Opinion
NUMBER 13-17-00167-CV
06-07-2018
REBECCA LEIGH FLORES AND FERNANDO MEDINA, Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
On appeal from the 92nd District Court of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Justices Contreras, Longoria, and Hinojosa
Memorandum Opinion by Justice Hinojosa
Appellants Rebecca Leigh Flores and Fernando Medina sued appellee State Farm Mutual Automobile Insurance Company (State Farm), seeking to recover as third-party beneficiaries to an automobile liability policy. By two issues, which we treat as one, appellants argue that the trial court erred in granting State Farm's motion for summary judgment and in denying appellants' motion for summary judgment. We affirm.
I. BACKGROUND
Appellants were involved in a vehicle collision with Vanessa Hernandez, who was driving a vehicle insured under an automobile liability policy issued by State Farm (the policy). State Farm received notice that appellants had retained counsel in relation to the accident. State Farm then sent a letter to Hernandez advising her that appellants were represented by counsel and instructing her to notify State Farm if she "receive[d] any contact from this attorney or their representatives[.]" Appellants later sued Hernandez for negligence and obtained a default judgment. Hernandez did not forward the lawsuit to State Farm and did not otherwise notify State Farm that she had been sued.
Appellants filed the instant action against State Farm, seeking to collect on the default judgment. Appellants filed a motion for summary judgment, arguing that "the judgment obtained by [appellants] against Hernandez made [appellants] third-party beneficiaries with respect to said policy of insurance issued to Hernandez by State Farm." Appellants supported their motion with declarations by appellants and their counsel, the default judgment against Hernandez, the policy, and appellants' written demand to State Farm seeking to collect under the policy. State Farm filed a response, arguing that it had no duty to defend under the policy because Hernandez did not comply with the policy's notice-of-suit provisions.
State Farm later filed a hybrid traditional and no-evidence motion for summary judgment, arguing that it had no duty to defend the suit against Hernandez, and no liability on the policy, because Hernandez failed to comply with the policy. State Farm supported its motion with evidence that Hernandez did not notify State Farm of the underlying suit and that it had no knowledge of the suit. State Farm also provided a copy of the policy, which provides in part as follows:
PART E - DUTIES AFTER AN ACCIDENT OR LOSS(Bold in original).
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:
1. Cooperate with us in the investigation, settlement or defense of any claim or suit.
2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.
. . . .
LEGAL ACTION AGAINST US
A. No legal action may be brought against us until there has been full compliance with the terms of this policy. . . .
The trial court denied appellants' motion for summary judgment and granted State Farm's hybrid motion for summary judgment. This appeal followed.
II. DISCUSSION
A. Standard of Review
We review summary judgments de novo. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156 (Tex. 2004). The party moving for summary judgment bears the burden of proof. Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013). Though these burdens vary for traditional and no-evidence motions, where a hybrid motion is filed and both parties present summary judgment evidence, "the differing burdens are immaterial and the ultimate issue is whether a fact issue exists." Id. (citing Buck v. Palmer, 381 S.W.3d 525, 527 & n.2 (Tex. 2012)). A fact issue exists, precluding summary judgment, if there is more than a scintilla of probative evidence to support the plaintiff's claim. Id.; see TEX. R. CIV. P. 166a(c), (i).
We review the evidence presented in the motion and response in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Further, when both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides and determine all questions presented. Id. In such a situation, we render the judgment that the trial court should have rendered. Id
B. Applicable Law
Generally, an injured person cannot sue the tortfeasor's liability insurer directly until the tortfeasor's liability has been determined by agreement or judgment. See Ohio Cas. Ins. Co. v. Time Warner Entm't Co., LP, 244 S.W.3d 885, 888 (Tex. App.—Dallas 2008, pet. denied) (citing Angus Chem. Co. v. IMC Fertilizer, Inc., 939 S.W.2d 138, 138 (Tex. 1997)). After judgment, the injured person can sue the insurer as a third-party beneficiary of the insurance policy. Martinez v. ACCC Ins. Co., 343 S.W.3d 924, 929 (Tex. App.—Dallas 2011, no pet.). However, as a third-party beneficiary, the injured party "steps into the shoes" of the tortfeasor and is bound by the policy's conditions precedent. Id. Compliance with a notice provision is a condition precedent to an insurer's liability on the policy. Hudson v. City of Houston, 392 S.W.3d 714, 725-26 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). An insurer has no duty to defend or to indemnify an insured unless the insured forwards suit papers and requests a defense in compliance with the policy's notice-of-suit conditions. Nat'l Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 607-08 (Tex. 2008); Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 174-75 (Tex. 1995); Hudson, 392 S.W.3d at 726; Jenkins v. State & Cty. Mut. Fire Ins. Co., 287 S.W.3d 891, 895 (Tex. App.—Fort Worth 2009, pet. denied).
The "notice and delivery-of-suit papers provisions in insurance policies serve two essential purposes: (1) they facilitate a timely and effective defense of the claim against the insured, and more fundamentally, (2) they trigger the insurer's duty to defend by notifying the insurer that a defense is expected." Crocker, 246 S.W.3d at 608. "Mere awareness of a claim or suit does not impose a duty on the insurer to defend under the policy[.]" Id. "[T]here is no unilateral duty to act unless and until the . . . insured first requests a defense—a threshold duty that the insured fulfills under the policy by notifying the insurer that the insured has been served with process and the insurer is expected to answer on its behalf." Id. (emphasis in original). However, the insured's failure to notify the insurer does not absolve the insurer from liability on an underlying judgment unless the lack of notice results in prejudice. Harwell, 896 S.W.2d at 174. "The 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." Id.
B. Analysis
Appellants maintain that "State Farm is liable to [a]ppellants even if Hernandez failed to perform all of her obligations to State Farm." In support of their argument, appellants rely solely on Dairyland County Mutual Insurance Co. of Texas v. Childress, 650 S.W.2d 770 (Tex. 1983). In Dairyland, the Texas Supreme Court concluded that the statutory requirement in Texas for all drivers to carry liability insurance implies that all potential claimants for damages resulting from automobile accidents are intended as beneficiaries. Id. at 774-76. Therefore, the court held that the injured party is a third-party beneficiary of the liability insurance contract and has the right to bring an action on the contract for damages. Id.
Dairyland articulated what is now well-settled law—that an injured party may recover as a third-party beneficiary to a tortfeasor's automobile liability policy. See id.; Martinez, 343 S.W.3d at 929. However, this principle is not without limitation. As noted above, a third-party claimant "steps into the shoes" of the insured tortfeasor and is bound by the conditions precedent of the applicable policy. See Martinez, 343 S.W.3d at 929. Therefore, State Farm's obligation to pay appellants was contingent upon proof that the policy's conditions precedent were met, including compliance with the notice-of-suit conditions. See Crocker, 246 S.W.3d at 607-08; Harwell, 896 S.W.2d at 174-75.
It is undisputed that Hernandez did not comply with the policy's notice requirements. It is also undisputed that State Farm was unaware of appellants' suit against Hernandez until after judgment was rendered. Therefore, State Farm had no duty to defend or indemnify Hernandez in the underlying litigation and is not liable to appellants under the policy. See Crocker, 246 S.W.3d at 607-08; Harwell, 896 S.W.2d at 174-75. Further, State Farm established prejudice as a matter of law because it was not notified of the default judgment against Hernandez until after the default judgment was final and nonappealable. See Harwell, 896 S.W.2d at 174.
State Farm conclusively established that Hernandez did not provide notice of appellants' suit as required by the policy and that it was prejudiced by this failure. See Crocker, 246 S.W.3d at 607-08; Harwell, 896 S.W.2d at 174-75; Jenkins, 287 S.W.3d at 899 (affirming summary judgment in favor of insurer and dismissing third-party claimant's suit where insured failed to comply with the policy's notice provision). Therefore, the trial court properly granted State Farm's motion for summary judgment. See Neely, 418 S.W.3d at 59. We overrule appellants' issues.
III. CONCLUSION
We affirm the trial court's judgment.
LETICIA HINOJOSA
Justice Delivered and filed the 7th day of June, 2018.