Dunn v. Southern Farm Bureau Cas. Ins. Co.

• Decision Date: 29 April 1999
• Docket Number: No. 12-97-00184-CV,12-97-00184-CV
• Citation: 991 S.W.2d 467
• Parties: Terry and Ladona DUNN, Appellant, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 467

991 S.W.2d 467

Terry and Ladona DUNN, Appellant, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY, Appellee.

No. 12-97-00184-CV.

Court of Appeals of Texas Tyler.

April 29, 1999.

Rehearing Overruled May 24, 1999.

Bill Clark, Mike Hatchell, Tyler, for appellants.

Brent Howard, Robert G. Hogue, Chris Bunt, Tyler, for appellees.

Panel consisted of RAMEY, Jr., C.J., HADDEN, J. and WORTHEN, J.

OPINION ON MOTION FOR REHEARING

HADDEN, Justice.

Appellant Ladona Dunn ("Dunn") filed a motion for rehearing in this matter. ¹ Dunn urged this court to rehear its decision to deny attorney's fees and prejudgment interest. With regard to Dunn's motion, the court grants it in part and denies in part. This Court's previous opinion of December 31, 1998, is withdrawn, and the following opinion issued.

In a nonjury trial, Appellant Dunn recovered a judgment for personal injury damages under the uninsured/underinsured motorist coverage provision of a liability insurance policy. However, in one point of error, Dunn appeals the trial court's refusal to award her 18 percent additional damages and reasonable attorney fees against her insurer for alleged violations of the prompt payment requirements of Texas Insurance Code, Article 21.55. Appellee and Cross-Appellant, Southern Farm Bureau Casualty Insurance Company ("Farm Bureau"), in three cross-points, alleges that the trial court erred in awarding damages to Dunn because there were no findings that the underinsured motorist was negligent and because the evidence was not legally or factually sufficient to support its findings. We will reverse and render in part, reverse and remand in part, and affirm the balance of the judgment.

Dunn was insured under a standard form automobile liability policy issued by Farm Bureau which contained uninsured/underinsured motorist ("UM") coverage. She was injured when her vehicle was struck from the rear by an underinsured motorist. In her suit Dunn sought to recover not only UM benefits, but additional damages and attorney fees as the result of Farm Bureau's alleged violation of the prompt payment requirements of article 21.55 of the Texas Insurance Code. After a bench trial, the trial court rendered judgment in favor of Dunn in the amount of $220,000.00 for personal injury damages and $118,251.22 for prejudgment interest. However, the trial court did not award Dunn the requested 18 percent additional damages and attorney fees provided for in article 21.55, section 6. In her sole issue presented, Dunn asserts that the trial court erred by refusing to award the 18 percent penalty, attorney's fees, and prejudgment interest.

At the heart of this case is the interpretation and application of the prompt payment provisions of article 21.55. The interpretation of statutes is a quest for legislative intent. State v. Jackson, 376 S.W.2d 341, 346 (Tex.1964). Legislative intent is found principally in the "words" of a statute. St. Luke's Episcopal Hospital v. Agbor, 952 S.W.2d 503, 505 (Tex.1997). A statute's words must be given their plain, grammatical meaning. TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 1988). The pertinent provisions of article 21.55 are as follows:

...

Notice of Claim

Sec. 2. (a) ... an insurer shall, not later than the 15th day after receipt of notice of a claim ...

(1) acknowledge receipt of the claim;

(2) commence any investigation of the claim; and

(3) request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant. Additional requests may be made if during the investigation of the claim such additional requests are necessary.

(b) If the acknowledgment of the claim is not made in writing, the insurer shall make a record of the date, means, and content of the acknowledgment.

Acceptance or rejection of claims

Sec. 3. (a) ... an insurer shall notify a claimant in writing of the acceptance or rejection of the claim not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer, in order to secure final proof of loss.

...

(c) If the insurer rejects the claim, the notice required ... must state the reasons for the rejection.

...

(f) ... if an insurer delays payment of a claim following its receipt of all ...

items, statements, and forms reasonably requested and required, as provided under Section 2 of this article ... for more than 60 days, the insurer shall pay damages and other items as provided for in Section 6 of this article.

Damages

Sec. 6. In all cases where a claim is made pursuant to a policy of insurance and the insurer liable therefor is not in compliance with the requirements of this article, such insurer shall be liable to pay the holder of the policy, or the beneficiary making a claim under the policy, in addition to the amount of the claim, 18 percent per annum of the amount of such claim as damages, together with reasonable attorney fees. If suit is filed, such attorney fees shall be taxed as part of the costs in the case.

...

Liberal construction

Sec. 8. This article shall be liberally construed to promote its underlying purpose which is to obtain prompt payment of claims made pursuant to policies of insurance.

TEX. INS.CODE ANN. art. 21.55, §§ 2, 3, 6, and 8 (Vernon 1997) (emphasis added).

Following the bench trial, the trial court found that Farm Bureau verbally acknowledged receipt of the claim and requested more information within fifteen days of receiving the claim. However, because the acknowledgment was verbal, Farm Bureau was required to make a record of the date, the means, and the content of the acknowledgment. The trial court found that Farm Bureau improperly documented the verbal acknowledgment by failing to record the date that it was made. Additionally, Farm Bureau's adjuster admitted at trial that he did not record the means of the acknowledgment as required by the statute. The trial court further found that Farm Bureau had received all the requested information between December 13 and December 20, 1994, and that Farm Bureau delayed payment of the claim for more than sixty days after its receipt of the necessary information. This delay was essentially undisputed in the record and admitted by Farm Bureau's adjuster.

There is very little case law interpreting article 21.55. No legislative history was cited by either party in support of their respective arguments. However, the Austin Court of Appeals has held that the payment of the penalty provided for in article 21.55, section 6, is payable when the insured fails to comply with any of the requirements of the act. Mid-Century Insurance Co. v. Barclay, 880 S.W.2d 807, 811-12 (Tex.App.--Austin 1994, writ denied). We agree with this interpretation. Thus, under the plain, grammatical meaning of the words used in the statute and the undisputed facts found by the trial court, we hold that Dunn was entitled to the 18 percent statutory damages provided for in article 21.55.

Farm Bureau contends that the trial court correctly concluded that the sanctions imposed by article 21.55 should not be applied to the instant case (1) because it was in compliance with the requirements of the statute, (2) because the statute does not apply to situations where claimants are represented by counsel, and (3) because the statute was not designed to apply to UM claims.

WAS FARM BUREAU IN COMPLIANCE WITH THE STATUTE?

Dunn had previously submitted a claim for personal injury protection ("PIP") benefits under the same insurance policy for her injuries arising out of the same accident. It is undisputed that Farm Bureau properly followed the requirements of article 21.55 in regard to the PIP claim. Farm Bureau asserts that article 21.55 does not require an insurer to take the same procedural steps each time an The policy in the instant case offers five separate coverages, that is, liability coverage, medical payments coverage, personal injury protection coverage, uninsured/underinsured motorist coverage, and coverage for damage to property. Each coverage has its own distinct insuring agreement, exclusions, limits of liability, and other provisions applicable to that kind of coverage. The items, statements and forms that an insurer would reasonably believe would be required from a claimant in order to investigate a claim under one type of coverage would not necessarily be the same as those required for a claim under another type of coverage. For example, a claim for damages to a covered auto would not require evidence of medical expenses. Further, a claim under medical payments coverage would only require evidence of medical expenses, whereas a claim under PIP coverage would also require evidence of loss of wages from personal injury. A significant distinction is that if a PIP claim is made, the adjuster does not need to establish who is legally responsible for the accident, but does need to establish legal responsibility when a UM claim is made, and such a claim would greatly expand the investigative efforts of the adjuster. Thus, the contract provisions relating to the PIP coverage and the UM coverage were different, the grounds for liability under the two coverages were different, the documents and other items necessary to be submitted by Dunn would not necessarily be the same, and the grounds for accepting or rejecting each claim would not necessarily be the same. If filing one claim under one type of coverage satisfies the requirement of article 21.55, then the purpose of the statute could easily be circumvented. Farm Bureau could respond to a small claim under the PIP coverage, thereby satisfying all of the requirements of article 21.55 but thereafter delay paying a claim made under one of the other coverages, such as the UM coverage in the instant case, and thus defeat the underlying purpose of the statute which is to obtain prompt payment of claims. Thus, we conclude that when Farm Bureau...