RZQ, L.L.C., Hameed Quraishi, M.D., Rafath Quraishi, M.D., Aadam Quraishi, M.D., and Advanced Medical Imaging, L.L.C. v. McClelland and Hine, Inc.

NUMBER 13-19-00471-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
RZQ, L.L.C., HAMEED QURAISHI, M.D.,
RAFATH QURAISHI, M.D., AADAM
QURAISHI, M.D., AND ADVANCED
MEDICAL IMAGING, L.L.C., Appellants,
v.
MCCLELLAND AND HINE, INC., Appellee.
On appeal from the 389th District Court
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Longoria and Tijerina
Memorandum Opinion by Chief Justice Contreras
In this appeal concerning issuance of a commercial surplus lines insurance policy,
appellants RZQ, L.L.C. (RZQ), Hameed Quraishi, M.D., Rafath Quraishi, M.D., Aadam
Quraishi, M.D., 1 and Advanced Medical Imaging, L.L.C. argue that the trial court erred by
granting summary judgment dismissing their claims against appellee McClelland and
Hine, Inc. (MHI). We affirm in part and reverse and remand in part.
I. BACKGROUND
MHI is a surplus lines insurance agent based in San Antonio. 2 In 2011, appellants
hired Felipe Farias, an insurance agent, to obtain property and liability coverage for their
medical offices and equipment in Brownsville, Weslaco, McAllen, and Edinburg. Farias
contacted MHI underwriter Wendy O’Brien, who, in turn, contacted Dave Pulley, an
underwriter with Insurance Exchange Brokerage Services (IEBS), an unlicensed surplus
lines insurer and an affiliate of Prime Insurance Company (Prime). On May 18, 2011,
Pulley provided a written “Indication Quote” to O’Brien. O’Brien then altered the quote by
removing Pulley’s and IEBS’s names and contact information, by adding her own name
and contact information and that of MHI, and by changing the annual premium amount.
O’Brien forwarded the altered quote to Farias, and appellants accepted it.
IEBS sent a binder to MHI on June 3, 2011. See TEX. INS. CODE ANN. § 549.001(2)
(“‘Insurance binder’ means a contract that provides insurance coverage pending the
issuance of an original insurance policy that will be issued on or before the 30th day after
the date the insurance binder is issued.”). The binder was on IEBS letterhead but stated
that Prime was the “Insurer.” Before forwarding the binder to Farias, O’Brien altered it to
1
Incorrectly spelled as “Adam Quraishi, M.D.” in the final judgment.
2
Surplus lines insurance is an exception to the general statutory restriction on unauthorized
insurers created for consumers who have difficulty obtaining coverage. Johnson v. State Farm Mut. Auto.
Ins., 520 S.W.3d 92, 98 (Tex. App.—Austin 2017, pet. denied). A surplus lines insurer is not authorized to
issue polices in Texas but may be eligible to “place” surplus lines policies through a licensed surplus lines
agent, provided the insurer complies with strict capitalization and registration requirements. Id.; see
generally TEX. INS. CODE ANN. ch. 981.
2
replace Prime’s name and contact information with those of MHI.
It is undisputed that neither the quote nor the binder indicated that, as part of the
proposed policy with Prime, appellants would be required to agree to forum-selection and
choice-of-law clauses. It is also undisputed that MHI did not advise appellants of the
existence of those clauses in the Prime policy.
On June 22, 2011, a storm caused damages to appellants’ office and equipment
in McAllen. Appellants submitted a claim to Prime asserting they had incurred over $1.4
million in property damages from the storm, including the loss of an $800,000 MRI
machine. A dispute arose, and Prime refused to pay the claim. In June of 2013, appellants
sued Prime and other defendants 3 in Hidalgo County, Texas, for breach of contract,
negligence, and violations of the Texas Deceptive Trade Practices Act (DTPA) and the
Texas Insurance Code. Appellants alleged that Prime failed to pay “reasonable and
necessary benefits” as the policy required; misrepresented a material fact or policy
provision; and failed to effectuate a prompt, fair, and equitable settlement of their storm
damage claim. See id. § 541.060.
Prime moved to dismiss appellants’ suit on grounds that the policy contained a
mandatory forum selection clause requiring any suit arising from the policy to be brought
in Utah. 4 The trial court denied Prime’s motion to dismiss, and Prime filed a petition for
3
The suit also named Farias, Maryland Casualty Company, Zurich American Insurance Company,
and Javier Lujan as defendants.
4
The policy stated:
SECTION X — CONSENT TO EXCLUSIVE JURISDICTION
The Insured understands and acknowledges that the Insurer conducts its business
activities, including underwriting, risk management and claims services within the State of
Utah. The Insured represents and acknowledges that the Insured has purposefully directed
its actions to procure the insurance services of the Insurer within the State of Utah and, for
that purpose, will make continuous and systematic requests for the Insurer’s services in
3
writ of mandamus with this Court. In August of 2014, Prime tendered a check to appellants
in the amount of $48,500—purportedly representing the value of a replacement MRI
machine, with interest since February 2013—but appellants refused the check.
Subsequently, we conditionally granted mandamus relief to Prime and directed the trial
court to enforce the forum-selection clause and to grant Prime’s motion to dismiss. In re
Prime Ins., No. 13-14-00490-CV, 2014 WL 5314514 (Tex. App.—Corpus Christi–
Edinburg Oct. 16, 2014, orig. proceeding) (mem. op.). On February 13, 2015, in
compliance with our ruling, the trial court vacated its earlier denial and rendered an order
dismissing the claims against Prime.
On June 3, 2015, appellants filed an amended petition adding MHI as a defendant
on claims of breach of contract, breach of fiduciary duty, negligence, and fraudulent
inducement. Appellants argued MHI breached its agreement and its duties by, among
other things, “failing to procure a commercial insurance policy in accordance with the
quote and binder.” They claimed that the binder (as “altered” by O’Brien) violated the
insurance code because it was a “surplus lines document” but did not include a mandatory
statutory disclaimer; did not state the name and address of the “true” insurer; and did not
state the “coverage, conditions, and term of the insurance.” See TEX. INS. CODE ANN.
§ 891.101(b), (c). Appellants also argued that MHI violated the insurance code because
it: (1) lacked the authority to deliver the binder to Farias; and (2) failed to promptly issue
the State of Utah. The Insured acknowledges that, by entering into this policy of insurance,
the Insured is deemed to be transacting business within the State of Utah such that the
courts of Utah may exercise jurisdiction over it regarding any issues arising out of this
Policy. In addition, the Insured hereby understands and consents to the jurisdiction of the
courts in the State of Utah and agrees that those courts shall be the exclusive forum for
the resolution of any claims or disputes arising between the parties related to any insurance
coverage issues and any payments due the Insured under the Policy, unless both the
Insurer and Insured agree otherwise in writing.
4
and deliver the underlying Prime policy or a certificate, cover note, or other confirmation
of insurance. See id. § 981.103; 28 TEX. ADMIN. CODE § 15.105. They further asserted
that MHI misrepresented the terms and conditions of coverage and thereby fraudulently
induced them into entering into the Prime policy.
MHI filed a motion for traditional and no-evidence summary judgment in March
2016, arguing that appellants’ claims are barred by the law of the case doctrine due to
our 2014 opinion in the mandamus proceeding. MHI also argued: (1) appellants’ breach
of contract claim fails because no contract existed between appellants and MHI and there
is no evidence of breach; (2) appellants’ negligence and fiduciary duty claims fail because
there was no evidence MHI, as an agent or broker, breached any duty to appellants; and
(3) appellants’ fraud claim fails because they did not assert MHI made any
misrepresentations about the coverage provided under the Prime Policy.
Appellants filed a response to the motion alleging that the law of the case doctrine
does not apply because there has been no direct appeal in the case. Appellants further
contended that there is more than a scintilla of evidence to support their claims. In
support, they attached an affidavit by appellant Hameed Quraishi stating that MHI issued
a quote which “created a false impression” because it “did not disclose restrictive
enforcement of rights and remedies provisions, including, but not limited to a Utah forum
selection clause and Utah choice of provision.” Quraishi averred that “I would not have
had an opportunity to discover the forum selection clause until the commercial insurance
policy was delivered after coverage was bound.” Quraishi stated that appellants would
not have accepted the quote if MHI had made “a full disclosure” concerning the forum
selection and choice of law clauses. He also stated that MHI “failed to promptly deliver”
5
the Prime policy to appellants as required by the insurance code, see TEX. INS. CODE ANN.
§ 981.103(a); and that if the policy had been promptly delivered, appellants “would have
procured additional insurance to allow for claims in Texas.” Quraishi claimed in his
affidavit that, as a result of MHI’s negligence and misrepresentations, appellants incurred
over $90,000 in attorney’s fees required to litigate a declaratory judgment action brought
by Prime against appellants in Utah.
The trial court granted MHI’s summary judgment by written order on January 24,
2016, but later vacated that order and granted appellants’ motion to file a supplemental
summary judgment response. Appellants did so in 2017, attaching additional evidence,
including excerpts of deposition testimony by a Prime corporate representative, Jaime
Gustafson, stating that it was “MHI’s responsibility” to “distribute the quote, binder and
policy documentation” to appellants, and that MHI would have been familiar with Prime’s
forms and thus would have known about the forum selection and choice of law clauses in
the policy. According to Gustafson, a “Policy Receipt Form and Coverage Conditions
Summary” was attached to the policy which set forth the subject forum selection and
choice of law clauses and stated:
TO THE PRODUCER AND INSURED: Coverage provided under the Policy
referenced below is expressly conditioned upon you (the “Insured”) reviewing
and properly executing and returning this Policy Receipt Form and Coverage
Conditions Summary (“Form”) to us (the “Insurer”) within 10 days of receipt of
the Policy.
Gustafson stated that it was “the broker’s responsibility” to get the form signed by the
insured, and yet appellants did not sign and return the form. Appellants’ supplemental
response also included deposition testimony by an MHI supervisor, Leslie Ann Lloyd,
stating that it appeared from an internal email that MHI had not yet received a copy of the
policy as of August 25, 2011.
6
MHI filed an amended summary judgment motion on May 9, 2019, reiterating the
arguments made in its earlier motion and additionally asserting that each of appellants’
claims are barred by limitations. Appellants filed a response to the amended motion
reiterating their earlier arguments and also contending their claims are not time-barred
because “the facts that authorized [them] to seek judicial remedy against MHI for its
representations concerning the Policy did not come into existence until February 13,
2015,” the date on which the trial court first enforced the forum selection clause by
dismissing their claims against Prime. Appellants did not contend in their response to the
amended summary judgment motion that the limitations period was tolled due to
application of the discovery rule, though they made that allegation in their live petition
dated November 16, 2016.
The trial court granted MHI’s summary judgment motion, and this appeal followed. 5
II. DISCUSSION
By a single issue on appeal, appellants contend the trial court erred in granting
summary judgment for MHI. We construe the issue as comprising three sub-issues: (1)
summary judgment was improper on law of the case grounds; (2) summary judgment was
improper on limitations grounds; and (3) summary judgment was improper on no-
evidence grounds. We address each in turn.
A. Standard of Review and Applicable Law
A summary judgment motion may be brought on traditional or no-evidence
grounds. A movant for traditional summary judgment has the burden to establish that no
5
Appellants’ claims against Farias were severed into a separate cause number. Farias is not a
party to this appeal.
7
genuine issue of a material fact exists and that it is entitled to judgment as a matter of
law. TEX. R. CIV. P. 166a(c); Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437
S.W.3d 507, 511 (Tex. 2014). A no-evidence summary judgment alleges that, after
adequate time for discovery, there is no evidence of one or more essential elements of a
claim or defense on which the other party would have the burden of proof at trial. TEX. R.
CIV. P. 166a(i). If, in response to a summary judgment motion, the non-movant produces
more than a scintilla of evidence to raise a fact issue on the challenged elements, then
summary judgment is improper. Amedisys, Inc., 437 S.W.3d at 511; King Ranch, Inc. v.
Chapman, 118 S.W.3d 742, 751 (Tex. 2003). More than a scintilla of evidence exists
when the evidence “rises to a level that would enable reasonable and fair-minded people
to differ in their conclusions.” Merrell Dow Pharms. Inc. v. Havner, 953 S.W.2d 706, 711
(Tex. 1997). Less than a scintilla of evidence exists when the evidence is “so weak as to
do no more than create a mere surmise or suspicion” of a fact. Kindred v. Con/Chem,
Inc., 650 S.W.2d 61, 63 (Tex. 1983). Summary judgment evidence is viewed in the light
most favorable to the non-movant. Smith v. O’Donnell, 288 S.W.3d 417, 424 (Tex. 2009).
We review summary judgments de novo. Scripps NP Operating, LLC v. Carter,
573 S.W.3d 781, 790 (Tex. 2019). “Issues not expressly presented to the trial court by
written motion, answer or other response shall not be considered on appeal as grounds
for reversal.” TEX. R. CIV. P. 166a(c).
B. Law of the Case
MHI contended in its amended summary judgment motion that the law of the case,
as set forth in our 2014 ruling on appellants’ mandamus petition, compels a ruling in its
favor. By its first sub-issue on appeal, appellants argue the trial court erred if it granted
8
summary judgment to MHI on this basis.
Under the law of the case doctrine, “a decision rendered in a former appeal of a
case is generally binding in a later appeal of the same case.” Paradigm Oil, Inc. v.
Retamco Operating, Inc., 372 S.W.3d 177, 182 (Tex. 2012). By narrowing the issues in
successive stages of the litigation, the doctrine is intended to achieve uniformity of
decision as well as judicial economy and efficiency. Briscoe v. Goodman Corp., 102
S.W.3d 714, 716 (Tex. 2003). But a decision rendered on an issue before the appellate
court does not absolutely bar re-consideration of the same issue on a second appeal. Id.In particular, the law of the case doctrine “does not necessarily apply when either the
issues or the facts presented at successive appeals are not substantially the same as
those involved on the first trial.” Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986);
Creative Thinking Sources, Inc. v. Creative Thinking, Inc., 74 S.W.3d 504, 511 (Tex.
App.—Corpus Christi–Edinburg 2002, no pet.). “Application of the doctrine lies within the
discretion of the appellate court and depends on the particular circumstances surrounding
that case.” Briscoe, 102 S.W.3d at 716.
In our 2014 opinion, we reviewed and rejected at least seven different reasons
offered by appellants for why the forum selection clause should not be enforced with
respect to their suit against Prime. See In re Prime Ins., 2014 WL 5314514, at *5
(concluding that the clause applies to the specific claims at issue because those claims
“arose out of” Prime’s obligations under the policy); id. at *7 (finding Prime did not waive
enforcement of the clause by filing a separate subrogation suit in Texas against a third
party who was not a signatory to the policy); id. at *8–9 (rejecting appellants’ claim that
enforcement would be “fundamentally unfair” because appellants “[were] not given any
9
notice” that the policy included the clause); id. at *10 (rejecting appellants’ claim that the
clause is “fundamentally unfair” because appellants did not have the right to reject the
insurance policy with impunity upon being notified of the clause); id. at *11 (rejecting
appellants’ argument that the clause is unenforceable because the particular forum was
selected to discourage claims); id. (rejecting appellants’ argument that the clause is
unenforceable because Prime engaged in fraud and overreaching); id. at *12 (rejecting
appellants’ argument that the forum-selection clause was not supported by
consideration).
MHI argued in its summary judgment motion that we “held as a matter of law” the
following in our 2014 opinion: (1) that appellants are “charged with knowledge of the
contents” of the Prime Policy, including the forum selection clause; (2) that “the quote and
binder did not reference the forum selection clause because the quote and binder did not
constitute the parties’ entire agreement”; (3) that appellants “would have had the
opportunity to reject the contract without incurring financial penalty if they had informed
themselves regarding the terms of the Policy prior to execution”; (4) that “[a]ny
inconvenience associated with litigating in Utah was foreseeable at the time of
contracting”; (5) that appellants “could proceed in Utah”; and (6) that “[l]itigating in Utah
would not deprive [appellants] of their day in court.” MHI argued that, therefore, we are
bound to conclude that all of appellants’ claims against it fail.
In their summary judgment response and on appeal, appellants argue that the law
of the case doctrine cannot apply here because there has been no previous appeal and
the case was never remanded to the trial court; instead, we granted conditional
mandamus relief in an original proceeding. See Perry Homes v. Cull, 258 S.W.3d 580,
10
585–86 (Tex. 2008) (holding, where appellees contended that pre-arbitration mandamus
proceedings established law of the case and barred the appellants from raising the same
arguments on appeal, that because “mandamus is a discretionary writ, ‘its denial, without
comment on the merits, cannot deprive another appellate court from considering the
matter in a subsequent appeal’” (quoting Chambers v. O’Quinn, 242 S.W.3d 30, 32 (Tex.
2007)). We disagree. Our 2014 opinion in In re Prime was not a summary denial without
comment, as was the allegedly binding precedent in Perry Homes. See id.; In re Prime
Ins., 2014 WL 5314514. In any event, the law of the case doctrine may apply whenever
the law and the facts are substantially the same; it does not matter that the allegedly
binding precedent was developed in an original proceeding rather than a direct appeal.
See Roman v. Ramirez, 573 S.W.3d 341, 348 (Tex. App.—El Paso 2019, pet. denied)
(“[A] legal issue actually resolved in a mandamus action becomes law of the case in
subsequent proceedings in the same case.”); In re United Servs. Auto. Ass’n, 521 S.W.3d
920, 928 (Tex. App.—Houston [1st Dist.] 2017, orig. proceeding) (applying law of the case
to reverse a new trial order on the same grounds as decided in an earlier mandamus
proceeding in the same case); In re Guardianship of Cantu de Villarreal, 330 S.W.3d 11,
20–21 (Tex. App.—Corpus Christi–Edinburg 2010, no pet.) (holding law of the case
doctrine prevented reconsideration of issue decided in earlier mandamus proceeding).
Appellants additionally argue that our earlier opinion does not compel dismissal of
their claims against MHI because we never specifically addressed those claims in that
opinion; instead, we only addressed the claims against Prime. 6 We agree. There are
6
In their summary judgment response, appellants pointed out that MHI previously filed petitions for
writ of mandamus with this Court and with the Texas Supreme Court seeking dismissal of appellants’ claims
on law-of-the-case grounds, and that both of those petitions were denied. See In re McClelland & Hine,
11
substantial differences between the issues and facts presented here and those we
considered in 2014. Most glaringly, the claims at issue here are against MHI, not against
Prime, and the factual allegations made against the two parties are not substantially the
same. As to Prime, appellants raised claims of negligence, breach of contract, breach of
the duty of good faith and fair dealing, and DTPA and insurance code violations. In re
Prime Ins., 2014 WL 5314514, at *1. They specifically alleged that Prime failed to
adequately investigate its storm damage claim, provided an “inaccurate and low ball
estimate” as to the damaged MRI machine, and “failed to return [their] phone calls.” Id.Appellants’ allegations against Prime exclusively concerned Prime’s alleged mishandling
of their storm damage claim. Those claims bear little resemblance to the claims appellants
have brought against MHI, which are based on MHI’s alleged failure to procure a policy
in accordance with the quote and binder.
The principal conclusion which MHI urges was made in 2014 and is binding on us
here is that appellants are deemed to have constructive knowledge of all policy terms,
including the forum-selection clause, even though they were subjectively unaware of them
at the time they accepted the quote. 7 In that regard, we note that the 2014 original
proceeding was decided on the limited record available to the trial court at the time of
Inc., No. 13-16-00527-CV, 2016 WL 5846551, at *1 (Tex. App.—Corpus Christi–Edinburg Oct. 6, 2016,
orig. proceeding [mand. denied]). Appellants do not argue that MHI’s law-of-the-case argument is itself
barred by the law of the case doctrine due to these rulings.
7
Though MHI claims that we set forth certain conclusions of law in 2014 which require judgment in
its favor here, most of those specific conclusions would not compel a ruling in favor of MHI. For example,
MHI claims that our 2014 opinion binds us to conclude that “[l]itigating in Utah would not deprive [appellants]
of their day in court.” We made that conclusion in the context of determining whether the forum-selection
clause is “fundamentally unfair” so as to be unenforceable. See In re Prime Ins., 2014 WL 5314514, at *11.
The enforceability of the forum-selection clause with respect to Prime may have been decided, but that
decision does not establish MHI’s entitlement to judgment as a matter of law on any of the grounds alleged
in its summary judgment motion.
12
Prime’s motion to dismiss, and the record has since developed significantly.
In 2014, we noted that the Texas Supreme Court has rejected the argument that
“the failure to provide a copy of an agreement containing a forum selection clause to a
claimant constitutes the type of fundamental unfairness that precludes enforcement of the
forum selection clause.” Id. at *9 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S.
585, 595 (1991) (“[F]orum-selection clauses contained in form passage contracts are
subject to judicial scrutiny for fundamental fairness.”); In re Int’l Profit Assocs., 286 S.W.3d
921, 924 (Tex. 2009) (orig. proceeding) (finding that the “fundamental fairness” analysis
concerns only “the clause itself” and does not apply to the argument that the “[the
claimant’s] representative was never given the first page of the agreement that included
the forum-selection clause”)). In other words, “simply being unaware of a forum-selection
clause does not make it invalid.” Id. We then concluded as follows:
[P]arties to a contract have an obligation to protect themselves by reading
what they sign and, absent a showing of fraud, cannot excuse themselves
from the consequences of failing to meet that obligation. If we were to
determine otherwise, it would require a party seeking to enforce a forum-
selection clause to prove that the opposing party was separately shown
each provision of every contract sought to be enforced and was subjectively
aware of each clause. And, specifically applicable to this case, an insured
is charged with knowledge of the provisions of the insurance policy, that is,
it will be deemed to know the contents of the contract it makes. In the instant
case, although the quote and binder did not reference the forum selection
clause, it is clear that the quote and binder did not constitute the parties’
entire agreement. There is no evidence in the record that Prime concealed
the forum-selection clause or evidence proving Prime concealed the clause
with an intent to defraud RZQ, thus RZQ’s allegations that it was unaware
of the forum selection clause are insufficient as a matter of law to prove
fraud or overreaching. Accordingly, we reject RZQ’s contention that Prime’s
alleged failure to notify RZQ that the policy contained a forum selection
clause rendered enforcement of the forum selection clause fundamentally
unfair.
Id. (emphasis added, internal citations and quotations omitted).
When we held that appellants are charged with knowledge of the forum selection
13
clause, we explicitly based that ruling on our observation that, at the time, there was “no
evidence” in the record “that RZQ accepted the surplus lines coverage in a different
manner than that contemplated by Prime’s offer.” Id. at *9 n.10. We distinguished the
situation from another case where a forum selection clause was held unenforceable
because “[t]he employee accepted employment with the company, but did not sign and
return the letter agreement containing the forum selection clause.” Id. (citing Lujan v.
Alorica, 445 S.W.3d 443, 448 (Tex. App.—El Paso 2014, no pet.)). We noted that,
because there was no similar evidence adduced with respect to RZQ’s acceptance of
Prime’s offer, there was no basis to conclude that “Prime failed to establish the parties’
mutual assent or meeting of the minds regarding the forum selection clause.” Id. However,
at least a scintilla of such evidence has now been produced—specifically, Quraishi
testified that the quote provided by MHI did not include the forum selection and choice of
law clauses, and that RZQ would not have accepted the quote if it had stated those terms
would be part of the policy. And it is undisputed that (1) appellants never received a copy
of the policy until August 2011, and (2) they never signed and returned the “Policy Receipt
Form and Coverage Conditions Summary,” which explicitly reiterated and emphasized
the forum selection and choice of law clauses, and which by its own terms was required
to be signed in order for the policy to be effective. The evidence which has been produced
since 2014 has therefore brought this case into closer alignment with Lujan. See Lujan,
445 S.W.3d at 448 (“Ordinarily, an offer’s terms prescribing the time and manner of its
acceptance must be satisfied as prescribed to create a contract.”).
In fact, the case for enforcement is arguably weaker here than it was in Lujan.
Here, not only did appellants decline to sign and return the form which contained the
14
forum selection clause, they also declined to accept benefits under the policy after being
made aware of the clause—this contrasts with the plaintiff in Lujan, who accepted
employment with the defendant after receiving (and declining to sign) the letter containing
the forum-selection clause. See id. Unlike in Lujan, there was no reason for appellants in
this case to believe that their acceptance of MHI’s offer to procure a policy would require
them to agree to a forum selection provision with the insurer. Instead, the offer was silent
as to the existence of the subject clauses. The clauses were not among the “contents” of
the offer communicated to appellants, nor were they incorporated by reference into that
offer. Cf. In re Prime Ins., 2014 WL 5314514, at *9. (“[A]n insured is charged with
knowledge of the provisions of the insurance policy, that is, it will be deemed to know the
contents of the contract it makes.”)
This situation is also not precisely akin to In re International Profit Associates, 286
S.W.3d at 922. That case concerned whether it is fundamentally unfair to enforce a forum-
selection clause when the clause has not been specifically pointed out to the complaining
party. See id. There was no dispute that the clause was actually explicitly set forth in a
document which the plaintiff duly executed. See id. at 922–23 (noting that the plaintiff
“signed a contract” containing a forum-selection clause on the first page). The
International Profit Associates Court noted that “simply being unaware of a forum-
selection clause does not make it invalid,” 286 S.W.3d at 924, but it was undisputed that
the insured should have discovered the clause with the use of reasonable diligence—i.e.,
it should have read the contract. See id. (citing In re Lyon Fin. Servs., Inc., 257 S.W.3d
228, 233 (Tex. 2008) (orig. proceeding) (per curiam) (“[P]arties to a contract have an
obligation to protect themselves by reading what they sign and, absent a showing of fraud,
15
cannot excuse themselves from the consequences of failing to meet that obligation.”
(Emphasis added)). In contrast, appellants’ evidence here, if believed by the trier of fact,
would support a finding that they had no ability or opportunity to discover the existence of
the clause, with the use of reasonable diligence, prior to the time coverage was bound.
We note that, when an insurance binder incorporates policy terms implicitly or by
reference, those terms may be enforced even though the formal policy itself has not yet
been issued or made available to the insured. See, e.g., Dalton v. Norwich Union Fire Ins.
Soc., 213 S.W. 230, 231 (Tex. Comm’n App. 1919). In those situations, the binder “is to
be construed in accordance with the terms and subject to the conditions of the standard
form of policy in use by the insurer at the time.” Id.; see Ranger Cnty. Mut. Ins. v. Chrysler
Credit Corp., 501 S.W.2d 295, 298 (Tex. 1973) (“As long as a binder is in effect, the
insured may look to the form of the contemplated policy for coverage, duration,
cancellation, and other terms.”); see also QB Invs., LLC v. Certain Underwriters at Lloyd’s,
London, No. 01-10-00718-CV, 2011 WL 3359683, at *3 (Tex. App.—Houston [1st Dist.]
Aug. 4, 2011, no pet.) (mem. op.) (“It is well established that coverage provided under a
binder is determined based on reference to the terms and conditions contained in the
standard form of policy in use by the insurer at the time the binder is issued.”). Here,
however, neither the quote nor the binder explicitly or implicitly referred to any standard
policy form. Instead, the quote explicitly stated that the policy to be issued was a
“manuscript” policy—i.e., it was customized and not based on a standard form. See Black
& Veatch Corp. v. Aspen Ins. (UK) Ltd., 882 F.3d 952, 958 (10th Cir. 2018) (“Policies that
deviate from the standard [commercial general liability] policy forms and endorsements
are called ‘manuscript’ policies.”); see also Vought Aircraft Indus., Inc. v. Falvey Cargo
16
Underwriting, Ltd., 729 F. Supp. 2d 814, 823 (N.D. Tex. 2010); Treesdale, Inc. v. TIG Ins.,
681 F. Supp. 2d 611, 622 (W.D. Pa. 2010) (“Manuscript policies do not provide
‘boilerplate’ coverage, but are negotiated between the parties as to each item.”). There is
no reason in this case to impute knowledge of the forum-selection clause to appellants
before the policy was made available to them.
As elucidated above, the parties, claims, and facts at issue here are different than
those before this Court in 2014. Therefore, we decline to find that the law of the case
doctrine compels a ruling in MHI’s favor on any of appellants’ claims. Appellants’ first sub-
issue is sustained.
C. Limitations
MHI’s 2019 amended summary judgment motion also argued that all of appellants’
claims are barred as a matter of law on limitations grounds. Appellants contend by their
second sub-issue on appeal that the trial court erred if it granted summary judgment on
this basis.
The parties agree as to which statutes of limitations apply to each of appellants’
claims against MHI. Appellants’ breach of contract, fraudulent inducement, and breach of
fiduciary duty claims are subject to four-year limitations periods. See TEX. CIV. PRAC. &
REM. CODE ANN. § 16.004(a)(4) (fraud); id. § 16.004(a)(5) (breach of fiduciary duty); id.
§ 16.051 (residual statute of limitations); see also Stine v. Stewart, 80 S.W.3d 586, 592
(Tex. 2002) (applying residual statute of limitations to a general breach of contract claim).
Their other claims against MHI are subject to two-year limitations periods. See TEX. BUS.
& COM. CODE ANN. § 17.565 (DTPA); TEX. CIV. PRAC. & REM. CODE ANN. § 16.003(a)
(negligence); TEX. INS. CODE ANN. § 541.162(a) (insurance code). The limitations period
17
begins when the cause of action accrues, and “[g]enerally, a cause of action accrues
when a wrongful act causes a legal injury.” Etan Indus., Inc. v. Lehmann, 359 S.W.3d
620, 623 (Tex. 2011); see Provident Life & Accident Ins. v. Knott, 128 S.W.3d 211, 221
(Tex. 2003) (“In most cases, a cause of action accrues when a wrongful act causes a
legal injury, regardless of when the plaintiff learns of that injury or if all resulting damages
have yet to occur.”).
The discovery rule defers accrual of a cause of action “until the claimant knows or,
by exercising reasonable due diligence, should know of the facts giving rise to the claim.”
Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001); see TEX. INS. CODE
ANN. § 541.162(a)(2) (applying discovery rule to insurance code claims). 8 “An injury is
inherently undiscoverable if it is, by its nature, unlikely to be discovered within the
prescribed limitations period despite due diligence.” Id. at 734–35. Appellants pleaded the
discovery rule in their live petition.
A defendant moving for summary judgment on the affirmative defense of limitations
has the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison
Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999); see TEX. R. CIV. P. 166a(c).
Thus, the defendant must (1) conclusively prove when the cause of action accrued, and
(2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by
proving as a matter of law that there is no genuine issue of material fact about when the
plaintiff discovered, or in the exercise of reasonable diligence should have discovered the
nature of its injury. KPMG Peat Marwick, 988 S.W.2d at 748.
8
The discovery rule is not applicable to claims for breach of contract for sale of goods. TEX. BUS. &
COM. CODE ANN. § 2.725(b) (“A cause of action [for breach of contract for sale of goods] accrues when the
breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.”). This case does not
involve the sale of goods.
18
MHI contended in its summary judgment that the limitations period on appellants’
claims began to run on May 27, 2011, the date appellants accepted MHI’s quote and paid
the premium and, according to the policy, the date coverage began. Appellants first
named MHI as a defendant on June 3, 2015, 9 more than four years later; accordingly,
MHI argued that all of appellants’ claims are time-barred. In response, appellants alleged
that their claims did not accrue until February 13, 2015, which is when the trial court
dismissed the claims against Prime pursuant to our conditional mandamus ruling.
Appellants argued that, before that date, they did not yet “suffer legal injury from MHI’s
misrepresentations” because they had “not yet been forced to bring their claim against
Prime in a forum outside of Texas.” They stated that, “[f]or the sake of argument, the only
other date that could plausibly be argued as being the accrual date” would be October
16, 2014, the date we handed down our opinion directing the trial court to enforce the
forum-selection clause and to grant Prime’s motion to dismiss.
In its discussion of limitations on appeal, MHI mainly relies on our 2014 ruling that
appellants are “charged with knowledge” of the terms of the policy, including the forum-
selection clause. See In re Prime Ins., 2014 WL 5314514, at *9. However, for the reasons
explained above, our 2014 opinion is not binding on us here. In any event, though we
stated in 2014 appellants are charged with knowledge of the policy terms, we did not state
that this knowledge is imputed to appellants on any particular date. Thus, even if we were
bound by our 2014 opinion, our finding there that appellants are “charged with knowledge”
of the forum-selection clause does not itself settle the question of when the limitations
9
Appellants’ statutory claims against MHI were first brought in their sixth amended petition dated
November 16, 2016. However, because those claims were not “wholly based on a new, distinct, or different
transaction or occurrence,” they relate back to the date when appellants first named MHI as a defendant.
See TEX. CIV. PRAC. & REM. CODE ANN. § 16.068.
19
period began to run.
That said, under these circumstances, we cannot conclude that appellants’ claims
against MHI accrued as late as 2014 or 2015. Appellants’ negligence, breach of contract,
and breach of fiduciary claims against MHI share the same central factual allegations—
i.e., that MHI failed to procure a policy in accordance with the quote and binder and filed
to advise appellants of the existence of the forum-selection and choice-of-law clauses in
the Prime policy. Appellants’ statutory claims are based on the same conduct. 10 However,
as we noted in our 2014 opinion, a copy of the policy was filed with the Surplus Lines
Stamping Office of Texas (SLTX) 11 on June 16, 2011. In re Prime Ins., 2014 WL 5314514,
at *8. Moreover, the storm which gave rise to appellants’ claim under the policy occurred
on June 22, 2011. Thus, with the use of reasonable diligence, appellants should have
10
As to their DTPA claim, appellants generally alleged in their live petition that MHI “committed one
or more deceptive trade practices as outlined in [§] 17.45 of the [DTPA].” See TEX. CIV. PRAC. & REM. CODE
ANN. § 17.45. As to their insurance code claims, appellants alleged that MHI violated § 541.051 of the
insurance code by:
1. making, issuing, or circulating or causing to be made, issued, or circulated an estimate
or statement misrepresenting with respect to a policy issued or to be issued the terms of
the policy; and
2. making, issuing, or circulating or causing to be made, issued, or circulated an estimate
or statement misrepresenting with respect to a policy issued or to be issued the benefits or
advantages promised by the policy.
See TEX. INS. CODE ANN. § 541.051. Appellants further alleged that MHI violated § 541.061 of the insurance
code by:
1. making an untrue statement of material fact;
2. making a statement in a manner that would mislead a reasonably prudent person to a
false conclusion of a material fact; and
3. failing to disclose a matter required by law to be disclosed, including failing to make a
disclosure in accordance with another provision of the Texas Insurance Code.
See id. § 541.061.
11
SLTX is a non-profit organization created under the insurance code to review and record surplus
lines policies placed by licensed Texas surplus lines agents and to assist the Commissioner of Insurance
in evaluating the eligibility of surplus lines insurers. See TEX. INS. CODE ANN. §§ 981.151, .154, .158;
Strayhorn v. Lexington Ins., 128 S.W.3d 772, 775 (Tex. App.—Austin 2004), aff’d, 209 S.W.3d 83 (Tex.
2006). Texas-licensed surplus lines agents must file a copy of every policy placed through them with SLTX
within sixty days of a policy’s effective or issue date. See id. § 981.105.
20
recognized the nature of their injury by that date, at the latest. See KPMG Peat Marwick,
988 S.W.2d at 748. It is true that appellants’ claimed damages were largely incurred in
defending against Prime’s declaratory judgment suit in Utah, and that this out-of-state
defense was necessary only because of our ruling in 2014 that the forum-selection clause
was enforceable. But the limitations period begins running when an injury is caused by
the wrongful act, even if “all resulting damages have yet to occur.” Provident Life, 128
S.W.3d at 221.
We conclude that MHI established as a matter of law that appellants’ claims
accrued no later than June 22, 2011. Because appellants first brought suit against MHI
on June 3, 2015, their negligence, DTPA, and insurance code claims are barred by the
two-year statute of limitations. TEX. BUS. & COM. CODE ANN. § 17.565; TEX. CIV. PRAC. &
REM. CODE ANN. § 16.003(a); TEX. INS. CODE ANN. § 541.162(a). Their remaining claims,
however, are not time-barred because they were brought within four years of accrual. See
TEX. BUS. & COM. CODE ANN. § 2.725(a) (breach of contract); TEX. CIV. PRAC. & REM. CODE
ANN. § 16.004(a)(4) (fraud); id. § 16.004(a)(5) (breach of fiduciary duty).
We sustain in part and overrule in part appellants’ second sub-issue.
D. No-Evidence Summary Judgment
As to the claims against it which are not barred by limitations—breach of contract,
breach of fiduciary duty, and fraud—MHI’s amended summary judgment motion also
alleged that there is no evidence of certain elements of those claims. See TEX. R. CIV. P.
166a(i). Appellants argue by what we construe as their third sub-issue that the trial court
erred if it granted summary judgment on these grounds.
As to appellants’ breach of contract claim, MHI argued that there is no evidence of
21
a valid contract between it and appellants for the issuance of a policy without a forum-
selection clause. See USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 502 n.21
(Tex. 2018) (noting that the essential elements of a breach of contract action are: “(1) the
existence of a valid contract; (2) the plaintiff performed or tendered performance as the
contract required; (3) the defendant breached the contract by failing to perform or tender
performance as the contract required; and (4) the plaintiff sustained damages as a result
of the breach”). MHI also argued that, even if there was a valid contract in place, there
was no evidence of breach because the contract did not specify that MHI had to procure
a policy lacking a forum-selection clause. As to the breach of fiduciary duty claim, MHI
argued there was no evidence that MHI owed any such duty to appellants or that they
breached any such duty. See Guevara v. Lackner, 447 S.W.3d 566, 579 (Tex. App.—
Corpus Christi–Edinburg 2014, no pet.) (“The elements of a breach-of-fiduciary-duty claim
are: (1) a fiduciary relationship between the plaintiff and defendant; (2) a breach of the
duty by the defendant; and (3) injury to the plaintiff or benefit to the defendant because of
the defendant’s breach.”). Finally, as to appellants’ fraudulent inducement claim, MHI
argued there was no evidence it made any affirmative misrepresentation to appellants.
See Zorrilla v. Aypco Const. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015) (noting that the
elements of a common-law fraud claim are: (1) the defendant made a representation to
the plaintiff; (2) the representation was material; (3) the representation was false; (4) when
the defendant made the representation, the defendant knew the representation was false
or made the representation recklessly, as a positive assertion, and without knowledge of
its truth; (5) the defendant made the representation with the intent that the plaintiff act on
it; (6) the plaintiff relied on the representation; and (7) the representation caused the
22
plaintiff injury.”); White v. Zhou Pei, 452 S.W.3d 527, 537 (Tex. App.—Houston [14th Dist.]
2014, no pet.) (“The elements of fraud by nondisclosure are (1) the defendant failed to
disclose material facts to the plaintiff that the defendant had a duty to disclose; (2) the
defendant knew the plaintiff was ignorant of the facts and the plaintiff did not have an
equal opportunity to discover the facts; (3) the defendant was deliberately silent when the
defendant had a duty to speak; (4) by failing to disclose the facts, the defendant intended
to induce the plaintiff to take some action or refrain from acting; (5) the plaintiff relied on
the defendant’s nondisclosure; and (6) the plaintiff was injured as a result of acting without
that knowledge.”).
To support their claims, appellants point to the quote and binder issued by MHI.
They argue that the quote constituted an offer to procure insurance in accordance with
the quote, and that they accepted the quote, thereby giving rise to an enforceable
contract. They emphasize that O’Brien altered the original quote and binder to remove
references to Pulley, IEBS, and Prime. In deposition testimony, when asked why she
removed IEBS’s identifying information from the “Indication Quote” before sending it to
Farias, O’Brien explained: “So when I send a quote to Felipe Farias, he would know I’m
the point of contact. He is to contact me, and no one else.” When asked why she removed
Prime’s information from the binder before sending it to Farias, O’Brien similarly
explained: “Because I’m the point of contact, and Felipe is not to contact the company.
He’s to contact me, since we have a relationship.” O’Brien agreed that there was nothing
in the quote or binder she sent to Farias indicating that Prime was the carrier for the policy,
and she never discussed the forum-selection or choice of law clauses with Farias.
Appellants also point to an affidavit by Jose Manuel Diaz, a licensed insurance
23
agent in McAllen. Diaz testified he has more than fifteen years’ experience in the
insurance industry and is familiar with surplus lines agents and carriers. Diaz averred:
5. I sell insurance policies as an independent agent through multiple
insurance carriers. One of my job duties is assisting in the purchase of
insurance by acting reasonably in fully informing potential clients of the
binding terms and conditions contained in insurance policies.
6. When selling an insurance policy, I have a duty, as all insurance and
surplus lines agents do, to fully disclose all material provisions of the policy,
including but not limited to, whether the insurance policy will contain a forum
selection clause and choice of law provision that would be controlling in the
event that a legal dispute concerning the insurance coverage were to arise
between the insurer and the insured.
Appellants also attached to their summary judgment response a report by Michael
Fazekas, a senior manager in “Forensic Insurance and Recovery” with BDO Consulting.
Fazekas opined that, based on his analysis, appellants suffered over $2 million in
damages as a result of the June 22, 2011 storm, including $489,172 to replace the
damaged MRI machine and $1,669,982 due to “business interruption.” Finally, appellants
attached a copy of an “Independent Producer’s Agreement” between MHI and IEBS. This
agreement provided that MHI would earn commissions for “risks submitted by the Broker
[MHI] and ultimately bound by the Company [IEBS]” and that “[t]he Broker [MHI] is the
agent of the Client and not of the Company [IEBS].” 12
We agree with MHI that appellants’ evidence does not support the breach of
contract claim. The quote constituted an offer by MHI to procure insurance, and that offer
was accepted, but a quote only “summarizes the proposed coverage and does not contain
all the terms, provisions, and exclusions that are set forth in the actual insurance policy.”
See Howard v. Burlington Ins., 347 S.W.3d 783, 789–90 (Tex. App.—Dallas 2011, no
12
The “Independent Producer’s Agreement” itself contained a Utah forum-selection and choice-of-
law provision.
24
pet.). Here, in particular, the quote did not state that the contemplated policy contained a
forum-selection clause, but it also did not state that the policy lacked such a clause.
Appellants have provided no evidence indicating that they ever communicated to MHI
their desire for a policy lacking a forum-selection clause, nor have they provided any
evidence indicating that their desire was apparent from the context or the prior dealings
between the parties. We conclude that there is less than a scintilla of evidence to support
a finding that the parties had an enforceable contract for MHI to procure an insurance
policy without a forum-selection clause.
The evidence is also not enough to support a breach of fiduciary duty claim.
Fiduciary duties may arise from certain formal relationships that are considered to be
fiduciary as a matter of law or from informal, “confidential” relationships. Garcia v. Vera,
342 S.W.3d 721, 724 (Tex. App.—El Paso 2011, no pet.). Generally, the relationship
between an insurance agent and an insured does not give rise to a formal fiduciary duty.
Envt’l Procedures, Inc. v. Guidry, 282 S.W.3d 602, 626–628 (Tex. App.—Houston [14th
Dist.] 2009, pet. denied). And appellants’ evidence does not establish that they had a
“confidential” relationship with MHI so as to give rise to an informal fiduciary duty. See
Garcia, 342 S.W.3d at 724.
Nevertheless, even though there was no evidence that MHI breached its contract
with appellants or owed a fiduciary duty to them, Diaz’s affidavit testimony is more than a
scintilla of evidence supporting a finding that MHI had the duty to disclose to appellants
the lack of the forum-selection clause in the Prime policy. O’Brien’s testimony that she
altered the quote and binder to remove Prime’s and IEBS’s contact information,
respectively, is probative of an affirmative misrepresentation regarding the origin of the
25
policy and supports a finding that MHI knew that appellants were unaware of the forum-
selection clause. See Zorrilla, 469 S.W.3d at 153 (setting forth elements of common-law
fraud claim); White, 452 S.W.3d at 537 (setting forth elements of fraud by nondisclosure).
And Quraishi’s affidavit testimony indicates that appellants relied on MHI’s failure to
disclose the forum-selection clause when deciding to accept the quote. See Zorrilla, 469
S.W.3d at 153; White, 452 S.W.3d at 537.
MHI argues that, because an insurance quote is only intended to summarize the
proposed coverage and not all the terms and conditions of the policy, a broker can be
held liable only when it makes a misrepresentation about coverage. MHI cites cases in
which misrepresentations affecting coverage have formed the basis of a fraud claim
against an insurance broker. See, e.g., May v. United Servs. Ass’n of Am., 844 S.W.2d
666, 669 (Tex. 1992). However, MHI cites no authority, and we find none, establishing
that an insurance broker is immune from liability for misrepresentations concerning
matters other than the extent of coverage under the proposed policy. Instead, as
appellants note, the insurance code places the responsibility on surplus lines agents such
as MHI to obtain the policy from the insurer and deliver the policy to the insured “as soon
as reasonably possible” upon the insured’s request. See TEX. INS. CODE ANN.
§ 981.103(b).
Here, appellants asserted that MHI misrepresented the Prime policy, either
through affirmatively altering the quote and binder or through non-disclosure, and they
provided more than a scintilla of evidence to support that assertion. 13 Accordingly, the
13
In the section of its summary judgment motion addressing the fraud claim, MHI raised no-
evidence grounds only as to the misrepresentation element. We therefore do not express an opinion as to
whether the summary judgment evidence supported the other fraud elements. See TEX. R. CIV. P. 166a(c).
26
trial court erred if it granted no-evidence summary judgment on appellants’ fraudulent
inducement claim. We sustain appellants’ third sub-issue in part.
III. CONCLUSION
The trial court’s summary judgment is reversed with respect to appellants’
fraudulent inducement claim, and with respect to that claim, we remand the cause to the
trial court for further proceedings consistent with this opinion. The remainder of the trial
court’s summary judgment, dismissing appellants’ other claims against MHI, is affirmed.
DORI CONTRERAS
Chief Justice
Delivered and filed on the
15th day of April, 2021.
27