Summary
holding that insurer "cannot be liable for breach of the duty of good faith and fair dealing or violations of the . . . Insurance Code since no coverage existed"
Summary of this case from Carolina Casualty Insurance Company v. SowellOpinion
NO. 4:00-CV-1746-A
July 3, 2001
MEMORANDUM OPINION and ORDER
Came on for consideration the motion of defendants Federated Mutual Insurance Company ("Federated") and Beck Wells ("Wells") for summary judgment. The court, having considered the motion, the response of plaintiffs, Darrell Dean Eilander and Janice Ruth Eilander, the reply, the record, the summary judgment evidence, and applicable authorities, finds that the motion should be granted.
I. Plaintiffs' Claims
On October 18, 2000, plaintiffs filed their original petition in the 141st Judicial District Court of Tarrant County, Texas. By notice of removal filed October 30, 2000, the action was brought before this court.
Plaintiffs are the parents of David Eilander ("Eilander"), who was killed on August 27, 1999, when the vehicle in which he was a passenger was involved in a one-car accident. Plaintiffs contend that Eilander had given permission to Tina Marie Walker ("Walker") to drive his company-owned vehicle and that Walker was therefore an insured under a commercial automobile policy and following form excess policy issued by Federated to Managerial Consultants of North Texas, Inc. ("MCNT") and Alta Mesa Tire Service, Inc. ("Alta Mesa"). Plaintiffs sued Walker in state court and each obtained a six million dollar judgment against her. She then assigned her claims against defendants to plaintiffs. Plaintiffs seek declaratory relief and assert claims for breach of contract, violation of the Texas Insurance Code, violation of the Texas Deceptive Trade Practices — Consumer Protection Act ("DTPA"), breach of duty of good faith and fair dealing, and negligence.
II. Defendants' Request for Declaratory Judgment
Each defendant filed along with the defendant's answer a request for a declaratory judgment that Federated has not had, and does not have, under the commercial automobile policy or the excess policy, a duty to defend or indemnify Walker with respect to any claim made, or lawsuit brought, against her by the plaintiffs in the instant action.
III. Grounds of the Motion
Defendants seek judgment that plaintiffs take nothing on any of their claims. They also seek judgment on their counterclaims for declaratory relief. Defendants contend, inter alia, that the summary judgment evidence establishes as a matter of law that Walker was not an insured under the policies issued by Federated. The motion is worded as though defendants have a greater burden than actually falls on them, see infra at 5-6, but it is clear from their "matter of law" language that they mean that plaintiffs cannot establish that Walker was an insured under the policies. Defendants assert other grounds in their motion, but the court finds it unnecessary to consider them.IV. The Undisputed Facts
The summary judgment evidence establishes the following undisputed facts:
Federated and MCNT and Alta Mesa entered into an insurance contract numbered 9360028 (the "policy") and an excess insurance contract numbered 9360029 (the "excess policy") for the period 4/1/99 to 4/1/00. MCNT and Alta Mesa were the named insureds under the policy and the excess policy. Each policy has a space to indicate the named insured's form of business. The choices include "Partnership" and "Corporation." In each instance, the policy indicates that the named insured's form of business is "Corporation."
The policy and the excess policy define the terms "you," "your," and "yours" as the named insured. Only a named insured could give the authority to make a permissive user of a covered vehicle an omnibus or additional insured under the Federated policies. Eilander and Walker were not named insureds under the policy or excess policy. The policy and the excess policy each describe as an insured a person who uses an owned covered auto with a named insured's permission.
Alta Mesa was a corporation set up by Kenneth Nowak ("Nowak") to operate a tire store on Alta Mesa Boulevard in Fort Worth, Texas. Eilander had been an employee of Nowak's in Kansas City several years earlier. When Eilander moved to Texas, he became reacquainted with Nowak and the two decided that Eilander would operate the Alta Mesa store and one day have the opportunity to own it. Nowak and Eilander agreed on a five-year buy-out program pursuant to which Eilander could buy stock at the end of each year until he bought all of the stock of the corporation. At the time of his death, Eilander had not yet purchased any of the stock, since the store had only been open about four months.
The pickup involved in the fatal one-car accident in issue was an owned covered auto under the policy and the excess policy.
As a manager of Alta Mesa's tire store, Eilander was allowed to drive the pickup. He was specifically informed at least twice that only employees holding valid driver's licenses could drive the pickup and that non-employees could not.
This is established through the affidavit of Roxanne Michelle Nowak attached to the appendix to defendants' reply brief. The reply and appendix were filed May 18, 2001, and plaintiffs never objected to the additional evidence presented or sought leave to make any response or add additional evidence of their own. There is undisputed evidence that Roxanne Michelle Nowak had a position of authority that enabled her to define to Eilander the scope of his authority relative to use of the pickup.
At the time Eilander was killed, Walker was driving the pickup. Walker was not an employee of the named insureds in the policy or excess policy. The accident occurred at 2:00 a.m. on August 27, 1999. Both Walker and Eilander were legally intoxicated at the time of the accident. There is no evidence that their activities beginning on the evening of August 26, 1999, until the accident had anything to do with the business of Alta Mesa or MCNT.
On October 4, 1999, plaintiffs sued Walker in the 236th Judicial District Court of Tarrant County, Texas. Each plaintiff obtained a judgment against Walker for six million dollars plus interest and costs.
Defendants do not admit the regularity of the judgment. The summary judgment record contains a transcript of the proceedings that plaintiffs refer to as a trial that resulted in the judgment. The transcript discloses that the "trial" was a farce, and that the state court judge apparently was willing to sign whatever kind of judgment counsel for the Eilanders put in front of him. However, the court does not need to explore the enforceability of the state court judgment in order to reach a decision in this case.
V. Applicable Summary Judgment Principles
A party is entitled to summary judgment on all or any part of a claim as to which there is no genuine issue of material fact and as to which the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The moving party has the initial burden of showing that there is no genuine issue of material fact. Anderson, 477 U.S. at 256. The movant may discharge this burden by pointing out the absence of evidence to support one or more essential elements of the non-moving party's claim "since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). Once the moving party has carried its burden under Rule 56(c), the non-moving party must do more than merely show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party opposing the motion may not rest on mere allegations or denials of pleading, but must set forth specific facts showing a genuine issue for trial. Anderson, 477 U.S. at 248, 256. To meet this burden, the nonmovant must "identify specific evidence in the record and articulate the `precise manner' in which that evidence support[s] [its] claim[s]." Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994). An issue is material only if its resolution could affect the outcome of the action. Anderson, 477 U.S. at 248. Unsupported allegations, conclusory in nature, are insufficient to defeat a proper motion for summary judgment. Simmons v. Lyons, 746 F.2d 265, 269 (5th Cir. 1984).The standard for granting a summary judgment is the same as the standard for a directed verdict. Celotex Corp., 477 U.S. at 323. If the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.Matsushita, 475 U.S. at 597.
VI. Law Applied to the Facts
The basis for all of plaintiffs' claims is that Walker was an insured under the policy and the excess policy. Plaintiffs rely on Eilander's alleged position as a "vice principal" of Alta Mesa to establish that Walker had permission to drive the pickup. The cases they rely on establish only that the acts of a vice principal are deemed to be acts of the corporation itself with regard to actions taken in the workplace.See, e.g., GTE Southwest, Inc. v. Bruce. 998 S.W.2d 605, 618 (Tex. 1999). They alternatively argue that Eilander was a partner with Nowak in Alta Mesa. The summary judgment evidence establishes, however, that Eilander did not have any ownership interest in Alta Mesa. And, there is no evidence of any partnership between Eilander and Nowak in which Eilander agreed to share in losses incurred. See Stephanz v. Laird. 846 S.W.2d 895, 900 (Tex.App.-Houston [1st Dist.] 1993, writ denied) (an agreement to share losses is an essential ingredient of a partnership).
As a further alternative, plaintiffs contend that as a manager in control of the pickup, Eilander had the authority to authorize Walker to drive it. They cite to Georgia Casualty Co. v. Waldman, 53 F.2d 24 (5th Cir. 1931). In Waldman, the president of a corporation permitted his stepson to use a company car. When the stepson had an accident, the carrier denied coverage, urging that the stepson was not a permissive user. The Fifth Circuit held that coverage applied. No question of the authority of the president of the corporation was raised. Nor was there any evidence that the corporation had placed specific restrictions on the use of the vehicle. 53 F.2d at 26.
As yet another alternative, plaintiffs urge that the insureds were bound by the acts of Eilander, their agent. They adduce no summary judgment evidence, however, to show that the insureds communicated in any manner to Walker that Eilander had unlimited authority to use the pickup and to authorize anyone else to use it. See Baptist Mem. Hosp. Sys. v. Sampson, 969 S.W.2d 945, 949 (Tex. 1998); Biggs v. United States Fire Ins. Co., 611 S.W.2d 624, 629 (Tex. 1981). Representations made by an agent of his authority have no effect. Southwest Title Ins. Co. v. Northland Bldg. Corp., 552 S.W.2d 425, 428 (Tex. 1977).
American Surety Co. v. McCarty, 395 S.W.2d 665 (Tex.Civ.App. — Austin 1965, writ ref'd n.r.e.), upon which plaintiffs rely, is not to the contrary. The issue there was whether the driver of a vehicle was covered by her own policy of insurance. 395 S.W.2d at 667.
The final alternative is that the named insured should be deemed to have given Walker permission because, plaintiffs argue, Walker was operating the vehicle for the benefit of Eilander at a time when he was an occupant of the vehicle. The case authorities cited by plaintiffs for this proposition do not support it.
Here, the undisputed summary judgment evidence establishes that Walker was not an insured under either policy. The affidavit of Roxanne Nowak establishes that on two separate occasions she advised Eilander about Alta Mesa's policy of not allowing non-employees to drive the pickup. As stated, plaintiffs have not disputed this testimony. They have only attempted to impeach Kenneth Nowak, through the affidavit of Jay Murray, by showing that Nowak earlier denied having placed any limitation on Eilander's use of the pickup. In his deposition, Nowak explained that he did not sign an affidavit to that effect because it was not true. According to Nowak, the attorney who prepared the affidavit wrote down what he wanted to hear rather than what Nowak actually said. In any event, even assuming that Nowak made inconsistent statements, plaintiffs cannot rely on the affidavit of Murray to establish the truth of the statements he represents that Nowak made. To meet their burden of establishing that Walker was a permissive user of the pickup, they must adduce more than hearsay. And, the fact that Kenneth Nowak may have made inconsistent statements does not alter Roxanne Nowak's unequivocal testimony regarding the limitations placed on Eilander's use of the pickup.
The facts of this case are similar to those in Government Employees Ins. Co. v. Edelman, 524 S.W.2d 546 (Tex.Civ.App.-Beaumont 1975, writ ref'd n.r.e.). There, the insured allowed his teenage son to drive a scheduled vehicle, but expressly told the son that only immediate family members could drive the vehicle. The court ruled that where an owner forbids a permittee to lend the vehicle and the permittee does so anyway, no coverage exists, even where the permittee has exclusive use of the vehicle. 524 S.W.2d at 549-50. In a similar case, the court stated that it would be "incongruous to first recognize that the named insured has expressly forbidden the original permittee to extend permission to another, and then proceed to hold he has given implied consent under these circumstances." Indiana Lumbermen's Mut. Ins. Co. v. Hartford Accident Indem. Co., 454 S.W.2d 781, 784 (Tex.Civ.App.-Waco 1970, writ ref'd n.r.e.).See also Columbia Cas. Co. v. Lyle, 81 F.2d 281 (5th Cir. 1936).
Because Federated had no duty to defend Walker, it likewise has no duty to indemnify her. Farmers Tex. County Mut. Ins. Co. v. Griffin. 955 S.W.2d 81, 84 (Tex. 1997). Moreover, it cannot be liable for breach of the duty of good faith and fair dealing or violations of the DTPA or Insurance Code since no coverage existed. Republic Ins. Co. v. Stoker, 903 S.W.2d 338 (Tex. 1995); Tivoli Corp. v. Jewelers Mut. Ins. Co., 932 S.W.2d 704 (Tex.App.-San Antonio 1996, writ denied). (Plaintiffs have failed to show that any exceptional circumstance exists that would allow recovery of extracontractual damages. See Viles v. Sec. Nat'l Ins. Co., 788 S.W.2d 566 (Tex. 1990).)
Finally, plaintiffs have not come forward with any evidence upon which to base any claim against Wells. And, the summary judgment evidence establishes that no legitimate claim could be asserted against him.
VII. ORDER
For the reasons discussed herein,
The court ORDERS that defendants' motion for summary judgment be, and is hereby, granted.
The court further ORDERS and DECLARES that Federated has no obligation or duty, and has not had any obligation or duty, under the policy or the excess policy to defend any suit brought by plaintiffs against Walker or to pay any judgment in favor of plaintiffs against Walker because Walker was not an insured under the policy or the excess policy while operating the pickup truck at the time of the accident that resulted in the death of Eilander and, therefore, was not afforded any insurance protection under the policy or excess policy with respect to such accident, injuries suffered by Eilander, or the death of Eilander.
The court further ORDERS that plaintiffs take nothing on their claims against defendants; and that such claims be, and are hereby, dismissed with prejudice.