Court Opinion

ID: 4075905
Source: CourtListenerOpinion
Date Created: 2016-09-30 06:41:12.789208+00
Date Added: 2024-06-11T13:29:00.336803
License: Public Domain

ACCEPTED
                                                                    03-15-00378-CV
                                                                            8148155
                                                         THIRD COURT OF APPEALS
                                                                    AUSTIN, TEXAS
                                                               12/8/2015 6:00:03 PM
                                                                  JEFFREY D. KYLE
                                                                             CLERK
                N0. 03—15—00378—CV
                                                   FILED IN
                                            3rd COURT OF APPEALS
                 JAMES HANSEN                   AUSTIN, TEXAS
                                            12/8/2015 6:00:03 PM
                                              JEFFREY D. KYLE
                                                    Clerk

               LONNIE ROACH and
             BEMIS, ROACH & REED

          APPELLANT’S REPLY BRIEF

                          Scott R. Kidd
                          State Bar No. 11385500
                          512-330-1713
                          sc0tt@kidd1awaustin.com
                          Scott V. Kidd
                          State Bar No. 24065556
                          512-542-9895
                          sVk@kiddlaWaustin.com
                          KIDD LAW FIRM
                          819 West   11th Street
                          Austin,   TX
                                     78701
                          512-330-1709 (fax)
Oral Argument Requested
                   TABLE OF CONTENTS
Table Of Contents

Index To Authorities                                ii

Caption

Argument & Authorities

     De Novo Review
     Roach ’s Brief Contains Red Herring Arguments 2

     The “Business” Continued Under The Texas
     Business Organizations Code

     Hansen Did Not “End The Business” When He
     Could No Longer Perform Surgery

     Construction Of The Policy Supports Coverage   10

     Breach Of Contract By Northwestern Mutual
     Nullifies Its Contractual Defenses             12

Conclusion                                          13

Prayer                                              15

Certificate   Of Compliance With TRAP     9.4       15

Certificate   Of Service                            16
                  INDEX OF AUTHORITIES
                               Cases

City of Houston U. Williams, 353 S.W.3d 128,
     141 (Tex. 2011)                                            6

Continental Casualty     Company       v.   Warren,
    254 S.W.2d 762, 763                                         10

FFE Transportation Services, Inc.           U.   Fulgham,
     154 S.W.3d 84 (Tex. 2004)                                  2

Gulf Insurance Company v. Parker Products,              Inc.,
     498 S.W.2d 676, 679 (Tex. 1973)                            10

Markel Insurance Company v. Muzyka,
    293 S.W.3d 380, 385 (Tex. App.—
    Ft. Worth 2009, no pet.)                                    12

Mead   12.   Johnson Group,   Inc.,   615 S.W.2d 685,
    689 (Tex. 1981)                                             13

                              Statutes

TEX. BUS. ORG. CODE.                                            5,   6
                            No. 03-15-0037 8-CV

                             JAMES HANSEN

                            LONNIE ROACH and
                       BEMIS, ROACH & REED

                   APPELLANT’S REPLY BRIEF

         Appellant James Hansen ("Hansen")        files this   Appellant's Reply

Brief.

                        ARGUMENT & AUTHORITIES
         Despite Roach’s attempts to claim to the contrary, the only issue

before the court is Whether Roach’s negligence             Was the proximate

cause of        harm   to   Hansen.     The defendants have admitted

negligence in failing to timely perfect the appeal in the underlying

case.     Did that admitted       failure cause    harm     to   Hansen?     The

answer     is   undoubtedly   “yes.”   The question   is   Whether   this   Court
would have reversed the underlying case                if   Roach had properly

perfected the appeal, and that      is   a question of law.

De Novo Review

        The   facts of the underlying case             were undisputed—the

parties in that case stipulated to the facts.                      A      trial court’s

application of the law     is   reviewed de novo and           is       not entitled to

any deference.     FFE Transportation Services,             Inc.   v.   Fulgham, 154
S.W.3d 84 (Tex. 2004). The issue before          this court, in determining

if   Roach’s negligence in failing to properly perfect the appeal was

a proximate cause of harm to Hansen,           is to   decide      if   the trial court

in the underlying case properly applied the law in denying

benefits under the Disability Office Expense policy (“the                         DOE
policy’) after   Hansen surrendered his medical license and had not
completed the winding up of his business. The Court makes this

review de novo.

Roach’s Brief Contains Red Herring Arguments

        Roach spent a   significant portion of his brief in this Court in

a transparent attempt to        make Hansen appear unworthy                     of this
Court’s consideration.      Those matters are irrelevant         to the issue

before the court.    Roach emphasized that Hansen had malpractice

cases pending against him. That           was     certainly not a defense to

any claim by Northwestern Mutual in the underlying                case,   and   it

is   no defense in this case nor     is it in   any Way relevant. Does the

fact that   Hansen had malpractice       cases pending against     him mean

that   Hansen (Who had paid premiums                for years   on the     DOE
policy) is not entitled to recover     on the    DOE policy?    Certainly not.

Nevertheless, Roach insists on highlighting that circumstance for

the Court, although     it is   totally irrelevant to   any issue before the

Court.

       Roach emphasized that Hansen had a complaint pending                     at

the Medical Board at the time          Hansen surrendered         his medical

license.   Roach   also pointed out that Northwestern       Mutual made a

settlement offer of $75,000.00.           Those facts have no bearing

whatsoever on Whether Hansen’s ongoing expenses were within

coverage of the policy.          The only       possible purpose for      Roach

arguing those facts in his brief were an attempt to cast Hansen as

somehow unworthy        of a recovery.      As the insured who paid         his
premiums   for years   and was admittedly         totally disabled,      Hansen

was most certainly not unworthy of a recovery.

     Roach goes    into detail about       Hansen being unable      to   perform

surgery following his injury, not seeing patients following the

injury, notifying patients that           he Was closing his practice,       etc.

Those   facts   might have been relevant evidence that Hansen

“ended” his practice on the date of his injury, but both the trial

court in the underlying case and the trial court in this case

properly rejected that conclusion. So          Why   does Roach spend any

time in his brief on those issues? Again,        it is   simply a transparent

attempt to argue that Hansen         is   simply unworthy of any recovery,

and should have no bearing on this          court’s ruling.

     The   issue before this Court is one of         law—were the ongoing
expenses (Which were stipulated in the underlying case) covered

expenses under the policy of insurance after Hansen surrendered

his medical license.   That   is   a question of law and simply requires

the correct application of law to the undisputed facts.

     The undisputed    facts are that        Hansen had ongoing expenses

that exceeded the   maximum monthly benefit for               the entire period
of coverage.     Roach argues several times    in his brief that       Hansen

Wanted    to   keep the business going to repay the $758,313.51 loan

Hansen made to.the          P.A.   But the particular elements of the

“covered” overhead expense         is   not relevant—in the underlying

case the parties stipulated that the covered expenses exceeded the

maximum monthly           benefit for the entire time that coverage          was

available.     Roach argues that Hansen could just keep one account

open and receive beneﬁts indeﬁnitely. That bugbear                is   nothing

other than a red herring. Accounts receivable are not covered by

the   DOE policy. What is covered are expenses, including rent and
payroll expenses,         and those were stipulated        to    exceed the

maximum        benefit.    This would be so whether there were any

accounts receivable or not.             Roach’s argument    is   completely

foreclosed by the stipulation in the underlying case because            it   was

agreed that the “covered expenses” would exceed the monthly

maximum for every month benefits were payable.

The “Business” Continued Under The Business Organizations Code

       Roach argues that the Texas Business Organizations Code

has no application in this case. Roach’s theory       is   that the Texas
Business Organizations Code has no application because the Code

was not     specifically   mentioned in the contract of insurance.            When
a contract    is   entered into in Texas,   it is   subject to the laws of the

State in existence at the time.         City of Houston         v.   Williams, 353
S.W.3d 128, 141 (Tex. 2011). The Texas Business Organizations

Code was part of the laws of Texas, and to the extent provisions                  of

that code could impact the insurance contract between the parties,

it   was   applicable without any mention or incorporation into the

insurance contract.         Taking Roach’s argument           to its logical (or,

more accurately,        illogical) conclusion,      an insurer would not be

subject to the Deceptive Trade Practices Act or the Insurance

Code unless those statutes were              specifically incorporated           by

reference in the policy of insurance.            That    is   not the law, and

cannot logically be the law.

       The Texas Business Organizations Code applies                   to the facts

of this case.       As discussed   in Hansen’s Appellant’s Brief,             when
Hansen surrendered           his medical license, that           Was an event

requiring the winding up of Austin Neurosurgical.                      By   statute,

Austin Neurosurgical had to “cease to carry on            its   business, except
to the extent     necessary to wind up                its    business.”    By       that very

provision, the business does carry on to the extent necessary to

wind up   its   business. At that point the Winding up of the business

is   the “continuing operation of the business.”                         The   trial court’s

conclusion of law that Hansen’s entitlement to monthly benefits

ended on April        8,   2011,     is   therefore   an   incorrect application of the

law   to the    undisputed           facts.     As a matter        of   law and      fact,   the

“business” continued in existence for the period necessary to                            wind

up the business’s          affairs   and that continued past April             8,   2011.

       The     trial court also            concluded as a matter of law that

“collection     of     accounts            receivable       did    not    constitute         the

“continuing operation of the Insured’s business” within the plain

meaning       of the applicable provisions of the insurance policy

between Northwestern Mutual Life Insurance Company and

Plaintiff.”     The   trial court         was   incorrect in that conclusion of              law

since collection of accounts receivable                     is   part of the winding up

process and therefore part of the continuing operation of Hansen’s

business in the winding up period. Additionally, payment of the

ongoing expenses (such as the lease obligation, payroll expenses,
medical record maintenance,     etc.) is    most certainly part of the

ongoing operation of the business during the winding up period.

     Roach argues that the court cannot allow Hansen                 to recover

the beneﬁts due to the continuation of the business during the

winding up process because a physician practicing as an

individual might not be able to   make     the   same argument. That         is

simply a false argument.     That “individual physician” might or

might not be able   to receive benefits, but the        Court   is   not faced

with that circumstance or the particular facts applicable to that

hypothetical “individual physician.” The Court must restrict                its

analysis to the facts of this case—the surrender of Hansen’s

medical license was an event of termination of the professional

association   beginning   the     winding        up    period    of     Austin

Neurosurgical.   During the Winding up                period, the business

continues for that winding up purpose, and the expenses in that

continued operation were covered by the      DOE policy.
Hansen Did Not “End The Business” When He Could No Longer
Perform Surgery

      Roach argues that the beneﬁts ended when Hansen ended

his professional practice.        Under that flawed approach, the

beneﬁts would have terminated on the date of Hansen’s injury,

since he could not operate after that date     and never saw a patient

after that date.   Roach successfully argued against that position in

the underlying case, and neither the court in that case nor the

trial court in this case     accepted that as the date   Hansen “ended

the business.”

     Roach argues on page 21           of his brief that   Hansen has

omitted an important provision found in the Definitions Section of

the Disability Overhead Expense Supplement, and then quotes

that provision from the supplement.        What Roach    does not point

out to the Court   is   that the Supplement does not replace the policy

but only purports to explain it.

           You  will find the following information of value to you
           if you are totally or partially disabled and wish to claim
           benefit under 21 Northwestern Mutual Disability
           Overhead Expense Policy. This form explains the
           terms used but it does not replace the policy.
               Please refer to the policy   if you   are in doubt....

The    policy itself defines the   term “business.” “Business” means

“the Insured’s business or the Insured’s professional practice at

the time disability starts.”    As pointed out       in the Supplement, the

language in the policy controls over that of the Supplement.

Construction Of The Policy Supports Coverage

       A policy of insurance    must be     strictly   construed against the

insurer and in favor of the insured,                   and any reasonable

interpretation of a policy provision        must be indulged       in favor of

the insured and coverage.          Gulf Insurance Company           U.    Parker

Products, Inc., 498 S.W.2d 676, 679 (Tex. 1973).             The Court must

adopt the construction of an exclusionary clause urged by the

insured as long as that construction         is   not by itself unreasonable,

even   if   the construction urged by the insurer appears to be more

reasonable or a more accurate reﬂection of the parties’ intent.

Continental Casualty       Company    v.    Warren, 254 S.W.2d 762, 763

(Tex. 1953).

       The Court must interpret the termination provision                in favor

of providing coverage, if     any reasonable interpretation        Will do so.

                                                                               10
Interpreting the policy as Roach does                   now     denies coverage;

interpreting the policy as           Hansen does provides coverage.                   A
reasonable interpretation of the termination provision                    is   that   if

either the insured’s “business or professional practice” is not

ended during    disability, the      coverage   is   not terminated. While the

injury ended Hansen’s professional practice,               it   did not end the

business at that time. The “business” was Austin Neurosurgical,

and that business continued through the period                  of   Winding up, as

a matter or law.

        Neither the court in the underlying case nor the                 trial court

in this case specifically found that         Hansen “ended” the business

during the period of       disability.    Both found that he           “closed” the

business on April         8,   2011, and that terminated the right to

benefits.   Roach     criticizes   Hansen’s discussion of the deﬁnitions of

“close”   and “end”   in his opening brief, stating that “[d]eﬁnitions for

these   common words       are unnecessary       and represent an attempt             to

divert this Court’s focus from the key issue in this case.”                      But

Words have meaning, and there               is       a difference between the

definitions of “close”    and   “end.”   The deﬁnition     of “end” is to “bring

                                                                                      11
to    an end” and “come or bring               to a   ﬁnal   point, finish.” “Close” is

“to   suspend or stop the operations” or                 to “cease to   be in operation

or accessible to the public.
                                       7)
                                             The business (Austin Neurosurgical)

may have      closed,   but    it   had not ended        until the period of   winding

up had been concluded. Terms in an insurance contract                           will be

given their ordinary meaning unless the policy shows that the

Words were meant in a technical or                        different sense.      Markel

Insurance Company         v.    Muzyka, 293 S.W.3d 380, 385 (Tex. App.-

Ft.    Worth 2009, no         pet.).        Much   as Roach      now wants     to    argue

otherwise, interpreting the policy liberally in favor of coverage (as

the Court      must     do),        and using common ordinary               definitions,

results in the conclusion that the trial court in the underlying case

got the result wrong,               and     this court   would have reversed that

judgment if the appeal had been properly perfected.

Breach Of Contract By Northwestern Mutual Nullifies                                      Its
Contractual Defenses

        The    trial    court        in      the   underlying      case    found that

Northwestern Mutual breached the contract by refusing                               to   pay

benefits   when    due.        When          one party to a contract commits a

                                                                                          12
material breach of the contract, the other party            is   excused from

any further obligation     to perform.   Mead     U.   Johnson Group,    Inc.,

615 S.W.2d 685, 689 (Tex. 1981). The         trial court in   the underlying

case found that    Hansen was    entitled to benefits from the time of

injury until he surrendered his medical license, so maintaining

that license   was what Hansen had       to do to      maintain the right to

benefits.      However, he was excused from the obligation                 to

maintain that license by Northwestern Mutual’s breach of the

contract.   As much   as   Roach wants       to mischaracterize     Hansen’s

argument in     his opening brief, the result is that simple.           Upon
Northwest Mutua1’s breach of the contract, Hansen Was under no

obligation to further perform    any   act   under the contract, and was

entitled to the full contract beneﬁts.

                            CONCLUSION
     If   Roach had not negligently      failed to perfect the appeal in

the underlying case, this Court would have reversed the trial

court in the underlying case.    As a matter      of law,   Hansen    did not

“end the business”    when he surrendered        his medical license.     By
statute, the “business” continued for the period of winding up,          and

                                                                           13
that    was the “continued operation       of the business”   under a   liberal

interpretation of the policy,         Both factually and         legally, the

business continued in existence for that period, and                    it   was

stipulated that the “covered expenses” would exceed the            maximum
monthly benefit for the entire period        of coverage.

        Northwestern Mutual breached the contract of insurance,

and from that period forward could not insist on any action by the

insured necessary to comply with the policy.                    Hansen was

therefore not required to maintain his medical license in order to

continue to receive beneﬁts.

        If this   Court had heard the appeal of the underlying case,          it

would have reversed the judgment of the           trial court   and rendered

judgment     for   Hansen   for the full   amount   of the    unpaid benefits

plus penalty interest.       Therefore, the trial court in the present

case erred in holding that Roach’s admitted negligence in failing

to timely perfect the appeal     was not a proximate cause        of Hansen’s

loss.

                                                                              14
                                 PRAYER
       Wherefore, Hansen prays that the Court reverse the

judgment    of the trial court   and render judgment         for   Hansen   for

the full   amount   of his damages,   and   for   such other relief to which

he   may show himself justly entitled.

                                      KIDD LAW FIRM
                                      819 West      11“1 Street
                                      Austin,     TX 78701
                                      512-330-1709      (fax)

                                      /s/Scott R.Kidd
                                      Scott R. Kidd
                                      State Bar No. 11385500
                                      512-330-1713
                                      scott@kidd1aWaustin.com
                                      Scott V. Kidd
                                      State Bar No.     24065556
                                      512-542-9895
                                      sVk@kjddlaWaustin.com

            Certificate of   Compliance with      TRAP 9.4(i)(3)
       This brief contains a total of 2487 words excluding the parts
exempted under TRAP 9.4(i)(1), as Verified by Microsoft Word for
Mac. This brief is therefore in compliance with TRAP 9.4(i)(2)(B).

                                             /s/Scott R.   Kidd

                                                                            15
                      Certiﬁcate of Service

        A copy
             of this brief has been served on John Shepperd, 909
Fannin Street, Suite 3300, Houston, TX 77010 in accordance With
the Texas Rules of Appellate Procedure this 8”‘ day of December,
2015.

                                      /s/Scott R.   Kidd

                                                             16