Opinion issued March 20, 2008
For=20 The
The central=20
issue in this appeal is whether a person who is not a party to an=20
insurance policy can nonetheless recover from the insurance =
company or its=20
agent because of incorrect information regarding the scope of =
coverage.=20
Here, the noninsured person sued the insurance company and its =
agent on=20
negligence and DTPA theories based on the insurance agent's oral =
statement=20
and written certificate of insurance, which both erroneously =
represented=20
that coverage existed for the uninsured person's property. We hold =
that=20
because the existence of coverage is a question of law to be =
determined by=20
interpreting the insurance policy itself, a person who is not a =
party to=20
an insurance policy cannot recover from the insurance company or =
its agent=20
based on information outside of the actual policy. See =
Via=20
Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex. 2006) (holding =
that=20
party may not rely on certificate of insurance, but must ask for =
insurance=20
policy itself).
Appellee=20
Omni Metal, Inc. is a buyer and seller of steel coils. Port Metal=20
Processing, Inc. stored steel belonging to Omni, processed that =
steel into=20
coils, and temporarily stored the finished coils for Omni. Port =
Metal=20
purchased insurance from appellant Transcontinental Insurance =
Company=20
originally through the Russell Lee Jacobe Insurance Agency. The =
Jacobe=20
agency was acquired on November 1, 1994 by Poe & Brown of =
Texas, Inc.,=20
which is now known as appellant Brown & Brown of Texas,=20
Inc. Blake=20
McKnight, Port Metal's president, testified that he asked Danny =
Sparks, an=20
agent for Jacobe and later Poe & Brown, to insure the Port =
Metal=20
warehouse and its inventory, including steel that Port Metal's =
customers=20
were storing at the warehouse. However, the original policy =
written in=20
1992 excluded from coverage property held in storage or property =
for which=20
a storage charge is made, as did the 1993, 1994, and 1995 =
renewals.=20
McKnight said he asked Sparks about the exclusion and was told =
that it=20
meant Port Metal could not store property on its premises that was =
unrelated to its business. Sparks testified that by June 1993 he =
knew Port=20
Metal was charging a storage fee to its customers like Omni and =
that he=20
failed to explain to McKnight that the insurance policy excluded =
the steel=20
Port Metal was storing at Omni. McKnight testified that he did not =
read=20
the 1995 insurance policy in effect at the time of the fire and =
that he=20
was aware that Poe & Brown had recommended that he review the =
policy=20
carefully. Omni's=20
president, Arthur Tomes, spoke on several occasions with McKnight =
and=20
inquired if Omni's steel at Port Metal's warehouse was insured. =
Omni's=20
bank required that Omni request certificates of insurance from =
Jacobe and=20
later Poe & Brown to document Port's Metal's coverage. =
The 1993=20
certificate contains the incorrect statement that Port Metal's =
insurance=20
coverage "INCLUDES PROPERTY OF OTHERS IN CUSTODY OF INSURED." The =
1994 and=20
1995 certificates contain the alleged misrepresentation that the =
insurance=20
covers "all risk." All three certificates contain the following=20
disclaimer: "THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION =
ONLY=20
AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE =
DOES NOT=20
AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES=20
BELOW." Tomes=20
testified at trial that he did not read the disclaimer and that it =
would=20
not have made a difference to him if he had read the=20
disclaimer: Q. Now when=20
you received, or when Omni would receive a certificate of =
insurance, what=20
was done with it? [Tomes]=20
They would be put in a file. Q. All=20
right. Did you personally read and review every single certificate =
of=20
insurance that came across to Omni? [Tomes]=20
No. Q. Why=20
not? [Tomes] I=20
would never -- I mean, I'm assuming that what we are expecting to =
get=20
under coverage -- the coverage would be what they told us it was =
and that,=20
you know, those would just be put in the file for our=20
edification. If someone=20
asked us -- or the bank or someone else, I mean, I would -- I =
wouldn't=20
read a policy. I don't think anybody reads their insurance =
policies from=20
front to bottom. Q. Did you=20
actually receive the insurance policy rather than the certificate =
of=20
insurance? [Tomes]=20
No. Q. Did you=20
ever ask for an insurance policy? [Tomes]=20
No. Q. Did you=20
ever ask for an insurance policy from Poe & Brown related to =
Port=20
Metal Processing? [Tomes]=20
No. Q. Why=20
not? [Tomes]=20
Because we would think that the certificate of insurance would be =
adequate=20
to cover what we needed. Port=20
Metal's warehouse burned down on December 5, 1995 and Omni lost =
$2,600,000=20
in steel. Transcontinental Insurance Company denied coverage on =
Omni's=20
steel that was stored at Port Metal. Omni filed suit, and settled=20
separately with Port Metal, Electrical Wire & Cable Company, =
Inc.,=20
Electrical Redesign Company, Lighting Surplus, Harry Schubeck, =
Jr., and=20
Textron, Inc. for a total of $1,660,000. Omni spent $740,000 in =
attorney's=20
fees in that suit that were not legally recoverable. Omni's suit=20
against Transcontinental and Poe & Brown was severed from the =
claims=20
against the parties who settled. In the severed suit, Omni raised =
claims=20
against Transcontinental and Poe & Brown of misrepresentation, =
failure=20
to disclose, and violations of the DTPA. Transcontinental and Poe =
&=20
Brown successfully moved for summary judgment on the basis there =
was no=20
misrepresentation or false or misleading act. The summary judgment =
was=20
appealed to the Fourteenth Court, which reversed and remanded. =
Omni=20
Metals, Inc. v. Poe & Brown, Inc., No. 14-00-01081-CV =
(Tex.=20
App.--Houston [14th Dist.] June 13, 2002, pet. denied). The =
Fourteenth=20
Court held, among other things, that (1) Transcontinental and Poe =
&=20
Brown had a duty to disclose additional coverage information to =
Omni, (2)=20
fact issues existed concerning misrepresentations made to Omni, =
and (3)=20
fact issues existed concerning misrepresentations made to Port =
Metal, on=20
which Omni relied. On remand,=20
the jury found the following: 1.=20
Transcontinental and Poe & Brown made negligent =
misrepresentations on=20
which Omni justifiably relied. 2. Damages=20
for the negligent misrepresentations of $704,267 (value of steel), =
$370,964.72 (expenses incurred in selling the steel), and $740,000 =
(attorney's fees incurred by Omni in the lawsuit against the =
parties who=20
caused the fire). 3.=20
Transcontinental and Poe & Brown engaged in an unfair or =
deceptive act=20
that damaged Omni. 4. Damages=20
for the unfair or deceptive act of $704,267 (value of steel), =
$370,964.72=20
(expenses incurred in selling the steel), and $740,000 (attorney's =
fees=20
incurred by Omni in the lawsuit against the parties who caused the =
fire). 5.=20
Transcontinental and Poe & Brown knowingly engaged in their=20
conduct. 6. Treble=20
damages for the knowing conduct of $1,620,000 for Poe & Brown =
and=20
$1,080,000 for Transcontinental. 7.=20
Attorney's fees of $161,050.07 (preparation and trial), $50,000.00 =
(appeal=20
to court of appeals), and $25,000.00 (appeal to supreme =
court). 8.=20
Transcontinental's and Poe & Brown's negligence caused the=20
injury. 9.=20
Transcontinental was 40% responsible and Poe & Brown 60%=20
responsible.
On appeal=20
to this Court, Poe & Brown raises four issues: (1) the =
evidence is=20
factually and legally insufficient to establish: (a) it made a =
negligent=20
misrepresentation and engaged in a DTPA unfair or deceptive act; =
(b) the=20
representation caused Omni's damages; (c) Omni justifiably relied; =
and (d)=20
it acted knowingly; (2) the DTPA does not apply to Omni because =
Omni is=20
not a consumer under the DTPA or an insured or third party =
beneficiary=20
under the insurance policy; (3) attorney's fees in another lawsuit =
are not=20
recoverable as proper damages; and (4) the trial court erred in =
not giving=20
Poe & Brown a proper credit for the $1,660,000 settlement in =
the other=20
lawsuit. In both Poe=20
& Brown's issue 1 and Transcontinental's issues 3 and 4, the =
two=20
appellants argue that Omni could not detrimentally rely on either =
the=20
certificates of insurance or the statements from Danny Sparks that =
McKnight passed on to Tomes. In light of the supreme court's =
Via=20
Net, we agree. 211 S.W.3d at 314. Both the=20
negligent misrepresentation and DTPA in=20
questions 1 Insurance=20
policies are interpreted according to the rules of contract =
construction.=20
Am. Mfrs. Mut. Ins. Co. v. Schaeffer, 124 S.W.3d 154, 157 =
(Tex.=20
2003). If the insurance policy is worded so that it can be given a =
definite meaning or a certain legal meaning, then the policy is =
not=20
ambiguous. Id. If the policy is not ambiguous, then the =
court=20
construes the policy as a matter of law. Id. No party to =
this=20
appeal has claimed that the insurance policy is ambiguous, so the =
issue of=20
whether the insurance policy provided coverage for Omni is one for =
the=20
court to decide as a matter of law. Here, Omni was not even a =
party to the=20
insurance contract, yet Omni neither requested a copy of the =
insurance=20
policy, nor read the certificate of insurance that clearly stated =
that the=20
certificate could not change the terms of the insurance policy. =
Tomes,=20
Omni's president, testified that he chose instead to rely on "what =
we are=20
expecting to get under coverage -- the coverage would be what they =
told us=20
it was." The supreme=20
court in Via Net acknowledged there is little use for=20
certificates of insurance if a contracting party must verify them =
by=20
reviewing the full insurance policy. 211 S.W.3d at 314. =
Nevertheless, the=20
court proceeded to say that "those who take such certificates at =
face=20
value do so at their own risk." Id. Here, Omni chose to =
rely on=20
oral representations, something even a party to a contract cannot =
do when=20
the oral representation directly contradicts the express, =
unambiguous=20
terms of a written contract. See DRC Parts & =
Accessories,=20
L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858-59 (Tex.=20
App.--Houston [14th Dist.] 2003, pet. denied) (en =
banc). Following=20
the reasoning of Via Net, we hold as a matter of law that =
Omni=20
could not detrimentally rely on either the certificates of =
insurance or=20
the oral representations in order to recover on its negligent=20
misrepresentation and DTPA claims. We sustain (1) Poe & =
Brown's issue=20
1 as it relates to the legal sufficiency of the negligent=20
misrepresentation and DTPA claims and (2) Transcontinental's =
issues 3 and=20
4. We do not reach the factual sufficiency portion of Poe & =
Brown's=20
issue 1, and we will discuss the portion of Poe & Brown's =
issue 1=20
relating to the additional award of $1,620,000 in DTPA treble =
damages=20
later. In both Poe=20
& Brown's issue 3 and Transcontinental's issue 5, the two =
appellants=20
challenge the damage award of $740,000 in attorney's fees, which =
was the=20
unrecoverable amount of attorney's fees that Omni incurred in its =
suit=20
against Port Metal, Electrical Wire & Cable Company, Inc., =
Electrical=20
Redesign Company, Lighting Surplus, Harry Schubeck, Jr., and =
Textron, Inc.=20
Omni received this "damage" award against the two appellants by =
relying on=20
the wrongful-act exception recognized by the Eastland Court of =
Appeals.=20
See Baja Energy , Inc. v. Ball, 669 S.W.2d 836, =
838-39=20
(Tex. App.--Eastland 1984, no writ). Without deciding whether we =
agree=20
with this wrongful-act exception, we sustain Poe & Brown's =
issue 3 and=20
Transcontinental's issue 5 because we have already reversed Omni's =
DTPA=20
claim on which this damage award of attorney's fees was=20
predicated. In a=20
portion of Poe & Brown's issue 1 and in Transcontinental's =
issue 6,=20
the two appellants challenge the additional DTPA treble damage =
award of=20
$1,620,000 for Poe & Brown and $1,080,000 for Transcontinental =
for=20
engaging in knowing conduct under the DTPA. As with the=20
attorney's fees damage award, the treble damage award was =
predicated on=20
awarding DTPA damages under jury question 3, which we have already =
reversed. Accordingly, we sustain the portion of Poe & Brown's =
issue 1 related to the legal sufficiency of the treble =
damages and=20
Transcontinental's issue 6. In both Poe=20
& Brown's issue 4 and Transcontinental's issue 7, the two =
appellants=20
contend the trial court erred in refusing to give them a judgment =
credit=20
for the $1,660,000 settlement Omni previously received from Port =
Metal,=20
Electrical Wire & Cable Company, Inc., Electrical Redesign =
Company,=20
Lighting Surplus, Harry Schubeck, Jr., and Textron, Inc. In=20
Transcontinental's issue 8, it contends the trial court erred in =
refusing=20
to admit into evidence a prior federal court judgment in its favor =
in a=20
suit between Port Metal and Transcontinental. These issues are =
moot in=20
light of our disposition on the other issues in this =
appeal. We reverse=20
the judgment of the trial court and render judgment that Omni take =
nothing. Sam=20
Nuchia Panel=20
consists of Justices Nuchia, Keyes, and Higley. Justice=20
Keyes dissenting.=20
1. Deceptive Trade Practices-Consumer =
Protection Act,=20
Tex. Bus. & Com. Code Ann. =A7 17.46(a), (b)(5), (12) (Vernon =
Supp.=20
2007).=20
2. QUESTION NO. =
1 Did one or=20
more of the Defendants make a negligent misrepresentation on which =
Omni=20
Metals, Inc. justifiably relied?=20
3. QUESTION NO. =
3 Did one or=20
more of the Defendants engage in any unfair or deceptive act or =
practice=20
that caused damages to Omni Metals?
"Unfair or=20
deceptive act or practice" means any of the following:
(1)=20
representing that goods or services had or would have =
characteristics that=20
they do not have; or
(2)=20
representing that an agreement confers or involves rights that it =
does not=20
have or involve.=20
4. Deceptive Trade Practices-Consumer =
Protection Act,=20
Tex. Bus. & Com. Code Ann. =A7 17.50(b)(1) (Vernon Supp.=20
2007).