DANIEL, Justice.
This is a suit to recover under the uninsured motorist provisions of a Texas standard automobile policy issued by State Farm Mutual Automobile Insurance Company. The principal question is whether State Farm’s unconditional denial of liability constituted a waiver of its right to consent before its insured subsequently settled with another insurance carrier.
The trial court, hearing the case without a jury, rendered judgment for the insured. The Court of Civil Appeals reversed and rendered. 537 S.W.2d 138. We reverse the judgment of the Court of Civil Appeals and affirm that of the trial court.
On October 18, 1969, Mrs. Joan Elizabeth Ford was a passenger in an automobile driven by Mrs. Shirley Harvey when the Harvey automobile was in a collision with a vehicle driven by Jeffrey Whitten. The collision resulted in Joan Ford’s death and damages in excess of $20,000. Mrs. Ford was survived by her husband, Robert W. Ford, Jr., and their three children. Jeffrey Whitten, whose negligence caused the collision, was an uninsured motorist.
At the time of the collision, the Harvey automobile was covered by a policy of automobile liability insurance issued by Gulf Insurance Company, with a standard uninsured motorist clause coverage of bodily injury limits for one person in the amount of $10,000. At the same time, Ford also had an automobile liability policy with State Farm containing the same standard uninsured motorist coverage.
On July 21,1970, suit was filed by Robert W. Ford, Jr., individually and as guardian of his three minor children, against State Farm and Gulf Insurance for recovery under the uninsured motorist provisions of each policy, in the total sum of $20,000. Plaintiff plead the existence and coverage of both policies.1 Separate answers were filed for State Farm and Gulf by different members of the same law firm. Gulf had indicated a willingness to settle for the [664]*664$10,000 limit of its policy. Before consummation, the parents of Mrs. Ford filed a conflicting claim, and Gulf interpleaded them in its answer of July 29, 1970.
On October 23, 1970, State Farm filed its original answer generally denying any liability. Thereafter, on April 16, 1971, plaintiff amended his petition to claim a total of $30,000 against the two insurance companies. On April 20, 1971, State Farm filed its first amended answer with pleas in bar “to Plaintiff’s action in its entirety.” One of these pleas alleged that plaintiff’s action was barred by the policy’s “OTHER INSURANCE” clause inasmuch as Mrs. Ford was riding in a car which was covered by the uninsured motorist provisions of a Gulf Insurance Company policy. It alleged that the Gulf policy was applicable and available to plaintiff, and that State Farm was in no event liable to pay anything under its policy.2
In the meantime, on June 29, 1971, an interlocutory judgment was entered dismissing the interpleader suit against Mrs. Ford’s parents and in favor of plaintiff against Gulf for its policy limit in the amount of $10,000, without prejudice to plaintiff’s cause of action against the remaining defendant, State Farm. Contemporaneously, plaintiff and Gulf entered a release-trust agreement by which Gulf, and only Gulf, was released from claims growing out of the accident and authorizing Gulf, at its sole expense, to proceed in the name of plaintiff against the person or organization responsible for the operation of the uninsured automobile at the time of the accident.3
The remaining cause as to State Farm was severed on July 26, 1971, and on November 9, 1972, State Farm filed its second amended answer in which it set up as an additional defense the allegation that plaintiff’s claim was barred because of the settlement with Gulf Insurance without the written consent of State Farm. It specifically plead an exclusionary clause in its policy relating to Part IV (the uninsured motorist provisions), which reads as follows:
“Exclusions. This policy does not apply under Part IV:
“(a) . . .
“(b) [T]o bodily injury to an insured with respect to which such insured, his legal representative or any person entitled to payment under this coverage shall, without written consent of the company, make any settlement with any person or organization who may be legally liable therefor.”
It was stipulated that State Farm “had denied liability to the plaintiffs as evidenced by, among other things, the Original Answer . . . and had refused to pay any money damages prior to the entering of the interlocutory judgment made between Robert William Ford, Jr., and Gulf Insurance Company . . . .” It was also stipulated that prior to the settlement with Gulf, “Plaintiffs or their representatives [665]*665made no request or demand” upon State Farm to consent to the settlement.
Robert W. Ford, Jr., died on November 19, 1973. His mother, Mrs. Margaret Ford, was substituted as plaintiff in the capacity as guardian of Ford’s three minor children. The trial court heard evidence and stipulations on October 14, 1974, received briefs, and kept the case under consideration until July 29, 1975. On that date it rendered judgment that plaintiff recover against State Farm the sum of $10,000 on behalf of the children.
There are no findings of fact or conclusions of law, but it appears from the State Farm’s motion for new trial that the trial court may have followed Stephens v. State Farm Mutual Automobile Ins. Co., 508 F.2d 1363 (5th Cir. 1975), which held that the consent clause was waived in that case by State Farm’s denial of liability under similar circumstances. Upon appeal of the present case by State Farm, plaintiff (as appellee) had a counterpoint stating that the trial court correctly ruled in favor of plaintiff because State Farm waived the consent provisions by denying all liability under its policy prior to plaintiff’s acceptance of Gulf’s policy limit payment. In reversing and rendering, the Court of Civil Appeals made no holding on or mention of the waiver counterpoint. We granted this writ on petitioner’s (plaintiff’s) point which alleged error of the Court of Civil Appeals in failing to sustain the waiver counterpoint.
Plaintiff-petitioner also asserts that the exclusionary provision of the policy is wholly invalid because it deprives the insured of the statutory protection of Article 5.06-1 of the Insurance Code. Although there is a trend in other jurisdictions toward narrow construction or voiding such clauses as unreasonable restrictions on mandatory uninsured motorist coverage,4 Texas courts have consistently upheld the validity of the provision as a means of protecting the insurer’s subrogation rights against the uninsured motorist or any other person legally responsible for the insured’s injuries. McClelland v. United Services Automobile Association, 525 S.W.2d 271 (Tex.Civ.App.1975, writ ref’d); Jessie v. Security Mutual Casualty Company, 488 S.W.2d 140 (Tex.Civ.App.1972, writ ref’d, n. r. e.); Grissom v.
Free access — add to your briefcase to read the full text and ask questions with AI
DANIEL, Justice.
This is a suit to recover under the uninsured motorist provisions of a Texas standard automobile policy issued by State Farm Mutual Automobile Insurance Company. The principal question is whether State Farm’s unconditional denial of liability constituted a waiver of its right to consent before its insured subsequently settled with another insurance carrier.
The trial court, hearing the case without a jury, rendered judgment for the insured. The Court of Civil Appeals reversed and rendered. 537 S.W.2d 138. We reverse the judgment of the Court of Civil Appeals and affirm that of the trial court.
On October 18, 1969, Mrs. Joan Elizabeth Ford was a passenger in an automobile driven by Mrs. Shirley Harvey when the Harvey automobile was in a collision with a vehicle driven by Jeffrey Whitten. The collision resulted in Joan Ford’s death and damages in excess of $20,000. Mrs. Ford was survived by her husband, Robert W. Ford, Jr., and their three children. Jeffrey Whitten, whose negligence caused the collision, was an uninsured motorist.
At the time of the collision, the Harvey automobile was covered by a policy of automobile liability insurance issued by Gulf Insurance Company, with a standard uninsured motorist clause coverage of bodily injury limits for one person in the amount of $10,000. At the same time, Ford also had an automobile liability policy with State Farm containing the same standard uninsured motorist coverage.
On July 21,1970, suit was filed by Robert W. Ford, Jr., individually and as guardian of his three minor children, against State Farm and Gulf Insurance for recovery under the uninsured motorist provisions of each policy, in the total sum of $20,000. Plaintiff plead the existence and coverage of both policies.1 Separate answers were filed for State Farm and Gulf by different members of the same law firm. Gulf had indicated a willingness to settle for the [664]*664$10,000 limit of its policy. Before consummation, the parents of Mrs. Ford filed a conflicting claim, and Gulf interpleaded them in its answer of July 29, 1970.
On October 23, 1970, State Farm filed its original answer generally denying any liability. Thereafter, on April 16, 1971, plaintiff amended his petition to claim a total of $30,000 against the two insurance companies. On April 20, 1971, State Farm filed its first amended answer with pleas in bar “to Plaintiff’s action in its entirety.” One of these pleas alleged that plaintiff’s action was barred by the policy’s “OTHER INSURANCE” clause inasmuch as Mrs. Ford was riding in a car which was covered by the uninsured motorist provisions of a Gulf Insurance Company policy. It alleged that the Gulf policy was applicable and available to plaintiff, and that State Farm was in no event liable to pay anything under its policy.2
In the meantime, on June 29, 1971, an interlocutory judgment was entered dismissing the interpleader suit against Mrs. Ford’s parents and in favor of plaintiff against Gulf for its policy limit in the amount of $10,000, without prejudice to plaintiff’s cause of action against the remaining defendant, State Farm. Contemporaneously, plaintiff and Gulf entered a release-trust agreement by which Gulf, and only Gulf, was released from claims growing out of the accident and authorizing Gulf, at its sole expense, to proceed in the name of plaintiff against the person or organization responsible for the operation of the uninsured automobile at the time of the accident.3
The remaining cause as to State Farm was severed on July 26, 1971, and on November 9, 1972, State Farm filed its second amended answer in which it set up as an additional defense the allegation that plaintiff’s claim was barred because of the settlement with Gulf Insurance without the written consent of State Farm. It specifically plead an exclusionary clause in its policy relating to Part IV (the uninsured motorist provisions), which reads as follows:
“Exclusions. This policy does not apply under Part IV:
“(a) . . .
“(b) [T]o bodily injury to an insured with respect to which such insured, his legal representative or any person entitled to payment under this coverage shall, without written consent of the company, make any settlement with any person or organization who may be legally liable therefor.”
It was stipulated that State Farm “had denied liability to the plaintiffs as evidenced by, among other things, the Original Answer . . . and had refused to pay any money damages prior to the entering of the interlocutory judgment made between Robert William Ford, Jr., and Gulf Insurance Company . . . .” It was also stipulated that prior to the settlement with Gulf, “Plaintiffs or their representatives [665]*665made no request or demand” upon State Farm to consent to the settlement.
Robert W. Ford, Jr., died on November 19, 1973. His mother, Mrs. Margaret Ford, was substituted as plaintiff in the capacity as guardian of Ford’s three minor children. The trial court heard evidence and stipulations on October 14, 1974, received briefs, and kept the case under consideration until July 29, 1975. On that date it rendered judgment that plaintiff recover against State Farm the sum of $10,000 on behalf of the children.
There are no findings of fact or conclusions of law, but it appears from the State Farm’s motion for new trial that the trial court may have followed Stephens v. State Farm Mutual Automobile Ins. Co., 508 F.2d 1363 (5th Cir. 1975), which held that the consent clause was waived in that case by State Farm’s denial of liability under similar circumstances. Upon appeal of the present case by State Farm, plaintiff (as appellee) had a counterpoint stating that the trial court correctly ruled in favor of plaintiff because State Farm waived the consent provisions by denying all liability under its policy prior to plaintiff’s acceptance of Gulf’s policy limit payment. In reversing and rendering, the Court of Civil Appeals made no holding on or mention of the waiver counterpoint. We granted this writ on petitioner’s (plaintiff’s) point which alleged error of the Court of Civil Appeals in failing to sustain the waiver counterpoint.
Plaintiff-petitioner also asserts that the exclusionary provision of the policy is wholly invalid because it deprives the insured of the statutory protection of Article 5.06-1 of the Insurance Code. Although there is a trend in other jurisdictions toward narrow construction or voiding such clauses as unreasonable restrictions on mandatory uninsured motorist coverage,4 Texas courts have consistently upheld the validity of the provision as a means of protecting the insurer’s subrogation rights against the uninsured motorist or any other person legally responsible for the insured’s injuries. McClelland v. United Services Automobile Association, 525 S.W.2d 271 (Tex.Civ.App.1975, writ ref’d); Jessie v. Security Mutual Casualty Company, 488 S.W.2d 140 (Tex.Civ.App.1972, writ ref’d, n. r. e.); Grissom v. Southern Farm Bureau Casualty Insurance Company, 476 S.W.2d 448 (Tex.Civ.App.1972, writ ref’d, n. r. e.).
The question of whether the insurer waives the consent provision by prior unconditional denial of liability is one of first impression for Texas courts. The issue was not raised in any of the above cited Texas decisions, although the holding on the waiver issue in Stephens v. State Farm, supra, was noted in McClelland v. United Services Automobile Association, supra, in distinguishing the two cases. Those jurisdictions which have examined the issue agree that such denial of liability prior to the insured’s settlement with a third party constitutes a waiver of the consent clause. Employers National Insurance Co. v. Parker, 286 Ala. 42, 236 So.2d 699 (1970); Calhoun v. State Farm Mutual Automobile Ins. Co., 254 Cal.App.2d 407, 62 Cal.Rptr. 177 (1967); Allstate Ins. Co. v. Pietrosh, 85 Nev. 310, 454 P.2d 106 (1969); Gay v. Preferred Risk Mutual Insurance Co., 114 N.H. 11, 314 A.2d 644 (1974); Vanguard Ins. Co. v. Polchlopek, 18 N.Y.2d 376, 275 N.Y.S.2d 515, 222 N.E.2d 383 (1966); Childs v. Allstate Ins. Co., 237 S.C. 455, 117 S.E.2d 867 (1961); and Stephens v. State Farm Mutual Automobile Ins. Co., 508 F.2d 1363 (5th Cir. 1975). See Annot. 25 A.L.R.3d 1275, 1291-1292 (1969), wherein the rule is stated as follows:
“Where an insurer has denied liability under an uninsured motorist indorsement prior to the time that the insured commenced suit or entered into settlement, it has been held that the insurer was thereby precluded from asserting a clause in the indorsement excluding coverage where the insured, without the insurer’s consent, makes a settlement with, or ob[666]*666tains judgment against, a person or organization liable for his injuries.”
In the Stephens ease, supra, the United States Court of Appeals, Fifth Circuit, faced a waiver of consent issue based upon relevant facts which were almost identical to those in the instant case. Stephens, individually and as personal representative of his deceased wife, sued State Farm and Royal Indemnity Company in the United States District Court for the Southern District of Texas for recovery under the uninsured motorist provisions of the Texas standard automobile policies which State Farm carried on Mr. Stephens’ car and which Royal issued on Mrs. Stephens’ car. State Farm filed an answer denying all liability. Thereafter, Stephens settled with Royal for the full recovery limit of its policy without State Farm’s written consent. Whereupon, State Farm amended its pleading, claiming exclusion of coverage for the same reasons alleged against plaintiff in the present case. The trial court entered judgment for Stephens, and State Farm appealed.
The Circuit Court of Appeals affirmed after correctly anticipating that, “based upon reason and out-of-state authority” that we would hold “that a denial of co ver-age waives the consent clause.” It said:
“. . . The rationale behind holding to this particular waiver theory is that a claimant should not be required to approach his insurer, hat in hand, and request consent to settle with another when he has already been told in essence, that the insurer is not concerned, and he is to go his way. It is difficult to see why an insurer should be allowed, on the one hand, to deny liability and thus, in the eyes of the insured breach his contract and, at the same time, on the other hand, be allowed to insist that the insured hon- or all his contractual commitments. . in the case of existent, denied liability the denial is a breach of contract on the part of the insurer and its breach should by rights, relieve the insured of the punitive effects of his failure to comply with consent provisions of the insurance policy. We believe that Texas would so hold.”
We have so held, because the cases cited above are in accord with principles of Texas contract law. State Farm’s contract was to pay up to its policy limits “all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury . including death . . . caused by accident and arising out of the . . . use of such uninsured automobile . . Awaiting payment, the policy provides how State Farm may determine by agreement, arbitration, or judicial process any issues affecting the claimant’s entitlement to payment.
State Farm neither paid nor pursued any of its affirmative steps for determination of what, if anything, it was due to pay plaintiff. Instead, it unconditionally denied all liability under the policy. This intentional conduct was inconsistent with claiming the right under the policy to consent before its insured settled with a third party. Such conduct constituted a waiver of that right. “Waiver has been frequently defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming it.” (Emphasis supplied.) Massachusetts Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex.1967). See Womack v. Allstate Insurance Company, 156 Tex. 467, 296 S.W.2d 233, 236 (1956); Niagara Ins. Co. v. Lee, 73 Tex. 641, 11 S.W. 1024 (1889); American Employers’ Ins. Co. v. Brock, 215 S.W.2d 370 (Tex.Civ.App.1948, writ ref. n. r. e.).
If State Farm had been correct in unconditionally denying coverage and liability, it would have lost nothing by plaintiff’s settlement with Gulf. Since State Farm was incorrect in its denial, it has lost only the inconsistent right to assert the exclusionary consent clause as a grounds for forfeiture of plaintiff’s entire coverage. It has not lost its right of subrogation. See Art. 5.06-1(3), Texas Insurance Code. When it pays the amount adjudged to plaintiff by the trial court, State Farm will still have its right to institute proceedings in the name of plaintiff against the uninsured motorist [667]*667or any other person responsible for the accident. It is true that State Farm will have to share subrogation rights with Gulf Insurance which may, by reason of the earlier settlement, have a call on the first $10,000 recovered by plaintiff from any person responsible for the accident. The relative status of the subrogation rights of the two companies, as between themselves, is a question which is not now before us, and we express no opinion thereon.
The judgment of the Court of Civil Appeals is reversed and the judgment of the trial court is affirmed.
Dissenting opinion by POPE, J., in which REAVLEY, J., joins.
YARBROUGH, J., not sitting.