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Farmers Texas County Mutual Insurance Co. v. Okelberry

Court of Appeals of Texas, Fourteenth District

May 25, 2017

FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, Appellant
v.
STEVEN MARTIN OKELBERRY, INDIVIDUALLY AND AS NEXT FRIEND OF NEXT FRIEND OF NICHOLAS OKELBERRY AND ANTHONY OKELBERRY, MINOR CHILDREN, Appellee

         On Appeal from the 333rd District Court Harris County, Texas Trial Court Cause No. 2013-42435

          Panel consists of Justices Boyce, Christopher, and Wise.

          OPINION

          Ken Wise Justice

         This is a suit between an insured and his insurance company over the amount due to the insured from his underinsured motorist (UIM) coverage following a settlement in an underlying personal injury lawsuit. Appellant contends that the trial court erred in failing to offset the full amount of the settlement against the insurance company's UIM policy limit. We hold that Farmers was entitled to a credit for the full amount of the settlement and so reverse and remand to the trial court to enter a judgment accordingly.

         Factual Background

         Appellee Steven Okelberry and his wife, Patricia Okelberry, had a Texas personal auto policy issued by appellant Farmers Texas County Mutual Insurance Company (Farmers). Farmers' policy with the Okelberrys provided $500, 000.00 in UIM coverage.

         On March 9, 2008, Steven and his two sons were injured in an accident caused by a collision with an 18-wheeler owned by Charles M. Archer and insured by Home State Mutual Insurance Company (Home State). Steven suffered a neck injury requiring surgery and the possibility of additional surgeries in the future.

         Home State settled Steven's property-damage claim for $20, 066.12 out of the total policy limits of $750, 000.00. On February 25, 2010, Steven and his sons sued Archer, his company, and the truck driver for negligence to recover personal injury damages. Patricia, who was not in the car accident, was not a party to the suit.

         Farmers gave Steven consent to settle the lawsuit individually and on behalf of his sons on February 1, 2011. The parties settled for $729, 993.88, the amount of the remaining Home State liability limit, on November 10, 2011. The judge of the 127th District Court signed a final judgment approving the settlement after a minor settlement hearing the same day. Under the settlement agreement, which was signed by both Steven and Patricia, the parties agreed to the following payments:

1. $269, 212.06 payable to Steven's counsel on Steven's behalf;
2. $320, 776.71 payable to Steven and Patricia;
3. $50, 000.00 payable to Ingenix Subrogation Services on Steven's behalf.

          The three checks totaled $639, 988.77. The check for $320, 776.71 was made payable to Patricia and Steven jointly. The balance of the liability limit was paid to or on behalf of the sons for subrogation claims, annuities, and attorney's fees.

         At the minor settlement hearing, the guardian ad litem explained that the parties proposed allocating the settlement amount pro rata based on the amount of past medical expenses incurred for treating Steven and his sons. Steven's pro rata portion of the medical bills was 87.67%. Both Steven and Patricia testified that the pro rata distribution of the settlement money to Steven and his sons was fair. Patricia also signed a release.

         Steven, on behalf of himself and his sons, then sued Farmers for UIM benefits. The sons were nonsuited before trial, leaving Steven as the sole plaintiff. At trial, the jury awarded Steven $825, 675.84 for past and future physical pain, mental anguish, physical impairment, and medical expenses, as well as past loss of earning capacity. This amount exceeded Farmer's $500, 000.00 policy limit.

         Farmer's policy provides that the policy limit can be offset by settlement amounts paid to the covered insured by the legally responsible parties. Under the policy, Farmers was obligated to pay the lesser of (1) the difference between the amount of Steven's damages and the amount "paid or payable" to Steven for his damages, or (2) the full amount of the $500, 000.00 policy limit.

         The issue of how to calculate an offset was raised several times during the course of the trial. Ultimately, Farmers rested its case after ensuring that the record included evidence of the settlement and the amounts paid to Steven by the three checks. Steven's counsel also stipulated to the property-damages payment Steven had received.

         After the jury verdict, Farmers filed a "Motion to Apply Credits" in which it argued that Farmers was entitled to offset the jury's damage award by the $639, 988.77 that was paid to Steven in the settlement, including the full amount of the $320, 776.71 check made out jointly to Steven and Patricia. Farmers argued that Patricia was not a party to the underlying suit, never presented a claim for loss of consortium, and any such claim was barred by the statute of limitations; therefore, Patricia could not have released a claim that was not in existence. Farmers also argued that the testimony from the minor settlement hearing demonstrated that the settlement funds were divided among Steven and his sons and no part of the settlement was allocated to Patricia. Farmers attached supporting exhibits consisting of the petition in the underlying case, the transcript of the minor settlement hearing, and the settlement agreement.

         In response, Steven filed a "Motion for Judgment" in which he argued that the burden was on Farmers to prove the amount of the offset to which it was entitled with regard to the $320, 776.71 payment to Steven and Patricia jointly, and because it failed to present any evidence of how that amount should be apportioned, Farmers was entitled to no credit with respect to that payment. Steven also argued that the entire $639, 988.77 that Steven and Patricia had received in the settlement was presumed to be community property absent clear and convincing evidence to the contrary, and therefore only Steven's one-half interest in those proceeds, or $319, 994.38, should be deducted from the jury's verdict. Under either scenario, Steven asserted, he would still be entitled to recover the full $500, 000.00 limit under the Farmers policy.

         Farmers filed a response to the motion for judgment in which it restated the arguments made in its motion to apply credits and responded to Steven's community property arguments. Among other things, Farmers argued that the jury's verdict awarding categories of damages that were Steven's separate property was clear and convincing evidence that Steven, not Patricia, was the one who sustained injuries in the underlying accident and that the checks issued in the settlement were for the sole benefit of Steven for the injuries he alone sustained. Farmers attached supporting exhibits consisting of the petition in the underlying case, the transcript of the minor settlement hearing, and the settlement agreement.

         The trial court held a hearing at which both parties elaborated on their arguments in support of their respective positions. On September 28, 2015, the trial court signed a judgment awarding Steven $500, 000.00 in UIM benefits. Farmers moved for a new trial, which was denied after a hearing. This appeal followed.

         Issues ...


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