Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Johnson v. State Farm Mutual Automobile Insurance Co.

Court of Appeals of Texas, Third District, Austin

April 6, 2017

Jerry C. Johnson and Jacob Johnson, Cross-Appellants,
v.
State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company, Cross-Appellees, State Farm Fire and Casualty Company and State Farm Mutual Automobile Insurance Company Appellants, Jerry C. Johnson and Jacob Johnson Appellees,

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT NO. D-1-GN-14-002961, HONORABLE KARIN CRUMP, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Goodwin and Bourland

          OPINION

          Melissa Goodwin, Justice.

         This appeal arises from a suit brought by Jerry C. Johnson seeking declarations construing the terms of two insurance policies following an automobile accident in which Jerry's son, Jacob, a minor at the time, was injured while Jerry was driving.[1] See Tex. Civ. Prac. & Rem. Code §§ 37.001-.011. Jerry sued State Farm Mutual Automobile Insurance Company, which had issued Jerry an auto policy, and State Farm Fire and Casualty Company, which had issued Jerry an umbrella policy (jointly State Farm). Jerry also named Jacob as a defendant, as a party with a claim or interest that would be affected by the litigation.[2] Jacob admitted Jerry's claims and asserted a cross-claim for declaratory relief against State Farm. State Farm asserted counterclaims for declaratory relief against Jerry and Jacob. All parties filed motions for summary judgment. The trial court granted in part and denied in part the motions of Jerry and State Farm and denied Jacob's motion. All parties appeal the rulings adverse to them. For the reasons that follow we affirm in part and reverse and render in part the trial court's judgment.

         FACTUAL AND PROCEDURAL BACKGROUND

         In 2008, Jerry, Stephanie, and Jacob were traveling on Interstate 70 in Colorado in a rented car driven by Jerry. Jerry became confused about which exit to take and turned into the path of a semi-truck, resulting in a collision. Jacob, who was eleven years old at the time and asleep in the back seat, suffered serious bodily injuries, including severe traumatic brain injury. Jacob lived with his parents at the time of the accident and remained in the home until May 29, 2015, when he permanently moved out of the residence. At the time of the accident, Jerry was insured by a Texas Personal Auto Policy (the auto policy) and a Personal Liability Umbrella Policy (the umbrella policy), both issued by State Farm. The auto policy contains a provision, the "family member exclusion, " that excludes from liability coverage bodily injury to "any family member, except to the extent of the minimum limits of Liability Coverage required by Texas [Revised] Civil Statutes, Article 6701h, entitled 'Texas Motor Vehicle Safety-Responsibility Act, '" which at the time was $25, 000.[3] See Act of May 15, 2007, 80th Leg., R.S., ch. 1298, § 1, sec. 601.072(a)(1), Tex. Gen. Laws 4365, 4365 (expired Dec. 31, 2010).[4] "Family member" is defined as "a person who is a resident of your household and related to you by blood, marriage, or adoption." The umbrella policy contains a similar provision, also referred to as a "family member exclusion, " that excludes coverage for "bodily injury . . . to any insured, " defined as "you and your relatives whose primary residence is your household."[5] "Relative" is defined as "any person related to you by blood, adoption, or marriage." Jerry sought coverage for Jacob's injuries under both policies. State Farm contended that the family member exclusions in the policies excluded coverage except to the extent of the minimum limits of liability coverage required under the auto policy by the Texas Motor Vehicle Safety Responsibility Act and offered to pay $25, 000. See id.

         Jacob also made a claim for payment under the auto policy's underinsured motorist (UIM) coverage.[6] The UIM provision affords coverage for bodily injury that a "covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle." "Covered person" as defined includes "[y]ou or any family member." "Uninsured motor vehicle" is defined to include an underinsured motor vehicle, which is further defined, in relevant part, as "one to which a liability bond or policy applies at the time of the accident but its limit of liability . . . is not enough to pay the full amount the covered person is legally entitled to recover as damages . . . ." The UIM provision excludes from the definition of "uninsured motor vehicle" any vehicle "[o]wned or furnished or available for the regular use of you or any family member." State Farm contended that UIM coverage is not available for damages sustained by a passenger who has already recovered the full amount of liability limits under the same policy and denied Jacob's claim.

         Jerry filed suit seeking declarations that the family member exclusions in the policies are unconstitutional and/or contrary to public policy and invalid. In the alternative, he sought a declaration that to the extent the family exclusions are valid, they apply only so long a Jacob is a member of Jerry's household. State Farm filed a counterclaim seeking declarations that the family member exclusions are valid and enforceable to exclude coverage under the auto and umbrella policies for any amount over the statutory minimum of $25, 000 and that the application of the family member exclusions occurs at the time of the accident. Jacob filed a cross-claim against State Farm seeking a declaration that he is entitled to UIM benefits.[7]

         All parties filed motions for summary judgment. The trial court granted in part and denied in part the motions of Jerry and State Farm and denied Jacob's motion. The trial court entered a final judgment ordering that the family member exclusion in the auto policy is valid and enforceable, that the application of the family member exclusion in the auto policy occurs at the time of the accident, that coverage for Jacob's bodily injuries under the auto policy is limited to the statutory minimum, and that Jacob is not covered under the auto policy's UIM coverage. The court further ordered that the umbrella policy is valid and enforceable, that the application of the definition of "insured" in the umbrella policy occurs at the time a liability claim is made, that at the time the claim was made Jacob's primary residence was not in Jerry's household, that Jacob was not an "insured" under the umbrella policy at the time the claim was made, and that the umbrella policy does not exclude coverage for liability arising from Jacob's injuries.

         State Farm filed a motion for new trial, arguing that the trial court erred in determining that the application of the definition of "insured" in the umbrella policy occurs at the time a liability claim is made rather than at the time of the accident. In the alternative, State Farm argued that, even if the definition of "insured" is applied at the time the claim is made, Jacob was still a resident of Jerry's household when the claim was made.[8] Following a hearing, the trial court issued an order on State Farm's motion for new trial, an amended final judgment, and findings of fact and conclusions of law. In its amended final judgment, the trial court added to its determinations regarding the auto policy determinations that it excludes liability coverage for bodily injury to a family member, that Jacob was a family member whose bodily injuries are excluded from coverage, that the "retained limit"[9] for the auto policy is the statutory minimum of $25, 000, and that Jacob's damages are not covered under the UIM provision because UIM benefits are not available for damages of a passenger who has already recovered the full amount of the liability limits under the same policy.

         The court modified its determinations concerning the umbrella policy, ordering that the application of the definition of "insured" occurs at the time the insured becomes "legally liable" for damages that exceed the "retained policy limit, " that Jerry is legally liable for Jacob's damages that exceed $25, 000, [10] that Jacob was not a resident of Jerry's household or an "insured" at the time Jerry became legally liable, that Jerry is entitled to coverage under the umbrella policy for Jacob's damages that exceed $25, 000, and that State Farm is obligated under the umbrella policy to pay damages that arise from the accident and exceed $25, 000 up to the policy limit. This appeal and cross-appeal followed.

         STANDARD OF REVIEW AND APPLICABLE LAW

         We review a trial court's summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). To prevail on a traditional summary judgment motion, the movant must demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). When the movant satisfies this initial summary judgment burden, the burden shifts to the nonmovant to produce evidence raising an issue of fact. See Tex. R. Civ. P. 166a(c); Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 517 (Tex. 2014). When all parties move for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000); Abbott v. Dallas Area Rapid Transit, 410 S.W.3d 876, 879 (Tex. App.-Austin 2013, no pet.). When the parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by all sides, determine all questions presented, and if we determine that the trial court erred, render the judgment the trial court should have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005) (citing FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000)).

         The parties' issues require us to interpret Jerry's insurance policies. "When interpreting an insurance contract we consider all its parts, read all of them together, and give effect to all of them." Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 766 (Tex. 2014). Ordinarily we seek to ascertain the intent of the parties as expressed in the language of a contract, but where, as here, the policy is a standard form prescribed by the Board of Insurance, "the intent of the parties is not what counts because they did not write the contract." Id. Instead, we interpret the policy language according to the ordinary, everyday meaning of its words. Id.; see Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 8 (Tex. 2007) ("Terms that are not defined in a policy are given their generally accepted or commonly understood meaning."). When a policy permits only one interpretation, we will construe it as a matter of law and enforce it as written. Charida v. Allstate Indem. Co., 259 S.W.3d 870, 873 (Tex. App.-Houston [1st Dist.] 2008, no pet.). We construe the policy against the insurer and in favor of the insured only when policy terms are ambiguous. Id.

         DISCUSSION

         In his appeal, Jerry challenges the trial court's determinations that the family exclusion in the auto policy is valid and enforceable and that its application occurs at the time of the accident. Jacob, in his appeal, incorporates Jerry's arguments and also challenges the trial court's determination that he is not entitled to UIM coverage under the auto policy. In its cross-appeal, State Farm challenges the trial court's determination that Jacob's status as an "insured" under the umbrella policy is determined at the time of the judgment, rather than at the time of the accident. State Farm also argues that the trial court erred in determining that State Farm is liable for damages that exceed $25, 000 up to the policy limits and challenges certain findings of fact and conclusions of law. We address each party's appeal in turn.

         Jerry's Appeal - Family Member Exclusion Under the Auto Policy

         In issues one through five and seven, Jerry challenges the family member exclusion in the auto policy as against public policy, unconstitutional, unconscionable, and void. In his sixth issue, Jerry challenges the trial court's determination that the family exclusion applies at the time of the accident. We address these issues in turn.

         Public Policy

         In his first issue, Jerry argues that the family exclusion violates public policy in two ways-by acting as a barrier to Texans' freedom to contract and by discouraging family unity. His arguments are premised on statutory provisions governing insurance policy forms. Section 5.06 of the Insurance Code provides that the Board of Insurance shall adopt a policy form and endorsements for each type of motor vehicle insurance. See Tex. Ins. Code § 5.06(1). The standard auto policy adopted by the Board of Insurance contains the family member exclusion at issue that excludes from liability coverage bodily injury to "any family member, " except to the extent of the statutory minimum limits. Section 5.06 further provides that the Board may approve the use of other policy forms if they (1) are "adopted by a national organization of insurance companies, or similar organization" and (2) provide "coverage equivalent to the coverage provided by the form adopted by the Board." Id. § 5.06(3). Jerry contends that requirement that a non-form policy be "equivalent" means it must contain a comparable family member exclusion, that no national organization of insurance companies or similar organization has promulgated a policy without a family member exclusion, and that no insurance company licensed in the State of Texas offers an auto policy without a family member exclusion.[11] The result, Jerry argues, is that it is impossible for motorists to protect themselves from ruinous liability to family members and that state law thus creates a barrier to Texans' freedom of contract, contrary to Texas's strong public policy in favor of freedom to contract. See Philadelphia Indem. Ins. Co. v. White, 490 S.W.3d 468, 471 (Tex. 2016) (noting that Texas's strong public policy favoring freedom of contract is "firmly embedded in our jurisprudence").

         In his second argument, Jerry argues that because Texas insurance law effectively requires Texans to purchase auto policies containing family member exclusions, it discourages family unity. He contends that the only way a motorist can protect himself from liability like that Jerry faces is to stay single or refrain from driving with his children in the car. He also compares the results of applying the family member exclusion when families remain intact and both parents are subject to liability to their children with the results of applying the exclusion when parents divorce and the custodial parent remains subject to liability while the noncustodial does not. Jerry also cites provisions in the Family Code stating Texas public policy of ensuring frequent and continuing contact between parents and children, providing a safe and stable environment for children, and encouraging shared rights and duties of raising children by divorced parents. See Tex. Fam. Code §§ 153.001, .251.

         While we appreciate Jerry's arguments, we are bound by case law suggesting otherwise. In National County Mutual Fire Insurance Company v. Johnson, 879 S.W.2d 1 (Tex. 1993), the Texas Supreme Court, in a plurality opinion, upheld the family member exclusion in auto policies so long as the insurer provides the minimum statutory limits required by state law. Id. at 5-6 (Cornyn, J. concurring and dissenting). Four members of the court concluded that a family member exclusion that did not provide the minimum statutory limits was not "consistent with the legislative purpose of ensuring that every motor vehicle is covered by an automobile liability policy that will protect all claimants against losses which arise out of the operation of the vehicle." Id. at 2. In his concurring and dissenting opinion, Justice Cornyn agreed that the family member exclusion conflicted with state law, but only to the extent that it failed to provide coverage in the minimum amount of insurance required by the Texas Motor Vehicle Safety Responsibility Act. Id. at 6 (Cornyn, J., concurring and dissenting). Less than a year after the Johnson decision, the Supreme Court unanimously held that "the family member exclusion is invalid only to the extent it conflicts with the Texas [Motor Vehicle] Safety Responsibility Act . . . that is, to the statutorily-imposed minimum limit of automobile liability insurance imposed by the Act." See Liberty Mut. Fire Ins. Co. v. Sanford, 879 S.W.2d 9, 10 (Tex. 1994) (per curiam) (adopting reasoning of plurality opinion in Johnson). As this Court has observed,

The plurality of the Johnson Court held that [family member] exclusions contravene the Texas Motor Vehicle Safety-Responsibility Act and are thus void for public policy reasons, as well as violations of statutory requirement of minimum liability insurance. See Johnson, 879 S.W.2d at 2 However, Justice Cornyn's concurring and dissenting opinion, which formed the plurality, stated that such exclusions are void only because they conflict with Texas' compulsory liability insurance statute Therefore, Justice Cornyn stated that such exclusions should be invalid only up to the minimum amount of mandated liability insurance See Id. at 6 (Cornyn, J, concurring and dissenting). (emphasis added). The Supreme Court adopted Justice Cornyn's position as that of the Court in the per curiam opinion in Liberty Mutual Fire Insurance Company v. Sanford, 879 S.W.2d 9, 10 (Tex. 1994).

Texas Farmers Ins. Co. v. Miller, No. 03-97-00233-CV, 1997 Tex.App. LEXIS 6210, at *4 n.2 (Tex. App.-Austin Dec. 4, 1997, pet. denied) (not designated for publication).

         Since Sanford, Texas courts of appeals have recognized family member exclusions as valid and enforceable. See, e.g., Charida, 259 S.W.3d at 876 (stating that "[u]nder Sanford/Johnson, the insurer is obligated to pay insured family members the statutorily imposed minimum limit of liability insurance"); Armendariz v. Progressive Cty. Mut. Ins. Co., 112 S.W.3d 736, 739 n.2 (Tex. App.-Houston [14th Dist.] 2003, no pet.) (stating that "as the 'swing vote, ' Justice Cornyn's opinion determined the scope of the plurality's judgment" in Johnson and that "[t]he family member exclusion is invalid 'to the statutorily-imposed minimum limit of automobile liability insurance imposed by the [Texas Motor Vehicle Safety Responsibility] Act.'" (quoting Johnson, 879 S.W.2d at 5 n.1)); Hanson v. Republic Ins. Co., 5 S.W.3d 324, 329 (Tex. App.-Houston [1st Dist.] 1999, pet. denied) (stating that "[u]nder the Sanford and Johnson precedents, the family-member exclusion limits [the insurer's] duty to indemnify [the policyholder] to the $20, 000 minimum mandated by [the Texas Motor Vehicle Safety Responsibility Act]" and holding that "the trial court properly granted summary judgment in [the insurer's] favor on the grounds it had no duty to indemnify [the policyholder] beyond [the statutory minimum] under the liability coverage of the policy"); State Farm Mut. Auto. Ins. Co. v. Nguyen, 920 S.W.2d 409, 410-11, 413 (Tex. App.-Houston [1st Dist.] 1996, no writ) (same); Farmers Tex. Cty. Mut. Ins. Co. v. Griffin, 868 S.W.2d 861, 867 n.4 (Tex. App.-Dallas 1993, writ denied) ("Justice Cornyn's concurrence and dissent [in Johnson] determined the scope of the supreme court's judgment: The family member exclusion is invalid only to the extent it conflicts with the Texas Safety Responsibility Act, that is, to the statutorily imposed minimum limit of automobile liability insurance imposed by the Act.") (citation omitted).

         The Texas Supreme Court has determined that Texas public policy as reflected in the Texas Motor Vehicle Safety Responsibility Act does not require more than the statutory minimum limits of liability regardless of whether the negligent driver injures a stranger or a family member. See Sanford, 879 S.W.2d at 10 (adopting Justice Cornyn's concurring and dissenting opinion, which formed the plurality in Johnson); Johnson, 879 S.W.2d at 6 (Cornyn, J., concurring and dissenting) ("The legislature has not said that family members should receive greater coverage than other members of the public . . . . It is not for this court to evaluate the public policy implications of mandatory insurance coverage; the legislature has already done that."). Jerry's complaints concerning the unavailability of policies that do not contain the family member exclusion lie with the legislature and the Texas Board of Insurance, not with State Farm.[12] See Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 665 (Tex. 2008) ("The Legislature determines public policy through the statutes it passes."); Castillo v. Canales, 174 S.W.2d 251, 253 (Tex. 1943) ("The Legislature has the power to declare what shall be the policy of the State with reference to insurance matters."). We overrule Jerry's first issue.

         Consti ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.