Opinion
Civil Action No. 5:02-CV-279-C
May 15, 2003
ORDER
On this day the Court considered Defendant Mendota Insurance Company's Motion to Dismiss for Failure to State a Claim, or in the Alternative, Motion for Judgment on the Pleadings or, in the Alternative, Motion for Summary Judgment filed on April 11, 2003. Plaintiff Charles West filed a Response on May 1, 2003. Defendant filed a Reply on May 14, 2003. After considering all relevant argument and evidence, the Court is of the opinion that Defendant's Motion should be GRANTED in part and DENIED in part.
I. BACKGROUND
On April 20, 2002, Plaintiff was involved in a serious auto accident in Lubbock, Texas. Plaintiff sought coverage under an automobile insurance policy issued by Defendant. However, Defendant denied coverage under the policy asserting that the policy had expired prior to the accident as a result of Plaintiff's nonpayment of premiums.On November 4, 2002, Plaintiff Charles West filed suit against Defendant Mendota Insurance Company in the 237th District Court of Lubbock, Texas. Plaintiff alleged breach of contract, violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act in connection with the Defendant's denial of insurance coverage. On November 21, 2002, the action was removed to this Court by the Defendant.
II. STANDARD
Conversion of Rule 12(b)(6) Motion to Rule 56 Motion
When a party moves to dismiss an action under Rule 12(b)(6), both parties necessarily proceed with the expectation that the court will decide the motion based on the pleadings alone. Song v. City of Elyria, Ohio, 985 F.2d 840, 842 (6th Cir. 1993). If, however, on a Rule 12(b)(6) motion for judgment on the pleadings, "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." FED. R. CIV. P. 12(b). See also Porter v. Shearson Lehman Bros., Inc., 802 F. Supp. 41, 53 (S.D. Tex. 1992) (noting that the Fifth Circuit has long recognized that materials filed concurrently with pleadings are sufficient to convert a motion to dismiss into a motion for summary judgment). Whether or not the court considers matters outside the pleadings is left entirely to the discretion of the court. Isquith on behalf of Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 193 n. 3 (5th Cir. 1988). The court's discretion is generally exercised in terms of whether the proffered material and the resulting conversion to a Rule 56 procedure is likely to facilitate the disposition of the action. Id.
When a motion to dismiss is converted into a motion for summary judgment, "all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." FED. R. CIV. P. 12(b). The purpose of the "reasonable opportunity" language contained in Rule 12(b) is to prevent unfair surprise to the parties. Clark v. Tarrant County, Texas, 798 F.2d 736, 745 (5th Cir. 1986). All parties are entitled to notice that the court might treat the motion as one for summary judgment. Isquith, 847 F.2d at 195. See also Clark, 798 F.2d at 746 (holding that the district court erred in dismissing a case under summary judgment without giving notice as required by Rule 56).
However, when a non-movant submits material outside the pleadings in response to a Rule 12(b)(6) motion, the non-movant is deemed to have constructive notice that the motion to dismiss might be treated as a motion for summary judgment. Dayco v. Goodyear Tire Rubber Co., 523 F.2d 389, 393 (6th Cir. 1975). Constructive notice that the court might consider matters outside the pleadings is sufficient to satisfy the notice requirements of Rule 56. Madewell v. Downs, 68 F.3d 1030, 1048 (8th Cir. 1995). A party who submits material beyond the pleadings in opposition to a Rule 12(b)(6) motion to dismiss is scarcely in a position to claim unfair surprise or inequity. Arnold v. Air Midwest, Inc., 100 F.3d 857, 859 n. 2 (10th Cir. 1996).
In the instant case, this Court finds that (1) not only does Defendant's Motion to Dismiss or, in the Alternative, for Summary Judgment give the non-movant Plaintiff actual notice that this Court might treat Defendant's alternative motions as a Rule 56 motion, but (2) the nonmovant Plaintiff has submitted materials outside the pleadings in response to Defendant's alternative motions and "is scarcely in a position to claim unfair surprise or inequity." Accordingly, pursuant to Rule 12(b), this Court will treat Defendant's alternative motions as a Rule 56 motion for summary judgment.
Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," when viewed in the
light most favorable to the non-moving party, "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986) (internal quotations omitted). A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 248. In making its determination, the court must draw all justifiable inferences in favor of the non-moving party. Id. at 255. Once the moving party has initially shown "that there is an absence of evidence to support the nonmoving party's case," Celotex Corp. V. Catrett, 477 U.S. 317, 325 (1986), the non-movant must come forward, after adequate time for discovery, with significant probative evidence showing a triable issue of fact. FED. R. CIV. P. 56(e); State Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th Cir. 1990). Conclusory allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation are not adequate substitutes for specific facts showing that there is a genuine issue for trial. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428 (5th Cir. 1996) (en banc); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993). To defeat a properly supported motion for summary judgment, the non-movant must present more than a mere scintilla of evidence. See Anderson, 477 U.S. at 251. Rather, the non-movant must present sufficient evidence upon which a jury could reasonably find in the non-movant's favor. Id.
III. DISCUSSION
In his first amended Complaint, Plaintiff asserts a claim of breach of contract by Defendant. Defendant denies this claim. The elements in a suit for breach of contract are: "(1) the existence of a valid contract; (2) that the plaintiff performed or tendered performance; (3) that the defendant breached the contract; and (4) that the plaintiff was damaged as a result of the breach. " Southwell v. University of Incarnate Word, 974 S.W.2d 351, 354-55 (Tex.App.-San Antonio 1998). The threshold question is whether or not a contract exists.An insured's failure to pay premiums when they come due causes the insurance policy to lapse and become ineffective. See Walker v. Federal Kemper Life Assurance Co., 828 S.W.2d 442, 447 (Tex.App. — San Antonio 1992). When a grace period on a policy passes without payment of the defaulted premium, the policy lapses and terminates. See P.M. Baker v. Penn Mutual Life Ins. Co., 617 S.W.2d 814, 815 (Tex. CIV. App. — Houston [14th Dist.] 1981). In addition, an insurance company need not advise an insured that his policy has lapsed; however waiver or estoppel might prevent a lapse and keep the policy in force. See Cantu v. Southern Life Health Ins. Co., 360 S.W.2d 812, 813 (Tex. CIV. App. — San Antonio 1962).
"[I]n the absence of any agreement to that effect," waiver results "from negotiations or transactions with the insured, after knowledge of the forfeiture, by which the insurer recognizes the continued validity of the policy or does acts based thereon." See Equitable Lfe Assurance Society v. Ellis, 105 Tex. 526, 536-37 (1912). An insurer's acceptance of premium payments beyond the grace period does not constitute waiver of the provisions of the forfeiture clause for nonpayment of premiums, and a company who accepts late premiums does not waive the forfeiture clause in any future situation. Blanton v. John Hancock Mut. Life Ins. Co., 345 F. Supp. 168, 170 (N.D. Tex. 1971).
In the present case, Defendant sent Plaintiff a renewal notice on March 15, 2002. The renewal notice informed Plaintiff that his automobile insurance policy would expire on April 18, 2002 at 12:01 a.m. unless Defendant received a premium payment by April 8, 2002. No payment was received by Defendant, thus the policy expired on April 18, 2002. Subsequently, on April 19, 2002, Plaintiff sent a premium payment to Defendant. Plaintiff claims that the policy did not expire because there had been a course of dealing in the past between Defendant and Plaintiff wherein payments were accepted late. However, the mere fact that Defendant had accepted late payments in the past does not create a waiver of the provisions of the forfeiture clause for nonpayment of the premiums. The evidence does not establish that Plaintiff tendered performance, which is an essential element in a suit for breach of contract. Accordingly, Defendant's Motion to Dismiss Plaintiffs contract claim is GRANTED. Moreover, because Plaintiff failed to make his payment on or before the expiration date, the policy expired on April 18, 2002 and Plaintiff was not insured by Defendant on April 20, 2002.
Plaintiff also asserts claims under the Texas Insurance Code and the Texas Deceptive Trade Practices Act. Plaintiff claims that on or about April 17, 2002, he spoke with an employee of Defendant on Defendant's 800 telephone number. Plaintiff alleges when he called Defendant's 800 number he spoke with someone about paying late and that the person told him he could pay late without disrupting his insurance coverage. Plaintiff claims that he relied on this representation and sent his insurance payment in on April 19, 2002. Defendant argues that the employee Plaintiff spoke with had no authority to bind Defendant, thus no misrepresentation was made by Defendant.
An insurer may be responsible for damages to an insured when the insurer has engaged in unfair insurance practices or violated the Deceptive Trade Practices Act, even though no coverage existed under the policy. See Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96 (Tex. 1994). To recover under article 21.21 of the Texas Insurance Code, Plaintiff need not prove that the employee he spoke with possessed actual or apparent authority to bind Defendant. Plaintiff must only prove that Defendant engaged in an unfair insurance practice that was a producing cause of damage to him. See Tex. Ins. Code Ann. art. 21.21; Celtic Life Insurance Co. v. Coats, 885 S.W.2d 96, 99 (Tex. 1994); Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688, 691-93 (Tex. 1979); State Farm Fire Cas. Co. v. Gros, 818 S.W.2d 908, 912-14 (Tex.App.-Austin 1991).
In Celtic Life Insurance Co. v. Coats, the Supreme Court of Texas held an insurer liable for the misrepresentations of one of its agents that the insured was "covered" for up to one million dollars in psychiatric benefits, when the policy actually covered only $10,000. 577 S.W.2d at 99. Similarly in Royal Globe Insurance Co. v. Bar Consultants, Inc., a local recording agent for Royal Globe represented to the insured that coverage was provided for damage caused by vandalism. 577 S.W.2d at 689. When Royal Globe later denied a vandalism claim on the ground that the claim was not covered under the policy, the insured sued under the Texas Deceptive Trade Practices Act and article 21.21 of the Insurance Code alleging damages as a result of the pre-loss misrepresentation. Id. at 690. The Texas supreme court held that the actions of the agent amounted to a violation of both statutes. Id. at 694.
Although Coats and Royal Globe involved misrepresentations about coverage, the employee's statements to Plaintiff are similar. Plaintiff has presented sufficient evidence to raise a genuine issue of material fact regarding whether or not the employee's statements were misrepresentations in violation of article 21.21 of the Insurance Code and the Texas Deceptive Trade Practices Act. As such, Defendant's Motion for Summary Judgment on these claims are DENIED.
IV. CONCLUSION
Plaintiffs failure to pay his premium before the expiration date resulted in the expiration of his automobile insurance policy on April 18, 2002. Therefore, Plaintiff was not insured by Defendant on April 20, 2002. Because Plaintiff cannot establish an essential element of his breach of contract claim, Defendant's Motion for Summary Judgment as to Plaintiffs breach of contract claim is GRANTED. Regarding Plaintiffs Insurance Code claim and Texas Deceptive Trade Practices Claim, Plaintiff submitted evidence creating a genuine issue of material fact thereby precluding Defendant's Motion for Summary Judgment on these claims. Defendant's Motion for Summary Judgment as to Plaintiffs claims under the Texas Insurance Code and the Texas Deceptive Trade Practices Act are DENIED.SO ORDERED