May 3, 2006The Texas Supreme Court issued four significant (and lengthy) decisions in the last month. In Hyundai Motor Co. v. Vasquez, the Court limited the ability of attorneys to commit a prospective juror on what their verdict would be if certain facts were proved during trial. The Court issued a far reaching opinion in General Motors Corp. v. Hudiburg Chevrolet, Inc., restricting the right of the manufacturer of a component part to obtain indemnity in a products liability action. In Minnesota Life Ins. Co. v. Vasquez, the Court limited the ability of plaintiffs to obtain extra contractual damages for the failure of an insurance company to pay a claim. Finally, the Court upheld an arbitration agreement sought to be enforced by an entity that was not a party of the contract that contained the arbitration agreement, In re Vesta Insurance Group, Inc. I. TRIAL COURTS CAN DISALLOW QUESTIONS DURING JURY SELECTION WHICH MAY CAUSE POTENTIAL JURORS TO REVEAL BIAS AS TO PARTICULAR FACT SITUATIONS In Hyundai Motor Co. v. Vasquez (decided March 10, 2006), the Texas Supreme Court found that a trial court may refuse to allow certain questions during jury selection. In particular, a trial court can prohibit questions that are designed to expose a potential juror’s bias to a specific fact scenario, which in the Hyundai case, was the failure of a minor child to wear a seatbelt. The Supreme Court noted that such questions improperly seek to commit potential jurors to a specific verdict.
The Hyundai Motor Co. v. Vasquez case arose out of an automobile accident in which 4 year old Amber Vasquez, the child of Victor and Brenda Vasquez, was killed by a deployed air bag. Amber went for a short ride with her aunt in her aunt’s Hyundai. Amber was riding in the front passenger seat and was not wearing a seat belt. During the trip the aunt was involved in a slow speed accident with another vehicle. The accident caused the air bag of the Hyundai to deploy, striking Amber under her chin with such force to break her neck. Amber’s parents brought their lawsuit against Hyundai alleging that the air bag was defective in both its placement and the force in which it deployed. Hyundai contended that the air bag was not defective in that Amber would not have been killed had she been properly seat belted or had she been riding in the back seat as the vehicle’s warnings cautioned. During jury selection the Plaintiffs’ attorneys asked questions of the jury panel whether the fact that Amber was not wearing a seat belt would determine their verdict. Over 60% of the first jury panel said such information would have an effect on their verdict and that entire jury panel was dismissed. The same questions were asked of the second jury panel, and 35% of those jurors said the information would affect their verdict. As a result, the second jury panel was dismissed. Prior to the questioning of the third jury panel, the trial court judge advised the attorneys that she would not allow inquiry concerning the fact that Amber had not been wearing a seat belt. The judge was concerned that the potential jurors were confused about the question involving the failure of Amber to wear a seatbelt in that the jurors might think they were being questioned about the weight of evidence versus whether they could fairly consider all the evidence. However, the judge noted that the attorneys could ask general questions to the potential jurors about their own habits in using seat belts. The court further held that during individual questioning, out of the presence of other jurors, the Plaintiffs’ attorney could pose questions to the individual potential jurors about facts more specific to the case involving the failure of Amber Vasquez to be wearing a seat belt. When it came time for the individual questions the Plaintiffs’ counsel approached the bench and argued that he needed to ask questions to the individuals regarding "their preconceived notion that if there is no seat belt use, no matter what else the evidence is, that they could not be fair and impartial." Hyundai objected to the question saying that it would "pretest these jurors about the facts of the case." In reversing her previous ruling, the judge sustained the objection and further stated that the attorneys were not to go any further into seat belts use -- thereby cutting off a relevant area of inquiry. A jury was later empaneled from this third panel. After a three week trial the jury came back with a verdict in favor of Hyundai, finding the aunt 75% responsible for the accident and the other driver 25% responsible. The parents appealed the verdict, claiming that the trial court committed error in refusing to allow the questions regarding non-use of seat belts.
The Supreme Court acknowledged that voir dire questions should be used to reveal any biases or prejudices of potential jurors which may cause those persons to be struck "for cause." Further, the Court noted that voir dire questions should be designed to allow an attorney to intelligently use peremptory strikes in order to obtain a fair and impartial jury. The Court, however, stated that peremptory strikes may not be used to obtain a favorable jury. As such, a trial court has broad control in the type of questions it will allow during jury selections. Only when a trial court abuses its discretion regarding voir dire questions may a verdict be reversed and remanded for a new trial. The Supreme Court found that the question posed by the Plaintiffs’ attorneys regarding non-use of a seat belt would cause potential jurors to either commit to a potential verdict or reveal their possible verdict by revealing the weight the jurors would give to this evidence. Accordingly, the Court found that the trial court did not abuse its discretion in not allowing the question to be posed to the individual jurors. The Court reaffirmed that "commitment" questions are improper jury selection inquiry. In particular, questions which ask about a specific fact of a case and whether a juror could ignore all relevant facts but that one fact in reaching its decision are improper. However, a question that asks whether a juror will ignore all relevant facts would be proper because it could expose biases and/or prejudices.
The second issue in this case was whether the Plaintiffs were entitled to a new trial because the trial court put an end to any further questions about seat belts (before the individual questioning). The Supreme Court conceded that a properly worded area of inquiry regarding use or non-use of seat belts may be appropriate, as long as it is not fact specific to a case. As such, the Court found that the trial court should not have foreclosed inquiry into this subject. Nonetheless, the Court observed that the Plaintiffs failed to properly preserve the error by failing to present an alternative question to the court. The Court noted that the question presented to the third jury panel was the one the trial court found confusing to the second jury panel. Accordingly, the Court held that the attorneys should have restated their question in another form to "adequately apprise the trial court of the nature of their inquiry." This was despite the fact that the line of questioning had been presented to the first jury panel and there had been lengthy discussions regarding the questions after the second panel had been dismissed. The Court noted that attorneys need not present a list of questions to the trial court but must instead advise the court of the type and manner of questions intended so the court can make an informed decision on any challenges for cause.
It is sometimes necessary to raise some of the detrimental facts in a case during jury selection, such as whether any jurors have any biases regarding the fact that a client may have been speeding immediately before an accident. Often an attorney will be able to disqualify potential jurors "for cause" due to their inability to be fair to a client knowing this fact. Because of this ruling by the Supreme Court, questions as to specific facts in a case will no longer be allowed. Further, it may be likely that trial courts will limit any meaningful discussion of facts. It will be necessary for an attorney to become creative when asking questions during jury selection so that questions are not fact specific but will still be able to expose potential jurors who have biases towards such facts. II. EXTRA CONTRACTUAL DAMAGES ARE NOT AVAILABLE WHERE AN INSURER DOES NOT KNOWINGLY FAIL TO PAY A CLAIM AFTER COVERAGE HAS BECOME CLEAR
In November 1998, Minnesota Life issued a Mortgage Accidental Death insurance policy to Joe and Elia Vasquez. In June 2000, Joe Vasquez became ill and was hospitalized. While no one else was present, he fell in his room, hit his head, and died. Mrs. Vasquez filed a claim with Minnesota Life requesting payment of the balance due on her mortgage (about $41,000) and submitted copies of the death certificate and autopsy report. Minnesota Life sought advice from a medical consultant as to whether Mr. Vasquez’s death resulted from an accident "independently of all other causes," as required by the policy. The consultant advised that he needed to see the relevant medical records to make this determination. There was nearly a 5 month delay in a third-party vendor’s attempts to obtain the records for the consultant’s review. In early 2001 Ms. Vasquez’s attorney sent Minnesota Life a $110,000 demand letter for violations of the Texas Insurance Code. Minnesota Life sent its own demand letter to the hospital and the records were finally produced on March 25, 2001. The records contained no further details about Mr. Vasquez’s death than what had already been provided by the plaintiff on the death certificate and autopsy report. Minnesota Life then paid the remaining balance on the Vasquez’s mortgage on March 28, 2001. Two days later, Minnesota Life was served with Ms. Vasquez’s suit. At trial, the jury found that Minnesota Life knowingly violated the Insurance Code and that Ms. Vasquez was entitled to $60,000 for mental anguish, $250,000 in additional damages (reduced to $120,000 in the judgment),and $37,000 in attorneys’ fees.
The facts were clear that all Minnesota Life ever knew about the cause of death was what appeared in the autopsy report and death certificate. Those documents described an "accident" in which Joe Vasquez "[f]ell and hit back of head [sic]." But both documents listed his cause of death as "[s]eizure disorder with encephalopathy followed by blunt force trauma to the head." The policy in question provided coverage if "death results directly and independently of all other causes ... from an accidental injury." The autopsy and the death certificate listed both a seizure disorder and a blow to the head as the causes of death. The Court found that while the death certificate and autopsy report unquestionably disclosed an "accidental injury," the reports did not indicate that the injury was the sole cause of death "independently of all other causes." The policy also excluded payment of benefits if "death results from or is caused directly or indirectly by ... bodily or mental infirmity, illness or disease." By listing both a seizure and an accident, the autopsy report and the death certificate suggested that an illness had contributed at least indirectly to the death. While the death certificate and the autopsy report concluded only that the head injury "followed" the seizure disorder, the Court reasoned that listing both as a single cause reasonably suggested the two were related and that both played a role in the death. The Court therefore found that given that the autopsy report and death certificate were all the insurer had to base a decision, coverage was not reasonably clear from these documents. The Texas Supreme Court therefore held that there was no evidence that the insurer failed to pay the claim after coverage had become reasonably clear.
The Insurance Code contains several penalties for delayed investigation and payment of claims. State law requires an insurer to accept or reject a claim within 15 business days after receiving "all items, statements, and forms required," a deadline the insurer may extend an additional 45 days by notifying the insured of the reasons why it needs additional time. Failure to meet these deadlines entitles the insured to 18 per cent interest and reasonable attorney’s fees. However, the Code also defines failing to affirm or deny coverage within a reasonable time as an "unfair settlement practice." Minnesota Life conceded that it failed to pay the claim within a reasonable time after Ms. Vasquez sent everything requested from her. However, Minnesota Life presented undisputed evidence that the hospital from which the records were requested was slow to return calls and was unresponsive to repeated requests for the medical records. Additionally, the head of the hospital’s medical records division confirmed that four-month delays in providing records were not infrequent. The Court found that there was no evidence that Minnesota Life was aware that its protracted efforts to obtain the medical records were false, deceptive, or unfair to Ms. Vasquez. There was no evidence Minnesota Life intentionally prolonged the investigation. There was no evidence it gave false reasons for the delay. Further, Ms. Vasquez’s expert admitted at trial that he would not have paid her claim based on the autopsy report and death certificate alone. Under the Insurance Code, an insurer that fails to pay claims promptly must pay for actual damages it causes as a result of a delay in payment of claims. There must be evidence that the insurer was actually aware that it was handling the claim in a way that was false, deceptive, or unfair for a claimant to recover damages under the Insurance Code.
This opinion is informative as to the basic standard for determining violations of the Prompt Payment of Claims Act versus intentional delays and deceptive actions sufficient to show an unfair settlement practice. Simply being negligent in timely seeking documents or evidence related to coverage is not enough to prove intentional conduct. While this does not take an insurance company out of the realm of actual damages and fees for the violations of the Prompt Payment of Claims Act, absent evidence of specific intent to delay or unfairly handle the claim, exemplary damages are not available. III. A COMPONENT PART MANUFACTURER WHO THE PLAINTIFF ALLEGES PRODUCED A DEFECTIVE PART IS NOT ENTITLED TO INDEMNITY FROM THE MANUFACTURER OF THE FINISHED PRODUCT The Court established the guidelines for determining when, and if, a component part manufacturer in a product liability case is entitled to indemnity under both common law and statute (Ch. 82, Tx. Civ. Prac. Rem. Code) in General Motors Corp. and Rawson-Koenig, Inc. v. Hudiburg Chevrolet, Inc. (decided March 24, 2006).
General Motors Corp. and Rawson-Koenig, Inc. v. Hudiburg Chevrolet, Inc. involved a claim for common law and statutory indemnity arising out of an automobile accident that resulted in severe injuries and a death. The following parties were involved in the underlying action:
Seaton and Anderson’s beneficiaries filed suit against Hudiburg and GM alleging that the GM pickup truck along with the after-market installed truck bed were defective. Hudiburg then asserted a claim for indemnity against Rawson-Koenig as a responsible third-party. Hudiburg and GM settled with the plaintiffs at which time Hudiburg then proceeded with its claim for indemnity against GM, Rawson-Koenig, and B&M Truck, Inc. B&M filed for bankruptcy and was subsequently non-suited. The issue before the Texas Supreme Court was whether GM and Rawson-Koenig owed indemnity to Hudiburg.
The Court first pointed out that in order to establish common law indemnity a party seeking indemnity must establish the following: (1) The liability of the party seeking indemnity must be entirely vicarious; (2) The party seeking indemnity must not be independently liable to the claimant; and (3) The liability of the party against whom indemnity is sought must be adjudicated or admitted. The important distinction between common law and statutory indemnity is that under Chapter 82.002 of the Texas Civil Practice and Remedies Code the duty to indemnify arises upon an allegation in the injured claimant’s pleading, and not on proof of a defect. The duty "of indemnity" is imposed only on the manufacturer of a product claimed in a petition or complaint to be defective. Chapter 82 continues the common law requirement that an entity is not entitled to indemnity if it is independently liable. The Court then noted that under Chapter 82 a manufacturer of a component part alleged by a claimant to be defective has a duty to indemnify both the seller and/or manufacturer of the finished product. As a result, while the manufacturer of the final product does not have to indemnify the manufacturer of the component part alleged to be defective, the manufacturer of an alleged finished product does have a duty to indemnify the component part manufacturers and sellers of component parts that are not alleged to be defective. Accordingly, the Court stated that:
One of the issues in the Hudiburg case was the degree of specificity needed in the claimant’s pleadings to identify a component part manufacturer’s product in order to trigger the duty of indemnity. Applying the facts of the Hudiburg case, the Court held that the plaintiff’s pleadings were insufficient to put Rawson-Koenig on notice that any claim was being made that its after-market truck bed was allegedly defective. The Court concluded that: ....in order for a component product manufacturer to be subject to a duty to indemnify a seller under Section 82.002, the claimant’s pleadings must clearly allege a defect in the component itself, not merely a defect in the seller’s product of which the component was a part.
Hudiburg had hired an independent contractor, B&M Truck, Inc., to assemble the after-market truck bed. The Court noted that if Hudiburg had been responsible for the faulty assembly of the truck that it would not be entitled to indemnity. While the Court concluded that Hudiburg would not be entitled to indemnity simply because it hired an independent contractor such as B&M Truck, Inc. to do the assembly, the Court held that: A seller who has a product altered in a way that causes loss is not, at least in a relation to the manufacturer, innocent, even if the seller cannot be held liable to an injured plaintiff for its conduct. The Court stated that if any independent liability was established against either the party seeking indemnity or against B&M who was hired by Hudiburg, then Hudiburg was not entitled to indemnity under Section 82.002.
The Court held that GM had no duty to indemnify Hudiburg for any alleged defects in the after-market bed of the truck. Because GM had settled all claims that the chassis were defective, GM contended that it was not responsible for the alleged defects due to the after-market truck bed. Therefore, assuming Hudiburg was not independently liable, it would only be entitled to indemnity for allegations related to that part of the truck that was allegedly defectively manufactured by GM, which was the truck chassis. In other words, GM would not be responsible for the defects allegedly due to the after-market installation of the truck bed. As such, Hudiburg would not be able to obtain indemnity from GM for a product that GM was not responsible for installing.
This rather complex and lengthy opinion deals with the issues of a manufacturer’s right to indemnity when an after-market component part is added to an existing product. The Court held that a component part manufacturer of a component part that the plaintiff alleges is defective is not entitled to indemnity from the manufacturer. IV. A NON-SIGNATORY TO A CONTRACT IS REQUIRED TO ARBITRATE A CLAIM IF HE SEEKS TO DERIVE A DIRECT BENEFIT FROM THE CONTRACT CONTAINING AN ARBITRATION PROVISION
James Cashion and States General Insurance Company signed a contract on September 28, 1999, in which Cashion agreed to sell health insurance policies as a general agent for States General. The contract provided that States General could modify or cancel Cashion’s commissions on 60 days’ notice and either party could terminate the relationship on 180 days’ written notice. The contract also required arbitration of "any dispute between them under or with respect to this contract." Cashion filed suit against Vesta and two of its corporate officers, his replacement, and two affiliates of Vesta. The suit alleged tortuous interference with Cashion’s contracts with States General and with its own subagents. States General intervened and then settled leaving Cashion as the only signatory of the arbitration agreement. The remaining non-signatory defendants sought to compel arbitration.
The Court first discussed that all corporations must act through human agents. As a result, every contract claim against a corporation could be recast as a tortuous interference claim against its agents. The court stated that allowing such tactics would allow entities and individuals to stall otherwise required arbitrations. The Court concluded that it must avoid any rule that makes it easier to avoid arbitration clauses than other clauses of a contract. The Court next observed that it is obvious that when contracting parties agree to arbitrate all disputes "under or with respect to" a contract, they generally intend to include disputes about their agents’ actions. This is because, as a general rule, the actions of a corporate agent on behalf of the corporation are deemed the corporation’s acts. If arbitration clauses only applied to contractual signatories then this intent can only be accomplished by having every officer and agent (and every affiliate and its officers and agents) either sign the contract or be listed as a third-party beneficiary. Therefore, the court held that tortuous interference claims between a signatory to an arbitration agreement and agents or affiliates of the other signatories arise more from the contract rather than general law, and thus fall on the arbitration side of the scale.
Cashion also asserted that several of the defendants waived any right to arbitration by litigating for two years in the trial court. The Court stated that merely taking part in litigation is not enough to establish waiver unless a party "has substantially invoked the judicial process to its opponent’s detriment." Simple delay alone generally does not establish waiver. The record showed that Cashion’s pre-trial costs were largely self-inflicted. He sent far more discovery requests than he received, and amended his petition at least eleven times. The defendants did not abuse the discovery process and Cashion admitted that the discovery obtained in the litigation would be of equal value in a subsequent arbitration. On these facts the Court found the evidence insufficient to establish waiver.
This case confirms the far reaching scope of arbitration agreements and the Texas Supreme Court’s predilection for enforcing them. Even successor interest corporations and former employees of a corporate signatory to an arbitration agreement can invoke it during litigation. This opinion follows the Texas Supreme Court’s and the Fifth Circuit’s clear policy of enforcing any interpretation of an arbitration agreement in favor of arbitration. |
- Insurance Defense and Litigation
- Commercial Trucking Accidents Defense and Litigation
- Professional Malpractice
- Healthcare Malpractice
- Employment Law
- Constitutional Torts and Civil Rights
- Environment and Toxic Torts - Medical Devices
- Construction Defects
- Oilfield and Offshore Platform Accidents
- Business and Commercial Litigation
Volume VI, No. 2
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