REVERSE and RENDER; and Opinion Filed August 22, 2018.




                                            In The
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                     No. 05-16-01062-CV

  AMERICAN NATIONAL COUNTY MUTUAL INSURANCE COMPANY, Appellant
                              V.
                  JONATHAN A. MEDINA, Appellee

                      On Appeal from the 68th Judicial District Court
                                  Dallas County, Texas
                           Trial Court Cause No. DC-13-14472

                            MEMORANDUM OPINION
                         Before Justices Bridges, Brown, and Boatright
                                   Opinion by Justice Brown
       Jonathan Medina was injured when he was struck by a truck listed as a covered vehicle on

an American National County Mutual Insurance Company (ANPAC) policy. ANPAC denied

coverage on Medina’s claim, and Medina subsequently obtained a default judgment against the

driver. After the driver assigned her claims to Medina, Medina sued ANPAC.

       Following a four-day trial, a jury made findings in favor of both Medina and ANPAC. As

to ANPAC, the jury found the driver failed to cooperate with its investigation, settlement, or

defense of the underlying suit and that such failure prejudiced ANPAC. The trial court ignored

these findings and rendered judgment on the jury’s findings in Medina’s favor on his contractual

and extra-contractual claims. ANPAC raises several issues on appeal. Because we conclude the

jury’s favorable findings to ANPAC are dispositive, we reverse the trial court’s judgment and

render a take-nothing judgment on Medina’s claims.
           On October 30, 2009, Angel Freeman ran a stop sign and crashed into Medina who was

riding a motorcycle. Medina was injured and his motorcycle was totaled. Angel was driving a

1998 Dodge Ram truck that at the time was listed as a covered vehicle on an ANPAC automobile

insurance policy belonging to Paul and Katie Freeman. Angel is Paul’s sister. There is no dispute

that if the truck was covered under the policy, Angel was a covered “insured.”

           After the collision, however, a question arose as to who owned the truck and whether it

was insured by Paul’s policy. If the truck was not owned by Paul, it could not be covered by his

policy. Paul and Angel both told the insurance company that Paul sold the vehicle to Angel for

cash four weeks before the accident, on October 1, 2009, and both gave the insurance company

written statements to that effect.1 According to Paul, he gave the truck’s title to Angel, who was

supposed to put the title in her name and obtain insurance, but she did not. Based on these

statements and after concluding its investigation, ANPAC canceled coverage on the Dodge Ram

truck effective October 1, refunded the premiums paid after that date to Paul and Katie, and denied

coverage. On December 8, 2009, ANPAC notified Medina, through his attorney, of the decision

and closed the file on the case.

           Medina then sued Paul and Angel, and ANPAC retained defense counsel for Paul. ANPAC

again contacted Paul and Angel, who again reported that Angel was the owner of the vehicle.

During the pendency of the lawsuit, Medina made a Stowers demand to ANPAC offering to settle

his claims against Paul and Angel for the available limits of Paul’s policy. While this demand was

pending, the trial court granted Paul’s no-evidence motion for summary judgment on the only

claim against him, negligent entrustment of the vehicle, and dismissed the claim. 2 Although

served, Angel did not appear in the suit. After Paul was dismissed from the suit, Medina obtained



      1
        Katie told the adjustor that Angel paid $1,200 for the truck, and Angel told the adjustor she paid $2,000. Later, Paul and Angel said Angel
paid $1,500. ANPAC asked for a bill of sale during the initial investigation but did not receive one.
    2
      Paul had asserted there was no evidence of two elements of the claim: that he entrusted a vehicle to Angel and that he knew or should have
known Angel was an unlicensed, incompetent, or reckless driver. The trial court’s order did not state the basis of the ruling.

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a default judgment against Angel for damages resulting from the collision. Later, Angel assigned

her rights in the insurance policy to Medina, and Medina then brought this lawsuit against ANPAC

for breach of contract and other extra-contractual claims.

       The primary issue at trial was ownership of the vehicle at the time of the collision because

if Paul did not own the vehicle, there was no coverage under the policy. Both sides presented

evidence on the issue and on whether the insurance company’s actions were reasonable. For

example, Medina presented evidence that on October 2, 2009, the day after Paul and Angel said

the sale took place, Paul applied for title to the truck in his name. After hearing the evidence, the

jury found Paul owned the truck on the date of the collision. The jury also made the following

findings favorable to Medina: ANPAC failed to comply with the provisions of the policy; ANPAC

failed to comply with a duty of good faith and fair dealing to Medina and that failure proximately

caused damages to Medina, as assignee of Angel; ANPAC was negligent in failing to accept the

terms of the Stowers demand letter; and $50,000 was a reasonable fee for Medina’s counsel.

       But the jury also made findings favorable to ANPAC that impacted ANPAC’s obligations

under the policy. Specifically, in questions 2 and 3, the jury found that Angel did not cooperate

with ANPAC in the investigation, settlement, or defense of the underlying lawsuit prior to

ANPAC’s coverage determination and found Angel’s conduct prejudiced ANPAC.

       Both parties moved for judgment. ANPAC’s motion relied on several grounds, one of

which was the jury’s answers to questions 2 and 3. ANPAC argued that assuming Angel was a

covered insured under the ANPAC policy, she failed to satisfy all conditions precedent to coverage

and ANPAC therefore had no duty or obligation to her––or Medina as her assignee––under the

policy. In his response to ANPAC’s motion for judgment, Medina asserted there was “no evidence

of prejudice” and the findings to questions 2 and 3 should be disregarded. The trial court ultimately

rendered judgment in Medina’s favor, finding that coverage was in effect on the truck on the date

of the collision and ordering that Medina recover damages and attorney’s fees from ANPAC. The

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trial court did not set aside the answers to questions 2 and 3 or otherwise mention them in the

judgment. ANPAC appealed.

       In its third issue, ANPAC argues the trial court erred by failing to give legal effect to the

jury’s findings that Angel failed to cooperate and her actions were prejudicial. ANPAC argues

these findings mandate that coverage does not exist under the policy. We agree.

       An insurer’s obligation depends upon proof that all conditions precedent have been

performed. Martinez v. ACCC Ins. Co., 343 S.W.3d 924, 929 (Tex. App.—Dallas 2011, no pet.).

The ANPAC policy at issue here required a person seeking coverage to “[c]ooperate with us in the

investigation, settlement or defense of any claim or suit.” The language of the cooperation clause

is identical to that in Progressive County Mutual Insurance Co. v. Trevino, 202 S.W.3d 811, 815–

16 (Tex. App.—San Antonio 2006, pet. denied), where the court held the clause was a condition

precedent to coverage. Because the cooperation clause is a condition precedent to coverage under

the policy, Medina had the burden of showing Angel cooperated with ANPAC. See Martinez, 343

S.W.3d at 929; Trevino, 202 S.W.3d at 816. But a lack of cooperation will not operate to discharge

the insured’s obligations under the policy unless the insurer is prejudiced. Martinez, 343 S.W.3d

at 929. ANPAC had the burden of showing it was prejudiced by the failure to cooperate. See Mid-

Continent Cas. Co. v. Petroleum Sols., Inc., No. 4:09-0422, 2016 WL 5539895, at *15 (S.D. Tex.

Sept. 29, 2016). If an insurer is actually prejudiced or deprived of a valid defense by the insured’s

failure to cooperate, the insurer’s obligations under the policy are discharged. See Martinez, 343

S.W.3d at 930.

       Here, the legal effect of the jury’s answers to questions 2 and 3 was to discharge ANPAC’s

obligations under the policy. The trial court did not set aside these findings; it simply ignored

them. On appeal, Medina not has not brought a separate issue challenging the sufficiency of the

evidence to support the findings. But to the extent his brief raises the issue, we conclude there was

some evidence to support both findings.

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       “Cooperation clauses in insurance contracts ‘fulfill the reasonable purpose of enabling the

insurer to obtain relevant information concerning the loss while the information is fresh.’”

Hamilton v. State Farm Fire & Cas. Ins. Co., 477 F. App’x 162, 165 (5th Cir. 2012) (quoting

Holden v. Connex-Metalna Mgmt. Consulting, No. Civ.A.98-3326, 2000 WL 1741839, at *2 (E.D.

La. Nov. 22, 2000)). The duty to cooperate is “intended to guarantee to insurers the right to prepare

adequately their defenses on questions of substantive liability.” Mid-Continent Cas., 2016 WL

5539895, at *24 (explaining cooperation clause with similar language). Determination of what

constitutes a breach of the cooperation clause of a liability policy is usually a question of fact. Id.

at *16; Frazier v. Glen Falls Indem. Co., 278 S.W.2d 388, 391 (Tex. Civ. App.—Fort Worth 1955,

writ ref’d n.r.e.). The cooperation clause is violated where the insured’s conduct is not “reasonable

and justified under the circumstances.” Mid-Continent Cas., 2016 WL 5539895, at *16. An

insured who fails to make full, frank, and fair disclosure of the facts or makes false statements that

materially prejudice an insurer’s ability to defend the lawsuit on the insured’s behalf violates her

duty under the policy. Frazier, 278 S.W.2d at 392; Martin v. Travelers Indem. Co., 450 F.2d 542,

553 (5th Cir. 1971). Further, an insured is obliged to refrain from any fraudulent or collusive act

which might operate as a means of prejudice to the insurance company in the conduct of the

defense against, or settlement of, the claim made against her. Frazier, 278 S.W.2d at 392.

       Both parties rely to some extent on United States Casualty Co. v. Schlein, 338 F.2d 169

(5th Cir. 1964). In that case, Schlein, the insured, was in a collision with another vehicle. Id. at

170. In a pretrial deposition, Schlein lied about how the accident occurred. Id. at 170–71. The

insurer withdrew from defending him in a lawsuit brought by the occupants of the other vehicle,

citing his breach of the cooperation clause. Id. at 172. Schlein settled the lawsuit and then sued

the insurance company seeking to be reimbursed for the amount of the settlement. Id. The trial

court awarded Schlein reimbursement, finding that his “misstatements” did not constitute a



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substantial and material breach of the cooperation clause and that the insurer did not suffer

prejudice from those misstatements. Id. at 172–73.

           The Fifth Circuit noted that purposeful falsification of material information by the insured

is a breach of the cooperation clause. Id. at 173. It therefore questioned the trial court’s finding

that the false statements at issue did not constitute a breach. Id. at 174. Nevertheless, the insurer

did not present any evidence that it was prejudiced by its insured’s lies. Id. at 174–75. The parties

stipulated that the settlement reached was fair and reasonable. Id. at 172. Without a finding of

prejudice, the insurance company’s defense of breach of cooperation failed. Id. at 175.

           ANPAC contends Schlein demonstrates that Angel’s lies about ownership of the car

constitute a failure to cooperate. Medina responds that Angel’s duty to cooperate was “not a duty

of absolute truthfulness” and that she did cooperate by speaking with ANPAC on numerous

occasions and providing a recorded statement.3 Medina would limit Schlein to false statements

about the circumstances of the accident. Medina also argues that, as in Schlein, there is no evidence

of prejudice in this case.

           We agree there is not a duty of absolute truthfulness to the extent that not every false

statement prejudices an insurer. However, here, Angel (and Paul) lied about ownership of the

truck, the very basis for whether or not there was coverage under the policy. During ANPAC’s

investigation and thereafter, Angel represented that she owned the truck at the time of the collision.

This was not a statement based on a faulty observation, recollection, actual but genuine mistake,

or the like. See id. at 173. Rather, given the jury’s finding that Paul owned the truck, it could only




     3
        Medina’s brief suggests, as his attorney did during closing arguments, ANPAC’s assertion that Angel breached the cooperation clause was
related to notice provisions of the policy. Medina contends that provisions in an insurance policy requiring notice of a claim or lawsuit may be
waived and that ANPAC waived compliance with such provisions in this case. ANPAC instead argued Angel breached the cooperation clause by
making false statements about the sale of the truck. Given the jury’s finding that Paul owned the truck at the time of the collision, the jury necessarily
believed Angel failed to cooperate by lying about who owned the truck. Accordingly, we need not address Medina’s arguments about notice and
waiver.


                                                                          –6–
mean the jury believed Angel consciously and purposely lied about a fact material and dispositive

of coverage.

          Medina argues that ANPAC failed to show how its handling of his case was affected by

Angel’s lies. But based on Angel’s untrue statements, ANPAC denied coverage and made the

decision not to defend her. It also refused Medina’s offer to settle his case against Paul and Angel

for the $50,000 bodily injury policy limit, plus $15,332.60 for property damages. Instead Medina

obtained a default judgment against Angel for $211,629, which he then sought to recover from

ANPAC. Medina does not explain why this evidence is insufficient to show prejudice.

          In sum, the jury’s answers to questions 2 and 3 are supported by the evidence. Medina

cannot conclusively establish that Angel cooperated with ANPAC in its investigation, settlement,

or defense of his claims. There is also more than a scintilla of evidence Angel’s conduct prejudiced

ANPAC. See Long v. Long, 196 S.W.3d 460, 464, 466 (Tex. App.—Dallas 2006, no pet.)

(discussing appropriate burdens of proof when challenging adverse findings). The legal effect of

these findings was to discharge ANPAC’s obligations under the policy. The trial court erred in

failing to render judgment in accordance with these findings. We sustain ANPAC’s third issue.

As a result, we need not address its other issues.

          We reverse the trial court’s judgment and render a take-nothing judgment on Medina’s

claims.




                                                     /Ada Brown/
                                                     ADA BROWN
                                                     JUSTICE

161062F.P05




                                                –7–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 AMERICAN NATIONAL COUNTY                           On Appeal from the 68th Judicial District
 MUTUAL INSURANCE COMPANY,                          Court, Dallas County, Texas
 Appellant                                          Trial Court Cause No. DC-13-14472.
                                                    Opinion delivered by Justice Brown,
 No. 05-16-01062-CV         V.                      Justices Bridges and Boatright
                                                    participating.
 JONATHAN A. MEDINA, Appellee

    In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that:

       Jonathan A. Medina take nothing on his claims against American National County
       Mutual Insurance Company.

       It is ORDERED that appellant American National County Mutual Insurance Company
recover its costs of this appeal from appellee Jonathan A. Medina.


Judgment entered this 22nd day of August, 2018.




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