Allstate Insurance Co. v. Watson

DOGGETT, Justice,

dissenting.

Nov. 24, 1993

An explicit statute and an unequivocal pri- or ruling of this Court once again impose no restraint on a majority determined to deny Texans any meaningful remedy for abusive insurance claims handling practices. After suffering injuries in an automobile collision, Kathleen Watson alleges she sustained only more injuries from Allstate’s delay in resolving her claim and lack of good faith. The decision of the court of appeals assured Watson the protection against unfair claim settlement practices afforded by section 16, art. 21.21 of the Texas Insurance Code. 828 S.W.2d 423 . Today’s opinion removes that safeguard. Because this important law should be enforced, I dissent.

If only this statute had been drafted differently, the majority would not have had to go through such gyrations in once again assuming for itself a legislative role. But today’s word games do more than harm third parties like Kathleen Watson. By challenging the legitimacy of Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 129 (Tex.1988) (finding a statutory cause of action for unfair claim settlement practices under Tex. Ins.Code Ann. art. 21.21 (Vernon Supp. 1993)), and implicitly adopting the regressive reasoning of the previously rejected writings of Justices Gonzalez and Phillips, id. at 137, 139 (Gonzalez, J., dissenting and Phillips, C.J., dissenting on rehearing), the majority has invited imminent attack on the most effective tool that Texas consumers possess to ensure that they have not paid premiums only to be subjected to abuse by their oum insurers.

Texans victimized by the unfair or deceptive conduct of insurance companies have been afforded statutory protection:

Any person ... damagefd] as a result of another’s engaging in an act or practice declared in ... regulations lawfully adopted by the Board ... to be ... unfair or deceptive acts or practices in the business of insurance or in any practice defined by Section 17.46 of the [DTPA] as an unlawful deceptive trade practice may maintain an action against the [violator].

Tex.Ins.Code Ann. art. 21.21, § 16 (Vernon Supp.1993). This Court has relied upon the express language of this enactment to assure protection against unfair claim settlement practices. See Vail, 754 S.W.2d 129 . Such claims practices are actionable as unfair acts under art. 21.21 both because they are so defined by a regulation of the State Board of Insurance and because they can constitute a breach of section 17.46 of the Texas Business and Commerce Code (DTPA).

State Board of Insurance Order 18663, section 4(a) states that any act defined by the Insurance Code to be an unfair or deceptive act or practice is prohibited by art. 21.21. 28 Tex.Admin.Code § 21.3(a) (West 1993). One such prescribed unfair practice is “not attempting in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonably clear.” Tex.Ins.Code art. 21.21-2, § 2(d). Since there is not the slightest indication that Board Order 18663 and the definition contained in article 21.21-2, § 2(d) were to be excluded from incorporation by art. 21.21, this Court simply acknowledged that unfair claims settlement practices are among the provisions actionable under art. 21.21. 1 Vail at 134 .

*152 But the majority now blocks any opportunity by Kathleen Watson to enforce art. 21.21 with the amazing argument that a wholly separate statute, art. 21.21-2, does not itself create a private cause of action for unfair claims settlement practices. 876 S.W.2d at 148. This very rationale has already been repudiated by this Court in Vail . Aware “that article 21.21-2 does not confer a private cause of action,” this Court rejected the insurer’s argument that this provision “ ‘sealed off any private cause of action for unfair claims settlement practices under the DTPA or Insurance Code.” Vail at 132 .

Article 21.21 would be wholly superfluous were it limited solely to rules and regulations enacted under other Code provisions that offered their own separate private cause of action. There would have been no reason to promulgate art. 21.21 if a claimant could already proceed separately under other provisions such as art. 21.21-2. We have already determined in Vail that “[t]he fact that article 21.21-2 itself does not confer a private cause of action does not preclude the incorporation of definitions contained in that article into rules and regulations promulgated by the State Board of Insurance.” Vail at 134 . Since by its plain terms art. 21.21 provides a cause of action for every practice determined elsewhere in the Code to be unfair, and art. 21.21-2 proscribes unfair claim settlement practices, they are actionable under art. 21.-21. 2

Article 21.21 affords a second basis for an action for unfair claim settlement practices by its reference to section 17.46 of the DTPA, which defines “false, misleading, or deceptive acts or practices” as including, but not limited to, a list of enumerated items. Tex.Bus. & Com.Code Ann. § 17.46 (Vernon 1987). Since the list of prohibited acts is not exhaustive, Spradling v. Williams, 566 S.W.2d 561, 564 (Tex.1978), recovery may be based upon a finding of deception in the occurrence of an unlisted act or practice. Id. This Court has already determined that a finding that an insurer’s failure to exercise good faith in the handling of a claim constituted a deceptive act was sufficient under section 17.46, and has further held that “section 16 of article 21.21 incorporates any [such] unlisted practice that is determined to be false, misleading or deceptive.” Vail at 135 (emphasis added).

After conceding that section 17.46 is not a comprehensive list of actionable DTPA violations, the majority somehow concludes, without any authority whatsoever, that in order to ground an unfair practices claim under art. 21.21, the conduct complained of must be specifically enumerated in section 17.46. 876 S.W.2d at 149. 3 Representing the converse of our holding in Vail, 4 this decision imposes a wholly unjustified restriction on section *153 17.46 devoid of support in either the statutory text or legislative history.

The only real difference between the Vails and Watson is the type of individual making the claim; the former were insureds, while the latter is not. The benefits of art. 21.21 might well have been limited to the “insured” or the “consumer” but they are not. It guarantees a right to “[ajny person,” art. 21.21, § 2 (emphasis added), which unequivocally includes Kathleen Watson. The same statute which supported the claim by the Vails unquestionably supports the claim by Watson. Because the legislature did not authorize such discrimination, today’s opinion must invent some basis for its disparate treatment of Kathleen Watson. Ironically, the majority finds support in the very opinion to which it has devoted such energy in dismembering — Vail, a decision allegedly “predicated upon this court’s expressed belief that a special relationship exists between an insured and the insurer.” 876 S.W.2d at 149 (citing Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987)).

Vail did no such thing. There, in a rather easy case of basic statutory interpretation, the Court read what the legislature wrote, not what we may have wanted written as the majority has now done. Today we learn for the first time that Vail was somehow decided va the shadow of Arnold ⅛ focus on the insured-insurer relationship. 5 Such a conclusion announces a highly peculiar new rule of analysis: no matter how an opinion is itself worded, a decision of this Court should be considered as necessarily predicated on any decision from the prior calendar year addressing any similar subject matter, even though one involves a question of statutory construction and the other the development of the common law. 6 Vail 's sole reference to Arnold was in support of a completely separate statutory basis for recovery under art. 21.21 that does not form any part of Kathleen Watson’s claim. 754 S.W.2d at 135 . 7

But not only is this reading of Vail inapplicable to Watson, it is also plainly wrong. Our previous conclusion that Arnold was one of two “determinations pursuant to law that an insurer’s lack of good faith in processing a claim is an unfair or deceptive act” is as applicable to third party claims as to those by insureds. 754 S.W.2d at 135 . Any argument that Vail can be limited solely to the claims of insureds finds absolutely no basis in that decision itself; rather it represents a newly fabricated rule to deny Kathleen Watson relief.

By following the unequivocal command of what had been our law, the most recent court to address this issue has reached the precise conclusion that the majority should have *154 reached today. In Transport Ins. Co. v. Faircloth, 861 S.W.2d 926 (Tex.App.—Beaumont 1993, writ requested), the court of appeals held that a third-party claimant had standing under art. 21.21 to sue an insurer based on both listed and unlisted violations of section 17.46 of the DTPA, and the unfair claim settlement practice definition contained in art. 21.21-2.

In what is only a rationalization for a decision that lacks any basis in law, the majority concludes that any third party cause of action under art. 21.21 would “undermine the insurer’s duty to its insured imposed in Vail and Arnold.” 876 S.W.2d at 150. This contention is based upon the erroneous assumption that recognizing such a cause of action constitutes acknowledgment of inherently conflicting “concomitant and coextensive duties” to insureds and third parties. Id. at 150. The majority even goes so far as to speculate that such “potential for conflicting duties” may have provided a reason for the legislature’s “refus[al] to provide a direct cause of action for third party claimants.” 876 S.W.2d at 150. But art. 21.21 reflects no such “refusal”; its use of the phrase “any person” is not only a clear directive, but certainly thwarts any suggestion that the legislature recognized the majority’s imagined conflict. How disingenuous to divine legislative intent from such judicial guesswork rather than to give effect to the plain wording of a legislative enactment.

Concluding that art. 21.21 requires an insurer to refrain from unfair settlement practices does not in any way preclude its serving the interests of the insured. Indeed, engaging in fair claims settlement practices would appear very much in the interest of the insured as well as the third party. While an insurer acting in good faith will be forced to consider carefully its actions from the perspectives of both the insured and the claimant, no duties need to be compromised. An insurer simply may not act in bad faith toward a claimant in fulfilling its duty to defend its insured.

An insurer may defend against third party claims yet still fulfill the duty to act in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonably clear. Article 21.21 only demands conduct which we have long rightfully expected from insurance companies. There was no need here to “expand our holding in Vail,” 876 S.W.2d at 147; all the majority had to do was enforce a law protecting individuals from wrongdoing by the considerable power of large insurance companies. In Vail this Court declined an insurer’s request to carve out of this comprehensive statute certain types of deception:

There is no provision in the DTPA or the Insurance Code that exempts insurers from liability for conduct relating to the handling of insurance claims.

Vail at 132 . Unfortunately the majority creates just such an unwarranted exception— the deception here has not been limited to the insurer; it permeates today’s opinion.

GAMMAGE, J., joins in this dissent.

. Board Order 41454, codified at 28 Tex.Admin.Code § 21.203 (West 1993), also supports a claim for unfair claim settlement practices under art. 21.21. This rule was not relied upon in Vail , however, because at that time it included a requirement of frequency of the improper conduct. Vail at 134 . That prerequisite has since been deleted by an amendment effective after the instant claim had been filed.

*152 Today’s opinion wrongly asserts that this provision remains unavailable even for post-amendment claimants because it was adopted pursuant to art. 21.21-2 rather than art. 21.21. 876 S.W.2d at 148. Like the balance of the majority’s writing, this reasoning conflicts directly with our ruling in Vail permitting the use of definitions from art. 21.21-2 in an action under art. 21.21.

.As a final bootstrap, the majority seizes on preVail legislative rejection of a direct cause of action for unfair claim settlement practices. 876 S.W.2d at 149. Since such an action was already provided through art. 21.21 under the rules and regulations of the State Board of Insurance, the Legislature’s declining to add a more specific but duplicative prohibition is hardly persuasive. As to more recent consideration of such an additional enactment, the Legislature acted with full knowledge of Vail . If dissatisfied with this Court’s reading of art. 21.21, the Legislature had an excellent opportunity to rewrite it. The refusal to amend away the protection of art. 21.21, not the "refusal to create a [separate] statutory private cause of action" is controlling and is completely "ignorefd]” by today’s opinion. 876 S.W.2d at 149.

. This is hardly the first time that Allstate has advanced an argument contrary to our holding. Its longstanding contention that the cause of action provided by section 16 of art. 21.21 is limited solely to “acts and practices set forth in [section] 17.46” was rejected in Allstate Ins. Co. v. Kelly, 680 S.W.2d 595, 605 (Tex.App.—Tyler 1984, writ ref'd n.r.e.).

. Compare today’s conclusion that ”[u]nfair claim settlement practices are not listed and, therefore, they are not actionable under art. 21.-21,” 876 S.W.2d at 149, with this Court’s earlier plain reading of the statute: "Thus, section 16 of article 21.21 incorporates any unlisted practice that is determined to be false, misleading, or deceptive.” Vail at 135 (citation omitted).

. Arnold emphasized "the parties’ unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds’ misfortunes in bargaining for settlement or resolution of claims.” Arnold, 725 S.W.2d at 167 .

. Indeed, Arnold drew a bold type distinction between "Statutory Causes of Action” under articles 21.21 and 21.21-2 and a “Common Law Cause of Action,” which is predicated upon a "special relationship” between insured and insurer. Arnold, 725 S.W.2d at 167 .

. Vail makes this abundantly clear:

We hold that the Vails stated and proved a cause of action for unfair claims settlement practices under section 17.50(a)(4) of the DTPA on any one of three alternative grounds: (1) by incorporating article 21.21, § 16 of the Insurance Code, section 4(a) of Board Order 18663, and the definition of an unfair claims settlement practice in article 21.21-2, § 2(d) of the Insurance Code; (2) by incorporating orti-ele 21.21, § 16 of the Insurance Code, section 4(b) of Board Order 18663, and the determinations made by this court in Arnold and Aranda; and (3) by incorporating article 21.21, § 16 of the Insurance Code and section 17.46 of the DTPA.

Vail, 754 S.W.2d at 136 (emphasis added). Ground (2) of Vail is based upon section 4(b) of Order 18663, which prohibits conduct "determined pursuant by law” to be an unfair act or practice. 28 Tex.Admin Code § 21.3(b) (West 1993). Vail concluded that Arnold and Aranda [v. Insurance Co. of North America, 748 S.W.2d 210 (Tex.1988)] constituted such a determination, thus giving the Vails an art. 21.21 cause of action based on section 4(b). 754 S.W.2d at 135 . Watson’s claim is supported by ground (1) of Vail , which includes section 4(a) of Order 18663, prohibiting unfair practices as defined by rules and regulations of the State Board of Insurance. See supra at 151. Watson also alleges ground (3) of Vail in support of her claim. However, Watson's claim does not adopt ground (2) of Vail , the only portion citing Arnold , in support of her claim.