Methodist Hospital v. Zurich American Insurance Co.

OPINION

Appellant, The Methodist Hospital (“Methodist”), sued appellees, Zurich American Insurance Company (“Zurich”), Tamera McKenney, and Mary Vu, asserting various causes of action based on ap-pellees’ allegedly improper handling and payment of workers’ compensation claims filed by two Methodist employees. In a single issue encompassing several arguments, Methodist contends the trial court erred by granting summary judgment on Methodist’s (1) breach-of-contract action against Zurich, (2) negligence action against all appellees, and (3) breach-of-express-warranty action against Zurich. We affirm.

I. Background

Zurich issued workers’ compensation insurance policies (“the policy”) to Methodist for various successive periods.1 Workers’ compensation claims were subject to a $1 million deductible per each accident. The parties executed a document entitled “Deductible Agreement,” which outlined “the scope, description and structure” of the “Deductible Program” and “the duties and obligations of each party with respect to this Program.” The Deductible Agreement consisted of the “Terms and Conditions” outlined therein and separate documents entitled “Specifications to Deductible Agreement” executed by the parties.

We will later discuss in more detail pertinent provisions of the Deductible Agreement. However, in general, Zurich agreed to handle and pay workers’ compensation claims and then bill Methodist for payments within the deductible. Methodist agreed to remit all such amounts when due. To accomplish this billing and remittance, Methodist deposited a certain amount into an escrow fund and Zurich initiated a weekly electronic transfer from the fund to obtain payment for losses adjusted within the deductible.

Judith Riegert and Ana Fulton-Perez, Methodist employees, were injured during two applicable policy periods. Both employees filed workers’ compensation claims. Vu was the Zurich adjuster who handled these claims, and McKenney was Vu’s supervisor. The total benefits paid *514for each claim were within the $1 million deductible.

Methodist eventually sued Zurich, McKenney, and Vu. In its live petition, Methodist pleaded (1) breach of contract against Zurich only, (2) negligence against all appellees, (3) breach of express warranty against Zurich only, and (4) a request for declaratory judgment. Methodist alleged Zurich, McKenney, and Vu improperly handled the Riegert and Fulton-Perez claims. Methodist alleged portions of the claimed injuries were not compensable because of pre-existing conditions, but appel-lees failed to dispute compensability within the deadline prescribed by the Texas Workers’ Compensation Act (“the act”) and improperly approved payment of these benefits. Because the amounts paid for each claim were within the $1 million deductible, Methodist contended it sustained damages as a direct consequence of Zurich’s allegedly improper payments.

Zurich filed a traditional and no-evidence motion for summary judgment on Methodist’s claim for breach of express warranty. On July 27, 2007, the trial court signed an order granting the motion and ruling that Methodist take nothing on this cause of action.

Appellees filed a traditional motion for partial summary judgment on the negligence and breach-of-contract actions. On September 20, 2007, the trial court signed an “Amended Order Granting Final Summary Judgment, Partial Dismissal Without Prejudice, and Dismissal Without Prejudice of Defendants’ Counterclaims,” ruling that Methodist take nothing on its (1) breach-of-contract action against Zurich and (2) negligence action against all appel-lees.2 The court further stated the order disposed of all claims and was final and appealable.3

II. Traditional Summary Judgment on Breach-of-Contract and Negligence Actions

A party moving for traditional summary judgment must establish no genuine issue of material fact exists and it is entitled to judgment as a matter of law. See Tex.R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex.2003). A defendant moving for summary judgment must conclusively negate at least one element of the plaintiffs theory of recovery or plead and conclusively establish each element of an affirmative defense. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.1995). If the defendant establishes its right to summary *515judgment, the burden shifts to the plaintiff to raise a genuine issue of material fact. Id. We review a summary judgment de novo. Knott, 128 S.W.3d at 215. We take all evidence favorable to the nonmovant as true and indulge every reasonable inference and resolve any doubts in favor of the nonmovant. Id.

A.Appellees’ Summary-Judgment Grounds

Appellees presented separate grounds for summary judgment on the breach-of-contract and negligence actions but relied on the same case to support both grounds. To understand the parties’ positions, it is helpful to first explain both grounds and Methodist’s general response.4

1. Breach of Contract

In its live petition, Methodist alleged Zurich breached the parties’ contract by failing to timely contest compensability of the Riegert and Fulton-Perez injuries and paying claims that were invalid because of pre-existing conditions.5 Specifically, Methodist asserted Zurich breached the “duty to defend” set forth in the policy. Methodist also asserted Zurich breached the Deductible Agreement; Methodist did not specify a particular provision of this agreement allegedly violated but seemed to allege Zurich breached a general contractual obligation to properly handle claims.

Zurich moved for summary judgment on the ground that the policy gave Zurich complete discretion in handling and paying workers’ compensation claims; consequently, its decisions to pay the claims at issue were not actionable in breach of contract. In particular, Zurich cited the following portion of the policy:

B. We Will Pay

We will pay promptly when due the benefits required of you by the workers’ compensation law.

C. We Will Defend

We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance. We have the *516right to investigate and settle these claims, proceedings or suits.

We have no duty to defend a claim, proceeding or suit that is not covered by this insurance.

Zurich also relied on Wayne Duddlesten, Inc. v. Highland Insurance Co., 110 S.W.3d 85 (Tex.App.-Houston [1st Dist.] 2003, pet. denied). In Duddlesten, the employer’s workers’ compensation policies included a retrospective premium payment plan, under which the standard annual premium would be adjusted based on amounts the insurer had paid for claims under the policy. Id. at 88-89. The insured sued the carrier, alleging it improperly paid several workers’ compensation claims that were not covered under the policy. Id. at 89-90. The court of appeals affirmed summary judgment in favor of the insurer on several causes of action, including breach of contract. Id. at 88.

The insured maintained the policy obligated the insurer to properly investigate and adjust claims and pay only valid claims. Id. at 89-90. The policy contained identical language to the above-cited provisions in Methodist’s policy. Id. The court of appeals relied on the language of Paragraph C., giving the insurer the “right to investigate and settle ... claims[,] proceedings or suits” against the insured “for benefits payable by this insurance.” Id. at 90. The court stated the policy contained no requirement that the insurer obtain the insured’s consent when settling or investigating the merits of a claim and the court was not permitted to write such a clause into the policy. Id. (citing Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 913-14 (Tex.App.-Dallas 1997, pet. denied), ovemiled on other grounds by Apex Towing Co. v. Tolin, 41 S.W.3d 118, 122-23 (Tex.2001), which held that, when policy gives absolute right to settle third-party claims, courts are not permitted to “engraft any consent requirement onto [the] policy”).

The court recognized a separate issue was presented on whether the insurer owed extra-contractual duties to prudently investigate and settle claims. Id. However, because the policy gave the insurer the right to settle claims, its discretion in investigating and paying claims was not contractually limited. Id. Consequently, the court held the insured had no breach of contract action against the insurer as a matter of law. See id. at 89-90; see also Dear, 947 S.W.2d at 913-15 (holding insured relinquished right to sue general liability insurer for breach of contract relative to insurer’s allegedly improper handling and payment of third-party claim by purchasing policy which gave insurer right to settle). Zurich contended that, likewise, Methodist’s breaeh-of-contract action was precluded because the policy gave Zurich the right to investigate and settle the claims at issue.

2. Negligence

In its live petition, Methodist alleged Zurich, McKenney, and Vu breached a purported duty to exercise ordinary care when handling the Riegert and Fulton-Perez claims. Appellees moved for summary judgment on the ground that Texas law has not recognized a cause of action by an insured for its insurer’s negligent handling of an insurance claim in any context other than Stowers. See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 547 (Tex. Comm’n App.1929, holding approved) (recognizing, generally a liability insurer may be liable in tort for failing to accept a reasonable settlement demand within policy limits).

Appellees again relied on Duddlesten, in which the insured also alleged the insurer was negligent in handling and paying the claims at issue. 110 S.W.3d at 96-7. The court of appeals affirmed the trial court’s *517granting special exceptions and striking the insured’s pleadings relative to its negligence cause of action. Id. The court stated it was unaware of any authority from the Texas Supreme Court expressly permitting a plaintiff to sue an insurer for negligent claims-handling outside the scope of Stowers. Id. at 97. “ ‘Texas law recognizes only one tort duty in this context, that being the duty stated in Stowers ... ’ ” Id. (quoting Md. Ins. Co. v. Head Indus. Coatings and Servs., 938 S.W.2d 27, 28 (Tex.1996); and citing Ford v. Cimarron Ins. Co., 230 F.3d 828, 832-33 (5th Cir.2000), in which court stated Texas law does not recognize negligence cause of action for insurer’s handling, investigation, and settling of claim against insured and “Stowers provides the only common law tort duty in Texas in that setting”).6

Unlike a Stowers scenario, the Duddlesten insured did not allege the insurer negligently failed to settle a claim when there was an offer within policy limits; rather, the insured complained the insurer was negligent by settling an invalid claim. Id. The court was unwilling to expand the scope of an insurer’s duties to the insured absent express authorization from the Texas Supreme Court to do so. Id. Appellees contend that, likewise, Zurich owed no duty of ordinary care to Methodist when handling and paying the claims at issue.7

B. Methodist’s Contentions

Methodist challenges summary judgment on the breach-of-contract and negligence actions collectively. Methodist’s overarching argument on both grounds is Duddlesten does not control because the workers’ compensation claim therein was wholly payable by the insurer; see generally 110 S.W.3d 85; in contrast, the present case involves payment of claims within Methodist’s $1 million deductible. Methodist contends that, unlike the Duddlesten scenario, the relationship between Methodist and Zurich was not insured/insurer for payment of claims within the deductible; rather, Methodist was self-insured for these claims and Zurich acted solely as Methodist’s claims-handling agent. Methodist urges that, by virtue of this relationship, Zurich owed contractual and extra-contractual duties to properly handle these claims. Methodist also emphasizes that Zurich, when adjust*518ing and paying claims within the deductible,. was effectively spending Methodist’s money because it was entitled to automatic reimbursement from Methodist’s escrow fund.8

We construe Methodist’s contention regarding the parties’ purported relationship of self-insured/claims-handling-agent as more applicable to the negligence action; the Duddlesten court relied on the parties’ status when holding the insurer owed no extra-contractual duties to its insured. See id. at 97. The Duddlesten court relied on the actual policy language giving the insurer discretion to settle claims — not the parties’ relationship — to negate that the insurer owed contractual duties to the insured. See id. at 89-90.

Nevertheless, Methodist apparently posits that the parties’ relationship also imposed general contractual duties on Zurich to properly handle claims within the deductible. Alternatively, Methodist does advance the following argument that is directed solely toward the breach-of-contract ground and involves construction of the contract: Duddlesten is inapplicable because (1) Zurich failed to establish its actual policy language gave it discretion when handling and paying claims within the deductible, and (2) unlike the present case, Duddlesten did not involve an allegation of breach of the duty to defend.

We will first evaluate Methodist’s challenge to summary judgment on the negligence action because this issue primarily encompasses the contention regarding the parties’ relationship, followed by summary judgment on the breach-of-contract action. Finally, we will discuss Methodist’s general argument that Zurich owed contractual and extra-contractual duties when handling and paying claims within the deductible because it was spending Methodist’s money.

C. Analysis — Negligence

Methodist contends Duddlesten is inapplicable to its negligence action because Zurich owed Methodist all duties in handling claims within the deductible that are owed by any agent to its principal, including the duty to perform the parties’ contract with care.9

Methodist relies on Chapter 2053, Sub-chapter E of the Texas Insurance Code, which governs “Optional Deductible Plans” for workers’ compensation insurance. See Tex. Ins.Code Ann. §§ 2053.201-.06 (Vernon 2009). Section 2053.202 provides:

(a) The department shall require each insurance company writing workers’ compensation insurance in this state to offer at least three optional deductible *519plans adopted under this section that allow a policyholder to self-insure for the amount of the deductible.

(b) The commissioner by rule shall allow an employer to enter into an agreement with an insurer for a negotiated deductible that exceeds the highest deductible available under a plan described by Subsection (a).

Id. § 2053.202.

Section 2053.203 then outlines the method for payment of claims and reimbursement under an optional deductible plan:

(a) An insurance company issuing a deductible policy under this subchapter shall service all claims that arise during the policy period, including those claims payable, wholly or partly, from the deductible amount.

(b) A deductible policy must provide that:

(1) the insurance company issuing the policy shall pay all benefits that are payable from the deductible amount; and

(2) the policyholder shall make reimbursements periodically, rather than at the time claim costs are incurred.

(c) The commissioner shall adopt rules to provide for adequate security for reimbursement of the amount paid by an insurance company that is payable from the deductible amount.

Id. § 2053.203.

Methodist suggests its Deductible Agreement was a deductible plan as contemplated under these provisions; thus, Methodist was self-insured for the deductible and Zurich was merely its claims-handling agent or claims contractor.

Zurich argues the Deductible Agreement was not a deductible plan under these provisions. Zurich asserts the parties’ contract demonstrates Methodist was solely Zurich’s insured with a high deductible — not self-insured. Further, Zurich emphasizes it is undisputed Methodist was not certified as required for a private, individual employer to be self-insured under the workers’ compensation act.10 See Tex. Lab.Code Ann. § 407.041 (Vernon 2006) (providing that such an employer who desires to self-insure must obtain a certificate of authority); Tex. Lab.Code Ann. § 401.011(6) (Vernon Supp. 2008) (defining “Certified self-insurer” to mean “a private employer granted a certificate of authority to self-insure, as. authorized by [the act], for the payment of compensation”); Tex. Lab.Code Ann. § 401.011(27) (defining “insurance carrier” to mean “(A) an insurance company; (B) a certified self-insurer for workers’ compensation insurance; (C) a certified self-insurance group under Chapter 407A; or (D) a governmental entity that self-insures, either individually or collectively”). Zurich asserts that a private, individual employer either purchases workers’ compensation insurance, obtains certification to self-insure, or is considered a non-subscriber. See Tex. Lab.Code Ann. § 406.003 (Vernon 2006) (providing, “an employer may obtain workers’ compensation coverage through a licensed insurance company or through self-insurance as provided by this [act].”). Therefore, according to Zurich, section 2053.202 merely provides that a carrier must offer deductible plans, which allow an employer, who is certified, to choose to self-insure for the deductible amount, but Methodist’s Deductible Agreement was hot such a plan.

*520Methodist asserts there is no requirement under section 2053.202 that an employer be certified to purchase a deductible plan outlined therein. See Tex. Ins. Code Ann. § 2053.202. The gist of Methodist’s argument is that every agreement governing reimbursement of a deductible is an optional deductible plan contemplated by section 2053.202; thus, “every employer holding a deductible reimbursement workers’ compensation policy is self-insured for the amount of the deductible.”

We need not decide whether an employer must be certified as a self-insurer to purchase an optional deductible plan under section 2053.202 because we conclude the Deductible Agreement in this case was not such a plan. We recognize the Deductible Agreement operated somewhat like a plan under section 2053.202 because Zurich was required to service and pay claims before obtaining periodic reimbursement from Methodist and an escrow fund was established to provide adequate security for reimbursement. See id. §§ 2053.202, .203. However, section 2053.202 does not provide that every deductible-reimbursement agreement is automatically a plan outlined in the statute. See id. § 2053.202. As we construe the statute, it merely provides there exist plans that allow the employer to self insure and a carrier must offer these plans as an option. See id.

In this case, the Deductible Agreement indicated it was not such a plan and Zurich was Methodist’s insurer with respect to claims within the deductible. The terms, “self-insured,” “self-insurance,” or “self-insurance retention” were never mentioned in the Deductible Agreement. There was no provision stating the insurance coverage did not begin until the $1 million layer was exhausted. Further, nothing in the Deductible Agreement gave it the character of solely a claims-handling agreement divorced from the terms of the insurance policy for claims within the deductible.

Rather, the Deductible Agreement expressed that it was interrelated with the policy: “The Program has two primary, independent components: (1) the insurance coverage provided under the Policies); and (2) the cash flow benefits achieved through the financing arrangement under the Program.” (emphasis added). Moreover, the Deductible Agreement explicitly provided that Zurich would “handle and pay the claims presented in accordance with the provisions of the Policy(ies) ... and bill [Methodist] for the claim payments within the Deductible Amount(s) ... as stated in the Specifications.” (emphasis added).

In sum, because section 2053.202 does not provide that every agreement concerning reimbursement of a deductible is a plan governed by the statute and the Deductible Agreement does not indicate Methodist was self-insured, we decline to hold the Deductible Agreement was such a plan. We conclude the relationship between Methodist and Zurich was insured/insurer with respect to claims within the deductible.11 Accordingly, Texas law negates Methodist’s contention that Zurich *521owed a duty to perform with care.12 We decline to acknowledge a duty with respect to handling and paying claims within the deductible that has not been recognized under Texas law.13

D. Analysis — Breach of Contract

As we have explained, although its position is not exactly clear, Methodist apparently suggests the parties’ purported relationship of self-insured/claims-handling-agent also imposed contractual duties on Zurich to properly handle and pay claims within the deductible. Because we have rejected Methodist’s contention regarding the parties’ relationship, we also reject this suggestion.

Moreover, regardless of how the parties’ relationship is characterized, like the Dud-dlesten court, we must consider the terms of their contract when evaluating the con-traetual duties owed by Zurich to Methodist and enforce it as written. See Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.2006) (stating court’s primary concern when interpreting contract is to ascertain and give effect to intent of parties as expressed in the contract); Royal Indem. Co. v. Marshall, 388 S.W.2d 176, 181 (Tex.1965) (recognizing court must enforce unambiguous contract according to its terms); see also Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995) (stating interpretation of insurance policy is governed by same rules of construction applicable to other contracts). Consequently, we will address Methodist’s alternative arguments that involve construction of the parties’ contract.

1. Discretion When Investigating and Paying Claims Within Deductible

*522First, Methodist contends Duddlesten is inapplicable because Zurich failed to establish the policy language granting it discretion when investigating and paying claims extended to those within the deductible.

As Methodist asserts, the policy provision granting Zurich the “right to investigate and settle these claims, proceedings or suits” referred to “any claim, proceeding or suit against [Methodist] for' benefits payable by this insurance.” (emphasis added). ' Methodist argues (1) the emphasized language demonstrated Zurich had the right to settle only claims for which it was ultimately responsible or (2) based on existence of the deductible, there was a latent ambiguity on whether Zurich had the right to settle all claims or only those for which it was ultimately responsible. See CBI Indus., Inc., 907 S.W.2d at 520 (recognizing latent ambiguity arises when contract unambiguous on its face is applied to subject matter with which it deals and ambiguity appears by reason of some collateral matter). We disagree with both contentions.

Because the Deductible Agreement governed the deductible program and was interrelated with the policy, we must construe these writings together when determining the parties’ contractual duties relative to claims within the deductible. See Seagull Energy E & P, Inc., 207 S.W.3d at 345 (stating that court, when interpreting contact, must examine and consider entire writing in an effort to harmonize and give effect to all provisions so none will be rendered meaningless; no single provision will be given controlling effect, but rather, all provisions must be considered with reference to the whole instrument).14

Significantly, as we have mentioned, the Deductible Agreement provided Zurich would “handle and pay the claims presented in accordance with the provisions of the Policy(ies) and bill [Methodist] for the claim payments within the Deductible Amount(s) ... as stated in the Specifications.” (emphasis added). The Deductible Agreement did not prescribe any special rules applicable to handling or paying claims within the deductible. Specifically, there was no provision modifying Zurich’s “right to investigate and settle the claims, proceedings or suits” relative to benefits within the deductible or otherwise requiring Methodist’s consent to pay such claims. The Deductible Agreement simply required Zurich to handle and pay these claims before obtaining reimbursement from Methodist under the methods for billing and remittance outlined therein. Accordingly, construing the entire contract, we conclude the provision in the policy granting Zurich the discretion to settle “any claim, proceeding or suit” against Methodist “for benefits payable by this insurance” encompassed all claims for workers’ compensation benefits, including those within the deductible.

2. Applicability of Duddlesten to Action for Breach of Duty to Defend

Methodist also contends Duddlesten is not controlling because, unlike the present case, it did not involve an allegation of breach of the duty to defend. As Methodist asserts, both the Duddlesten insured and Methodist contended the insurer had a contractual obligation to pay only valid *523claims, but they relied on different policy language.

The Duddlesten insured argued the insurer’s obligation derived from Paragraph B. of the pertinent policy provisions, which stated the insurer “will pay ... benefits required of you by the Workers’ Compensation law.” 110 S.W.3d at 90. However; the court reasoned the insurer’s actions taken pursuant to Paragraph C., which gave it the “right to investigate and settle these claims[,] proceedings or suits,” determined whether it was required to pay benefits pursuant to Paragraph B.; i.e., if the insurer exercised its right to settle a claim under Paragraph C., payment was required of the insurer under Paragraph B. Id.

Methodist relies on Paragraph C. providing, “We have the ... duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance.” As Methodist asserts, the Duddlesten court did state, “Appellant does not argue that appellees failed to defend it from any suits or claims against it, but rather, appellees did not properly investigate and adjust the claims according to its duties under the policy.” 110 S.W.3d at 90. However, the court' did not suggest its conclusion would be different if the employer had asserted the insurer’s payment of an invalid claim constituted breach of the duty to defend.. See id. at 89-90. Rather, the court’s statement could be interpreted as suggesting the employer’s allegation did not equate to a contention the insurer breached the duty to defend. At most, the court did not expressly address whether an insured would have a viable cause of action if it alleged an insurer’s payment of an invalid claim violated the duty to defend. See id. We conclude the provision giving the insurer the right to settle negates existence of a contractual obligation to pay only valid claims, regardless of the different policy provisions cited by the Duddlesten insured and Methodist.

Under its plain meaning, the “duty to defend ... any claim ... for benefits payable by this insurance” merely imposed an obligation on Zurich to assume responsibility for handling a claim when benefits are payable under workers’ compensation law. See Burlington Ins. Co. v. Tex. Krishnas, Inc., 143 S.W.3d 226, 229 (Tex.App.-Eastland 2004, no pet.) (recognizing, in context of general liability policy, if petition contains allegations which, when fairly and reasonably construed, state cause of action potentially covered by policy, insurer has duty to defend insured in underlying suit). Methodist does not allege Zurich refused to handle and pay claims for compensable injuries. Rather, Methodist alleges Zurich paid claims for injuries that were not com-pensable.

A federal court applying Texas law has considered a similar issue, albeit in an unpublished opinion. The insured sued his general liability insurer alleging, among other theories, breach of contract for'settling a third-party claim that the insured considered “utterly frivolous” and “completely defensible.” Kreit v. St. Paul Fire & Marine Ins. Co., No. CIV.A.H-04-1600, 2006 WL 322587, at *1 (S.D. Tex. Feb. 10, 2006). The policy required the insurer to defend any suit for damages covered under the policy and vested the insurer with the right to investigate, negotiate, and settle any suit as it deemed appropriate. Id. The insured contended the insurer breached the policy by “not really defending” the suit. Id. at *4. When granting summary judgment for the insurer, the court cited the provision unambiguously allowing the insurer to settle the suit and rejected the suggestion its obligation to provide a defense meant it was required to take the suit to trial. Id. at *5.

*524Likewise, we reject Methodist’s suggestion that the duty to defend required Zurich to dispute payment for any benefits that might not be due under workers’ compensation law. This interpretation would render meaningless the provision immediately following that gave Zurich the right to settle claims. Accordingly, the duty-to-defend provision did not impose an obligation to pay only valid claims.15

E. General Contention Zurich Owed Duties When Spending Methodist’s Money

Finally, Methodist urges Zurich owed contractual and extra-contractual duties to properly handle and pay claims within the deductible because it was effectively spending Methodist’s money. This argument was apparently interwoven with Methodist’s other contentions, which we have rejected. Nonetheless, to the extent Methodist suggests that, despite the right-to-settle provision negating any such contractual duty and lack of Texas authority imposing an extra-contractual duty, Methodist should have legal recourse because the money “came from [its] pocket,” we disagree.

Notably, the Duddlesten insured argued the insurer should be liable for negligent claims handling because it had less incentive to dispute invalid claims when it would be reimbursed by the insured pursuant to the retrospective premium payment plan. 110 S.W.3d at 97. The court specifically rejected this argument relative to the insured’s negligence action — not breach-of-contract. See id,, at 89-90, 97. But, obviously, this argument did not sway the court when rejecting both causes of action as a matter of law. See id. at 89-90. We acknowledge a retrospective premium payment plan is not the same as a deductible. Nevertheless, the fact the insured might incur financial loss if the insurer paid an invalid claim did not persuade the court to disregard the right-to-settle provision or impose an extra-contractual duty not recognized under Texas law. See id. at 97; see also Dear, 947 S.W.2d at 912, 913-15 (holding insured had no viable breach-of-contract or negligence theories of recovery for liability insurer’s improper handling and settlement of third-party claim, although he complained its actions caused him loss of business and increased costs for professional liability insurance, because he was bound by terms of policy he purchased, including provision vesting insurer with right to settle any claim).

In fact, a Texas court has addressed, albeit in an unpublished opinion, an insured’s complaint its general liability insurer improperly investigated and settled a suit for an amount that invoked the insured’s high deductible, despite its disapproval. Stevens Transport, Inc. v. Nat’l Cont’l Ins. Co., No. 05-98-00244-CV, 2000 WL 567225 (Tex.App.-Dallas May 11, 2000, no pet.) (not designated for publication). In affirming a directed verdict for the insurer on all causes of action, including breach of contract and negligence, the court of appeals relied on the policy provi*525sion unambiguously vesting the insurer with an absolute right to settle third-party claims based on its own discretion. Id. at *3. The court stated, “[b]y purchasing an insurance policy that did not give [the insured] the right to reject a settlement of third party claims, [it] gave up the right to complain that the settlement caused it damages” and “mere presence of the large deductible does not change the result.” Id. (emphasis added).

Additionally, courts in several other jurisdictions have reached the same conclusion when addressing an insured’s refusal to reimburse its general liability insurer for a deductible or retention because a claim was settled over the insured’s objection; the courts rejected the insured’s suggestion that a right-to-settle provision should not be enforced solely because the insured’s funds were at stake, reasoning the insured was bound by its contract. See Am. Prot. Ins. Co. v. Airborne, Inc., 476 F.Supp.2d 985, 987, 990-92 (N.D.Ill.2007) (applying Illinois law and holding insured cannot complain right-to-settle provision inevitably allows insurer to commit insured’s funds without its consent because “that is exactly the bargain that the insured struck under the policy that it bought and paid for”); United Capitol Ins. Co. v. Bartolotta’s Fireworks Co., Inc., 200 Wis.2d 284, 546 N.W.2d 198, 199-202 (1996) (rejecting insured’s suggestion “Self Insured Retention Endorsement” somehow separated single policy into two, leaving insured with authority over claims within the deductible and insurer with power over remainder and that it was in unfair position and subject to exploitation by insurer because, among other reasons, “insureds who are burned by one insurance company may find refuge in the marketplace by seeking coverage from another insurer”); Am. Home Assurance Co. v. Hermann’s Warehouse Corp., 117 N.J. 1, 563 A.2d 444, 448 (1989) (recognizing, insured has “bargained away whatever rights might otherwise be created by” inherent conflict between insured and insurer when policy contains deductible and right-to-settle clause, contours of the arrangement are negotiable in commercial setting, and insured is not foreclosed from obtaining coverage with no deductible if it ■wishes to pay for such additional consideration).16

We find Stevens Transport and these decisions from other jurisdictions persuasive in the present case because Texas has a “strong commitment to the principle of contractual freedom” and its “indispensable partner-contract enforcement.” See Churchill Forge, Inc. v. Brown, 61 S.W.3d 368, 371 (Tex.2001); In re Wells Fargo Bank Minn., N.A., 115 S.W.3d 600, 607 (Tex.App.-Houston [14th Dist.] 2003, orig. proceeding [mand. denied]); see also Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex.2003) (“we may neither rewrite the parties’ contract nor add to its language.”). In short, Methodist seeks to impose contractual and extra-contractual duties that are' contrary to the terms of the contract for which it bargained.17

*526We also acknowledge the above-cited decisions involved general liability policies— not specifically workers’ compensation policies. Nevertheless, their reasoning is even more compelling in the workers’ compensation setting. In particular, the act prohibits an employer, other than a certified self-insured, from exercising control over claims handling and settlement. See Tex. Lab.Code Ann. § 415.002(a)(6) (Vernon 2006) (stating an insurance carrier, or its representative, commits an administrative violation if it “allows an employer, other than a self-insured employer, to dictate the methods by which and the terms on which a claim is handled and settled”). Because Methodist was not a certified self-insured, we have no option but to enforce the provision giving Zurich discretion to settle claims within the deductible. Methodist argues it did not seek to exercise discretion but only insisted that Zurich act reasonably. However, if Zurich had adjusted a claim knowing that, after the fact, it may be required to account to Methodist for the reasonableness of its decisions, Methodist would have indirectly influenced handling and settlement of the claim.

Finally, we reject Methodist’s suggestion it should have recourse because Zurich bore no risk when handling Methodist’s funds. To the contrary, along with its discretion in handling claims, Zurich, as insurance carrier, was the party who faced potential liability to the employee with respect to claims-handling. See Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210, 211-12 (Tex.1988) (recognizing workers’ compensation insurance carrier owes employee duty of good faith and fair dealing in processing compensation claims). Methodist certainly does not admit it was personally liable to its employees for the manner in which claims were handled. Consequently, we decline to approve a scenario in which Methodist indirectly retained discretion over Zurich’s handling and settlement of claims, yet Zurich, not Methodist, was potentially liable to an employee for claims-related decisions.

In sum, the trial court properly concluded that, as a matter of law, Methodist had no cause of action for breach of contract or negligence against Zurich.

III. Summary Judgment On Cause of Action for Breaoh of Express Warranty

Zurich’s motion for summary judgment on the breach-of-express-warranty action included both traditional and no-evidence grounds. When, as in this case, the trial court does not specify in the order the grounds relied on in granting summary judgment, we must affirm the summary judgment if any of the grounds presented are meritorious. W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex.2005); Pico v. Capriccio Italian Rest., 209 S.W.3d 902, 905 (Tex.App.-Houston [14th Dist.] 2006, no pet.). We conclude the trial court properly granted the no-evidence motion.

*527After adequate time for discovery, a party may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. Tex.R. Civ. P. 166a(i); Urena, 162 S.W.3d at 550; Pico, 209 S.W.3d at 905. Unless the respondent produces summary-judgment evidence raising a genuine issue of material fact, the trial court must grant the motion. Tex.R. Civ. P. 166a(i); Urena, 162 S.W.3d at 550; Pico, 209 S.W.3d at 905. To defeat a no-evidence motion for summary judgment, the non-movant need not marshal its evidence, but must point out in its response evidence raising a genuine issue of fact as to the challenged elements. See Tex.R. Civ. P. 166a(i) cmt.; Johnson v. Breiuer & Pritchard, P.C., 73 S.W.3d 193, 207 (Tex.2002); Pico, 209 S.W.3d at 912.

The parties disagree on all elements of a claim for breach of express warranty for services, but they agree the plaintiff must prove at least the following: the defendant sold services to the plaintiff; the defendant made a representation to the plaintiff about the characteristics of the services by affirmation of fact, promise, or description; the representation became part of the basis of the bargain; the defendant breached the warranty; and the plaintiff suffered injury. See Paragon Gen. Contractors, Inc. v. Larco Constr., Inc., 227 S.W.3d 876, 886 (Tex.App.-Dallas 2007, no pet.) (citing Sw. Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576-77 & n. 3 (Tex.1991); Mills v. Pate, 225 S.W.3d 277, 289-90 (Tex.App.-El Paso 2006, no pet.); Great Am. Prods. v. Permabond, Int’l, 94 S.W.3d 675, 681 (Tex.App.-Austin 2002, pet. denied)).18

In earlier petitions, Methodist set forth a very general breach-of-warranty claim. Pursuant to the trial court’s order, Methodist filed a pleading entitled, “[Methodist’s] Basis For Its Breach of Warranty Claims” (hereinafter “the warranty filing”), in which Methodist supplemented previous discovery responses to outline the basis for its cause of action. Subsequently, in its live pleading, Methodist more specifically outlined the basis of its action. In the warranty filing and live petition collectively, Methodist identified two categories of express warranties allegedly breached by Zurich: (1) a warranty contained in the policy; and (2) several representations made by Zurich to induce Methodist to purchase the policies. Zurich divided the no-evidence portion of its motion for summary judgment according to each of these categories.

A. Alleged Warranty in the Policy

In its motion, Zurich asserted there was no evidence of a warranty in the policy or that Zurich breached any warranty. In the warranty filing, Methodist alleged the provision requiring Zurich to “pay ... the benefits required of [Methodist] by the workers compensation law” constituted a warranty that Zurich would properly perform this obligation to handle and pay claims. In its summary-judgment response, Methodist generally contended the policy contained “a warranty of performance” but did not cite a specific provision. Thus, we will consider only whether the above-quoted policy provision constituted a *528warranty.19

Once again, the principle enunciated in Duddlesten regarding the insurer’s discretion to settle claims negates Methodist’s contention. We recognize the Dud-dlesten court addressed a breach-of-eon-tract, as opposed to breaeh-of-warranty, action. Nevertheless, its reasoning is applicable here because the Duddlesten insured advanced the exact argument to support its breach-of-contract action that Methodist urges to support its breach-of-warranty action. See 110 S.W.3d at 89-90. Additionally, although breach of warranty and breach of contract are distinct causes of action with separate remedies, an express warranty is part of the basis of the bargain and contractual in nature. Med. City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55, 60 (Tex.2008). Consequently, when ascertaining the parties’ intentions in a warranty, we look to well-established rules for interpretation and construction of contracts. Id. at 61.

As we have discussed, based on the insurer’s right to settle claims, the Duddlesten court held that an identical provision did not impose an obligation on the insurer to properly investigate and adjust claims and pay only valid claims. 110 S.W.3d at 89-90. Likewise, because Zurich had the right to settle claims, this provision cannot have constituted a warranty it would properly handle, and pay only valid, claims. Accordingly, Methodist failed to raise a genuine issue of material fact on existence of a warranty in the policy.20

B. Representations Allegedly Constituting Warranties

In its petition, Methodist alleged Zurich made the following representations and promises to induce Methodist to purchase the policy:

• Zurich would set team meetings for the applicable account team three times per year to review Zurich’s commitments to Methodist and ensure that Zurich was meeting them;

• Zurich had experienced and expert personnel to handle all claims;

*529• Zurich would provide protection, listen for and anticipate Methodist’s risk management needs and offer cost-effective solutions;

• Zurich would provide a customized claims program that would control Methodist’s loss costs;

• Zurich would help Methodist recognize characteristics of fraud and challenge fraudulent claims successfully;

• Zurich would perform large case reviews in which Zurich’s team of experts would assure that a systematic approach is used in establishing an ultimate loss reserve;

• Zurich would work to ensure that goals and commitments concerning cost reduction and loss savings were being met; and

• Zurich would provide individualized service at a high level and tailored to meet the particular circumstances and requirements of Methodist.

In its motion for summary judgment, Zurich asserted there was no evidence of the following elements: the representations were statements of fact that constituted warranties, as opposed to opinions; the representations became part of the basis of the bargain for the policies applicable to the claims at issue; Zurich breached the alleged warranties; Methodist suffered resulting injuries; or Methodist notified Zurich of any breach.

In response, Methodist presented the affidavit of Beau Harrison, System Director, Corporate Risk & Insurance Department for the Risk Management Group of Methodist. Harrison averred that Pam Mitchell, Zurich’s Vice-President for customer service, orally “warranted” the above-cited list of representations while initially attempting to sell insurance to Methodist. Harrison further stated he relied on these representations when deciding to purchase insurance from Zurich and each year when electing to renew coverage.21

The parties disagree whether these representations were positive averments of fact as required to constitute warranties. We will assume, without deciding, the representations constituted warranties because we conclude Methodist failed to present evidence of any breach or resulting damages. To raise a fact issue on these elements, Methodist relied on Harrison’s affidavit plus McKenney’s deposition testimony.

1. Harrison’s affidavit

Methodist contended paragraph 11 of Harrison’s affidavit raised a genuine issue of material fact on the breach and resulting-damages elements. After explaining Methodist’s obligation to reimburse Zurich *530for payments within the deductible, Harrison continued:

By paying claims which were not com-pensable with respect to the workers compensation claims of [Fulton-Perez and Riegert], Zurich caused Methodist to pay for amounts that were not contemplated under the insurance policy, the Deductible Agreement, or the Specifications to Deductible Agreement. Methodist was damaged as a result. It is my opinion that Zurich failed to fulfill the Warranties to Methodist and that Zurich’s improper payment of non-com-pensable workers compensation benefits for [Fulton-Perez and Riegert] directly resulted from Zurich’s failure to fulfill the Warranties. More specifically, Zurich’s failure to satisfy the Warranties caused it to miss the deadline for contesting compensability because Zurich’s adjuster lacked the appropriate experience and was not properly supervised and because Zurich did not provide the customized claims programs that it promised.

In the trial court, Zurich objected that these statements were legal and factual conclusions and therefore were not competent summary judgment evidence. The record does not reflect a ruling on the objections. However, because a conclusory affidavit is substantively defective, failure to obtain a ruling on an objection does not waive a challenge to the defect and the objection may be considered on appeal. See Paragon Gen. Contractors, 227 S.W.3d at 883; Pico, 209 S.W.3d at 909. Conclusory statements in affidavits are insufficient to raise a fact issue. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex.1996); Paragon Gen. Contractors, 227 S.W.3d at 883; Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex.App.-Houston [1st Dist.] 1997, no pet.). A conclusory statement is one that does not provide the underlying facts to support the conclusion. Paragon Gen. Contractors, 227 S.W.3d at 883; Rizkallah, 952 S.W.2d at 587. A conclusory statement can be either a legal conclusion or factual conclusion. See Rizkallah, 952 S.W.2d at 587.

Harrison’s averments arguably concerned only two of the representations on which Methodist relied to support its breaeh-of-warranty action: “Zurich had experienced and expert personnel to handle all claims”; and “Zurich would provide a customized claims program that would control Methodist’s loss costs.” Even if Harrison’s affidavit was some evidence Zurich breached these warranties, his aver-ments regarding resulting damages were at least factual conclusions. Harrison asserted Methodist sustained damaged because it was required to reimburse Zurich for paying benefits for non-compensable injuries. Accordingly, Harrison’s contention regarding causation hinged on his assertion, “Zurich’s failure to satisfy the Warranties caused it to miss the deadline for contesting compensability because Zurich’s adjuster lacked the appropriate experience and was not properly supervised and because Zurich did not provide the customized claims programs that it promised.”

However, Harrison provided no facts indicating Zurich’s purported inadequacies caused its failure to challenge com-pensability of the claims; instead, he merely made a bare assertion there was a causal connection. See id. at 587 (holding plaintiff car owner’s averment in affidavit that certain actions by defendant mechanic caused damage to plaintiffs car were con-clusory because she provided no factual support). In fact, Harrison stated the assertions were his “opinion.” See Ryland Group, Inc., 924 S.W.2d at 122 (recognizing that an interested witness’s affidavit reciting he “estimates” or “believes” cer*531tain facts to be true will not support summary judgment). Accordingly, Harrison’s averments were substantively defective and did not constitute evidence that any breach of the warranties mentioned in paragraph 11 resulted in damages to Methodist.

2. McKenney’s deposition testimony

At the time of'the injuries at issue, McKenney was employed by Zurich as a workers’ compensation team manager. She managed a group of adjusters and provided guidance on handling claims, including those by Methodist employees. In its summary-judgment response, Methodist cited testimony from McKenney that again arguably concerned only the following representations on which Methodist relied to support its breach-of-warranty action.22

Zurich would set team meetings for the applicable account team three times per year to review Zurich’s commitments to Methodist and ensure that Zurich was meeting them.

First, according to Methodist, McKenney testified she could not recall attending any “team meetings” to ensure Zurich was meeting its commitments to Methodist. However, in the exact representation at issue, Zurich promised to conduct meetings for the applicable “account team” (emphasis added). In fact, consistent with this representation, McKenney was asked: “Did the [Methodist] account team at Zurich have any team meetings in 2005 specifically to discuss Zurich’s commitments to [Methodist]?” (emphasis added). McKenney responded she was “not aware of any meetings that we had to discuss specifically [Methodist].” She later clarified she lacked knowledge of “account team” meetings because “[t]hat was not part of our department” and “would be underwriting, risk management or whoever” (emphasis added). Because “account team” meetings were outside McKenney’s area of knowledge and responsibility, her testimony ■ was not evidence Methodist breached this warranty (emphasis added).

Zurich would provide protection, listen for and anticipate Methodist’s risk management needs and offer cost-effective solutions.

Next, Methodist asserted McKen-ney testified she was unaware of any “cost-effective solutions” offered by Zurich. However, Methodist cited her testimony out of context. McKenney did answer “[n]ot that I am aware of’ when asked whether she or anyone at Zurich offered “cost effective solutions” to Methodist in 2005 with respect to workers’ compensation claims. However, the full representation at issue clearly concerned “cost-effective solutions” relative to risk management needs — not adjustment of claims. In fact, when asked about “cost-effective solutions,” she also explained, “[t]hat’s not something I would be asked to do as a workers’ comp team manager” and she was not involved in risk management. Again, because “anticipating risk management needs and offering cost-effective solutions” fell outside McKenney’s realm of knowledge and responsibility, her testimony was not evidence Zurich breached this warranty.

*532 Zurich would provide a customized claims program that would control Methodist’s loss costs.

Methodist further asserted McKenney testified she was unaware of Zurich’s offering any “customized claims program” to control Methodist’s losses despite her responsibility to ensure claims were properly handled. However, Methodist misconstrued her testimony. She explained she did not know what Methodist’s attorney meant when inquiring about a “claims program” because “[t]hat’s not part of what’s within my job duties” and “that is not something within the workers’ comp department. That’s an underwriting, risk management or something [sic] function other than ours.” Once again, because implementing a “customized claims program” was outside McKenney’s realm of knowledge and responsibility, her testimony was not evidence Methodist breached the warranty at issue.

McKenney eventually agreed there was no “customized” set of procedures used to handle claims by Methodist employees differently than claims by employees of other clients; rather, for every client, each claim was handled based on the merits and individual facts. Thus, Methodist contended McKenney finally admitted there was no “customized claims program.” In this regard, analysis of the breach element overlaps somewhat with Zurich’s contention “customized claims program” was too general to constitute a warranty. Even if the representation regarding a “customized-claims program” related to claims-handling, it is nevertheless unclear what was meant by the term. For instance, as Methodist suggests, Zurich may have meant it would implement unique procedures for handling Methodist’s employee claims. As another example, Zurich may have meant it would ensure all Methodist’s employee claims were handled by certain personnel, which did occur. Because the term was not defined, McKenney’s testimony that Zurich lacked a “customized” set of procedures for handling Methodist’s employee claims was not evidence Zurich failed to implement a “customized claims program,” as warranted.

Finally, even if all three representations at issue were intended to relate to claims-handling and McKenney’s testimony constituted evidence of breach, Methodist presented no evidence it incurred damages as a result. Methodist suggested a fact-finder might infer Zurich adjusters would have contested compensability of Riegert’s and Fulton-Perez’s pre-existing injuries if the adjusters had only attended “account team meetings” or Zurich had implemented “cost-effective solutions” or “a customized claims program.”

This inference is a leap unsupported by any evidence. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex.2004) (stating, for purposes of a no-evidence summary judgment, although evidence is viewed in light most favorable to non-mov-ant and generally circumstantial evidence may be used to establish material fact, “[e]vidence that is so slight as to make any inference a guess is in legal effect no evidence.”). Because these terms were quite broad and McKenney was unaware of their meaning, Methodist presented no evidence indicating how adjusters’ participation in “account team meetings” or implementation of “cost-effective solutions” or “customized claims program” may have affected Zurich’s handling of any claims. Accordingly, there was no evidence Zurich’s alleged breach of these warranties caused its adjusters to improperly handle the claims at issue.

In sum, Methodist failed to present evidence raising a genuine issue of material fact in response to Zurich’s no-evidence motion on the breach-of-express-warranty action.

*533IV. Conclusion

The trial court did not err by granting summary judgment on Methodist’s (1) breach-of-contract action against Zurich, (2) negligence action against Zurich, McKenney, and Vu, and (3) breach-of-express-warranty action against Zurich.

Accordingly, we overrule Methodist’s sole issue and affirm the trial court’s final judgment in its entirety.

FROST, J., concurring.