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Mid-Century Insurance Company v. Childs2/29/2000
This is an appeal from a declaratory judgment in which the court declared that Mid-Century Insurance Company is obligated to defend Alton Childs in a personal injury lawsuit pending against him. The parties stipulated to the facts. Childs is an insured in a liability insurance policy issued by Mid-Century. Childs was involved in a three-car accident in which several people were injured. Mid-Century investigated the claims arising from that accident and concluded that Childs would be liable for multiple major injuries resulting from the accident. Mid-Century settled some of the claims against Childs, and in so doing, exhausted the policy limits for personal injuries, without settling with one of the injured claimants, Nicole Dodson. Dodson later sued Childs for personal injuries, and Mid-Century refused to provide Childs a defense, relying on a provision of the policy stating that the insurer's duty to defend the insured expires when the insurer has paid all benefits recoverable under the policy.
Mid-Century filed a suit for declaratory judgment asking the court to declare that it had no duty to further defend Childs. The court ruled against Mid-Century, finding that it was obligated to defend Childs (1) because it had only settled some of the claims and had not attempted to settle all potential claims, (2) because Mid-Century failed to act reasonably in settling the claims, and (3) because Mid-Century failed to prove that its limits of coverage for property damage had also been exhausted.
We review declaratory judgments under the same standards that apply to other judgments and decrees. Federal Deposit Ins. Corp. v. Projects Am. Corp., 828 S.W.2d 771, 772 (Tex. App.-Texarkana 1992, writ denied); see Tex. Civ. Prac. & Rem. Code Ann. ยง 37.010 (Vernon 1997). Because the case here was tried on stipulated facts, we review the propriety of the declaratory judgment under the standards applied to judgments rendered on agreed statements of facts. City of Galveston v. Giles, 902 S.W.2d 167, 171 (Tex. App.-Houston [1st Dist.] 1995, no writ); Federal Deposit Ins. Corp. v. Projects Am. Corp., 828 S.W.2d at 772. The trial court's conclusion, being one of law, will be upheld on appeal if it can be sustained on any legal theory supported by the evidence. In re W.E.R., 669 S.W.2d 716, 717 (Tex. 1984).
The first question is whether Mid-Century's contractual obligation to defend Childs ended when the policy limits for personal injury liability were paid. The policy provides:
[Mid-Century] will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident. Property damage includes loss of use of the damaged property. Damages include prejudgment interest awarded against the covered person. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted.
(Emphasis added.)
Mid-Century contends that the trial court erred by finding that it continued to have a duty to defend Childs. The court based its judgment on findings that Mid-Century failed to include all potential claimants in the settlement. The court found that by settling only part of the claims and exhausting the available funds, Mid-Century created a conflict between itself and Childs, and that Mid-Century did not act reasonably because it failed to more fully investigate the remaining claim. The court's findings and conclusions of law also intimate that Mid-Century acted improperly by settling the claims, sugg
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