Recently, the Houston Fourteenth Court of Appeals affirmed a district court’s granting of an insurer’s summary judgment in Reule v. Colony Insurance Co, 14-11-00602-CV, (Tex. App—Houston [14th Dist.] 2013).  According to the plaintiff’s pleadings, the homeowner’s association Sherwood Valley I (“SVI”) acted against her for years in an effort to cause her to move. The plaintiff maintained that SVI failed to address rodent problems, allegedly harassed her because she is female, disabled, and a single parent, allegedly denied her voting rights and access to HOA services, and allegedly defamed her. Plaintiff ultimately resolved her claims against SVI, but maintained a lawsuit against SVI’s property and liability insurer for multiple claims she had asserted directly against Colony Insurance Company  for her personal claims based on alleged violations of the Texas Insurance Code, breach of the duty of good faith and fair dealing, breach of fiduciary duty, DTPA violations, fraud, Federal and Texas Fair Housing Act violations, Federal and Texas Fair Debt Collection Act violations, Federal Civil Rights Act claims, RICO allegations, negligence and negligent misrepresentation claims, breach of contract, slander and libel, and civil conspiracy claims.  Colony Insurance provided the master policy for all of the condominium units in SVI community. The homeowner’s association, SVI, was the sole named insured on the policy.  Colony asserted none of her claims were viable because she wasn’t an insured. 

The Court noted that the plaintiff failed to preserve, much less adequately brief, the majority of her claims; however, the Court carefully and thoroughly addressed her claims based on the Texas Insurance Code and the duty of good faith and fair dealing.  Colony challenged Plaintiff’s standing to bring direct claims under the insurance code because she was a claimant suing Colony’s insured under its liability policy. Plaintiff argued that because she owned a condominium and paid association dues that she was also automatically a part of SVI and, therefore, an insured under the insurance policy. The Court determined that even if the plaintiff was an insured, the policy provided commercial general liability coverage that covered an insured when the insured injured another person or property, and the insurer did not provide coverage to the insured for the insured’s own personal injuries or property damage.

The Court adopted the rationale set forth in Rumley v. Allstate Indemnity Co., 924 S.W.2d 448 (Tex. App.—Beaumont 1996, no writ) wherein the Court considered whether a party who was a premium-paying insured under an insurance policy was in a different posture when she sued another insured and sought to trigger coverage under the liability provision of the policy.  In Rumley, the Court refused to permit a named insured wife to maintain a cause of action under the Texas Insurance Code against her and her husband’s insurance company for injuries she sustained while her husband was driving.  Drawing parallels with the facts in Rumley, the Houston Court of Appeals concluded that even if the plaintiff paid a portion of the premiums and was theoretically entitled to receive liability coverage benefits under the policy, she was a third-party claimant suing the insured and, as a result, the insurer did not owe her duties under sections 541 and 542 of the Texas Insurance Code or any duty of good faith and fair dealing.  To hold otherwise would mean the insurer would owe conflicting and inconsistent duties to both the  tortfeasor insured and to the person suing their insured.  Texas law has never allowed for a carrier to face such inconsistent duties.  As such, the trial court’s summary judgment was affirmed.

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