Texas Farm Bureau Underwriters and Texas Farm Bureau Insurance v. Douglas Rasmussen and Kathy Rasmussen , 2013 Tex. App. LEXIS 8483 ( 2013 )

Opinion issued July 11, 2013
In The
Court of Appeals
For The
First District of Texas
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NO. 01-12-00992-CV
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TEXAS FARM BUREAU UNDERWRITERS AND TEXAS FARM BUREAU
INSURANCE, APPELLANTS
V.
DOUGLAS RASMUSSEN AND KATHY RASMUSSEN, APPELLEES
On Appeal from the 239th District Court
Brazoria County, Texas
Trial Court Cause No. 53818
OPINION
A fire destroyed a rental property owned by Douglas and Kathy Rasmussen.
The Texas Farm Bureau Insurance Company denied the Rasmussens’ property
insurance claim because the Rasmussens had failed to pay the insurance premium
due for the renewal of that policy six months before the fire occurred. The
Rasmussens sued Texas Farm Bureau and Fred Bolton, a Texas Farm Bureau
agent, for breach of contract and Texas Insurance Code violations. A jury found for
the Rasmussens, and awarded $40,000 in damages. The trial court entered
judgment in favor of the Rasmussens and against Texas Farm Bureau. Throughout
the proceedings, Texas Farm Bureau sought judgment as a matter of law on the
basis that Rasmussens had no insurance policy in effect that covered their claim.
Texas Farm Bureau appeals the judgment, challenging the legal sufficiency
of the evidence to support the jury’s findings that (1) a policy was in place at the
time of the fire, (2) Texas Farm Bureau breached that policy, and (3) Texas Farm
Bureau made untrue or misleading statements of fact in violation of the Texas
Insurance Code. Because no insurance policy was in effect at the time of the fire,
we hold that legally insufficient evidence supports the jury’s liability findings and
the trial court thus erred in denying Texas Farm Bureau’s motions for judgment as
a matter of law. We reverse and render a take-nothing judgment.
Background
The Rasmussens owned a rental house located at 111 Primrose, in Lake
Jackson, Texas. Beginning in 2006, the Rasmussens insured the house with Texas
Farm Bureau. To encourage a shift in their insurance provider, Bolton told the
Rasmussens that he would take care of the Rasmussens’ insurance needs, provide
more personalized service, and notify them of any changes to their policies.
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The Rasmussens renewed the policy that covered the rental home in June
2007. They paid the premium for the term of June 1, 2007 to June 1, 2008. They
did not pay the premium when it was again due in June 2008. In January 2009, the
fire occurred. The Rasmussens submitted an insurance claim, but the Texas Farm
Bureau denied it.
At trial, Texas Farm Bureau proffered evidence and testimony that it had
mailed a renewal notice for the policy and a demand for the premium, to cover the
term June 1, 2008 to June 1, 2009. It adduced further evidence that it had sent a
final notice stating that the premium was past due, and that if the Texas Farm
Bureau did not receive the amount due by June 18, “all coverage afforded by this
policy expired 12:01 A.M., 06-01-08.”
The Rasmussens testified that they had never received either of these
notices, and they were unaware that a premium was due. Bolton never notified the
Rasmussens about the expiration of the policy. The Rasmussens conceded at trial
that they had never paid a premium for the June 2008 to June 2009 term.
Discussion
I. Standard of review
In conducting a legal sufficiency review, we review the evidence presented
below in a light most favorable to the jury’s verdict, crediting favorable evidence if
reasonable jurors could and disregarding contrary evidence unless reasonable
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jurors could not. Del Lago Partners, Inc. v. Smith, 307 S.W.3d 762, 770 (Tex.
2010); City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In reviewing
Texas Farm Bureau’s challenge to the verdict in favor of the Rasmussens, we set
aside that verdict only if the evidence at trial would not enable reasonable and fair-
minded people to reach the verdict under review. See City of Keller, 168 S.W.3d at
827. The evidence is legally insufficient if (a) there is a complete absence of
evidence of a vital fact; (b) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact; (c) the evidence
offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence
establishes conclusively the opposite of the vital fact. See City of Keller, 168
S.W.3d at 810; King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003).
II. Expiration of Coverage
Texas Farm Bureau first contends that legally insufficient evidence supports
the jury’s finding that an insurance policy was in place at the time of the fire. We
construe an insurance policy according to the rules of contract construction. See
Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). Our
primary concern in interpreting a policy is to ascertain and to give effect to the
parties’ intentions as expressed in the document. Seagull Energy E & P, Inc. v.
Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Frost Nat’l Bank v. L & F
Distribs., Ltd., 165 S.W.3d 310, 311–12 (Tex. 2005). We construe contracts to
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avoid a construction that is unreasonable, inequitable, or oppressive. Frost Nat’l
Bank, 165 S.W.3d at 312. If, after applying the pertinent rules of construction, the
policy has a definite legal meaning, then it is unambiguous, and we construe it as a
matter of law. Id.; Schaefer, 124 S.W.3d at 157. If, in contrast, after applying the
rules of construction, a contract term is ambiguous, then we construe it in favor of
the insured. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 746 (Tex. 2006);
Archon Invs., Inc. v. Great Am. Lloyds Ins. Co., 174 S.W.3d 334, 338 (Tex. App.—
Houston [1st Dist.] 2005, pet denied).
An insurance policy constitutes a contract for a period of time covered by
the contract. See Hartland v. Progressive Cnty. Mut. Ins. Co., 290 S.W.3d 318, 322
(Tex. App.—Houston [14th Dist.] 2009, no pet.); Zuniga v. Allstate Ins. Co., 693
S.W.2d 735, 738 (Tex. App.—San Antonio 1985, no writ); Harrington v. Aetna
Cas. & Sur. Co., 489 S.W.2d 171, 176 (Tex. Civ. App.—Waco 1972, writ ref’d
n.r.e.). To renew a contract, the offer by the insurer to renew must be accepted by
the insured completely and unequivocally. Hartland, 290 S.W.3d at 322. Thus, the
payment of the insurance premium in accordance with the provisions of the
insurance policy is generally a condition precedent to establish liability against the
insurer. Id.; Walker v. Federal Kemper Life Assur. Co., 828 S.W.2d 442, 449 (Tex.
App.—San Antonio 1992, writ denied). If the insured fails to meet this condition,
then the policy expires. Southland Life Ins. Co. v. Hopkins, 244 S.W. 989, 990
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(Tex. Comm’n App. 1922, judgm’t adopted) (holding failure to pay premium
“would ipso facto terminate all liability” under insurance policy); Hartland, 290
S.W.3d at 322; see Walker, 828 S.W.2d at 447; Zuniga, 693 S.W.2d at 738.
The Rasmussens’ insurance policy for the rental home applies to losses that
occur during the policy period. Coverage under the policy is conditioned on the
receipt of the premium. The Rasmussens admittedly did not pay the premium for
the June 2008 to June 2009 term. Accordingly, the Rasmussens’ insurance policy
expired by its own terms in June 2008, six months before the fire. See Hopkins,
244 S.W. at 990; Hartland, 290 S.W.3d at 322; Walker, 828 S.W.2d at 447;
Zuniga, 693 S.W.2d at 738.
The Rasmussens respond that their policy automatically renewed upon its
expiration, because Texas Farm Bureau failed to give them thirty days’ notice of
non-renewal. They rely on section 551.105 of the Texas Insurance Code, which
provides:
Unless the insurer has mailed written notice of nonrenewal or renewal
with written notice of change in coverage as provided by Section
2002.001 to the insured not later than the 30th day before the date on
which the insurance policy expires, an insurer must renew an
insurance policy, at the request of the insured, on the expiration of the
policy.
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TEX. INS. CODE ANN. § 551.105 (West Supp. 2012). The insurance policy
mirrors section 551.105:
If we refuse to renew this policy, we must deliver to you, or mail to
you at your mailing address . . . written notice of refusal to renew not
later than the 30th day before the date in which this policy expires.
Proof of mailing will be sufficient proof of notice. If we fail to give
you proper notice of our decision to refuse renewal, you may require
us to renew the policy.
Neither provision, however, provides for renewal of an insurance policy when the
insured fails to pay the premium. Absent a timely notice of nonrenewal by the
insurance carrier, the insured has an option to renew the policy that the insurer may
not refuse. See TEX. INS. CODE ANN. § 551.105. Such a renewal must be at the
request of the insured: “an insurer must renew an insurance policy, at the request of
the insured, on the expiration of the policy.” Id.; see Tex. Specialty Underwriters,
Inc. v. Tanner, 997 S.W.2d 645, 648–49 (Tex. App.—Dallas 1999, pet denied)
(interpreting predecessor provision to provide insured with option to renew its
policy if insurer does not provide thirty days’ notice of nonrenewal). This
provision does extend the policy, however, if the insured does not accept the offer
of renewal by payment of the premium due.
The Rasmussens rely on Trinity Universal Insurance Co. v. Burnette to
contend that section 551.105 provides for automatic renewal even absent payment
of any premium, but the Beaumont Court of Appeals in that case declined to
address the effect of an insured’s failure to pay premiums. 560 S.W.2d 440, 442
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n.3 (Tex. Civ. App.—Beaumont 1977, no writ) (“None of the parties have made
mention of the failure of plaintiffs to pay or to tender the premiums due on the
policy, and we do not reach the question sua sponte.”). In contrast to Burnette, the
central issue in this case is the effect of an insured’s failure to pay the premium,
which is a condition for coverage under the policy.
The Rasmussens direct us to the Texas Farm Bureau’s notice that the
premium was due and the renewal policy that Texas Farm Bureau issued before the
Rasmussens’ prior policy expired. The renewal policy covered the June 2008 to
June 2009 term. The notice and renewal policy, however, are an offer to provide
renewed coverage upon payment of the renewal premium and, without payment,
do not constitute a binding agreement. See Hartland, 290 S.W.3d at 372 (holding
renewal of an insurance policy constitutes a separate and distinct contract that must
be accepted by payment of premium); see also Harrington, 489 S.W.2d at 176
(holding policy delivered to insured on expiration is generally offer which must be
accepted before renewal is effective). The premium notice provides: “please pay
amount due on or before date due,” noting a price of $499.00 due on June 1, 2008.
And the renewal policy provides that it is conditioned on payment of the premium:
“We will provide the insurance described in this policy in return for the premium.”
Nothing in the record suggests that the Rasmussens attempted to pay the premium
owed to accept the offer or otherwise renewed the policy in exercise of their option
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under section 551.105. Nor does any evidence suggest that Texas Farm Bureau
refused to renew. Although the Rasmussens respond that they would have renewed
the policy had they known it had expired and received the offer, unexpressed intent
is insufficient to express assent to an agreement. See Angelou v. African Overseas
Union, 33 S.W.3d 269, 278 (Tex. App.—Houston [14th Dist.] 2000, no pet.)
(“Unexpressed subjective intent is irrelevant.”). Because the Rasmussens did not
pay the premium due for the June 2008 to June 2009 term, the policy expired more
than six months before the fire occurred. See Hartland, 290 S.W.3d at 322.
The Rasmussens further respond that Texas Farm Bureau employees have
described the insurance as “cancelled,” rather than “expired,” and that such a
description estops Texas Farm Bureau from contending that the policy had
“expired.” Essentially, they contend that the employees’ statements created
insurance coverage by estoppel. The Texas Supreme Court has long held, however,
that the “doctrine of estoppel cannot be used to create insurance coverage when
none exists by the terms of the policy.” Utica Nat’l Ins. Co. of Tex. v. Am. Indem.
Co., 141 S.W.3d 198, 203 (Tex. 2004); (quoting Tex. Farmers Ins. Co. v. McGuire,
744 S.W.2d 601, 602–03 (Tex. 1988)); Ulico Cas. Co. v. Allied Pilots Ass’n, 262
S.W.3d 773, 787 (Tex. 2008).
The Rasmussens also note that they never received any renewal notices,
regardless of whether the Texas Farm Bureau sent them. An insurer, however, has
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no obligation to inform an insured about a delinquent premium. See MacIntire v.
Armed Forces Benefit Ass’n, 27 S.W.3d 85, 93 (Tex. App.—San Antonio 2000, no
pet.) (holding that insurer had no duty under Insurance Code to notify insured of
delinquent premium); Shindler v. Mid-Continent Life Ins. Co., 768 S.W.2d 331,
333 (Tex. App.—Houston [14th Dist.] 1989, no writ) (holding that insurer had no
duty to notify insured that premiums were due under common law or Insurance
Code).
As a matter of law, the policy expired in June 2008 due to non-payment of
the premium then due. The jury’s finding that an insurance contract was in place at
the time of the fire is not supported by legally sufficient evidence. See City of
Keller, 168 S.W.3d at 810. We hold that the trial court erred in failing to grant
Texas Farm Bureau’s motions for directed verdict or for judgment notwithstanding
the verdict on the Rasmussens’ claim for breach of contract.
III. Insurance Code Violations
The Rasmussens brought claims under Texas Insurance Code sections
551.104 for improperly cancelling the policy, 541.060 for unfair claims settlement
practices, 541.051 for misrepresenting terms, benefits, or advantages it would
provide under the policy, and 541.061 for misrepresenting benefits supplied by the
policy. Because the policy expired when the Rasmussens failed to pay the premium
due, Texas Farm Bureau was not required to cancel the policy under section
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551.104. See TEX. INS. CODE ANN. §551.104 (West 2009); Zuniga, 693 S.W.2d at
738 (holding insurer not required to renew coverage absence payment of renewal
premium nor obligated to comply with cancellation procedures). Similarly, section
541.060 liability for unfair claim settlement practices applies only to covered
claims. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 77 S.W.3d
253, 261 (Tex. 2002); Progressive C’nty Mut. Ins. Co. v. Boyd, 177 S.W.3d 919,
922 (Tex. 2005). No evidence supports the Rasmussens’ claims under 551.104 and
541.060. See id.
To prevail in a claim under section 541.061, the insured must show that the
insurer made untrue statements about coverage, or that the insurer failed to disclose
material information about an insurance policy provision. TEX. INS. CODE ANN.
§ 541.061 (West 2009) (creating liability for an insurer that misrepresents policy
coverage); see also Texas Mut. Ins. Co. v. Morris, 383 S.W.3d 146, 150 (Tex.
2012) (holding misrepresentation must be about what policy says or what policy
covers to recover under section 541.061); Texas Mut. Ins. Co. v. Ruttiger, 381
S.W.3d 430, 446 (Tex. 2012) (holding insufficient evidence existed to support
section 541.061 claim when plaintiff showed no evidence of an “untrue statement
made by [insured] regarding the policy or any statement about the policy that
misled [the plaintiff]”). A section 541.061 claim requires evidence that the insurer
denied coverage under circumstances that it previously had represented would be
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covered. See TEX. INS. CODE ANN. § 541.051 (West 2009) (creating liability for an
insurer that misrepresents the terms, benefits, or advantages of a policy); see
Morris, 383 S.W.3d at 150. Section 541.051 similarly requires evidence that the
insurer misrepresented the terms or benefits of the policy. See TEX. INS. CODE
ANN. § 541.051.
The Rasmussens presented evidence that Bolton told them in 2006 that he
would “take care of [the Rasmussens’] insurance needs” and would “inform [them]
of any changes to [their] policy.” Bolton emphasized to the Rasmussens that he
was a local agent who would be more responsive than other insurance providers.
Because Bolton’s statements do not reflect the terms or benefits of the policy,
however, they are not actionable under section 541.051. See Morris, 383 S.W.3d at
150 (holding that liability under section 541.061 requires misrepresentation about
policy coverage); Ruttiger, 381 S.W.3d at 446 (same). Bolton’s statements do not
express or imply that coverage would continue even if the Rasmussens did not
purchase or renew the coverage through payment of the premium due. Absent such
evidence, the jury’s finding that Texas Farm Bureau violated Texas Insurance
Code sections 541.051 and 541.061 is unsupported by legally sufficient evidence.
See Morris, 383 S.W.3d at 150; City of Keller, 168 S.W.3d at 810.
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Conclusion
Because the insurance policy had expired six months’ earlier due to non-
payment of premium, none of the Rasmussens’ claims for policy coverage has
merit. 1 Accordingly, we reverse the judgment of the trial court and render a take
nothing judgment.
Jane Bland
Justice
Panel consists of Justices Jennings, Bland, and Massengale.
1
Given our disposition, we do not address Texas Farm Bureau’s remaining challenges to the trial
court’s judgment.
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