Property Damage

Weatherford insurance attorneys and those in Springtown, Graford, Millsap, Mineral Wells, Aledo, and other places in Parker and Palo Pinto Counties need to be aware of this Texas Supreme Court case.
The opinion was issued in June 2012. The style of the case is, Evanston Insurance Company v. Legacy of Life, Inc.
The case came to the Texas Supreme Court on two certified questions from the Fifth Circuit Court of Appeals. The certified questions arise from a suit filed by a daughter against an organ donation charity when she discovered that the charity–contrary to an earlier representation to her–would allegedly profit from harvesting her deceased mother’s tissues. The charity requested a defense from its insurer and the insurer denied a defense. The insurer’s subsequent suit against the charity resulted. One of those issues will be dealt with here.
Here is some factual background.
Legacy of Life, Inc. (Legacy) is an organ donation charity. Debra Alvarez consented for Legacy to harvest some of her terminally ill mother’s tissues after she died. Alvarez alleges in her suit against Legacy that she only consented because Legacy represented the tissues would be distributed on a nonprofit basis but that Legacy instead transferred them to companies that sold the tissues for a profit. Alvarez brought various claims against Legacy, seeking compensatory damages, mental anguish damages, restitution, exemplary damages, and attorney’s fees. Importantly, Alvarez did not allege that she or her mother suffered a physical injury. Instead, Alvarez alleged that her mother’s estate as the legal and rightful owner of the remains was wrongfully deprived of them, causing restitution damages to the estate and mental anguish damages to Alvarez.
Legacy had a combined medical professional and general liability insurance policy through Evanston Insurance Company (Evanston). Legacy demanded that Evanston defend the Alvarez suit. Evanston denied the request and filed suit in federal court seeking a declaratory judgment that it had no duty to defend because Alvarez did not claim damages for personal injury or property damage. Legacy counterclaimed, asserting various insurance claims and requesting a declaratory judgment in its favor.
Evanston and Legacy both moved for summary judgment.
The Court first noted that in determining whether an insurer has a duty to defend, the eight corners rule is followed by looking at the four corners of the complaint for alleged facts that could possibly come within the scope of coverage in the four corners of the insurance policy. The Court then discussed this legal principle. Then it looked at the property damage issue.
There were two questions but only the second one will be discussed here. The second certified question states:
Does the insurance policy provision for coverage of “property damage,” defined therein as “physical injury to or destruction of tangible property, including consequential loss of use thereof, or loss of use of tangible property which has not been physically injured or destroyed,” include coverage for the underlying plaintiff’s loss of use of her deceased mother’s tissues, organs, bones, and body parts?
Legacy’s policy defines “property damage” as, inter alia, “loss of use of tangible property which has not been physically injured or destroyed.” Evanston and Legacy agree that human tissues are tangible but disagree on whether they are property. The policy does not define property. Evanston contends that Texas common law and statutes have only recognized body parts as quasiproperty. Legacy counters that dictionaries define property as something that can be owned or possessed, and that body parts can be possessed.
As the common law and statutes define these rights, it is appropriate to review them to determine if an object has sufficient rights to achieve the status of tangible property.
Some scholars have observed that there are eleven core rights in the bundle of property rights:
(1) the right to exclusive possession;
(2) the right to personal use and enjoyment;
(3) the right to manage use by others;
(4) the right to the income from use by others;
(5) the right to the capital value, including alienation, consumption, waste, or destruction;
(6) the right to security (that is, immunity from expropriation);
(7) the power of transmissibility by gift, devise, or descent;
(8) the lack of any term on these rights;
(9) the duty to refrain from using the object in ways that harm others;
(10) the liability to execution for repayment of debts; and (11) residual rights on the reversion of lapsed ownership rights held by others.
Historically, the bodies of deceased persons (and necessarily the human tissues they contain) have held a unique status in the law. Under the English common law, “a dead body is not the subject of property,” although next of kin have a right to possess the body of a deceased person to bury it. In this respect, Texas common law has largely tracked English common law. Long ago, Texas courts recognized that next of kin have only quasi-property rights in the body of a deceased person: “there is no property in a dead man’s body, in the usually recognized sense of the word, yet it may be considered a sort of quasi property, in which certain persons have rights therein and have duties to perform,” such as the right of possession and control of the burial.
Medical science has undisputedly progressed significantly since the courts classified bodies as quasi property to the next of kin in 1934. Doctors have been transplanting kidneys for over 55 years. Living persons can now donate a portion of their liver, pancreas, lung, or intestine. Deceased individuals can donate numerous parts of their bodies. A newborn’s umbilical cord blood can be cryogenically frozen for use in future transplants.
The Texas Legislature, in prescient recognition of the rapid progress of medical science, expanded the common-law quasi-property rights of next of kin with the Revised Uniform Anatomical Gift Act (Anatomical Gift Act), granting next of kin the right to make “an anatomical gift of a decedent’s body or part for the purpose of transplantation, therapy, research, or education.” The Anatomical Gift Act also sets forth the procedure for making an anatomical gift before death, and restricts the purposes for selling tissues (to transplantation, therapy, research, or education) and the fees that may be collected (to a reasonable amount for certain services performed).
With this legal framework in mind, the Court first assessed whether Alvarez’s mother’s tissues are Alvarez’s property. The common law gives Alvarez the right to direct the burial, which the Court called a quasi-property right. The common law also allows next of kin to sue for mental anguish damages when acts are performed on a decedent’s body or tissues without the next of kin’s consent in certain circumstances.
In recognition of the many advances in medical science discussed above and the ability to transplant tissues, the Anatomical Gift Act also gives next of kin the right to gift tissues.
Despite these rights Alvarez has in her deceased mother’s tissues, there are many rights Alvarez does not have. Some of the key rights that make up the bundle of property rights include the rights to possess, use, transfer, and exclude others. Next of kin have no right to possess a body other than for burial or final disposition. Next of kin have no right to use tissues unless they have been designated by the individual as a transplant recipient. Next of kin have no right to transfer tissues other than as set forth in the Anatomical Gift Act. And next of kin have no right to exclude, other than to seek damages in certain circumstances for acts done beyond their consent. In light of these limited rights, the Court could not say that tissues have attained the status of property of the next of kin.
The Court next had to decide whether the mother’s tissues are the property of her estate. The Anatomical Gift Act gives an individual the right to designate a recipient of their tissues while they are alive and gives their agent at the time of death the right to designate a recipient immediately before their death. The Anatomical Gift Act does not give the estate the right to designate a recipient once the individual dies. Nor can the estate be compensated financially for the individual’s tissues. The Anatomical Gift Act only allows a person to charge a reasonable amount for certain services rendered. The Act does not allow for compensation for the tissue itself (creating an offense if a person knowingly purchases or sells tissue). In sum, the individual can designate a recipient for their tissues before their death, but once they die, their estate cannot designate a recipient or receive compensation for the tissues. The estate therefore has fewer rights in tissues than next of kin, who may designate a recipient once the individual dies. Because the Court has held that tissues are not the property of next of kin, it necessarily concluded that tissues are also not the property of the estate. They answered the second certified question in the negative.
This case is yet another prime example why a person or company filing claim with an insurance company needs to have the advice of an Insurance Law Attorney.

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