The Court of Appeals of Texas, Fourth District, sitting en banc, has denied a motion for en banc reconsideration. Notably, three of the seven justices would have granted the motion, and the three justices would have ruled that an automobile insurance policy covered exemplary damages – including punitive damages. Given that Chief Justice Sandee Bryan Marion of the Fourth District felt compelled to write a separate opinion concurring in the denial of the motion for en banc consideration, perhaps this issue has not yet been firmly settled in Texas.
The Dispute
The parties in this case disputed whether an auto insurance policy covered exemplary damages. The policy provided:
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.
The appellees argued that the phrase "We will pay damages for bodily injury" included coverage for exemplary damages – a type of damages that may be awarded in cases involving bodily injury. They contended that their interpretation was reasonable, and either was the only reasonable construction (that is, the policy was unambiguous in their favor), or was one of many reasonable constructions (that is, the policy was ambiguous), in which case they had to prevail.
The insurer contended that the appellees' construction was unreasonable because the policy did not say that the insurer would pay "all sums" of damages.
The Dissenting Opinion
The dissent's reasoning was straightforward. The dissent contended that the court of appeals had to adopt the appellees' construction of the policy provision because it was "reasonable."
The dissent reasoned that the absence of "all sums" language in the policy did not make the appellees' construction unreasonable.
Rather, the dissent said, in the phrase "We will pay damages," the damages covered was "not limited or qualified whatsoever." According to the dissent, the court of appeals "must therefore construe the phrase, at least initially, as including coverage for all damages, including exemplary damages."
The dissent reasoned that the only language in the policy that might limit or qualify the damages covered was the phrase "for bodily injury or property damage." If "for" meant "because of" or "on account of," it would include exemplary damages, the dissent reasoned. By contrast, if "for" was more narrowly defined to mean an "exchange" or "in order to remedy," it would exclude exemplary damages, the dissent said. Therefore, the dissent asserted, the appellate court had to construe the term strictly against the insurer and in favor of the appellees.
According to the dissent, three "extraordinary circumstances" justified en banc reconsideration in this case. First, the dissent said, "many Texas residents" had purchased an auto insurance policy substantially similar to the policy involved in this case. Therefore, the dissent reasoned, how this form language was construed affected the contractual rights of Texas residents who had paid for insurance policies that could be reasonably construed as providing coverage for exemplary damages. Moreover, it also would affect the construction of other types of insurance policies, "such as the [h]omeowners [p]olicy and the [c]ommercial [g]eneral [l]iability [p]olicy, [that] have substantially similar language in the insuring agreement."
Second, according to the dissent, rejecting the appellees' construction "would be not only contrary to the vast majority of decisions of courts throughout the country," but "also in conflict with a decision of another Texas court of appeals. Manriquez [v. Mid-Century Ins. Co. of Tex., 779 S.W.2d 482 (Tex. App.—El Paso 1989, writ denied), disapproved of on other grounds by Trinity Universal Ins. Co. v. Cowan, 652 S.W.2d 819 (Tex. 1997).]"
Third, the dissent concluded, construing "for bodily injury" as limiting "damages" to those that redressed only physical damage to a human body created "further uncertainty about this form policy's coverage." According to the dissent, accepting the insurer's position "would raise serious questions about what damages elements other than exemplary damages would not be covered" in "auto, homeowners, and commercial general liability policies."
The case is Farmers Texas County Mutual Ins. Co. v. Zuniga, No. 04-16-00773-CV (Tex. Ct.App., 4th Dist., March 14, 2018). Attorneys involved include: For APPELLANT: Kenneth R. Chambers, Kent Chambers, Attorney at Law, Conroe, TX. For APPELLEE: Andrew E. Toscano, San Antonio, TX; Matthew Brian Probus, Wauson Probus, Sugar Land, TX.