Oran Greene v. Empire Fire and Marine Insurance Company and NGC County Mutual Insurance Company

Greene v. Empire Fire IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS, AT AUSTIN NO. 3-92-037-CV ORAN GREENE, APPELLANT vs. EMPIRE FIRE AND MARINE INSURANCE COMPANY AND NGC COUNTY MUTUAL INSURANCE COMPANY, APPELLEES FROM THE DISTRICT COURT OF TRAVIS COUNTY, 147TH JUDICIAL DISTRICT NO. 493,705, HONORABLE PAUL R. DAVIS, JR., PRESIDING JUDGE This is a suit on an insurance policy. Oran Greene, appellant, sued NGC County Mutual Insurance Company ("NGC") and Empire Fire and Marine Insurance Company ("Empire"), to enforce a judgment rendered against Michael Chinn, an erstwhile insured of NGC. Empire was NGC's authorized agent to adjust claims made against Chinn's policy. The cause arose from injuries Greene sustained in an accident while Chinn was driving. The insurance companies denied liability on the ground that, at the time of the accident, Chinn's policy was no longer in effect. The parties submitted the case to the district court on an agreed record, pursuant to Rule 263 of the Texas Rules of Civil Procedure. The district court rendered judgment that Greene recover nothing from the insurance companies. We will affirm that judgment. BACKGROUND The facts of this case are stipulated. NGC issued an automobile insurance policy to Chinn, the policy period to run from December 30, 1989, through December 30, 1990. On or about March 20, 1990, NGC canceled the policy for non-payment of premiums. On April 9, 1990, Chinn and his passenger, Greene, were involved in the accident that forms the basis of this suit. Chinn filed a claim with Empire, which assigned the claim to a local adjuster, Littleton Claims ("Littleton"). Empire authorized Littleton to settle property damage and bodily injury claims. An agent of Littleton, Holly Whatley, contacted the involved parties and extended a settlement offer to at least one of the injured parties. In the course of attempting to settle the claim and responding to requests for insurance coverage information, Empire discovered that NGC had canceled Chinn's policy. On July 19, 1990, Empire denied coverage to Chinn due to the cancellation of his policy with NGC. In Greene's subsequent suit against Chinn, both NGC and Empire refused to defend because Chinn had forfeited coverage by non-payment of premiums. Chinn suffered a default judgment for $21,000. Greene sought to enforce this judgment against NGC and Empire on the theory that the insurance companies had waived the cancellation of Chinn's policy or were estopped to deny coverage. The district court, on the basis of the agreed record, denied Greene any recovery against NGC and Empire. On appeal, Greene brings two points of error challenging the legal and factual sufficiency of the evidence to support the judgment, first contending that the record shows a waiver of forfeiture as a matter of law, and next urging that the judgment is against the great weight and preponderance of the evidence. DISCUSSION A case submitted to the trial court on an agreed stipulation of facts under Rule 263 is in the nature of a special verdict and is a request by the litigants for judgment in accordance with the applicable law. State Bar of Tex. v. Faubion, 821 S.W.2d 203, 205 (Tex. App.--Houston [14th Dist.] 1991, writ denied). The court's judgment must declare only the law necessarily arising from the stipulated facts. Gibson v. Drew Mortgage Co., 696 S.W.2d 211, 213 (Tex. App.--Houston [14th Dist.] 1985, writ ref'd n.r.e.). The trial court may not, unless provided otherwise in the agreed statement, find any facts not conforming to the agreed statement. Henry S. Miller Co. v. Wood, 584 S.W.2d 302, 303-04 (Tex. Civ. App.--Texarkana 1979), aff'd, 597 S.W.2d 332 (Tex. 1980). The question on appeal is limited to whether the trial court correctly applied the law to the admitted facts. Faubion, 821 S.W.2d at 205. Greene contends that the trial court erred in rendering judgment against him because, by their actions in investigating the accident and authorizing the settlement of claims, appellees have waived the cancellation of Chinn's policy. Texas courts address renewal, or reinstatement, of a lapsed policy in terms of "waiver of forfeiture." Preferred Risk Mut. Ins. Co. v. Rabun, 561 S.W.2d 239, 242 (Tex. Civ. App.--Austin 1978, writ dism'd w.o.j.). A claim of waiver of forfeiture relating to a lapsed policy typically arises in the context of the insured's attempts to renew coverage by late-payment of premiums. The paradigmatic case involves (1) a policy lapsed through non-payment of premiums, (2) an effort by the insured to pay the premium and reinstate the policy, (3) acceptance of the late payment by the insurance company, (4) a loss concurrent with or soon after the late payment, and (5) denial of coverage by the insurer. See, e.g., Bailey v. Sovereign Camp, W.O.W., 286 S.W. 456 (Tex. 1926); Equitable Life Assurance Soc'y v. Ellis, 152 S.W. 625 (Tex. 1913); Sovereign Camp W.O.W. v. Cameron, 41 S.W.2d 283 (Tex. Civ. App.--Austin 1931, writ ref'd); Preferred Risk Mut. Ins. Co. v. Rabun, 561 S.W.2d 239. The Texas Supreme Court gracefully articulated the principle underlying the theory of waiver of forfeiture in the lapsed policy context in Bailey v. Sovereign Camp: The time has not come in this state when an insurance company . . . can, with knowledge that a policy holder has forfeited his right of protection, voluntarily accept and retain the premium which the insured has paid, as was done in this instance, without also keeping in full force and effect the liability of said insurance company under said policy. Particularly is this true where the premium is retained with the knowledge of facts constituting a forfeiture and returned only after the death of the insured. One who places his bets after the dice are thrown is sure to win. It is too evident for words that, had Bailey [the insured] lived, no forfeiture would have been claimed or sought. But Bailey died, and the premiums were returned. Insurance companies cannot so gamble on the lives of their policy-holders. Having accepted the wager in accepting the premium, the [insurer] was bound by the consequences. Bailey, 286 S.W. at 458. This principle, intended to prevent insurers from retaining premiums only as convenient, is doubtless as vital today as it was in 1926, but we do not believe it applies to this case. There is no record evidence showing that Chinn made any effort at all to reinstate his coverage by paying his premiums. Thus, it cannot be said that the appellees were in any way gambling with the well-being of their former policy holder. We decline to hold that the appellees revived Chinn's lapsed policy, where he made no effort to reinstate it, simply because they began to investigate a claim as though the policy were still in force. Such a holding would do nothing to advance the protection of insureds from "bet-hedging" insurers, but would punish the insurer for promptly processing claims. To support his claim of waiver, Greene relies heavily on Equitable Life Assurance Society v. Ellis, 147 S.W. 1152 (Tex. 1912), aff'd on rehearing, 152 S.W. 625 (Tex. 1913). The supreme court there explained, [A] waiver of the forfeiture of the policy will result, in absence of any agreements to that effect, from negotiations or transactions with the insured, after knowledge of the forfeiture, by which the insurer recognizes the continued validity of the policy or does acts based thereon. Id. at 1156 (emphasis added). Ellis, by failing to pay annual premiums timely, had forfeited two life insurance policies. Rather than lose Ellis's business, however, the insurer offered to lend Ellis the money needed to pay the premiums, taking as security the underlying policies. Id. at 1155. The supreme court determined that, despite its awareness of the forfeiture, the insurer had, through its loan negotiations with Ellis, evinced its clear intent to treat the lapsed policies as valid. Id. at 1158. The insurer was therefore held to have waived its defense of non-coverage. Unlike Ellis's insurer, Empire acted without knowledge that Chinn's policy had lapsed. The stipulated facts in the instant case reveal that Empire discovered the cancellation while investigating Chinn's claim and that Empire's prompt response to Chinn's claim ended when it learned that the policy had lapsed. NGC and Empire thereafter refused to defend Chinn from Greene's suit. We cannot conclude from this evidence that either Empire or NGC manifested any express or implied intention, as did the insurer in Ellis, to waive the defense of non-coverage. Neither the facts nor the policy undergirding Ellis controls the instant case. We overrule Greene's points of error because (1) the evidence does not show that the insurance companies waived Chinn's forfeiture as a matter of law and (2) the judgment is not against the great weight and preponderance of the evidence. Although Greene does not bring a point of error specifically raising the matter of estoppel, we will briefly discuss estoppel due to its potential applicability to the facts of this case. We pause to note that waiver and estoppel, though related and oft-confused concepts, are separate and distinct. The supreme court has explained the difference between the two: "Waiver presupposes full knowledge of existing right, while estoppel arises where by fault of one, another has been induced to change his position for the worse." Massachusetts Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967) (citing New Amsterdam Casualty Co. v. Hamblen, 190 S.W.2d 56 (Tex. 1945)). Though Empire's conduct in investigating and authorizing settlement of injury claims does not constitute a waiver on the facts of this case, we note that similar conduct could give rise to an estoppel against the insurer, where an insurer induces detrimental reliance by a third party. Here, however, Greene has not shown estoppel. Any party seeking to establish an estoppel must prove (1) a false representation or concealment of material facts, (2) made with knowledge, actual or constructive, of those facts, (3) with the intention that it should be acted on, (4) to a party without knowledge or the means of knowledge of those facts, (5) who detrimentally relied upon the misrepresentation. Schroeder v. Texas Iron Works, Inc., 813 S.W.2d 483, 489 (Tex. 1991). Assuming, without deciding, that Greene proved all the other elements, we are unable to find an estoppel since there is no proof of detrimental reliance. Because all of Greene's physical injuries occurred before any misrepresentations by Whatley, the only way that Greene could possibly have relied to his detriment would have been if he had incurred greater medical expenses based on Whatley's assurances of coverage than he would have incurred had Whatley not indicated coverage. The sole record evidence bearing on this issue appears in an excerpt from Greene's deposition contained in the agreed record. Greene explained that he "doubt[ed] . . . very seriously" that he would have sought any medical care beyond the ambulance trip and the emergency room physician had Whatley not indicated that "there was coverage somewhere." The record, however, is bereft of any additional evidence that Greene did seek additional medical care. We therefore have no way to determine whether Greene's reliance on Whatley's assurances caused him any damage or detriment. Consequently, Greene has failed to prove an essential element of a claim of estoppel. We conclude that the district court properly denied Greene recovery. CONCLUSION For the foregoing reasons, we affirm the judgment of the district court that Greene take nothing. Bea Ann Smith, Justice [Before Justices Powers, Aboussie and B. A. Smith] Affirmed Filed: December 9, 1992 [Do Not Publish]