Smith-Reagan & Associates, Inc. D/B/A Smith-Reagan Insurance Agency v. Fort Ringgold Limited, Pete Diaz III, Aaron Diaz and Monica Aguillon ( 2015 )

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As of: April 9, 2015 3:31 PM EDT
Smith-Reagan & Assocs. v. Fort Ringgold Ltd.
FILED IN
Court of Appeals of Texas, Fourth District, San Antonio 4th COURT OF APPEALS
March 11, 2015, Delivered; March 11, 2015, Filed SAN ANTONIO, TEXAS
4/9/2015 3:16:37 PM
No. 04-13-00608-CV
KEITH E. HOTTLE
Clerk
Reporter
2015 Tex. App. LEXIS 2291
Prior History: [*1] From the 381st Judicial District Court, Civil Procedure > Appeals > Appellate Jurisdiction > General
Starr County, Texas. Trial Court No. DC-02-343. Honorable Overview
Jose Luis Garza, Judge Presiding. Civil Procedure > Judgments > Relief From Judgments >
Motions for New Trials
Disposition: REVERSED AND TAKE-NOTHING
JUDGMENT RENDERED. HN2 When the appellate court sustains a no evidence point
of error after a trial on the merits, the appellate court renders
Core Terms judgment on that point. However, if there is some evidence
of the correct measure of damages, the appellate court
reverses and remands the cause for a new trial.
damages, appellees, hotel, business interruption, coverage,
rooms, occupancy rate, expenses, procured, awarding Counsel: For Appellant: Crisanta Guerra Lozano, Roerig,
damages, no evidence, calculation Oliveira & Fisher, Brownsville, TX.
Case Summary For Appellee: Brendan K. McBride, The McBride Law
Firm, San Antonio, TX; Matthew R. Pearson, Gravely &
Overview Pearson, L.L.P., San Antonio, TX.
HOLDINGS: [1]-A take-nothing judgment was rendered Judges: Opinion by: Sandee Bryan Marion, Justice. Sitting:
against appellees because appellees were required to present Sandee Bryan Marion, Justice, Marialyn Barnard, Justice,
evidence on the amount they would have recovered from the Luz Elena D. Chapa, Justice.
insurance company if appellant had procured an insurance
policy that provided business interruption coverage, and Opinion by: Sandee Bryan Marion
appellees presented no evidence of how business interruption
damages would have been calculated if the policy had been
Opinion
obtained.
Outcome MEMORANDUM OPINION
Judgment reversed and take-nothing judgment rendered. REVERSED AND TAKE-NOTHING JUDGMENT
RENDERED
LexisNexis® Headnotes
In September 2001, the family-owned Fort Ringgold Motor
Inn sustained extensive damage following a storm. At the
Insurance Law > ... > Insurance Company Operations >
Company Representatives > Brokers time, the hotel was covered under an insurance policy issued
by Highlands Insurance Company. Appellant, Smith-Reagan
HN1 The measure of the liability for an agent’s failure to & Associates, Inc. d/b/a Smith-Reagan Insurance Agency, is
procure insurance is the amount that would have been due the Highlands agent that sold the policy to Fort Ringgold.
under the insurance policy if it had been obtained.
Following the storm, the hotel submitted claims for both
Civil Procedure > Appeals > Remands property damage and loss of income that resulted from the
Page 2 of 3
2015 Tex. App. LEXIS 2291, *2
hotel’s closure of forty-three of its sixty-four rooms due to amount to repair building; instead, plaintiff’s damages
mold.1 Although Highlands paid claims submitted by the measured by amount plaintiff would have been due under
hotel for property damage, it refused to pay any claim policy if policy had been obtained); accord William M.
associated with lost income on the grounds that the policy Mercer, Inc. v. Woods, 717 S.W.2d 391, 400-01 (Tex.
did not include business interruption coverage. The hotel’s App.—Texarkana 1986), aff’d in part, rev’d in part on other
owners, Fort Ringgold Limited; Pete Diaz, III; Aaron Diaz; grounds, 769 S.W.2d 515 (Tex. 1988). Therefore, appellees
[*2] and Monica Aguillon sued Smith-Reagan and others. were required to present evidence on the amount they would
In their suit against Smith-Reagan, appellees alleged have recovered from Highlands if Smith-Reagan had
Smith-Reagan failed to procure business interruption procured [*4] an insurance policy that provided business
coverage for the hotel and misrepresented to them that the interruption coverage.
Highland policy provided such coverage. A starting point for this calculation would have been the
terms of a policy provision that provided such coverage
After appellees settled with the other defendants, the case during the relevant time period. See Nat’l Fire Ins. Co. of
went to trial, and the jury returned a verdict against Pittsburgh, Pa. v. Valero Energy Corp., 777 S.W.2d 501,
Smith-Reagan and in favor of appellees. On appeal, 509-10 (Tex. App.—Corpus Christi 1989, writ denied)
Smith-Reagan (1) challenges the sufficiency of the evidence (concluding lost profits as a result of business interruption
in support of the jury’s findings and the amount of damages was speculative because no evidence of business interruption
awarded; (2) asserts the trial court erred by failing to apply damages in conformity with insurance policy provision
a settlement credit; and (3) asserts the trial court erred in providing for such coverage); Gibbs v. Allstate Ins. Co., 386
various evidentiary rulings. Because we believe the S.W.2d 606, 609 (Tex. Civ. App.—Fort Worth 1965, writ
complaint related to the damages awarded is dispositive, we ref’d n.r.e.) (evidence sufficient to support damage award
address only that issue on appeal. See TEX. R. APP. P. 47.1. because award was within limits of policy had the policy
been procured). Here, however, appellees presented no
DAMAGES evidence of how business interruption damages would have
been calculated if the policy had been obtained. Appellees
On appeal, Smith-Reagan asserts appellees failed to present
did not present, as such evidence, testimony about or a copy
any evidence as to the correct measure of damages for the
of a policy providing business interruption coverage during
failure to include business interruption coverage in the
the relevant time period. Such evidence would have allowed
Highlands policy.
the jury to calculate the loss of business income, if any, that
The jury was asked ″[w]hat sum of money, if paid now in would have been due if Smith-Reagan had procured an
cash, would fairly and reasonably compensate [*3] Fort insurance policy that included business interruption
Ringgold for its damages, if any, that resulted from the coverage.
conduct of [Smith-Reagan] . . . .″ The jury was instructed to Instead, at trial, appellees stated their damages amounted to
″[c]onsider the following elements of damages, if any, and $1,175,796.00. This amount was based on the number of
none other″: ″The loss of business income, if any, sustained closed rooms (forty-three) multiplied [*5] by the rate
by Fort Ringgold that would not have occurred had charged for those rooms multiplied by the total number of
[Smith-Reagan] procured insurance for Fort Ringgold that days the forty-three rooms were closed. Pete Diaz (″Pete″),
included coverage for business interruption.″ The jury one of the hotel owners, agreed this amount did not take into
awarded Fort Ringgold $325,000.00. The jury charge closely consideration any expenses associated with the closed
tracked case law, which provides that HN1 ″[t]he measure rooms, and he assumed a 100% occupancy rate. Pete
of the liability for [an agent’s] failure to procure insurance testified the hotel’s expenses remained the same after
is the amount that would have been due under the insurance closing the forty-three rooms because the hotel still had to
policy [if] it had been obtained.″ Scott v. Conner, 403 pay the mortgage, taxes, and payroll. Therefore, according
S.W.2d 453, 457 (Tex. Civ. App.—Beaumont 1966, no writ) to appellees on appeal, the gross amount of $1,175,796.00
(plaintiff could not recover value of house at time of fire; includes operating expenses. Pete admitted he did not know
instead, plaintiff’s damages measured by amount of how much he would have been entitled to receive if the
insurance in cancelled policy defendant was to replace); policy had included business interruption coverage.
Taylor v. Republic Grocery, 483 S.W.2d 293, 296 (Tex. Civ. Pete’s brother Aaron, who managed the day-to-day
App.—El Paso 1972, no writ) (plaintiff could not recover operations of the hotel and was also an owner, testified the
1
The hotel closed fifteen rooms in January 2002 and another twenty-eight rooms in July 2002.
Page 3 of 3
2015 Tex. App. LEXIS 2291, *5
occupancy rate was ″about 70 percent,″ but he did not evidence is legally insufficient to support the jury’s award
provide any evidence on which to base this statement. of damages for lost business income.
Although both Pete and Aaron testified the expenses
remained the same, Aaron testified he cut employee hours, Generally, HN2 ″when we sustain a no evidence point of
and the hotel was not earning a profit of $1 million. The error after a trial on the merits, we render judgment on that
only expert appellees presented on the issue of damages was point.″ Texarkana Mem’l Hosp., Inc. v. Murdock, 946
the testimony of their contractor who testified about the S.W.2d 836, 841 (Tex. 1997) (citing Holt Atherton Indus.,
costs [*6] to repair the hotel and who admitted his estimates Inc. v. Heine, 835 S.W.2d 80, 86 (Tex. 1992)). However, if
had nothing to do with a loss in revenue due to business there is ″some evidence of the correct measure of damages,″
interruption. we reverse and remand the cause for a new trial. Formosa
Plastics Corp. USA v. Presidio Eng’rs and Contractors,
On appeal, appellees contend the jury could have relied on Inc., 960 S.W.2d 41, 51 (Tex. 1998) (holding that appellate
the occupancy rate provided by Smith-Reagan’s expert and court can remand for new trial when no evidence supports
simply multiplied their estimate of lost gross revenue by damages awarded but there is evidence of some damages);
that rate. Smith-Reagan’s expert testified the occupancy rate see Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 682
from January 1, 2001 through July 31, 2001, was fifty-seven (Tex. 2000) (holding remand for new trial is appropriate
percent based on his review of the hotel’s Manager’s Daily remedy where there is evidence of some damages but there
Reports, which showed the occupancy rate for each day of is no evidence to support full amount of damages found by
the month. Even assuming the contract formula for the jury). Here, the only evidence adduced by appellees was
calculating business interruption damages was unnecessary, speculative; therefore, we cannot say some evidence exists
we do not agree with appellees’ argument because this to warrant a remand for a new trial on damages. Accordingly,
contention assumes the policy would have paid gross we must render a take-nothing judgment against appellees.
revenues without regard to a decrease in expenses due to the
closure of forty-two of the hotel’s sixty-four rooms. CONCLUSION
We conclude Pete’s estimate of lost gross revenue and a Appellees’ evidence was legally insufficient to support the
100% occupancy rate was speculative, as was Aaron’s damage award. Because Smith-Reagan’s challenge to the
estimate of a seventy percent occupancy rate. Although both legal sufficiency of the damage award [*8] is dispositive,
testified the expenses remained the same, neither provided we do not reach the remainder of the issues. We reverse the
the amounts of those expenses, and Aaron testified he trial court’s judgment and render judgment that appellees
reduced employee hours. Moreover, neither tied their take nothing.
calculation [*7] of lost revenue to any amount that would
have been due under a policy that provided business Sandee Bryan Marion, Justice
interruption coverage. On this record, we conclude the