Memorial Medical Center of East Texas v. James A. Howard, Special Deputy Receiver of Texas Employers' Insurance Association and Texas Property and Casualty Insurance Guaranty Association--Appeal from

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State: Texas

Court: Texas Northern District Court

Docket No: 03-97-00567-CV

Case Date: 07/30/1998

Plaintiff: Memorial Medical Center of East Texas

Defendant: James A. Howard, Special Deputy Receiver of Texas Employers' Insurance Association and Texas Proper

Preview:Memorial Medical Center of East Texas v. James A.
Howard, Special Deputy Receiver of Texas Employers'
Insurance Association and Texas Property and Casualty
Insurance Guaranty Association--Appeal from 98th
District Court of Travis County
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-97-00567-CV
Memorial Medical Center of East Texas, Appellant
v.
James A. Howard, Special Deputy Receiver of Texas Employers' Insurance Association,
and Texas Property and Casualty Insurance Guaranty Association, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT
NO. 93-15520, HONORABLE DON B. MORGAN, JUDGE PRESIDING
Appellant, Memorial Medical Center of East Texas ("Memorial"), appeals the summary judgment in favor of
appellees, James A. Howard, Special Deputy Receiver of Texas Employers' Insurance Association ("the Receiver"),
and Texas Property and Casualty Insurance Guaranty Association ("the Association"). (1) Memorial sued appellees
seeking a declaration that they owed Memorial reimbursement for the costs it incurred defending a suit brought against
it by past and present employees. All parties filed motions for summary judgment. Without specifying the grounds, the
trial court granted the motions filed by appellees. Memorial now appeals the granting of the motions. We will affirm.
STATEMENT OF FACTS
Texas Employers Insurance Association ("Employers") provided workers' compensation insurance to Memorial during
the 1970s and 1980s. As part of the coverage, Employers agreed to defend Memorial against any claim, proceeding, or
suit brought for benefits payable under the insurance policy. In 1989, former and present employees of Memorial filed
suit against the hospital styled Allen v. Memorial Medical Center of East Texas. (2) In their original petition, the Allen
plaintiffs claimed that, as a result of Memorial's negligence, gross negligence, and intentional acts, they suffered
personal injuries from exposure to ethylene oxide gas, which Memorial's surgical department used to sterilize surgical
instruments. (3) Since Employers insured Memorial during part of the time the Allen plaintiffs claimed to have been
exposed to the gas, Memorial requested that Employers defend it against the suit. According to the facts alleged in
Memorial's pleadings in the present case, Employers assumed the defense of Memorial until Employers became an
impaired insurer and the subject of receivership proceedings.
On February 1, 1991, Employers was placed in temporary receivership, and a temporary receiver was appointed. The
trial court appointed a permanent receiver on March 28, 1994, and James A. Howard was appointed Special Deputy
Receiver. On April 8, 1994, the Association elected to assume the Receiver's responsibilities to process and pay
covered claims in the Employers' receivership proceeding.
On December 21, 1993, Memorial filed suit seeking a declaration that appellees were obligated both "to provide a
defense for Memorial" in the Allen suit and "to indemnify Memorial for its past expenses in defending" the Allen suit.
On August 29, 1996, Memorial filed its Third Amended Petition in which it claims that, as of the date of filing, it has
spent $147,985.98 defending the Allen suit. Memorial continues to assert that the Receiver and the Association are
obligated to pay Memorial's past and future expenses incurred in defending the Allen suit and continues to seek a
declaration to that effect. All parties filed motions for summary judgment. The trial court, without specifying the
reasons, granted appellees' motions. In two points of error, Memorial now appeals, contending the trial court erred in
granting the appellees' motions for summary judgment.
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STANDARD OF REVIEW
A summary judgment is proper only when a movant establishes that there is no genuine issue of material fact and that
it is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a. In deciding whether a disputed material fact
issue precluding summary judgment exists, evidence favorable to the nonmovant will be taken as true. See Nixon v.
Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference must be indulged in
favor of the nonmovant, and any doubts resolved in its favor. See id. A summary judgment for the defendants
disposing of the entire case is proper if, as a matter of law, the plaintiff could not succeed upon any theories pleaded.
See Delgado v. Burns, 656 S.W.2d 428, 429 (Tex. 1983).
A motion for summary judgment must expressly state the grounds upon which it is made and will stand or fall on those
grounds alone. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993). Summary judgments
may not be affirmed or reversed on grounds not expressly set forth in the motions presented to the trial court. See City
of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 677 (Tex. 1979). Where, as here, a trial court's order granting
summary judgment does not specify the ground or grounds relied on for the ruling, the nonmovant must defeat each
summary judgment ground urged by the movant. See Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989). Otherwise,
the appellate court must uphold the summary judgment if any of the theories advanced are meritorious. Id.
When reviewing cross-motions for summary judgment, the appellate court should consider all the summary judgment
proof and determine all questions presented. See Commissioners Court of Titus County v. Agan, 940 S.W.2d 77, 81
(Tex. 1997). The appellate court may affirm the trial court's summary judgment or reverse and render judgment on the
non-prevailing party's motion. See Holmes v. Morales, 924 S.W.2d 920, 922 (Tex. 1996); Jones v. Strauss, 745 S.W.2d
898, 900 (Tex. 1988).
DISCUSSION
A. Claim Against the Receiver
As part of its grounds for summary judgment, the Receiver argued that any duty to reimburse Memorial its defense
costs was statutorily precluded by article 21.28 section 2(e) of the Texas Insurance Code (the "Code"). This section
states:
(e) Conducting of Business. Upon taking possession of the assets of a delinquent insurer the receiver shall, subject to
the direction of the court, immediately proceed to conduct the business of the insurer, or to take such steps as may be
necessary to conserve the assets and protect the rights of policyholders and claimants for the purpose of liquidating,
rehabilitating, reinsuring, reorganizing or conserving the affairs of the insurer. Notwithstanding the foregoing
requirements or the terms of any insurance contract issued by a delinquent insurer, the receiver is not required to
defend any action against an insured of a delinquent insurer.
Tex. Ins. Code Ann. art. 21.28 (West Supp. 1998) (emphasis added). Memorial claims that this statute is irrelevant
because Memorial is not demanding that the Receiver provide a defense but only that it reimburse Memorial for its
defense costs. There is no merit to Memorial's argument. According to the relief requested in Memorial's pleadings,
Memorial seeks both reimbursement of defense costs already incurred in the Allen suit and a declaration that appellees
are obligated to provide any future defense. More importantly, the duty to reimburse arises from an initial duty to
defend. See U.S. Fidelity & Guar. Co. v. Baldwin Motor Co., 34 S.W.2d 815, 819 (Tex. Comm'n App. 1931, judgm't
adopted) (insurance company not required to reimburse its insured for defense costs unless duty to defend is triggered);
Houston Title Guar. Co. v. Fontenot, 339 S.W.2d 347, 352 (Tex. Civ. App.--Houston 1960, writ ref'd n.r.e.) (obligation
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to defend was clearly intended to mean that company would relieve insured of duty and expense of having counsel).
Here, the plain language of the statute specifically removes the duty to defend an insured from the Receiver's list of
obligations in conducting the business of a delinquent insurer. Consequently, Memorial's reimbursement claim against
the Receiver, as the party conducting the business of Employers, must fail. We hold that the Receiver is not required to
defend Memorial in the Allen suit or to reimburse Memorial for defense costs already incurred. Point of error one is
overruled.
B. Claim Against the Association
The Association also argues in its motion for summary judgment that it is statutorily precluded from defending or
reimbursing Memorial. The Association relies on the following 1993 historical note to article 21.28-C of the Code:
[T]he Texas Property and Casualty Insurance Guaranty Association may assume its responsibilities under this Act in
proceedings initiated before January 1, 1992, prior to September 1, 1994, on an estate-by-estate basis. Assumption of
its responsibilities in proceedings initiated before January 1, 1992, shall not impose upon the Texas Property and
Casualty Insurance Guaranty Association a duty to defend insureds who have been sued under a liability policy issued
by an impaired insurer.
Tex. Ins. Code Ann. art. 21.28-C historical note (West Supp. 1998) [Act of May 30, 1993, 73d Leg., R.S., ch. 685,
9.23, 1993 Tex. Gen. Laws 2559, 2638] (emphasis added). The appellate record reflects that receivership proceedings
were initiated against Employers on February 1, 1991, and that the Association elected to assume its responsibilities on
April 8, 1994. Consistent with the Code, we hold that the Association has no duty to defend Memorial or, for the
reasons previously explained, to reimburse its defense costs. Point of error two is overruled.
CONCLUSION
Under these circumstances, the Receiver and the Association have no obligation to defend or to reimburse Memorial,
the insured of a delinquent insurer, for defense costs. Consequently, we conclude that summary judgment for appellees
was proper, and we affirm the judgment of the trial court.
Marilyn Aboussie, Justice
Before Chief Justice Yeakel, Justices Aboussie and Jones
Affirmed
Filed: July 30, 1998
Publish
1. We will refer to the Receiver and Association jointly as "appellees."
2. For convenience and clarification, we will refer to the employees as the "Allen plaintiffs" and to their underlying
lawsuit as the "Allen suit."
3. The Allen plaintiffs have amended the original petition numerous times. The most recent petition, filed in 1995,
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maintains the previous allegations but also includes claims for assault and battery and punitive damages for the death
of employees due to Memorial's gross negligence.
the purpose of liquidating, rehabilitating, reinsuring, reorganizing or conserving the affairs of the insurer.
Notwithstanding the foregoing requirements or the terms of any insurance contract issued by a delinquent insurer, the
receiver is not required to defend any action against an insured of a delinquent insurer.
Tex. Ins. Code Ann. art. 21.28 (West Supp. 1998) (emphasis added). Memorial claims that this statute is irrelevant
because Memorial is not demanding that the Receiver provide a defense but only that it reimburse Memorial for its
defense costs. There is no merit to Memorial's argument. According to the relief requested in Memorial's pleadings,
Memorial seeks both reimbursement of defense costs already incurred in the Allen suit and a declaration that appellees
are obligated to provide any future defense. More importantly, the duty to reimburse arises from an initial duty to
defend. See U.S. Fidelity & Guar. Co. v. Baldwin Motor Co., 34 S.W.2d 815, 819 (Tex. Comm'n App. 1931, judgm't
adopted) (insurance company not required to reimburse its insured for defense costs unless duty to defend is triggered);
Houston Title Guar. Co. v. Fontenot, 339 S.W.2d 347, 352 (Tex. Civ. App.--Houston 1960, writ ref'd n.r.e.) (obligation
to defend was clearly intended to mean that company would relieve insured of duty and expense of having counsel).
Here, the plain language of the statute specifically removes the duty to defend an insured from the Receiver's list of
obligations in conducting the business of a delinquent insurer. Consequently, Memorial's reimbursement claim against
the Receiver, as the party conducting
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