Tex. Fair Plan Ass'n v. Ahmed

• Decision Date: 11 August 2022
• Docket Number: 14-20-00585-CV
• Citation: 654 S.W.3d 488
• Parties: TEXAS FAIR PLAN ASSOCIATION, Appellant v. Adil AHMED, Appellee
• Court: Texas Court of Appeals

654 S.W.3d 488

TEXAS FAIR PLAN ASSOCIATION, Appellant

v.Adil AHMED, Appellee

NO. 14-20-00585-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed August 11, 2022

Rehearing and Reconsideration En Banc Denied October 25, 2022

James Rowland Old Jr., Beaumont, J. Stephen Barrick, Houston, for Appellant.

John Scott Black, Richard D. Daly, Maria Gerguis, Melissa Waden Wray, Houston, for Appellee.

Panel consists of Justices Wise, Spain, and Hassan.

Charles A. Spain, Justice

In Barbara Technologies Corp. v. State Farm Lloyds , the supreme court determined that an insurer's payment of an appraisal value past the statutory deadline for payment under Insurance Code chapter 542, subchapter B (the "Prompt Payment Act") does not entitle the insurer to summary judgment on an insured's claim brought under the Act.¹

Barbara Techs. , 589 S.W.3d 806(Tex.2019).The case before this court presents a related question that appears to be an issue of first impression in Texas courts—does payment of an appraisal award plus payment of estimated interest due under the Prompt Payment Act entitle an insurer to summary judgment on an insured's claims under the Act, thereby absolving the insurer from paying attorney's fees that otherwise would be due under the Act?We conclude the answer to this question is no.

AppellantTexas FAIR Plan Association appeals the trial court's judgment in favor of appelleeAdil Ahmed on his claims under the Prompt Payment Act.In four issues, Texas FAIR Plan argues (1)the trial court erred by denying its summary-judgment motion as to Ahmed's Prompt Payment Act claim, (2)the trial court erred by granting Ahmed's traditional-summary-judgment motion on his Prompt Payment Act claim, (3) the attorney's fees awarded by the trial court are excessive and include fees that are not recoverable, and (4)the trial court's judgment must be reformed to eliminate awards of amounts that were not in controversy.We overrule issue 1 and sustain issue 2.Without reaching issues 3 and 4, we reverse the trial court's summary judgment in favor of Ahmed on his Prompt Payment Act claim and remand the case to the trial court for further proceedings.

I.BACKGROUND

Ahmed's home sustained hail damage in spring 2015.Ahmed reported a claim to his insurer, Texas FAIR Plan.Texas FAIR Plan inspected the house and assessed a replacement-cost value of $1,091.47, which was below the deductible of Ahmed's policy of $9,506.After a reinspection, Texas FAIR Plan increased its estimate to $7,605.02, still below the deductible.

Ahmed sued for, among other things, breach of the Prompt Payment Act,² claiming that Texas FAIR Plan had undervalued the claim and was liable to pay it, and was also liable for statutory interest because payment was late under the Prompt Payment Act.SeeTex. Ins. Code Ann. § 542.060.Texas FAIR Plan demanded an appraisal, as provided by the policy.³On October 19, 2016 the appraisers issued an agreed appraisal award determining the replacement-cost value of the claim was $22,699.78, well above the deductible.On November 4, 2016, Texas FAIR Plan notified Ahmed that it would pay the full replacement-cost value.Texas FAIR Plan paid Ahmed $13,193.78, which it characterized as the value of the appraisal award minus the deductible.Texas FAIR Plan then filed traditional and no-evidence summary-judgment motion on Ahmed's Prompt Payment Act claim.The trial court denied the motion.

In 2019, while this case was still pending in the trial court, the Supreme Court of Texas decided Barbara Technologies.Texas FAIR Plan then made an additional payment to Ahmed of $6,458.26, which it characterized as constituting $3,206.19 in statutory interest, $752.23 in prejudgment interest, and $2,500 for "estimated attorney's fees."Texas FAIR Plan moved for reconsideration of its summary-judgment motion on Ahmed's Prompt Payment Act claim, attaching new evidence showing it had paid both the appraisal award and the statutory interest it determined would be owed under the Prompt Payment Act, and arguing that these payments entitled it to summary judgment.Ahmed filed a competing traditional summary-judgment motion on his Prompt Payment Act claim, along with a no-evidence summary-judgment motion as to certain defenses pleaded by Texas FAIR Plan.The trial court granted Texas FAIR Plan's motion for reconsideration but denied relief.The trial court granted Ahmed's traditional and no-evidence motions, determining he was entitled to relief on his Prompt Payment Act claim as a matter of law and that Texas FAIR Plan had presented no evidence in support of numerous defenses.⁴

The trial court then held a bench trial on attorney's fees.At the conclusion of trial, the trial court signed a final judgment awarding Ahmed damages, statutory interest under Insurance Code section 542.060, attorney's fees through trial in the amount of $96,358.50, contingent appellate attorney's fees, pre- and post-judgment interest, and costs.

II.ANALYSIS

A.Standard of review

In issues 1 and 2, Texas FAIR Plan challenges the trial court's rulings on the parties’ competing summary-judgment motions on the issue of Texas FAIR Plan's liability under the Prompt Payment Act.We review summary judgments de novo, taking as true all evidence favorable to the nonmovant, and indulging every reasonable inference and resolving any doubts in the nonmovant's favor.Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 661(Tex.2005).When both parties move for summary judgment on the same issue, the reviewing court considers the evidence presented by both parties, determining all questions presented.Id.;seeBarbara Techs. , 589 S.W.3d at 811(reviewing competing summary-judgment motions on issue of Prompt Payment Act liability).

B.The Prompt Payment Act

The Prompt Payment Act"imposes several key requirements on insurers":

(1) the insurer must acknowledge receipt of the claim, commence any investigation of the claim, and request any items, statements, or forms required from the claimant within fifteen days of its receipt of notice of the claim; (2) the insurer must notify the claimant of acceptance or rejection of the claim no later than fifteen business days after the insurer receives all items, statements, and forms required to secure final proof of loss; (3) if the insurer notifies the insured that it will pay all or part of the claim, it must pay it by the fifth business day after the date of notice of acceptance of the claim; (4) if the insurer delays payment of a claim for more than the applicable statutory period or sixty days, the insurer shall pay [Prompt Payment Act] damages; and (5) an insurer that is liable for a claim under an insurance policy and violates a [Prompt Payment Act] provision is liable for [Prompt Payment Act] damages in the form of 18% interest on the amount of the claim per year, with attorney's fees.See[Tex. Ins. Code Ann.]§§ 542.055(a)(1)–(3), .056(a), .057(a), .058(a), 060(a).Thus, the [Prompt Payment Act] has three main components—non-payment requirements and deadlines, deadlines for paying claims, and enforcement.See generallyid.§§ 542.055 –.060.

Barbara Techs. , 589 S.W.3d at 812–13.In other words, an insurer may be liable under the Prompt Payment Act if it does not pay a valid claim within 60 days after receiving all items and information reasonably requested and necessary to make a determination regarding the claim.Tex. Ins. Code Ann. § 542.058(a).In such cases, the insurer is required to pay "the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney's fees."Tex. Ins. Code Ann. § 542.060(a).The question in this case is whether an insurer may avoid liability under the Act by voluntarily paying both the appraisal amount and the statutory interest that would be due for a late payment under the Act.

C.Texas FAIR Plan's summary-judgment motion

In issue 1, Texas FAIR Plan argues that the trial court erred by denying its summary-judgment motion.The crux of Texas FAIR Plan's argument is that it was entitled to judgment as a matter of law after it (1) voluntarily paid the appraisal award and (2) voluntarily paid what it contends was the statutory interest due on the late payment of the claim.

We begin with Barbara Technologies , which has strikingly similar facts: an insurer initially determined a claim was below the policy deductible and paid nothing.589 S.W.3d at 809.After the insured sued, the insurer invoked the appraisal process to determine the value of the damages.Id.The appraisal came back over the deductible.Id. at 810.The insurer paid the appraisal value, well past the statutory deadline if measured from the date of proof of loss, but within the deadline if measured from the date of appraisal.Id.The San Antonio Court of Appeals affirmed summary judgment in favor of the insurer, holding that a "plaintiff could not sustain a claim under the [Prompt Payment Act] when it [is] undisputed that the insurer had paid the appraisal award."Barbara Techs. Corp. v. State Farm Lloyds , 566 S.W.3d 294, 296(Tex. App.—San Antonio2017), rev'd , 589 S.W.3d 806(Tex.2019).

The supreme court reversed and "disapproved" of the reasoning of the San Antonio Court of Appeals and other courts holding that an insurer could discharge liability under the Prompt Payment Act by paying an appraisal award: "Nothing in the [Prompt Payment Act] would excuse an insurer from liability for [Prompt Payment Act] damages if it was liable under the terms of the policy but delayed payment beyond the applicable statutory deadline, regardless of use of the appraisal process."Barbara Techs. , 589 S.W.3d at 819.⁵The supreme court based its reasoning on the peculiar features of the appraisal process, a process that is not addressed in the Prompt Payment Act.Seeid. at 820.

To determine how appraisals should be treated under the Act, the supreme court detailed the features...