TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-98-00355-CV
Patricia Hamilton, Leonard Smith, and Latisha Hamilton, Appellants
v.
Texas Property and Casualty Insurance Guaranty Association; George Piccoli as Receiver for International Underwriters Insurance Company; White's Wrecker Service; and Lawrence Newhouse, Appellees
NO. 94-12823, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING
This appeal involves interpretation of the Texas Property and Casualty Insurance Guaranty Act (the "Guaranty Act"). (4) The Guaranty Act provides for the payment by the Guaranty Association of "covered claims" up to a statutorily mandated maximum cap in the event a member insurance company becomes insolvent. The question raised is whether an injured third party may seek recovery when the insurance company is in receivership in Delaware, has been declared an impaired insurer in Texas, and the statute of limitations has expired as to the insured party. We hold that, under the circumstances of this case, the Hamiltons may not recover. We will affirm the trial court's summary judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The facts of the case are uncontested. On February 19, 1992, a White's Wrecker Service truck driven by Lawrence Newhouse collided with the Hamiltons' vehicle. White's Wrecker was insured by International Underwriters Insurance Company ("IUIC"), a Delaware insurance company. On March 11, 1993, IUIC was placed in receivership in Delaware and was designated an impaired insurer by the Texas Commissioner of Insurance on March 22, 1993. The impairment of IUIC authorized the Guaranty Association to pay "covered claims" (5) against IUIC insureds.
The Hamiltons' attorney received a letter dated July 6, 1993, from an adjuster, apparently on behalf of the Guaranty Association, acknowledging the Association's involvement in the claim. The letter described the procedure for filing claims with the Guaranty Association and further stated: "The Association is considered the insurer to the extent of its obligation on covered claims and to that extent has all the rights, duties, and obligations of the impaired insurer as if the insurer had not become impaired." The Hamiltons filed proofs of claim with the Delaware receiver in November and December, 1993. On June 20, 1994, they sued White's Wrecker Service and Lawrence Newhouse for personal injuries sustained as a result of the collision. They also named the Guaranty Association and the Delaware receiver in the lawsuit.
Appellees moved for summary judgment on the grounds that, under Texas law, the Hamiltons could not maintain a direct cause of action against the Guaranty Association, and that the claims against White's and Newhouse were barred by the two-year statute of limitations. The trial court granted the motion, holding that the Hamiltons could not maintain a direct cause of action against the Association and that all claims of plaintiffs (except the minor's) were barred by the applicable two-year statute of limitations. (6)
THE GUARANTY ACT
The Guaranty Act establishes an association of all property and casualty insurers licensed to transact business in Texas. See Guaranty Act § 6. (7) By assessing contributions from solvent member insurers, the Guaranty Association maintains a guaranty fund which assumes insolvent insurers' obligations with respect to statutorily defined "covered claims." Id. § 5(8). The fund is held by the Guaranty Association to pay insureds' claims up to a statutorily mandated maximum cap in the event the insurance company becomes insolvent. The stated purposes of the Act are: (1) to protect policyholders and claimants from financial loss because of the impairment of an insurer, and (2) to provide a mechanism for the payment of "covered claims" under certain insurance policies. Id. § 2.
The receiver and the Guaranty Association are creatures of statute. (8) Prior to 1992, the Texas receiver had dual responsibilities: liquidation of the company and the administration, evaluation, and payment of claims with funds advanced by the various guaranty funds. The Guaranty Association, under the old statute, played no claims-processing role but merely provided an extra purse for the payment of claims the receiver determined were "covered claims." See Chandler v. Gutierrez, 906 S.W.2d 195, 198 (Tex. App.--Austin 1995, writ denied).
In 1991, the Texas Legislature made substantial changes to the insurance liquidation statute. (9) The changes included the transfer of the receiver's duty to administer, evaluate, and pay claims to the Guaranty Association for all companies placed in receivership on or after January 1, 1992. Specifically, the Guaranty Association undertook "to discharge the policy obligations of the impaired insurer, including the duty to defend insureds under a liability policy, to the extent that policy obligations are covered claims" under the Act. (10) See Guaranty Act § 8(b). It is this changed role of the Guaranty Association that is disputed by the parties. Because of the procedural posture of this case, we do not address the changed role of the Association in the handling of claims.
DISCUSSION
In granting the appellees' motion for summary judgment, the trial court specified two grounds in its order: (1) that appellants did not have a direct cause of action against the Guaranty Association and (2) that the claims were barred by the two-year statute of limitations. On appeal, the Hamiltons challenge the court's granting of summary judgment only on the basis of the statute of limitations. Since the judgment is final as to the Guaranty Association regarding its direct action bar, we need only address the remaining defendants, White's Wrecker and Newhouse.
We review the record under the familiar precepts of summary judgment law that a summary judgment is proper only when a movant establishes that there is no genuine issue of material fact and that he is therefore entitled to judgment as a matter of law. In deciding whether there is a disputed issue of material fact, matters in the record that favor the nonmovant will be taken as true and every reasonable inference from the record must be resolved in favor of the nonmovant. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). A defendant who conclusively establishes all of the elements of an affirmative defense is entitled to summary judgment. See Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995).
When a defendant moves for summary judgment on its affirmative defense, it must prove each element of its defense as a matter of law, leaving no issues of material fact. See Johnson & Johnson Med., Inc. v. Sanchez, 924 S.W.2d 925, 927 (Tex. 1996). When the defendant moves for summary judgment on a statute of limitations defense, the defendant must conclusively (1) prove when the cause of action accrued, and (2) if the plaintiff pleaded a tolling provision, negate its application as a matter of law. See Jennings v. Burgess, 917 S.W.2d 790, 793 (Tex. 1995). Once the movant has established a right to a summary judgment as a matter of law, the burden shifts to the non-movant. The non-movant must then respond to the motion for summary judgment by presenting to the trial court summary judgment proof sufficient to raise a fact issue. See Casso v. Brand, 776 S.W.2d 551, 556 (Tex. 1989).
The uncontroverted summary judgment evidence establishes that the Hamiltons' claims are barred by the statute of limitations. The automobile accident occurred on February 19, 1992. The lawsuit was filed on June 20, 1994, more than two years following the date their cause of action accrued. Once appellees demonstrated that the Hamiltons filed their lawsuit more than two years following the accrual of their cause of action, the burden shifted to the Hamiltons to produce evidence sufficient to raise a fact issue that would preclude summary judgment. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). This they failed to do.
The Hamiltons contend that they relied upon a letter to their lawyer to delay the filing of their lawsuit and that they were misled by the letter into believing that they should await denial of their claims before filing suit. Specifically, on July 6, 1993, a claims adjuster, on behalf of the Guaranty Association, sent a letter to the Hamiltons' attorneys "to notify you of your rights and obligations." The letter went on to state:
You must file your third party liability claim against an insured of International Underwriters, with the Association. In the event the Association denies your claim, you are entitled to appeal that denial by filing suit against the insured in the same manner as you would file suit if International Underwriters had not become impaired.
In November and December 1993, the Hamiltons filed proofs of claim with the Delaware receiver. They filed this lawsuit in July 1994.
Relying solely upon the July 1993 letter, the Hamiltons contend that they were not told in the letter that their claims were subject to a statute of limitations and that the letter was misleading as to the procedure to be followed for third party claims. They assert that these factual issues regarding the Association's conduct are sufficient to estop appellees from asserting a limitations defense. Because appellees adduced conclusive evidence that the suit was barred by the limitations period, the burden was on appellants, as the non-movants, to produce summary judgment evidence sufficient to raise a fact issue on estoppel in avoidance of the affirmative defense of limitations.
The scope of review in an appeal from a summary judgment is necessarily limited. It is well recognized that a summary judgment motion must expressly state the grounds upon which it is made and will stand or fall on those grounds alone. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993). Likewise, the answer or response to the motion must set forth the grounds upon which the non-movant relies to defeat the motion. Issues not expressly and timely presented by written answer or response may not be considered on appeal as grounds for reversal. See Tex. R. Civ. P. 166-a(c); see also Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996); Abbott Labs., Inc. v. Segura, 907 S.W.2d 503, 507 (Tex. 1995); Clear Creek Basin Auth., 589 S.W.2d at 678.
Reviewing the record, we find that the issue of estoppel was not timely presented to the trial court. The Hamiltons failed to address estoppel in either their response to the motion for summary judgment or in their supplemental response. They raised for the first time the issue of estoppel in their Motion for New Trial. This, alone, does not put the issue before this court. See Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex. 1988); Keightley v. Republic Ins. Co., 946 S.W.2d 124, 126 (Tex. App.--Austin 1997, no writ).
When a motion for new trial is filed after a summary judgment has been granted, as here, the district court is entitled to consider only the record as it existed prior to granting the summary judgment. See Parchman v. United Liberty Life Ins. Co., 640 S.W.2d 694, 696 (Tex. App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.). Having raised no issue of estoppel in response to the motion for summary judgment, as it was their burden to do, appellants are not entitled to raise the issue on appeal.
Even if the issue of estoppel could now be raised by the Hamiltons, it is without merit. First, it is moot as to the Guaranty Association. Appellants' estoppel argument does not apply to the Association because the summary judgment is final on other grounds. Moreover, a plaintiff may invoke equitable estoppel to prevent an opponent from pleading limitations if the opponent, his agent, or representatives made representations that induced the plaintiff to delay filing suit within the applicable statute of limitations. See Cook v. Smith, 673 S.W.2d 232, 235 (Tex. App.--Dallas 1984, writ ref'd n.r.e.). To invoke equitable estoppel, proof must be made of the following elements: (1) a false representation or concealment of a material fact; (2) made with actual or constructive knowledge of the facts; (3) to a party without knowledge or the means of knowledge of the real facts; (4) with the intention that it should have been acted upon; and (5) the party to whom it was made must have relied upon or acted upon it to his prejudice. See id.; Gulbenkian v. Penn, 252 S.W.2d 929, 932 (Tex. 1952).
As evidence in support of their response to appellees' motion, the Hamiltons attached the following five documents: a copy of the appellees' motion for summary judgment; a copy of a partial summary judgment order rendered in another district court case, which was never appealed and has no precedential value in this case; a copy of a letter from an adjusting firm to the Hamiltons' counsel dated July 28, 1992 seeking additional information about their injuries; the notification letter of July 1993 from a second adjusting firm, presumably on behalf of the Guaranty Association to the Hamiltons' counsel; and a Plan of Operation of the Guaranty Association, which was not in effect at the time of the Hamiltons' claims, containing claims-handling information for the Association.
There is no summary judgment evidence on any element of estoppel sufficient to raise a fact question that would defeat summary judgment. At most, there is argument of counsel that the July 1993 letter, standing alone, is misleading. No affidavits or testimony were submitted to show, for example, that the Hamiltons' attorneys, who received the letter, were without knowledge of the real facts, that the Guaranty Association intended for the Hamiltons or their attorney to rely on the letter, that the Hamiltons or their counsel relied upon the letter, or even that the letter was wrong or misleading. In addition, the record is devoid of any showing that White's Wrecker or Newhouse engaged in any conduct that would warrant the invocation of equitable estoppel. The Hamiltons have failed to carry their burden of adducing evidence to defeat the affirmative defense and the evidence is, in any event, insufficient to constitute estoppel. Accordingly, we overrule appellants' first issue.
As their second issue on appeal, the Hamiltons contend that the trial court erred in failing to grant a new trial because of unresolved issues of disputed fact. They also argue that newly acquired evidence is relevant to their claim that the Guaranty Association should be equitably estopped from asserting a limitations defense. Appellants attached to the motion the Association's Plan of Operation which sets forth the Association's claims-handling procedures. They argue that, under the plan, the Association was required to deny appellants' claims in writing and that the document constitutes new evidence supporting their estoppel argument. The record reflects that the document attached to the motion was the Association's Plan of Operation which was approved in June 1996 and was not in effect during the period of the lawsuit.
To be entitled to a new trial on the basis of newly discovered evidence, the party seeking the new trial must satisfy the court that: (1) the evidence has come to the knowledge of the party since the trial; (2) it could not have been discovered earlier by the exercise of reasonable diligence; (3) it is not cumulative; and (4) it is so material that it would probably produce a different result if a new trial was granted. See Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex. 1983). Except for the first prong, the Hamiltons wholly fail to make the requisite showing.
A trial court has broad discretion in deciding whether to grant a new trial based upon new evidence, and the trial court's discretion will not be disturbed on appeal absent a showing of a manifest abuse of discretion. See Champion Int'l Corp. v. Twelfth Court of Appeals, 762 S.W.2d 898, 899 (Tex. 1988). Finding no abuse of discretion in the ruling of the trial court, we overrule appellants' second issue on appeal.
As a final issue on appeal, appellants argue that because the Guaranty Association is a quasi-governmental entity, its use of the limitations defense violates the "open courts" provision of the Texas Constitution. Appellants did not raise this constitutional argument in the trial court, and therefore, we may not consider it on appeal. See Boyd v. Fuel Distribs., Inc., 795 S.W.2d 266, 271 (Tex. App.--Austin 1990, writ denied). We overrule the third issue.
CONCLUSION
We conclude that the trial court did not err in granting partial summary judgment to appellees, and we affirm the judgment of the trial court.
Jan P. Patterson, Justice
Before Justices Jones, Kidd and Patterson
Affirmed
Filed: April 29, 1999
Do Not Publish
1. For convenience and clarity, we will refer to the appellants as the "Hamiltons." Patricia Hamilton was the driver of the appellants' automobile, and the remaining appellants were her passengers. Latisha Hamilton also sued as next friend for Senquinsha Howard, a minor.
2. For convenience, we will refer collectively to the Guaranty Association, White's Wrecker, and Newhouse as appellees except where necessary to name them individually. George Piccoli, the Delaware receiver for International Underwriters Insurance Company ("the receiver") was served but did not answer.
3. The claim of Senquinsha Howard was settled and approved by the court. The partial summary judgment granted to appellees became a final judgment on March 31, 1997, by combining the partial summary judgment with the court's approval of the minor's settlement. The Hamiltons appeal only the summary judgment ruling that does not affect the claim of the minor.
4. See Tex. Ins. Code Ann. art. 21.28-C (West Supp. 1999).
5. A "covered claim" is defined as "an unpaid claim of an insured or third-party liability claimant that arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Act applies, issued or assumed . . . by an insurer licensed to do business in this state. . . ." Tex. Ins. Code Ann. art. 21.28-C, § 5(8) (West Supp. 1999).
6. Actions for personal injury must be brought within two years of the injury. See Tex. Civ. Prac. & Rem. Code Ann. § 16.003 (West 1986).
7. The Texas Insurance Code creates three separate guaranty funds: the Texas Title Insurance Guaranty Association to administer "covered claims" of an "impaired" title insurance company authorized to do business in the state, Tex. Ins. Code Ann. art. 9.48, § 14; the Texas Property and Casualty Insurance Guaranty Association to provide funds to the receiver for the payment of "covered claims" of an "impaired" member of the association, Tex. Ins. Code Ann. art. 21.28-C, § 14; and the Life, Accident, Health, and Hospital Service Insurance Guaranty Association to provide funds to the receiver for payment of the "contractual obligations" of an "impaired" member company, Tex. Ins. Code Ann. art. 21.28-D, § 6. The procedures as well as the definitions of "covered claim" are defined by the applicable statutory provision.
8. See Couch on Insurance, Guarantee Associations § 6:27 (3d ed. 1997).
9. The Guaranty Act was amended in 1991 and became effective on January 1, 1992. The amended Act applies to any company designated an impaired insurer on or after January 1, 1992. The Act has been amended since 1992, but those amendments are not relevant to this appeal.
10. Article 21.28-C section 8(d) authorizes the Association to:
investigate and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims. The association may review settlements, releases, and judgments to which the impaired insurer or its insureds were parties to determine the extent to which those settlements, releases, and judgments may be properly contested. Any judgment taken by default or consent against an insured or the impaired insurer, and any settlement, release, or judgment entered into by the insured or the impaired insurer, is not binding on the association, and may not be considered as evidence of liability or of damages in connection with any claim brought against the association or any other party under this Act.
Guaranty Act § 8(d).
se the Guaranty Association is a quasi-governmental entity, its use of the limitations defense violates the "open courts" provision of the Texas Constitution. Appellants did not raise this constitutional argument in the trial court, and therefore, we may not consider it on appeal. See Boyd v. Fuel Distribs., Inc., 795 S.W.2d 266, 271 (Tex. App.--Austin 1990, writ denied). We overrule the third issue.