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XL Insurance Company of New York, Inc. v. Lucio

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

May 24, 2018

XL INSURANCE COMPANY OF NEW YORK, INC., Appellant,
v.
JUAN LUCIO, Appellee.

          On appeal from the County Court at Law No. 2 of Cameron County, Texas.

          Before Justices Rodriguez, Contreras, and Hinojosa

          OPINION

          LETICIA HINOJOSA JUSTICE

         Appellant XL Insurance Company of New York, Inc. (XL New York) appeals from a no-answer default judgment that awards appellee Juan Lucio approximately $144, 500. In two issues, XL New York complains that (1) the trial court abused its discretion in denying its motion to set aside the default judgment, and alternatively, for new trial (the post-judgment motion); and (2) the amount awarded exceeds the stipulation Lucio filed along with his original petition, which, according to XL New York, requires us to reform the judgment, suggest a remittitur, or remand for a new trial on damages. We affirm in part and reverse and remand in part with instructions.

         I. BACKGROUND

         According to Lucio's April 17, 2015 original petition, a hail storm severely damaged his Cameron County home, and he filed a claim for damages on a homeowner's insurance policy issued by XL New York. After XL New York allegedly underpaid his claim, Lucio sued it within two years of the storm's occurrence. Under the causes of action section of Lucio's original petition, he lists "XL at Lloyd's, London" as the defendant, and asserts claims for violations of the Texas Insurance Code, breach of contract, breach of the duty of good faith and fair dealing, and fraud. Lucio's petition sought damages over $10, 000 but no more than $70, 000. Contemporaneously with his original petition, Lucio also filed a stipulation addressed to "Underwriters At Lloyd's, London, by and through its Agent for Service, Edward T. Smith, at Mendes & Mount, 750 Seventh Avenue, New York, NY 10019." The stipulation provides that the damages "shall not exceed $74, 000.00 inclusive of penalties, interest, attorney's fees, or any other damages the Plaintiff may be entitled to recover."

         XL New York's registered agent in Texas received Lucio's original petition and the citation on April 27, 2015. That same day, XL New York's registered agent forwarded these documents by email to, among others, Barbara Brown, a paralegal. In an affidavit in support of XL New York's post-judgment motion, Brown described herself as a paralegal employed by XL Global Services, Inc. (XL Global). XL New York and XL Global are, according to Brown, affiliated companies and indirect, wholly-owned subsidiaries of XL Group Ltd. (XL Group). Brown receives legal documents from the registered agents for XL Group companies, including XL New York. As for receipt and processing of legal citations, Brown explained:

During any given calendar year, it is normal for more than one hundred lawsuits to be filed against XL Group Ltd.'s companies. When I receive notice from a registered agent that a new lawsuit has been filed against an XL Group Ltd. company, it is my standard practice to review various claims and underwriting databases/systems and attempt to identify an appropriate claim number and/or policy number pertaining to the lawsuit and to then forward the matter to the appropriate employee for handling. If it is determined that there are no underlying records relating to that lawsuit, it is my standard practice to notify the claimant's attorney of the need for additional information and/or the possibility that the XL Group Ltd. company has been incorrectly sued. No attorney is retained to represent the XL Group Ltd. company until after the alleged insured demonstrates intent to continue pursuing its claim against the XL Group Ltd. Company.
In accordance with these standard practices, after receiving . . . Lucio's Original Petition, I unsuccessfully attempted to locate a policy issued by [XL New York] to him or covering the property described in the pleading. I was also unable to locate any records of any pre-litigation claim submitted by Lucio to [XL New York]. I also noticed that the Original Petition contained references to and claims asserted against entities that are not XL Group Ltd. companies. Therefore, on April 28, 2015, l sent an email to Lucio's legal counsel informing Lucio that [XL New York] had no records relating to him.

         Brown's April 28, 2015 email states:

We can find no record of insuring this claim. Therefore, we are suggesting you contact Folksamerica Insurance for possible coverage.
Briefly, XL Insurance Company of America, Inc. was originally known as Great Lakes American Reinsurance Company ("GLARC"), which was incorporated in September 1994 and licensed to transact business on October 1, 1994. GLARC was acquired by Folksamerica Holding Company in July 1997 and was renamed Folksamerica General Insurance Company. That company (whose assets and liabilities were transferred via a transfer and assumption agreement to Folksamerica Reinsurance Company) was subsequently purchased by X.L. America, Inc. in March 1998 and its name was changed to X.L. Insurance Company of America, Inc., later to be renamed XL Insurance Company of New York.
Thank you for your cooperation and assistance.

         Brown avers that she "never received a written or oral response to [the above-quoted] e-mail, and [she has] no personal knowledge that Lucio or his legal counsel ever attempted to speak with [her] regarding" it.

         On January 28, 2016, the trial court sent a notice of intent to dismiss the case for want of prosecution and set a hearing for March 30, 2016. No one appeared at the March 30, 2016 hearing; on that day, the trial court signed an order of dismissal for want of prosecution.

         Within thirty days, Lucio filed a motion to reinstate, which pleads:

Plaintiff will show good cause exists why the above styled and numbered case should not be dismissed for want of prosecution, in that Plaintiff's counsel did not receive a copy of the Court's notice that this matter was set for dismissal for want of prosecution on March 30, 2016, thus the event was not properly calendared.
Defendant was served by the Clerk of this Court with Citation by Certified Mail on April 27, 2015; however, Defendant has failed to file an answer in this matter.
Plaintiff requests this Court give Defendant more time to formally appear and/or answer in this cause.

         The trial court granted Lucio's motion to reinstate on April 15, 2016.

         Later, the trial court signed an order setting the case for a jury trial on August 29, 2016. The week before a jury trial was scheduled to begin, Lucio filed a motion for default judgment. On August 29, 2016, the trial court signed a default judgment against XL New York, which in part provides:

That Defendant XL Insurance Company of New York, Inc. knowingly engaged in acts and practices defined in Texas Insurance Code Section 541, Subchapter B, Unfair Methods of Competition and Unfair or Deceptive Acts or Practices ...

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