USAA v. Menchaca, 545 S.W.3d 479 (Tex. 2018)
Quinn’s Part Eight
This Part–the last one–is no longer a discussion of particular opinions, whether an exposition, discussion or critique. It is a bit of speculation. I will not be speculating on why this case became a landmark case, which it surely has. No doubt the legal fees, in this case, added up to as much as several hundred thousand dollars, while the potential recovery was quite small–hundreds of percentage points smaller. (One might even imagine that there was a “political” or “ideological” clash near or at the bottom of all this.)
I am much more interested in wondering why Question l and Answer 1 got formulated as they did and wondering what might have happened if it had been formulated differently.
Q#1 could have been formulated in a much better way–really, in several much better ways. If it had been done differently, it is quite possible that there would have been no appeal or no appeal anything like the one that is now famous, or infamous, depending on your point of view.
This speculation begins with a fundamental truth of insurance law, and that is this. All ambiguities in contracts of insurance are to be interpreted in favor of the insured if that alleged ambiguity reasonably corresponds to different available meanings in language as commonly used, and the alternative meaning proposed by the insured is to be adopted for interpreting the contract, even if the one proposed by the insurer is more reasonable.
How could this rule be otherwise since all contracts of insurance presuppose a “special relationship” between the insurer and insured, where the “special relationship” requires the insurer to treat the interests of the insured as at least equal to its own. The “special relationship principle” was designed to be a great equalizer between insureds and insurers and thereby protect policyholders from behemoth sized companies. The Opinion of the Court, in this case, recognizes that fact. (Of course, all semantics in the interpretation of contracts, among at least some other documents, are legal matters and therefore for judges to decide, as opposed to finders of fact.
None of the foregoing is controversial.
One can plausibly argue that the word “term” is ambiguous in a variety of ways. One of the ways it can be ambiguous in contract interpretation begins with the proposition that it might mean either a word (or phrase, or clause), on the one hand, or a provision, on the other. Obviously, a provision is one thing, while a linguistic or semantic unit is another–indeed, they are quite different. Clearly, the idea of term-as-provision is the one a rational court would have to adopt, since it is reasonable, or so the argument would go.
Now here’s another ambiguity. Some provisions are explicitly set forth in contracts of insurance while others are implied, just as is the case in all contracts. This point is so obvious, that it might not even depend on an ambiguity. The law has recognized implied provisions in contracts for as long a several hundred years–or a very long time, anyway.
What if an implied term in property policies–or homeowner’s policies, at least–is that all determinations as to whether, and by how much, or in what amounts, a deductible clause applies to a given claim, must be determined with considerable exactitude and suppose further that this requirement can be met only by careful investigation on the part of the insurer. (Of course, the insured must also perform a suitable investigation in order to establish coverage.)
Now, in the Menchaca case, there was apparently not a satisfactory investigation. What if that requirement was thought of as a “term”–an implied term, if nothing else, in the policy. If that’s true, and if the jury was properly instructed, then its answer to Question 1 would have been “Yes” and not “No” (or so the argument would go).
If the jury answered Question 1 in the affirmative, the judge would not have disregarded Answer 1, and the main, foundational, controversy in the Menchaca case would disappear. If there had been an appeal in this case at all, it would have been quite routine, and there would have been no landmark Supreme Court decision arising out of it.
Of course, that type of giant decision might be found in another Supreme Court decision, at around this point in time, maybe. Then again, perhaps not.
Having laid all this out, it is to be remembered that this part of the eight-part blog entry on Menchaca II in “Quinn’s Commentaries on Insurance Law” is nothing more than speculation.