USAA TEXAS LLOYDS COMPANY, PETITIONER, v. GAIL MENCHACA, RESPONDENT
No. 14-0721
IN THE SUPREME COURT OF TEXAS
April 13, 2018
ON PETITION FOR REVIEW
JUSTICE GREEN, joined by JUSTICE GUZMAN and JUSTICE BROWN as to Parts I, II, and IV, dissenting, and joined by CHIEF JUSTICE HECHT, JUSTICE GUZMAN, and JUSTICE BROWN as to Part III, delivering a plurality opinion.
The Court‘s opinion outlines five rules governing the relationship between contractual and statutory claims. See S.W.3d at ___. Under those five rules, I would hold that USAA Texas Lloyds Company is entitled to judgment in its favor because the plaintiff, Gail Menchaca, failed to prove that USAA was contractually obligated to pay
I. Background
Three jury questions and answers are relevant here. Jury Question 1, which Menchaca insisted upon submitting despite the trial court‘s concerns and later urged the trial court to disregard,1 relates to contractual liability:
1. Did USAA Texas Lloyd‘s Company (“USAA“) fail to comply with the terms of the insurance policy with respect to the claim for damages filed by Gail Menchaca resulting from Hurricane Ike?
Answer “Yes” or “No“.
Answer: NO
In answering “no,” the jury thus rejected Menchaca‘s assertion that USAA breached the policy.
Jury Question 2 relates to extra-contractual liability and provided a list of potential statutory violations:
2. Did USAA engage in any unfair or deceptive act or practice that caused damages to Gail Menchaca?
Answer “Yes” or “No” as to each subpart.
“Unfair or deceptive act or practice” means any one or more of the following:
A. Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim when the liability under the insurance policy issued to Gail Menchaca had become reasonably clear; or
Answer: NO
B. Failing to promptly provide to Gail Menchaca a reasonable explanation of the factual and legal basis in the policy for the denial of a claim(s); or
Answer: NO
C. Failing to affirm or deny coverage within a reasonable time; or
Answer: NO
D. Refusing to pay a claim without conducting a reasonable investigation with respect to a claim(s); or
Answer: YES
E. Misrepresenting to Gail Menchaca a material fact or policy provision relating to the coverage at issue.
Answer: NO
Thus, the only liability finding against USAA was for failure to conduct a reasonable investigation. See
Concerned about a potential conflict between the jury‘s answers to Questions 1 and 2,2 the trial court ultimately disregarded
Finally, Question 3, which was submitted over USAA‘s objection:3
If you answered “Yes” to Question 1 or any part of Question 2 or both questions, then answer the following question. Otherwise, do not answer the following question.
3. What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Gail Menchaca for her damages, if any, that resulted from the failure to comply you found in response to Question number 1 and/or that were caused by an unfair or deceptive act that you found in response to Question number 2.
The sum of money to be awarded is the difference, if any, between the amount USAA should have paid Gail Menchaca for her Hurricane Ike damages and the amount that was actually paid.
In answering questions about damages, answer each question separately. Do not increase or reduce the amount in one answer because of your answer to any other question about damages. Do not speculate about what any party‘s ultimate recovery may or may not be. Any recovery will be determined by the court when it applies the law to your answers at the time of judgment. Do not add any amount for interest on damages, if any.
Answer in dollars and cents for damages, if any.
Answer: $ 11,350.00
USAA contends that Question 3 was merely a damages question, and the trial court seemed to agree.4 I also tend to agree.5 The Court seems to view Question 3 as another liability question about whether USAA owed Menchaca unpaid policy benefits—in other words, whether USAA failed to comply with the policy—concluding that the answer to Question 3 conflicts irreconcilably with the jury‘s answer to Question 1. Id. at ___. Either way, considering the jury‘s answers to all three questions, I would hold that USAA is entitled to judgment in its favor.
II. Right to Receive Policy Benefits
In answer to Question 2, the jury found that USAA violated the Insurance Code by failing to investigate Menchaca‘s claim properly. As the Court‘s opinion explains, to recover for that statutory violation,
The jury‘s answer to Question 1 represents the jury‘s conclusion that Menchaca failed to satisfy her burden of proof on her claim that USAA breached the policy. See id. at ___ (agreeing that the answer to Question 1 “confirms [the jury‘s] conclusion that Menchaca ‘failed to carry [her] burden of proof’ to establish that USAA failed to comply with the policy‘s terms” (citing Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989))). In other words, the jury rejected Menchaca‘s claim that the policy required USAA to do something that it failed to do. Had the jury determined that USAA owed Menchaca any unpaid benefits due under the policy, the jury could only have answered Question 1 “yes.” More specifically, had the jury determined that Menchaca‘s damages from Hurricane Ike exceeded her deductible, the jury would have had to return a “yes” answer to Question 1. Because the jury answered “no,” however, we can conclude only that USAA‘s Insurance Code violation did not cause Menchaca to lose any benefits that she was due under the policy. In fact, as the Court acknowledges, the jury‘s answer is supported by evidence that the amount of Menchaca‘s loss was less than the policy‘s deductible, id. at ___, so the policy did not obligate USAA to pay Menchaca anything. Menchaca cannot use a statutory violation theory of recovery to recover the very same contract damages that the jury specifically rejected. Cf. City of Brownsville v. Alvarado, 897 S.W.2d 750, 752–53 (Tex. 1995) (holding that jury‘s “no” answer to liability question rendered submission of question involving plaintiff‘s negligence immaterial).
This result is consistent with the Court‘s no-recovery rule, S.W.3d at ___, and with our holding in Provident American Insurance Co. v. Castañeda, 988 S.W.2d 189 (Tex. 1998), which I believe govern this case. Under the no-recovery rule, an insured cannot recover any damages for an insurer‘s statutory violation without establishing either the right to receive policy benefits or an independent injury. S.W.3d at ___. An insurer‘s statutory violation does not, by itself, establish an entitlement to policy benefits. See Castañeda, 988 S.W.2d at 198, 201 (recognizing that “failure to properly investigate a claim is not a basis for obtaining policy benefits” and rendering judgment for the insurer whose conduct was not “the producing cause of any damage separate and apart from those that would have resulted from a wrongful denial of the claim“); Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 666 n.3 (Tex. 1995) (“[S]ome acts of bad faith, such as a failure to properly investigate a claim or an unjustifiable delay in processing a claim, do not necessarily relate to the insurer‘s breach of its contractual duties to pay covered claims, and may give rise to different damages.“). Menchaca could have sought damages for an independent injury,
The Court‘s general rule yields the same result. Under the general rule, if the insured does not have a right to benefits under the policy, she cannot recover policy benefits as damages for an insurer‘s statutory violation. Id. at ___. The jury‘s answer to Question 1 rejected Menchaca‘s claim that she has a right to unpaid benefits under the policy. Therefore, under the general rule, Menchaca is not entitled to recover policy damages for USAA‘s Insurance Code violation.
The plaintiff bears the burden of proving her case and obtaining jury findings to support a judgment in her favor. See United Scaffolding, Inc. v. Levine, 537 S.W.3d 463, 480–81 (Tex. 2017) (recognizing that the burden to secure proper findings to support a theory of recovery is on the plaintiff); BP Am. Prod. Co. v. Red Deer Res., LLC, 526 S.W.3d 389, 395 n.4 (Tex. 2017) (explaining that the Court did not need to resolve the issue of conflicting jury findings because the plaintiff did not obtain a finding in its favor that could support a judgment against the defendant); Grenwelge v. Shamrock Reconstructors, Inc., 705 S.W.2d 693, 694 (Tex. 1986) (holding that the jury‘s failure to find that the defendant breached the contract “merely means that the [plaintiffs] failed to carry their burden of proving the fact“); Vestal v. Gulf Oil Corp., 235 S.W.2d 440, 442 (Tex. 1951) (recognizing that on an ultimate issue, “the burden rested on the petitioners to plead and prove and secure a jury finding“); Little Rock Furniture Mfg. Co. v. Dunn, 222 S.W.2d 985, 990 (Tex. 1949) (explaining that before a party is entitled to judgment in its favor, it must satisfy its burden of obtaining jury findings in its favor on every essential element of its claim). When the plaintiff does not discharge that burden, judgment cannot be rendered in her favor. See Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 679 (Tex. 1973); Little Rock Furniture Mfg. Co., 222 S.W.2d at 990. Here, Menchaca has not discharged her burden and is not entitled to a damages award for USAA‘s statutory violation. As a result, there is no reason to remand the case.
The Court‘s remand suggests an exception to the no-recovery rule—that an insured may recover policy benefits as damages for a statutory violation despite an insured‘s failure to prove entitlement to policy benefits and a jury‘s answer that the insurer did not breach any of its obligations under the policy. When the jury found liability on only one basis—a statutory violation—and the plaintiff failed to prove entitlement to policy benefits and failed to seek damages for an independent injury, the plaintiff is not entitled to recover any damages. Applying the Court‘s five rules to the facts of this case, I would hold that USAA is entitled to judgment in its favor.
III. Preservation
Generally, a party should object to conflicting answers before the trial court dismisses the jury. The absence of such an objection, however, should not prohibit us from reaching the issue of irreconcilable conflicts in jury findings. I disagree with JUSTICE BOYD‘s suggestion that a defendant‘s failure to object in a case such as this requires judgment for the plaintiff or
If it is incomplete, or not responsive to the questions contained in the court‘s charge, or the answers to the questions are in conflict, the court shall in writing instruct the jury in open court of the nature of the incompleteness, unresponsiveness, or conflict, provide the jury such additional instructions as may be proper, and retire the jury for further deliberations.
The amendment [effective January 1, 1988] makes it clear that the court may direct a complete yet defective verdict to be reformed. The amendment also makes it clear that in the event the verdict is incomplete or otherwise improper, the court is limited to giving the jury additional instructions in writing.
If the trial court opts not to direct reformation of the verdict, as Rule 295 allows, but instead enters judgment, an option JUSTICE BOYD does not recognize, JUSTICE BOYD believes that Rule 295 prohibits an appellate court from disturbing that judgment absent an objection to conflicting jury answers. S.W.3d at ___. According to JUSTICE BOYD, the Rule 295 verdict-reformation process is the only remedy for conflicting jury answers, and that process is triggered only if the party who would later challenge judgment on the verdict
JUSTICE BOYD bases his preservation standard on cases involving incomplete verdicts, extending the rule in those cases to cases involving conflicting jury answers. Id. at ___. We have held that a “party who would benefit from answers” to questions the jury left blank must object to the incomplete verdict, “making it clear that he desires that the jury redeliberate on the issues or that the trial court grant a mistrial.” Fleet v. Fleet, 711 S.W.2d 1, 3 (Tex. 1986); see Cont‘l Cas. Co. v. Street, 379 S.W.2d 648, 650 (Tex. 1964) (holding that error was not preserved when the plaintiff “did not object to the acceptance of the jury verdict as incomplete, and thus by timely objection afford the trial court the opportunity, before the jury was discharged, of correcting the error (if such it was) of accepting the verdict with the issues unanswered“). This is because “a judgment cannot be based on a verdict containing unanswered issues, supported by some evidence, unless the issues are immaterial.” Fleet, 711 S.W.2d at 3 (citing Powers v. Standard Acc. Ins. Co., 191 S.W.2d 7 (Tex. 1946)); see
Recognizing that difficulty, Menchaca‘s counsel raised the possibility of conflicting answers before the jury was dismissed, attempting to argue that any conflict would not be irreconcilable. When the trial court made clear its view that the proper time for that argument would be later at a
The Court reviewed conflicting answers under just such circumstances in Little Rock Furniture Manufacturing Co. v. Dunn, 222 S.W.2d 985, 988–91 (Tex. 1949). In that case, the trial court asked both parties before dismissing the jury whether there was a conflict between answers, and both parties said no. Id. at 988. Before receiving the verdict, the trial court again asked the parties if they thought there were any conflicts, and the parties again said no. Id. When the issue of irreconcilable conflict was later raised, the trial court refused to grant a mistrial or a new trial. Id. Despite the trial court having given the parties multiple opportunities to object to conflicting jury answers and the parties choosing not to do so, this Court considered the issue of conflicting findings and whether the judgment must be set aside. Id. at 988–91. Although the disposition in that case was based on the holding that the conflict in jury answers not fatal, the Court was very clear that its ruling should not be interpreted as support for waiver in the case of an irreconcilable conflict: “We do not hold, however, that in a case of a fatal conflict in answers the parties can waive the conflict.”9 Id. at 991. Years later, this Court analyzed conflicting findings when neither party raised the issue before jury dismissal and both sought “outright victory.” C. & R. Transp., Inc. v. Campbell, 406 S.W.2d 191, 195–96 (Tex. 1966); see Meyer, 502 S.W.2d at 679–80 (affirming the court of appeals’ order of new trial because of a fatal conflict in jury answers, without any mention of waiver, preservation, or St. Paul Fire & Marine Ins. Co. v. Murphree, 357 S.W.2d 744 (Tex. 1962)). If the only way to obtain appellate review of a judgment entered on conflicting jury findings were to
As support for a preservation standard requiring an objection to conflicting findings before jury dismissal, JUSTICE BOYD cites the inapplicability of the fundamental-error exception to our preservation of error rules. S.W.3d at ___. JUSTICE BOYD relies primarily on a single sentence in a 1962 case: “The entry of judgment by a trial court on conflicting findings does not constitute fundamental error.” Murphree, 357 S.W.2d at 749. But the Court in Murphree never applied that sentence to the facts of the case, and the Court certainly never held that only an objection before jury dismissal would allow an appellate court to consider whether a judgment based on conflicting findings can stand. In fact, the opinion suggests that “assignment of error contained in [a] motion for new trial sufficient to bring this question to the trial court‘s attention” might have avoided a waiver problem. Id. at 748–49. This Court later explained our Murphree ruling, but again we did not hold that only an objection before jury dismissal would preserve error as to conflicting answers. See St. Louis Sw. Ry. Co. v. Duke, 424 S.W.2d 896, 898 (Tex. 1967). Rather, we explained that “[a]ssuming, without deciding, that there was an irreconcilable conflict in the jury answers, it was necessary to file a motion for new trial assigning as error the entry of judgment on conflicting jury findings” when no motion for judgment notwithstanding the verdict or to disregard special issue findings had been filed. Id. (explaining Murphree, 357 S.W.2d at 744). Thus, to the extent that preservation is required under Murphree, this Court has recognized other mechanisms by which the conflict complaint can be preserved for appeal, including a motion to disregard specific findings, motion for judgment notwithstanding the verdict, and motion for new trial alleging erroneous entry of judgment based on entry of conflicting jury findings. Although I do not believe our preservation requirements prevent us from ruling in USAA‘s favor or even from considering the issue of conflicting jury answers in this case, I do believe that USAA‘s post-verdict motions were sufficient “to bring this question [of conflicting answers] to the trial court‘s attention” and thus preserved error.10 See Murphree, 357 S.W.2d 748.
As in Little Rock Furniture, the trial court here practically invited the parties to object before the jury was dismissed. See Id. at 987–88. Despite Menchaca‘s counsel noting a conflict in the jury‘s answers, neither party objected because they each believed they had won. And as in Little Rock Furniture, that should not prevent us from considering whether the verdict can support a judgment in the plaintiff‘s favor. Id. at 989–91. This is especially true when a judgment has never been based on the entire verdict, but on the jury answers that had not been disregarded.
IV. Conclusion
We should resolve this case by deciding the simple question of whether Menchaca met her burden to prove and obtain findings that USAA‘s statutory violation caused her to lose benefits that USAA owed under the policy. Based on the jury‘s answers to Questions 1, 2, and 3, the answer is no.12 Applying the Court‘s five
Just as we can affirm a judgment in the plaintiff‘s favor when we determine that the answers do not conflict irreconcilably, id. at 991, I would hold that we can enter judgment in the defendant‘s favor when the answers establish that the plaintiff did not satisfy her burden of proof and is not entitled to any recovery.
For the reasons expressed above, I would render judgment that Menchaca take nothing on her claims.
Paul W. Green
Justice
OPINION DELIVERED: April 13, 2018
Notes
At the hearing on the parties’ motions for entry of judgment, the trial court asked:
Isn‘t that a conflict, the answer to question number one which is a breach of contract? Isn‘t that a breach of contract? I mean, failure to be reasonable in the investigation of the incident and the behavior of the adjuster is a breach of contract, and so now you have one that says, no, there is no breach of contract, and the other one says, yeah, there was? Isn‘t that a conflict between the two?
JUSTICE BOYD acknowledges that Rule 295 leaves room for a trial court to reconcile conflicting findings but, ignoring the comment to the rule, refuses to acknowledge that a trial court may exercise other options without violating the rule. S.W.3d at ___. Thus, JUSTICE BOYD reads language into Rule 295 that is not there:
If the jury‘s answers conflict irreconcilably or the purported verdict is otherwise defective, the court may must direct it to be reformed. If it is incomplete, or not responsive to the questions contained in the court‘s charge, or the answers to the question are in conflict and cannot be reconciled, the court shall in writing instruct the jury in open court of the nature of the incompleteness, unresponsiveness, or irreconcilable conflict, provide the jury such additional instructions as may be proper, and retire the jury for further deliberations.
In this case, after the jury returned its verdict but before the jury was dismissed, the trial court made clear that it would not enter a judgment until a later date, after a separate hearing in which the parties could present argument. In response to Menchaca‘s counsel‘s attempt to argue about how any conflict in the verdict could be reconciled, the trial court stated:
Well, you‘re out of line here. Now is not the time to be arguing that. The time to [argue] that is the time to enter judgment. And we‘ll [set up] a special hearing date, give both sides a chance to go over the verdict. And I‘m sure that they‘re going to say – I‘m sure they‘re going to say this is our win, you lose. And I‘m sure you‘re going to say that‘s not true and that you are entitled to attorney fees as awarded and so forth. But that‘s the time for that. Not right now.
Because it was impossible to know which party would later complain of the court‘s judgment, JUSTICE BOYD‘S preservation standard apparently would require both parties to object to conflicting answers to ensure that appellate courts are not bound by a judgment entered on fatally conflicting answers.