paradigm Oil, Inc. v. Retamco Operating, Inc., 372 S.W.3d 177, 182 (Tex. 2012). By narrowing the issues in successive stages of the litigation, the doctrine is intended to achieve uniformity of decision as well as judicial economy and efficiency. Briscoe v. Goodman Corp., 102 S.W.3d 714, 716 (Tex. 2003). But a decision rendered on an issue before the appellate court does not absolutely bar re-consideration of the same issue on a second appeal. Id. In particular, the law of the case doctrine “does not necessarily apply whеn either the issues or the facts presented at successive appeals are not substantially the same as those involved on the first trial.” Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986); Creative Thinking Sources, Inc. v. Creative Thinking, Inc., 74 S.W.3d 504, 511 (Tex. App.—Corpus Christi–Edinburg 2002, no pet.). “Application of the doctrine lies within the discretion of the appellate court and depends on the particular circumstances surrounding that case.” Briscoe, 102 S.W.3d at 716.
In our 2014 opinion, we reviewed and rejected at least seven different reasons offered by appellants for why the forum selection clause should not be enforced with respect to their suit against Prime. See In re Prime Ins., 2014 WL 5314514, at *5 (concluding that the clause applies to the specific claims at issue because those claims “arose out of” Prime‘s obligations under the policy); id. at *7 (finding Prime did not waive enforcement of the clause by filing a separate subrogation suit in Texas against a third party who was not a signatory to the policy); id. at *8–9 (rejecting appellants’ claim that enforcement would be “fundamentally unfair” because аppellants “[were] not given any
MHI argued in its summary judgment motion that we “held as a matter of law” the following in our 2014 opinion: (1) that appellants are “charged with knowledge of the contents” of the Prime Policy, including the forum selection clause; (2) that “the quote and binder did not reference the forum selection clause because the quote and binder did not constitute the parties’ entire agreement“; (3) that appellants “would have had the opportunity to reject the contract without incurring financial penalty if they had informed themselves regarding the terms of the Policy prior to execution“; (4) that “[a]ny inconvenience associated with litigating in Utah was foreseeable at the time of contracting“; (5) that appellants “could proceed in Utah“; and (6) that “[l]itigating in Utah would not deprive [appellants] of their day in court.” MHI argued that, therefore, we are bound to conclude that all of appellants’ claims against it fail.
In their summary judgment response and on appeal, appellants argue that the law of the case doctrine cannot apply here because there has been no previous appeal and the case was never remanded to the trial court; instead, we granted conditional mandamus relief in an original proceeding. See Perry Homes v. Cull, 258 S.W.3d 580,
Appellants additionally argue that our earlier opinion does not compel dismissal of their claims against MHI because we never specifically addressed those claims in that opinion; instead, we only addressed the claims against Prime.6 We agree. There are
The principal conclusion which MHI urges was made in 2014 and is binding on us here is that appellants are deemed to have constructive knowledge of all policy terms, including the forum-selection clause, even though they were subjectively unaware of them at the time they accepted the quote.7 In that regard, we note that the 2014 original proceeding was decided on the limited record available to the trial court at the time of
In 2014, we noted that the Texas Supreme Court has rejected the argument that “the failure to provide a copy of an agreement containing a forum selection clause to a claimant constitutes the type of fundamental unfairness that precludes enforcement of the forum selection clause.” Id. at *9 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991) (“[F]orum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness.“); In re Int‘l Profit Assocs., 286 S.W.3d 921, 924 (Tex. 2009) (orig. proceeding) (finding that the “fundamental fairness” analysis concerns only “the clause itself” and does not apply to the argument that the “[the claimant‘s] representative was never given the first page of the agreement that included the forum-selection clause“)). In other words, “simply being unaware of a forum-selection clause does not make it invalid.” Id. We then concluded as follows:
[P]arties to a contract have an obligation to protect themselves by rеading what they sign and, absent a showing of fraud, cannot excuse themselves from the consequences of failing to meet that obligation. If we were to determine otherwise, it would require a party seeking to enforce a forum-selection clause to prove that the opposing party was separately shown each provision of every contract sought to be enforced and was subjectively aware of each clause. And, specifically applicable to this case, an insured is charged with knowledge of the provisions of the insurance policy, that is, it will be deemed to know the contents of the contract it makes. In the instant case, although the quote and binder did not reference the forum selection clause, it is clear that the quote and binder did not constitute the parties’ entire agreement. There is no evidence in the record that Prime concealed the forum-selection clause or evidence prоving Prime concealed the clause with an intent to defraud RZQ, thus RZQ‘s allegations that it was unaware of the forum selection clause are insufficient as a matter of law to prove fraud or overreaching. Accordingly, we reject RZQ‘s contention that Prime‘s alleged failure to notify RZQ that the policy contained a forum selection clause rendered enforcement of the forum selection clause fundamentally unfair.
Id. (emphasis added, internal citations and quotations omitted).
When we held that appellants are charged with knowledge of the forum selection
In fact, the case for enforcement is arguably weaker here than it was in Lujan. Here, not only did appellants decline to sign and return the form which contained the
This situation is also not precisely akin to In re International Profit Associates, 286 S.W.3d 921, 922 (Tex. 2009). That case concerned whether it is fundamentally unfair to enforce a forum-selection clause when the clause has not been specifically pointed out to the complaining party. See id. There was no dispute that the clause was actually explicitly set forth in a document which the plaintiff duly executed. See id. at 922–23 (noting that the plaintiff “signed a contract” containing a forum-selection clause on the first pаge). The International Profit Associates Court noted that “simply being unaware of a forum-selection clause does not make it invalid,” 286 S.W.3d at 924, but it was undisputed that the insured should have discovered the clause with the use of reasonable diligence—i.e., it should have read the contract. See id. (citing In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 233 (Tex. 2008) (orig. proceeding) (per curiam) (“[P]arties to a contract have an obligation to protect themselves by reading what they sign and, absent a showing of fraud,
We note that, when an insurance binder incorporates policy terms implicitly or by reference, those terms may be enforced even though the formal policy itself has not yet been issued or made available to the insured. See, e.g., Dalton v. Norwich Union Fire Ins. Soc., 213 S.W. 230, 231 (Tex. Comm‘n App. 1919). In those situations, the binder “is to be construed in accordance with the terms and subject to the conditions of the standard form of policy in use by the insurer at the time.” Id.; see Ranger Cnty. Mut. Ins. v. Chrysler Credit Corp., 501 S.W.2d 295, 298 (Tex. 1973) (“As long as a binder is in effect, the insured may look to the form of the contemplated policy for coverage, duration, cancellation, and other terms.“); see also QB Invs., LLC v. Certain Underwriters at Lloyd‘s, London, No. 01-10-00718-CV, 2011 WL 3359683, at *3 (Tex. App.—Houston [1st Dist.] Aug. 4, 2011, no pet.) (mem. op.) (“It is well established that coverage provided under a binder is determined based on reference to the terms and conditions contained in the standard form of policy in use by the insurer at the time the binder is issued.“). Here, however, neither the quote nor the binder explicitly or implicitly referred to any standard policy form. Instead, the quote explicitly stated that the policy to be issued was a “manuscript” policy—i.e., it was customized and not based on a standard form. See Black & Veatch Corp. v. Aspen Ins. (UK) Ltd., 882 F.3d 952, 958 (10th Cir. 2018) (“Policies that deviate from the standard [commercial general liability] policy forms and endorsements are called ‘manuscript’ policies.“); see also Vought Aircraft Indus., Inc. v. Falvey Cargo Underwriting, Ltd., 729 F. Supp. 2d 814, 823 (N.D. Tex. 2010);
As elucidated above, the parties, claims, and facts at issue here are different than those before this Court in 2014. Therefore, we decline to find that the law of the case doctrine compels a ruling in MHI‘s favor on any of appellants’ claims. Appellants’ first sub-issue is sustained.
C. Limitations
MHI‘s 2019 amended summary judgment motion also argued that all of appellants’ claims are barred as a matter of law on limitations grounds. Appellants contend by their second sub-issue on appeal that the trial court erred if it granted summary judgment on this basis.
The parties agree as to which statutes of limitations apply to each of appellants’ claims against MHI. Appellants’ breach of contract, fraudulent inducement, and breach of fiduciary duty claims are subject to four-year limitations periods. See
The discovery rule defers accrual of a cause of action “until the claimant knows or, by exercising reasonable due diligence, shоuld know of the facts giving rise to the claim.” Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001); see
A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999); see
In its discussion of limitations on appeal, MHI mainly relies on our 2014 ruling that appellants are “charged with knowledge” of the terms of the pоlicy, including the forum-selection clause. See In re Prime Ins., 2014 WL 5314514, at *9. However, for the reasons explained above, our 2014 opinion is not binding on us here. In any event, though we stated in 2014 appellants are charged with knowledge of the policy terms, we did not state that this knowledge is imputed to appellants on any particular date. Thus, even if we were bound by our 2014 opinion, our finding there that appellants are “charged with knowledge” of the forum-selection clause does not itself settle the question of when the limitations
That said, under these circumstances, we cannot conclude that appellants’ claims against MHI accrued as late as 2014 or 2015. Appellants’ negligence, breach of contract, and breach of fiduciary claims against MHI share the same central factual allegations—i.e., that MHI failed to procure a policy in accordance with the quote and binder and filed to advise appellants of the existence of the forum-selection and choice-of-law clauses in the Prime policy. Appellants’ statutory claims are based on the same conduct.10 However, as we noted in our 2014 opinion, a copy of the policy was filed with the Surplus Lines Stamping Office of Texas (SLTX)11 on June 16, 2011. In re Prime Ins., 2014 WL 5314514, at *8. Moreover, the storm which gave rise to appellants’ claim under the policy occurred on June 22, 2011. Thus, with the use of reasonable diligence, appellants should have
We conclude that MHI established as a matter of law that appellants’ claims accrued no lаter than June 22, 2011. Because appellants first brought suit against MHI on June 3, 2015, their negligence, DTPA, and insurance code claims are barred by the two-year statute of limitations.
We sustain in part and overrule in part appellants’ second sub-issue.
D. No-Evidence Summary Judgment
As to the claims against it which are not barred by limitations—breach of contract, breach of fiduciary duty, and fraud—MHI‘s amended summary judgment motion also alleged that there is no evidence of certain elements of those claims. See
As to appellants’ breach of contract claim, MHI argued that there is no evidence of
To support their claims, appellants point to the quote and binder issued by MHI. They argue that the quote constituted an offer to procure insurance in accordance with the quote, and that they accepted the quote, thereby giving rise to an enforceable contract. They emphasize that O‘Brien altered the original quote and binder to remove references to Pulley, IEBS, and Prime. In deposition testimony, when asked why she removed IEBS‘s identifying information from the “Indication Quote” before sending it to Farias, O‘Brien explained: “So when I send a quote to Felipe Farias, he would know I‘m the point of contact. He is to contact me, and no one else.” When asked why she removed Prime‘s information from the binder before sending it to Farias, O‘Brien similarly explained: “Because I‘m the point of contact, and Felipe is not to contact the company. He‘s to contact me, since we have a relationship.” O‘Brien agreed that there was nothing in the quote or binder she sent to Farias indicating that Prime was the carrier for the policy, and she never discussed the forum-selection or choice of law clauses with Farias.
Appellants also point to an affidavit by Jose Manuel Diaz, a licensed insurance
5. I sell insurance policies as an independent agent through multiple insurance carriers. One of my job duties is assisting in the purchase of insurance by acting reasonably in fully informing potential clients of the binding terms and conditions contained in insurance policies.
6. When selling an insurance policy, I have a duty, as all insurance and surplus lines agents do, to fully disclose all material provisions of the policy, including but not limited to, whether the insurance policy will contain a forum selection clause and choice of law provision that would be controlling in the event that a legal dispute concerning the insurance coverage were to arise between the insurer and the insured.
Appellants also attached to their summary judgment response a report by Michael Fazekas, a senior manager in “Forensic Insurance and Recovery” with BDO Consulting. Fazekas opined that, based on his analysis, appellants suffered over $2 million in damages as a result of the June 22, 2011 storm, including $489,172 to replace the damaged MRI machine and $1,669,982 due to “business interruption.” Finally, appellants attached a copy of an “Independent Producer‘s Agreement” between MHI and IEBS. This agreement provided that MHI would earn commissions for “risks submitted by the Broker [MHI] and ultimately bound by the Company [IEBS]” and that “[t]he Broker [MHI] is the agent of the Client and not of the Company [IEBS].”12
We agree with MHI that appellants’ evidence does not support the breach of contract claim. The quote constituted an offer by MHI to procure insurance, and that offer was accepted, but a quote only “summarizes the proposed coverage and does not contain all the terms, provisions, and exclusions that are set forth in the actual insurance policy.” See Howard v. Burlington Ins., 347 S.W.3d 783, 789–90 (Tex. App.—Dallas 2011, no pet.). Here, in particular, the quote did not state that the contemplated policy contained a forum-selection clause, but it also did not state that the policy lacked such a clause. Appellants have provided no evidеnce indicating that they ever communicated to MHI their desire for a policy lacking a forum-selection clause, nor have they provided any evidence indicating that their desire was apparent from the context or the prior dealings between the parties. We conclude that there is less than a scintilla of evidence to support a finding that the parties had an enforceable contract for MHI to procure an insurance policy without a forum-selection clause.
The evidence is also not enough to support a breach of fiduciary duty claim. Fiduciary duties may arise from certain formal relationships that are considered to be fiduciary as a matter of law or from informal, “confidential” relationships. Garcia v. Vera, 342 S.W.3d 721, 724 (Tex. App.—El Paso 2011, no pet.). Generally, the relationship between an insurance agent and an insured does not give rise to a formal fiduciary duty. Envt‘l Procedures, Inc. v. Guidry, 282 S.W.3d 602, 626–628 (Tex. App.—Houston [14th Dist.] 2009, pet. denied). And appellants’ evidence does not establish that they had a “confidential” relationship with MHI so as to give rise to an informal fiduciary duty. See Garcia, 342 S.W.3d at 724.
Nevertheless, even though there was no evidence that MHI breached its contract with appellants or owed a fiduciary duty to them, Diaz‘s affidavit testimony is more than a scintilla of evidence supporting a finding that MHI had the duty to disclose to appellants the lack of the forum-selection clause in the Prime policy. O‘Brien‘s testimony that she altered the quote and binder to remove Prime‘s and IEBS‘s contact information, respectively, is probative of an affirmative misrepresentation regarding the origin of the
MHI argues that, because an insurance quote is only intended to summarize thе proposed coverage and not all the terms and conditions of the policy, a broker can be held liable only when it makes a misrepresentation about coverage. MHI cites cases in which misrepresentations affecting coverage have formed the basis of a fraud claim against an insurance broker. See, e.g., May v. United Servs. Ass‘n of Am., 844 S.W.2d 666, 669 (Tex. 1992). However, MHI cites no authority, and we find none, establishing that an insurance broker is immune from liability for misrepresentations concerning matters other than the extent of coverage under the proposed policy. Instead, as appellants note, the insurance code places the responsibility on surplus lines agents such as MHI to obtain the policy from the insurer and deliver the policy to the insured “as soon as reasonably possible” upon the insured‘s request. See
Here, appellants asserted that MHI misrepresented the Prime policy, either through affirmatively altering the quote and binder or through non-disclosure, and they provided more than a scintilla of evidence to support that assertion.13 Accordingly, the
III. CONCLUSION
The trial court‘s summary judgment is reversed with respect to appellants’ fraudulent inducement claim, and with respect to that claim, we remand the cause to the trial court for further proceedings consistent with this opinion. The remainder of the trial court‘s summary judgment, dismissing appellants’ other claims against MHI, is affirmed.
Delivered and filed on the 15th day of April, 2021.
DORI CONTRERAS
Chief Justice
Notes
SECTION X — CONSENT TO EXCLUSIVE JURISDICTION
The Insured understands and acknowledges that the Insurer conducts its business activities, including underwriting, risk management and claims services within the State of Utah. The Insured represents and acknowledges that the Insured has purposefully directed its actions to procure the insurance services of the Insurer within the State of Utah and, for that purpose, will make continuous and systematic requests for the Insurer‘s services in the State of Utah. The Insured acknowledges that, by entering into this policy of insurance, the Insured is deemed to be transacting business within the State of Utah such that the courts of Utah may exercise jurisdiction over it regarding any issues arising out of this Policy. In addition, the Insured hereby understands and consents to the jurisdiction of the courts in the State of Utah and agrees that those courts shall be the exclusive forum for the resolution of any claims or disputes arising bеtween the parties related to any insurance coverage issues and any payments due the Insured under the Policy, unless both the Insurer and Insured agree otherwise in writing.
- making, issuing, or circulating or causing to be made, issued, or circulated an estimate or statement misrepresenting with respect to a policy issued or to be issued the terms of the policy; and
- making, issuing, or circulating or causing to be made, issued, or circulated an estimate or statement misrepresenting with respect to a policy issued or to be issued the benefits or advantages promised by the policy.
- making an untrue statement of material fact;
- making a statement in a manner that would mislead a reasonably prudent person to a false conclusion of a material fact; and
- failing to disclose a matter required by law to be disclosed, including failing to make a disclosure in accordance with another provision of the Texas Insurance Code.