Court Opinion

ID: 9668143
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:03:47.118335+00
Date Added: 2024-06-11T18:15:43.283089
License: Public Domain

OPINION
CORNELIUS, Chief Justice.
Sabine Towing & Transportation Co., Inc. (Sabine) appeals from a take-nothing judgment in its suit against Holliday Insurance Agency, Inc. (Holliday) for negligent misrepresentation and violation of Tex.Ins.Code Ann. art. 21.21 (Vernon Supp. 2001). In two points of error, Sabine challenges the legal and factual sufficiency of the evidence, contending that the trial court erred by finding that Sabine’s suit was barred by the two-year statute of limitations; and that Holliday neither made misrepresentations as to insurance coverage nor violated Article 21.21 of the Texas Insurance Code. We find that the trial court correctly held that Sabine’s suit was barred by limitations, and we affirm the judgment.
Sabine’s suit arose from a personal injury sustained by Danny LeLeux, an employee of Superin, Inc., one of Sabine’s subcontractors. In February 1991, LeLeux was working on the S/S Pecos, one of Sabine’s vessels docked in Port Arthur, Texas, and he slipped and injured his back. In contemplation of situations such as this, Sabine required all its contractors to have a current certificate of insurance on file with its insurance and risk management department. In early October 1990, Supe-rln purchased a comprehensive general liability (CGL) policy with ship repairers liability coverage from Holliday Insurance Agency. In addition to the CGL, the policy also contained blanket waivers of subro-gation as well as blanket waivers of additional insureds endorsements. Because Superin routinely performed work for Sabine, a copy of its certificate of insurance was forwarded to Sabine via Holliday on October 16, 1990. LeLeux filed suit against Sabine on June 12, 1991. Sabine sought liability coverage under Superin’s insurance policy via the blanket waiver of subrogation and additional insureds endorsement provisions included on the insurance certificate on file for Superin, which were named in favor of Sabine. Counsel for Sabine sent a letter to Edna Holliday, president of Holliday, on July 8, 1991, seeking a determination of coverage. Sabine did not receive a response until April 1992, approximately nine months later, when Richard Schwartz, on behalf of *59Holliday, indicated that Sabine was not covered by Superin’s policy. On March 21, 1994, Sabine filed a third-party action against Holliday for negligently misrepresenting that Sabine was an additional insured under Superin’s policy.1 Sabine settled with LeLeux in July 1994 for $250,000.00, of which all but $25,000.00 was paid by Sabine’s liability insurance carrier. After a nonjury trial in November 1999, the trial court rendered a take-nothing judgment in favor of Holliday.
Sabine attacks both the legal and factual sufficiency of the trial court’s findings that (1) the two-year statute of limitations barred its causes of action, arguing that the discovery rule should apply to defer the commencement of the limitations period, and that (2) Holliday neither negligently misrepresented that Sabine was covered by Superin’s policy nor violated Article 21.21 of the Texas Insurance Code.
When both legal and factual sufficiency grounds are raised, we review the legal sufficiency point first to determine whether there is any probative evidence to support the jury’s verdict. See Glover v. Texas Gen. Indem. Co., 619 S.W.2d 400, 401 (Tex.1981). The traditional legal sufficiency or no-evidence test requires us to consider only the evidence favorable to the verdict, disregard all evidence and inferences to the contrary, and determine whether any probative evidence exists to support the verdict. See Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 51 (Tex.1997); Wal-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 326-27 (Tex.1993); Weirich v. Weirich, 833 S.W.2d 942, 945 (Tex.1992). If more than a scintilla of evidence supports the jury’s finding, the no-evidence challenge fails. See Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex.1996); Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. See Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983); Seideneck v. Cal Bayreuther Assocs., 451 S.W.2d 752, 755 (Tex.1970).
The standard for a factual sufficiency review requires us to review all the evidence, both favorable and unfavorable to the verdict, and determine whether the verdict is so against the great weight and preponderance of the evidence as to be manifestly wrong or unjust. See Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). Findings of fact and conclusions of law have the same force and dignity as a jury’s verdict, and are reviewable for sufficiency of the evidence by the same standards that are applied in reviewing a jury’s verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991). Although we are required to review all the evidence, we may not interfere with the fact finder’s resolution of conflicts in the evidence. See Am.’s Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 628-29 (Tex.App.-San Antonio 1996, writ denied); Lawson-Avila Constr., Inc. v. Stoutamire, 791 S.W.2d 584, 594 (Tex.App.San Antonio 1990, writ denied). Where conflicting evidence is presented, the fact finder’s verdict on such matters is generally considered to be conclusive. See Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508, 511-12 (1947).
A cause of action generally accrues, and the statute of limitations begins *60to run, when facts come into existence that authorize a party to seek a judicial remedy. Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex.1998), citing Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.1990). In most cases, a cause of action accrues when a wrongful act causes an injury, regardless of when the plaintiff learns of that injury or if all resulting damages have yet to occur. S.V. R.V., 933 S.W.2d 1, 4 (Tex.1996). More specifically, actions for violations of the Insurance Code or for negligent misrepresentation must be brought within two years of the day the cause of action accrues. See Tex.Ins.Code Ann. art. 21.21, § 16(d) (Vernon Supp.2001); Milestone Props., Inc. v. Federated Metals Corp., 867 S.W.2d 113, 118 (Tex.App.—Austin 1993, no writ).
The discovery rule exception defers the accrual of a cause of action until the plaintiff knew, or through the exercise of reasonable diligence should have known, of the facts giving rise to the cause of action. Trinity River Auth. v. URS Consultants, Inc., 889 S.W.2d 259, 262 (Tex.1994); Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex.1990). The discovery rule thus delays the commencement of the limitations period when the nature of the injury is inherently undiscoverable and evidence of the injury is objectively verifiable. See Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex.1996); Tanglewood Terrace v. City of Texarkana, 996 S.W.2d 330, 337 (Tex.App.—Texarkana 1999, no pet.). These two elements of inherent undiscoverability and objective verifiability balance these conflicting policies in statutes of limitations: the benefits of precluding stale claims versus the risks of precluding meritorious claims that happen to fall outside an arbitrarily set period. S.V. v. R.V., 933 S.W.2d at 6. An injury is inherently undiscoverable if it is the type of injury that is not generally discoverable by the exercise of reasonable diligence. See HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex.1998) citing Computer Assocs. Int’l, Inc. v. Altai Inc., 918 S.W.2d at 455. In order for an injury to be inherently undiscoverable, the injury need not be absolutely impossible to discover. S.V. v. R.V., 933 S.W.2d at 7. The discovery of a particular injury depends on the circumstances of the injury and the plaintiffs diligence.
Holliday contends that in Texas the discovery rule does not apply to negligent misrepresentation causes of action. To support this position Holliday relies extensively on the decision in Kansa Reinsurance Co. v. Congressional Mortgage Corp. of Texas, 20 F.3d 1362 (5th Cir.1994). In Kansa, the court held that the discovery rule does not apply to negligent misrepresentation actions, stating, that, “such a claim should be subject to the rules of accrual governing negligence, and we will apply the general Texas rule that the limitations period for negligence actions runs from the commission of the negligent act, not the date of the ascertainment of damages.” 20 F.3d at 1372, quoting Fusco v. Johns Manville Prods. Corp., 643 F.2d 1181,1183 (5th Cir.1981).
In HECI Exploration Co. v. Neel, 982 S.W.2d 881, however, the Texas Supreme Court, in an attempt to provide predictability and consistency, articulated a two-pronged test for applying the discovery rule: that an injury be inherently undis-coverable and be objectively verifiable. The court in that case engaged in a discovery rule analysis of a negligent misrepresentation claim, ultimately holding that because the injury was not inherently un-discoverable, the discovery rule did not toll the limitations period. Id. at 886. Recently the court has held that by implementing this two-pronged categorical ap*61proach to the discovery rule, we no longer determine when an injury was actually discovered in a particular case, but rather whether that case is the type of case to which the discovery rule applies. Apex Towing Co. v. Tolin, 41 S.W.3d 118 (Tex.2001); HECI Exploration Co. v. Neel, 982 S.W.2d at 886. Additionally, two Texas courts of appeals have similarly applied the discovery rule to negligent misrepresentation causes of action. Matthiessen v. Schaefer, 27 S.W.3d 26, 31 (Tex.App.—San Antonio 2000, pet. denied); Hendricks v. Thornton, 973 S.W.2d 348, 365 (Tex.App.—Beaumont 1998, pet. denied).
In light of HECI, which postdates the Fifth Circuit’s decision in Kansa, as well as our sister courts’ decisions in Matthies-sen and Hendricks, we find that the discovery rule is applicable to negligent misrepresentation causes of action.2
We now turn to the two-pronged test to determine whether Sabine’s injury — Holliday’s denial of coverage — was inherently undiscoverable and objectively verifiable. First, with regard to the inherent undiscoverability prong, it is important to establish the commercial backdrop on which Sabine, Superin, and Holliday were operating. According to two insurance law commentators, contracting parties generally use a variety of risk-shifting measures
to minimize the costs of performance and to allocate responsibility for contingent liabilities. See Samir B. Mehta, Additional Insured Status in Construction Contracts and Moral Hazard, 3 Conn. Ins. L.J. 169 (1996-97); William E. O’Neal, Insuring Contractual Indemnity Agreements Under CGL, MGL and P & I Policies, 21 MaR. Law. 359 (1997). One of these measures is the use of insurance procurement clauses that require a party to procure insurance, to name the other party as an additional insured, and to effect a waiver of subrogation from the insurer. See O’Neal, supra. One party’s acquisition of additional insured status on another’s CGL policy is a common risk management technique. See Mehta, supra. CGL policies, like that purchased by Superin from Holliday, provide insurance for tort liabilities. See O’Neal, supra. The broad grant of coverage in the CGL policies obligates the insurer to pay sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage. However, while contractual liability has become a standard element of coverage in most CGL policies, O’Neal admonishes indemnitees that they should by no means become complacent and assume, when evidence of insurance is provided confirming compliance with insurance procurement clauses, that coverage is actually availing. This admo*62nition is particularly important in light of variances in policy language and the different forms in use, some of which limit the type of contracts insured. These limitations, such as requiring written contracts between the insured and a third party for coverage to attach, as in this ease, necessitate that third parties like Sabine exercise diligence to ensure that they are in fact covered by the policy indicated in an insurance certificate.
In this case, the evidence adduced at trial showed that Sabine was provided a certificate of insurance indicating that Superin was insured by Holliday. This certificate was sent to Sabine’s insurance and risk management department in care of department manager Mary Ann Duplan-tis on October 16, 1990. As required by Sabine,3 Superin’s certificate of insurance contained a blanket waiver of subrogation and an additional insured endorsement in favor of Sabine. However, the certificate also included the following language appearing prominently in the upper right-hand corner: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER.” (Emphasis added.) Additionally, Sabine was required to send all certificates of insurance to Sequia Industries, its parent company, for approval. Although Sequia customarily returned certificates of insurance to Sabine with “approved” stamped on them, Ms. Duplantis testified that she did not recall receiving the Superin certificate back from or approved by Sequia. For some reason, despite this apparent procedural departure, Sabine authorized Superin to begin work. Notwithstanding the lack of approval by Sequia, Sabine allowed nine months to elapse between July 8, 1991, the date it sent a letter regarding coverage to Holli-day, and April 28, 1992, the date it received the letter indicating that Sabine was not insured under the Superin policy, without making any further contact with Holliday.
After reviewing the evidence for legal and factual sufficiency, we cannot say that Holliday’s denial of coverage was an inherently undiseoverable injury. In Prieto v. John Hancock Mut. Life Ins. Co., the court held that the “inherently undiscoverable” prong is satisfied when the nature of the injury is unlikely to be discovered even through due diligence. Prieto v. John Hancock Mut. Life Ins. Co., 132 F.Supp.2d 506, 513 (N.D.Tex.2001), quoting Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 214 (5th Cir.1999). The court reasoned that this first prong constitutes less than absolute impossibility of discovery, but more than mere failure to discover, and held that an injury that could have been discovered through the exercise of due diligence does not satisfy the inherent undiscoverability requirement. Id., citing In re Coastal Plains, Inc. 179 F.3d at 215.
All Sabine needed to do to discover the alleged injury was to conduct a routine check regarding the insurance certificate with Holliday and inquire whether insurance coverage was in effect.4 Unfortu*63nately, Sabine failed to seek any additional assurances from Holliday other than the bare insurance certificate indicating that Sabine was an additional insured pursuant to its insurance procurement requirement. Had Sabine exercised due diligence, it would have insisted on a formal approval from Sequia before allowing Superin to commence work. Finally, the fact that Sabine allowed nine months to elapse before receiving a response from Holliday suggests that Sabine failed to exercise the reasonable diligence Texas courts have traditionally required to trigger exemption from statutes of limitations under the discovery rule. Sabine’s failure to discover its lack of coverage does not save it from being barred by limitations. Accordingly, we find that the two-year statute of limitations did expire on October 16, 1992, two years after Sabine first received Superin’s certificate of insurance, almost thirteen months before Sabine first filed suit against Holliday.
In light of the dispositive nature of this point, we do not reach the issue of whether the trial court erred in finding that Holli-day neither negligently represented to Sabine that it was covered by Superin’s policy, nor violated Article 21.21 of the Texas Insurance Code.
For the reasons stated, we affirm the judgment of the trial court.
Concurring Opinion by

. In April 1999, Sabine amended its original petition to include violations of Tex. Ins.Code Ann. art. 21.21 (Vernon Supp.2001).

. But see Davis v. Minnesota Life Ins. Co., No. 03-99-00882-CV, 2000 WL 795887, 2000 Tex.App. LEXIS 4137 (Tex.App. — Austin June 22, 2000, no pet. h.). There, the court of appeals stated, in a footnote, that while the discovery rule may be applied to Insurance Code, Deceptive Trade Practice Act, and fraud causes of action, see Tex.Bus. & Com.Code Ann. § 17.565 (Vernon 1987); Tex.Ins.Code Ann. art. 21.21, § 16(d) (Vernon Supp.2001); Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997), it is not clear whether the discovery rule may be applied to negligent misrepresentation causes of action. Davis v. Minnesota Life Ins. Co., 2000 WL at *3 n. 3, 2000 Tex. App. LEXIS at *10 n. 3. Compare Matthies-sen v. Schaefer, 27 S.W.3d 25, 31 (Tex.App.— San Antonio 2000, pet. denied) (holding that the discovery rule may be applied to actions involving negligence, gross negligence, breach of fiduciary duty, and negligent misrepresentation), and Hendricks v. Thornton, 973 S.W.2d 348, 365 (Tex.App. — Beaumont 1998, pet. denied) (holding that the discovery rule may be applied to negligent misrepresentation causes of action), with Kansa Reinsurance Co. v. Congressional Mortgage Corp., 20 F.3d 1362, 1372-73 (5th Cir.1994) (holding that Texas courts do not apply the discovery rule to negligent misrepresentation causes of action).

. Sabine required its subcontractors to include a waiver of subrogation and an additional insured endorsement in favor of Sabine, before the commencement of any labor aboard Sabine’s vessels.

. Our review of the record indicates that Superin's insurance coverage contained an exclusion for any bodily injuries directly or indirectly caused by asbestos. This was subsequently confirmed during oral argument by counsel for Holliday. Since LeLeux was injured while removing asbestos from the S/S Pecos, it is arguable that even if Sabine was covered by Superin's policy this injury would not have been covered.