karina holland for staples or plus lines insurance company may it please the court i'm going to address first why the district court in correctly interpreted the texas prompt payment after requiring reversal of the one point two million dollars in first award against  insurer to accept or reject a claim once it receives all information reasonably required to determine coverage but no five six does not include the words reasonably required or determine coverage the plain wording actually says the deadline starts to run after the insurer has received all items statements and forms required to secure final proof of loss the district court conflated industry terms of art mixing up a proof of loss with the coverage determination a final proof of loss is the last act necessary and the precursor to the acceptance and payment of a claim it includes but it does not comprise alone a coverage determination suffered no actual loss the statute does not define what comprises a final proof of loss and that may differ depending on the type of policy involved or the type of loss but there as you said it's not the fine to use a word from the last argument it's fairly vague and i think you acknowledge it doesn't require every single piece of paper to be received by the insurance company so what what standard can we use your honor if you look at it there's general agreement in the case law in authoritative commentators what comprises a final proof of loss in particular identity of the parties making the claim the insurable ownership interest the covered cause of loss of the evidence of the amount of the l and proof that the insured has actually sustained an out of pocket loss those are the elements that you see repeatedly identified in case law and it's undisputed here that saint paul did not have those fundamental idence that fundamental information that was necessary to secure a final proof of lost they were missing three items your honor as of november sixth two thousand and nine the date the court found a violation they were missing three critical items to secure proof a loss the first was evidence of actual loss evidence of an out of pocket loss as a standard proof of last item and this insurance contract had been correct they had no evidence that why super and or the other working interest owners were out of pocket and had paid any amount of the invoices that had been incurred for the control of while event that they alleged was an underground blowout or about that spreadsheet that listed a whole bunch of different costs than your honor what that was was a partial submission and the act doesn't address partial submissions but all it was was invoices of all the costs burned at the well from the day of spud until it was plugged in abandoned and what the adjusters have to do is go in behind those invoices and find out what work was being done to see if it fits within the coverage of the policy this is a control of all policy so it only reimburses out of pocket costs that are related to bringing a well back under control on the cover up that particular point your market now so as to conclude the core never got to that analysis it what the court did was conflate a coverage determination with the proof of laws and what the court said was as of november two thousand and  had sufficient information to determine whether the claim was covered but that's only a piece or a part of a proof of loss the testimony was undisputed in this case why should brown's claim leave it on testified they did not give the a awful it's certainly a possibility your honor except that's not what you find in the findings of fact and what the court appears to have done was determined whether there were sufficient engineering facts available to determine whether there was an underground flow going on that would constitute an underground blowout the correct analysis does not seem to have been made because not only were we missing the final invoices that would have shown the amount of loss we were missing the evidence of the insura ownership interest here wires around three percent of this well what it did was claim the rest being ninety seven percent other working interest donner's saying that it had an obligation to carry their insurance but it never would have paid i don't think that can be assumed you're out of there are too many cases where that assumption has been made and when an investigation has been done it turns out that in fact there are no other people involved in the insurance or that the person carrying the insurance has no insured interest in the well that's why this is one of the fundamental proof of lost items that's required for all indemnity and property policies is proof that the person making the claim is actually out of questions on that if the position is the final proof of loss requires various bits and pieces what instead he's not generally what specific case defines exactly what those pieces are i don't think there's a specific just give me your best case it will tell us the orbit of pieces that would ever equate to a final proof a lot if you look at the texas state court cases of in a republic lloyd's and us fire versus land those give you some pieces some pieces  are the not then tied to the facts here if it's a certain threshold of pieces at what point in time in this case did enough pieces come together to make it a final proof well your honor i think if you look at lamar holmes it tells you that it years into the litigation that was the final point all the invoices and backup to show what work was done in proof that they wouldn't that would allow you to know your client to know how much you need to pay but the provisions were interpreting fifty six is a accept clause correct your honor to claim handling deadline but if you look at all the word and it says look at what's necessary to secure final proof of law in order to accept or reject the claim and if you accept you trigger a five day payment deadline in zero five seven that means you must have everything necessary at that point you must have all the invoice you have a subsection option of request there is an option in there it says if another fact is required i would read that to mean filling out the final proof of the last form which typically you verified and say that i'm the owner i'm not aware of any other property owners claim in an interest i agree you owe me x number of dollars under the policy and if that is the case and you only have a five day payment deadline that presumes you have all the information at that point that you need to pay the fine last question on this point guide one is a case that seems adverse to your position texas court of appeals what's your thought on that i think it's correct to point your honor and i think it goes off the rails a little bit it recognizes the distinction between the items requested in zero five five and those requested in zero five six but it says that the five six just goes to prove generally the amount of the loss and that's all you need is some idea of the amount but that can't be the case because if you're going to accept or reject the claim you have to know this person is the owner that they have an interest in the property and that they have sustained x amount of dollars of loss so that five days later you can give them a check for that amount and  by november of zero nine wiser brown it provided most of the requested engineering data and then he finds that after that point your client never asked for additional information or said oh you never sent us that i've looked at some of those documents you basically as i interpreted say we're not going to provide coverage or our guy still thinks this isn't a covered loss you know you can submit stuff if you think they're wrong but is there anywhere where you actually say oh you never provided us x y and z we requested last year please submit that so we can figure this out in your honor i'm not sure that there i think there are bits and pieces of the e mails throughout that period and i would point out that what  saying look you got all this stuff in november that must have been enough free to reject or accept the claim because otherwise common sense as you would have said by the way we still need x y and z or we can't figure this out and i think the record does show during that time your honor that first of all w issue the independent engineer hired by st paul had come to a preliminary conclusion based on the evidence he had which was not all the evidence that it didn't look like there was an underground flow that was communicated  insured no response was given to letters went out saying look you know you've not given us enough to support your claim your claim this was about a year after the claim your honor in november two thousand and his second report in january and the adjuster sends it to wiser brown and says look we've looked at these few additional pieces of engineering data you've given us we still don't see an underground slow that during that time another for example on the insurable interesting issue another operator had come in and made a claim on another policy for this same well after wiser brown had represented it represent that it had all the working interest donors it was aware of that claim and that same poll was investigating that and trying to figure out the discrepancy of why this supposedly one hundred percent ownership had a separate claim part of it over here on another policy and in addition wiser brown well first of all sinkholes sent out two letters saying if there is any other engineering data you have to support your claim please let us know there's insufficient amount we're going to close the file is stead of closing the file they then emailed the broker and that's in the record saying we've had no response from the so sure for months to our requests for information which indicates followup was going on and remember honor we didn't know the amount of the loss we didn't know how much of the invoices were related to control of our work we didn't know how this policy the limits are scaled to working interest so we didn't know whether to pay wise or brown's three percent if we ever found out how much was owed or if we needed to pay one hundred percent we had fundamental idle submission or obligation does the insurer have under texas law to push the absence of information that it needs to make under this statute the insurer is going to be penalize you can't penalize an insurer for given an insured every opportunity to support its claim leaving the claims open for them wiser grown remember in june and july did respond a month later in july with a one paragraph sentence with no substance in it and they filed a lawsuit so how can you penalize an insurer if the if the purpose of the prompt him a statute is for the insurer to promptly pay a claim how can you penalize that insurer for not paying when the insured has not supported it and given you sufficient information to pay that can't be the purpose of the penalty account with respect to the good judgment as a matter of law on the bad faith claim i think the courts questions emphasise some of the very critical issues that i'd like to just make sure are clear number one section fifty six along with the entire prompt name of the statute has a purpose it's to encourage prompt payment but it's also to encourage prompt claims handling throughout the entire process whether it's a notice the client if they didn't know what kind of interest to your own if they did not know whether the there was in fact a boa and could not determine from the information you furnished well i think number one they could determine that and they did determine that and they deny coverage when suit was filed categorically with no further information so they had all the information they could to deny coverage it's true that they didn't have all the information that they might have needed to pay the claim what had paid anything out because they took the position at that time and throughout the entire process that well it was never out of control they relied on an improper definition used by their expert cases guide one is one of them close colonial county is another that the extra cision to accept or reject under section fifty six doesn't require all the knowledge to be able to pay the claim it requires at least for rejection  demonstration or something you're not paid well we were entitled and did supply the invoices and that allowed us to be paid but the problem was they decided to indict the claim based on the well being out of control expert decided based on the wrong policy provision in the incorrect provision and that's the basis that they were allied on at a later time now they also relied on fifty five notice did they request as the statute allows items and information relating to your notice of a claim no they made no further requests after november sixth because when you look at the overall structure i think one argument that was made was true it's an except or reject it's not a payment clause but it triggers a five business day payment under section fifty seven so here's the point that she was arguing was that essentially a payment clause and i think that's a mis interpretation of what section fifty seven says section fifty seven says that when you agree to pay the claim you have to pay it within five days i don't think that's the same as he accept or reject the terminations i think that the you except under fifty six and yet then they are dispute amounts yes you know that because you know this area of law but but but where is that indisputable that was sort of a missing piece to the puzzle for me thinking about it  i think it's clear from the statutory provisions but i don't know of any specific issues any time that that's been raised i don't know of any instance in which there's been a section fifty seven claim based on a and i accept and so the claim under section fifty six but what i think too often the case that the amount of the loss is far more in dispute than the one of those coverage when is your position it seems to me is that there's two different deadlines under fifty six if you going to deny the claim for coverage that's one day but if you're going to accept the claim because you need to know the last amount that might come months later exactly but that's the that's the most that seems well  because remember the purpose of the statute is designed to make the insurer respond promptly at each stage of the claim so if they know they're going to deny coverage they need to tell the insurers because they can't just say that you it's not in section fifty six and that what triggers section six is the insurance company having been in enough documents to secure final proof of loss well then you need that final proof to accept a claim don't you that's some confusion i'd like to really clear up the statute uses the word secure final proof of laws there's case law to the effect i believe it's a colonial county case that says there's no case it's ever interpreted what that means there are cases that say that you cannot avoid a section fifty six claim by saying i was waiting on information about invoices or keys or course samples related to damages what with the issue with respect been talked about in section fifty six there's no case that's ever said that you have to have a proof of lawsuit ready otherwise section fifty six would be meaningless because you never get to the point if they're going to deny coverage th you'll never get to the point where they're going to issue a proof of laws it doesn't say the insurer insured has to submit a final proof of was but it says the insurance company has to have enough information from which it can basically but essentially that would turn it into meaning that that's the absolute last thing in the claim which would mean that it means the same thing as fifty seven and fifty eight which are different provisions that relate to payment of the creation's exemptions  time to make the determination of acceptance or rejection that they can ask for additional time but if so there's a forty five day cap on that the section fifty six is not talking about the term of art a what you say makes the rest of the statute superfluous i mean it says you have to this except to deny the claim within fifteen days and then you know the million dollars are going out the door you need a few weeks to get that ready forty five days later you have to actually make the payment and why is that a reasonable to say that there should be disguised time between determining what you're doing and then making the actual payment well the point is that as respects rejecting the claim it would allow an insurer to essentially do what was done in this case which is continue even though they know they're going to deny coverage they continue not to tell the insure that they're going to deny coverage and their position is that is long as they can do that until the insurer either gives up or file suit then they're insulated from any section fifty six responsibility their position is if you give him all the information they needed then you don't have a problem but they didn't need any of that information to determine that they thought the well was out of could not well out of control and they said that throughout the entire litigation and the god one case of colonial county and the leaders as caitlin cases make it clear to me that i mean i thought it that it was out of control based on a definition that was not consistent with the policy that they knew about and didn't advise the insured which relates to the bad faith only but essentially what happened is the engineer first the quote independent adjuster evaluated the claim and determined that he didn't think there was a well out of control then he hired an expert engineer without telling the insured and the expert engineer said he didn't think it was out of control and then they passed on to the no evidence your honor we were responding to issues relating to whether or not there was coverage i don't think there was ever any real dispute or question in anybody's mind that we had paid all the invoices the thing is this is a red herring sure will interest was resolved it wasn't the reason that they weren't paying the claim the reason they were paying the claim within the fifteen day period we're talking about later insurable interest became resolved shortly thereafter but they still didn't pay the claim they always denied the claim in fact the trial they deny the claim on the grounds of the well was an out of control so nothing changed from november sixth to the end of trial they already made that decision and they had told the insurer about it up to mention briefly the cross appeal the jury was presented with evidence that they could determine these acts were done in bad faith with an outcome oriented approach that would focus the expert or excuse me the expert looked at the definition of well out of control that wasn't consistent with the policy language policy language said any flow of oil gas water or other fluids the expert relied on the definition of well out of control that required that the fluids be formation fluids the adjuster noted that the definition was quote a bit strict and advised the  to try to manipulate this for and how can oriented denial of coverage about cross if you are correct but there's also a lot of engineering dispute about exactly what happened underground your position that no that was sort of obfuscation but yes i think that the issue was they were focusing on the formation fluids and there wasn't they concluded there was no evidence of formation fluids and based on that decision trial judge which is not clearly erroneous is that as of november sixth they had all the information that they had reasonably requested miss milhollin referred to the facts stat sixty's bring me back to that november the sixth is when they received the most of the information that they had requested correct coming not from our expert from our client is used to come to the opposite conclusion i'm sorry your  information led you to conclude what had happened below well we always thought that there was a well out of control and that it met the policy definition but they were lied they got some final documents and that didn't change their previously formed opinion that it didn't meet the well out of control definition simple questions to your position is that it's common for insurers to accept or reject before they know the full loss and it's common to reject because when you reject issues of insurable interest the amount of the last invoice a final proof of loss none of those are required it's it would be like the trial if they were right but if they aren't to blame none and forgive me your honor they would have incurred no penalty under fifty six they would have occurred a potential penalty under fifty eight when it was determined that the wrong homes and it says these statements are and wishes are the last piece of information needed to put a value on the insurance laws in a quote section fifty six doesn't that indicate you do need some last information it's not just  coverage that's that's a fifty six acceptance issue in other words if you're trying to say the insurer should have accepted my claim then yes the insurer would be correct to say well wait i didn't have the last tiny bit of information on interest or the particular invoice or something like that but when they know that they are going to reject to then lead the insured along and keep asking for invoices would mean that there's never a determination under fifty six because they're not going to deny coverage because they're trying to string it out and that's completely inconsiderate gave them everything necessary to secure a final proof of loss of the statute says the reason and point but it says everything necessary to accept or reject and in this case rejection when they know as down by the trial court that they're going to reject that's when section fifty six is triggered any case ever said that when rejecting a that the district court here that there's a separate deadline and there would be for it well there are three cases that were relied on by judge allison which say that you can't avoid a fifty six penalty by asking for stuff that's not relevant to krach next testimony seemed to say conclusively that they didn't have enough you think they just were just concluded that that was not credible again i think that was talking about accepting and paying the claim back to the same distinction i just i think it's important to understand how the statute set up it's designed to govern all the plain claim process elements not just the end it's not just that you can ask for every bit of information in the world god wanting colonial county make it clear that you can't avoid a fifty six obligation by relying on not having suffered it's not relevant with respect to the cross appeal there was evidence that the court the st paul had knowingly let an expert report allow on the rely on an incorrect definition of policy that was very their quote in the pin of the juster testified at trial as their expert the expert that relied on the incorrect definition didn't testify to trial if you should if your bad faith should have gone to the jury what damages would you have asked texas law you did not your honor the veil case makes very clear that where coverage is did not because of the bad faith action policy proceeds are sufficient there's a footnote in great america that seems to indicate to the contrary but that i believe is dicta and it relies if you follow the path in the case of that relies on you'll see that the case it relies on was not a denial of coverage so there were no policy proceeds to be an issue in parkinson's and in the case that that relied on it was a completely different situation because the bad faith had not caused the denial of coverage and therefore the court said if the bad wasn't the last issue on the cross appeal is that there was sufficient evidence for the case to go to the jury the judge the civic lee said it's not free from doubt that means it should go to the jury in addition the court rejected from the absence of evidence and sent them on the way we could have rejected them your honor the reason we did not is because mr wiser wrote back in response to the e mail that went to the broker saying we've got no responses to these requests for information no contact we're going to close a file he wrote back and said we're still studying it we're studying your engineers response so st paul left a claim i got out of a plywood to comply with the statute if you  we would be liable under section zero five eight as a result of that you're right but the analysis is if you look at lamar holmes which governs this case the analysis is what they said their interest does not run intil two things occur the insured has to submit the invoices and the backup necessary to secure profit loss not just determine coverage because that quantified and puts a value on the actual out of pocket loss and then the insurer has to  pay within the deadline in that case they're already had been a denial a denial of a duty to defend but the court believed the claim was premature because the insured had not presented its actual loss and nothing had happened  that would give rise to the duty to accept or reject the claim in pay it that's especially true when you have an indemnity policy like we do here with reimbursement work nobody here argued that the claim of complying that's correct your honor i'm the structure of the statute is to claim handling deadlines to payment deadlines their time to each other oh five five which is the request for information is tied five eight zero five eight expressly references zero five five and says it's to catch all the sixty day catch off once you have all your requests for information and you've done nothing and you haven't paid within sixty days interest will apply oh five six which is what we have in this case is tied to a five seven o five seven says once you've accepted the claim under oath five six you have to pay within five days if you reject the claim that if you agree to pay  that if you accept the claim in all five six the deadline in zero five seven starts to run for you to pay the kline if the insurer doesn't timely pay the claim in those cases on this were partial payments  we believe our position is that the lamar rule applies here and because we never received all the information necessary to secure prove the laws that interest doesn't run if you disagree whether lamar applies then we believe that should