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At a Glance:
Title:
Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.
Date:
April 14, 1998
Citation:
966 S.W.2d 482
Court:
Texas Supreme Court
Status:
Published Opinion

Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.

Supreme Court of Texas.

LIBERTY MUTUAL INSURANCE COMPANY and Robert G. Garrett, Petitioners,

v.

GARRISON CONTRACTORS, INC., Respondent

No. 96–1013.

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Argued Oct. 7, 1997.

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Decided April 14, 1998.

Attorneys & Firms

*483W. Neil Rambin, Dallas, for Petitioners.

Philip K. Maxwell, Austin, for Respondent.

Opinion

SPECTOR, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, HANKINSON, Justices, join.

The primary issue in this case is whether an insurance agent employed by an insurance company is a “person” under section 2(a) of Article 21.21. We affirm.

I.

In 1986, the president of Garrison Contractors, Inc. contacted Robert Garrett to obtain an insurance quote on the company’s workers’ compensation, general liability, and automobile liability insurance from Liberty Mutual Insurance Company. Garrett was a Liberty employee-agent whose duties included soliciting and obtaining insurance policy sales for Liberty as well as explaining policy provisions and premium calculations to customers.

After meeting with Garrett, Garrison purchased a three-year, multi-line insurance policy from Liberty. The policy featured a retrospective premium plan, in which a base premium is paid, then adjusted based on actual losses. If losses are less than expected, the insurer refunds part of the base premium. If losses are greater than expected, the insured owes additional premiums. During the policy period, Garrison paid both base premiums and retrospective premiums. When the policy period ended, Liberty billed Garrison $159,371.85 more in retrospective premiums. Garrison refused to pay and Liberty sued to collect the premiums. Garrison *484 counterclaimed against Liberty and filed a third-party claim against Garrett. Claiming that Liberty and Garrett misrepresented the retrospective premium terms, Garrison alleged common-law bad faith, breach of fiduciary duty, DTPA violations, and Insurance Code violations.

The trial court granted Liberty and Garrett’s motion for summary judgment on Garrison’s counterclaim against Liberty and its third-party claim against Garrett. The trial court also granted Liberty’s motion for summary judgment on its sworn account suit against Garrison.

The court of appeals affirmed Liberty’s summary judgment, disallowing Garrison’s claims for breach of the duty of good faith and fair dealing and breach of fiduciary duty. However, the court of appeals reversed the summary judgment for Liberty and Garrett against Garrison’s DTPA and Insurance Code claims. The court of appeals held, in part, that material fact issues remained about the alleged policy misrepresentations, and that Garrison had a cause of action against Garrett individually on both the DTPA and Insurance Code claims.1 Finally, the court of appeals reversed the summary judgment on Liberty’s sworn account claim because Garrison’s summary judgment proof raised a fact issue on whether there was agreement between the parties regarding price due to the alleged misrepresentations.

We granted Liberty and Garrett’s application for writ of error primarily to consider whether an insurance company employee is a “person” under section 2(a) of Article 21.21 of the Insurance Code.

II.

Our objective when we construe a statute is to determine and give effect to the Legislature’s intent. TEX. GOV’T CODE 312.005.

The purpose of Section 3 of Article 21.21 prohibits any person from engaging in deceptive trade practices in the insurance business, and section 16 provides a private cause of action against a person that engages in an act or practice declared in section 4 of the article to be unfair or deceptive. Id. § 16(a). In addition, the Texas Department of Insurance and the attorney general are authorized to take enforcement actions against any person who engages in deceptive acts or practices. See id. §§ 6, 7, 15.

“Person” means

any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.

Id. § 2(a) (emphasis added). Liberty and Garrett contend that the definition only *485 reaches business entities, and not the entities’ employees; employees, they contend, do not engage in the business of insurance, but engage in their employer’s business. They argue that no purpose is served by including employees like Garrett in the definition of “person” because an insurance company will always be liable for its employees’ activities in the course and scope of employment. See Royal Globe Ins. Co. v. Bar Consultants, 577 S.W.2d 688, 693–94 (Tex.1979)).

We disagree. First, the legislative history of a 1985 amendment to TEX. INS.CODE art. 21.21, § 16).

The word “company” is commonly understood to mean “a business enterprise; firm.” AMERICAN HERITAGE DICTIONARY 384 (3d ed.1992). Thus, the Legislature’s change of the word “company” to the term “person” is highly suggestive: if the Legislature intended the term “person” to have the narrow meaning that Liberty and Garrett would give it, this alteration would have been an empty gesture. The word “company” would have been broad enough to include the business entities that Liberty and Garrett contend are within the statutory definition. But we do not lightly presume that the Legislature may have done a useless act. Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 551 (Tex.1981).

Additionally, we have previously noted that the term “business of insurance” in Article 21.21.

The Department’s regulations reflect that position. The Department “is authorized to promulgate ... and enforce reasonable rules and regulations ... necessary in the accomplishment of the purposes” of section 21.1 of Title 28 of the Texas Administrative Code. That rule provides:

It is the purpose of these sections to further define and state the standards that are necessary to prohibit deceptive acts or deceptive practices by insurers and insurance agents and other persons in their conduct of the business of insurance...irrespective of whether the person is acting as insurer, principal, agent, employer, or employee, or in other capacity or connection with such insurer.

28 TEX. ADMIN. CODE § 21.1 (West 1997) (emphasis added).

Liberty and Garrett maintain that some individuals, such as independent agents and brokers, are “persons” under TEX. INS.CODE art. 21.21, § 1(a).

Liberty and Garrett also assert that our reasoning in Watson, however, is simply inapposite because this case does not involve a third-party claim.

Liberty and Garrett next argue that article 21.21, it does not limit the scope of section 2(a).

Finally, a number of other statutes define “person” similarly to Article 21.21, individual employees would also not be regulated (or protected) under other laws that similarly define “person.”

We emphasize, however, that not every employee of an insurance company is a “person” under section 16. To come within the statute, an employee must engage in the business of insurance. In this case, Garrett personally carried out the transaction that forms the core of Garrison’s complaint. Garrett testified that his job responsibilities included soliciting and obtaining insurance policy sales and explaining policy terms to prospective buyers. He was also responsible for explaining premium calculations to consumers. Garrett was thus required to have a measure of expertise in the field, which was necessary to perform his job. Clearly, Garrett was engaged in the business of insurance. On the other hand, an employee who has no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor, does not engage in the insurance business.

III.

Liberty and Garrett argue, finally, that the court of appeals erred in remanding Garrison’s DTPA and Insurance Code claims and related defenses to Liberty’s sworn account claim. We disagree. The court of appeals held that the trial court erred in granting summary judgment because Garrison raised a material fact issue on whether Liberty and Garrett misrepresented the policy terms. 927 S.W.2d at 300. Alternatively, Liberty and Garrett contend that the court of appeals remanded too much because it held that only one of Garrison’s grounds for recovery under the DTPA and Insurance Code was viable.

*487 The court of appeals compared some of the allegations in Garrison’s summary judgment affidavits to claims that another court of appeals held were not actionable in Id.

Our decision in 885 S.W.2d at 99. Garrison presented summary judgment evidence creating a fact issue on whether Liberty and Garrett misrepresented the policy terms by telling Garrison that the retrospective premiums were subject to a cap. Because Liberty and Garrett did not establish their entitlement to judgment as a matter of law on Garrison’s DTPA and Insurance Code claims and defenses, the court of appeals did not err in remanding.

* * *

We hold that Article 21.21 provides a cause of action against insurance company employees whose job duties call for them to engage in the business of insurance. We also hold that the court of appeals properly remanded Liberty’s sworn account claim and Liberty and Garrison’s Insurance Code and DTPA claims to the trial court. Accordingly, we affirm the judgment of the court of appeals.

BAKER, Justice, joined by GONZALEZ, Justice, concurring and dissenting in part.

I agree with the Court’s judgment except where the Court holds that an insurance company employee, acting within the course and scope of employment, can be individually liable under the Insurance Code. Therefore, I dissent in part.

I. BACKGROUND

After Garrison refused to pay a retrospective premium, Liberty sued to collect the premium. Garrison counterclaimed against Liberty and filed a third-party claim against Liberty’s employee, Garrett. The court of appeals reversed a summary judgment for Liberty and Garrett. The court of appeals held, in part, that material fact issues remained about alleged policy misrepresentations, and that Garrison had a private cause of action against Garrett individually under the Insurance Code. We granted application for writ of error to decide whether an insurance company employee can be individually liable under the Insurance Code for acts in the course and scope of employment.

II. INSURANCE CODE CLAIMS AGAINST INSURANCE COMPANY EMPLOYEES

As the Court holds, we determine the Legislature’s intent by the plain and common meaning of the statute’s words. See RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex.1985). Here, the statute does not envision individual liability against insurance company employees.1

Article 21.21, section 2(a) lists potential defendants by defining “person” as:

[a]ny individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.

TEX. INS.CODE art. 21.21, § 2(a)(emphasis added).

Thus, for a “person” to have Insurance Code liability, the “person” must be a “legal entity engaged in the business of insurance.” SeeTEX. INS.CODE art. 21.21, § 2(a). Not just any “person” fits the definition. Instead, only a “person” that acts as a “legal entity” in the insurance business can be held liable.

Because Ayoub, 820 F.Supp. at 299.

Moreover, the term “legal entity” simply does not contemplate insurance company employees the way that it does insurance companies, independent agents, insurance brokers, independent adjusters, or independent life insurance counselors. SeeTEX. INS.CODE art. 21.07–2, § 3 (providing for licensing and regulation of independent life insurance counselors and expressly excluding insurance company employees from statute’s scope).

Where the Legislature intended to impose personal liability under the Insurance Code, it has done so expressly. Article 21.02 provides:

Any person who solicits insurance on behalf on any insurance company ... without such company having first complied with the requirements of the laws of this State, shall be personally liable to the holder of any policy of insurance in respect of which such act was done for any loss covered by the same.

Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex.1995)(regarding general rule about an employee’s individual liability).

Of course, an insurer may be liable for its employees’ misrepresentations. See art. 21.21 of the Insurance Code and Vail are engrafted onto the contract between the insurer and insured....”).

Here, Garrison’s insurance contract is with Liberty, not with Liberty’s employee, Garrett. It is the contract that vests the insurer with exclusive control over its relationship with the insured. See Natividad, 875 S.W.2d at 698 n. 7. I would reverse the court of appeals and affirm the trial court’s summary judgment for Garrett against Garrison’s Insurance Code claim.

III. CONCLUSION

I would hold that a statutory cause of action under the Insurance Code does not exist against an insurance company employee for his or her acts in the course and scope of employment. Because the Court holds otherwise, I respectfully dissent.

Footnotes

1

Liberty and Garrett’s summary judgment motion did not assert that Garrison’s DTPA claims against Garrett individually were precluded. Instead, the summary judgment motion focused on Garrett’s individual liability under the Insurance Code. Likewise, on appeal, the defendants do not argue about Garrett’s individual liability under the DTPA. Accordingly, we express no opinion on the issue of whether there may be individual DTPA liability against an insurance company employee.

1

The Court gives considerable deference to the Department of Insurance’s views as amicus curiae. Importantly, the Insurance Code’s regulatory powers are broad and extend to “all agents of [insurance] companies,” regardless of whether they are a “natural or artificial person [ ] engaged in the business of insurance.” Seearticle 21.21, section 16(a)’s scope.

End of Document
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