Cantu v. State Farm Mutual Automobile Insurance Company
MEMORANDUM AND OPINION entered GRANTING 16 MOTION for Partial Summary Judgment .(Signed by Chief Judge Lee H Rosenthal) Parties notified.(leddins, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
ELEAZAR CANTU, JR.,
STATE FARM MUTUAL AUTOMOBILE
June 07, 2017
David J. Bradley, Clerk
CIVIL ACTION NO. H-16-3703
MEMORANDUM AND OPINION
The plaintiff, Eleazar Cantu, Jr., was injured when he fell off a truck driven by an uninsured
motorist. Mr. Cantu sued the driver, two other uninsured individuals, and State Farm, Mr. Cantu’s
uninsured motorist insurer, in state court. After receiving a default judgment for $65,095.12 against
the three individual defendants, Mr. Cantu demanded that State Farm pay $30,000, the policy limit.
State Farm declined to pay, and Mr. Cantu sued. State Farm timely removed on the basis of diversity
jurisdiction. (Docket Entry No. 1).
State Farm has moved for partial summary judgment, arguing that it is not responsible for
paying the default judgment in the uninsured-motorist lawsuit because it did not consent to be bound
by that judgment. (Docket Entry No. 16). Mr. Cantu responded and cross-moved for partial
summary judgment, arguing that State Farm’s knowledge of and participation in that lawsuit
indicated its consent to be bound by the default judgment. (Docket Entry No. 17).
Based on the pleadings; the motions, responses, and replies; the record; and the applicable
law, the court grants State Farm’s motion for partial summary judgment and denies Mr. Cantu’s
cross-motion. The reasons for these rulings are explained below.
The Legal Issue Presented and the Summary Judgment Standard
Under Texas law, an insurer’s obligation to pay under an uninsured-motorist policy does not
arise until there is a judicial determination that an uninsured tortfeasor was negligent and caused the
policyholder’s damages, up to the policy limits. See Brainard v. Trinity Universal Ins. Co., 216
S.W.3d 809 (Tex. 2006). Because the alleged tortfeasor’s negligence and the plaintiff’s damages
are by definition uncontested when a default judgment issues, the default does not bind an insurer
that does not otherwise consent to be bound by the proceedings. See, e.g., U.S. Fire Ins. v. Millard,
847 S.W.2d 668 (Tex. App.—Houston [1st Dist.] 1993, no writ).
State Farm argues that it did not consent to be bound by the default judgment awarded to Mr.
Cantu and that negligence and damages have yet to be judicially determined under Mr. Cantu’s
uninsured-motorist policy. (Docket Entry No. 16). The issue is whether, as Mr. Cantu claims, State
Farm’s participation in the uninsured-motorist lawsuit indicated its consent to be bound by the
default judgment issued in that case. (Docket Entry No. 17).
“Summary judgment is required when ‘the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.’” Trent v. Wade,
776 F.3d 368, 376 (5th Cir. 2015) (quoting FED. R. CIV. P. 56(a)). “A genuine dispute of material
fact exists when the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving
party.’” Nola Spice Designs, LLC v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “The moving party ‘bears the
initial responsibility of informing the district court of the basis for its motion, and identifying those
of [the record] which it believes demonstrate the absence of a genuine issue of material fact.’” Id.
(quoting E.E.O.C. v. LHC Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014)); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
“Where the non-movant bears the burden of proof at trial, the movant may merely point to
the absence of evidence and thereby shift to the non-movant the burden of demonstrating by
competent summary judgment proof that there is an issue of material fact warranting trial.” Nola
Spice, 783 F.3d at 536 (internal quotation marks and citation omitted); see also Celotex, 477 U.S.
at 325. Although the party moving for summary judgment must demonstrate the absence of a
genuine dispute of material fact, the movant does not need to negate the elements of the
nonmovant’s case. Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511 (5th Cir. 2014).
“A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit
under governing law.” Sossamon v. Lone Star State of Texas, 560 F.3d 316, 326 (5th Cir. 2009)
(citation omitted). “If the moving party fails to meet [its] initial burden, the motion [for summary
judgment] must be denied, regardless of the nonmovant’s response.” United States v. $92,203.00
in U.S. Currency, 537 F.3d 504, 507 (5th Cir. 2008) (quoting Little v. Liquid Air Corp., 37 F.3d
1069, 1075 (5th Cir. 1994) (en banc)).
When the parties cross-move for summary judgment, the court must review “each motion
independently, viewing the evidence and inferences in the light most favorable to the nonmoving
party.” Mid-Continent Cas. Co. v. Bay Rock Operating Co., 614 F.3d 105, 110 (5th Cir. 2010)
(alteration omitted) (citation omitted). When the moving party has met its Rule 56(a) burden, the
nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of
its pleadings. The nonmovant must identify specific evidence in the record and explain how that
evidence supports that party’s claim. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir. 2007). “This
burden will not be satisfied by ‘some metaphysical doubt as to the material facts, by conclusory
allegations, by unsubstantiated assertions, or by only a scintilla of evidence.’” Boudreaux v. Swift
Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005) (quoting Little, 37 F.3d at 1075). In deciding a
summary judgment motion, the court draws all reasonable inferences in the light most favorable to
the nonmoving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir. 2008). Nevertheless, “[i]f
a party fails to properly support an assertion of fact or fails to properly address another party’s
assertion of fact as required by Rule 56(c), the court may: . . . consider the fact undisputed for
purposes of the motion.” FED. R. CIV. P. 56(e)(2).
State Farm Did Not Consent to Be Bound
In Texas, default judgments are not binding without the insurer’s consent if the uninsuredmotorist policy requires consent. See, e.g., State Farm Mut. Auto. Ins. Co. v. Azima, 896 S.W.2d
177, 178 (Tex. 1995); Millard, 847 S.W.2d at 674; Gov’t Employees Ins. Co. (GEICO) v. Lichte, 792
S.W.2d 546, 548 (Tex. App.—El Paso 1990, writ denied); Criterion Ins. Co. v. Brown, 469 S.W.2d
484, 484-85 (Tex. Civ. App.—Austin 1971, writ ref’d n.r.e.). Consent clauses “protect the carrier
from liability arising from default judgments against an uninsured motorist or from insubstantial
defense of the uninsured motorist.” Azima, 896 S.W.2d at 178 (citing Allstate Ins. Co. v. Hunt, 469
S.W.2d 151, 153 (Tex. 1971)).
The State Farm policy stated that “[a]ny judgment for damages arising out of a suit brought
without our consent is not binding on us. . . .” (Docket Entry No. 16 at 4). State Farm did not give
written consent, but that is not required. (Docket Entry No. 19 at 2). Mr. Cantu instead asserts that
State Farm’s consent to the lawsuit was apparent from its participation in the suit against the alleged
tortfeasors, including naming the three individuals as defendants, deposing the uninsured driver of
the truck (one of the three named individual defendants), and appearing at the default-judgment
hearing. (Id. at 3).
Mr. Cantu’s arguments are unavailing. Even if unwritten, the insurer’s consent must be
“expressly” given. Nationwide Mut. Ins. Co. v. Patterson, 962 S.W.2d 714, 717 n.5 (Tex.
App.—Austin 1998, pet. denied). During the state-court proceedings, State Farm stated on the
record that “by appearing [it was] not agreeing to be bound” by any default judgment entered in the
proceedings. (Docket Entry No. 16 at 8). Mr. Cantu’s attorney responded, “We’re not contending
State Farm is bound by [a default judgment].” Id. It is clear that State Farm expressly refused to
be bound by a default judgment and that Mr. Cantu’s attorney understood State Farm’s position.
Mr. Cantu argues that although State Farm is “not liable for the actual Judgment,” the default
judgment nonetheless “trigger[s] State Farm’s contractual duty to pay Plaintiff” the $30,000 policy
limit because the default judgment exceeded that limit. (Docket Entry No. 17 at 13-14). But Texas
law is clear that the contractual duty to pay under an uninsured-motorist policy does not arise until
an adversarial proceeding establishes that a covered activity was negligently performed and caused
covered damages within the policy limit. Mr. Cantu cannot recover the policy limit on the
speculation that, when proven, the damages awarded will likely exceed State Farm’s policy limit.
Without State Farm’s consent to be bound, the default judgment does not establish the damages
amount Mr. Cantu’s policy covered. Taking the facts in the light most favorable to Mr. Cantu, his
argument against summary judgment on this ground fails.
Waiver of Consent Clause
Mr. Cantu alternatively argues that State Farm’s participation in the state-court proceedings
waived the policy’s consent requirement. (Docket Entry No. 17 at 9). Waiver requires the
“intentional relinquishment of a known right or intentional conduct inconsistent with claiming it.”
Ford v. State Farm Mut. Auto. Ins. Co., 550 S.W.2d 663, 666 (Tex. 1977) (quoting Massachusetts
Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967)). An
unconditional denial of liability may waive a consent clause in an uninsured-motorist policy. Id.
Texas courts have consistently held that insurance providers do not waive the consent requirement
by knowing about the suit or by entering a general denial. See, e.g., Soliz v. Cofer, Civil No.
03-01-00246, 2002 WL 821909, at *4 (Tex. App.—Austin May 2, 2002); Millard, 847 S.W.2d at
674 (notice of a suit against an uninsured motorist did not waive the policy’s requirement for the
insurer’s consent to be bound); Lichte, 792 S.W.2d at 548 (filing a general denial and counterclaim
for a declaration of rights under the policy did not waive the consent requirement); Criterion, 469
S.W.2d at 485 (knowledge of the underlying suit was not equivalent to the consent to be bound by
that suit the coverage policy required).
State Farm has not unconditionally denied liability. (See Docket Entry No. 17 at 8). State
Farm’s clear statement that it did not agree to be bound by the default judgment in the underlying
lawsuit shows that State Farm did not waive the consent requirement. To the contrary, it has taken
a consistent position on enforcing the consent clause. (Docket Entry No. 16 at 8). State Farm’s
knowledge of Mr. Cantu’s suit against the uninsured motorists did not establish waiver. See, e.g.,
Soliz, 2002 WL 821909, at *4; Lichte, 792 S.W.2d at 548. Mr. Cantu cites no authority for his
argument that State Farm’s limited participation in discovery in the state-court suit expressly waived
the consent clause. (Docket Entry No. 17 at 9-14). The law is clear that State Farm’s limited
involvement did not express or establish waiver. Nor did that limited participation provide a basis
to infer that State Farm controlled the underlying litigation or that its interests were adequately
represented during the default-judgment hearing. Soliz, 2002 WL 821909, at *5 (the insurer was not
bound by the default judgment against uninsured motorists even though the insurer was a party to
the suit, because the insurer could not exercise control over the suit and its interests were not
Mr. Cantu’s arguments against summary judgment on this ground fail.
Mr. Cantu asserted that State Farm is collaterally estopped from contesting liability and
damages. (Docket Entry No. 17 at 16). Texas law undermines his argument. If a policyholder
chooses to proceed without the insurer’s consent, “any judgment obtained against the uninsured
motorist will not be binding on the insurance carrier. Liability and damages will have to be
relitigated.” Lichte, 792 S.W.2d at 548 (citing Criterion, 469 S.W.2d at 485); see also Soliz, 2002
WL 821909, at *5 (the insurer “should not be estopped from relitigating the liability determinations
in the default judgments”). Because State Farm did not consent to be bound by the default judgment
and did not waive the consent clause, State Farm is not estopped from litigating liability and
damages. This argument against summary judgment also fails.
State Farm’s motion for partial summary judgment, (Docket Entry No. 16), is granted. Mr.
Cantu’s cross-motion for partial summary judgment, (Docket Entry No. 17), is denied. The trial of
State Farm’s liability under the uninsured-motorist policy will proceed under the scheduling and
docket control order previously entered by the court. (Docket Entry No. 11).
SIGNED on June 7, 2017, at Houston, Texas.
Lee H. Rosenthal
Chief United States District Judge
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