James Hansen v. Lonnie Roach and Bemis, Roach & Reed

ACCEPTED
03-15-00378-CV
7516414
THIRD COURT OF APPEALS
AUSTIN, TEXAS
10/23/2015 1:16:31 PM
JEFFREY D. KYLE
CLERK
No. 03-15-0037 8—CV
FILED IN
3rd COURT OF APPEALS
JAMES HANSEN AUSTIN, TEXAS
10/23/2015 1:16:31 PM
JEFFREY D. KYLE
Clerk

LONNIE ROACH and
BEMIS, ROACH & REED

APPELLANT’S BRIEF

Scott R. Kidd
State Bar No. 11385500
512-330-1713
scot’t@kidd1avvaustin.com
Scott V. Kidd
State Bar No. 24065556
512-542-9895
svk@kidd1awaustin.com
KIDD LAW FIRM
819 West 11th Street
Austin, TX 78701
512330-1709 (fax)

Oral Argument Requested
 IDENTITY OF PARTIES AND COUNSEL

APPELLANT
James Hansen

APPELLANT’S COUNSEL
Scott R. Kidd
State Bar No. 11385500
512-330-1713
scott@kidd1awaustin.com
Scott V. Kidd
State Bar No 24065556
512-542-9895
svk@kidd1aWaustin.com
KIDD LAW FIRM
819 West 11th Street
Austin, TX
78701
512-330-1709 (fax)

APPELLEES
Lonnie Roach
Bemis, Roach & Reed
APPELLEES’ COUNSEL
John Shepperd
State Bar No. 18236050
iohn.shepperd@wilsone1ser.com
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP
909 Fannin Street, Suite 3300
Houston, TX 77010
713-353-2000
713-785-7780 (fax)
 TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL
TABLE OF CONTENTS ii

INDEX OF AUTHORITIES iv

CAPTION
STATEMENT OF THE CASE
STATEMENT REGARDING ORAL ARGUMENT
ISSUES PRESENTED
THE RECORD
STATEMENT OF FACTS
SUMMARY OF ARGUMENT 13

ARGUMENT & AUTHORITIES 17

Standard of Review 17

The Policy Language 21

Rules of Construction 22

Interpretation of the Policy Language 24

Continuation of the Business In Fact 28

Continuation of Business Under Texas
Business Organizations Code 30
 The “Findings of Fact” 35

The Defense’s Cases 37

No Subsequent-Act Defense After
Breach of Contract 38

CONCLUSION 40

PRAYER 41

CERTIFICATE OF COMPLIANCE WITH TRAP
RULE 9.4(i)(3) 42

CERTIFICATE OF SERVICE 42

iii
 INDEX OF AUTHORITIES
CASES
Alexander v. Turtur & Associates, Inc.,
146 S.W.3d 113 (Tex. 2004) 17

Andrews v. Key, 77 Tex. 35, 13 S.W. 640, 641 (1890) 36

Barnett v. Aetna Life Insurance Co.,
723 S.W.2d 663, 666 (Tex. 1987) 23

Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) 20

Continental Casualty Co. Warren, v.
254 S.W.2d 762, 763 (Tex. 1953) 23, 28

Cooke County Appraisal District v. Teel,
129 S.W.8d 724 (Tex. App.—Ft. Worth 2004, no pet.) 36

El Chico Corp. v. Poole, 732 S.W.2d 306,
313-314(Tex. 1987) 18

FFE Transportation Services, Inc. v. Flugham,
154 S.W.3d 84 (Tex. 2004) 19

Grider Mike 0’Brien, P. C., 260 S.W.3d 49
U.
(Tex. App.—Houston [1S‘ Dist.] 2008, pet. den.) 17, 19

Gulf Insurance Company 11. Parker Products,
498 S.W.2d 676, 679 (Tex. 1973) 23, 28

Heritage Resources 12. Hill, 104 S.W.3d 612
(Tex. App.—Austin 1998, no pet.) 20

Insurance Company of North America v. Cash,
475 S.W.2d 912 (Tex. 1972) 23, 28

iv
Jackson 1). Urban, Coolidge, Pennington & Scott,
516 S.W.2d 948, 949 (Tex. Civ. App-
Houston [lst Dist.]1974, writ refd n.r.e.) 19

Jackson v. Van Winkle, 660 S.W.2d 807, 810 (Tex. 1983)

Kelly-Coppedge, Inc. Highlands Ins.
v. Co.,
980 S.W.2d 462, 464 (Fex. 1998) 22

Mead v. Johnson Group, Inc., 615 S.W.2d 685,
689 (Tex. 1981) 39

Milhouse U. Weisenthal, 775 S.W.2d 626 (Tex. 1989) 19

Nicol v. Gonzales, 127 S.W.3d 390, 394
(Tex. App.—Dal1as 2004, no pet.) 20

Paul Revere Life Insurance Company v. Klock,
169 So.2d 493 (Fla. Ct. App. 1964) 37

Principal Mutual Life Insurance Company v. Toranto,
1997 WI. 279751 (N.D. Tex. 1997) 37

State v. The Evangelical Lutheran Good Samaritan
Society, 981 S.W.2d 509, 511 (Tex. App.—
Austin 1998, no pet.) 20

Texas Farmers Insurance Company v. Murphy,
996 S.W.2d 873, 879 (Tex. 1999) 22

Walker 11. Packer, 827 S.W.2d 833 (Tex. 1992) 20

Western Indemnity Co. v. Murray, 208 S.W. 696,
698 (Tex. Comm. App. 1919) 23

Wilson U. Monarch Life Insurance Company,
971 F.2d 312 (9th Cir. 1992) 37
 STATUTES AND CODES
TEX. BUS. ORG. CODE Chapt. 11 30, 31, 32, 33

TEX. BUS. ORG. CODE Chapt. 301 30

TEX. BUS. ORG. CODE Chapt. 302 30

TEX. BUS. ORG. CODE §11.001 31

TEX. BUS. ORG. CODE §11.051 31

TEX. BUS. ORG. CODE §11.052 32

TEX. BUS. ORG. CODE §11.101 33

TEX. BUS. ORG. CODE §301.003 31

TEX. BUS. ORG. CODE §301.004 31

TEX. BUS. ORG. CODE §301.007 30

TEX. BUS. ORG. CODE §301.008 30

TEX. BUS. ORG. CODE §302.013 33

vi
 No. 03-15-0037 8-CV

JAMES HANSEN

LONNIE ROACH and
BEMIS, ROACH & REED

APPELLANT’S BRIEF

Comes now Appellant James Hansen (“Hansen”) and
files this Appellant’s Brief.

STATEMENT OF THE CASE
This is a legal malpractice case filed by Hansen against

Lonnie Roach (“Roach”) and the firm of Bemis, Roach & Reed (“the
Firm”). The legal malpractice claim arises out of the failure of

Roach and the Firm to timely perfect an appeal in a prior case in

Which Roach and the Firm represented Hansen (“the Underlying
Case”). The Underlying Case was a suit by Hansen against a

disability insurance company for recovery on a disability office

expense policy. In the Underlying Case, the trial court had

granted Hansen a judgment for part of the benefits but had denied

recover for a majority of the benefits payable. Hansen desired to

appeal that judgment denying benefits, but Roach and the Firm

did not timely perfect the appeal.

This present case was filed by Hansen against Roach and the

Firm for the negligence in not perfecting the appeal. (CR 3-8).

This case was tried to the court without a jury. (CR 11). The trial

court granted a take nothing judgment for Roach and the Firm

and filed findings of fact and conclusions of law. (CR 11, 15-17).

Hansen duly and timely perfected this appeal. (CR 13)

STATEMENT REGARDING ORAL ARGUMENT
Oral argument would be of benefit to the court in deciding

the issues in this case. In order to decide whether Roach’s

admitted negligence in this case proximately caused damage to

Hansen, the court must decide the issues that would have been
presented in the aborted appeal of the Underlying Case. That

involves a determination of the effect of certain policy language in

the disability office expense policy, and there are no Texas cases

on point in making that determination. Accordingly, oral

argument will assist in probing the issues related to the

Underlying Case and the ultimate decision in this appeal.

ISSUES PRESENTED
1. Whether the failure by Roach to timely perfect the appeal in

the Underlying Case proximately caused loss or harm to Hansen.
2. Whether this Court would have reversed the trial court’s

judgment in the Underlying Case if Roach had timely perfected

the appeal in the Underlying Case.

8. Did Hansen “end the business” when he surrendered his

medical license or did the business continue for the period of

Winding up as a matter of law.

4. Did the trial courts in this case and in the Underlying Case

commit error When the courts held that the coverage for disability
office expense terminated when Hansen voluntarily surrendered

his medical license?

5. Did the trial courts in this case and in the Underlying Case

commit error as a matter of law when the courts held that the

coverage for disability office expense terminated when Hansen
surrendered his medical license since the court in the Underlying

Case held that the insurance carrier had previously breached the

contract of insurance‘?

6. In the Underlying Case, did the disability office expense

policy provide benefits for office overhead during the period of the

statutory winding up of Hansen’s business?

THE RECORD
The record on appeal consists of the Clerk’s Record and the

Reporter’s Record. In this brief the Clerk’s Record will be

referenced as “CR” and the Reporter’s Record Will be referenced as

“RR.” Since this is an appellate legal malpractice case based on

the appellee’s failure to properly perfect the appeal in the
Underlying Case, the court must have before it What would have

been the appellate record in that case.

The Underlying Case was tried nonjury on a stipulated

record. The plaintiff introduced as an exhibit in the trial court in

the present case the stipulations and exhibits from the trial of the

Underlying Case, along with the relevant pleadings, orders, and

filed documents that would have constituted the appellate record

in the Underlying Case. Those documents, along with this Court’s

memorandum opinion and judgment dismissing the Underlying

Case for Want of jurisdiction and the defendant’s admissions in

this case, were introduced as Plaintifl’ s Exhibit 1. In this brief the

documents in Plaintiffs Exhibit 1 will be referenced by the

appropriate tab in that exhibit (“Tab___”) and the evidence in

that Underlying Case will be referenced as Tab F# .

STATEMENT OF FACTS
Hansen is a neurosurgeon by education, training, and

experience. (TAB F #4, p. 17). Hansen had developed a thriving

neurosurgical practice in Austin, and practiced in a registered
professional association, Austin Neurosurgical and Spine

Institute, P.A. (“Austin Neurosurgical”). Hansen was the only

member of Austin Neurosurgical. (Tab F Jnt EX. 1, Tab F #3).

To protect himself and his family in the event he became

disabled in any Way, Hansen purchased several disability

insurance policies. (Tab F Jnt EX 1). He purchased two basic

types of p0licies—policies covering the loss of his personal income

and policies to cover his liability for ongoing office expenses in the

event of his disability. (Tab F Jnt Ex 1). The policies he purchased
were all issued by The Northwestern Mutual Life Insurance

Company (“Northwestern Mutual”). (Tab F J nt Ex 1; Tab F #s 1,

2).

On June 5, 2010, Hansen suffered a disabling injury. While

riding his mountain bicycle on an offiroad path, his head contacted

a tree limb, resulting in a cervical nerve injury. (Tab F Jnt Ex 1).

That cervical nerve injury essentially destroyed the fine motor

coordination in Hansen’s hands. Due to that injury, Hansen could

no longer perform surgery, and he has been rendered totally

disabled from the time of that injury through the present.
 Following that injury, Hansen submitted claims for benefits

to Northwestern Mutual under his disability policies—both the

loss of income policies and the office expense policies. (Tab B; Tab

F Jnt EX 1). After the elimination period, Northwestern Mutual

began paying the disability income benefit, and that policy was

not an issue in the Underlying case, nor is it at issue in the

present case. (Tab F Jnt Ex 1). However, Northwestern Mutual

denied benefits with regard to the disability office expense

policies. (Tab B; Tab D; Tab F #s 1, 2). There were two disability

office expense policies, each containing the same policy language.

(Tab F #s 1, 2). The trial court in the Underlying Case treated the

policies as one for the purposes of that case. Hansen will also

treat those two policies as one for the purposes of this brief, and

will refer to them as the “DOE Policy.” The two DOE policies

combined provided a benefit up to $25,000.00 per month, with a

maximum total benefit of $600,000.00. (Tab F Jnt Ex 1; Tab F #s

1, 2).

The DOE Policy, owned by Austin Neurosurgical, provided

that benefits would be payable upon the total disability of the
insured, who was identified as Hansen. The policy had a provision
for termination of benefits if the insured “ends the operation of the

business” while totally or partially disabled. Northwestern

Mutual acknowledged that Hansen’s accident rendered him totally

disabled within the terms of the policy, qualifying Hansen for

benefits under the DOE Policy. However, since the accident

rendered Hansen unable to perform neurosurgery, Northwestern

Mutual took the position that Hansen had “ended the business”

and therefore Hansen’s rights to benefits had terminated under

the policy. (Tab D). In other words, according to Northwestern

Mutual’s paradoxical position, the same accident that qualified

Hansen for benefits terminated his right to benefits.

Northwestern Mutual denied benefits under the DOE Policy,

never voluntarily paid Hansen any benefits under the DOE Policy,
and took the position at the trial of the Underlying Case that

Hansen was not entitled to any benefits.

Following that denial of benefits, Hansen retained Roach

and the Firm to pursue recovery of the DOE Policy benefits from

Northwestern Mutual. Suit was filed by Roach on Hansen’s behalf
on December 23, 2010. (Tab B). Being unable to perform surgery,

and there being significant costs associated with maintaining his

medical license, Hansen voluntarily surrendered his medical

license on April 8, 2011, While the case against Northwestern

Mutual was pending. (Tab F Jnt Ex 1; Tab F # 6).

The Underlying Case was tried on stipulated facts to the

court without a jury. (Tab 1). Under the stipulated evidence in

that case, the insurance coverage was established, along with the

“termination of benefits” provision of the DOE Policy. The gross

amount of coverage was established under the DOE Policy

($600,000.00), along with the maximum monthly benefit of

$25,000.00 being payable in the event of liability on the part of

Northwestern Mutual. The parties stipulated that if benefits were

not terminated under the policy, Hansen’s covered overhead

expenses would exceed the maximum benefit of $25,000.00 per

month for each month benefits were payable. (Tab F Jnt Ex 1).

The potential recoverable damages were therefore stipulated to be

the full amount of the available coverage.
 Northwestern Mutual had steadfastly refused to pay DOE
Policy benefits from the date of Hansen’s injury based on its

position that Hansen had “ended his business” on the date of his

injury. However, to hedge its bet, Northwestern Mutual

attempted to also argue an alternative date for termination of the

business at trial——and that was the date Hansen surrendered his

medical license.

Following trial on the merits in the Underlying Case, the

trial court held for Hansen as to the qualification for benefits at

the time of his injury, and that Hansen did not “end the business”

on the date of his injury, although he could not perform surgery

from that date forward. (Tab I; Tab L). However, the trial judge in

the Underlying Case held that Hansen “closed the business” on

April 8, 2011, when Hansen voluntarily surrendered his medical

license. (Tab L). The trial court awarded Hansen DOE Policy

benefits from the time of injury until the surrender of Hansen’s

medical license. (Tab I; Tab L). Based on that holding, the trial

court in the Underlying Case granted judgment to Hansen for

$201,827.96 in DOE Policy benefits, penalty interest of

10
$105,208.70 under §542.060 of the Texas Insurance Code, and

attorney’s fees of $80,000.00 through the trial of that case. (Tab 1).

The District Clerk’s file in the underlying case contains two

Final Judgments. (Tab H; Tab I). The language of the two

judgments is identical, but one judgment reflects a signing date of

October 18, 2013, and the other reflects a signature date of

October 21, 2013. The October 18 judgment reflects that it was
filed by the clerk on October 25; the October 21 judgment reflects

a filing date of October 28. There is no explanation in the file for

the existence of the two judgments.

Hansen desired to appeal the denial of the DOE Policy

benefits after he surrendered his medical license. In furtherance

of that appeal, on November 14, 2013, Roach filed a Request for

Findings of Fact and Conclusions of Law on Hansen’s behalf. (Tab

J). The trial court did not file findings and conclusion within

twenty days of the request, so Roach properly filed a Notice of

Past Due Findings of Fact and Conclusions of Law on December 9,

2013. (Tab K) The trial court then filed Findings of Fact and

11
Conclusions of Law on December 13, 2013. (Tab L). Roach filed

Hansen’s Notice of Appeal on December 19, 2013. (Tab M).

Subsequently this Court noted that the notice of appeal did

not appear to be timely and requested Roach to explain. Roach

did not respond to this Court’s inquiry.

This Court then dismissed the appeal for lack of jurisdiction.

This Court noted that the notice of appeal was due to be filed on or

before November 20, 2013, but was not filed until December 19,

2013. (Tab N; Tab 0). While a timely filed request for findings of

fact and conclusions of law will extend the time for filing the

notice of appeal, the request for findings and conclusions filed by
Roach was not timely, and the notice of appeal filed by Roach was

therefore late. Due to the late filing of the notice of appeal, this

court lacked jurisdiction and dismissed the appeal. Due to the

negligent failure of Roach, Hansen could not present his appeal to

this Court, and Hansen then filed suit against Roach to recover

the benefits he would have received through that successful

appeal.

12
 SUMMARY OF ARGUMENT
The appeal of the Underlying Suit was dismissed by this

Court because Roach negligently missed a jurisdictional appellate

deadline. Roach and the Firm do not dispute that this failure on

Roach’s part was negligence—they have admitted that it was

negligence. (Tab P). The issue before this Court is whether that

admittedly negligent act proximately caused Hansen harm. There

is no doubt that it did. The determination of this proximate cause

issue is a legal question, not a factual determination. It requires

the Court to decide if Hansen would have been successful on the

appeal of the Underlying Case if the appeal of that case had been

timely and properly perfected by Roach.

It was admitted and undisputed in the Underlying Case that

Hansen had ongoing office expenses and costs in excess of

$25,000.00 per month. (Tab F) Hansen had an ongoing lease

obligation that he had to pay, he had debt associated with the

practice that had to be paid, he had records that he had to

maintain, he had personnel to pay, and he had accounts receivable

that he needed to collect. (Tab F Jnt Ex 1; Tab F #s 5, 9) From a

13
factual standpoint, the “business” continued following Hansen’s

disabling injury because those functions had to be performed—the

debts had to be paid and the accounts had to be collected. Simply

because Hansen could no longer perform surgery did not mean
that Hansen “ended the business” when the business had ongoing

debts to pay, records to maintain, and accounts to collect. The

undisputed facts in the Underlying Case were that the business

continued in actual fact.

Hansen did not “end the business” when he surrendered his

medical license. Northwestern Mutual’s argument was that “the

business” was Austin Neurosurgical, a professional association. A
professional association can only have licensed professionals as

members, and when it has no licensed professionals as members,

it cannot continue to exist. Under Northwestern Mutual’s

argument, when Hansen surrendered his medical license on April

8, 2011, Austin Neurosurgical terminated since it no longer had

any licensed professionals as members. Therefore, under that

argument, Hansen “ended the business” at that time since Austin

14
Neurosurgical had no member Who was licensed to practice

medicine and no employees to perform surgery.

That argument overlooks the fact that “the business”

continued to pay its obligations and collect its assets, and it

ignores the fact that under the Texas Business Organizations

Code the business continued in existence for the period of Winding

up, as a matter of law. The surrender of Hansen’s medical license

might be an event triggering the winding up of the professional

association, but it was certainly not a complete “end” of the

business. As a matter of law the business continued for the period

of winding up, which is the period necessary to gather and

liquidate the assets and pay the debts and liabilities of the entity.

This is exactly what was happening following Hansen’s surrender

of his medical license. As a matter of both law and undisputed

fact, Hansen did not ::
end the business” when he voluntarily

surrendered his medical license because the business continued

for the period of winding up. Hansen was therefore entitled to the

unpaid DOE Policy benefits and the applicable penalty interest

15
through the date of the original judgment, an amount totaling

$605,723.31.

An additional basis that the Underlying Case would have

been reversed on appeal is that Northwestern Mutual breached

the contract of insurance when it failed to pay Hansen the benefits
to which he was entitled following his injury. After breaching the

contract, Northwestern Mutual could not rely upon a subsequent

act by Hansen as a defense to its liability on the contract.

Accordingly, the trial court in the Underlying Case erred in

holding that Hansen was not entitled to recover the full coverage

of the DOE benefits. If the appeal of the Underlying Case had

been properly perfected by Roach, this Court would have reversed

the trial court’s judgment in that case and would have rendered

judgment that Hansen recover the benefits that had been denied

in the trial court. Roach’s error in failing to timely perfect the

appeal was therefore the proximate cause of Hansen’s loss of

$605,723.31.

16
 ARGUMENT & AUTHORITIES

Standard of Review

In a legal malpractice suit the plaintiff must show that (1)

the attorney owed a duty to the plaintiff, (2) the attorney breached

that duty, (3) the breach proximately caused the plaintiffs

injuries, and (4) damages occurred. Alexander U. Turtur &
Associates, Inc., 146 S.W.3d 113 (Tex. 2004); Grider v. Mike

0’Brien, P. C., 260 S.W.3d 49 ( Tex. App.—Houston [lst Dist] 2008,

pet. den.). Defendants admitted that Roach was Hansen’s

attorney in the Underlying Case, so as a matter of law Roach owed

Hansen the duty to exercise that degree of care, skill, and

diligence that would be exercised by a lawyer of ordinary skill and

knowledge under the same or similar circumstances. The

defendants have acknowledged that Roach breached that duty by

being negligent in failing to timely perfect the appeal in the

Underlying Case.

The damages in a legal malpractice case are usually a fact

issue for determination by the fact finder at trial. However, in the

17
present case those damages are established as a matter of law by

the stipulations and judgment in the Underlying Case. It was

stipulated that there was $600,000.00 in available coverage under

the DOE Policy and that the maximum monthly benefit of

$25,000.00 would be exceeded for each month benefits were

payable. The judgment awarded $201,827.96 in benefits, leaving

$398,172.04 as unpaid benefits under the policy, to which benefits

Hansen was entitled under the stipulations in the event the

benefits were not terminated by Hansen’s surrender of his medical

license. (Tab F; Tab 1). That sum, plus the applicable penalty

interest, are the damages in the present case, and are established

as a matter of law under the record in the Underlying Case.

The only remaining element to establish in the present legal

malpractice case is proximate cause. Typically, proximate cause is

a fact issue in any case based on a claim of negligence. El Chico

Corp. v. Poole, 732 S.W.2d 306, 313-314 (Tex. 1987). However, the

present case is an appellate legal malpractice case. The causation

issue is whether Hansen would have been successful in the appeal

of the Underlying Case to this Court but for the negligence of

18
Roach in failing to perfect the appeal. See Grider v. Mike O’Brien,

P. C., 260 S.W.3d at 55; Jackson v. Urban, Coolidge, Pennington &
Scott, 516 S.W.2d 948, 949 (Tex. Civ. App.——-Houston [lst Dist]

1974, writ ref’d n.r.e.). While proximate cause is normally a

question of fact in any trial of a negligence action, appellate courts

determine questions of law. Since the proximate cause issue in an

appellate malpractice case is whether the party would have been

successful on appeal, the proximate cause question in an appellate

malpractice case should logically be a question of law and not a

question of fact. The Supreme Court of Texas faced that issue in

Milhouse v. Weisenthal, 775 S.W.2d 626 (Tex. 1989) and held that

in an appellate legal malpractice case, proximate cause is a

question of law for the court.

This court is therefore reviewing a legal decision by the trial

court, as opposed to reviewing a factual determination of the trial

court. Legal conclusions of the trial court are always reviewable

by the courts of appeals, and the appellate court is not obligated to

give any deference to the trial court’s legal conclusions. FFE
Transportation Services, Inc. v. Fulgham, 154 S.W.8d 84 (Tex.

19
2004); Nicol U. Gonzales, 127 S.W.3d 390, 394 (Tex. App.—Dallas

2004, no pet.). This Court reviews the trial court’s conclusions of

law ole novo. State v. The Evangelical Lutheran Good Samaritan

Society, 981 S.W.2d 509, 511 (Tex. App.—Austin 1998, no pet.);

Heritage Resources, Inc. v. Hill, 104 S.W.3d 612 (Tex. App.—Fort

Worth 2003, no pet.). An appellate review of a trial courts legal

conclusions is not under an abuse of discretion standard, since a

trial court has no discretion in determining or applying the law.

Walker v. Packer, 827 S.W.2d 833 (Tex. 1992). The interpretation

of an unambiguous contract is a question of law. Coker v. Coker,

650 S.W.2d 391, 393 (Tex. 1983). Therefore, this Court must

make a de novo determination of Whether Roach’s negligence was

a proximate cause of loss to Hansen, including a de novo

determination of the meaning of the contract of insurance. The

trial courts’ determinations in that regard by the courts in this

case and the Underlying Case are not entitled to any deference.

20
 The Policy Language

The DOE Policy provided that “This policy provides a

monthly benefit for Covered Overhead Expense when the Insured

is totally or partially disabled....
77
“Covered Overhead Expense”

Was defined by the policy as:

...the total of monthly expenses that are normal and
customary in the continuing operation of the Insured’s
business as properly reported for federal income tax
(FIT) purposes...

There was no question in the Underlying Case that Hansen was

totally disabled within the contemplation of the policy. The
parties to that case stipulated that he was totally disabled for all

of the relevant time period.

The defense to Hansen’s claim for benefits under the DOE
Policy advanced by Northwestern Mutual was that the Benefit

Termination provision of the policy applied and ended Hansen’s

right to benefits. That provision is as follows:

Benefit Termination or Adjustment. If the insured
ends the operation of the business while totally or
partially disabled, benefits for Covered Overhead
Expenses and Waiver of Premium will end.

21
The DOE Policy contained the following definition of “Business” in
Section 16:

Except as provided in sections 8.3 and 8.9, the word
“business” means the Insured’s business or the
Insured’s professional practice at the time disability
starts.

The court must perform a de novo interpretation of those

provisions to determine if Hansen would have been successful in

the appeal of the Underlying Case, had such appeal been properly

perfected.

Rules of Construction

This Court must begin with the rules of construction to

apply in the interpretation of an insurance policy. An insurance

policy is a contract, and the Court interprets insurance contracts

according to the general rules of contract construction. Texas

Farmers Insurance Company U. Murphy, 996 S.W.2d 873, 879

(Tex. 1999); Kelly-Coppedge, Inc. v. Highlands Ins. C0,, 980

S.W.2d 462, 464 (Tex. 1998). Ifthe policy language can be given a

definite or certain legal meaning, the policy is not ambiguous and

the court construes it as a matter of law. Kelly-Coppedge at 464.

22
 A policy of insurance is by its nature a contract of adhesion.

Accordingly, a policy of insurance will be strictly construed

against the insurer and in favor of the insured, and any

reasonable interpretation of a policy provision must be indulged in

favor of the insured and coverage. Gulf Insurance Company v.

Parker Products, Inc., 498 S.W.2d 676, 679 (Tex. 1973); Western

Indemnity Company U. Murray, 208 S.W. 696, 698 (Tex. Comm.

App. 1919). The rule favoring interpretation in favor of the

insured and coverage is even more applicable when interpreting

policy exceptions and limitations of coverage. Barnett v. Aetna

Life Insurance Co., 723 S.W.2d 663, 666 (Tex. 1987). The Court
must adopt the construction of an exclusionary clause urged by

the insured as long as that construction is not by itself

unreasonable, even if the construction urged by the insurer

appears to be more reasonable or a more accurate reflection of the

parties’ intent. Continental Casualty Co. U. Warren, 254 S.W.2d

762, 763 (Tex. 1953); Insurance Company of North America v.

Cash, 475 S.W.2d 912 (Tex. 1972). Applying these rules to the

facts of the Underlying Case demonstrates that there Was

23
coverage for the expenses Hansen incurred after the surrender of

his medical license, and this Court Would have reversed the

judgment of the trial court in that case if the appeal had been

properly perfected.

Interpretation of the Policy Language

The policy language on which Northwestern Mutual relied

was that “the insured ends the operation of the business While

totally or partially disabled...
7:
This is language purporting to

limit or terminate benefits payable under the policy, and

therefore, applying the settled rules of construction discussed

above, that provision must be interpreted in favor of providing

coverage as long as that construction is not itself unreasonable.

The use of the phrase “the insured ends the operation of the

business” would imply an affirmative act by the insured that not

simply leads to the eventual ending of the business, but actually

ends it at that time. The limitation or termination of coverage

would not be applicable until the business actually ended.

Likewise, the use of the term “business” must be interpreted

24
liberally in favor of coverage and against denial or forfeiture of

benefits. The Court simply cannot adopt a narrow interpretation

or application of the terms that would limit or forfeit coverage—

the court must interpret the provisions to recognize coverage if

reasonably possible to do so.

The “Insured’s business” at the time disability started was

Austin Neurosurgical. The court in the Underlying Case found

that Hansen “closed his business on the date he surrendered his

medical license, April 8, 2011.” Hansen had not been able to

render neurosurgical medical care since June 5, 2010, the date he

suffered his disabling injury. The mere relinquishment of his

medical license essentially changed nothing with regard to his

ability to render professional services other than to mean that he

could no longer even do so legally from that time, even though he

had not and could not provide such services prior to that time.

But “the Insured’s business” Was Austin Neurosurgical. The

policy does not terminate benefits when that business is “closed”

as found by the trial court, but when the insured “ends” the

business. There is a difference between when a business “closes”

25
and when it “ends.” The applicable definition in the Merriam

Webster Dictionary of the transitive verb “close” is “to suspend or

stop the operations.” The applicable definition of the transitive

verb “close” in the Oxford Dictionary is “cease to be in operation or

accessible to the public.” Austin Neurosurgical may have closed

when it suspended the provision of surgical services to the public,

but the DOE Policy only provides for the termination of benefits if
the “insured ends” the business. The Merriam Webster Dictionary

definition of the verb “end” is “to bring to an end.” The Oxford

Dictionary defines the verb “end” as “come or bring to a final

point, finish.” In order for Hansen to end the business of Austin

Neurosurgical, he must bring it to a final point—bring it to an

end. However, as long as it must pay its debts, owns assets, and

has accounts it is collecting, it has not ended. While Hansen may
have “closed” Austin Neurosurgical since it suspended the

provision of medical services to the public, Hansen did not “end”

the business because it had not been brought to a final point or

finish, and that could not occur until all of its debts were paid and

26
its assets accumulated and distributed. To pay these ongoing

expenses is precisely the reason Hansen purchased this coverage.

The trial court in the Underlying Case found in its sole

finding of fact that “Plaintiff closed his business on the date he

surrendered his medical license, April 8, 2011.” (Tab L). That is

not the same as a determination as to when “the insured ends the

operation of the business...” under the policy. While the trial

court’s factual determination i_n that regard may be entitled to

some deference, it simply does not resolve the issue of termination

of coverage. That is a question of law. A business can close but

still have a continuing existence for certain purposes.

The term “ends the business” is not defined in the policy and

can be interpreted in more than one way. It could mean that the

business ends whenever Hansen no longer performs surgery. It

could mean that the business ends Whenever Hansen stops having
patient contact. It could mean that the business ends whenever

Hansen has terminated his last employee. It could mean that the
business ends when the business has collected all of its assets

and/or retired all of its liabilities. It could mean that the business

27
ends Whenever Hansen ceases to be a licensed physician. It could

mean that the business ends when Austin Neurosurgical ceases to

be an existing entity. Any one of these could be a reasonable

interpretation of that term. However, a court must resolve this

dispute by adopting the interpretation advanced by the insured,

even if the interpretation advanced by the carrier seems a more

reasonable interpretation. Continental Casualty Co. v. Warren,

254 S.W.2d 762, 763 (Tex. 1953); Insurance Company of North

America v. Cash, 475 S.W.2d 912 (Tex. 1972). The court must

adopt the broadest interpretation resulting in coverage and

against denial of coverage. Gulf Insurance Co. v. Parker Products,

498 S.W.2d 676, 679 (Tex. 1978). Applying those rules of

interpretation, the trial courts in the Underlying Case and in the

present case incorrectly held that Hansen “ended the business” on

April 8, 201 1.

Continuation of the Business In Fact

The evidentiary record from the Underlying Case reflects

that Hansen had not yet ended the business when he surrendered

28
his medical license. As reflected by the joint stipulation in that

case, Austin Neurosurgical had ongoing expenses and obligations

that exceeded the monthly maximum benefit for the entire period

of coverage. (Tab F Jnt. Ex. 1). Austin Neurosurgical had a five-

year sublease from Spine Center, Inc., commencing on February 1,

2010, and expiring on July 31, 2015. (Tab F #5). Austin

Neurosurgical leased 1607 square feet on a “triple net” lease

beginning at the rate of $12.00 per rentable square foot, with the

rental rate escalating over time to $14.00 per rentable square foot.

Austin Neurosurgical also had a $758,313.51 promissory note

payable to Hansen dated May 19, 2010, calling for bi-Weekly

payments of $23,000.00 until paid in full. (Tab F #9). Austin

Neurosurgical also had ongoing employee costs. All of these costs

and expenses continued past the time that Hansen surrendered

his medical license. There were accounts receivable to collect, and

the effort to collect those accounts was ongoing at the time Hansen

surrendered his license. As a matter of undisputed fact, the

business of Austin Neurosurgical had not been brought to an end,

a final point, a finish, by the time Hansen surrendered his license.

29
 Continuation of Business Under Texas Business
Organizations Code

Northwestern Mutual argued at the trial of the Underlying

Case that the business necessarily ended when Hansen

surrendered his medical license since a professional association

can only have licensed professionals as members, and Hansen had

been the only member of Austin Neurosurgical. This argument,

however, overlooks the applicable provisions of the Texas Business

Organizations Code. Professional associations are specifically

governed by Chapters 301 and 302 of the Business Organizations

Code. A professional association is an entity that must file under
the Business Organizations Code, and therefore the provisions of

Chapter 11 are also applicable to it.

Under §301.008 of the Business Organizations Code, an

owner of a professional association who ceases to be an

“authorized person” as required by Section 301.007 must promptly

relinquish the person’s ownership interest in the entity. Section

301.007 provides that a person may be an owner of a professional

entity or a governing person of a professional limited liability

30
company only if the person is an “authorized person.” Section

301.004 provides that a person is an “authorized person” with

respect to a professional association if the person is a “professional

individual,” which is defined by §301.003 to be an individual who
is licensed to provide in this state or another jurisdiction the same

professional services as is rendered by that professional entity.

Under these provisions, when Hansen voluntarily

relinquished his medical license, he ceased to be an authorized

person, requiring him to relinquish his ownership interest in

Austin Neurosurgical. But since Hansen was the only member of

Austin Neurosurgical, that was an event requiring a winding up of

the entity since it had no authorized person as an owner. Chapter

11 of the Business Organizations Code covers What happens when

an event requiring the Winding up of an entity occurs. Under

§11.051, Austin Neurosurgical was required to Wind up its

business since it no longer had any owner Who qualified as an

authorized person. Section 11.001 defines “winding up” as the

process of winding up the business and affairs of a domestic entity

31
as a result of the occurrence of an event requiring Winding up.

The Winding up procedures are established in §11.052.

(a) Except as provided by the title of this code
governing the domestic entity, on the occurrence of an
event requiring Winding up of a domestic entity, unless
the event requiring Winding up is revoked under
Section 11.151 or cancelled under Section 11.152, the
owner, members, managerial officials, or other persons
specified in the title of this code governing the domestic
entity shall, as soon as reasonably practicable, wind up
the business and affairs of the domestic entity. The
domestic entity shall:
(1) cease to carry on its business, except to the
extent necessary to wind up its business;
(2) if the domestic entity is not a general
partnership, send a written notice of the
winding up to each known claimant against
the domestic entity;
(3) collect and property to the extent the
sell its
property is not to be distributed in kind to
the domestic entity’s owners or members,
and
(4) perform any other act to Wind up its
business and affairs.
(b) During the Winding up process, the domestic
entity may prosecute or defend a civil, criminal, or
administrative action.

Under Chapter 11 of the Business Organizations Code, the

business is not “terminated” until the winding up process is

completed. Section 11.052 clearly provides that the business does

continue to the extent necessary to wind up its business, which in

32
this instance includes paying its liabilities and collecting its

accounts receivable. The business is not “terminated” until it has

completed the process of winding up and has filed a certificate of

termination under §11.101 of the Business Organizations Code.

Section 802.013 of the Code requires that the certificate of

termination filed in accordance with Chapter 11 must be executed

by an officer of the professional association on behalf of the

association.

When Hansen Voluntarily relinquished his medical license,

that became an event requiring the winding up of Austin

Neurosurgical because it no longer had an authorized person as a

member. At that point, Austin Neurosurgical was required to

cease its regular course of business (providing neurosurgical

services) and begin the winding up process. Of course, Austin

Neurosurgical ceased providing neurosurgical services when
Hansen suffered his disabling injury. But Austin Neurosurgical

did not cease to exist or terminate at that time—it continued in

existence until the completion of the winding up process. As a

matter of law, Hansen did not “end” the business when he

33
surrendered his medical license—by statute Austin Neurosurgical

was required to continue in existence for the period of Winding up.

As part of the winding up process, Austin Neurosurgical had to

pay its debts and gather its assets. As shown by the evidentiary

record in the Underlying Case, those debts were ongoing in an

amount for a period in excess of the maximum available coverage

under the DOE Policy. As a matter of law, Austin Neurosurgical

did not “terminate” (end) until the process of winding up had been

completed and the certificate of termination filed. That had not

occurred at the time Hansen voluntarily surrendered his medical

license, and could not occur until the last lease payment was made

in July 2015. As a matter of law, the business did not end but

continued for the statutorily required period of winding up.

Therefore, the trial court in the Underlying Case erred in denying

DOE Policy benefits after Hansen relinquished his medical

license. This Court would have reversed the trial court in the

Underlying Case if Roach had not negligently failed to timely

perfect the appeal.

34
 The “Findings of Fact”

In the present case, the trial court filed findings of fact and

conclusions of law. (CR 15-17). In Finding of Fact No. 3 the court

found as follows:

3. The court further finds that District Judge
Suzanne Covington did not abuse her discretion in
finding that “Plaintiff closed his business on the date
he surrendered his medical license, April 8, 2011,” as
referenced in the December 13, 2013 Findings of Fact
of District Judge Suzanne Covington in the Underlying
Case.

This is not properly a finding of fact, and it is not relevant

whether or not Judge Covington abused her discretion in finding

as a fact that plaintiff closed his business on that date. To begin

with, a determination of Whether the trial court abused its

discretion is a question of law. Jackson 12. Van Winkle, 660 S.W.2d

807, 810 (Tex. 1983). Finding of Fact No. 3 Would more properly

be a conclusion of law, not a finding of fact. As noted above,

questions of law are reviewed de novo by the appellate court, and

no deference is accorded the trial court’s determination. The trial

court does not have the discretion to incorrectly apply the law.

Accordingly, this Court must make a de novo determination as to

35
Whether the business “ended” on April 8, 2011. Fact Finding No. 3

in the present case has no bearing on the review that this court

must perform.

The determinative issue is a question of law—When does

Austin Neurosurgical “end” under the policy of insurance? The

facts surrounding Hansen’s injury, disability, and surrender of his

medical license were undisputed—in fact, stipulated. The fact

finding in the Underlying Case that Hansen “closed” the business

may be evidentiary of the issue of when the business “ended”, but

closing the business and ending the business are, or can be,

different things. The sole fact finding by the trial court in the

Underlying case is therefore immaterial to the ultimate legal

determination. As an immaterial fact finding, it should be

disregarded. Andrews v. Key, 77 Tex. 35, 13 S.W. 640, 641 (1890);

Cooke County Tax Appraisal District v. Teel, 129 S.W.3d 724 (Tex.

App.—Ft. Worth 2004, no pet.). The issue is when, as a matter of

law, applying the rules of interpretation and statutory law that

the court must apply, did Hansen “end the business?” Applying

those rules and statutes to the undisputed facts, Hansen did not

36
“end the business” when he surrendered his medical license.

Rather the “business” continued for that period necessary to

gather its assets and discharge its liabilities, both as a matter of

law and as a matter of stipulated fact.

The Defense’; Cases

In the trial court, Roach tried to avoid the conclusion that

the business continued incurring Covered Overhead Expenses by

citing three distinguishable cases—Wilson v. Monarch Life

Insurance Company, 971 F.2d 312 (9th Cir. 1992); Paul Revere Life

Insurance Company v. Klock, 169 So.2d 493 (Fla. Ct. App. 1964);

and Principal Mutual Life Insurance Company v. Toranto, 1997

WL 279751 (N.D. Tex 1997). In those cases, the insured was

denied benefits under office overhead expense policies specific to

those cases. However, in each of those cases, the denial was based

@
on the fact that the insured had sold his practice and was

attempting to claim benefits for expenses the sale of the

practice. Not surprisingly, the courts in those cases found that

expenses incurred after the insured sold the practice Were not

37
covered by the policies. However, those results were based on the

fact that the insureds sold their practices—a fact missing in the

present case. Hansen did not sell his practice—he did exactly

what the Business Organizations Code requires and went through

the winding up process by collecting and disposing of the assets of

the business and paying the liabilities of the business. In none of

the cases cited by Roach i.n the court below did the insured go

through a statutory winding up, and none of those cases even

address that issue. Those cases are simply inapplicable to the

case now before the Court.

No Subsequent-Act Defense After Breach of Contract
The fact that Hansen voluntarily surrendered his medical

license in the face of Northwestern Mutual’s wrongful denial of

benefits could not be a defense for Northwestern Mutual in the

Underlying Case. When Hansen was injured, the DOE Policy

benefits were due beginning at that time. The trial court in the

Underlying Case found that Hansen was entitled to those benefits

and that Northwestern Mutual breached the contact when it

38
denied his claim. After it breached the contract, Northwestern

Mutual could no longer insist that Hansen comply with the

contract. When one party to a contract commits a material breach

of the contract, the other party is excused from any further

obligation to perform. Mead v. Johnson Goup, Inc., 615 S.W.2d

685, 689 (Tex. 1981). What Northwestern Mutual was essentially

arguing was that Hansen had to maintain his medical license

during the entire period of coverage in order to receive the DOE
Policy benefits, even though Hansen was physically incapable of

performing surgery. But Hansen had to pay the ongoing office

overhead expenses without the benefits that Northwestern

Mutual had promised and contracted to provide to him to meet

those same obligations. After breaching the contract,

Northwestern Mutual could not rely on Hansen’s post-breach

conduct as a “fall-back” defense when its complete denial of

liability failed. The trial court in the Underlying Case erred in

relying upon Hansen’s voluntary surrender of his medical license

as a defense when that conduct occurred after Northwestern

Mutual had breached the contract. This Court would not have

39
affirmed the denial of DOE Policy benefits to Hansen on that

basis.

CONCLUSION
This Court would have reversed the judgment in the

Underlying Case if Roach and the Firm had properly perfected the

appeal in that case. As a matter of law and stipulated facts,

Hansen did not “end the business” of Austin Neurosurgical when
he surrendered his medical license. By statute Austin

Neurosurgical continued for the required period of winding up,

and the stipulations in the Underlying Case establish that the

winding up process actually did occur following Hansen’s

surrender of this medical license. Both factually and legally, the

professional association continued in existence to collect its assets

and discharge its liabilities.

After Northwestern Mutual had fully breached the contract

by refusing to pay any benefits, Hansen was under no obligation

to comply with any of the terms of the contract. If maintenance of

his medical license was required for Hansen to receive the DOE

40
Policy benefits, Northwestern Mutual’s breach of the contract

relieved him of that obligation.

Accordingly, if this Court had been able to hear and decide

the appeal of the Underlying Case, this Court would have reversed

the trial court and rendered judgment for Hansen for the full

amount of the unpaid benefits plus penalty interest. Therefore,

the trial court in the present case erred in holding that Roach’s

admitted negligence in failing to timely perfect the appeal was not

a proximate cause of Hansen’s loss of the amount of that

judgment.

PRAYER
Wherefore, Hansen prays that the court reverse the

judgment of the trial court and render judgment for Hansen for

the full amount of his damages, which would constitute the

amount of the unpaid benefits under the DOE Policy plus penalty
interest from the date of Hansen’s injury until the entry of the

trial court’s judgment in the Underlying Case, plus prejudgment

41
interest on that sum in this case, and for such other relief to which

he may show himself entitled.
KIDD LAW FIRM
819 West 11”‘ Street
Austin, TX
78701
512-330-1709 (fax)

/s/Scott R.Kidd
Scott R. Kidd
State Bar No. 11385500
512-330-1713
scott@kiddlawaustin.com
Scott V. Kidd
State Bar No. 24065556
512-542-9895
svk@kidd1awaustin.com

Certificate of Compliance with TRAP 9.4(i)(3)

This brief contains a total of 6863 words excluding the parts
exempted under TRAP 9.4(i)(1), as verified by Microsoft Word for
Mac. This brief is therefore in compliance with TRAP 9.4(i)(2)(B).

/s/Scott R. Kidd

Certificate of Service

A copy of this brief has been served on John Shepperd,
909
Fannin Street, Suite 3300, Houston, TX 77010 in accordance With
the Texas Rules of Appellate Procedure this 19th day of October,
2015.

/s/Scott R. Kidd

4-2
 APPENDIX
A. Final Iudgment

B. Findings of Fact and Conclusions of Law

C. TEX. BUS. ORG. CODE §11.052
 DC BK15169 PG1588 “'95 l" The Diilrlct Court
of Travis County, Tan;
JUN 1 2 2015
%"
Al ,3 L0
M_
cAUsE No. D-1-GN-14-001213 Veiva L. P ca. District cum
JAMES HANSEN § IN THE DISTRICT COURT
§
-
§
Plaintiff, §
§ 98th JUDICIAL DISTRICT
V. §
§
LONNIE ROACH, AND LAW §
LAW OFFICES OF BEMIS, ROACH §
& REED §
§
Defendants. § TRAVIS COUNTY, TEXAS
FINAL JUDGMENT
On May 27, 2015, the Court held the final trial in the above entitled and numbered cause.
Plaintiff appeared in person and through his attorney, Scott Russell Kidd, and announced ready.

Defendants appeared through their attorney, John R. Shepperd, and announced ready. The
parties did not request a jury and all questions of fact and law were submitted to the Court for

detennination. The parties further stipulated to the record and exhibits for trial. Having
considered the pleadings, evidence presented, argument of counsel, and applicable law, the Court

concludes that judgment should be granted for Defendants.

Accordingly, it is ORDERED, ADJUDGED AND DECREED that Plaintiff, James Hansen,

take nothing by this suit. It is further ORDERED, ADIUDGED, AND DECREED that this

judgment disposes of all issues and parties and is an appealable final judgment. All relief not

expressly granted herein is denied.

SIGNED this 12th day of June 2015.

IlllllllllllllllllllIllll||l|Ill||||l||l||||lll|H|Il
0040 @ 11
 Filed in The District Court
of Travis courtly, T9Xfi5

JUN gt: E2015 3“
CAUSE No. 13.1 _GN_144101213 At 5'

L Pm’ D SW‘ M -

JAMES HANSEN § IN THE DISTRICT COURT
~ §
,
§
*

Plaintiff, §
§ 98th JUDICIAL DISTRICT
‘

V. §
1

§
LONNIE ROACH, AND LAW §
LAW OFFICES OF BEMIS, ROACH §
& REED
i;

§
:

§
Defendants. § TRAVIS COUNTY, TEXAS
FINDINGS OF FACT AND CONCLUSIONS OF LAW
On May 27, 2015, the Court held the final trial in the above entitled and numbered cause.
Plaintiff appeared in person and through his attorney, Scott Russell Kidd, and announced ready.

Defendants appeared through their attorney, John R. Shepperd, and announced ready.

The parties did not request a jury and all questions of fact and law were submitted to the

Court for determination. The parties further stipulated to the record and exhibits for trial. The

parties did not present any additional testimony or evidence at trial. The sole question before

this Court was whether Defendants’ failure to timely perfect the appeal of the in the underlying

case, Cause No. D-1-GN-10-004459 in the 200"‘ Judicial District Court, styled James Hansen,

M.D. v. The Northwestern Mumal_ Life Insurance Company (the “Underlying Case”l),

proximately caused loss or harm to Plaintiff.

In response to a request from Plaintifl‘, the Count issues the following findings of fact

conclusions of law:

\

Page 1 of 3
FINDINGS OF FACT AND CONCLUSIONS OF LAW
 FINDINGS OF FACT
1. The Court adopts the parties’ Joint Stipulation of Facts and all documents attached to the

Appendix Supporting Joint Stipulation of Facts, filed on June 10, 2011 in the Underlyitig
1

Case.

The parties have stipulated to the failure of Defendants to timely perfect an appeal in in

Underlying Case.

The Court further finds that District Judge Suzanne Covington did not abuse her discretion

finding that “Plaintiff closed his business on the date he surrendered his medical license,

April 8, 201 1," as referenced in the December 13, 2013 Findings of Fact of District Judge

Suzanne Covington in the Underlying Case.

CONCLUSIONS or LAW 1

1. The following provisions of the insurance policy between Northwestern Mutual Life

Insurance Company and Plaintiff are applicable:

SECTION 1. GENERAL TERMS AND DEFINITIONS.
This policy provides a monthly benefit for Covered Overhead Expenses when the
Insured is totally or partially disabled.

##1##

1.6 BUSINESS
Except as provided in Sections 8.3 and 8.9, the word “business” means the
Insured’s business or the Insured’s professional practice at the time the disability
starts.
*:**

1.7 COVERED OVERHEAD EXPENSE
Covered Overhead Expense is the total of monthly expenses that are normal and
customary in the continuing operation of the Insured’s business, as properly
reported for federal income tax (F II‘) purposes, with some exceptions as described
below.

Page 2 of 3
FINDINGS OF FACT AND CONCLUSIONS OF LAW
 *=|=$%

3.2 MONTHLY BENEFIT FOR DISABILITY
Benefit Termination or Adjustment If the insured ends the operation of the
business while totally or partially disabled, benefits for Covered Overhead
Expenses and Waiver of Premium will end. I

2. Plaintiffs entitlement to monthly benefits ended on April 8, 201 l, the date he closed

business.
i

A

3. Collection of accounts receivable did not constitute the “continuing operation of the

lnsured’s business" Within the plain meaning of the applicable provisions of the insurancla
I

policy between Northwestem Mutual Life Insurance Company and Plaintiff.
4. A timely filed appeal would not have changed the outcome in the Underlying Case.

Accordingly, Defendants’ failure to timey appeal did not proximately cause loss or harm to

Plaintiff.

SIGNED this 23rd day of June 2015.

PRESIDING ?

Page 3 of 3
FINDINGS OF FACT AND CONCLUSIONS OF LAW
§ 11.052. Winding Up Procedures — WestlawNext 10/19/15. 3524 PM

Westtawluext”
§ 11.052. Winding Up Procedures NOTES OF DECISIONS (5)
Vernon's Texas Statutes and Codes Annotated Business Organizations Code Efiedive: sepremben, 2013 (Appmx. 2 pages)

Vernon's Texas statutes and codes ztnnotated
‘ RWWWW‘ I H

fi:;‘:T::fl°n
M app“°afi°"

BusinessO1'ganiz.at1onsOode(RefS 8: Annos) Banmmcy
Title 1. General Provisions (Refs & Annos)
Chapter 11. Winding up and Termination of Domestic Entity
Subchapter B, Winding up of Domestic Entity

Effective: September 1, 2013

V.T.C.A., Business Organizafions Code § 11.052

§ 11.052. Winding Up Procedures

Currentncss

(a) Except as provided by the title of this code governing the domestic entity. on the
occurrence of an event requiring winding up of a domestic entity, unless the event requiring
winding up is revoked under Section 11.151 or canceled under Section 11.152, the owners,
members, managerial officials, or other persons specified in the title of this code governing
the domestic entity shall, as soon as reasonably practicable, wind up the business and
affairs of the domestic entity. The domestic entity shall:

(1)cease to carry on its business. except to the extent necessary to wind up its

business;

(2) if the domestic entity is not a general partnership, send a written notice of the winding
up to each known claimant against the domestic entity;

(3) collect and sell its property to the extent the property is not to be distributed in kind to
the domestic entity's owners or members; and

(4) perform any other act required to wind up its business and affairs.

(la) During the winding up process, the domestic entity may prosecute or defend a civil,

criminal, or administrative action.

Credits
Ads 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2013. 83rd Leg., ch.
9 (5.3 347), § 3, eff. Sept. 1, 2013.

Editors‘ Notes
CROSS REFERENCES
Certain procedures for approval, nonprofit corporations, see V.T.CA, Business
Organizations Code § 22.302.
Certain procedures relating to winding up, for-profit corporations, see V.T.CA.. Business
Organizations Code § 21.502.
Powers of person conducting wind up. see V.T.C,A,, Business organizations Code§
153.503.

LIBRARY REFERENCES
2012 Main Volume

2012 Main Volume

Corporations and Business Organizations as-8089 to 3091 3120 to 3140, 3660. ,

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