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. ,
https://a.next.westlaw.com/DocumenuNC14FBO9OD98111E2B2838FF124B0...ch%ZOResu|t&transiIlonType=Searchlrem&contextData=%28sc.Search%29 Page 1 of 3