Texas Farm Bureau Insurance Companies v. Sears

54 S.W.3d 361, 2001 Tex. App. LEXIS 5006, 2001 WL 840607
CourtCourt of Appeals of Texas
DecidedJuly 25, 2001
Docket10-00-050-CV
StatusPublished
Cited by17 cases

This text of 54 S.W.3d 361 (Texas Farm Bureau Insurance Companies v. Sears) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Texas Farm Bureau Insurance Companies v. Sears, 54 S.W.3d 361, 2001 Tex. App. LEXIS 5006, 2001 WL 840607 (Tex. Ct. App. 2001).

Opinions

OPINION

VANCE, Justice.

In 1983, James Sears was an insurance agent for Texas Farm Bureau Insurance Companies (“Farm Bureau” or the “company”) in its Nacogdoches office, which was managed by Joe Sweat. Sears reported to Sweat that he suspected irregularities in how claims were being processed in the office. The allegations were that a local contractor, Mickey Walker, would inflate bids on repairs for property damage which would then be approved by Farm Bureau’s adjuster, Don Lackey, for a “kickback.” Some agents may also have been involved peripherally. Sears and Sweat reported the allegations to the main office in Waco. No action was taken by Farm Bureau. Over the next several years Sears made some other reports about the scheme, one to another superior, Ronnie Worth, and later to the district manager, Lewis Rix. Still, no action was taken by Farm Bureau.

In 1990, when Sears was recuperating from hip surgery and working only part-time, an insured of Farm Bureau, later identified as one of Sears’s clients, sent an anonymous letter to the company, with a copy to the Texas Department of Insurance, describing the “kickback” scheme and accusing Walker, Lackey, and Sears of being involved in it. Farm Bureau had one of its internal auditors, Darren Calla-way, review Sears’s files, and he found a few to be suspicious. The company began an investigation of the Nacogdoches office, hiring an out-of-state investigator, Bill Graham. Graham was aided by Callaway. Sears later claimed that Farm Bureau gave Graham no parameters within which to conduct his investigation, but simply “unleashed” him on Sears and others. Sears also claimed Graham targeted him and used unethical tactics. For example, when Sears arrived at the office for his first investigatory interview with Graham, two police officers were waiting to speak with Sears. Graham later told Sears that the police believed Sears was involved in criminal activity. Evidently that was untrue.

Although he found no “direct” evidence linking Sears to the scheme, Graham continued to identify Sears to Farm Bureau as being involved in the scheme, at least in part because evidence indicated that Sears recently had suspicious dealings with [366]*366Walker regarding two inflated bids. As a result of reports to the company from Graham and Callaway, Sears was fired on October 1, 1990. However, accusations about Sears continued. Farm Bureau made the results of its investigation of Sears available to the Texas Board of Insurance, the United States Postal Service, the United States Attorney’s Office, the Internal Revenue Service, and various other federal agencies. Months after Sears’s termination, Graham or Callaway had Walker, the contractor involved in the “kickback” scheme, prepare an IRS Form 1099 listing the amount of money Sears supposedly took from “kickbacks.” The insinuation was that Sears had never reported this as income or paid taxes on it. The IRS eventually contacted Sears for an explanation. Finally, also months after Sears’s termination, Farm Bureau sent Graham and Callaway to Austin to convince the Board of Insurance to revoke Sears’s license to sell insurance. The Board refused.

Eventually Lackey and Walker were indicted for mail fraud; Walker was convicted and incarcerated. Two other insurance agents in the Nacogdoches office admitted to taking “kickbacks” and were fired.

In 1993, Sears and his wife, Sue, sued Sweat, Rix, and Farm Bureau. Their pleadings asserted claims of defamation, negligent investigation with gross negligence, negligent and intentional infliction of emotional distress, and wrongful discharge. They sought actual damages and exemplary damages connected to the emotional distress claim. The defendants filed motions for summary judgment which were granted regarding all claims against Sweat and Rix, and regarding claims for defamation, negligent infliction of emotional distress, and wrongful discharge against the company. The claims for negligent and grossly negligent investigation and for intentional infliction of emotional distress with exemplary damages were tried to a jury in September of 1999. After a four-day trial, the jury found in Sears’s favor and awarded:

• $150,000 for Sears’s past mental anguish due to Farm Bureau’s negligent investigation;
• $324,000 for Sears’s past loss of pecuniary income due to the negligent investigation;
• $500,000 in exemplary damages due to Farm Bureau’s gross negligence;
• $100,000 for Sears’s emotional distress intentionally caused by the company; and
• $250,000 in exemplary damages due to the company’s conduct in intentionally inflicting emotional distress on Sears.1

Judgment was entered in November 1999 in favor of the Searses and against Farm Bureau for $574,000 in compensatory damages and $750,000 in punitive damages, $943,486.03 in prejudgment interest, and postjudgment interest at the rate of 10% per year.

Farm Bureau makes a variety of complaints on appeal which can be grouped as follows:

1. Negligent Investigation:
a. The company had no duty to Sears to investigate using ordinary care, and therefore as a matter of law cannot have been negligent or grossly negligent in its investigation of Sears.
b. The evidence is legally and factually insufficient that the company negligently investigated Sears.
c. The evidence is legally and factually insufficient that the company [367]*367was grossly negligent in its investigation of Sears.
2. The evidence is legally and factually insufficient to support any award for past mental anguish.
3. The evidence is legally and factually insufficient to support any award for past loss of pecuniary income.
4. The evidence is legally insufficient that the company intentionally inflicted emotional distress on Sears.

We will sustain the challenge to the negligence and gross negligence claims and overrule the challenge to the claim based on intentional infliction of emotional distress. Thus, we will reverse the judgment as to the negligence claims, sever them, and remand those claims for a new trial. We will affirm the judgment as to the intentional-infliction-of-emotional-distress claim.

NEGLIGENT INVESTIGATION

Farm Bureau attacks both the basis for liability and the damages awarded.

The Legal Duty to Investigate Using Reasonable Care

The company initially complains that it had no duty to use reasonable care in its investigation, and therefore, as a matter of law, it cannot have been either negligent or grossly negligent. Sears claims that he was fired because the company conducted a poor investigation, and that if the investigation had been done with reasonable care, he would have been exonerated, not fired, and not damaged.

It is true there is no duty of good faith and fair dealing between an employer and an at-will employee. The Legislature has enacted a variety of statutes to regulate employment relationships, and a common-law tort for good faith and fair dealing would “tend to subvert those statutory schemes by allowing employees to make an end-run around the procedural requirements and specific remedies the existing statutes establish.” City of Midland v.

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54 S.W.3d 361, 2001 Tex. App. LEXIS 5006, 2001 WL 840607, Counsel Stack Legal Research, https://law.counselstack.com/opinion/texas-farm-bureau-insurance-companies-v-sears-texapp-2001.