National Fire Insurance Co. v. State and County Mutual Fire Ins. Co.
(Tex.App.- Houston [1st Dist.] Oct. 8, 2009)(Massengale)(insurance litigation, summary judgment
standards, burden shifting, admissibility sufficiency of evidence)
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Opinion by Justice Massengale
Before Chief Justice Radack, Justices Bland and Massengale
01-07-00845-CV National Fire Insurance Company of Hartford, as Assignee of Kelvin Ray Gatlin
v. State and County Mutual Fire Insurance Company
Appeal from 127th District Court of Harris County
Trial Court Judge: Hon. Sharolyn Wood
In this insurance dispute, Appellant National Fire Insurance Company of Hartford, as assignee of Kelvin
Ray Gatlin, appeals from the district court’s final summary judgment on claims for breach of an insurance
policy and for claims arising under the Stowers doctrine and under the Insurance Code. The rulings below
were predicated upon summary-judgment evidence suggesting that an owned-vehicle exclusion applied to
preclude insurance coverage. Because the evidence proffered below was inadmissible hearsay, we
reverse and remand the case for further proceedings.
This appeal arises out of a December 23, 2000 auto accident in which Kelvin Ray Gatlin allegedly ran a
red light in his 1994 Ford Ranger and struck a vehicle belonging to Rainbow Play Systems. Gatlin had
automobile insurance from appellee State and County Mutual Fire Insurance Company, and Rainbow had
automobile insurance from appellant National Fire Insurance Company of Hartford.
State and County Mutual denied coverage to Gatlin, and National Fire filed a subrogation suit against
Gatlin to recover the insurance proceeds it paid to Rainbow Play Systems. In 2003, National Fire received
a $42,293.63 postanswer default judgment against Gatlin in statutory county court. After that judgment
became final on appeal, the statutory county court signed a turnover order that assigned to National Fire
all of Gatlin’s causes of action against State and County Mutual. On June 2, 2006, National Fire filed the
current lawsuit against State and County Mutual for breach of contract, a Stowers action, Footnote and
violations of the Insurance Code (former Tex. Ins. Code art. 21.21, § 4 and current Tex. Ins. Code §§
On June 20, 2007, State and County Mutual filed a single eight-page document (excluding attached
evidence) styled its “Motion for Final Summary Judgment and No Evidence Motion for Summary Judgment.”
By referencing Rules 166a(c) and 166a(i) of the Texas Rules of Civil Procedure, the motion purports to
move for summary judgment as to all of National Fire’s claims on both traditional and no-evidence
grounds. However, the motion draws no formal distinction between its traditional and no-evidence grounds.
Examination of the motion reveals that State and County Mutual relied on summary-judgment evidence in
an attempt to demonstrate the application of an owned-vehicle exclusion as a defense to the breach-of-
contract claim, and it failed to offer any separate no-evidence argument with respect to the breach-of-
contract claim. State and County Mutual then expressly relied on the same arguments and summary-
judgment evidence to argue that the Stowers claim must be dismissed on noncoverage grounds, again
offering failing to offer any separate no-evidence argument. Finally, and again in express reliance upon
prior arguments and evidence purportedly establishing noncoverage, State and County Mutual contended
that there is no evidence to suggest that it committed any violations of the Insurance Code.
In support of its contention that its insurance policy did not cover Gatlin’s accident, State and County
Mutual offered six exhibits into evidence. The summary-judgment evidence included a Texas personal auto
policy which provides liability coverage under the following terms: “We will pay damages for bodily injury or
property damage for which any covered person becomes legally responsible because of an auto
accident.” The policy defines “covered person” to mean, in part, “You or any family member for the
ownership, maintenance or use of any auto or trailer.” The policy also includes the following owned-vehicle
B.We do not provide Liability Coverage for the ownership, maintenance or use of:
. . .
2.Any vehicle, other than your covered auto, which is
a. owned by you . . . .
The policy contains the following definition:
G.“Your covered auto” means:
1.Any vehicle shown in the Declarations;
2.I.Any of the following types of vehicles on the date you became the owner:
a.a private passenger auto; or
b.a pickup or van with a G.V.W. of 10,0000 lbs. or less not used for the delivery or transportation of goods,
materials or supplies other than samples, or (2) used for farming or ranching.
II.This provision (G.2) applies only if you:
a.acquire the vehicle during the policy period;
b.notify us within 30 days after you become the owner.
If the vehicle you acquire replaces one shown in the Declarations, it will have the same coverage as the
vehicle it replaced. You must notify us of a replacement vehicle within 30 days only if you wish to add or
continue Coverage for Damage to Your Auto.
If the vehicle you acquire is in addition to any shown in the Declarations, it will have the broadest coverage
we now provide for any vehicle shown in the Declaration.
In addition, the summary-judgment evidence included:
• the declarations page to Gatlin’s personal auto policy from December 19, 2000 to June 19, 2001,
which did not list the 1994 Ford Ranger among the covered vehicles;
• a December 24, 2004 claim file that states Gatlin is the owner of the 1994 Ford Ranger and lists a
“title date” of October 29, 1999;
• the declarations page to Gatlin’s personal auto policy from June 26, 2001 to August 6, 2001, which
also did not list the 1994 Ford Ranger among the covered vehicles;
• a list of insurance adjuster’s “action notes,” which among other things contains the December 24,
2002 statement, “REVIEWED FILE AND THIS CLAIM IS DENIED FOR NO COVERAGE THE UNLISTED
VEHICLE WAS BOUGHT ON 10/29/99 BY KEVIN GATLIN AND NEVER LISTED ON THE POLICY”; and
• a compilation of correspondence to Gatlin from his insurance broker, Insurance Depot.
Applying the policy language, State and County Mutual claimed that although Gatlin owned the 1994 Ford
Ranger at the time of the accident, coverage was excluded because the vehicle was not listed on the
declarations page and Gatlin failed to notify State and County Mutual that he had acquired the vehicle
within the 30-day period set forth in the policy. State and County Mutual relied upon the insurance claim
file as proof that Gatlin bought the 1994 Ford Ranger on October 29, 1999, as well as its adjuster’s “action
notes” as proof of Gatlin’s ownership of the 1994 Ford Ranger at the time of the accident.
National Fire filed a response and objections to State and County Mutual’s motions for summary judgment,
including objections to the claim file and the action notes. National Fire objected to the claim file for various
reasons, including the fact that its accompanying business-records affidavit did not establish the identity of
the person who made the record or the foundation of that person’s knowledge. National Fire also objected
to the statement in the action notes that “THE UNLISTED VEHICLE WAS BOUGHT ON 10/29/99 BY KEVIN
GATLIN” because the statement was hearsay, and its accompanying business-records affidavit did not
establish the identity of the writer or the foundation of the writer’s knowledge. National Fire thus contended
that, because there was no proper summary-judgment evidence that Gatlin owned the 1994 Ford Ranger
at the time of the accident, State and County Mutual was not entitled to summary judgment based on the
owned-vehicle exclusion provision of the insurance policy.
After a hearing, the district court rendered summary judgment. In a final summary-judgment order, the
district court rendered a traditional motion for summary judgment on the breach-of-contract and Stowers
claims and a no-evidence motion for summary judgment on the Insurance Code claims. The district court
also signed an order denying National Fire’s objections to State and County Mutual’s summary-judgment
National Fire brings seven issues on appeal. Because all of State and County Mutual’s defenses are
predicated on its contention that it has established noncoverage based on the covered-auto exclusion, we
address that issue first. In issue 2, National Fire contends that State and County Mutual has failed to prove
as a matter of law the application of the covered-auto exclusion.
Because a trial court cannot grant a summary-judgment motion on grounds not presented in the motion,
we consider the issues that relate to the grounds in State and County Mutual’s motion. See, e.g., Timpte
Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). State and County Mutual’s specific proffered ground
for summary judgment was an exclusion to coverage under the insurance policy because Gatlin owned the
1994 Ford Ranger at the time of the accident and he did not notify State and County Mutual that he owned
Traditional Summary Judgment
In issue 2, National Fire asserts the district court erred in rendering summary judgment because there is
no conclusive evidence that the owned-vehicle exclusion applied. The burden of proof as to this issue is
on State and County Mutual to prove the applicability of an exclusion to insurance, as the exclusion
constitutes an avoidance or an affirmative defense. See Tex. Ins. Code Ann. § 554.002 (Vernon 2009).
In order to prove that the owned-vehicle exclusion applied, State and County Mutual bore the burden of
proving that Gatlin owned the 1994 Ford Ranger at the time of the December 23, 2000 accident. No such
evidence was presented to the district court. The only two documents offered into evidence by State and
County Mutual in this regard were the claim file and action notes, both of which recited that Gatlin acquired
title to the truck on October 29, 1999. Assuming, without deciding, that these documents were properly
admitted into evidence, Footnote this evidence was insufficient to carry State and County Mutual’s burden
to prove that Gatlin was the owner of the vehicle on December 23, 2000. We therefore conclude that State
and County Mutual did not establish the application of the covered-auto exclusion, and we sustain issue 2.
No-Evidence Summary Judgment on Insurance Code Claims
Finally, we consider the no-evidence summary judgment rendered by the district court on National Fire’s
claims under the Insurance Code. A no-evidence motion for summary judgment generally shifts the burden
of proof to the non-movant to raise a genuine issue of material fact. E.g., McCoy v. Rogers, 240 S.W.3d
267, 271 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). The non-movant need not, however, respond
to a no-evidence summary-judgment motion filed with respect to claims or affirmative defenses for which
the movant has the burden of proof. Nowak v. DAS Inv. Corp., 110 S.W.3d 677, 680 (Tex. App.—Houston
[14th Dist.] 2003, no pet.); Barraza v. Eureka Co., 25 S.W.3d 225, 231 (Tex. App.—El Paso 2000, pet.
Here, the burden of proof is on State and County Mutual to prove an exclusion to insurance, as the
exclusion constitutes an avoidance or an affirmative defense. See Tex. Ins. Code Ann. § 554.002 (Vernon
2009). As the Texas Supreme Court has recently observed, insurance policies are contracts. Ulico Cas.
Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008) (citing Barnett v. Aetna Life Ins. Co., 723 S.W.
2d 663, 665 (Tex. 1987)). As such, the rights and obligations arising from an insurance policy, and the
rules used to construe them, are those generally pertaining to contracts. Id. (citing Forbau v. Aetna Life
Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994)). If an insurance contract covers certain risks but the policy
contains exclusions or limitations of coverage, when the insured makes a claim for loss from a covered
risk, the insurer must assert any applicable exclusion or limitation to avoid liability. Id. (citing Employers
Cas. Co. v. Block, 744 S.W.2d 940, 943–44 (Tex. 1988)). The insurer has neither a “right” nor a burden to
assert noncoverage of a risk or loss until the insured shows that the risk or loss is covered by the terms of
the policy. Id. (citing Employers Cas. Co., 744 S.W.2d at 943–44). Once the insured does so, then it
becomes incumbent on the insurer—that is the insurer has the “right”—to assert any exclusions or
limitations as affirmative defenses. Id. (citing Employers Cas. Co., 744 S.W.2d at 943-44).
There is no dispute that the policy at issue applies unless coverage is precluded by application of the
owned-vehicle exclusion. State and County Mutual bears the burden of proving the applicability of such
exclusion. As explained above, on this record the application of the exclusion was not established by
traditional summary-judgment methods, and thus noncoverage cannot be presumed for purposes of State
and County Mutual’s no-evidence motion. Because the no-evidence motion is contingent upon a
determination of noncoverage, the district court erred in granting the no-evidence motion as to National
Fire’s Insurance Code claims.
We thus sustain issue 6 as it relates to the no-evidence motion for summary judgment on National Fire’s
Insurance Code claims. Footnote
We reverse the district court’s judgment and remand the case for further proceedings.
Panel consists of Chief Justice Radack and Justices Bland and Massengale.