A Texas appellate court has upheld a summary judgment in favor of Redwood Fire and Casualty Insurance Company, finding that the insurer lawfully sought unpaid premiums from a charter bus company that defaulted during the COVID-19 pandemic.
The case stemmed from a commercial auto policy issued by Redwood to Imperial Charters, LLC, a charter bus operator. The policy covered the period from June 19, 2019, through June 19, 2020. Imperial Charters failed to pay monthly premiums in February, March, and April 2020. In response, Redwood issued a cancellation notice effective June 2, 2020.
After calculating the outstanding balance, Redwood credited Imperial Charters $2,369 for unearned premiums and $2,892 as a one-time COVID-19 credit. Following these adjustments, Redwood determined that Imperial Charters still owed $11,554.76 and filed suit for breach of contract. The insurer also sought attorney’s fees.
Imperial Charters defended the suit by asserting the affirmative defense of impossibility of performance, arguing that COVID-19 had rendered it unable to operate and, by extension, to perform under the insurance contract. Additionally, the company filed counterclaims for breach of the contractual duty of good faith and fair dealing and for fraud, claiming that Redwood should have refunded the credits instead of applying them to the outstanding premium balance.
The trial court granted summary judgment to Redwood on both its breach of contract claim and Imperial Charters’ counterclaims, awarding Redwood $11,554.76 in damages and $7,490.65 in attorney’s fees. On appeal, Imperial Charters challenged the ruling, focusing on the impossibility defense and the denial of its counterclaims.
On April 3, the Court of Appeals for the Second Appellate District of Texas affirmed the judgment in full. In its opinion, the court emphasized that the impossibility defense applies only in limited circumstances under Texas law: death or incapacity of a party necessary for performance, destruction of a thing necessary for performance, or a legal change that renders performance unlawful.
Imperial Charters did not allege that any such condition applied. Although the company claimed that a March 2020 executive order from Governor Greg Abbott and industry-specific impacts made performance impractical, the court found no evidence that the charter bus industry had been legally prohibited from operating. Moreover, the insurance policy itself contained no force majeure clause or any provision excusing nonpayment of premiums due to economic hardship or the effects of a pandemic. Accordingly, the impossibility defense failed as a matter of law.
The appellate court also rejected Imperial Charters’ counterclaims. Regarding the alleged breach of good faith and fair dealing, the court reiterated that under Texas law, that duty is confined to the handling of claims—not to the billing or collection of premiums. Since Redwood’s actions related to the application of return premiums and a COVID-19 credit toward the outstanding balance, they could not, as a matter of law, constitute bad faith.
Imperial Charters also alleged fraud based on Redwood’s failure to refund rather than credit the premiums. The court affirmed summary judgment on this counterclaim under both traditional and no-evidence standards. Importantly, because Imperial Charters failed to challenge the trial court’s no-evidence ruling on appeal, the appellate court affirmed the fraud dismissal on that unchallenged ground.
With the appellate ruling, Redwood retains its full damages and fee award, and Imperial Charters receives nothing on its claims.
The decision underscores how courts may strictly enforce premium payment obligations under commercial insurance policies in the absence of contractually agreed exceptions. It also clarifies that business hardships arising from COVID-19 do not, by themselves, excuse contractual performance—particularly in the absence of legal prohibitions or explicit policy terms to the contrary.
