TEXAS UPDATE
By CHAMBERLAIN
McHANEY
TEXAS LAWYERS
This week
we issue warnings to folks who rent cars, folks who deny coverage to
insureds, folks who incur punitive damages and folks who toilet paper other folks homes. We also have a plan to
bring us all together. It may sound like a lot, but it's all in
a day's work for Texas Update.
RENTER MUST PAY FOR STOLEN RENTAL CAR: IF ALL THOSE DANG RENTAL CAR
TAXES WEREN'T ENOUGH, LAST FRIDAY THE TEXAS SUPREME COURT decided that the renter must pay the rental car
company the value of a stolen rental car despite the fact that the car was
stolen by an unknown third party and despite the fact that the renter was
without fault. The car rental agreement contained a paragraph that the
"renter is responsible and agrees to pay Owner...all losses and damages to
the rented car....regardless of fault or negligence to the
renter..." The renter argued the paragraph was ambiguous and
misleading because the paragraph was entitled "DAMAGE TO RENTED CAR"
and the paragraph mentioned nothing about responsibility for stolen cars.
Besides, he argued, it just ain't fair. The Supreme Court gave short
shrift to this appeal with a pithy per curium conclusion that "All
losses means all losses." Enterprise Leasing Co. v. Barrios
(Tex 2004).
ARE PUNITIVE DAMAGES INSURABLE IN TEXAS? LAST WEDNESDAY, THE TEXAS SUPREME COURT heard oral arguments as to whether it is against
public policy in Texas to insure punitive damages. The federal
fifth circuit court of appeals certified the question in a challenge of a
summary judgment declaring that Fairfield Insurance Company
must defend Stephens Martin Paving in a lawsuit claiming punitive damages based
on gross negligence. The underlying case involves a spouse's claim that
the paving company's gross negligence resulted in her husband's death. Fairfield, the paving company's workers compensation carrier,
argues that punitive damages should not be indemnified because such
damages are intended to punish the grossly negligent defendant, not its
insurer. Fairfield Ins.
Co. v. Stephen Martin Paving (on certified question).
A decision should be forthcoming in the next six months.
IS AN INSURER SUBJECT TO AN 18% STATUTORY PENALTY FOR
WRONGFULLY DENYING A DEFENSE TO AN INSURED?
TxUp congratulates itself for
asking itself such a poignant and timely question. An insurer
who violates Texas Insurance Code article 21.55 is liable to its insured for an
additional 18% of the amount due on a first party claim under an insurance
policy unless the claim is determined by litigation to be invalid. The
insured can also recover its attorneys fees for
pursuing the claim and at least one Texas court has held that the 18% penalty is also subject
to an additional add-on for prejudgment interest, effectively
increasing it to a 23% penalty. Does an insurer who wrongfully
denies a defense to an insured owe a penalty to its
insured? Who knows. Courts are
split. Late last month, a federal district court in Dallas said the insurer does owe the additional
penalty if the insurer wrongfully denies a defense because it is a first
party claim. Mathews Heating v Liberty Mutual (N.D. Tex 2004) (
following its earlier decision in Travelers Indem. Co. v. Presbyterian
Healthcare (N.D. 2004). But the Dallas Court of Appeals reached the
opposite result finding no exposure to the penalty because the insured's
request for a defense was not a first party claim for money to be paid directly
to the insured. TIG Ins. Co. v.
Dallas Basketball, Ltd (Tex App-Dallas 2004, pet. filed). To make matters more uncertain, the Texas
Supreme Court dodged the issue in another case, Northern County Mut. Ins. Co. v. Davalos
(Tex 2004). Since
the petition for review in TIG is
still pending before the Supremes, this issue could be resolved some time in
the future. TxUp is
following developments in this area as there several similar suits pending
around the state.
OUR OWN DESPERATE HOUSEWIVES:
TxUp thinks the most interesting
story of the election occurred right here in central Texas. First-term Texas State House Representative Todd Baxter was up for
re-election earlier this month. Baxter's wife discovered that
several women in their very own upper-class west Austin neighborhood had taken up the campaign of his
opponent when someone sent her a copy of one of their campaign emails.
Baxter's wife took umbrage at this impudence and sent
an email to the same email list lambasting the neighborhood women as
"man-hating liberals." The neighborhood women responded
by rolling the Baxter's House in toilet paper on the morning of
the election. Baxter narrowly won re-election later that
day and the toilet papering neighbors were arrested on charges
of criminal trespass.
TxUp is a politically neutral publication,
which means we are hated equally by all sides. However, we do have a
native Texan that we would nominate for President in 2008. He is
unique in that he is friends with both Toby Keith and Jimmy Carter. We
believe he can bridge the gap between man-hating liberals and victims
of toilet paper rolling. We submit:
WILLIE '08
TEXAS UPDATE IS BROUGHT TO YOU AS A SERVICE OF THIS
FIRM