TEXAS PROMPT PAYMENT OF CLAIMS ACT [TPPCA] 

POLICY APPRAISAL CLAUSES

Alvarez v. State Farm Lloyds, 18-0127 (Tex. April 17, 2020) (per curiam)

Lazos v. State Farm Lloyds, 18-0205 (Tex., April 17, 2020) (per curiam)

Quinn Comment. Technically, a per curiam decision or opinion is one in which no particular judge is listed as the deliverer of the opinion of the court. Usually, they are unanimous decisions, and the designation “per curiam” is intended to indicate firm agreement amongst the justices and that the matter has already been established, perhaps in several senses. This last observation may be especially true in this situation. (1) The cases are almost identical. (2) They were decided on the same day. (3) They come at what is probably the end of a several-year slew of cases involving the same topic(s). One can imagine the justices singing together in one voice, (4) And all justices have he their “say.” “Enough is enough,” sighed the justice together of one voice in conference. 

However, there is a hidden issue in these decisions which is not particularly insurance-related and which might have larger implications for sufficiency when it comes to pleadings and preservation of error. 

Both these two cases involved property insurance claims arising from wind and hail storms. Both involve State Farm Lloyds (SFL) demanding an appraisal of the value of the loss, making that demand after the insured had instituted a suit against it, obtaining an order from the court compelling the insured to submit to it. Both cases involved SFL initially denying the claim on the grounds that the loss was within the deductible. The insured sued; SFL sought an appraisal; the insured was awarded money in excess of the deductible, which SFL quickly paid. In each case, SFL sought the complete defeat of the remainder of the insured’s claim, i.e., a take-nothing judgment, including breach of contract, insurance bad faith, TPPCA, and other less usual causes of action. 

In each of the two cases, the trial court entered the summary judgment SFL had sought, and the San Antonio Court of Appeals affirmed the trial courts’ decision.  Its decisions were based on USAA Texas Lloyds v. Menchaca, 545 S.W.3d 479 (Tex. 2018). In both of these cases, the insureds sought further review before the Texas Supreme Court. Before those reviews could be obtained, however, the Supreme Court had made decisions and issued opinions in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) and Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019).

In Barbara Tech, the Court had held that “payment in accordance with an appraisal is neither an acknowledgment of liability nor a determination of liability under the policy for the purposes of TPPCA damages under section 542.060 [of TIC].” On the same day, in Ortiz, the Court held that “an insurer’s payment of an appraisal award does not as a matter of law bar an insured’s claims under the Prompt Payment Act.”

Each of the two cases was remanded to the trial court, the decision of the court of appeals having been reversed. 

Quinn CommentSo, that’s that. Or is it? Another similarity between the two cases was that neither insured had expressly alleged a TPPCA claim in his Orignal Petition. Instead, he merely alleged that he was entitled to the 18% statutory interest, which reflects TPPCA damages and gave related arguments in his motion for summary judgment. SFL knew that this was the score, as the saying goes, since it argued that it was not liable for TPPCA damages in its own summary judgment motion.
Now, SFL appears to have argued in the Supreme Court anyway that the insured failed to preserve his error given how it had pleaded the case.  The Court rejected this argument–called it “mistaken,” and noted that the same argument had been employed and discounted, if not explicitly rejected,  in the Ortiz Opinion of the Court. 

Is this a new-ish rule of appellate procedure?Might the rule be something like this:

If P does not plead a specific cause of action CA#1 but pleads something close to it using appropriate terminology, e.g., virtually uniquely related damages, and D clearly know that P had CA#1 in mind and both proceeded upon it, then there is no pleading prejudicial error and appellate review can be had for something in controversy related to the technically unpled cause of action. 

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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