I’m not usually surprised when insurance companies win at the Texas Supreme Court, but today was a little stunning when the Court issued its opinion in USF&G v. Goudeau. And I’ll warn you up front, I’m short on time and don’t have a lot of time to explain my ramblings below.
While working on the job, Goudeau stopped on a Houston freeway to help another motorist. Shortly after Goudeau got out of his car, an SUV hydroplaned and hit both cars, pinning Goudeau between the cars and a retaining wall and causing Goudeau serious injuries.
USF&G was the carrier for the UIM policy and also the company that issued the worker’s compensation policy that paid for much of Goudeau’s medical care.
Goudeau sued USF&G for UIM benefits. USF&G answered the lawsuit with one law firm and a few days later intervened to recover its subrogation interest with another law firm. (Normally, if you recover from a third party, you have an obligation to pay a worker’s comp carrier back a portion of what they paid on your behalf.)
USF&G took the position that the uninsured motorist coverage didn’t apply because Goudeau wasn’t “occupying” his vehicle at the time of the accident. But, by filing the subro claim, USF&G is also saying that if money is owed, then it goes right back to us.
One question the court answered was what does “occupying” mean? The court said Goudeau wasn’t occupying the car because he wasn’t in it. That doesn’t surprise me. There are other courts all over the country that define occupying in such a way that coverage would exist ( eg some states find occupancy when the person is in close proximity to the car, when the person is “within a reasonable geographic perimeter” of the car, or if occupancy started the chain of events that led to the incident). But there is no realistic expectation that the Court would interpret the phrase in a way that provides more coverage and protections than it has to. The Court says we must look at the plain meaning of the word “occupying.” Thus, there’s no coverage.
What did surprise me was the Court’s finding that USF&G was not bound by its answer to a request for admission that the claim was covered. During the case, Goudeau sent a request for admission to the USF&G lawyer on the subro side of the case who admitted that the claim was covered.
The Court says that the admission from USF&G subro lawyer isn’t an admission because USF&G is acting in different capacities. That’s problematic because it’s not true. USF&G is never acting in two capacities. It’s always acting on its own behalf. While one lawyer did the defense of the UIM claim and one did the intervention on the subro claim, USF&G is still only USF&G.
First, the Court looks at Rule 198, which says that requests for admission can only be used against the “party making the admission.” The Court says the question is how to apply that when the party appears in two different capacities. But what happened to the plain meaning rule the Court said was so necessary to interpret “occupying?” If you look at the plain meaning, USF&G is the same party and the admission should be binding. But the plain meaning rule is out the door here because it would be against USF&G.
Then the Court cites an old case that involved requests for admissions against a woman that was sued individually and as the executor of her husband’s estate. In that case, the court held that the admissions were admissible only against the woman individually, because they were directed to her in that capacity, and weren’t binding on the estate.
But that’s a very different situation. The woman in that case is appearing on behalf of two distinct entities — herself and the estate. There is no such segregation between USF&G. They are the same party, and in the defense and in the subrogation claim, they are both appearing on behalf of USF&G, not in some capacity on behalf of another entity. There’s no capacity question here because it’s all USF&G.
The Court then goes on to say that insurance companies are faced with this problem all the time when they represent both parties in an auto accident or when defending an insured while denying coverage. The Court says that “if they [insurance companies] can be bound by an admisison in one capacity that was sent to them in another, they can be made to forfeit every case regardless of the merits.” That is simply ridiculous.
In their first example, an insurance company represents two individuals in a wreck. But the lawyer doesn’t represent the insurance company. The lawyer represents Smith & Jones, the participants. If Smith makes an admission, it’s binding on Smith but no one else. Likewise for Jones. No admission in that case implicates the insurance company, and no admission could make the insurance company “forfeit every case regardless of the merits.”
In the second example, the Court says that insurance companies have a problem when defending an insured while denying coverage. But when defending the insured, the insurance company isn’t a party to the lawsuit. If the defendant tortfeasor answers an admission, the insurance company isn’t bound by it. Again, that admission wouldn’t implicate the insurance company.
The difference in this case is that both of the actual parties were USF&G. They were making different claims, but they were both acting on behalf of itself and not in a represntative capacity of some other entity.
Kudos to Justices Green, Jefferson and Johnson for a good dissent. As they stated:
The pleadings of both the intervenor and the defendant are consistently attributed to USF&G, and there is no indication of any real separation between the USF&G that administers the auto policy and the USF&G that administers the worker’s compensation policy. Although, as the Court points out, insurers may stand in different shoes or act in different capacities, there is no indication that USF&G in this case is anything but a single entity with the power to sue and be sued only in the name of USF&G.
Okay. My rant is over. Have a great weekend.
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