Kester v. Lloyds

Docket Number02-22-00267-CV
Decision Date06 July 2023
PartiesPaige A. Kester, Appellant v. State Farm Lloyds, Appellee
CourtTexas Court of Appeals

On Appeal from the 153rd District Court Tarrant County, Texas Trial Court No. 153-329343-21

Before Sudderth, C.J.; Kerr and Womack, JJ.

Elizabeth Kerr Elizabeth Kerr Justice

This is a first-party insurance suit brought by Appellant Paige A Kester against his homeowners-insurance carrier, Appellee State Farm Lloyds, for breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), and violations of Chapter 541 of the Texas Insurance Code. Only Kester's TPPCA claim is involved in this appeal.

In three issues, Kester appeals the trial court's TPPCA-related summary judgment in State Farm's favor. But because State Farm paid all that Kester was entitled to receive under his policy, along with all penalty interest that he could have recovered at trial, Kester cannot recover attorney's fees-or anything else-under the TPPCA. We will affirm.


In December 2019, Kester submitted a claim for alleged damage to his home in Southlake, Texas, sustained during an October 2019 storm. State Farm inspected Kester's home on December 23, 2019, finding covered damage with a replacementcost value of roughly $17,000. That same day State Farm accepted the claim and, after subtracting depreciation and Kester's deductible from that replacement-cost value, issued Kester an actual-cash-value[1] payment of $2,270.

In September 2020, after having gotten a public appraiser involved for a second inspection that did not change State Farm's decision, Kester sent State Farm a demand letter-which State Farm declined-seeking actual damages of $48,500 and $8,200 in attorney's fees. The next month Kester demanded appraisal according to his policy's terms. That process resulted in a late April 2021 appraisal award that set the amount of loss at nearly $48,000 on a replacement-cost basis and a little over $32,000 on an actual-cash-value basis. In June 2021, State Farm complied with the appraisal award by paying Kester roughly $21,000, which represented replacementcost value less depreciation, deductible, and State Farm's earlier payment.

Kester sued State Farm in September 2021. Several months later, State Farm voluntarily paid Kester $2,965.15 to "resolve any potential question or concern" about interest that it might owe Kester under the TPPCA for delayed payment.[2] See Tex. Ins. Code Ann. § 542.060. State Farm also voluntarily paid Kester $5,000 in attorney's fees, writing to his lawyer,

As your client's economic damages have now been paid, there is a question as to whether you would recover any attorney's fees under Section 542A.003 of the Texas Insurance Code. However, State Farm is enclosing payment for attorney's fees in the amount of $5,000 in relation were made, Kester would receive a further payment of about $6,000 after applying only his deductible. to the Texas Prompt Payment of Claims Statute and in accordance with Section 542A.003 of the Texas Insurance Code.

Soon after making these payments, State Farm moved for traditional summary judgment on all of Kester's claims. State Farm introduced its motion with this summary, which succinctly captures this appeal's posture:

Through the appraisal process, the amount of loss in this case was set. State Farm paid the appraisal award. Additionally, State Farm issued payments covering any statutory interest that Plaintiff could conceivably claim under Chapter 542 of the Texas Insurance Code for payment of policy benefits related to the Claim. State Farm further has issued a payment to Plaintiff covering any reasonable attorneys' fees Plaintiff could conceivably claim related to this lawsuit. There are, therefore, no further amounts that Plaintiff can possibly recover. Thus, summary judgment in favor of [State Farm] on all of Plaintiff's claims is appropriate.

After getting Kester's response-which did not controvert State Farm's position that Kester had received all conceivable statutory interest-and State Farm's reply, the trial court granted the motion. This appeal followed.


Kester offers three reasons why the trial court's judgment was allegedly wrong:

State Farm's paying the appraisal award did not extinguish Kester's TPPCA claim for delayed payment;
State Farm's gratuitously paying, pretrial, the TPPCA interest owed for delayed payment did not entitle it to judgment as a matter of law, but even if it did, State Farm's interest calculation was wrong; and
Insurance Code Section 542A.007 does not preclude an attorney's-fees award to Kester.

Because Kester did not and does not suggest that State Farm owes him some additional policy benefits, and because he waived any argument about the TPPCA-interest amount (and is mistaken anyway),[3] the only real fight on a practical level is whether Kester can recover his attorney's fees. For efficiency, we will address Kester's issues together.

Standard of Review

We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding evidence contrary to the nonmovant unless reasonable jurors could not. Mann Frankfort Stein &Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every reasonable inference and resolve any doubts in the nonmovant's favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A defendant that conclusively negates at least one essential element of a plaintiff's cause of action is entitled to summary judgment on that claim. Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010); see Tex.R.Civ.P. 166a(b), (c).

The Prompt Payment of Claims Act

The TPPCA "imposes procedural requirements and deadlines on insurance companies to promote the prompt payment of insurance claims." Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806, 812 (Tex. 2019); see Tex. Ins. Code Ann. §§ 542.051-061.

Special TPPCA provisions added in 2017 as Chapter 542A deal with weather-related claims for property damage and limit what insureds can recover.[4] See Tex. Ins. Code Ann. §§ 542A.001(2) (defining "claim" as one arising from damage or loss "caused, wholly or partly, by forces of nature, including . . . hail, wind, . . . or a rainstorm"), 542.060(c) (establishing how to calculate the statutory interest rate "on the amount of the claim" in cases to which Chapter 542A applies), 542A.007(a) (providing three disjunctive ways to calculate an attorney's-fees award); see also Amy Elizabeth Stewart, 2017 Insurance Law Update, 83 The Advoc. (Texas) 7, 1 (2018) ("[P]opularly referred to as the 'hailstorm' bill," Chapter 542A "limits a policyholder's ability to recover its attorney's fees for prosecuting such a claim and reduces the interest recoverable in connection with delayed payments.").

Chapter 542A attorney's fees are limited to the lesser of the amount "supported at trial," or "that may be awarded to the claimant under other applicable law," or- apropos here-as calculated by this formula:

(A) dividing the amount to be awarded in the judgment to the claimant for the claimant's claim under the insurance policy for damage to or loss of covered property by the amount alleged to be owed on the claim for that damage or loss in a notice given under this chapter; and
(B) multiplying the amount calculated under Paragraph (A) by the total amount of reasonable and necessary attorney's fees supported at trial by sufficient evidence and determined by the trier of fact to have been incurred by the claimant in bringing the action.

Tex. Ins. Code Ann. § 542A.007(a)(1)-(3) (emphasis added).


In his first issue, Kester frames State Farm's trial-court argument as one under which "its payment of the appraisal award extinguished Kester's claim for penalty interest and attorneys' fees under the TPPCA as a matter of law." Kester contends otherwise, relying on Barbara Technologies and its companion case, Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019).

Those pre-Chapter 542A cases, although useful in establishing that the payment of an appraisal award following the rejection of a covered loss does not in and of itself foreclose a TPPCA claim, see Barbara Techs., 589 S.W.3d at 819, Ortiz, 589 S.W.3d at 135, have little to do with what's actually at stake in this appeal: does paying an appraisal award and also paying all possible TPPCA interest moot a TPPCA claim? And, setting aside the penalty-interest component, does paying an appraisal award leave no "amount to be awarded in the judgment" for a "claim under [Kester's] insurance policy," thus making the numerator in Section 542A.007(a)(3)(A)'s attorney's-fee formula zero? After examining various authorities, we agree with the growing majority of them that under a plain reading of the statute, the answer to both questions is yes.

Our sister court in Dallas recently became the first Texas state court to address the scenario we face. See Rosales v Allstate Vehicle &Prop. Ins. Co., No. 05-22-00676-CV, 2023 WL 3476376 (Tex. App.-Dallas May 16, 2023, no pet. h.).[5] There, as here, the insurer paid an appraisal award and wrote a separate check intended "to cover any additional interest [the insured] could possibly allege to be owed" under the TPPCA. Id. at *1. Allstate then moved for traditional (and no-evidence) summary judgment on Rosales's TPPCA claim, arguing that

because it [had] paid all that could be owed on the claim (i.e., the full appraisal award plus any possible TPPCA interest), Rosales was not entitled to any money judgment on

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