Martinez, Stanley Joseph v. State Farm Lloyds

• Court: Court of Appeals of Texas
• Decided: August 31, 2000
• Docket: 13-98-00466-CV
• Status: Published

Opinion

NUMBER 13-98-466-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI

____________________________________________________________________

STANLEY JOSEPH MARTINEZ, Appellant,

v.

STATE FARM LLOYDS, Appellee.

____________________________________________________________________

On appeal from the 148th District Court of Nueces County, Texas.

____________________________________________________________________

O P I N I O N

Before Justices Hinojosa, Yañez, and Rodriguez Opinion by Justice Hinojosa

Appellant, Stanley Joseph Martinez, was sued by Sonia Cagle-Arvin, the property manager of the Riviera Condominiums, where Martinez lived. The suit alleged various causes of action stemming from a physical and verbal confrontation that occurred between Martinez and Cagle-Arvin in her office at Riviera. When Martinez asked State Farm Lloyds, Riviera's commercial general liability ("CGL") insurance carrier to defend him, State Farm refused on the grounds that: (1) he was not an insured and (2) the confrontation was not an "occurrence" covered by the CGL policy. Martinez then filed a third-party action against State Farm, asserting contractual and extra-contractual claims for State Farm's refusal to defend him. Martinez's third-party action against State Farm was eventually severed from the Cagle-Arvin v. Martinez lawsuit.

After successfully defending the suit brought by Cagle-Arvin, Martinez pursued his action against State Farm. State Farm moved for, and was granted, summary judgment on the issues of its duty to defend, the breach of good faith and fair dealing, and breach of contract. The trial court also sustained State Farm's motion to strike Martinez's amended pleadings which included additional causes of action for violations of the Texas Deceptive Trade Practices--Consumer Protection Act (DTPA) and the Texas Insurance Code. This appeal ensued.

Martinez presents the following points of error for our review:⁽¹⁾

1. The trial court erred in granting State Farm Lloyd's Motion for Summary Judgment because Stanley Martinez was entitled to a defense by State Farm Lloyds in the lawsuit filed against [him] by Sonia Cagle-Arvin.

2. The trial court erred in granting State Farm Lloyd's Motion for Summary Judgment and Motion to Strike because Stanley Martinez has causes of action against State Farm Lloyds for breach of contract, violations of the [DTPA and], violations of the insurance code for State Farm Lloyd's failure to defend [him] in the lawsuit filed against him by Cagle-Arvin.

3. The trial court erred in granting State Farm Lloyd's Motion for Summary Judgment because Martinez was entitled to [a] declaration under the Declaratory Judgment Act that he is a named insured under the policy of insurance [and] entitled to a defense.

4. The trial court erred in granting State Farm Lloyd's Motion for Summary Judgment because a genuine issue of material fact existed on State Farm's reliance on policy exclusions of whether Martinez's conduct alleged by Cagle-Arvin against Martinez was intentional, or whether Martinez used reasonable force in defending himself, thus entitling him to a defense under the policy of insurance.

5. The trial court erred in granting State Farm Lloyd's Motion for Summary Judgment because Martinez is entitled to recover his damages for State Farm's failure to defend and for recover[ing] his damages in having to sue State Farm to enforce the contract and for recover[ing his] attorney's fees and his statutory causes of action under the [DTPA], the insurance code, and under the Texas Declaratory Judgment Act.

We affirm.

I. Procedural History

Because the procedural history of this case is complicated, a brief outline is necessary to understand the issues. Cagle-Arvin filed her original petition against Martinez on January 22, 1996. On January 14, 1997, Martinez filed a "cross-action"⁽²⁾ against State Farm, seeking a declaratory judgment that State Farm owed him a defense under the CGL policy. State Farm then filed special exceptions. On August 6, 1997, Martinez filed his "First Amended Cross-Action," adding causes of action for breach of contract and breach of the duty of good faith and fair dealing. State Farm again filed special exceptions. On December 9, 1997, the trial court granted State Farm's motion to sever this case from the Cagle-Arvin v. Martinez case.

On January 9, 1998, State Farm filed its first amended motion for summary judgment on the grounds that it had no duty to defend Martinez because, inter alia, he was not an insured under the policy, that State Farm had not breached the contract by failing to indemnify because there is no duty to indemnify where there is no duty to defend, and that it owed Martinez no duty of good faith and fair dealing.

The Cagle-Arvin v. Martinez suit was tried between January 19 and January 28, 1998. The jury rendered a verdict in favor of Martinez, and the trial court signed a judgment in his favor on February 23, 1998.

On March 9, 1998, Martinez filed a response to State Farm's motion for summary judgment and argued that State Farm did have a duty to defend him. However, he did not respond to State Farm's claims that it had not breached the contract or the duty of good faith and fair dealing. On that date, Martinez also filed an amended petition adding new causes of action against State Farm for violations of the DTPA and insurance code. On April 7, 1998, State Farm filed special exceptions to Martinez's latest petition. State Farm filed a reply to Martinez's response in which it again argued that it had no duty to defend Martinez in the Cagle-Arvin v. Martinez suit.

On April 24, 1998, the trial court heard the motion for summary judgment. On April 29, 1998, the trial court signed an order granting the motion in favor of State Farm as to its duty to defend and against Martinez on his causes of action for breach of contract and breach of the duty of good faith and fair dealing.

State Farm's motion for summary judgment did not address the causes of action for violations of the DTPA and insurance code which Martinez added in the amended petition he filed on March 9, 1998. On May 15, 1998, the trial court conducted a hearing and sustained State Farm's special exceptions to the amended petition Martinez filed on March 9.

On June 24, 1998, Martinez filed his "First Amended Petition," alleging causes of action for breach of the duty of good faith and fair dealing, breach of contract, and violations of the DTPA and insurance code, and seeking a declaratory judgment as to his rights under the CGL policy. This petition contains ten allegations of alleged insurance code and DTPA violations. On July 1, 1998, State Farm filed an amended motion to strike, alleging the amended pleading still failed to be specific enough about the alleged insurance code and DTPA violations. On August 3, 1998, the trial court heard State Farm's amended motion to strike, granted the motion, and "dismisse[d] with prejudice plaintiff Stanley Martinez's causes of action under the insurance code and DTPA." A "Final Judgment," dated November 9, 1998, denied State Farm's motion for summary judgment on attorney's fees and costs,⁽³⁾ and states, "all relief not granted in this order or in prior orders is denied."

II. Standard of Review

Summary judgment is designed to eliminate unmeritorious claims or untenable defenses. Turner v. Richardson Indep. Sch. Dist., 885 S.W.2d 553, 557 (Tex. App.--Dallas 1994, no writ). The purpose of the summary judgment rule is not to provide either a trial by deposition or a trial by affidavit, but to provide a method of summarily terminating a case when it clearly appears that only a question of law is involved and that no genuine issue of material fact remains. Gaines v. Hamman, 163 Tex. 618, 626, 358 S.W.2d 557, 563 (1962). When reviewing a summary judgment, an appellate court must follow these well-established rules:

(1) the movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law;

(2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and

(3) every reasonable inference must be indulged in favor of the nonmovant and any doubts must be resolved in favor of the nonmovant.

American Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985); see also Tex. R. Civ. P. 166a.

When the defendant moves for summary judgment, the motion is properly granted only if the plaintiff cannot, as a matter of law, succeed upon any theory pleaded. Delgado v. Burns, 656 S.W.2d 428, 429 (Tex. 1983). A defendant's motion for summary judgment should be granted if he disproves at least one essential element of each of the plaintiff's causes of action, or if he establishes all the elements of an affirmative defense as a matter of law. Grinnell, 951 S.W.2d at 425; Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997); Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). Whether an insurance carrier owes a duty to defend under an insurance policy is a question of law that the appellate court reviews de novo. St. Paul Ins. Co. v. Texas Dept. of Transp., 999 S.W.2d 881, 884 (Tex. App.--Austin 1999, pet. denied).

Once the movant establishes its right to summary judgment as a matter of law, the burden shifts to the nonmovant to offer any issue or evidence that would preclude summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). When a defendant moves for summary judgment, a plaintiff can bar summary judgment by presenting evidence that creates a fact question on those elements of the plaintiff's case under attack by the defendant or on at least one element of each affirmative defense advanced by the defendant. Torres v. Western Casualty & Sur. Co., 457 S.W.2d 50, 52 (Tex. 1970). Alternately, the plaintiff can defeat the motion by conceding that the material facts are undisputed, but convincing the court that the defendant's legal position is unsound. Estate of Devitt, 758 S.W.2d 601, 601 (Tex. App.--Amarillo 1988, writ denied). If a summary judgment is granted generally, without specifying the reason, it will be upheld if any ground in the motion for summary judgment can be sustained. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989); Weakly v. East, 900 S.W.2d 755, 758 (Tex. App.--Corpus Christi 1995, writ denied); Benavides v. Moore, 848 S.W.2d 190, 192 (Tex. App.--Corpus Christi 1992, writ denied).

III. The Duty to Defend

An insurer's duty to defend a claimant is analyzed under the "eight corners" rule by looking at the allegations in the plaintiff's pleadings and the language of the insurance policy. National Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). An insurer has no duty to defend its insured against a suit in which the petition does not allege facts within the scope of coverage. Id. at 141; American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex. 1994). When applying this rule, we give the allegations in the pleadings a liberal interpretation:

Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy. Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in the insured's favor.

National Union Fire Ins., 939 S.W.2d at 141 (citing Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965)). Any vagueness in the insurance contract must be interpreted against the insurer, and in favor of finding a duty to defend. ANR Prod. Co. v. American Guarantee & Liab. Ins. Co., 981 S.W.2d 889, 891 (Tex. App.--Houston [1st Dist.] 1998, no pet.). In determining whether the claims alleged in the pleadings are covered by the policy, we must take the facts alleged in the petition as true. Id. A plaintiff's label for its cause of action is not dispositive; the facts alleged control. National Union Fire Ins. Co., 939 S.W.2d at 141-42.

This Court has held that evidence extrinsic to the "eight corners" may be considered in very limited circumstances:

Where the insurance company refuses to defend its insured on the ground that the insured is not liable to the claimant, the allegations in the claimant's petition control, and facts extrinsic to those alleged in the petition may not be used to controvert those allegations. But, where the basis for the refusal to defend is that the events giving rise to the suit are outside the coverage of the insurance policy, facts extrinsic to the claimant's petition may be used to determine whether a duty to defend exists.

Gonzales v. American States Ins. Co. of Tex., 628 S.W.2d 184, 187 (Tex. App.--Corpus Christi 1982, no writ)(emphasis in original). See Mid-Continent Cas. Co. v. Safe Tire Disposal Co., 16 S.W.3d 418, 421 (Tex. App.--Waco 2000, pet. filed); Guaranty Nat'l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 194-95 (5th Cir. 1998) (to the extent that plaintiff's pleadings are incomplete, extrinsic evidence may be used to determine if coverage exists) (citing Gonzalez, 628 S.W.2d at 187); State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 452 (Tex. App.--Corpus Christi 1992, writ denied) (where petition in underlying case did not allege facts sufficient for a determination of whether those facts, even if true, were covered by the policy, extrinsic evidence may be adduced); Cook v. Ohio Cas. Ins. Co., 418 S.W.2d 712, 715-16 (Tex. Civ. App.--Texarkana 1967, no writ) (extrinsic evidence allowed to show automobile involved in accident was excluded from coverage); International Serv. Ins. Co. v. Boll, 392 S.W.2d 153, 161 (Tex. Civ. App.--Houston [1st Dist.] 1965, writ ref'd n.r.e.) (extrinsic evidence allowed to show person involved in accident was excluded from policy). Thus, we may consider evidence extrinsic to the "eight corners" on the issue of whether Martinez was insured under the policy, but not on the issue of whether Martinez was liable to Cagle-Arvin for the injuries she claimed she received in her confrontation with Martinez.

IV. Summary Judgment Evidence A. Cagle-Arvin's Petition -- The First Four Corners

In her original petition, Cagle-Arvin alleged that on April 1, 1995, while she was employed as the property manager for the Riviera Condominiums, Martinez, a resident of the condominiums, entered her office and verbally and physically assaulted her, yelling and cursing at her, throwing her into a filing cabinet, pulling her across a desk, shoving her into a door jamb and knocking her to the ground. She alleged she sustained physical injuries and other damages as a result of Martinez's wrongful actions. She alleged two causes of action: intentional tort and "malice." In her first amended petition, she alleged the same facts, but asserted claims of assault, false imprisonment, and intentional infliction of emotional distress.

B. The CGL Policy -- The Second Four Corners

The relevant portions of the CGL policy purchased by Riviera states:SECTION II - WHO IS AN INSURED

1. If you are designated in the Declarations as :

* * * * *

c. An organization other than a partnership or joint venture, you are an insured. Your executive officers and directors are insureds, but only with respect to their duties as your officers or directors.

* * * * *

2. Each of the following is also an insured:

a. Your employees, other than your executive officers, but only for acts within the scope of their employment by you.

* * * * *

b. Any person (other than your employee), or any organization while acting as your real estate manager.

In the "Texas Commercial Package Policy Common Policy Declarations," Riviera Condominiums of Corpus Christi is the named insured. An endorsement to the policy states:

WHO IS AN INSURED (Section II) is amended to include as an insured each individual unit owner of the insured condominium, but only with respect to liability arising out of the ownership, maintenance or repair of that portion of the premises which is not reserved for that unit owner's exclusive use or occupancy.

C. Evidence Extrinsic to the "Eight Corners" 1. State Farm's Extrinsic Evidence

In support of its motion for summary judgment, State Farm attached an excerpt from the deposition of Jason Carter, the president of Riviera's Board at the time the events in question occurred. Carter testified that Martinez was not a member of Riviera's Board, was not an officer of Riviera, and was not an employee of Riviera. He stated that Martinez was "an owner . . . [who] had volunteered to look into some vandalism and -- and repair issues."

2. Martinez's Extrinsic Evidence a. Deposition of Jason Carter

Martinez also attached an excerpt from the deposition of Jason Carter. Carter testified that he had refused to sign the affidavit at the end of his first deposition because, while it was true that Martinez was never a Riviera executive officer or employee, he felt that his prior testimony was "incomplete" because Martinez "was working at the direction of the Board . . . he was acting at our behest." Carter opined that State Farm should be defending Martinez because "he was an agent of the Board."

b. Carter's Memo to Cagle-Arvin

Carter wrote the following memo to Cagle-Arvin:

Mr. Martinez has offered to give his advice concerning some maintenance and repair issues. Please arrange for Mr. Martinez, you and me to tour the property when I return from Chicago. Mr. Martinez will then present his recommendations to the Board. Also, Mr. Martinez would like for you to show him all the items that have been vandalized. This can be done before I return. Please contact Mr. Martinez and arrange these tours while I am in Chicago. Thank you.

cc: Stanley Martinez

P.S. Mr. Martinez would also like to see the engineer drawings for the walls and the police report concerning the vandalism.

c. Carter's Memo to Martinez

Carter wrote the following memo to Martinez, confirming what he had written to Cagle-Arvin:

Sonia [Cagle-Arvin] will be contacting you to arrange the tours mentioned in the attached memo to her. I am still looking for her resume which I have misplaced. I will share that with you as soon as I locate it.

V. Did State Farm have a duty to defend

Martinez as an agent of the Riviera Board?

The CGL policy clearly covers only "officers and directors" of the condominium association with respect to their duties as officers or directors. There is no explicit provision for coverage of agents of the Board, or for persons volunteering their services. It is undisputed that Martinez was not a Riviera Board member or an officer of Riviera, and the extrinsic evidence submitted by both parties clearly shows he was neither.

Martinez alleges, however, that because the policy does not specifically exclude coverage for agents of the Board, it is ambiguous and should be construed in his favor. State Farm asserts the policy is unambiguous, that it does not provide coverage for agents of the Board, and that, in the alternative, a number of exclusions preclude coverage, even if Martinez is an insured by virtue of being an agent of the Board.

It is true, as Martinez contends, that insurance policies are strictly construed in favor of the insured in order to avoid exclusion of coverage. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984). However, that rule does not apply when the term in question is susceptible of only one reasonable construction. Id. A written contract that can be given a definite or certain legal meaning is not ambiguous. National Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Not every difference in the interpretation of a contract or an insurance policy amounts to an ambiguity. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994); Hofland v. La Joya Gin, Inc., 907 S.W.2d 597, 599 (Tex. App.--Corpus Christi 1995, no writ). A contract is ambiguous when the language of a policy or contract is subject to two or more reasonable interpretations. National Union, 907 S.W.2d at 520; McCarthy Bros. Co. v. Continental Lloyds Ins. Co., 7 S.W.3d 725, 729 (Tex. App.--Houston [1st Dist.] 1999, no writ).

In construing contracts, the primary concern of the court is to ascertain the true intention of the parties as expressed in the instrument. Coker, 650 S.W.2d at 393; Hofland, 907 S.W.2d at 599. Language used by parties in a contract should be accorded its plain, grammatical meaning unless it definitely appears the intention of the parties would thereby be defeated. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985).

We hold the policy is susceptible to only one reasonable construction -- that only Riviera Board members were insureds, not their agents. To hold otherwise would mean that the Board could add as many people as insureds under the policy as it wished and at its sole discretion. This is not reasonable in light of the nature of the insurance business, i.e., assessing the risks associated with a known group of people and/or a known property and insuring against those risks for a certain premium. We hold Martinez was not a named insured under the policy as an agent of the Board, and that State Farm had no duty to defend him under the "officers and directors" provision of the policy.

VI. Did State Farm have a duty to defend

Martinez because the injury arose out of the "ownership,

maintenance or repair" of the common areas of the condominium?

Martinez also claims coverage as an individual unit owner, contending that, because he went to Cagle-Arvin's office to discuss repair and maintenance issues, the injuries Cagle-Arvin received in the ensuing scuffle "arose out of the ownership, maintenance or repair of the common areas of the condominium." However, this contention is without merit.

The Cagle-Arvin petitions alleged no liability stemming from property ownership; instead, they asserted facts supporting her causes of action for assault, false imprisonment, and intentional infliction of emotional distress, none of which has any connection with anyone's ownership, maintenance or repair of the common areas of the property. Given their most liberal interpretation, these allegations do not suggest Cagle-Arvin's injuries resulted from the ownership, maintenance or repair of the common areas of the property. See National Union Fire Ins., 939 S.W.2d at 141 (holding that a truck driver who negligently shot someone in another vehicle was not entitled to a defense from his automobile insurance carrier because the gunshot injuries did not result from the "ownership, maintenance or use of a covered auto"). We hold that under the "eight corners" rule, there was no coverage under this policy provision for the facts alleged in Cagle-Arvin's petition.

VII. Did State Farm have a duty to defend Martinez

because he was acting as Riviera's property manager?

Martinez contends he was entitled to a defense from State Farm under the provision of the policy that covered "[a]ny person (other than your employee) . . . while acting as your real estate manager." However, Cagle-Arvin's petition alleges that she was the property manager for Riviera, not Martinez. There is no allegation in either of Cagle-Arvin's petitions that Martinez was acting as Riviera's property manager. Martinez's summary judgment evidence fails to raise any question of fact that he was acting as Riviera's property manager. We hold that under the "eight corners" rule, State Farm had no duty to defend Martinez under this provision of the policy.

We hold, therefore, that Martinez was not an insured under the CGL policy, and that State Farm had no duty to defend him. Accordingly, we overrule Martinez's first, third, and fifth points of error.

Furthermore, because we have held that Martinez was not an insured under the policy, we need not address Martinez's fourth point of error, contending that he acted in self-defense rather than committing intentional conduct excluded under the policy. Tex. R. App. P. 47.1; see Carr, 776 S.W.2d at 569; Weakly, 900 S.W.2d at 758; Benavides, 848 S.W.2d at 192 (if a summary judgment is granted generally, without specifying the reason, it will be upheld if any ground in the motion for summary judgment can be sustained).

VIII. Summary Judgment on Martinez's Claims of Breach of

the Duty of Good Faith and Fair Dealing and Breach of Contract

In his second point of error, Martinez contends the trial court erred in granting State Farm's motion for summary judgment on his causes of action for breach of contract and breach of the duty of good faith and fair dealing.

Martinez's response to State Farm's motion for summary judgment does not address these two causes of action. The rules of civil procedure provide that, regarding motions for summary judgment, "[i]ssues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal." Tex. R. Civ. P. 166(c). The terms "answer" and "response" in this rule clearly refer to the motion for summary judgment and not to the pleadings generally; pleadings do not constitute summary judgment proof. City of Houston, 589 S.W.2d at 678. The written answer or response to the motion must fairly apprise the movant and the court of the issues the non-movant contends should defeat the motion. Id.; McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993).

However, while it would be prudent and helpful to the trial court for the non-movant always to file an answer or response, the non-movant needs no answer or response to contend on appeal that the grounds expressly presented to the trial court by the movant's motion are insufficient as a matter of law to support summary judgment. City of Houston, 589 S.W.2d at 687. Summary judgments must stand or fall on their own merits, and the non-movant's failure to answer or respond cannot supply by default the summary judgment proof necessary to establish the movant's right. McConnell, 858 S.W.2d at 343. Therefore, because Martinez's response did not address these causes of action, we must determine whether State Farm established its right to summary judgment on these causes as a matter of law.

Martinez's "Petition Against State Farm Lloyds," filed March 9, 1998, states in relevant part:

6. Martinez would show that he has sought from State Farm a defense under the policy of insurance between Riviera Condominiums. State Farm has a duty to defend Martinez under the policy of insurance because Martinez is identified as an additional insured, has been sued by Sonia Cagle-Arvin alleging factual allegations that come within policy coverage. Martinez has complied with all conditions precedent, he is an additional insured under the policy, the claims asserted by Cagle-Arvin are covered losses under the policy of insurance, and State Farm had a duty to defend Martinez under the policy of insurance, and as a result Martinez incurred reasonable, necessary, and customary attorney fees, and incurred reasonable, necessary, and customary litigation costs and expenses, and court costs in defending himself in the suit.

* * * * *

BREACH OF COVENANTS OF GOOD FAITH AND FAIR DEALING

9. Martinez would show that a special relationship exists between Martinez and State Farm, and the acts or omissions of the Defendant constitutes a breach of the covenants of good faith and fair dealing, which was the proximate or producing cause of Martinez's injuries, and was done with willful and wanton disregard of Martinez's rights and remedies to entitle the Plaintiff to exemplary damages.

BREACH OF CONTRACT

10. In the alternative, Martinez would show that such acts or omissions by State Farm constitute a breach of contract, express or implied.

In its motion for summary judgment, State Farm asserted it had not breached the duty of good faith and fair dealing to Martinez because "[a]n insurer has no duty to settle a claim that is not within the coverage of the policy." State Farm cited American Physicians Ins. Exchange v. Garcia, 876 S.W.2d 842, 848 (Tex. 1994), in support of this assertion. It further argued that: (1) it had not breached a contract with Martinez; (2) it had no duty to defend him; and (3) it had no duty to indemnify him. State Farm cited Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997), in support of this argument.

An insurer has a duty to deal fairly and in good faith with its insured in the processing and payment of claims. Arnold v. Nat'l County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987). An insurer breaches the duty of good faith and fair dealing when 1) there is no reasonable basis for denying or delaying payment of benefits under the policy, and 2) the insurer knew or should have known there was not a reasonable basis for denying the claim. Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995); Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 18 (Tex. 1994); see also Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex. 1988). However, there can be no claim for bad faith when an insurer has promptly denied a claim that is, in fact, not covered. Stoker, 903 S.W.2d at 341.

We have already determined that Martinez was not an insured under the CGL policy for the injuries alleged in the Cagle-Arvin lawsuit. Consequently, there can be no claim for "bad faith" where the only transgression alleged by Martinez is that State Farm refused to defend him in the Cagle-Arvin lawsuit. We hold the trial court did not err in granting State Farm's motion for summary judgment on the breach of the duty of good faith and fair dealing issue.

The only breach of contract alleged in Martinez's petition is that State Farm refused to defend him in the Cagle-Arvin lawsuit. Because we have already determined that Martinez was not an insured under the CGL policy for the injuries alleged in the Cagle-Arvin lawsuit, and that State Farm had no duty to defend him, there can be no breach of contract as alleged by Martinez. We hold the trial court did not err in granting State Farm's motion for summary judgment on the breach of contract issue.

IX. Dismissal of Martinez's Causes of Action

for Violations of the DTPA and Insurance Code

In his second point of error, Martinez also contends the trial court erred in granting State Farm's motion to strike because he has causes of action against State Farm for violations of the DTPA and insurance code. Nowhere in his brief does Martinez attack the trial court's sustaining of State Farm's special exceptions to Martinez's pleadings.

Martinez first added the allegations of insurance code and DTPA violations in his March 9, 1998 petition. State Farm filed special exceptions to this pleading, claiming, inter alia, that Martinez had failed to plead these causes of action with enough specificity, and had failed to state a claim upon which relief could be granted.⁽⁴⁾ The trial court sustained State Farm's special exceptions at a hearing on May 15, 1998. Martinez filed an amended petition on June 24, 1998, but the only change to the prior petition was the addition of the following language:

7. State Farm engaged in unfair settlement practices by misrepresenting to Martinez and Riviera Condominiums a material fact relating to the coverage at issue. The policy of insurance specifically provides that condominium owners are insureds under the policy of insurance.

(1) State Farm's conduct of asserting that Martinez is not an insured under the policy of insurance in direct contravention to a policy provision violates both the [DTPA] and the insurance code.

(2) When Cagle-Arvin alleged factual claims for false imprisonment and slander giving rise to coverage under the policy, they failed to effectuate a prompt, fair, and equitable settlement with respect to State Farm's liability because coverage had become reasonably clear considering the factual pleadings asserted by Cagle-Arvin.

(3) State Farm likewise violated the [DTPA] and insurance code when it failed to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim when Cagle-Arvin amended her petition and alleged a cause of action for false imprisonment.

(4) State Farm violated the [DTPA] and the insurance code when it failed to attempt to effectuate a prompt, fair, and equitable settlement under the portion of the policy providing for coverage for false imprisonment after Cagle-Arvin amended her pleading and specifically plead a cause of action for false imprisonment.

(5) State Farm has failed and the wrongful conduct continues by failing to provide Martinez a prompt, reasonable explanation of the basis in the policy for State Farm's denial of the claim. The policy specifically provides that a condominium owner is an insured under the policy, yet State Farm wrongfully, intentionally, and maliciously relies upon federal law from another state to deny Martinez coverage for Cagle-Arvin's claims against Martinez.

(6) State Farm refused to pay the claim or defend Martinez without conducting a reasonable investigation with respect to the claim.

(7) State Farm caused confusion or misunderstanding as to the source or approval of its insurance services because it has taken a position that they owe no duty to Martinez when they owe a duty two fold [sic]:

(a) Martinez is a condominium owner and covered as an insured under the policy and

(b) Cagle-Arvin asserted factual claims against Martinez for both slander and false imprisonment, and specifically sued for false imprisonment, both covered claims under the policy of insurance.

(8) State Farm, through the direct and plain reading of their policy have misrepresented through their actions that the policy of insurance has approval, characteristics, and benefits which they claim the policy does not have.

(9) State Farm represented the agreement involved or conferred rights and remedies or obligations which they assert after Martinez made a claim that the policy does not have.

(10) State Farm failed to disclose when the policy of insurance was issued to Riviera Condominiums that they would deny a claim made by an individual condominium owner if asserted by an employee of the condominium against one of the owners for specifically identified actions such as false imprisonment or slander.

On July 1, 1998, State Farm filed its Amended Motion to Strike, alleging that Martinez's latest petition had failed to cure the pleading defects:

The Petition contains 10 new factual allegations concerning State Farm's alleged violations of the insurance code and DTPA . . . . Contrary to the exceptions sustained, these allegations still fail to specify when the misrepresentations allegedly were made and by whom they were made. Also contrary to the exception sustained, some of the alleged DTPA and insurance code violations . . . are still improperly premised upon State Farm's alleged failure to defend or settle the third-party claim against Martinez. In short, the 10 new allegations neither cure Martinez's pleading defects nor state a claim for relief against State Farm.

Specifically, State Farm asserted that allegations (1) through (7) and (10) were not actionable because they complained of State Farm's alleged breach of the duty to defend. The trial court had already determined, by granting State Farm's motion for summary judgment, that State Farm had not breached any duty to defend Martinez. State Farm further asserted that allegations (8) and (9) made "no sense" and failed to specify the contents and nature of the alleged misrepresentations, or when they were allegedly made.

After notice, a hearing on the amended motion to strike was held on August 3, 1998. The trial court granted the motion on that date and dismissed, with prejudice, Martinez's causes of action under the DTPA and insurance code.

Special exceptions are allowed by Texas Rule of Civil Procedure 91, which states that a special exception shall point out the insufficiency in the pleading excepted to. Tex. R. Civ. P. 91; Lara v. Lile, 828 S.W.2d 536, 541 (Tex. App.--Corpus Christi 1992, writ denied). If the plaintiff's pleadings are insufficient, the defendant may file special exceptions, specifically pointing out the defect or reason that the plaintiff's claim is invalid. Lara, 828 S.W.2d at 541. If the special exceptions are sustained, the plaintiff must then be given an opportunity to amend his pleadings before the case may be dismissed. Id.; Texas Dept. of Corr. v. Herring, 513 S.W.2d 6, 9-10 (Tex. 1974); Moseley v. Hernandez, 797 S.W.2d 240, 242 (Tex. App.--Corpus Christi 1990, no writ). If, after amending his petition, the plaintiff has still not cured the defect, the trial court may dismiss the case. Nichols v. Jack Eckerd Corp., 908 S.W.2d 5, 7 (Tex. App.--Houston [1st Dist.] 1995, no writ).

A trial court has broad discretion to sustain special exceptions. Id. On review, the trial court's rulings on special exceptions will be reversed only upon a showing of an abuse of discretion. Gutierrez v. Karl Perry Enterprises, Inc. 874 S.W.2d 103, 105 (Tex. App.--El Paso 1994, no writ). The test for abuse of discretion is whether the trial court acted without reference to any guiding rules and principles and whether the act was arbitrary and unreasonable. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-21 (Tex. 1986).

However, an appellant complaining of the dismissal of a cause of action following the sustaining of special exceptions must first attack the trial court's decision to sustain the special exceptions and then attack the trial court's decision to dismiss. Holt v. Reproductive Servs., Inc., 946 S.W.2d 602, 604 (Tex. App.--Corpus Christi 1997, writ denied); Cole v. Hall, 864 S.W.2d 563, 566 (Tex. App.--Dallas 1993, writ dism'd). If the appellant does not challenge the ruling on the special exceptions, then any error in the sustaining of the special exceptions is waived. Cole, 566 S.W.2d at 566.

Here, State Farm specially excepted to Martinez's post-summary judgment pleading, which alleged insurance code and DTPA violations for breach of the duty to defend. The issue of State Farm's duty to defend Martinez had already been resolved in State Farm's favor on summary judgment. We conclude the trial court did not abuse its discretion by dismissing Martinez's allegations (1) through (7) and (10).

There are arguably two allegations, (8) and (9), that are not predicated on the duty to defend. In allegations (8) and (9), Martinez alleged misrepresentations by State Farm, but gave no specifics regarding these alleged misrepresentations. Because Martinez did not specify what these misrepresentations were, we conclude the trial court did not abuse its discretion by dismissing allegations (8) and (9). We hold the trial court did not abuse its discretion by granting State Farm's amended motion to strike and dismissing Martinez's causes of action under the DTPA and the insurance code.

We have held that the trial court did not err in granting State Farm's motion for summary judgment on the breach of contract and breach of the duty of good faith and fair dealing issues. We have also held that the trial court did not abuse its discretion in granting State Farm's amended motion to strike and dismissing Martinez's causes of action under the DTPA and the insurance code. Accordingly, we overrule Martinez's second point of error.

We affirm the trial court's orders granting State Farm Lloyd's motion for summary judgment and amended motion to strike.

FEDERICO G. HINOJOSA

Justice

Do not publish. Tex. R. App. P. 47.3.

Opinion delivered and filed this the

31st day of August, 2000.

1. Appellant's points of error are misnumbered in his brief. They begin with number two instead of number one. We will number them correctly to avoid confusion.

2. This is more properly called a third-party action. See Tex. R. Civ. P. 38(a).

3. We assume State Farm filed a second motion for summary judgment on the issue of attorney's fees and costs. That motion, however, is not in the record before us. We note that the issue of attorney's fees and costs was not specifically presented in State Farm's "First Amended Motion for Summary Judgment" at issue here.

4. The record shows that State Farm filed at least two previous special exceptions, and at least one previous motion to strike. However, we have no record of any hearing on these previous motions.