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