Bad day for injured driver
Old American County Mutual Fire Insurance Company writes personal auto insurance in Texas through managing general agents like United Automobile Insurance Services (UAIS). Francisco Hernandez bought an Old American policy through UAIS. The policy went into effect in May 2011 and listed Maria Hernandez as an authorized driver. The bodily injury limit was $30,012 per person.
In June 2011, Alvin Glenn Rhymes was involved in an accident with a vehicle driven by Maria. In June 2012, he sued Maria, alleging that he was injured in the accident that he claimed she negligently caused. Maria was served with process but did not respond. In November 2012, the court signed a default judgment awarding Rhymes $53,073 in damages and $737.95 in court costs against Maria. Rhymes sent a copy of the default judgment to UAIS over six months later.
Meanwhile, Rhymes’ attorney also was communicating with UAIS about the accident and attempting to settle Rhymes’ personal injury claim against Maria. UAIS made several unsuccessful attempts to contact Francisco and Maria about the matter before the default judgment was signed. Maria and Francisco never contacted UAIS or Old American, never sent suit papers to them, and never asked them to defend Maria.
Rhymes sued Old American and UAIS, asserting two claims. One was a contract claim based on Rhymes’ status as a third-party beneficiary of the Old American policy. The other was styled a “Stowers” negligence claim based on Old American and UAIS’s “negligent failure to settle” Rhymes’ personal injury claim against Maria within policy limits. (In Texas, a decision in the “Stowers” case established that an insured has a potential cause of action against its liability insurer for failing to settle a liability claim when a demand is made within policy limits, liability is reasonably clear, and a reasonable insurer should have settled the claim.)
Rhymes filed a motion for partial summary judgment on the issue of coverage, and Old American and UAIS filed a summary judgment motion seeking a final take-nothing judgment.
Each side responded to the other’s motion. Rhymes’ response included evidence that he had obtained a turnover order in the underlying suit against Maria. The order required Maria to turn over to Rhymes all rights, title, and interest in the auto policy.
The court denied the motion filed by Old American and UAIS. The court held that the Hernandez auto policy covered Rhymes’ damages and awarded Rhymes $30,012 against Maria. Although the second order did not mention Rhymes’ “Stowers” negligence claim, it implicitly denied that claim by including language sufficient to make it a final judgment. Old American and UAIS appealed.
On appeal, the court noted that Old American and UAIS did not dispute that the policy would have covered Maria for this accident had she complied with the policy’s notice requirements. The question was whether her failure to do so combined with the default judgment negated the appellants’ duty to indemnify and thus defeats Rhymes’ claim.
The court said Old American and UAIS conclusively proved that Maria did not give them notice of suit or request a defense. They also conclusively proved that Rhymes took a default judgment against Maria. The court held that these facts entitled the appellants to summary judgment.
Rhymes argued that Old American and UAIS failed to prove prejudice. Rhymes also argued that the notice of suit provision was actually satisfied because his attorney sent the appellants copies of the petition in the underlying suit and confirmation of service on Maria. The appellants replied that this fact was irrelevant; the court agreed.
Rhymes also argued that Old American and UAIS were not prejudiced because their claim file relating to the accident showed that they viewed coverage as “clear” and liability as “accepted.” The court stated that the default judgment not only deprived the appellants of the opportunity to litigate the claim’s merits but also imposed “a new burden of proof on new issues” in order to set the default judgment aside. The court concluded that the claim file documents did not raise a genuine fact issue as to prejudice.
Finally, Rhymes argued that Old American failed to plead prejudice. But Rhymes did not raise a pleadings argument in his summary judgment response; rather he argued the prejudice issue on the merits. Accordingly, Rhymes did not preserve his complaint about the appellants’ pleadings.
The court held that the trial court erred in granting Rhymes summary judgment and in denying the summary judgment motion of Old American and UAIS. The court reversed the trial court’s judgment and rendered judgment that Rhymes take nothing from the appellants.
United Automobile Insurance Services vs. Rhymes-Court of Appeals of Texas, Dallas-May 4, 2018-WL 2077561.