A & W Industries, Inc. v. Liberty Mut. Ins. Co.

Court of Appeals of Texas, Dallas.

A & W INDUSTRIES, INC., Appellant,

v.

LIBERTY MUTUAL INSURANCE CO., and Wilbert of North Texas, Inc., Appellees.

No. 05-96-01342-CV.

|

Nov. 13, 1998.

On Appeal from the County Court at Law No. 3, Dallas County, Texas. Trial Court Cause No. cc-94-2124-c.

Before Justices BRIDGES.

OPINION

JOSEPH B. MORRIS, Justice.

*1 This appeal follows a trial before the court without a jury. The trial court awarded judgment against A & W Industries, Inc. and in favor of Liberty Mutual Insurance Co. for $18,271.73 in unpaid workers’ compensation insurance premiums, attorney fees, and pre-judgment interest. In four points of error, A & W challenges a single finding of fact by the trial court and also contends the trial court erred as a matter of law in rendering judgment against it. Because we conclude that the trial court erred as a matter of law in rendering judgment against A & W, we reverse the trial court’s judgment and remand this matter to the trial court with instructions to enter judgment for Liberty Mutual Insurance Co. against Wilbert of North Texas, Inc.

FACTUAL BACKGROUND

This case arises out of a workers’ compensation insurance policy Liberty Mutual issued to Wilbert. The policy covered the period from March 1, 1991 through March 1, 1992. On September 11, 1991, A & W contracted with Wilbert to purchase all of the assets of Wilbert’s burial vault manufacturing business. Section 1.05 of the sales contract provided that A & W would be responsible “for any liability or obligation of or arising out of or relating to the Assets ... or the Business of whatever kind or nature, whether contingent or absolute arising on or after the Closing Date, and whether or not specifically referred to in this agreement.” The sales contract was later amended to add section 1.06, which clarified that A & W was to “reimburse [Wilbert] for ordinary and usual expenses of the Business incurred from September 1, 1991 through the date of closing.” The contract closing was on October 28, 1991.

About eight months later, in June of 1992, Liberty Mutual conducted a final audit on the workers’ compensation insurance policy and determined there was a balance due and owing of $25,036. Liberty Mutual issued an earned premium statement allocating $13,031 to the period from March 1, 1991 through September 30, 1991 and attributed the remaining $12,005 to the covered period from September 30, 1991 through March 1, 1992.

A & W paid Liberty Mutual $12,000 toward the outstanding premiums. Liberty Mutual then sued Wilbert to recover the remaining balance of $13,036. Wilbert, in turn, filed a third party action for indemnification against A & W. The case proceeded to trial. The parties stipulated that $13,036 was due to Liberty Mutual and that the outstanding premiums were based on the June 1992 audit. The trial court rendered judgment for Liberty Mutual and against A & W Industries, Inc. This appeal followed.

DISCUSSION

We first address appellant’s second, third and fourth points of error.¹ In these points of error, appellant generally contends that the trial court erred in concluding as a matter of law that it was liable for the outstanding workers’ compensation premiums due as a result of the June 1992 audit. We construe appellant’s points of error and accompanying argument as attacking the trial court’s conclusions of law. We review a challenge to the trial court’s legal conclusions as a question of law. See Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 894 (Tex.1991).

*2 Neither party disputes that section 1.05 of the sales contract requires A & W to assume all liabilities arising on or after the closing date. The critical issue, therefore, is whether the liability to pay the outstanding insurance premiums arose before or after the closing date. A & W argues that Wilbert became liable for all premiums due on the policy at the time it initially purchased the policy. Wilbert contends that the liability for the outstanding premiums on the policy did not accrue until the June 1992 audit, which occurred after the closing date.

The only evidence before the trial court regarding this accrual issue was the November 2, 1992 earned premium statement that was based on Liberty Mutual’s June 1992 audit.² An earned premium has been defined as “that portion of the premium properly allocable to [the] policy period which has expired.” BLACK’S LAW DICTIONARY 508 (6th ed.1990). The premium statement in evidence clearly shows that the premiums Liberty Mutual sought to collect were earned prior to the closing of the contract between A & W and Wilbert. There was nothing in the record from which the trial court could have found that the liability for these premiums accrued after the closing. Absent an otherwise binding contractual provision, which is nowhere in the evidence, the fact that the premiums were based on an audit performed after the closing is irrelevant for determining when the liability for the premiums accrued. The liability for the premium payments accrued when they were earned, and not when they were calculated. To hold otherwise would permit Wilbert to avoid paying premiums due for coverage Liberty Mutual had already provided to Wilbert. Because there is nothing in the record to support the trial court’s conclusion that the liability for the outstanding premiums accrued after the closing, we sustain appellant’s second, third, and fourth points of error. Our resolution of these points of error make it unnecessary to address appellant’s first point of error. See TEX.R.CIV.P. 47.1.

At trial, the parties stipulated that Liberty Mutual was owed $13,036 in outstanding premiums. They asked the court to determine which company, A & W or Wilbert, was obligated to pay the outstanding amount. Having concluded that there was nothing in the record to support the trial court’s judgment against A & W, we reverse the judgment and remand this matter to the trial court with instructions to enter judgment in favor of Liberty Mutual and against Wilbert.