BARBARA TECH v. STATE FARM LLOYDS CONCURRING AND DISSENTING OPINION

STATE FARM LLOYDS [SFL], RESPONDENT

CONCURRING AND DISSENTING OPINION OF JUSTICE BOYD

The Opinion of the Court aka the “Majority Opinion” was posted on April 20, 2020. The relevant facts are summarized there. Like the Opinion of the Court, Justice Boyd’s Opinion contains a substantial number of footnote principally containing citations an array of relevant cases and several brief discussions.  

What the court takes to be the relevant facts are set forth in the majority opinion, although the dissenting opinion of Chief Justice Hecht discusses more quite interesting facts. For review, think of the following ever so brief sketch: hail storm. . . . building damaged. . . . BT makes claim. . . . SFL says twice “Covered but too small to pay (deductible). . . .BT sued. SFL invoked appraisal clause commonly found in contracts of property insurance. . . . Appraisal award is more than 38 times the size of the deductible, and 65 times the insurer initial offer. SFL pays quickly, after subtracting deductible and depreciation. Question: As a matter of law, does SFL owe money under the policy and/or penalties (“insurance-bad-faith-damages” under the applicable law, including the Texas Prompt Payment of Claims (TPPCA)? (Section 542 of the Texas Insurance Code.) Holding: Not proved on summary judgment, i.e., as a matter of law, so reversed and remanded.

Justice Boyd, whose opinion this is, and his alone, concurred with the Court majority that the case needed to be remanded. The majority had concluded that SFL, by paying the appraisal award, had “accepted” liability. Justice Boyd disagreed; his opinion expresses the view that the following proposition is false:  “by voluntarily and unconditionally paying the benefits claimed, the insurer conceded both its liability and the claim’s validity.” By rejecting this proposition, Justice Boyd dissents. He concurs with the court in remanding the case, but “his remand” would be “solely for a determination of the amount of statutory interest and attorney fees the insurer owes the insured.” Of course, as the reader will see, Justice Boyd rejected some of the other propositions Justice Green and his group embraced. It is worth keeping in mind that one of the subtle differences between Justice Boyd and Justice Green concerns the meanings of two words: “liable” and “accept.”

I.  Background

A. The [Texas] Prompt Payment of Claims Act [TPPCA]

With considerable care, Justice Green lays out the TPPCA rules; he even sets up a graphic flowchart showing how the system works. He emphasizes the exactness and strictness of the timetables and the enforcement provisions. The way Justice Boyd portrays the rules, one sees that they are to be strictly enforced and that there are no defenses for the tardy insurer. The theme is “Get ‘it’ done by the day deductible from the rule or else.” “If you don’t get ‘it’ done by the nth day specified in the TPPCA rule, you will pay the penalties specified there.” The form of those penalties, as stated there, is 18% interest on unpaid balances and attorney fees. 

B. State Farm’s Response to Barbara Tech’s [BT’s] Claim

This information is to be found above and in the majority opinion, except, as Justice Boyd puts it, “Ultimately, 664 days after first inspecting the property, 659 days after completing its investigation and rejecting* the claim, and seven days after receiving the appraisal report, State Farm [SFL] voluntarily and unconditionally paid the appraisal amount, less depreciation and the deductible.” 

“Against this backdrop, the two issues are (1) whether SFL, having voluntarily and unconditionally paid the claim for benefits–but having ‘delayed payment’ for more than sixty days after receiving all the information it required from Barbara Tech–is also obligated to pay statutory interest and attorney fees and (2) whether SFL’s invocation of the appraisal process changes the analysis under the statute. [Remember: The initials “SFL” are consistently substituted for the name “State Farm,” even in quoted passages. [MSQ]] 

II. Appraisal

Justice Green agrees[–how could he not?–]with the Opinion of the Court that TPPCA does not indicate how the invocation of an appraisal clause affects the deadlines in TPPCA, that the appraisal process pertains only to disputes regarding valuation,  and that it does not decide issues of coverage, the validity of BT’s claim, or SFL’s liability. After the appraisal, just as before, had the right to “either deny the claim or voluntarily pay it. “

With only one exception, Texas state and federal cases have “consistently held that an insurer that makes full and timely payment of an appraisal is not obligated to pay statutory interest or attorney’s fees even if it previously failed to comply with the Act or timely pay the claim.” Justice Green criticizes this whole line of cases by asserting that most of them have not analyzed the statute, and when they have given arguments in favor of their decisions their arguments have not justified their views. 

Justice Boyd disagreed. For one thing, the statute restricts itself to information coming from “requests from the claimant,” and the appraisal report does not meet that condition. For another, the requests that matter must come during the process of investigation for the purpose of securing (i.e., obtaining?) a final proof of loss. In setting forth this argument, Justice Green and Justice Boyd agreed. 

In Justice Boyd’s opinion, SFL took more than 60 days to pay BT’s claim after it received all the information it required from BT. In fact, it rejected the claim and so is obligated to pay statutory interest and attorney’s fees.

Justice Boyd notes that on remand the trial court will have to decide whether 542.058 or 542.060 provide the standard as to whether SFL will owe statutory interest and attorney fees and make this decision based on arguments from both sides. Justice Boyd believes that the plain language of the statute itself decides the correct decision. He gave three reasons. First, these two subsections cannot apply at the same time since they involve different burdens of proof. Second, .060 does not apply since SFL fully complied with the Act. Third, regardless of which section applies, “SFL owes interest and fees because it conceded both claim’s validity and its own liability under the policy by voluntarily and unconditionally paying the benefit.” 

In summary, SFL timely acknowledged, investigated, and rejected BT’s claim just as the Act required. Unsatisfied with SFL’s decision, BT filed suit, forcing SFL to either voluntarily pay the claim or litigate its liability and the claim’s validity. SFL chose to voluntarily and unconditionally pay the claim but did so more than sixty days after receiving from BT all the information it reasonably required to initially reject the claim. Because SFL fully complied with the Act’s requirements, section .060 and its “is liable” standard does not apply. Instead, section .058 applies and because arbitration of litigation has never determined that BT’s claim was invalid and should not have been paid, section 0.58 requires SFL to pay statutory interest and attorney fees. Even if section .060 were to apply, payment of statutory interest and attorney’s fee would be required, since SFL admitted that it was liable under the policy.