Tenth Court Reverses Summary Judgment in Insurance Case

By October 26, 2016March 8th, 2019Announcements, Court Decisions

The Tenth Court of Appeals has reversed a take-nothing summary judgment granted to an insurance company, an insurance agent, and his agency.

Plaintiff Karl Wallace inherited an unoccupied property a few hundred miles from his residence. To insure the property, he contacted John Cole and the John Cole Insurance Agency, Inc. Cole and his agency ultimately procured the insurance through AmTrust Insurance Company of Kansas, Inc. A fire subsequently destroyed the property. Because the property was unoccupied, AmTrust contended it was under no obligation to pay, asserting a fraud-in-the-application defense and requesting rescission.

Wallace eventually sued AmTrust, Cole, and his agency. After the defendants moved for summary judgment, the trial court granted their motions, dismissed Wallace’s claims with prejudice, and issued a take-nothing judgment. The trial court also rescinded the policies. On appeal, Wallace asserted the following grounds to reverse the judgment concerning AmTrust: (1) the trial court erred because AmTrust did not conclusively prove that it complied with notice requirements under Texas Insurance Code section 705.005; (2) the trial court erred because AmTrust did not conclusively prove the elements of its fraud-in-the-application defense; (3) the trial court erred because it did not disprove an essential element of Wallace’s claims; (4) the trial court erred by applying the collateral estoppel/res judicata doctrines; and (5) the trial court erred by relying on what was ultimately an unmeritorious objection to Wallace’s affidavit evidence without explicitly ruling upon the objection.

Wallace also asserted the following grounds to reverse the judgment concerning John Cole and his agency: (1) the trial court erred by applying the sham-affidavit doctrine to strike Wallace’s affidavit evidence; (2) the trial court erred because Cole and his agency did not address Wallace’s negligence, agency, and vicarious liability claims; and (3) the trial court erred because Wallace had provided legally sufficient evidence, creating a fact issue on the negligence claims. Wallace did not, however, address the trial court’s summary judgment on his DTPA and Insurance-Code claims.

The Tenth Court originally reversed the trial court’s judgment as to AmTrust and affirmed the judgment in Cole and his agency’s favor. The Court held that a fact issue existed concerning notice under section 705.005 and that it need not address Wallace’s remaining grounds. As to Cole and his agency, the Tenth Court noted that Wallace had included an issue that broadly addressed the trial court’s grounds for its summary judgment. But the Tenth Court held that Wallace waived his complaints regarding his negligence claims because he did not also attack the summary judgment on his DTPA and Insurance Code claims.

Subsequently, a successful rehearing motion prompted the Tenth Court to issue a new opinion and judgment addressing Wallace’s arguments for reversing the summary judgment favoring Cole and his agency. In the new opinion, the Court held that the trial court abused its discretion by striking the affidavit evidence and considered it as part of the summary-judgment record. The Tenth Court also held that the trial court could not grant summary judgment on claims that Cole and his agency failed to address during the summary-judgment proceedings. The Court ultimately reversed summary judgment on the unaddressed claims and remanded the entire case for trial.

Maitreya Tomlinson was lead appellate counsel and handled the case on appeal, along with D. Todd Smith and Mark S. Humphreys.

Wallace v. AmTrust Ins. Company of Kansas, Inc., No. 10-14-00209-CV, 2016 WL 3136875 (Tex. App.—Waco June 2, 2016, no pet.) (mem. op. on reh’g).