Court Opinion

ID: 5102472
Source: CourtListenerOpinion
Date Created: 2021-10-01 22:42:07.096519+00
Date Added: 2024-06-11T08:21:05.342301
License: Public Domain

CHARLES W. SEYMORE, Justice,
dissenting.
I respectfully dissent for two major reasons: (1) the policy in question is not life or accident insurance prescribed under the Insurance Code; and (2) alternatively, NCS had an insurable interest in William Smith’s life through its Job Injury Benefit Program.
The Texas worker’s compensation system experienced a complete meltdown during the later 1980’s. Many businesses exited the state because they could no longer afford to pay extremely high premiums for worker’s compensation coverage. At all times material to this action, NCS was in bankruptcy. It elected to become a nonsubscriber (employer rejecting statutory worker’s compensation coverage). According to testimony, NCS created a Job Injury Benefit Program to compensate employees who sustain injury or death on the job. NCS contends it was necessary to insure its obligations under the program because the trustee in bankruptcy could not or probably would not timely allocate sums of money to pay for expenses resulting from employee injury or death. During this tumultuous period,1 domestic insurance carriers did not provide employer’s indemnity or liability coverage as an alternative to coverage prescribed by the Worker’s Compensation Act. Also, there was no prescribed language for a policy which would provide reimbursement to a nonsubscriber for payments in connection with injury or death of an employee.
Early in the 1990’s, a few Lloyd’s syndicates offered insurance alternatives for non-subscribers. The insurance contract in question is titled “Lloyd’s Occupational Accidental Death Insurance.” According to testimony, it was issued as a surplus lines policy. The insuring language does not conform to the specified language for group coverage defined in Texas Insurance Code, Article 3.51-6, Section 1(a)(1) or blanket policy defined in Article 3.51-6, Section 3. See Tex. Ins.Cobe Ann. Art. 3.51-6, §§ 1(a)(1), 3 (Vernon 1981 & Supp. 2002). In Tamez v. Certain Underwriters at Lloyd’s, London, a different panel on this court reviewed the same policy and opined that it provides group accident insurance prescribed under Article 3.51-6. *883999 S.W.2d 12, 20 (Tex.App.-Houston [14th Dist.] 1998, pet. denied). The Tamez panel grafted the provisions of article 3.51-6 Section 1(a)(1) onto the policy and concluded that “group insurance must be for the benefit of persons other than the employer.” Id. at 20. The majority follows the previous panel’s decision in Tamez and implicitly rewrites the policy by changing the designated assured/beneficiary from NCS to William Smith and/or his survivors. The rationale for rewriting the policy was stated in Tamez as follows: “NCS recovered benefits from this policy in violation, of the Insurance Code....” Id. at 20-21. This conclusion, without explanation, completely disregards NCS’s assertion and testimony that the policy was written as a manuscript (non-prescribed language) through Lloyd’s, an eligible surplus lines carrier. Accordingly, I would not rewrite the policy to achieve the result fostered by the majority.
During all times material to this case, NCS was a nonsubscriber, operating under the direction of a trustee in bankruptcy. In the event of employee injury or death, NCS would be required to ask the trustee for an allocation of corporate assets against the interest of other competing creditors. It would be reasonable to conclude that NCS could not have continued in business without creating a Job Injury Benefit Program and purchasing insurance to cover obligations and risks associated with being a nonsubscriber. See Kroger Co. v. Keng, 23 S.W.3d 347, 350-52 (Tex. 2000). It is apparent that our Supreme Court did not contemplate this type of relationship between employer and employee when it outlined the three general classes of people who have an insurable interest in the life of another.2 Drane v. Jefferson Standard Life Ins. Co., 139 Tex. 101, 161 S.W.2d 1057, 1058-59 (1942). Certainly, there should be no disagreement that employer-employee relations have changed in the last sixty years. Our legislature acknowledged and authorized insuring agreements similar to the subject Lloyd’s policy subsequent to the events made the basis of this appeal. See Tex. Ins.Code Ann., Article 3.49-1. The majority follows the Tamez panel and essentially ignores NCS’s payment of benefits under the Job Injury Benefit Program. Considering the unique facts of this case, I do not believe this court should be constrained by the Supreme Court’s sixty year old Drane opinion. It is my considered opinion that NCS had an insurable interest in William Smith’s life through its Job Injury Benefits Program. The majority refuses to recognize NCS’s precarious existence and the practical solution formulated to handle risks of loss. Imputation of vice in this insurance arrangement makes for great rhetoric by advocates; however, it is most difficult for any reasonable person to conclude that bankrupt NCS intended to make a profit by wagering on the lives of its employees. I would not approve imposition of a constructive trust to disgorge NCS as the assured/beneficiary of the subject insurance policy. I see little equity in awarding policy proceeds to William Smith’s survivors long after appellee, Angela Smith, agreed to accept $300,000 plus in monthly (structured) benefits for release of NCS’s potential contract and tort liability in connection with William Smith’s untimely death.
*884I concur with the majority in reversing that portion of the trial court’s judgment imposing joint and several liability for policy proceeds, attorney’s fees and interest against Lloyd’s. For all the reasons stated above, I respectfully register my dissent to that portion of the majority opinion affirming the trial court’s imposition of a constructive trust and award of policy proceeds and attorneys fees to Angela Smith.

. Chief Justice Phil Hardberger, Texas Worker's Compensation: A Ten-Year Survey— Strengths, Weaknesses and Recommendations, 32 St. Mary's L.J. 1, 1-3 (2000).

. Three general classes of those who may have an insurable interest in the life of another include (1) one so closely related by blood or affinity that he wants the other to continue to live, irrespective of monetary considerations; (2) a creditor; and (3) one having a reasonable expectation of pecuniary benefit or advantage from the continued life of another. Drane, 161 S.W.2d. at 1059.