Deanna v. Loya Ins. Co.

DEANNA AND PHILLIP HOFSTETTER, INDIVIDUALLY AND ASJUDGMENT CREDITORS AND TURNOVER ASSIGNEES OF MARIA I.BENITIZ, Appellants

v.LOYA INSURANCE COMPANY, Appellee

NO. 01-10-00104-CV

Court of Appeals For The First District of Texas

Opinion issued April 28, 2011

On Appeal from the 129th District Court

Harris County, Texas

Trial Court Case No. 2008-44994

MEMORANDUM OPINION

This appeal concerns the applicability of an excluded driver endorsement provision in an auto insurance policy. DeAnna and Phillip Hofstetter appeal thetrial court's traditional summary judgment in favor of Loya Insurance Company. They contend that the endorsement provision was procured by misrepresentations and was not enforceable. They also assert that the testimony of the policyholder was not credible and cannot support summary judgment.

We affirm.

Background

While driving a car owned by his mother, Juan Revuelta hit the Hofstetters car causing damages. Revuelta's mother, Maria Benitiz, insured that car and two other vehicles with Loya Insurance Company and had renewed that policy two times before the accident and once afterwards. In her initial policy, two renewals before the accident, and one renewal after the accident, Benitiz signed an endorsement to the policy in which she agreed that "none of the insurance coverage afforded by this policy" applied while Revuelta was "operating your covered auto or any other motor vehicle." The exclusion appeared on a separate page and included the following language: "515A. EXCLUSION OF NAMED DRIVER & PARTIAL REJECTION OF COVERAGES... WARNING! READ THIS ENDORSEMENT CAREFULLY!"

The Hofstetters sued Revuelta and Benitiz for negligence. Loya denied coverage and refused to provide a defense. The trial court found in favor of theHofstetters, awarded damages, and rendered a turnover order granting them any rights held by Benitiz or Revuelta to sue under the Loya policy.

The Hofstetters then sued Loya for breach of contract, violations of the Insurance Code, and negligence. Loya moved for a traditional summary judgment on the ground that the policy expressly excluded Revuelta as a covered driver. As summary judgment evidence, Loya attached the endorsement to the original policy, the renewals, and excerpts from Benitiz's deposition testimony. The policy is written in English and Benitiz speaks Spanish primarily. In her deposition, Benitiz testified that Loya explained the policy's terms to her in Spanish when she purchased it and at each of the renewals. Benitiz stated that she had the opportunity to ask questions and that she understood the policy.

The Hofstetters responded by citing other portions of Benitiz's deposition testimony. Benitiz testified that she believed the car itself to be insured even if the policy did not cover Revuelta. They also contended that her credibility had been called into doubt. They also relied on Revuelta's deposition testimony that Loya told him he was covered by the policy, but removed from coverage after the accident. The trial court granted the summary judgment motion and the Hofstetters appealed.

Summary Judgment

In one issue, the Hofstetters argue the trial court erred in granting Loya's summary judgment motion. They contend they raised a fact issue on whether Loya made misrepresentations to procure the driver exclusion. They also contend that Benitiz's deposition testimony is not credible and cannot support summary judgment.

A. Standard of Review

We review a trial court's summary judgment de novo. Travelers Ins. Co. v. Joachim., 315 S.W.3d 860, 862 (Tex. 2010). Under the traditional standard for summary judgment, the movant has the burden to show that no genuine issue of material fact exists and the trial court should grant judgment as a matter of law. Tex. R. Civ. P. 166a(c); KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). A defendant moving for traditional summary judgment must conclusively negate at least one essential element of each of the plaintiff's causes of action or conclusively establish each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997). The motion must state the specific grounds relied upon for summary judgment. See Tex. R. Civ. P. 166a(c). When reviewing a summary judgment motion, we must (1) take as true all evidence favorable to the nonmovant, and (2) indulge every reasonable inference and resolve any doubts in the nonmovant's favor. ValenceOperating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life Accid. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).

Once a defendant moving for summary judgment establishes all of the elements of an affirmative defense as a matter of law, the burden of production shifts to the non-movant to defeat the defendant's affirmative defense. See EPGT Tex. Pipeline, L.P. v. Harris Cnty. Flood Control Dist., 176 S.W.3d 330, 335 (Tex. App.—Houston [1st Dist.] 2004, pet. dism'd). The non-movant's response will defeat a facially valid affirmative defense if it (1) demonstrates that the motion's legal position regarding the affirmative defense is unsound, (2) raises a fact issue on the elements of the affirmative defense, or (3) sets forth a counter-affirmative defense to the affirmative defense.¹ See Tex. R. Civ. P. 94; see also Walters v. Cleveland Reg'l Med. Ctr., 307 S.W.3d 292, 295 (Tex. 2010) (holding that when movant defendant proved statute of limitations affirmative defense burden shifted to non-movant to raise fact issue on lack of reasonable opportunity to discover and bring suit within limitations period); G.C. Bldgs., Inc. v. RGS Contractors, Inc., 188 S.W.3d 739, 742 (Tex. App.—Dallas 2006, no pet.) (stating that if defendantestablishes affirmative defense in a summary judgment motion, "the burden then shifts to the party opposing the motion to raise a genuine issue of material fact or show the defendant's legal position is unsound"); Head v. U.S. Inspect DFW, Inc., 159 S.W.3d 731, 740 (Tex. App.—Fort Worth 2005, no pet.); Resolution Trust Corp. v. Ammons, 836 S.W.2d 705, 710 (Tex. App.—Houston [1st Dist.] 1992, no writ) (stating that a plaintiff may defeat defendant's summary judgment "by raising a fact issue on each element of its counter-affirmative defense"). If the non-movant asserts a counter-affirmative defense to overcome the established affirmative defense, the non-movant must provide summary judgment evidence to raise a fact issue for each element of the counter-affirmative defense. See Rabe v. Dillard's Inc., 214 S.W.3d 767, 768 (Tex. App.—Dallas 2007, no pet.).

B. Excluded Driver Affirmative Defense

An exclusion from coverage is an affirmative defense. See Tex. Ins. Code Ann. § 554.002 (West 2009); see also Lone Star Heat Treating Co. v. Liberty Mut. Fire Ins. Co., 233 S.W.3d 524, 526 (Tex. App.—Houston [14th Dist.] 2007, no pet.). Therefore, Loya bore the burden of proving that the parties agreed to the exclusion. See McFadden v. Am. United Life Ins. Co., 658 S.W.2d 147, 148 (Tex. 1983) (stating that insurance company moving for summary judgment did not satisfy its burden to demonstrate as matter of law that claim was excluded under insurance policy). As summary judgment evidence of the policy exclusion, Loyaattached the original excluded driver provision, each of the renewals, and Benitiz's testimony identifying her signature.

The Hofstetters argue that we must strictly construe the policy against the insurer, but that rule only applies if the policy is ambiguous. An exclusion of coverage must be expressed in clear and unambiguous language. Nat 'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., Inc., 811 S.W.2d 552, 555 (Tex. 1991). only when a policy "is susceptible of more than one reasonable interpretation" does a court "resolve the uncertainty by adopting the construction that most favors the insured." Id. The Hofstetters do not allege any ambiguity in the policy. The policy clearly excludes coverage for any operations of the vehicle by Revuelta and in capitalized letters informs the policyholder of the driver exclusion. Loya, therefore, satisfied its burden of proof as the movant to demonstrate its affirmative defense that Revuelta was excluded from coverage. The burden of proof then shifted to Hofstetters to raise a fact issue on that exclusion or to come forward with proof of its own claim to negate that exclusion.

C. Fraudulent Inducement

The Hofstetters next argue that Loya's fraud made the exclusion provision unenforceable. The elements of a fraudulent misrepresentation claim include proof by the plaintiff that (1) the defendant made a material misrepresentation; (2) the representation was false; (3) the defendant knew the representation was false whenmade or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intention that it should be acted upon; (5) the representation was in fact justifiably relied upon; and (6) damage to the plaintiff resulted. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); see also Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 575 (Tex. 2001). As a general rule, a party is not bound by a contract procured by fraud. Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998); see also Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997).

1. Misrepresentations to Revuelta

Revuelta testified that he believed the policy covered his conduct while driving his mother's car and that someone at Loya told him he was covered. Revuelta stated that:

Q. Did anyone at Fred Loya Insurance, when you went to make a payment, ever tell you were on the policy?

A. Yes. They told me I was on it, but then I was taken off.

Q. Was it before the accident with the Hofstetters that you were told you were taken off?

A. No. It was when that happened, right after it happened.

Q. After it happened, you were

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