Date: 04-06-2017

Case Style: Jerry C. Johnson and Jacob Johnson v. State Farm Mutual Automobile Insurance Company

Case Number: 03-16-00086-CV

Judge: Melissa Goodwin

Court: Texas Court of Appeals, Third District on appeal from the 98th District Court of Travis County

Plaintiff's Attorney: Randy G. Allen and Margaret A. Poissant

Defendant's Attorney: Linda J. Burgess, Melinda Elder and Elliot Clark

Description: This appeal arises from a suit brought by Jerry C. Johnson seeking declarations
construing the terms of two insurance policies following an automobile accident in which Jerry’s
son, Jacob, a minor at the time, was injured while Jerry was driving.1 See Tex. Civ. Prac. & Rem.
Code §§ 37.001–.011. Jerry sued State Farm Mutual Automobile Insurance Company, which had
issued Jerry an auto policy, and State Farm Fire and Casualty Company, which had issued Jerry an
umbrella policy (jointly State Farm). Jerry also named Jacob as a defendant, as a party with a claim
or interest that would be affected by the litigation.2 Jacob admitted Jerry’s claims and asserted a
cross-claim for declaratory relief against State Farm. State Farm asserted counterclaims for
1 For clarity, we refer to Jerry and Jacob Johnson by their first names.
2 Jerry sued Jacob by and through Stephanie Johnson, Jerry’s wife and Jacob’s mother, as
Jacob’s next friend.
declaratory relief against Jerry and Jacob. All parties filed motions for summary judgment. The trial
court granted in part and denied in part the motions of Jerry and State Farm and denied Jacob’s
motion. All parties appeal the rulings adverse to them. For the reasons that follow we affirm in part
and reverse and render in part the trial court’s judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 2008, Jerry, Stephanie, and Jacob were traveling on Interstate 70 in Colorado in
a rented car driven by Jerry. Jerry became confused about which exit to take and turned into the path
of a semi-truck, resulting in a collision. Jacob, who was eleven years old at the time and asleep in
the back seat, suffered serious bodily injuries, including severe traumatic brain injury. Jacob lived
with his parents at the time of the accident and remained in the home until May 29, 2015, when he
permanently moved out of the residence. At the time of the accident, Jerry was insured by a Texas
Personal Auto Policy (the auto policy) and a Personal Liability Umbrella Policy (the umbrella
policy), both issued by State Farm. The auto policy contains a provision, the “family member
exclusion,” that excludes from liability coverage bodily injury to “any family member, except to the
extent of the minimum limits of Liability Coverage required by Texas [Revised] Civil Statutes,
Article 6701h, entitled ‘Texas Motor Vehicle Safety-Responsibility Act,’” which at the time
was $25,000. See Act of May 15, 2007, 3 80th Leg., R.S., ch. 1298, § 1, sec. 601.072(a)(1),
3 The family member exclusion at issue is contained in standard form Endorsement 593E,
issued after the policy was issued. The original policy provision entirely excluded from liability
coverage bodily injury to any family member.
2
Tex. Gen. Laws 4365, 4365 (expired Dec. 31, 2010).4 “Family member” is defined as “a person who
is a resident of your household and related to you by blood, marriage, or adoption.” The umbrella
policy contains a similar provision, also referred to as a “family member exclusion,” that excludes
coverage for “bodily injury . . . to any insured,” defined as “you and your relatives whose primary
residence is your household.”5 “Relative” is defined as “any person related to you by blood,
adoption, or marriage.” Jerry sought coverage for Jacob’s injuries under both policies. State Farm
contended that the family member exclusions in the policies excluded coverage except to the extent
of the minimum limits of liability coverage required under the auto policy by the Texas Motor
Vehicle Safety Responsibility Act and offered to pay $25,000. See id.
Jacob also made a claim for payment under the auto policy’s underinsured motorist
(UIM) coverage.6 The UIM provision affords coverage for bodily injury that a “covered person is
legally entitled to recover from the owner or operator of an uninsured motor vehicle.” “Covered
person” as defined includes “[y]ou or any family member.” “Uninsured motor vehicle” is defined
to include an underinsured motor vehicle, which is further defined, in relevant part, as “one to which
a liability bond or policy applies at the time of the accident but its limit of liability . . . is not enough
4 The current minimum amount of motor vehicle liability insurance coverage required
to establish financial responsibility for bodily injury is $30,000. See Act of May 15, 2007,
80th Leg., R.S., ch. 1298, § 1, sec. 601.072(a-1)(1), Tex. Gen. Laws 4365, 4365 (codified at Tex.
Transp. Code § 601.072(a-1)(1)).
5 Jerry disputes that this provision is a “family member exclusion” and contends that it is a
health care exclusion instead. As discussed below in our discussion of State Farm’s cross-appeal,
we do not find this argument persuasive.
6 As discussed below, UIM coverage is contained in the provision for
uninsured/underinsured motorist (UM/UIM) coverage. Because only UIM coverage is at issue here,
we refer only to UIM coverage. The umbrella policy does not contain a UM/UIM provision.
3
to pay the full amount the covered person is legally entitled to recover as damages . . . .” The UIM
provision excludes from the definition of “uninsured motor vehicle” any vehicle “[o]wned or
furnished or available for the regular use of you or any family member.” State Farm contended that
UIM coverage is not available for damages sustained by a passenger who has already recovered the
full amount of liability limits under the same policy and denied Jacob’s claim.
Jerry filed suit seeking declarations that the family member exclusions in the policies
are unconstitutional and/or contrary to public policy and invalid. In the alternative, he sought a
declaration that to the extent the family exclusions are valid, they apply only so long a Jacob is a
member of Jerry’s household. State Farm filed a counterclaim seeking declarations that the family
member exclusions are valid and enforceable to exclude coverage under the auto and umbrella
policies for any amount over the statutory minimum of $25,000 and that the application of the family
member exclusions occurs at the time of the accident. Jacob filed a cross-claim against State Farm
seeking a declaration that he is entitled to UIM benefits.7
All parties filed motions for summary judgment. The trial court granted in part and
denied in part the motions of Jerry and State Farm and denied Jacob’s motion. The trial court
entered a final judgment ordering that the family member exclusion in the auto policy is valid and
enforceable, that the application of the family member exclusion in the auto policy occurs at the time
of the accident, that coverage for Jacob’s bodily injuries under the auto policy is limited to the
statutory minimum, and that Jacob is not covered under the auto policy’s UIM coverage. The court
Jacob 7 initially sought additional declarations but ultimately abandoned all but that relating
to UIM coverage.
4
further ordered that the umbrella policy is valid and enforceable, that the application of the definition
of “insured” in the umbrella policy occurs at the time a liability claim is made, that at the time the
claim was made Jacob’s primary residence was not in Jerry’s household, that Jacob was not an
“insured” under the umbrella policy at the time the claim was made, and that the umbrella policy
does not exclude coverage for liability arising from Jacob’s injuries.
State Farm filed a motion for new trial, arguing that the trial court erred in
determining that the application of the definition of “insured” in the umbrella policy occurs at the
time a liability claim is made rather than at the time of the accident. In the alternative, State Farm
argued that, even if the definition of “insured” is applied at the time the claim is made, Jacob was
still a resident of Jerry’s household when the claim was made.8 Following a hearing, the trial court
issued an order on State Farm’s motion for new trial, an amended final judgment, and findings of
fact and conclusions of law. In its amended final judgment, the trial court added to its
determinations regarding the auto policy determinations that it excludes liability coverage for bodily
injury to a family member, that Jacob was a family member whose bodily injuries are excluded from
coverage, that the “retained limit”9 for the auto policy is the statutory minimum of $25,000, and that
Jacob’s damages are not covered under the UIM provision because UIM benefits are not available
8 In their joint response to State Farm’s motion for new trial, Jerry and Jacob admitted that
“Jacob made a claim before he moved from his parents’ home.” In addition, the summary judgment
evidence includes affidavit testimony that Jacob moved out of the family home after suit was filed,
and in his briefing, Jerry states that “Jacob was an ‘insured’ when Jerry filed his petition” and that
“Jacob made a liability claim before he moved from the home.”
9 “Retained limit” is defined in the umbrella policy, in relevant part, as the sum of “the
amount paid or payable by any other insurance policy for the loss” and “the amount the insured is
required to pay for the loss as provided in the MAINTAINING REQUIRED UNDERLYING
INSURANCE section of this policy . . . .”
5
for damages of a passenger who has already recovered the full amount of the liability limits under
the same policy.
The court modified its determinations concerning the umbrella policy, ordering that
the application of the definition of “insured” occurs at the time the insured becomes “legally liable”
for damages that exceed the “retained policy limit,” that Jerry is legally liable for Jacob’s damages
that exceed $25,000, that 10 Jacob was not a resident of Jerry’s household or an “insured” at the time
Jerry became legally liable, that Jerry is entitled to coverage under the umbrella policy for Jacob’s
damages that exceed $25,000, and that State Farm is obligated under the umbrella policy to pay
damages that arise from the accident and exceed $25,000 up to the policy limit. This appeal and
cross-appeal followed.
STANDARD OF REVIEW AND APPLICABLE LAW
We review a trial court’s summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). To prevail on a traditional summary judgment motion, the
movant must demonstrate that there are no genuine issues of material fact and that it is entitled to
judgment as a matter of law. Tex. R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott,
128 S.W.3d 211, 215–16 (Tex. 2003). When the movant satisfies this initial summary judgment
burden, the burden shifts to the nonmovant to produce evidence raising an issue of fact. See Tex.
R. Civ. P. 166a(c); Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 517 (Tex.
2014). When all parties move for summary judgment, each party bears the burden of establishing
10 In its conclusion of law No. 19, the trial court found that Jerry became legally liable for
Jacob’s damages that exceed $25,000 on January 29, 2016, the date of the original final judgment.
6
that it is entitled to judgment as a matter of law. City of Garland v. Dallas Morning News,
22 S.W.3d 351, 356 (Tex. 2000); Abbott v. Dallas Area Rapid Transit, 410 S.W.3d 876, 879 (Tex.
App.—Austin 2013, no pet.). When the parties move for summary judgment on the same issues and
the trial court grants one motion and denies the other, we consider the summary judgment evidence
presented by all sides, determine all questions presented, and if we determine that the trial court
erred, render the judgment the trial court should have rendered. Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 661 (Tex. 2005) (citing FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868,
872 (Tex. 2000)).
The parties’ issues require us to interpret Jerry’s insurance policies. “When
interpreting an insurance contract we consider all its parts, read all of them together, and give effect
to all of them.” Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 766 (Tex. 2014). Ordinarily we
seek to ascertain the intent of the parties as expressed in the language of a contract, but where, as
here, the policy is a standard form prescribed by the Board of Insurance, “the intent of the parties is
not what counts because they did not write the contract.” Id. Instead, we interpret the policy
language according to the ordinary, everyday meaning of its words. Id.; see Lamar Homes, Inc.
v. Mid-Continent Cas. Co., 242 S.W.3d 1, 8 (Tex. 2007) (“Terms that are not defined in a policy are
given their generally accepted or commonly understood meaning.”). When a policy permits only one
interpretation, we will construe it as a matter of law and enforce it as written. Charida v. Allstate
Indem. Co., 259 S.W.3d 870, 873 (Tex. App.—Houston [1st Dist.] 2008, no pet.). We construe the
policy against the insurer and in favor of the insured only when policy terms are ambiguous. Id.
7
DISCUSSION
In his appeal, Jerry challenges the trial court’s determinations that the family
exclusion in the auto policy is valid and enforceable and that its application occurs at the time of the
accident. Jacob, in his appeal, incorporates Jerry’s arguments and also challenges the trial court’s
determination that he is not entitled to UIM coverage under the auto policy. In its cross-appeal, State
Farm challenges the trial court’s determination that Jacob’s status as an “insured” under the umbrella
policy is determined at the time of the judgment, rather than at the time of the accident. State Farm
also argues that the trial court erred in determining that State Farm is liable for damages that exceed
$25,000 up to the policy limits and challenges certain findings of fact and conclusions of law. We
address each party’s appeal in turn.
Jerry’s Appeal – Family Member Exclusion Under the Auto Policy
In issues one through five and seven, Jerry challenges the family member exclusion
in the auto policy as against public policy, unconstitutional, unconscionable, and void. In his sixth
issue, Jerry challenges the trial court’s determination that the family exclusion applies at the time
of the accident. We address these issues in turn.
Public Policy
In his first issue, Jerry argues that the family exclusion violates public policy in two
ways—by acting as a barrier to Texans’ freedom to contract and by discouraging family unity. His
arguments are premised on statutory provisions governing insurance policy forms. Section 5.06 of
the Insurance Code provides that the Board of Insurance shall adopt a policy form and endorsements
8
for each type of motor vehicle insurance. See Tex. Ins. Code § 5.06(1). The standard auto policy
adopted by the Board of Insurance contains the family member exclusion at issue that excludes from
liability coverage bodily injury to “any family member,” except to the extent of the statutory
minimum limits. Section 5.06 further provides that the Board may approve the use of other policy
forms if they (1) are “adopted by a national organization of insurance companies, or similar
organization” and (2) provide “coverage equivalent to the coverage provided by the form adopted
by the Board.” Id. § 5.06(3). Jerry contends that requirement that a non-form policy be “equivalent”
means it must contain a comparable family member exclusion, that no national organization of
insurance companies or similar organization has promulgated a policy without a family member
exclusion, and that no insurance company licensed in the State of Texas offers an auto policy without
a family member exclusion. The 11 result, Jerry argues, is that it is impossible for motorists to protect
themselves from ruinous liability to family members and that state law thus creates a barrier to
Texans’ freedom of contract, contrary to Texas’s strong public policy in favor of freedom to contract.
See Philadelphia Indem. Ins. Co. v. White, 490 S.W.3d 468, 471 (Tex. 2016) (noting that Texas’s
strong public policy favoring freedom of contract is “firmly embedded in our jurisprudence”).
11 Jerry offered as evidence an affidavit from an insurance attorney, with exhibits, outlining
the results of research the attorney conducted concerning unavailability in Texas of an auto policy
without a family member exclusion. State Farm’s attorney agreed that no “admitted” policy omits
the family member exclusion although she was unsure whether such a policy is available through
a surplus lines company. Surplus lines insurance is an exception to the general statutory restriction
on unauthorized insurers created for consumers who have difficulty obtaining coverage. A surplus
lines insurer is not authorized to issue polices in Texas but may become eligible to “place” surplus
lines polices through a licensed surplus lines agent, provided the insurer complies with strict
capitalization and registration requirements. See generally Tex. Ins. Code §§ 981.001–.222.
9
In his second argument, Jerry argues that because Texas insurance law effectively
requires Texans to purchase auto policies containing family member exclusions, it discourages
family unity. He contends that the only way a motorist can protect himself from liability like that
Jerry faces is to stay single or refrain from driving with his children in the car. He also compares the
results of applying the family member exclusion when families remain intact and both parents are
subject to liability to their children with the results of applying the exclusion when parents divorce
and the custodial parent remains subject to liability while the noncustodial does not. Jerry also cites
provisions in the Family Code stating Texas public policy of ensuring frequent and continuing
contact between parents and children, providing a safe and stable environment for children, and
encouraging shared rights and duties of raising children by divorced parents. See Tex. Fam. Code
§§ 153.001, .251.
While we appreciate Jerry’s arguments, we are bound by case law suggesting
otherwise. In National County Mutual Fire Insurance Company v. Johnson, 879 S.W.2d 1 (Tex.
1993), the Texas Supreme Court, in a plurality opinion, upheld the family member exclusion in auto
policies so long as the insurer provides the minimum statutory limits required by state law. Id. at 5–6
(Cornyn, J. concurring and dissenting). Four members of the court concluded that a family member
exclusion that did not provide the minimum statutory limits was not “consistent with the legislative
purpose of ensuring that every motor vehicle is covered by an automobile liability policy that will
protect all claimants against losses which arise out of the operation of the vehicle.” Id. at 2. In his
concurring and dissenting opinion, Justice Cornyn agreed that the family member exclusion
conflicted with state law, but only to the extent that it failed to provide coverage in the minimum
10
amount of insurance required by the Texas Motor Vehicle Safety Responsibility Act. Id. at 6
(Cornyn, J., concurring and dissenting). Less than a year after the Johnson decision, the Supreme
Court unanimously held that “the family member exclusion is invalid only to the extent it conflicts
with the Texas [Motor Vehicle] Safety Responsibility Act . . . that is, to the statutorily-imposed
minimum limit of automobile liability insurance imposed by the Act.” See Liberty Mut. Fire Ins.
Co. v. Sanford, 879 S.W.2d 9, 10 (Tex. 1994) (per curiam) (adopting reasoning of plurality opinion
in Johnson). As this Court has observed,
The plurality of the Johnson Court held that [family member] exclusions contravene
the Texas Motor Vehicle Safety-Responsibility Act and are thus void for public
policy reasons, as well as violations of statutory requirement of minimum liability
insurance. See Johnson, 879 S.W.2d at 2. However, Justice Cornyn’s concurring
and dissenting opinion, which formed the plurality, stated that such exclusions are
void only because they conflict with Texas’ compulsory liability insurance statute.
Therefore, Justice Cornyn stated that such exclusions should be invalid only up to the
minimum amount of mandated liability insurance. See id. at 6 (Cornyn, J.,
concurring and dissenting). (emphasis added). The Supreme Court adopted Justice
Cornyn’s position as that of the Court in the per curiam opinion in Liberty Mutual
Fire Insurance Company v. Sanford, 879 S.W.2d 9, 10 (Tex. 1994).
Texas Farmers Ins. Co. v. Miller, No. 03-97-00233-CV, 1997 Tex. App. LEXIS 6210, at *4 n.2
(Tex. App.—Austin Dec. 4, 1997, pet. denied) (not designated for publication).
Since Sanford, Texas courts of appeals have recognized family member exclusions
as valid and enforceable. See, e.g., Charida, 259 S.W.3d at 876 (stating that “[u]nder
Sanford/Johnson, the insurer is obligated to pay insured family members the statutorily imposed
minimum limit of liability insurance”); Armendariz v. Progressive Cty. Mut. Ins. Co., 112 S.W.3d 736,
739 n.2 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (stating that “as the ‘swing vote,’ Justice
11
Cornyn’s opinion determined the scope of the plurality’s judgment” in Johnson and that “[t]he
family member exclusion is invalid ‘to the statutorily-imposed minimum limit of automobile liability
insurance imposed by the [Texas Motor Vehicle Safety Responsibility] Act.’” (quoting Johnson,
879 S.W.2d at 5 n.1)); Hanson v. Republic Ins. Co., 5 S.W.3d 324, 329 (Tex. App.—Houston [1st
Dist.] 1999, pet. denied) (stating that “[u]nder the Sanford and Johnson precedents, the
family-member exclusion limits [the insurer’s] duty to indemnify [the policyholder] to the $20,000
minimum mandated by [the Texas Motor Vehicle Safety Responsibility Act]” and holding that “the
trial court properly granted summary judgment in [the insurer’s] favor on the grounds it had no duty
to indemnify [the policyholder] beyond [the statutory minimum] under the liability coverage of the
policy”); State Farm Mut. Auto. Ins. Co. v. Nguyen, 920 S.W.2d 409, 410–11, 413 (Tex.
App.—Houston [1st Dist.] 1996, no writ) (same); Farmers Tex. Cty. Mut. Ins. Co. v. Griffin,
868 S.W.2d 861, 867 n.4 (Tex. App.—Dallas 1993, writ denied) (“Justice Cornyn’s concurrence and
dissent [in Johnson] determined the scope of the supreme court’s judgment: The family member
exclusion is invalid only to the extent it conflicts with the Texas Safety Responsibility Act, that is,
to the statutorily imposed minimum limit of automobile liability insurance imposed by the Act.”)
(citation omitted).
The Texas Supreme Court has determined that Texas public policy as reflected in the
Texas Motor Vehicle Safety Responsibility Act does not require more than the statutory minimum
limits of liability regardless of whether the negligent driver injures a stranger or a family member.
See Sanford, 879 S.W.2d at 10 (adopting Justice Cornyn’s concurring and dissenting opinion, which
formed the plurality in Johnson); Johnson, 879 S.W.2d at 6 (Cornyn, J., concurring and dissenting)
12
(“The legislature has not said that family members should receive greater coverage than other
members of the public . . . . It is not for this court to evaluate the public policy implications of
mandatory insurance coverage; the legislature has already done that.”). Jerry’s complaints
concerning the unavailability of policies that do not contain the family member exclusion lie with
the legislature and the Texas Board of Insurance, not with State Farm.12 See Fairfield Ins. Co.
v. Stephens Martin Paving, LP, 246 S.W.3d 653, 665 (Tex. 2008) (“The Legislature determines
public policy through the statutes it passes.”); Castillo v. Canales, 174 S.W.2d 251, 253 (Tex. 1943)
(“The Legislature has the power to declare what shall be the policy of the State with reference to
insurance matters.”). We overrule Jerry’s first issue.
Constitutionality
In his second, third, and fourth issues, Jerry challenges the family member exclusion
on constitutional grounds. In his second issue, he complains that the exclusion violates article I,
section 3 of the Texas Constitution, the equal protection clause. See Tex. Const. art. I, § 3. In his
third issue, Jerry argues that the exclusion deprives motorists of due process. See id. art. I, § 19.
However, equal protection and due process challenges require state action and must be brought
against state actors. See Davis v. Fisk Elec. Co., 268 S.W.3d 508, 530 (Tex. 2008) (“The Equal
Protection Clause protects citizens from arbitrary and capricious state action.”) (emphasis added);
Republican Party of Tex. v. Dietz, 940 S.W.2d 86, 91, 93 (Tex. 1997) (holding that state action is
12 In fact, we observe that in his motion for summary judgment, Jerry asserted an “ultra
vires” claim in which he asserted that the Texas Board of Insurance exceeded its authority in
prohibiting Texas citizens from purchasing insurance policies without a family member exclusion.
He did not, however, join the Board of Insurance or its commissioner as a party defendant.
13
required before litigant can maintain claim under article I of Texas Constitution and that suit could
not be maintained against defendant that was not state actor); Yazdchi v. Tradestar Invs., Inc.,
217 S.W.3d 517, 520 n.9 (Tex. App.—Houston [14th Dist.] 2006, no pet.) (rejecting due process
argument where plaintiff failed to show how defendant’s conduct constituted state action as required
under article I, section 19 of Texas Constitution). Jerry does not assert that State Farm is a state
actor, and on these facts, we conclude that it is not. A private party’s actions should not be construed
as state action simply because the private party is licensed by the state. Campos v. South Tex.
Beverage Co., 679 S.W.2d 739, 740 (Tex. App.—El Paso, no writ 1984). In selling insurance
policies to consumers in the state-promulgated form in accordance with state law, State Farm was
not “so substantially involved with state . . . activity, that its actions should be treated as those of a
public entity for the purposes of constitutional adjudication.” See Jones v. Memorial Hosp. Sys.,
746 S.W.2d 891, 895 (Tex. App.—Houston [1st Dist.] 1988, no writ); accord Dietz, 940 S.W.2d at
91–93 (applying rule that state action is present for otherwise private conduct only when challenged
conduct can be fairly attributed to government, stating that ultimate determination of whether facts
are sufficient to constitute state action is question of law, and concluding that Republican Party was
not state actor when it denied plaintiff convention booth and program advertisement space). Thus,
Jerry’s equal protection and due process claims cannot be maintained against State Farm. We
overrule issues two and three.
In his fourth issue, Jerry contends that the family member exclusion violates article
XII, section 2 of the Texas Constitution. See Tex. Const. art. XII, § 2. Article XII, section 2
provides: “General laws shall be enacted providing for the creation of private corporations, and shall
14
therein provide fully for the adequate protection of the public and of the individual stockholders.”
Id. Jerry argues that any law that even allows—much less requires—the family member exclusion
fails to comply with this constitutional mandate. Construing his arguments liberally, we assume that
Jerry is challenging the authority of the Board of Insurance, in adopting form policies pursuant to
section 5.06 of the Insurance Code, to adopt a form policy that contains such an exclusion. See Tex.
Ins. Code § 5.06 (requiring Board of Insurance to adopt policy forms for motor vehicle insurance).
However, article XII, entitled “Private Corporation,” applies to the creation of private corporations.
See Tex. Const. art. XII. Section one, entitled “Creation by General Laws,” states that “[n]o private
corporation shall be created except by general laws.” Id. art. XII, § 1. Read in context, then,
section 2 requires that private corporations be created by general laws that protect the public and the
shareholders of the private corporation. See id. § 2. Thus, article XII applies to laws creating private
corporations, not to laws regulating insurance policy forms. See Miller v. Davis, 150 S.W.2d 973,
976, 978 (Tex. 1941) (distinguishing between public corporations, which are “‘connected with the
administration of the government’” and are not covered by Article XII, and private corporations,
which are all other corporations and are covered by Article XII, and concluding that special law
purporting to create private corporation was void for violation of article XII, section 1) (quoting
13 Am. Jur., p. 171, sec. 17 and notes); City of Tyler v. Texas Emp’rs Ins. Ass’n, 288 S.W. 409 (Tex.
Comm’n App. 1926, holding approved) (holding that Texas Employers’ Insurance Association was
not private corporation for purposes of Article XII, section 2); Tex. Att’y Gen. Op. No. 2971 (1935)
(ruling that Bank Deposit Insurance Corporation was not covered by Article XII, section 1 because
it was instrumentality of government).
15
Further, even if article XII, section 2 somehow applied to section 5.06, the proper
defendants in a declaratory judgment action seeking a declaration that a statute is unconstitutional
are the responsible governmental agencies. See Tex. Civ. Prac. & Rem. Code § 37.006(b) (waiving
governmental immunity for claim that statute is invalid by requiring that governmental entities be
made parties and requiring that attorney general be served with copy and provided opportunity to be
heard); Texas Dep’t of Transp. v. Sefzik, 355 S.W.3d 618, 622 n.3 (Tex. 2011) (per curiam) (stating
that in proceeding involving validity of statute, governmental entities must be joined and attorney
general notified). Thus, as with his other constitutional claims, Jerry’s claim under article XII,
section 2 does not lie against State Farm. See Texas Lottery Comm’n v. First State Bank of
DeQueen, 325 S.W.3d 628, 634 (Tex. 2010) (stating that governmental agencies that may be bound
by court’s declaration on statutes must be joined in suits to construe legislative pronouncements)
(citing Texas Educ. Agency v. Leeper, 893 S.W.2d 432, 446 (Tex. 1994)). We overrule Jerry’s
fourth issue.
Unconscionability
In his fifth issue, Jerry argues that the family member exclusion is unconscionable.
He recites “the basic test for unconscionability”— “whether, given the parties’ general commercial
background and the commercial needs of the particular trade or case, the clause involved is so
one-sided that it is unconscionable under the circumstances existing when the parties made the
contract.” See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 2001) (orig. proceeding).
Applying this test to the facts of this case, Jerry contends that (1) Jerry is a typical consumer while
State Farm is the largest insurance producer in Texas, (2) motorists must be able to buy insurance
16
sufficient to protect them, and the Texas insurance industry has no need to sell, exclusively, policies
that leave insureds exposed, and (3) the insurance contract is completely one-sided because Texas
law requires Jerry to have auto insurance with a family member exclusion. We do not find these
arguments persuasive.
In Fortis Benefits v. Cantu, 234 S.W.3d 642, 650 n.53 (Tex. 2007), the Texas
Supreme Court addressed an insured’s similar arguments concerning a subrogation clause. Cantu
argued that the equitable “made whole” doctrine—the rule that an insurer is not entitled to
subrogation of medical benefits paid to the insured unless the insured has been “made
whole”—precluded enforcement of the subrogation clause. Id. at 644. The court disagreed and held
that the made whole doctrine had to “yield to Fortis’s right to contractual subrogation under the plain
terms of the insurance policy.” Id. Cantu attempted to avoid the policy’s express language by
arguing that contractual abrogation of the “made whole” doctrine was unconscionable. Id. at 650
n.53. The Supreme Court stated that it is not per se unconscionable for an insurer to “seek to reduce
its risk and boost its solvency by including a subrogation and/or reimbursement clause” and that
Cantu had not produced any evidence of duress or unconsionability. Id.
We likewise conclude here that it is not per se unconscionable for an insurer to
“reduce its risk and boost its solvency” by including a family member exclusion that is promulgated
in a state-approved form and complies with the Texas Motor Vehicle Safety Responsibility Act and
that the record contains no evidence that establishes unconsionability.13 See id.; see also Bandas
13 Jerry points us to the affidavit of his insurance attorney expert, Jerry’s affidavit testimony
that he requested “full coverage polices,” the lack of negotiation involved in the purchase of a form
policy, the unequal bargaining power of the parties, and the one-sided nature of the contract.
17
Indus., Inc. v. Employers Fire Ins. Co., 585 S.W.2d 344, 346 (Tex. Civ. App.—Austin 1979, no writ)
(concluding that state-approved, form retrospective premium endorsement used throughout state, for
which insurer did not set rates, dictate terms, or violate any rule or regulation of Insurance Board,
was not unconscionable). As the Supreme Court stated in Cantu, “it remains the better policy for
the contracts of insurance to be changed by the public body charged with their supervision, the State
Board of Insurance, or by the Legislature, rather than for this Court to contravene the express
language of insurance contracts with equitable arguments.” 234 S.W.3d at 649 (internal quotations
and citations omitted). Informed by the Supreme Court’s decisions in Johnson, Sanford, and Cantu,
we cannot conclude that the family member exclusion is unconscionable. We overrule Jerry’s
fifth issue.
Time of Application
In his sixth issue, Jerry argues that the trial court erred in applying the family member
exclusion at the time of the accident rather that at the time the claim was made. The auto policy
family member exclusion excludes from liability coverage bodily injury to “any family member,
except to the extent of the minimum limits of Liability Coverage required by Texas [Revised] Civil
Statutes, Article 6701h, entitled ‘Texas Motor Vehicle Safety-Responsibility Act.’” “Family
member” is defined as “a person who is a resident of your household and related to you by blood,
However, even assuming, as Jerry argues and as the Cantu court took as true, that insurance contracts
are contracts of adhesion—that is, contracts in which one party has absolutely no bargaining power
or ability to change the terms—adhesion contracts are not automatically unconscionable, and we are
not persuaded that the evidence Jerry cites proves that the family member exclusion is
unconscionable. See Fortis Benefits v. Cantu, 234 S.W.3d 642, 650 n.53 (Tex. 2007).
18
marriage, or adoption.” Jerry argues that the use of the verb “is” in the definition of family member
means that the determination of whether an injured party is a family member—or “resident” of the
policyholder’s household—is determined at the time the claim is made, not at the time of the
accident.14 He cites the rule that, “[w]hen interpreting an exclusionary clause, a court must adopt
the construction urged by the insured as long as that construction is not unreasonable, even if the
construction urged by the insurer appears to be more reasonable or a more accurate reflection of the
parties’ intent.” See Gastar Expl., Ltd. v. U.S. Specialty Ins., 412 S.W.3d 577, 583 (Tex.
App.—Houston [14th Dist.] 2013, pet. denied).
State Farm argues that Texas courts uniformly determine “residency” of a family
member as of the time of the accident and that the trial court did not err in doing the same. We
agree. In applying various auto policy provisions, our sister courts have determined residency at the
time of the accident. See Anderson v. Texas Farm Bureau Mut. Ins. Co., No. 11-13-00004-CV,
2014 Tex. App. LEXIS 8020, at *1, *2–3, *9 (Tex. App.—Eastland July 24, 2014, no pet.) (mem.
op.) (applying UM provision); Brown v. Tucker, 652 S.W.2d 492, 494 (Tex. App.—Houston [1st
Dist.] 1983, writ ref’d n.r.e.) (same); Southern Farm Bureau Cas. Ins. Co. v. Kimball, 552 S.W.2d 207,
207–08, 210 (Tex. Civ. App.—Waco 1977, writ ref’d n.r.e.) (construing UM, personal injury
protection, and death indemnity benefits provisions); Boon v. Premier Ins. Co., 519 S.W.2d 703,
703–05 (Tex. Civ. App.—Texarkana 1975, no writ) (interpreting provision for medical payments);
14 Jerry agrees that “liability coverage” is determined at the time of the accident but
distinguishes between that determination and the determination of whether the family exclusion
applies. However, when Jacob’s “residency” is assessed ultimately determines whether there is
“liability coverage,” and we find this to be a distinction without a difference.
19
Garcia v. Southern Farm Bureau Cas. Ins. Co., 490 S.W.2d 616, 617 (Tex. Civ. App.—El Paso
1973, no writ), disapproved of on other grounds by Westchester Fire Ins. Co. v. Tucker,
512 S.W.2d 679, 685 (Tex. 1974) (applying UM coverage); Travelers Indem. Co. v. Mattox,
345 S.W.2d 290, 291–92 (Tex. Civ. App.—Texarkana 1961, writ ref’d n.r.e.) (determining insurer’s
duty to indemnify policyholder’s son against claim by stranger to policy under liability
provision); Travelers Indem. Co. v. American Indem. Co., 315 S.W.2d 677, 678–79, 681 (Tex. Civ.
App.—Fort Worth 1958, no writ) (same in suit between insurers); Arellano v. Maryland Cas. Co.,
312 S.W.2d 701, 702 (Tex. Civ. App.—El Paso 1958, no writ) (applying medical payments
provision); see also Bednarz v. Continental Ins. Co., 453 F.2d 372, 373 (5th Cir. 1972) (per curiam)
(applying Texas law and holding that daughter was not resident of insured father’s household for
purposes of liability coverage “on August 22, 1968,” date of accident); Rust v. Texas Farmers Ins.
Co., 341 S.W.3d 541, 545, 551 (Tex. App.—El Paso 2011, pet. denied) (upholding trial court’s
judgment against plaintiff where homeowner’s policy excluded bodily injury coverage for resident
of premises and plaintiff was resident of premises at time of accident).
Further, we agree with State Farm that Jerry’s interpretation of the family member
exclusion is unreasonable. Under Jerry’s construction, a policyholder could defeat application of
the exclusion and create coverage simply by moving the family member out of the home after an
accident but prior to filing a claim, rendering the family exclusion meaningless. See Plains Expl.
& Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015) (“[W]e consider the
entire writing, harmonizing and giving effect to all the contract provisions so that none will be
rendered meaningless.”); Charida, 259 S.W.3d at 872–73 (“We construe insurance contracts under
20
the same rules of construction that govern ordinary contracts.”). Based on the plain language of the
family member exclusion and guided by the Texas Supreme Court’s decisions in Johnson and
Sandford, we conclude that Jerry’s interpretation is unreasonable. See Greene, 446 S.W.3d at 766.
Additionally, we observe that the record reflects and Jerry has acknowledged that the claims were
asserted while Jacob lived in Jerry’s home. Consequently, even if we were to adopt Jerry’s
interpretation, there would be no coverage under the plain language of the exclusion. See id. We
overrule Jerry’s sixth issue.
Voidness
In his seventh and final issue, Jerry argues that the family member exclusion is void
because the policy fails to clearly describe its effect. He contends that the average consumer would
not understand the exclusion, would not know the amount of the “minimum limits of Liability
Coverage,” would have trouble locating the Texas Motor Vehicle Safety Responsibility Act, and
would have no idea from reading the policy whether the minimum limits are more or less than the
amount of coverage set forth on the declarations page. Jerry thus argues that because the exclusion
does not state that it covers claims by family members only to the extent of $25,000, the exclusion
is unclear, ambiguous, void, and cannot be enforced.
State Farm contends that Jerry asserts this argument for the first time on appeal and
has therefore waived it. Jerry does not dispute that he raises this issue for the first time on appeal
but responds that he did not receive the endorsement that revised the exclusion and therefore asserted
a different argument based on the language of the original policy exclusion and that only when the
trial court found in the Amended Final Judgment that Endorsement 593E applies was the issue of
21
the effect of the endorsement raised. However, the record reflects that in its motion for summary
judgment, State Farm referred to “Texas Personal Auto Policy Amendatory Endorsement,” quoted
its language, and attached a copy as an exhibit. 15 In any event, because Jerry did not raise this issue
in the trial court, we may not consider it on appeal. See Tex. R. Civ. P. 166a(c) (providing that
issues not expressly presented to trial court in summary judgment motion or response shall not be
considered on appeal as grounds for reversal); D.R. Horton-Tex., Ltd. v. Markel Int’l Ins. Co.,
300 S.W.3d 740, 743 (Tex. 2009) (“A non-movant must present its objections to a summary
judgment motion expressly by written answer or other written response to the motion in the trial
court or that objection is waived.”); Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 862
(Tex. 2000) (“On an appeal from summary judgment, we cannot consider issues that the movant did
not present to the trial court.”); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex.
1993) (explaining that summary judgment motions and responses must stand or fall on grounds
expressly presented to trial court). Accordingly, we overrule Jerry’s seventh issue.
Jacob’s Appeal – UIM Coverage under the Auto Policy
In a single issue, Jacob argues that the trial court erred in finding that the auto policy
does not afford UIM benefits to Jacob.16 The UIM provision affords coverage for bodily injury that
15 In addition, the record reflects that in arguing that the original policy exclusion language
was void, Jerry cited the Texas Supreme Court’s holding in Johnson that an exclusion limited to
claims exceeding the statutory minimum limits does not violate public policy and acknowledged that
many insurers now include such an exclusion.
16 In his issue, Jacob also asserts that the auto policy’s family member exclusion is invalid
and unenforceable and incorporates Jerry’s arguments on that issue. To the extent Jerry challenges
the validity and enforceability of the family member exclusion, we overrule his issue for the reasons
stated in our discussion of Jerry’s appeal.
22
a “covered person is legally entitled to recover from the owner or operator of an uninsured motor
vehicle.” “Covered person” is defined to include any family member. “Uninsured motor vehicle”
is defined to include an underinsured motor vehicle, which is further defined, in relevant part, as
“one to which a liability bond or policy applies at the time of the accident but its limit of liability
. . . is not enough to pay the full amount the covered person is legally entitled to recover as
damages.” “Uninsured motor vehicle” is further defined to exclude any vehicle “[o]wned by or
furnished or available for the regular use of your or any family member.”17 State Farm argues that
Jacob is not entitled to UIM coverage because he has already recovered the full amount of liability
limits under the same policy.18 Jerry argues that the availability of the $25,000 minimum statutory
liability coverage does not eliminate his right to UIM benefits. We agree with State Farm.
The Texas Supreme Court has stated, that “[b]y purchasing [UM/UIM] coverage
along with basic liability coverage, the insured has expressed an intent not only to protect others
from his or her own negligence but also to protect that person’s own family and guests from the
negligence of others.” Stracener v. United Servs. Auto. Ass’n, 777 S.W.2d 378, 384 (Tex. 1989).
Since then, Texas courts have held that “the purpose of [UIM coverage] is to protect the insured, his
17 This portion of the definition of “uninsured vehicle” is commonly referred to as the
“definitional exclusion” or, less often, the “family use exception.” See, e.g., Hunter v. State Farm
Cty. Mut. Ins. Co., No. 02-07-00463-CV, 2008 Tex. App. LEXIS 9481 (Tex. App.—Fort Worth
Dec. 18, 2008, no pet.) (mem. op.) (referring to “family use exception”); Charida v. Allstate Indem.
Co., 259 S.W.3d 870 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (referring to “definitional
exclusion”); Farmers Tex. Cty. Mut. Ins. Co. v. Griffin, 868 S.W.2d 861 (Tex. App.—Dallas 1993,
writ denied) (same); Rosales v. State Farm Mut. Auto. Ins. Co., 835 S.W.2d 804 (Tex. App.—Austin
1992, writ denied) (same).
18 Although Jacob has not accepted the offer, State Farm has agreed to pay the statutory
minimum of $25,000 under the liability portion of the auto policy.
23
family, and his guests from the ‘negligence of others’” who are “strangers to the policy holder,” not
from the negligence of the policyholder or his family members. See Charida, 259 S.W.3d at 875–76;
accord Griffin, 868 S.W.2d at 869; (“It is not the function of UIM coverage to operate as liability
insurance and protect family members from their own negligence in owning and operating an
underinsured automobile.”); Bergensen v. Hartford Ins. Co. of the Midwest, 845 S.W.2d 374, 377
(Tex. App.—Houston [1st Dist.] 1992, writ ref’d) (concluding that underinsured provision was
intended to protect policyholder from negligence of “other motorists who failed to maintain adequate
coverage on their vehicles” and that “negligence of others” refers to negligence of persons not
members of policyholder’s family); Rosales v. State Farm Mut. Auto. Ins. Co., 835 S.W.2d 804, 806
(Tex. App.—Austin 1992, writ denied) (stating that insured purchased UIM coverage to protect
passengers “from the negligence of other uninsured and underinsured drivers,” not for purpose of
increasing her policy limits or protecting passengers from her own negligence).
UIM coverage is not available for damages sustained by a passenger who is entitled
to the full amount of liability under the same policy for injuries caused by the same insured driver.
Rosales, 835 S.W.2d 806 (concluding that “UIM coverage is not available for damages sustained by
a passenger who has already recovered the full amount of liability limits under that same policy” and
holding that injured passengers could not recover both liability and UIM benefits under driver’s
policy for damages caused by driver’s negligence). To allow a passenger—whether a guest or a
family member—to recover both liability and UIM benefits under the same insured’s policy for
damages caused by the insured “converts the insured’s UIM coverage into a second layer of liability
coverage.” Griffin, 868 S.W.2d at 868 (reasoning that insured purchased UIM coverage to protect
24
himself against irresponsible drivers in other automobiles, that neither insurer nor insured
contemplated recovery under both provisions in cost of UIM coverage, and that disallowing such
coverage fulfills object of UIM statute and intent of insured driver in purchasing UIM coverage);
accord Charida, 259 S.W.3d at 876; Rosales, 835 S.W.2d at 806. Thus, while an injured guest can
recover liability benefits from the insured driver and UIM benefits under his own policy—assuming
his damages exceed the insured driver’s liability limits—an injured family member covered under
the same policy as the driver “is resigned to only the liability portion of that policy” even if his
damages exceed the policy’s liability limits. Charida, 259 S.W.3d at 876; Griffin, 868 S.W.2d at
867–68.
Jacob argues that these cases are irrelevant to this case because they do not
involve the “regular use” exclusion. Jacob refers to what is commonly referred to as the
“definitional exclusion” or “family use exception,” which excludes from the definition of
“uninsured motor vehicle” any vehicle “[o]wned by or furnished or available for the regular use of
you or any family member.” See Hunter v. State Farm Cty. Mut. Ins. Co., No. 02-07-00463-CV,
2008 Tex. App. LEXIS 9481 (Tex. App.—Fort Worth Dec. 18, 2008, no pet.) (mem. op.) (referring
to “family use exception”); Griffin, 868 S.W.2d 861 (referring to “definitional exclusion); Rosales,
835 S.W.2d 804 (same). Jacob argues that he is entitled to UIM coverage because Jerry did not own
the rental vehicle he was driving at the time of the accident and it was not “available for the regular
use” of Jerry and his family.
25
It appears that no Texas court has addressed the meaning of “regular use” as it relates
to a rental car in the context of UM/UIM coverage.19 Jacob contends that the “consensus from other
jurisdictions is that a temporary rental vehicle is not one ‘available for the regular use’ of a named
insured.” He cites American States Insurance Company v. Tanner, in which the Supreme Court of
West Virginia held that the use of a rental vehicle driven as a replacement for an insured vehicle
under a separate auto policy was not “regular use.” 563 S.E.2d 825, 827, 834 (W. Va. 2002).
However, the Tanner court construed an exclusion under liability coverage, and the case involved
claims brought by strangers to the policy who were struck by the insured driver. See id. at 827–28.
It did not involve UIM coverage or a passenger seeking coverage under both the liability and UIM
provisions of the same policy. Nor do the other cases cited by the Tanner court and relied on by
Jacob involve UIM coverage or a passenger seeking both liability and UIM coverage under the same
policy. See Factory Mut. Liab. Ins. Co. of Am. v. Continental Cas. Co., 267 F.2d 818, 818–20
(5th Cir. 1959) (per curiam) (construing exclusion under liability coverage for claim by stranger to
policy); Continental Cas. Co. v. Suttenfield, 236 F.2d 433, 434–35 (5th Cir. 1956) (same); State
Farm Mut. Auto. Ins. Co. v. Robinson, 926 P.2d 631, 633 (Idaho 1996) (same); George B. Wallace
Co. v. State Farm Mut. Auto. Ins. Co., 349 P.2d 789, 790 (Or. 1960) (addressing insured’s claim for
19 The line of Texas cases interpreting the definitional/family use exclusion involved drivers
using their own insured vehicles. See, e.g., Charida, 259 S.W.3d at 874 (holding that vehicle in
which daughter passenger was injured was owned by insured father and under plain language of
policy was not “uninsured”); Griffin, 868 S.W.2d at 864 (stating that parties stipulated that vehicle
was “owned by or available for the regular use of” insured father and concluding that as matter of
law vehicle did not qualify as uninsured/underinsured motor vehicle under terms of auto policy);
Rosales, 835 S.W.2d at 805 (stating that parties stipulated that vehicle in which passengers were
riding when injured was “owned by or available for the regular use of” insured driver).
26
collision damage to borrowed vehicle); Strickland v. State Farm Mut. Auto Ins. Co., 514 S.E.2d 304,
304–05 (N.C. Ct. App. 1999) (involving exclusion under liability coverage of motorcycle policy and
claims by strangers to policy); Mercury Ins. Grp. v. Checkerboard Pizza, 12 Cal. App. 4th 495, 497
(Cal. Ct. App. 1993) (interpreting exclusion for business use of nonowned vehicle in context of
claim by stranger to policy); Comunale v. Traders & Gen. Ins. Co., 253 P.2d 495, 496–97 (Cal. Ct.
App. 1953) (construing exclusion under liability coverage where insured who was driving borrowed
car injured stranger to policy); Vern v. Merchants Mut. Cas. Co., 21 Misc. 2d 51, 52 (N.Y. App.
Term 1952) (construing exclusion where insured sought personal injury protection coverage under
own policy). We do not find these cases applicable on the facts of this case.
We find more applicable Parekh v. Mittadar, in which the Louisiana First Circuit
Court of Appeals addressed a case with facts similar to this case that involved UM coverage. See
2011-1201, (La. App. 1 Cir. 6/20/12), 97 So. 3d 433. In Parekh, the insured was driving in
Louisiana in a car rented in Texas when he lost control of the vehicle and veered off of the highway,
causing the vehicle to flip over and injuring his passengers. Id. at 435. No other vehicle was
involved in the accident. Id. The passengers filed a claim for liability coverage under the rental
liability policy and received policy limits. Id. at 435–46. The passengers also sought UM/UIM
coverage under the same policy. Id. at 436. Construing an exclusion essentially identical to the one
at issue here, the court concluded that under Louisiana law, the rental vehicle was “accessible,
obtainable, and ready for [the insured’s] immediate use,” i.e., “available for the insured’s regular
use,” during the term of the rental agreement and therefore did not qualify as an “uninsured motor
27
vehicle” under the terms of the policy. Id. at 438–39. Accordingly, the court held that the
passengers were not entitled to UM coverage. The court also observed:
We note that this result would be the same under Texas law as well. In interpreting
the exclusion above, Texas courts have determined that this exclusion operated to
prevent the injured occupants of a vehicle from collecting the liability benefits and
UM benefits under a single policy. In these cases, the Texas courts relied, in part, on
language from the Texas Supreme Court in Stracener v. United Services Auto. Ass’n,
777 S.W.2d 378, 384 (1989), in which the court stated that “[b]y purchasing [UM]
coverage along with basic liability coverage, the insured has expressed an intent not
only to protect others from his or her own negligence but also to protect that person’s
own family and guests from the negligence of others.” The Texas courts have
interpreted the phrase “negligence of others” to refer to the negligence of those in
other automobiles, which is clearly not applicable to this matter, as this was a single
vehicle accident involving only the negligence of Mr. Mittadar. Specifically, the
Texas courts noted that the insured had purchased UM coverage to protect himself
and his guests from negligent, financially irresponsible drivers in other automobiles.
Allowing a guest passenger to recover both liability and UM benefits from the same
insured’s policy converts the UM coverage into a second layer of liability insurance,
which was not contemplated in the policy costs. Accordingly, under Texas law, no
UM coverage would be available under the policy at issue.
Id. at 439–40 (internal citations omitted).
Jacob seeks benefits under Jerry’s UIM coverage, which is intended to protect Jerry
and other “covered persons” from the negligence of others, not from their own negligence. See
Stracener, 777 S.W.2d at 384; Charida, 259 S.W.3d at 875–76; Griffin, 868 S.W.2d at 869;
Bergensen, 845 S.W.2d at 377; Rosales, 835 S.W.2d at 806. Given the different purposes of liability
and UIM coverages, informed by the Supreme Court’s statement in Stracener concerning the intent
of UM/UIM coverage, and persuaded by the reasoning of this Court and of our sister courts of
appeals in prior cases construing UM/UIM coverage provisions, we agree with the Louisiana First
Circuit Court of Appeals that under Texas law, a passenger may not recover under both the liability
28
and UIM provisions of the same policy for damages caused by the same insured driver. Accordingly,
we conclude that given the purpose and plain language of the UIM provision, the rental car Jerry was
driving at the time of the accident is excluded from the definition of “underinsured motor vehicle.”
See Greene, 446 S.W.3d at 766; Stracener, 777 S.W.2d at 384; Charida, 259 S.W.3d at 875–76;
Bergensen, 845 S.W.2d at 377; Parekh, 97 So. 3d at 439–40.
Jacob argues that this reasoning is inconsistent with Jankowiak v. Allstate Property
& Casualty Insurance Company, 201 S.W.3d 200 (Tex. App.—Houston [14th Dist.] 2006, no pet.)
which he contends is “[t]he case most similar” to this case. In Jankowiak, Laci Jankowiak was a
passenger in Daniel Dellasala’s vehicle when it was involved in a collision with Alejandra Salas, an
uninsured motorist. Id. at 203. Jankowiak sued Dellasala and Salas, alleging that both drivers were
at fault, and her own insurer. Id. Jankowiak settled with Dellasala for his maximum liability
coverage and with her own insurer for her maximum UM coverage. Id. She then sought to recover
from Dellasala’s insurer his policy limits of UM coverage. Id. The trial court granted the insurer’s
motion for summary judgment, and Jankowiak appealed. Id. On appeal, in concluding that
Dellasala’s insurer was obligated to pay Jankowiak UM benefits, the court explained that, as a guest
occupant of Dellasala’s vehicle, she was a “covered person” under his policy and was—to the extent
her damages exceeded the liability coverage—entitled to UM coverage to the extent of Salas’s fault.
Id. at 209, 211. The court observed that to hold otherwise would allow Jankowiak to recover only
for Dellasala’s negligence and not for Salas’s negligence. Id. at 212. In other words, the definitional
exclusion or family exception did not apply; Salas’s vehicle, not Dellasala’s, was the “uninsured
motor vehicle”; and the UM coverage under Dellasala’s policy was for Salas’s negligence, not
29
Dellasala’s. Here, the definitional/family use exclusion applies, there is no evidence that anyone
except Jerry was at fault, and there is no other vehicle that could be the “uninsured motor vehicle.”20
Thus, Jankowiak is distinguishable, and we do not find our sister court’s opinion persuasive
on the facts before us. Cf. Charida, 259 S.W.3d at 875 (noting that there was nothing in record
to suggest that anyone but insured father was at fault); Parekh, 97 So. 3d at 435 (describing
single-vehicle accident).
Finally, to the extent Jacob argues that the statutory limitation on his recovery under
the liability portion of Jerry’s policy resulting from the family member exclusion distinguishes his
liability recovery from a guest’s recovery of the full liability limits stated in the policy, we do not
agree that any such distinction leads to a different result. As the First Court of Appeals stated
in Charida,
[u]nder Sanford/Johnson, the insurer is obligated to pay insured family members the
statutorily imposed minimum limit of liability insurance, and nothing in Johnson
encourages the invalidation of the definitional exclusion at issue to award injured
family members UIM benefits in addition to the statutorily imposed minimum
liability limit. Allstate contends, and we agree, that to allow a family member to
collect underinsured motorist benefits above the statutory minimum liability limits
would render the supreme court’s holding in Johnson meaningless. According to
Allstate, “any family member whose recovery under the liability provisions of a
policy was limited to the statutory minimum by the family member exclusion could
simply turn to the underinsured motorist portion of the same policy to collect the
balance.
20 The record contains no evidence that Jacob made any allegations that the driver of the
semi-truck was at fault or sought any coverage under the truck driver’s insurance.
30
259 S.W.3d at 876–77. We conclude that under the plain language of the UIM provision, Jerry’s
UIM coverage is not available to pay for damages to Jacob caused by Jerry. See Greene, 446 S.W.3d
at 766; Stracener, 777 S.W.2d at 384; Charida, 259 S.W.3d at 875–76; Griffin, 868 S.W.2d at 869;
Parekh, 97 So. 3d at 439–40. We overrule Jacob’s issue.
State Farm’s Appeal – Coverage under the Umbrella Policy
In its first issue, State Farm argues that the trial court erred in finding that Jacob is
entitled to recover benefits under the umbrella policy because the policy unambiguously provides
that bodily injuries to an insured are not covered and it is undisputed that Jacob was an insured at
the time of the accident. The umbrella policy’s coverage clause provides coverage for damages that
exceed the “retained limit” “[i]f a claim is made or suit is brought against an insured for damages
because of a loss for which the insured is legally liable.”21 In Exclusion 13, the umbrella policy
excludes coverage for “bodily injury or personal injury to any “insured,” defined as “you and
your relatives whose primary residence is your household.” “Bodily injury” is defined as “physical
injury, sickness, or disease to a person, including death resulting therefrom.” “Relative” is defined
as “any person related to you by blood, adoption, or marriage.” Because these provisions parallel
those in the family member exclusion of the auto policy, State Farm labels Exclusion 13 a “family
member exception” and argues it should be construed in the same way as the family member
exclusion in the auto policy and applied at the time of the accident.
21 The parties disagree as to the amount of the retained limit under the umbrella policy in
their briefing on State Farm’s second issue, an issue we do not reach because of our disposition of
State Farm’s first issue.
31
Jerry argues that unlike the family member exclusion in the auto policy, Exclusion 13
is ambiguous with respect to liability claims. He contends that unlike the coverage clause and most
of the other exclusions, it does not refer to “loss” and, unlike some of the exclusions, does not use
the word “liability.” He argues that while the auto policy expressly excludes “Liability Coverage
. . . for bodily injury,” the umbrella policy excludes only “bodily injury,” and the court may not insert
language into the policy. He also observes that “bodily injury” is defined to include sickness and
disease without any reference to “loss.” Thus, under Jerry’s analysis, Exclusion 13 excludes health
claims, not liability claims, a construction he urges is consistent with the trial court’s conclusion.
We do not find this argument persuasive. The auto policy includes several coverage
sections: “Part A–Liability Coverage,” “Part B1– Medical Payments Coverage,” “Part B2–Personal
Injury Protection Coverage,” “Part C–Uninsured/Underinsured Motorists Coverage,” and
“Part D–Coverage for Damage to your Auto,” each with its own exclusions. In contrast, the
umbrella policy is exclusively a liability policy intended to provide coverage in excess of the
underlying limits of liability in the auto policy, not coverage for the insured’s own damages. See
C.L. Thomas, Inc. v. Lexington Ins. Co., No. 13-13-00566-CV, 2014 Tex. App. LEXIS 10148, at *2
(Tex. App.—Corpus Christi Sept. 11, 2014, no pet.) (mem. op.) (stating that umbrella policy
“covered liability for compensatory damages for personal injuries . . . to the extent that such liability
exceeded the applicable limits of certain other underlying policies”); Leigh v. Kuenstler,
No. 14-08-00245-CV, 2009 Tex. App. LEXIS 7633, at *2–3 (Tex. App.—Houston [14th Dist.]
Oct. 1, 2009, no pet.) (mem. op.) (“Although she believed that the umbrella policy would afford
coverage for her own medical expenses and damages she sustained as the result of an automobile
32
accident with an underinsured motorist, Leigh admits that she simply assumed this to be the case.
In fact, the umbrella policy afforded coverage only for Leigh’s liability, and not for her own
damages.”); Sidelnik v. American States Ins. Co., 914 S.W.2d 689, 693–94 (Tex. App.—Austin
1996, writ denied) (discussing nature of umbrella policies and stating that umbrella policy provided
excess coverage for liability arising from automobile accident); Celestino v. Mid-American Indem.
Ins. Co., 883 S.W.2d 310, 311–12 (Tex. App.—Corpus Christi 1994, writ denied) (stating that
combined umbrella policy provided excess coverage for automotive liability, general liability, and
employer’s liability); see also Fisher v. State Farm Mut. Auto. Ins. Co., 305 P.3d 861, 865 (Mont.
2013) (stating that umbrella policy “generally covers claims in excess of the insured’s primary
insurance but does not cover claims brought by an insured”). In short, it is well established that,
unlike an auto policy that provides coverages other than liability—such as personal injury protection
and medical payments—an umbrella policy is an excess liability policy only, absent express
provisions to the contrary, which are not present here. Therefore, there is no need for the policy to
specify that an exclusion is to “liability coverage,” as Jerry contends.
Jerry claims that there are five problems with this reasoning: (1) it ignores the
language of Exclusion 12, which includes the phrase “claim made or suit brought”; (2) it ignores the
actual language of Exclusion 13; (3) it is not illogical for an umbrella policy to exclude health
claims; (4) it is common in our society for companies to issue unnecessary warnings; and (5) it
ignores the coverage clause. We do not find these arguments persuasive and find Jerry’s reading of
Exclusion 13 as a health care exclusion strained, at best. In addition to running contrary to the nature
and purpose of umbrella policies, it ignores that the exclusion also excludes “personal injury,” which
33
is defined to include injuries from false arrest, libel, slander, and invasion of privacy—injuries
completely unrelated to “health care.” It also ignores that the term “bodily injury” occurs in four
other exclusions, making them, under Jerry’s analysis, all health care exclusions. We agree with
State Farm that Jerry’s construction of Exclusion 13 as a health care exclusion is unreasonable. See
Greene, 446 S.W.3d at 766 (stating that we interpret policy based on ordinary meaning of its words);
Plains Expl., 473 S.W.3d at 305 (“[W]e consider the entire writing, harmonizing and giving effect
to all the contract provisions so that none will be rendered meaningless.”); Gastar Expl., 412 S.W.3d
at 583 (stating that court must adopt construction urged by insured as long as it is not unreasonable);
Charida, 259 S.W.3d at 872–73 (“We construe insurance contracts under the same rules of
construction that govern ordinary contracts.”).
In its first issue, State Farm also argues that the trial court erred in concluding (1) that
“the application of the definition of ‘insured’ in the Umbrella Policy occurs at the time the insured
becomes ‘legally liable’” and (2) that Jerry became legally liable on the date of the trial court’s
judgment. State Farm contends instead that under the terms of the umbrella policy, Jerry became
legally liable at the instant that he negligently caused the accident that injured Jacob and that to apply
the definition of insured at any time other than at the time of the accident leads to unreasonable
results. We agree. As discussed above, Texas courts have determined residency at the time of the
accident in construing coverage for family members under auto policies for UM/UIM benefits,
medical payments, personal injury protection, death benefits, and the insurer’s duty to indemnify
against a claim by a stranger to the policy under the liability provision. In addition, federal decisions
construing umbrella policies under Texas law inform our decision. In State Farm Fire & Casualty
34
Co. v. Lange, in construing an umbrella policy, the Fifth Circuit determined coverage for
the policyholder’s son by determining the son’s residency at the time of the accident.
480 Fed. Appx. 309, 310 (5th Cir. 2012) (per curiam). Similarly, in a case determining coverage
under an umbrella policy, the United States District Court for the Western District of Texas stated
that whether the policyholder’s son qualified as an insured and whether the insurer had a duty to
defend him turned on whether the son’s “‘primary residence’ at the time of the accident was” the
policyholder father’s home. State Farm Fire & Cas. Co. v. Neuman, 186 F. Supp. 3d 643, 652
(W.D. Tex. 2016).
In light of these decisions and for the reasons stated in our discussion of the
determination of residency for purposes of the family member exclusion under the auto policy, we
conclude that the determination of Jacob’s residency for purposes of the umbrella policy’s Exclusion
13 is based on Jacob’s residency at the time of the accident. Just as it would defeat the intent of the
auto policy family member exclusion to construe it to allow an insured family member to obtain
coverage by moving out of the family residence after an accident but before filing a claim, it would
also defeat the intent of Exclusion 13 to construe it as allowing an insured family member to obtain
coverage by moving out of the family residence prior to a judgment determining the insured to be
“legally liable.” Such a construction would render Exclusion 13 meaningless. See Plains Expl.,
473 S.W.3d at 305; Charida, 259 S.W.3d at 872–73.
Further, even if we were to accept the trial court’s interpretation of the policy
provisions, the record does not support the conclusion that Jerry became legally liable at the time of
the trial court’s judgment. Although the trial court’s judgment “declared” that Jerry “is legally
35
liable” for Jacob’s damages, Jerry’s liability was not before the court. The only causes of action
before the court were claims for declaratory relief interpreting the family exclusions and UIM
provisions of the auto and umbrella policies. Jacob asserted no claims against Jerry and did not seek
a declaration or summary judgment as to Jerry’s liability. Thus, there was no cause of action,
summary judgment motion, or evidence to support the trial court’s declaration that Jerry was legally
liable. In short, there is no basis in the record for the trial court’s purported determination that Jerry
“is legally liable” and became legally liable on the date of the judgment. See Rust, 341 S.W.3d at
551 (holding that at time of summary judgment, insured was not “legally obligated” to pay damages
to plaintiff for injuries resulting from occurrence to which policy applied because plaintiff had not
obtained judgment against insured or entered into agreement establishing liability); Graves v. Diehl,
No. 01-00-00412-CV, 2006 Tex. App. LEXIS 5306, at *30–31(Tex. App.—Houston [1st Dist.]
2006, pet. denied) (mem. op.) (holding that trial court abused its discretion where it rendered
declaratory judgment on issue that was not presented by pleadings or evidence). We sustain State
Farm’s first issue.22

Outcome: We reverse the trial court’s judgment that Jerry is entitled to coverage for the damages
to Jacob under the umbrella policy and render judgment that Jerry take nothing by his claims under
the umbrella policy. We affirm the trial court’s judgment in all other respects.
Because our resolution of State Farm’s first issue is dispositive, we do not reach its second
issue, in which it challenges the trial court’s determination as to the amount for which State Farm
is liable under the umbrella policy or its third issue, in which it challenges certain of the trial court’s
findings of fact and conclusions of law for reasons that State Farm admits are largely subsumed in
its arguments in its first issue.

Plaintiff's Experts:

Defendant's Experts:

Comments: