# 02-17-00186-CV

________________________ ______________________ ____________________ COURT OF APPEALS SECOND DISTRICT OF TEXAS AT FORT WORTH

________________________ ______________________ ____________________ OLD AMERICAN INSURANCE COMPANY Appellant

v. LINCOLN FACTORING, LLC Appellee

________________________ ______________________ ____________________ Appeal from County Court at Law No. 1, Tarrant County, Texas Hon. Don Pierson pres iding (2015-005979-1)

________________________ ______________________ ____________________ APPELLEE’S BRIEF

________________________ ______________________ ____________________ MICHAEL G. ENGFER Texas Bar No. 24085296 6145 Wedgwood Drive Fort Worth, Texas 76133 817-850-9800 817-850-9801 fax mike@sryp.net FRANK GILSTRAP Texas Bar No. 07964000 Hill Gilstrap, PC 1400 West Abram Street Arlington, Texas 76013 817-261-2222 817-861-4685 fax fgilstrap@hillgilstrap.com ATTORNEYS FOR APPELLEE ORAL ARGUMENT REQUESTED ACCEPTED 02-17-00186-CV SECOND COURT OF APPEALS

FORT WORTH, TEXAS 12/21/2017 5:50 PM DEBRA SPISAK CLERK1 PARTIES AND COUNSEL Appellant

Appellee

Judges Old American Insurance Co. David R. Sweat (appeal) 3705 West Green Oaks Blvd., Suite C Arlington, Texas 76016 Andrew W. Seibert (trial) Seibert Law Firm PC 6001 W. I20, Suite 205 Arlington, Texas 76017 Lincoln Factoring, LLC Frank Gilstrap (appeal) Hill Gilstrap, PC 1400 West Abram Street Arlington, Texas 76013 Michael Engfer (trial and appeal) 6145 Wedgwood Drive Fort Worth, Texas 76133 Hon. Sergio L. DeLeon Justice of the Peace, Place 5 350 West Belknap, Suite 112 Fort Worth, Texas 76196-0247 Hon. Don Pierson, Judge County Court at Law No. 1 100 W. Weatherford St., Room 490 Fort Worth, Texas 76196-02402 TABLE OF CONTENTS

PARTIES AND COUNSEL ...................................................................................... 1

TABLE OF CONTENTS ........................................................................................... 2

INDEX OF AUT HORITIES ...................................................................................... 6

STATEMENT OF THE CASE ................................................................................ 13

FACTS ..................................................................................................................... 14 The “death benefit” and th e suicide exclusion .............................................. 14 The ADB and the additio nal exclusi ons ........................................................ 14 The death and th e assignment ........................................................................ 15 Lincoln makes a claim ................................................................................... 15 The three claims ............................................................................................. 16 Old American dela ys payment ...................................................................... 17 Lincoln sues and Old American pays ............................................................ 18 The litigation .................................................................................................. 18 The judgment ................................................................................................. 19
SUMMARY OF THE ARGUMENT ...................................................................... 19 Merits ............................................................................................................. 20 Coverage .............................................................................................. 20
Insurance Code .................................................................................... 203 Bad faith .............................................................................................. 21 Treble damages .................................................................................... 21 Prompt pa yment .................................................................................. 21 Misreprese ntation ................................................................................ 22 Declaratory Judgment .......................................................................... 22 Forfeiture ............................................................................................. 23 Preservation ......................................................................................... 23 Capacity” and “s tanding” .............................................................................. 23

a. Old American’s complaints invo lve capacity, not standing. ....... 24 b. The claims were assigned, a nd they were a ssignable. ................. 24

c. Direct standing under th e Insurance Code. .................................. 25 ARGUMENT PART ON E: MERITS ..................................................................... 25 1. Old American was required to pay the $10,000 “death benefit” when it received proof that the insured had died, regardless of cause-of-deat h. ............................................................................................... 25
2. Bad faith: Old American’s obligati on to pay the $10,000 death benefit was “reasonably clear” when Lincoln first made its claim. ................................. 27
3. Prompt payment: Lincoln was en titled to recover 18% interest and attorney’s fees. ........................................................................................ 32 The statute. .......................................................................................... 32 No “good faith” defense. ..................................................................... 33 Applicati on. ......................................................................................... 34 4. Old American has waived any error as to the misrepresentation claims. ..... 344 The statute: .......................................................................................... 35 Facts: .................................................................................................... 35 5. Old American also waived a ny error as to the award of attorney’s fees under the De claratory Judgmen ts Act. ............................. 38
6. Old American waived any defense under Section 1103.51 of the Insuran ce Code. ................................................................................... 40
7. Lincoln is entitled to recove r attorney’s fees. ............................................... 43
8. Treble damages: Old Amer ican acted “know ingly.” ................................... 44
9. Old American failed to preserve error as to the calculation of interest, calculation of damages, or the award of treble damages. ................ 45 ARGUMENT PART TWO: STANDING ............................................................. 47 10. Old American waived any error as to the assignment of claims by failing to raise it in the trial c ourt. ............................................................ 47
11. Alternatively, Lincoln has standing to assert its own claims for “bad faith” and misrepresentati on under Section 541.151 of the Code. ............................................................................................................. 52
12. Lincoln has standing to assert a “prompt payment” claim under section 542.060 of the Code. ............................................................... 58
13. Alternatively, the Insurance C ode claims were assigned and they were a ssignable. ..................................................................................... 60 Were the claims assigned? ........................................................... 60 Were the claims assignable? ......................................................... 60
14. Lincoln does not have standing as to the claim under Section 542.003 of the Code. ......................................................................... 64 PRAYER .................................................................................................................. 65 CERTIFICATE OF SERVIC E ................................................................................ 665 CERTIFICATE OF CO MPLIANCE ....................................................................... 666 INDEX OF AUTHORITIES

Cases Aleman v. Zenith Ins. Co. , 343 S.W.3d 817 (Tex.App.--El Pa so 2011, no pet.) ...................................... 29 Allstate Ins. Co. v. Watson , 876 S.W.2d 145 (Tex .1994) .......................................................................... 58 Amanda v. Ins. Co. of North Am. , 748 S.W.2d 210 (Tex .1998) .......................................................................... 29 American Southern In s. Co. v. Buckley , 748 F.Supp.2d 610 (E.D .Tex.2010) .............................................................. 64 Apex Fin. Corp. v. Garza , 155 S.W.3d 230 (Tex.App.--Dallas 2004, pet. de nied) ................................. 40 Barshop v. Medina County Underground Water Conservation Dist. , 925 S.W.2d 618 (Tex .1996) .......................................................................... 40 Basic Energy Service, Inc. v. D-S-B Properties, Inc. , 367 S.W.3d 254 (Tex.App. --Tyler 2011) ...................................................... 47 Berkley Regional Ins. Co. v. Philadelphia Indem. Ins. Co. , No. A-10-CA-3662-SS, 2011 WL 9879170, 2011 U.S.Dist. LEXIS 155 (W.D.Tex. Apr. 27, 2011) ................................. 64 Brown & Brown of Texas, In c. v. Omni Metals, Inc. , 317 S.W.3d 361 (Tex.App.--Houston [1st Di st.] 2010, pet. denied) ............ 58 Cash Rent-a-Car, Inc. v. Old Am erican County Mut. Fire Ins. Co. , No. 01-09-00021-CV, 2010 WL 143482, 2010 Tex.App. LEXIS 250 (Tex.App.--Houston [1st Dist.] Jan. 4, 2010, no pet.) ................................... 60 Casso v. Brand , 776 S.W.2d 551 (Tex .1989) .......................................................................... 42 Cater v. United Servs. Auto. Ass’n , 27 S.W.3d 81 (Tex.App.--San Antoni o 2000, pet. denied) ........................... 357 Ceshker v. Bankers Comm ercial Life Ins. Co. , 558 S.W.2d 102 (Tex.Civ.A pp.--Tyler 1977) ............................................... 57 Ceshker v. Bankers Comm ercial Life Ins. Co. , 568 S.W.2d 128 (Tex .1978) .......................................................................... 57 Chapparal Operating Co. v. EnergyPro, Inc., No. 02-16-00471-CV , 2017 Tex. App. LEXIS 10091 (Tex.App.--Fort Worth, Oct. 26, 2017, pet. filed) ......................................... 39 Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist. , 46 S.W.3d 880 (Tex .2001) ............................................................................ 25 Conley v. Tex. Bd. of Crim. Justice , No. 03-08-00293-CV, 2010 WL 163292, 2010 Tex.App.LEXIS 3011 (Tex.App.--Austin Apr. 2, 2010, no pet.) ........ 39 Conn. State Dental v. Anthem Health Plans , 591 F.3d 1337 (11th Cir.2009) ...................................................................... 61 Countrywide Home Loans, Inc. v. Howard , 240 S.W.3d 1 (Tex.App.--Austin 2007, pet. de nied) .................................... 40 Cybiz, Inc. v. Gaskill , No. 14-16-00405-CV, 2017 WL 1015560, 2017 Tex.App. LEXIS 2147 (Tex.App.--Houston [14th Dist .] March 14, 2017, no pet.) ..... 47 DamilerChrysler Corp. v. Enron , 252 S.W.2d 299 (Tex .2008) .......................................................................... 20 Dean Vivian Homes, Inc. v. Sabera’s Plumbing and Appliances, Inc. , 615 S.W.2d 921 (Tex.Civ.App.--W aco 1981, no pet.) .................................. 41 Douglas-Peters v. Choe & Holen P.C. , No. 05-15-01538-CV, 2017 WL 836848, 2017 Tex.App.LEXIS 1836 (Tex.App.--Dallas Ma rch 13, 2017, no pet.) ............... 48, 50, 52, 61, 62 Encompass Office Solutions, Inc. v. Ingenix, Inc. , 775 F.Supp. 938 (E.D.T ex.2011)............................................................ 59, 61 First Nat. Life Ins. Co. v. Vititow , 323 S.W.2d 313 (Tex.Civ.App.--Texar kana 1959, writ dism’d) .................. 358 Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C. , No. 05-13-00506-CV, 2015 WL 6750047, 2015 Tex.App. LEXIS (Tex.App.--Dallas Nov. 4, 201 5, no pet.) .................................... 25, 48-53, 61 Gillespie v. Nat’l Collegia te Student Loan Trust 2005-3 , No. 02-16-00124-CV, 2017 WL 2806780, 2017 Tex.App.LEXIS 5957 (Tex.App.--Fort Worth, June 29, 2017, no pet.)............................................ 24 Great Am. Ins. Co. v. Fed. Ins. Co. , No. 3:04-CV-2267-H, 2006 WL 22633 12, 2006 U.S.Dist. LEXIS 55038 (N.D.Tex. Aug. 8, 2006) ................................................................................ 64 Guinn Invs. v. Ridge Oil Co. , 73 S.W.3d 523 (Tex.App.--Fort Wort h 2002, pet. denied) ........................... 40 Gumpp v. Philadelphia Life Ins. Co. , 562 S.W.2d 885 (Tex.Civ.App.--San An tonio 1978, no writ) ...................... 35 Gusma Props., L.P. v. Travelers Lloyds Ins. Co ., 514 S.W.3d 319 (Tex.App.--Houston [14t h Dist.] 2016, no pet.) ................. 34 Harris v. American Protection Ins. , 158 S.W.3d 614 (Tex.App.--Fort Worth 2005, no pet.) ................................ 34 Hazlewood v. Werley , No. 07-12-00166-CV, 2014 WL 28102 15, 2014 Tex.App. LEXIS 6698 (Tex.App.--Amarillo, June 18, 2014, pet. de nied) ........................................ 41 Hermann Hosp. v. Nat. Standard Ins. Co. , 776 S.W.2d 249 (Tex.App.--Houston [1st Dist.] 1989, writ denied) ...... 56-58 Higginbotham v. State Farm Mut. Auto Ins. Co. , 103 F.3d 456 (5th Cir.1967) .......................................................................... 35 Hixson v. Pride of Texas Dist. Co. , Inc. , 683 S.W.2d 173 (Tex.App.--Fort Worth 1985, no writ.) .............................. 39 Hydroscience Technologies, In c. v. Hydroscience, Inc. , 401 S.W.3d 783 (Tex.App.--Dallas 2013, pet. de nied) ................................. 20 Jarvis v. Rocanville Corp. , 298 S.W.3d 305 (Tex. App.—Dalla s 2009, pet. de nied) .............................. 399 John C. Flood of DC, In c. v. SuperMedia, LLC , 408 S.W.3d 645 (Tex.App.--Dallas 2013, pet. denied) .......................... 51, 53 Key Life Ins. Co. v. Davis , 519 S.W.2d 403 (Tex.Civ.App.--Beau mont 1974, no writ) .......................... 35 King-Mays v. Nationwide Mut. Ins. Co. , 194 S.W.3d 143 (Tex.App.--Dallas 2006, pet. de nied) ................................. 51 KLZ Diamond Tools, Inc. v. TKG Gen. Agency, Inc. , 2016 Tex.App.LEXIS 7639 (Tex.App.--Dalla s July 18, 2016, no pet.) ....... 66 Lamar Homes, Inc. v. Mid-Continent Cas. Co. , 242 S.W.3d 1 (Tex .2007) .............................................................................. 33 Launius v. Allstate Ins. Co. , No. 03-06-CV-0579-B, 2007 WL 113547, 2007 U.S.Dist. 28286 (N.D.Tex. Apr. 17, 2007) .......................................... 64 Lee v. Rogers Agency , 517 S.W.3d 137 (Tex.App.--Texarka na 2017, no pet.) ................................. 63 MBM Fin. Corp. v. Woodlands Operating Co. , 292 S.W.3d 660 (Tex. 2009) ................................................................... 39, 40 Montoya v. State Farm Mut. Auto Ins. Co. , No. 16-00005 (RCL), 2016 WL 5942327, 2016 U.S.Dist. LEXIS 141 (W.D.Tex. Oct. 12, 2016) .............................................................................. 64 Nootsie Ltd. v. Williamson Cty. Appraisal Dist. , 925 S.W.2d 659 (Tex .1996) .......................................................................... 53 PPG Industries, Inc. v. JMB/ Houston Centers Partners, Ltd. , 146 S.W.3d 79 (Tex. 2004) ................................................................ 26, 62-64 Ramin’ Corp. v. Wills , No. 09-14-00168-CV, 2015 WL 61260 2, 2015 Tex.App. LEXIS 10612 (Tex.App.--Beaumont Oct. 15, 2015, no pe t.) ............................................... 41 Republic Nat. Life In s. Co. v. Spillars , 363 S.W.2d 373, 376 (Tex.C iv.App.--Waco 1962) ...................................... 5910 Ressler v. Gen. Am. Life Ins. Co., 561 F.Supp.2d 691 (E.D .Tex. 2007) ....................................................... 29-31 Royal Globe Ins. Co. v. Bar Consultants, Inc. , 566 S.W.2d 724 (Tex.Civ.App. --Austin 1978) ....................................... 56-58 Samedan Oil Corp. v. Intras tate Gas Gathering, Inc. , 78 S.W.3d 428 (Tex.App.--Tyler 2001, pet. granted, judgm’t vacated w.r.m.) ................................................................................. 47 Scottsdale Ins. Co. v. Travis , 68 S.W.3d 72 (Tex.App.--Dallas 2001, pet. denied) ..................................... 40 Star-Telegram, Inc. v. Doe , 915 S.W.2d 471 (Tex .1995) .......................................................................... 39 State and County Mut. Fire Ins. Co. v. Walker , 228 S.W.3d 404 (Tex.App.--Fort Worth 2007, no pet.) ................................ 45 State Farm Life In s. Co. v. Martinez , 216 S.W.3d 799 (Tex .2007) .......................................................................... 33 Sullivan , In re , 157 S.W.3d 911 (Tex.App.--Houston [14t h Dist.] 2005, no pet.) ................. 54 Tango Transport v. Health care Financial Services, LLC , 322 F.3d 888 (5th Cir.2003) .......................................................................... 60 Texas Farmers Ins. Co. v. Gerdes , 880 S.W.2d 215 (Tex.App.--Fort Wo rth 1994, writ de nied)......................... 50 Town Ctr. Mall v. Dyer , No. 02-14-00268-CV, 2015 Tex.App. LEXIS 10213 (Tex.App.--Fort Worth Oct. 1, 2015, pet. de nied) ........................................ 53 U.S. Bank, N.A. v. Prestige Fo rd Garland, Ltd. Partnership , 170 S.W.3d 272 (Tex.App.--Da llas 2005, no pe t.) ....................................... 42 Umar v. Scott , 991 S.W.2d 512 (Tex.App.--Fort Worth 1999, no pet.) ................................ 39 United States v. United Servs. Auto Ass’n , 431 F.2d 735 (5th Cir.1970), cert. denied , 400 U.S. 992 (1971) .................. 5911 Universe Life Ins. Co. v. Giles , 950 S.W.2d 48 (Tex. 1997) ..................................................................... 28, 33 Vail v. Texas Farm Bureau Mut. Ins. Co. , 754 S.W.2d 129 (Tex .1988) .......................................................................... 57 Vandeveter v. All American Life & Cas. Co. , 101 S.W.3d 763 (Tex.App[.--Fort Worth 2003, no pet.) .............................. 29 Vertical N. Am., Inc. v. V opak Terminal Deer Park, Inc. , No. 14-15-01088-CV, 2017 Tex.App. LEXIS 8944 (Tex.App.--Houston [14th Dist.] Sept. 21, 2017, no pet.) ............................. 51 Walker v. Federal Ke mper Life Ins. Co ., 828 S.W.2d 442 (Tex.App.--San Antonio, Jan. 29, 1992, writ denied) ........ 41 Watts v. Oliver , 396 S.W.3d 124 (Tex.App.--Houston [14t h Dist.] 2013, no pet.) ................. 47 Webb v. Int’l Trucking Co. , 909 S.W.2d 220 (Tex.App.--San An tonio 1995, no writ) ............................. 58
Statutes 29 U.S.C. §1132(a) (1) ........................................................................................ 60 T EX .C IV .P RAC

. & R EM
. C ODE §37.009 .................................................................... 40 T EX .I NS

. C ODE §541.001 ........................................................................................ 58 §541.008 ........................................................................................ 58 §541.002(2) ........................................................................................ 55 §541.051(1)(A) ........................................................................................ 36 §541.052(a) ........................................................................................ 36 §541.052(b)(5) ........................................................................................ 36 §541.060(a)(1) ........................................................................................ 36 §541.060(a)(2)(A ) ........................................................................................ 28 §541.061(1) ........................................................................................ 36 §541.152(a) ........................................................................................ 36 §541.152(a)(1) ........................................................................................ 45 §541.152(b) ................................................................................. 36, 45 §542.003(b)(1) ........................................................................................ 65 §542.005 ........................................................................................ 6512 §542.006 ........................................................................................ 65 §542.010 ........................................................................................ 65 §542.012 ........................................................................................ 65 §542.051(2) ........................................................................................ 60 §542.054 ........................................................................................ 33 §542.055(a)(2) & (3) ..................................................................................... 34 §542.058(a) ........................................................................................ 34 §542.060 ................................................................................. 34, 59 §1103.151 ................................................................................. 41, 42 §3.62 (repeal ed) ........................................................................................ 59 art. 21.21 §16(a) (re pealed) .................................................................... 55, 56 Acts 1951, 52nd Leg., ch. 491, amended by Acts 1957, 55th Leg., p.401, ch. 198 56 Acts 1969, 61st Leg., p.2051, ch. 706, §1 eff. June 12, 1989.................................. 56 Acts 1973, 63rd Leg., p.335, ch. 143, §§2( a)-2(c), eff. Ma y 21, 1973 .................... 56 Acts 1973, 63rd Leg., R.S., ch. 319 §1, 1973 T EX .G EN .L AWS 735 ......................... 36 Acts 2003, 78th Leg., ch.1274 §2 (eff. April 11, 2005) .......................................... 55 Rules
T EX .R.A PP .P. Rule 33.1 ........................................................................................ 51 Rule 33.1(a)(1 )(A) ........................................................................................ 47 Rule 33.1(b) ........................................................................................ 47 T EX .R.C IV .P. Rule 93(2) ........................................................................................ 51 Rule 329b(g) ........................................................................................ 4713 STATEMENT OF THE CASE This case arises from an eight month delay in paying life insurance proceeds. The policy was issued by Ol d American Life Insurance Co., the Appellant. When the insured died, th e beneficiary assigned his claim for $4,725 in policy proceeds to the funeral home, which, in turn, assigned it to Lincoln Factoring, LLC, the Appellee. In October of 2014, Lincoln reque sted payment, but Old American refused to pay until it had a “completed” d eath certificate showing cause-of-death. However, under the policy, payment did not depend on cau se-of-death. Five months later, in March of 2015, Lincoln su ed Old American in Justice Court. Three months after that, in June of 2015, Old American said that it had received a “completed death certifi cate” showing cause-of-death, and it paid the $4,725 to Lincoln. Thus, Old Amer ican delayed payment for eight months. Lincoln continued its suit. The Justice Court ruled for Old American, and Lincoln took a de novo appeal. In th e County Court at Law, Lincoln asserted Insurance Code claims for failure to make “prompt payment,” fo r “bad faith,” and for misrepresentation. Old American c ounterclaimed for declaratory judgment. The court rendered summary judgment fo r Lincoln awarding multiple damages, interest and attorney’s fees. Old American has appealed.14 FACTS The “death benefit” and

the suicide exclusion On August 13, 2011, Rebecca Barnes of Washington, D.C. applied for a life insurance policy with Old Amer ican Ins. Co., of Kansas City. 1 Old American issued a policy two days later. 2 It was a “whole life policy” in the “Initial Face Amount” of $10,000. See Policy, p.3 § 4.4, p.7 §4.6 (250, 254). 3
The “death benefit” was defined as the “face amount” of $10,000. Id. According to the policy, this initial $10,000 “death benefit” was payable “when we receive proof of the Insured’s covered death.” Id. , p.7 §5 (emphasis added). There was one ca use-of-death exclusion: suicide was “excluded from coverage for two y ears after the effective date.” Id. , p.8 §8.3 (255). The ADB and the additional exclusions The policy also provided for an “Accidental Death Benefit” (or “ADB”) for an additional $10,000. See Benefit and Premium Schedule (251). This ADB was payable “upon receiving proof that an insured’s death . . . resulted directly and inde pendently of all other causes from accidental bodily

1 See interview sheet (266).

2 See Ropp aff., p.1 (607); c over letter (242).

3 This citation is to the Clerk’s Record.15 injury.” (257) (emphasis added). There was also a list of “R isks Not Covered,” which excluded death from war, suicide, infection, disease, committing a felony, drugs, flying, etc. (257). But these ca use-of-death provisions applied only to the $10,000 ADB. Id. They did not apply to the initial $10,000 “death benefit.” Id. The death and the assignment Rebecca Barnes, the insured, died in Washington, D.C. on September 28, 2014, three years after the policy was issu ed. The death cer tificate stated that cause-of-death was “pending” (272). Howe ver, the funeral director signed an affidavit stating that the “cause of deat h was natural or accidental” (466) (emphasis added). The beneficiary of the policy wa s named Frank Howard (323). As fiancé of the deceased, he pur chased the funeral for $4,725 (465). He paid for the funeral by assigning $4,725 in policy proceeds to the funeral home, which in turn assigned them to Lincoln Factoring, LLC, of Fort Worth, the Appellee (269-270). Howard also assigned an additional $1,884. 75 in policy proceeds to the cemetery, which assigned them to American Capital Funding (352-353). Lincoln makes a claim On October 21, 2014 Lincoln Fact oring delivered the assignments, a claim form, the death certificate, a publis hed announcement of death, the funeral bill, and the funeral director’s affidavit to Old American and requested payment of16 the $4,725. The death certificate was issu ed by the Department of Health of the District of Columbia. It showed that Rebecca Barnes had died on September 28, 2014, and showed cause-of-death as “pendi ng.” (463). American Capital Funding also made a claim (636- 638). The three claims At this point, there were three claims to the initial $10,000 “death
benefit.” See Ropp. aff., p.2 (324). 4 Lincoln was claiming $4,725 and American Funding was claiming $1,884.75. Id. (324, 352-353). Thes e two claims totaled $6,609.75. The third claimant was Frank Howard, the beneficiary, who was owed the balance of the “death benefit” ( $10,000.00 - $6,609.75 = $3,390.25). Also,
Howard had a claim to the entire $10,000 ADB (257). Again, as to the initial $10,000 “death benefit,” there was only one cause-of-death exclusion--suicide (255). But that exclusion had expired a year before the death. The policy was issu ed on August 13, 2011; the suicide exclusion expired two years later, on August 13, 2013; and Rebecca Barnes died a year after that, on September 28, 2014. Accordingly, the initial $10,000 death benefit was payable immediately, and Old American wa s required to distribute it as follows:

4 See also Defendant’s Resp. to Plaintiff’s Moti on for Summary Judgment, p.2 ¶ 2 (595).17 (i) $4,475 to Lincoln (ii) $1,884.75 to American Capital Funding and (iii) $3,390.25 to Frank Howard, the beneficiary.
Matters were different as to th e $10,000 ADB, which was owed solely to Frank Howard, the beneficiary. Unlike the initial $10,000 “death benefit,” payment of the ADB was subject to cause-of-death exclusions. See supra , p.14. Therefore, under the policy, Old American had a right to delay payment of the ADB until it received evidence of cause-of-d eath. But Old American had no right to delay payment of the initia l $10,000 “death benefit.” Ev en so, as we shall see, Old American withheld both payments --the $10,000 “death benefit” and the $10,000 ADB--until it finally received a “c ompleted” death certificate showing cause-of-death. Old American delays payment On October 23, 2014, Old American advised Lincoln that “we still need a copy of the death certificate” (360) . Specifically, it wanted “a complete death certificate with cause and manner of death included.” Ropp aff., p.2 (608). On December 18, 2014, Lincoln’s attorney wr ote to Old American. He explained that “[p]roof of the cause of death is not required to pay on the above policy.” (362) (emphasis added). Old American ignored this obvious fact. Instead, on December 30, 2014, it replied as follows: Thank you for providing the deat h certificate for this claim. However, because the cause of death is listed as being “under18 investigation,” we cannot conclude our claim investigation at this time. The policy has an Accidental Death Benefit rider and the cause of death is required information to determine if the ADB claim is payable. Further, th e underlying claim may be affected if the cause of death is homicide or suicide. Letter (648) (emphasis added). The underlined language was simply wrong. The suicide exclusion had expired, and while homici de was an excluded cause-of -death for the ADB, that exclusion was not applicable to th e initial $10,000 “death benefit.”
Lincoln sues and Old American pays On March 16, 2015, five months after demand, Lincoln sued Old American in Justice Court (6). On J une 19, 2015, eight mont hs after demand, Old American emailed Lincoln that “We have the death certificate!” (374). The email continued: “By the way--cause of deat h Hypertensive Cardiovascular Disease” (374). On June 22, Old American delivered its check for $4,725 to Lincoln (375). Old American also paid American Corporate Funding and Frank Howard. 5 The litigation The Justice Court heard the case on September 29, 2015, and it rendered judgment that Lincoln take nothing (96). Lincoln appealed to the County Court at Law (97). It alleged Insurance Code claims for failure to make “prompt

5 See Old American’s summary judgment response, p.4 (597).19 payment,” for “bad faith,” and for misrepresentation (125-135, 137-140). 6 Old American counterclaimed for declaratory judgment and attorney’s fees (101). The judgment The parties filed cross-motions for summary judgment and responses (179, 311, 377, 594). 7 The County Court at Law gr anted Lincoln’s motion, denied Old American’s motion, and awarded $9,450 in “treble damages,” $1,050 in interest, and $12,000 in attorney’s fees. See Order (663). It also ordered “that judgment be entered in favor of Lincoln Factoring, LLC fo r all its claims, and that Defendant Old American Insurance Co mpany take nothing by its claims.” Id. The Order did not state the gr ounds upon which it was based. Id.
SUMMARY OF THE ARGUMENT Old American’s issues fall into tw o groups: “standing” and “merits.” “Standing” involves jurisdiction, and courts should decide jurisdictional issues first. 8 But Lincoln’s arguments involve “capac ity,” rather than “standing.” And in

6 Lincoln alleged both common la w and statutory bad faith. See Plaintiff’s Second Amended Petition, pp.6-7 ¶ 33 (126-127) & p.10- 11 ¶ 38 (130-131). It also alleged DTPA violations. Id. , p.16 ¶¶ 45-46 (136).

7 Lincoln sought summary judgment because Old American “violated the insurance code, breached the contract, and acted in bad faith” ( 180). It did not seek summary judgment under the DTPA (185-210).

8 See, e.g., Hydroscience Technologies , Inc. v. Hydroscience, Inc. , 401 S.W.3d 783, 789 (Tex.App.--Dallas 2013, pet. denied) (“Standing must be resolved before the merits of an issue may be addressed.”) ( citing DamilerChrysler Corp. v. Enron , 252 S.W.2d 299, 304 (Tex.2008)).20 any event, Lincoln has standing directly un der the Insurance Code . Both issue are complicated. So, before venturing into the weeds, we want to show the Court where we are going. Accordingl y, we will argue “merits” first. Merits Coverage. As noted above, eight months elapsed from October 2014, when Old American received proof th at Rebecca Barnes had died, until June of 2015, when it paid Lincoln. During th is entire period, Old American refused to pay until it received proof of cause- of-death. But the initial $10,000 “death benefit” was payable regardle ss of cause-of-death. All that was needed was proof that Rebecca Barnes had died, and Old Amer ican received that when Lincoln first submitted its claim. There was only one cause -of-death exclusion, to-wit: suicide. But it had expired. See Argument, part 1, infra , p.25. Insurance Code. An insurance policy is a contract, and once Old American finally paid the $10,000 “death be nefit,” Lincoln could not recover for breach of contract. This is a perennial problem for insurance beneficiaries. The insurer delays payment and then avoids li ability for breach of contract by paying at the last minute, just as in this case. Fortunately, the Texas Insuran ce Code provides extra-contractual remedies for delay in paying a claim. Sp ecifically, a claimant can recover (i) 18% interest and attorney’s fees under the “p rompt payment” provisions of the Code21 and (ii) damages and attorney ’s fees under the “bad faith” provisions of the Code. Also, under the Code, a claimant can recove r damages and attorney’s fees for the insurer’s misrepresentations. In this cas e, Lincoln can recover on all three claims. Bad faith. The test for “bad faith” is whether the insurer’s liability under the policy has become “reasonably cl ear.” In our case, Old American’s liability was absolutely clear. The suic ide exclusion had expired, and the initial $10,000 “death benefit” was payable as soon as Old American receiv ed the claim. Old American’s stated reason for delayi ng payment--that it needed evidence of cause-of-death--was transparen tly false. Indeed, Old American has never said why the initial $10,000 “death benefit” was not payable immediately. Accordingly, Old American is liable under the “bad faith” provisions of the code (and the common law). See Argument, part 2, infra , p.27. Treble damages. It was Old American’s policy to delay payment until it received a “completed” death cert ificate, even when payment did not depend on cause-of-death. Lincoln’s at torney told Old American why payment was due at once, but Old American ignor ed this explanation. Thus, it is undisputed that Old American “knowingly” re fused to pay, and is liable for treble damages. See Argument, part 8, infra , p.44. Prompt payment. Under the “prompt payment” provisions of the Code, Old American had 60 days to pa y the claim, and when it missed that22 deadline, it became liable for 18% interest and attorney’s fees. Old American says that there was a “good faith” disagreement over the interpretation of the policy. But Old American has never offered any interpretation that would let it delay payment, and in any event, “good faith” is not a defense to a “prompt payment” claim. Once it was established that the death was covered, Old American automatically became liable for 18% interest and attorney’s fees. See Argument, part 3, infra , p.32. Misrepresentation. There was evidence that, before accepting the assignment, Lincoln asked fo r and received assurances from Old American that it would pay the claim. But Old Am erican did not address Lincoln’s misrepresentation claim in its summary judgment response, and it has not addressed them in this Court. Accordin gly, Old American has waived any error as to the misrepresentation clai ms, and the judgment must be affirmed without regard to the merits. See Argument, part 4, infra , p.34. Declaratory Judgment. Old American filed a counterclaim for declaratory judgment. Unde r the Declaratory Judgments Act, attorney’s fees can be awarded to either party, regardless of who prevails. Here again, Old American has not assigned error and the attorney’s fees award must be affirmed without reaching the merits. See Argument, part 5, infra , p.38.23 Forfeiture: In this Court, for the first time, Old American is invoking an Insurance Code provision allowi ng forfeiture of life insurance benefits if the beneficiary intentionally caused the death of the insured. But Old American did not raise this issue in the tria l court, and it has been waived. See Argument, part 6, infra , p.40. Preservation: Finally, Old American complains about the calculation of interest and damages and the trebling of damages. But these issues were not raised in the trial court, and any error has been waived. See Argument, part 9, infra , p.45. “Capacity” and “standing” Old American is challenging Linc oln’s “standing” to seek relief under the Insurance Code. See Appellant’s Brief, p.13 (Issues 1-3) & pp.24-32 (Argument, parts 1-5). Of course, “s tanding is a component of subject matter jurisdiction that may be raised for the first time on appeal.” 9 But Old American’s arguments do not involve “standi ng.” They involve “capacity.” Old American’s argument is based on Frank Howard’s assignment to the funeral home. First, it says that, while Howard assigned his right to policy proceeds, he did not also assign his Insurance Code claims. See Appellant’s brief,

9 Gillespie v. Nat’l Collegiate Student Loan Trust 2005-3 , No. 02-16-00124-CV, 2017 WL 2806780, 2017 Tex.App.LEXIS 5957, at *3 n.12 (T ex.App.--Fort Worth, June 29, 2017, no pet.).24 pp.26-27. Second, Old American says that, for public policy reasons, Howard could not have assigned hi s Insurance Code claims. Id. , pp.27-32. We have three alternative responses. a. Old American’s complaints in volve capacity, not standing. Lack of capacity is waived if it is not raised in the trial court. 10 And the Fifth Court has expressly held that (i) whether a claim has been assigned is a question of capacity and (ii) whether a claim is assigna ble also involves a question of capacity. See Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C. , No. 05-13-00506-CV, 2015 WL 6750047, 2015 Tex.App. LEXIS at *42-44 (Tex.App.--Dallas Nov. 4, 2015, no pet.). Because Old American did not raise either of these issues in the trial court, they have been waived. See Argument, part 10, infra , p.47.
b. The claims were assigned, and they were assignable. Absent contrary language, an assi gnment of policy benefits carries with it an assignment of the Insurance Code claims. Accordi ngly, when Howard assigned his policy benefits, he also assigned his Insu rance Code claims. As to assignability, all claims are assignable except for a few kinds of claims which are non-assignable for public policy reasons. Old American’s claims do not fall within that narrow group of exceptions. Old American relies on

10 Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist. , 46 S.W.3d 880, 884 (Tex.2001) (challenges to lack of capacity can be waived).25 PPG Industries, Inc. v. JMB/ Houston Centers Partners, Ltd. , 146 S.W.3d 79 (Tex.2004), which prohibits assignment of DTPA claims to discourage “wealthy entrepreneurs” from trading in high dollar DTPA claims. These concerns are not applicable here. Lincol n (and other factoring companies) provide up-front money so that bereaved persons can afford fune rals for their loved ones. In return, Lincoln receives assignments of policy benefits. Because this business meets an important public need, acquisition of Insura nce Code claims s hould be facilitated, not discouraged. See Argument, part 13, infra , p.60.

c. Direct standing under the Insurance Code. In any event, Lincoln has standing, in its own right, to assert its claims directly under the Insurance Code. Under section 541.151 of the Code, “bad faith” and misrepresentation claims may be brought by “[a] person who sustains actual damages.” And under Secti on 542.060 “prompt payment” claims may be brought by the assignee of policy benefits. See Argument, parts 11 & 12, infra , pp.52-58.
ARGUMENT PART ONE: MERITS 1. Old American was required to p ay the $10,000 “death benefit” when it received proof that the insured had di ed, regardless of cause-of-death. As we have seen, Old American said (i) that it could not determine whether Lincoln’s claim was payable wit hout determining cause-of-death and (ii) that it could not determine cause-of-death until it received the “completed death26 certificate.” See supra , p.17. 11 But again, the policy had two parts: the initial $10,000 “death benefit” and the $10,000 ADB. We are only concerned with the initial $10,000 “death benefit,” and under the policy, that was payable “when we receive proof of the Insured’s covered death.” Policy, p.7 ¶ 5 (254) (emphasis added). Payment of the initial $10,000 “d eath benefit,” was subject to only one cause-of-death exclusion. Suicide wa s “excluded from cove rage for two years after the effective date.” See supra , p.14. But this exclusion had expired. 12 From that point on, death from any cause was a “covered death.” Accordingly, in order to receive payment, Lincoln merely had to present proof that the insured was, in fact, dead. And the death certificate undeniably showed that the insured was dead (even though it did not show causeof-death). Still, Old American refused to pay until it received a “completed” death certificate showing cause-of-death, even though payment of the initial $10,000 “death benefit” did not depend on cause-of-death. See supra , p.16. Using this transparently false excuse, Old American delayed payment for eight months.

11 See Response to Request for Admission, p.3 ¶ 4 (admitting that the claim would be paid once Old American received a death certificate showing the cause and manner of death). (295).

12 Id. , pp.2-3 ¶ 6 (295-296) & p.5 ¶ 17 (297) (admitting the insurance policy had been in force for over two years and that, if the cause of death had been suicide, the life insurance benefit would have had to be paid).27 Lincoln’s claim was only for $4,725, and it could be satisfied from the $10,000 “death benefit.” Again, Frank Howard, the beneficiary, was initially entitled to receive the entire $10,000, but he assigned $4,725 to the funeral home and $1,884.75 to the cemetery. Both clai ms could have been satisfied from the initial $10,000 “death benefit” leaving the balance ($3,390.25) for Frank Howard. See supra , p.16. 2. Bad faith: Old American’s ob ligation to pay the $10,000 death benefit was “reasonably clear” when Lincoln first made its claim. At common law, an insurer “violates its duty of good faith and fair dealing by denying or delaying payment of a claim if the insurer knew or should have known it was reasonably clear that the claim was covered.” Universe Life Ins. Co. v. Giles , 950 S.W.2d 48, 49 (Tex.1997) (empha sis added). Similarly, under the Insurance Code, it is an unfair prac tice to fail “to attempt in good faith to effectuate a prompt, fair, and equitable settlement of . . . a claim w ith respect to which the insurer’s liability ha s become reasonably clear.” T EX .I NS .C ODE §541.060(a)(2)(A) (emphasis added). 13 Old American correctly says that “the standard for statutory and common law bad faith is the sa me.” Appellant’s brief, p.39. 14 In both kinds of

13 See generally Giles , 950 S.W.2d at 55-56 (Tex.1 997) (statutory history).

14 Id. at 55-56 (adopting common-law standard for statutory ba d faith actions).28 cases “an objective standard is utilized to determine whether a reasonable insurer under similar circumstances w ould have delayed or denied payment of the claim.” Id. , p.40 (emphasis added). 15 And because the standard is “objective” it can be decided on summary judgment. Again, it is undisputed that Old American was obligated to pay the initial $10,000 “death benefit” when it recei ved proof that the insured had died regardless of cause-of-death. This o ccurred on October 1, 2014, when Lincoln delivered the death certifi cate, the published announcement of death, the funeral bill and the funeral director’s affidavit. See supra , p.16. At that point, Old American’s “liability ha[d] become reas onably clear,” and its decision to delay payment of the $10,000 “death benefit” for eight months is “bad faith” both at
common law and under the Insurance Code.
In Ressler v. Gen. Am. Life Ins. Co., 561 F.Supp.2d 691 (E.D.Tex. 2007), the insured initially purchased a $6 0,000 life insurance policy. Later the coverage was increased to $100,000. Under the policy, the insurer could contest the increased coverage amount ($40,00 0) if the application contained a

15 citing Amanda v. Ins. Co. of North Am. , 748 S.W.2d 210, 213 (Tex.1998); Vandeveter v. All American Life & Cas. Co. , 101 S.W.3d 763, 722 (Tex.App[.--Fort Worth 2003, no pet.). See also Appellant’s brief, p.38 (“Old American must be judged by an objective standard to determine whether a reasonable insurer under similar circumstances would have delayed payment of the claim.”) ( citing Aleman v. Zenith Ins. Co. , 343 S.W.3d 817, 822 (Tex.App.--El Paso 2011, no pet.)).29 misrepresentation regarding the health of the insured. That provision would expire after two years, and it did not a pply to the original coverage ($60,000). Id. at 693. The insured died a y ear after the coverage increas e, that is, within the twoyear contestability period. Id. The insurance company paid the $60,000, but it delayed paying the additional $40,000 because th e death certificate showed that the insured had suffered from “severe atherosclerotic disease,” a condition not shown on the application for the $40,000 increase in coverage. Id. The insurer asked the widow (who was also the beneficiary) to authoriz e release of medical information. She refused and sued for bad faith. Id. After the insurer obtained medical records via discovery, it determined that the insured had made no material misrepresent-ation, and it paid the remaining $40,000. Id. Citing a number of Texas cases, the court held that, as to the additional $40,000 co verage, liability had not been reasonably clear, and for this reason, the insurer had not breached its duty of good faith and fair dealing. Id. at 696. If Lincoln had acted in good faith--like the insurer in Ressler --it would have paid the initial $10,000 “deat h benefit” (including the $4,725 to Lincoln) and delayed payi ng the additional $10,000 ADB until it received proof of cause-of-death. But in our case, Old Am erican delayed payment of both the ADB and the “death benefit” until it received the “completed” death certificate showing30 cause-of-death. This would be the same as if the insurer in Ressler had delayed payment of both the $40,000 coverage increase and the $60, 000 initial coverage until questions regarding the alleged misr epresentation in the application were resolved. Under those circumstances, that insurer would have been liable for “bad faith” in delaying payment of the initial $60,000. Similarly, in our case, Old
American is liable for “bad faith” in de laying payment of the initial $10,000. Old American cites the Ropp affida vit as evidence that its “claim procedure . . . was c onsistent with the standards in the insurance industry.” Appellant’s brief, pp.37-38 ( citing Ropp affidavit). But Ropp did not say that. Rather, he said that: It is the standard in the insu rance industry to require certain information and documentation regard ing an insured’s death before paying a claim. Where the Policy does not mention claim forms, they are required in every claim. Additionally, a completed death certificate, while not specifically mentioned in the Policy is also required for all claims by Old American. Ropp aff., p.3 (325). Thus , Ropp merely said that it is “standard in the insurance industry” to require “certain informati on and documentation.” And in this case, the only “information and documentation” needed to pay the initial $10,000 “death benefit” was proof that the insured had died . It is undisputed that Old American had this in October of 2014 when Li ncoln first submitted its claim. Ropp also said that it was Old American’s policy to require “a completed death certificate . . . for all claims.” (em phasis added). While this31 might have been Old American’s internal requirement, there is no evidence that it is “the standard in the insurance industr y” to require proof of cause-of-death when payment does not depend on cause-of-death. On the contrary, this statement shows that Old American acted “knowingl y” thereby making it liable for treble damages. See infra , p.44. Old American also says that, “[ w]hen the death certificate raises questions which require further investig ation, the insurer is entitled to delay payment of the claim until a reasonable i nvestigation is conc luded.” Appellant’s brief, p.38. But, in this case, the deat h certificate did not raise questions “which require further investigation.” It showed that Rebecca Barnes had died, and that was all that was needed to pay the initial $10,000 “death benefit.”
Further evidence of Old American ’s “bad faith” is found in its December 18, 2014 letter. We have already quoted the first paragraph of this letter on page 17 and 18 a bove. That letter continued as follows: Please provide a death certificate w ith the cause of death determined (or other documentation demonstrati ng the cause of death) as soon as that investigation is concluded. Once we have that information, we can complete our claim investigation. Letter (648) (emphasis added). Also, Ropp swore that Lincoln Factoring never provided, or attempted to provide, “other documentation demonstrating the cau se of death.” There was no affidavit from a loved one stati ng the manner of death, no medical records, nothing ever indicating th e manner or cause of death.”32 Ropp aff., p.2 (608) (e mphasis added). This is yet another transparent falsehood. It is undisputed that, from the outset, Old American had the funeral dir ector’s affidavit, which stated that the “cause of death was natu ral or accidental.” See supra , p.15. 3. Prompt payment: Lincoln was e ntitled to recover 18% interest and attorney’s fees. See Appellant’s brief, pp.35-36. Because Old American finally paid the claim, it says that it is not liable for breach of contract. Even so, under the “pro mpt payment” provisions of the Insurance Code, it was still liable for 18% interest and attorney’s fees. The statute. Prompt payment statutes have been around since
Reconstruction. 16 The current version, applicab le here, is found in Chapter 542, Subchapter B, of the Insurance Code, entitled “Prompt Payment of Claims.” Specifically, we are concerned with sections 542.055, 542.058 and 542.060. These provisions must be liberally constr ued to promote “the prompt payment of insurance claims.” Id. §542.054. Under section 542.055, the insu rer has 30 days after “receiv[ing] notice of a claim” to “commence an inve stigation of the claim; and request from the claimant all items, statements, and fo rms that insurer reasonably believes, at

16 See generally State Farm Life Ins. Co. v. Martinez , 216 S.W.3d 799, 803-804 & nn.14- 20 (Tex.2007); Lamar Homes, Inc. v. Mid-Continent Cas. Co. , 242 S.W.3d 1, 24-25 & nn.1-7 (Tex.2007) (Brister, J., dissenting); Universe Life Ins. v. Giles , 950 S.W.2d 48, 55-56 (Tex.1997).33 that time, will be required.” T EX .I NS .C ODE §542.055(a)(2) & (3). Then, once the insurer “receiv[es] all items, statements, and forms reasonably required,” it has 60 days to pay the claim. Id . §542.058(a). If it fails to pay within 60 days, it “shall pay damages and other items provided n Section 542.060.” Id. §542.058(a). And under 542.060, an insurer who fails to comply “is liable to pay . . . interest on the amount of the claim at the rate of 18 percent per annum as damages together with reasonable attorney’s fees.” Id . §542.060. 17 No “good faith” defense. Old American says that the parties “merely had a good faith disagreement ove r the wording of the policy and the importance of having a complete death certif icate.” Appellant’s brief, p.37. It’s difficult to take this assertion seriously since Old American has never offered a reason as to why it needed a “complete deat h certificate.” But even if there had been a “good faith disagreement,” Old Am erican would still be liable because “good faith” is not a defens e to a claim under the “promp t payment” provision. “An insurance company’s good fa ith assertion of defense does not relieve the insurer of liability for penalties for tardy paymen t, as long as the insurer is finally adjudged liable.” Higginbotham v. State Farm Mut. Auto Ins. Co. , 103

17 See generally Gusma Props., L.P. v. Travelers Lloyds Ins. Co ., 514 S.W.3d 319, 322- 323 (Tex.App.--Houston [14th Dist.] 2016, no pe t.) (summarizing operation of statute); Harris v. American Protection Ins. , 158 S.W.3d 614, 623 (Tex.App.--Fort Worth 2005, no pet.) (same). Cf. Appellant’s brief, p.35 (last paragraph).34 F.3d 456, 461 (5th Cir.1967). 18 Accord Cater v. United Servs. Auto. Ass’n , 27 S.W.3d 81, 84 (Tex.App.--San Antonio 2 000, pet. denied) (“an insurance company’s good faith defense do[es] not relieve the in surer from liability for damages for late payment, as long as the insurer is finally found liable for the claim.”). 19 Thus, even if Old American had had a “reasonable basis” for withholding payment, it would still be liabl e for interest and attorney’s fees under the “prompt payment” provisions. Application. Old American withheld payment for eight months, but ultimately admitted that the $4,725 clai m was owed. Therefore, under the “prompt payment” provisions, Old American is liable for 18% interest on the amount of the claim for those eight months, plus attorney’s fees. 4. Old American has waived any error as to the misrepresentation claims.

18 citing Key Life Ins. Co. v. Davis , 519 S.W.2d 403, 405 (Tex.Civ.App.--Beaumont 1974, no writ).

19 See also Gumpp v. Philadelphia Life Ins. Co. , 562 S.W.2d 885, 888-889 (Tex.Civ.App. --San Antonio 1978, no writ) (“Where the 30-day de mand has been made, the penalty is due if the Insurer is ultimately held liable on the pol icy no matter how justifiable was the basis for its unsuccessful defense of non-liability); First Nat. Life Ins. Co. v. Vititow , 323 S.W.2d 313, 316 (Tex.Civ.App.--Texarkana 1959, writ dism’d) (“[i ]f a 30-day demand has been made, the penalty is collectible if the in surer is finally adjudged to be lia ble on the policy regardless of how justifiable its unsuccessful defens e of unaliability may have appear ed. The penalty flows from the failure to pay.”) (citations omitted).35 The statute: Chapter 541, Subchapter B, of the Insurance Code is a codification the Unfair Clai ms Settlement Practices Act. 20 All together it consists of eleven sections, each defining an unfair or deceptive act or practice. Under four of these--Sections 541.051, 541.052, 541.060 and 541.061--it is an unfair practice to misrepresent the terms or benefits of an insurance policy. 21 The remedial provisions for violation of Chapter 541, S ubchapter B--which includes both “bad faith” and misrepresentati on--are found in Chapter 5 41, Subchapter D. A violation of any of these sections entitles a plaintiff to the remedies available under section 541.152, which include actual da mages, attorney’s fees and costs. 22 And if the violation is “knowingly committe d,” the damages can be trebled. 23
Facts: As noted above, Lincoln submitted its claim to Old American on October 21, 2014. See supra , p.15. Lincoln’s cove r letter read as follows:

20 See Acts 1973, 63rd Leg., R.S., ch. 319 §1, 1973 T EX .G EN .L AWS 735 (codified at T EX .I NS .C ODE art. 21.21), repealed Acts 2003, 78th Leg., ch. 1274 (H.B. 2922), §26(a)(1) (eff. April 1, 2005).

21 See T EX .I NS .C ODE §541.051(1)(A)(It is an unfair prac tice to “make [a] state-ment misrepresenting . . . the terms of the policy.”); Id. §541.052(a)(It is an unfa ir practice to make “[a] statement containing an untrue, deceptive, or misleading . . . representations . . . regarding . . . the conduct of the person’s insurance business.”); Id. §541.060(a)(1)(It is an unfair settlement practice to “misrepresent[] to a claimant a material fact or policy provision relating to coverage at issue.”); Id. §541.061(1)(It is an unfair pract ice to “misrepresent an insurance policy by . . . making an untrue statement of material fact.”). See also id. §541.052(b)(5) (“This section applie s to [a] statement made . . . in any manner.”).

22 Id . §541.152(a).

23 Id . §541.152(b).36 Enclosed herewith is our assign ment of the above-captioned policy duly executed by Frank Howard, the na med beneficiary. Leah of your company verified the [following] information to us: 1. That the beneficiary entitled to the policy proceeds is the one named above; 2. That the policy was in full fo rce and effect a nd had benefits equal to the amount of this a ssignment at the time of the insured’s demise; 3. That there were no liens or loans except for against the corpus of the insurance; and 4. That you would recognize the assignment to us and remit your check in the payment of the pro ceeds of our assignment to our office at 6145 WEDGEWOOD DRIVE FORT WORTH, TEXAS 76133 Predicated and relying on the above representations, we have for a valuable consideration acc epted this assignment. Letter (459). 24 This letter, which was not object ed to, or even controverted, is evidence of an actionable misr epresentation under the code. In its First Amended Petition, Li ncoln made the following allegation: Before accepting assignment of th e policy proceeds and paying for the decedent’s funeral expenses, Plainti ff contacted Defendant to verify the legitimacy of the assignment of Frank Howard. Defendant through its representatives Leah on October 13, 2014 assured Plaintiff that Frank Howard was entitled to the proceeds of the policy, and Defendant agreed that it would r ecognize an assignment of $4,725 of the policy proceeds to Plaintiff and re mit its check to Plaintiff for that

24 Emphasis added in the opening paragraph. Emphasis in original in closing paragraph.37 amount. Relying upon the representations and promises of Defendant, Plaintiff paid Payne Funeral Support Services, LLC a check for the funeral services for the decedent. First Amended Petition, p.2 ¶ 6 (27). Later, Lincoln alleged additional misrepresentations. 25 In the trial court, Lincol n sought summary judgment as to all of these misrepresentation claims. 26 But Old American simply ignored these misrepresentation claims in its summary j udgment response. And, as noted above, the trial court granted Lincoln’s summary judgment motion as to all claims without distinguishing or identifying any particular claim. See Judgment (663). Now, in this Court, Old American has not assigned error to the misrepresentation claims. Indeed , Sections 541.051, 541.052, 541.060, and 541.061 are not even cited. See Appellant’s Brief, pp.27-29. “When, as here, a party move s for summary judgment on multiple grounds and the trial court's summary-judgment order does not specify the ground (or grounds) on which it is based, the appe llant must negate all possible grounds on which the order could be based.” Chapparal Operating Co. v. EnergyPro, Inc., No. 02-16-00471-CV , 2017 Tex. App. LEXIS 10091, at **2-3 (Tex.App.--Fort Worth,

25 See Plaintiff’s Second Amended Petition ¶¶ 34, 35, 36, 40 & Ex. A (127-129, 132, 143). See also Lincoln’s summary judgment response, p.3 (596).

26 See Lincoln’s summary judgment motion, pp. 15-19, 23-24 (193-198, 201-202).38 Oct. 26, 2017, pet. filed). 27 Similarly, on appeal, “[w] hen an appellant fails to challenge every ground on which the summa ry judgment could have been based, [the appellate court] must affirm, regardless of the unchallenged ground's merit.” Id. 28 Therefore, this Court must affirm th e judgment without reaching the merits of the misrepresentation theory. 5. Old American also waived an y error as to the award of attorney’s fees under the De claratory Judgments Act. It is common practice for an in surer to sue under the Declaratory Judgments Act to resolve coverage issues. 29 And in our case Old American counterclaimed for declaratory relief as follows: Plaintiff knew that Defendant n eeded to have a completed death certificate and that Defendant ca nnot require the Tarrant County Medical Examiner’s Office (sic) to proceed more quickly in issuing one. Defendant seeks a declarat ory judgment that it was only required to pay Plaintiff the proceeds on this event (sic) and that under Chapter 37 of the Texas Civil Prac tices and Remedies Code, Plaintiff be required to pay De fendant’s legal fees.

27 citing Star-Telegram, Inc. v. Doe , 915 S.W.2d 471, 473 (Tex.1995); Jarvis v. Rocanville Corp. , 298 S.W.3d 305, 313 (Tex. App.—Da llas 2009, pet. denied).

28 Accord Hixson v. Pride of Texas Dist. Co. , Inc. , 683 S.W.2d 173, 176 (Tex.App.--Fort Worth 1985, no writ.) (“Where a judgment may rest upon more than one ground, the party aggrieved must assign error to each such ground, or he has waived his right to complain of the ruling to which no error was assigned.”). See also Umar v. Scott , 991 S.W.2d 512, 514 (Tex.App.--Fort Worth 1999, no pet.) (citing cases); Conley v. Tex. Bd. of Crim. Justice , No. 03- 08-00293-CV, 2010 WL 163292, 2010 Tex.App.LEXIS 3011, at **3-4 (Tex.App.--Austin Apr. 2, 2010, no pet.).

29 See generally MBM Fin. Corp. v. Woodlands Operating Co. , 292 S.W.3d 660, 668 (Tex.2009) (noting that “historica lly, declarations of non-liability under a contract have been among the most common suits filed under the Act.”).39 Counterclaim, p.2 ¶ 4 ( 101) (emphasis added). 30 Lincoln answered that counterclaim and pleaded for “reasonable attorneys’ fees and costs.” (107). By seeking relief under the Declar atory Judgments Act, Old American invited being held liable for Lincoln’s attorney’s fees under that Act, which provides, in part, as follows: In any proceeding under this chap ter, the court may award costs and reasonable attorney’s fees as are equitable and just. T EX .C IV .P RAC

. & R EM
. C ODE §37.009. Under this broad language, attorney’s fees may be awarded to either party. 31 Indeed, attorney’s f ees may even “be awarded to the non-prevailing part y.” (emphasis added). 32 The trial court awarded attorney’s fees to Lincoln without stating its grounds (663), and that awar d can be upheld under the Decl aratory Judgments Act. Once again, Old American ha s waived any error as to the award of fees under the

30 citing Texas Uniform Declaratory Judgments Act, T EX .C IV .P RAC

. & R EM
. C ODE §37.001, et seq.

31 See MBM Fin. Corp. , 292 S.W.3d at 669 (The Declarat ory Judgments Act “allows fee awards to either party in all cases.”); Apex Fin. Corp. v. Garza , 155 S.W.3d 230, 238 (Tex.App.- -Dallas 2004, pet. denied) (“attorneys’ fees may be awarded to either party regardless of who prevails, as long as the awar d is equitable and just.”) ( citing Barshop v. Medina County Underground Water Conservation Dist. , 925 S.W.2d 618, 632 (Tex.1996)).

32 Accord Countrywide Home Loans, Inc. v. Howard , 240 S.W.3d 1, 7 (Tex.App.--Austin 2007, pet. denied) (“A court may even award costs and fees to a party who did not prevail.”) ( citing Barshop v. Medina County Unde rground Water Conservation Dist. , 925 S.W.2d 618, 637 (Tex.1996)); Guinn Invs. v. Ridge Oil Co. , 73 S.W.3d 523, 527 n.1 (Tex.App.--Fort Worth 2002, pet. denied) (same); Scottsdale Ins. Co. v. Travis , 68 S.W.3d 72, 77 (Te x.App.--Dallas 2001, pet. denied) (“Under the Act, attorney’s fees may be awarded to the non-pr evailing party.”).40 Declaratory judgment Act by failing to make any complaint about that award in the trial court or in this Court. Indeed , the words “declaratory judgment” do not appear in Old American’s summary judgment response (594-606), or the Appellant’s brief. 6. Old American waiv ed any defense under Section 1103.51 of the Insurance Code. In its brief, for the first time, Ol d American says that “the manner of death would determine whether there was a possibility of forfeiture of the death benefit by the named beneficiary unde r Texas Insurance Code §1103.151.” Appellant’s Brief, p.37. Th at provision reads as follows: A beneficiary of a life insuran ce policy or contract forfeits the beneficiary’s interest in the policy or contract if the beneficiary is a principal or an accompli ce in willfully bringing about the death of the insured. T EX .I NS .C ODE §1103.151 (emphasis added). There are three flaws in this argument. First, section 1103.151, which provides for “forfeiture,” is an affirmative defense wh ich must be pleaded, 33 and Old American did not plead this

33 See Hazlewood v. Werley , No. 07-12-00166-CV, 2014 WL 2810215, 2014 Tex.App. LEXIS 6698, at *10 (Tex.App.--Amarillo, June 18, 2014, pet. denied) (“Fee Forfeiture as an Affirmative Defense”); Walker v. Federal Kemper Life Ins. Co ., 828 S.W.2d 442, 449 (Tex.App. --San Antonio, Jan. 29, 1992, writ denied) (treating policy provision providing for forfeiture for non-payment of premiums as an affirmative defense); Dean Vivian Homes, Inc. v. Sabera’s Plumbing and Appliances, Inc. , 615 S.W.2d 921, 927 (Tex.Civ.App.--Waco 1981, no pet.) (holding that statute providing for forfeiture for charging of usurious interest was an affirmative defense); Ramin’ Corp. v. Wills , No. 09-14-00168-CV, 2015 WL 612602, 2015 Tex.App. LEXIS 10612, at *23 (Tex.App.--Beaumont Oct. 15, 2015, no pe t.) (“A party may seek forfeiture as a41 defense (93) 34 or raise it in its summary judgmen t response (594-606). In an appeal from a summary judgment ruling, a court may consider “only the theories that were presented in writing a nd considered by the trial court.” U.S. Bank, N.A. v. Prestige Ford Garland, Ltd. Partnership , 170 S.W.3d 272, 275 (Tex.App.--Dallas 2005, no pet.) ( citing Casso v. Brand , 776 S.W.2d 551, 553 (Tex.1989)). For that reason, this defense has been waived. Second, Old American never had any reason to believe that the beneficiary had been a “principal or an accomplice in willfully bringing about the death of [Rebecca Barnes].” 35 Indeed, when it firs t made a claim, Lincoln provided an affidavit from the funeral dir ector saying that the “primary cause of death was natural or accidental ” (466) (emphasis added). Third, Old American admitted that it never called the District of Columbia police to determine if Frank Ho ward was under suspicion of causing the death, and it never had any evidence that he was suspected of causing the death. 36 On deposition Richard Ropp, who was in charge of Old American’s claims, testified as to “whether or not the bene ficiary was under suspicion of causing the

remedy for breach of a fiduciary duty, provided the party includes a request for forfeiture in its pleadings.”).

34 Old American did not file an answ er in the County Court at Law.

35 T EX .I NS .C ODE §1103.151.

36 Response to Request for Admissions, p.3 ¶¶ 4-5 (302).42 death of Rebecca Barnes.” R opp depo. 43/5-15 (412). As to a December 30 email from Robin Hall, Id . 36/22 (412), Ropp testified as follows: Q. [By Mr. Engfer] Okay. Can you read it, the part that says what you’re referring to? A. (Reading) In an attempt to tr y to get this resolved I made some phone calls. I tried to locate a number for the beneficiary with no luck. I called the funeral home. I called the coroner’s office and was told that the inve stigation was still pending. I also called American Capital Funding. They called the cemetery, the cemetery called the coroner’s office. The coroner told them to check back in the middle of January. I’ve seen letters to both the finance comp anies. At this point it is a waiting game. Q. Okay. But that doesn’t say anything about whether or not the beneficiary is under suspicion of causing the death of Rebecca Barnes, correct?
A. Correct. Q. So there was, as far as you can tell, no investigation of whether or not the beneficiary is under suspicion of causing the death when you read those--this e-mail, correct? A. That e-mail may have indicated that we tried. Q. Well, where in the e-mail does it say that they inquired on whether the beneficiary was under suspicion of Rebecca Barnes’ death? A. It doesn’t. Q. Okay, so as of March 31, 2015 [Old American] had not investigated whether or not the beneficiary is under the suspicion of causing the deat h of Rebecca Barnes, correct?43 A. Under--further, on the exhibit, on Page 029, the e-mail between counsel Langland and Robin Hall-- Q. Okay. Can you read the speci fic part that says there was an investigation by Old American into whether or not the beneficiary is under suspicion of causing the death of Rebecca Barnes? Specifically read that. A. It doesn’t specifically say that. Q. It doesn’t say that. It doe sn’t say that anywhere on this--on 029; isn’t that correct?
A. Correct. Id . 36/22--38/9 (emphasis added) (412-413). 7. Lincoln is entitled to recover attorney’s fees. See Appellant’s brief, p.43. Old American’s challenge to th e attorney’s fees award is quite narrow. It says that “Lincoln is not a pr evailing party in this litigation” and cannot recover its attorney’s fees. Appellant’s brie f, p.43. But as we have demonstrated, Lincoln was the prevailing party, and it was entitled to recover attorney’s fees under the Insurance Code and under the Declaratory Judgments Act. Aside from arguing that it should be the prevailing party, Old American has made no complaint about th e attorney’s fees award. Lincoln supported its claim for attorney’s fees with an attorney’s affidavit (306). Old American did not object to that affidav it or present any evid ence to create a fact issue. Old American does not conte nd that the attorney’s fees were not44 “reasonable and necessary” or that th ey were not “equitable and just.” 37 Nor does it contend that the evidence of attorney’s fees was not prope rly segregated. Indeed, its summary judgment response does not even mention attorney’s fees. Thus, the attorney’s fees awar d must be upheld if the c ourt affirms any part of our Insurance Code claim. Indeed, under th e Declaratory Judgments Act, it must be affirmed even if the court reverses as to all of our claims, since the trial court can award fees even to th e non-prevailing party. See supra , p.38. 8. Treble damages: Old American acted “knowingly.” As previously noted, our statutor y bad faith claim is based on Section 541.060 of the Insurance C ode. That provision is entitled “Unfair Settlement Practices,” and it is found in Chapter 541 , Subchapter B of the Code. The remedial provisions are found in Chapte r 541, Subchapter D. Under these provisions “[a] plaintiff who prevails in an action under this subchapter may obtain: . . . actual damages, plus court costs and reas onable and necessary attorney’s fees.” T EX .I NS .C ODE §541.152(a)(1). And if the defendant “knowingly committed the act complained of,” a cour t “may award” up to “three times the amount of actual damages.” Id. §541.152(b).

37 See generally State and Count y Mut. Fire Ins. Co. v. Walker , 228 S.W.3d 404, 407 (Tex.App.--Fort Worth 2007, no pet.) (“Whether th e fees are reasonable and necessary are questions of fact; whether awardi ng the fees and costs is equitabl e and just is a question of law.”).45 As we have seen, the test for “b ad faith” is whether the insurer “knew or should have known” that lia bility was “reasonably clear.” See supra , n.16. The test for treble damages is whether the in surer “knew.” Here it is undisputed that Old American “knew” that the initial $10,000 was payable immediately. Early on, Lincoln’s lawyer explained why payment of the claim did not depend on cause-ofdeath. Even so, Old American expressl y refused to pay the claim until it received evidence of cause-of-death. Indeed, as we have s een, it was Old American’s policy to require a “completed” death cert ificate for “all claims ,” even in cases such as our where payment did not depend on cause-of-death. See supra , p.30. Also, in the trial court, Old American di d not even complain about the trebling of damages, as we shall now demonstrate. 9. Old American failed to preserve er ror as to calculating damages and as to awarding treble damages. See Appellant’s brief, pp.41-42, 43-45. As to the award of actual damages, Old American says that it should receive credit for the $4,725 paid after suit was filed. See Appellant’s brief, p.41- 42. And, as we have seen, it is also complaining about the award of treble damages. Id ., p.42. Finally, it says that the tr ial court erred in calculating interest under the prompt payment provisions. Id. , pp.43-45. Old American did not preserve erro r as to any of this. Its summary judgment response is completely silent on th ese issues (594-604). The actions that Old American is now complaining about we re set forth in the judgment (663).46 That was where the trial court awarded “tre ble damages” in the amount of $9,450. This appears to result from the following calculations: $4,725 x 3 = $14,175 $14,175 - $4,725 = $9,450 It was also there, in the judgment, that the trial court awarded the $1,050 in interest that Old American now says was excessive. To preserve error, Old American should have made these complaints to the trial court. See Rule 33.1(a)(1)(A), T EX .R.A PP .P. Old American could have done this by moving to modify the judgment under Rule 329b(g), T EX .R.C IV .P. 38 Old American did not do this. Nor did it make any other complaint about these rulings. Accordingly, it has waived a ny error in the calculation of interest, 39 the award of treble damages, 40 and the calculation of damages. 41

38 See Rule 33.1(b), T EX .R.A PP .P.

39 See Watts v. Oliver , 396 S.W.3d 124, 133-134 (Tex.App. --Houston [14th Dist.] 2013, no pet.) (holding that complaint about calculation of interest may not be raised for the first time on appeal). Cybiz, Inc. v. Gaskill , No. 14-16-00405-CV, 2017 WL 1015560, 2017 Tex.App. LEXIS 2147, at *12 (Tex.App.--Houston [ 14th Dist.] March 14, 2017, no pet.).

40 See Samedan Oil Corp. v. Intrastate Gas Gathering, Inc. , 78 S.W.3d 428, 457-458 (Tex.App.--Tyler 2001, pet. granted, judgm’t vacated w.r.m.) (punitive damages).

41 See Basic Energy Service, Inc. v. D-S-B Properties, Inc. , 367 S.W.3d 254, 262-264 (Tex.App.--Tyler 2011) (withdraw n pursuant to settlement).47 ARGUMENT PART TWO: STANDING 10. Old American waived any error as to the assignment of claims by failing to raise it in the trial court. See Appellant’s brief, pp.26-29. Old American’s “standing” arguments concern Frank Howard’s assignment to the funeral home. See supra , p.15. First, Old American says that Howard only assigned his right to the policy proceeds; he did not also assign his Insurance Code claims. 42 Second, Old American says that, for public policy reasons, Howard could not assi gn his Insurance Code claims. 43
Both issues--whether the clai m was assigned and whether it was assignable--are questions of capacity, not st anding. Unlike lack of standing, lack of capacity is waived if it is not raised in the trial court. And since Old American did not raise either issue in the trial cour t, they have been wa ived. Two recent cases from the Fifth Court of Appeals are directly in point . See Fitness Evolution, L.P. v. Headhunter Fitness, LLC , No. 05-13-00506-CV, 2015 Tex.App.LEXIS 11496 (Tex.App.--Dallas Nov. 4, 2015, no pet.), and Douglas-Peters v. Choe & Holen P.C. , No. 05-15-01538-CV, 2017 WL 83684 8, 2017 Tex.App.LEXIS 1836, at *23 (Tex.App.--Dallas Marc h 13, 2017, no pet.).

42 See Appellant’s brief, p.27 (“Frank Howard clearly reserved his right . . . to pursue any statutory claims he might have under the Texas Insurance Code.”).

43 Id. , p.28 (arguing that any “such assignment wo uld be invalid as a matter of law.”).48 In the first case, Fitness Evolution leased space in a shopping center from Gleneagles; and Joseph Mulr oy guaranteed the lease. See Fitness Evolution , 2015 Tex.App.LEXIS 11496, at *8. Fitn ess Evolution assigned the lease to Headhunter Fitness, which could not pay the rent. Id. at *9-*10. In 2007, Fitness Evolution sued Headhunter Fitness, and Headhunter Fitness filed a third-party action against Mulroy. Id . at *10. While that suit was in progress, Headhunter Fitness negotiated with Sagebrush Partners to lease spa ce in a different shopping center. Id. at *11-*12. Headhunter Fitness asked Gleneagles to re lease it from the original lease, but Gleneagles refused. Id. at *13-*14. At that point, the suit settled. Id. at *16-*17. In 2011, Mulroy and Fitness Evolution filed a new suit against Headhunter Fitness and Sagebrush. Id. at *19-*22. Mulroy, as assignee of Gleneagles, claimed that Sagebrush had tortiously in terfered with the original lease (between Gleneagles and Fitness Evolution). Id. at *21 & *22 n.13. The trial court granted summary judgment denying that tortious interference claim. Id. at *34. Mulroy appealed. On appeal, Sagebrush argued that Mulroy could not recover as the assignee of Gleneagles. Id. at *52-*53. In so doing, Sagebrush addressed the same two issues that we are concerned with in our case. First, Sagebrush argued that Gleneagles had “not specifically assi gn[ed]” the tortious interference claim to49 Mulroy. Id. at *53. 44 Second, Sagebrush argued th at purported assignment of the tortious interference claim “is void because it goes against public policy.” Id. at *55. 45 The court of appeals rejected both arguments for the same reason: they involved question of capacity, not standing ; and Sagebrush had not raised these issues in the trial court. Id. at *54-*56. Therefore, they had been waived. As to the first issue--“the scope of Gleneagles’s assignment to Mulroy”--the court noted that, wh ile “Sagebrush . . . re ferred to this as an issue of ‘standing,’ it is actually a challenge to whether Mulroy, as assignee of Gleneagles’s claims, can recover in the capacity in which he sued.” Id. at *57 (emphasis added). Texas law is clear that a challenge to a party’s privity of contract is a challenge to capacity, not standing. . . . While the question of whether a party is entitled to sue on a contract is often informally referred to as a questi on of ‘standing’ it is not truly a standing issue because it does not affect ju risdiction.” . . . Fitness Evolution , 2015 Tex.App.LEXIS 11496, at *42 (citations omitted). 46 But

44 See also, Fitness Evolution , 2015 Tex.App. LEXIS 11496, at 56 (arguing that the purported assignment “does not specifically assi gn a tortious interference with an existing contract claim.”).

45 Sagebrush argued that “public policy prohi bits Mulroy, as assi gnee of Gleneagles’s claims, from recovering on the assigned cause s of action because Gleneagles’s tortious interference with an existing contr act claims were not capable of assignment due to the fact that Mulroy, individually, was also th e guarantor of the lease.” Fitness Evolution , 2015 Tex.App. LEXIS 11496, at *55 ( citing Texas Farmers Ins. Co. v. Gerdes , 880 S.W.2d 215, 218 (Tex.App.- -Fort Worth 1994, writ denied).

46 Accord Douglas Peters , 2017 Tex.App.LEXIS 1836 at 21-22. See also Vertical N. Am., Inc. v. Vopak Terminal Deer Park, Inc. , No. 14-15-01088-CV, 2017 Tex.App. LEXIS 894450 Sagebrush had not file[d] a verified pleading cha llenging the capacity of Mulroy, as assignee of Gleneagles’s claim, to sue on this basis, nor do they brief this lack of capacity on appeal. This issue was not preserved in the trial court. Accordingly, we do not address the merits of this argument . . . Id. at *56-*57. 47 On this point the Court cited its earlier opinion in John C. Flood of DC, Inc. v. SuperMedia, LLC , 408 S.W.3d 645, 650-6 52(Tex.App.--Dallas 2013, pet. denied). 48 Similarly, as to the second i ssue, Sagebrush contended “that the assignment of Gleneagles’s claims is voi d because it goes against public policy.” Id. at *54-*55. But here again, the court held that “[t]his argument challenges the qualifications of Mulroy, as assignee of Gleneagles’s claim, to litigate Gleneagles’s claim.” Id. at *55. Although the Sagebrush Group refe rred to this as an issue of “standing” it is actually a challenge to whether Mulroy, as assignee of Gleneagles’s claim, can recover in the capacity in which he sued. Id. at 53 (emphasis added). 49 Once again, however, [t]his issue was not preserved in the trial court. Accordingly, we do at *3 (Tex.App.--Houston [14th Dist.] Sept. 21, 2017, no pet.) (“A challenge to who owns a claim raises the issue of capacity, not standing.”).

47 citing Rule 33.1, T EX .R.A PP .P. See also Rule 93(2), T EX .R.C IV .P. (requiring verified plea of lack of capacity).

48 See also King-Mays v. Nationwide Mut. Ins. Co. , 194 S.W.3d 143, 145 (Tex.App.-- Dallas 2006, pet. denied) (applying same reasoning to claim of subrogation).

49 citing John C. Flood , 408 S.W.3d at 640.51 not reach the merits of this argume nt that the Sagebrush Group labels as “standing.” Id. at 56. In Douglas-Peters , a law firm owned a claim against a former client for unpaid attorney’s fees . 2017 Tex.App. LEXIS 1836, at *5-*6. It assigned the claim to a new law fi rm; and the new firm sued the former client for the unpaid fee. Id. at *6-*7. The former client contended that the assignment is void because it is against public policy. She argues that the assignment of claims by attorneys ag ainst their clients are a “legal corollary” to the assignment of le gal malpractice cl aims, which is against public policy.” Id . at *27. Here again, the court held that this question--whether assignment of claims for unpaid attorney’s fees violat es public policy--involved a question of capacity, not standing. Id . at **21-22 (citing cases). Unlike Fitness Evolution , the court in Douglas-Peters held that the issue of capacity had been preserved. Therefore, the court could “address Douglas-Peters’ capacity arguments.” Id . at *25. Even so, the former client had not adequately briefed the public policy issue, and for this reason, the court declined the “invitation to in validate the assignment of cl aims for attorneys’ fees on the basis of public policy.” Id. at *28. In our case, Old American is maki ng these same arguments. It says (i) that Frank Howard never assigned his In surance Code claim and (ii) that his Insurance Code claim could not be assigned on public policy grounds. But, as in52 Fitness Evolution , these issues were never rais ed in the trial court. Old American never filed a ve rified pleading under Rule 93(2). 50 Nor did it raise this issue in its summary judgment response (594-606). 51 Old American did not raise the “capacity” issue--which it erroneously calls a “standing” issue--until it filed its brief in this Court, and for that reason, both arguments--whether the claim was assigne d and whether it was assignable--have been waived. See Nootsie Ltd. v. Williamson Cty. Appraisal Dist. , 925 S.W.2d 659, 662 (Tex.1996) (holding that “Nootsie fi rst questioned the district’s capacity in its briefing before this Court. Th erefore, Nootsie has waived its complaint about capacity.”). 52 11. Alternatively, Lincoln has standing to assert its own claims for “bad faith” and misrepresentation und er Section 541.151 of the Code. According to Old American, Lincoln is contending (i) that Frank Howard, the beneficiary, assigned his Insu rance Code claims to Lincoln and (ii) that Lincoln is asserting the assigned clai ms. And because those claims have not been assigned (and because they are not a ssignable), Lincoln has no standing, or so

50 See Defendant’s Original Answer (93). Old American never filed an answer in the County Court at Law. See docket sheet (665).

51 Cf. John C. Flood , 408 S.W.3d at 655 (“The problem with appellant’s argument is that their response to appellee’s summary judgment mo tions did not raise the issue of SuperMedia’s lack of capacity to bring suit.”).

52 Accord Town Ctr. Mall v. Dyer , No. 02-14-00268-CV, 2015 Tex.App. LEXIS 10213, at **7-8 (Tex.App.--Fort Worth Oct. 1, 2015, pet. denied).53 the argument goes. See Appellant’s brief, pp.26-27. We have just demonstrated that both arguments involve lack of capacity , not lack of standing, and they have been waived. See supra , p.47. Now, in the alternative, we say that Lincoln has standing to assert its own claims directly under the Code. In other words, standing is conferred by statute. 53 In this part of the argument, we will address Section 541.151 of the Insurance Code, which gives Lincoln standing to sue for “bad faith” and misrepresentation. And in part 12, we will address section 542.060, which gives Lincoln standing to sue for failure to make “prompt payment.” As previously noted, the Code provisions prohibiting “bad faith” and misrepresentation are found in Chapter 541, Subchapter B, of the Code. The remedial provisions are found in Chapte r 541, Subchapter D, entitled “Private Action for Damages.” Section 541.151, entitled “Private Action for Damages Authorized,” reads as follows: A person who sustains actual dama ges may bring an action against another person for those damages ca used by the other person engaging in an act or practice: (1) defined by [Chapter 541] Subchapter B [of the Insurance

53 See generally In re Sullivan , 157 S.W.3d 911, 915 (Tex.App.--Houston [14th Dist.] 2005, no pet.) (holding that “the judge-made criter ia regarding standing do not apply when the Texas Legislature has conferred stan ding through a statute. In st atutory standing cases, such as this, the analysis is a straight statutory construction of the re levant statute to determine upon whom the Texas Legislature has conferred standing and whether the claimant in question falls in that category.”) (internal citations omitted).54 Code] to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance; or (2) specifically enumerated in Section 17.46(b), Business & Commerce Code, as an unlaw ful deceptive trade practice if the person bringing the action shows that the person relief on the act or practice to other person’s detriment.
T EX .I NS

. C ODE §541.151 (emphasis added). 54 Here we are concerned with subparagraph (1), which provides a re medy for Lincoln’s “bad faith” and misrepresentation claims. 55 To recover for an unfair prac tice, as defined by Chapter 541, Subchapter B, of the Code (which include s “bad faith” and misrepresentation), one must qualify as “a person” under the following statutory definition: “Person” means an individual, cor poration, association, partnership, reciprocal or interinsurance exchange , Lloyd’s plan, fraternal benefits society, or other legal entity enga ged in the business of insurance, including an agent, broker, adjust er, or life and health insurance counselor.
T EX .I NS .C ODE §541.002(2) (emphasis added). The phrase “engaged in the busine ss of insurance” does not restrict the definition of “person.” Rather, it expands that definition to include those

54 See Acts 2003, 78th Leg., ch.1274 §2 (eff. April 11, 2005) (repealing T EX .I NS .C ODE art. 21.21 §16(a)).

55 Again, Lincoln did not seek summary judgm ent under the DTPA, which is the subject of sub-paragraph (2). See supra , p.10 n.7.55 “engaged in the business of insurance.” This issue was decided in 1978, when the statute read as follows: Any person who has been injured by another’s engaging in any of the practices declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board [of In surance] under this Article to be unfair methods of competition and unfair and deceptive acts or practices in the business of insurance or in any practice defined by Section 17.46 of the Business and Comm erce Code, as amended, as an unlawful deceptive trade practice ma y maintain an action against a company or companies engaging in such act or practices.
T EX .I NS .C ODE art. 21.21 §16(a). 56 Under that version of the statute, “person” was also defined as follows: “Person” shall mean any indivi dual, corporation, association, partnership, . . . and any othe r legal entity engaged in the business of insurance . . . Id. §2(a) (emphasis added). 57 Initially, the lower courts held th at the phrase “engage in the business of insurance” limited the scope of “pers ons” who could sue. For example, one court held that: Art. 21.21 does not confer a priv ate cause of action upon individuals for alleged unfair practices. One mu st be “engaged in the business of insurance” to bring suit under art. 21.21, T EX .I NS .C ODE

.

56 See Acts 1951, 52nd Leg., ch. 491, amended by Acts 1957, 55th Leg., p.401, ch. 198; Acts 1969, 61st Leg., p.2051, ch. 706, §1 eff. June 12, 1989; Acts 1973, 63rd Leg., p.335, ch. 143, §§2(a)-2(c), eff. May 21, 1973 ( quoted at Hermann Hosp. , 776 S.W.2d at 251).

57 quoted at Royal Globe , 566 S.W.2d at 726.56 Ceshker v. Bankers Comm ercial Life Ins. Co. , 558 S.W.2d 102, 104 (Tex.Civ.App. --Tyler 1977) (emphasis added). 58 But the Supreme Court disagreed: We disapprove the [above] holding wh ich construed the Code to limit the term “person” to one who is e ngaged in the business of insurance. Ceshker v. Bankers Comm ercial Life Ins. Co. , 568 S.W.2d 128, 129 (Tex.1978). Accord Royal Globe Ins. Co. v. Bar Consultants, Inc. , 566 S.W.2d 724, 726 (Tex.Civ.App.--Austin 1978) (“The Texas S upreme Court in a recent per curiam opinion disapproved a court of ci vil appeals’ restrictive reading of the definition of ‘person’ as used in Section 16 of Article 21.21 of the Insurance Code”), aff’d , 577 S.W.2d 688 (Tex.1979); Hermann Hosp. v. Nat. Standard Ins. Co. , 776 S.W.2d 249, 251 (Tex.App.--Houston [1st Dist.] 1989, writ denied) (“The Texas Supreme Court, in 1978, held that this statute doe s not require that the injured party be a person who is engaged in the bus iness of insurance.”). By way of example, an insured party is obviously not “engaged in the business of insurance.” Even so, in 1988, the Supreme Court held that an insured party was also a “person” who c ould sue under article 21.21 §16(a). See Vail v.
Texas Farm Bureau Mut. Ins. Co. , 754 S.W.2d 129, 134 (Tex.1988). This issue has now been decided. Any person or entity has standing to sue for an unfair practice defined by Chapter 541, Subchapt er B, which includes “bad faith” and

58 writ ref’d, n.r.e. , 568 S.W.2d 128 (Tex.1978).57 “misrepresentation.” 59 Despite this broad statutory lang uage, the Supreme Court has limited the definition of “person” in one kind of case, to-wit: “bad fa ith” claims brought by a “third party.” In Allstate Ins. Co. v. Watson , 876 S.W.2d 145 (Tex. 1994), the Court held that a car wreck plaintiff could not sue the defendant’s liability carrier under article 21.21 §16(a) because the plaintiff was asserting a “third-party” claim. Watson , 876 S.W.2d at 149-150. Th ere were practical reasons for this decision. To allow a third-pa rty plaintiff to sue under article 21.21 would place conflicting duties on the insurer. Th e insurer would owe one set of duties to its insured and another set of duties to the third party. Watson , 876 S.W.2d at 150. Accordingly, a “third-party” claimant a sserting a “bad faith” claim did not qualify as a “person,” despite the br oad statutory language.
But Watson applies only to “bad faith” clai ms. On the other hand, the courts have allowed third-party clai mants to sue for misrepresentation. 60 In any event, Lincoln is not a “third-party” claimant , that is, it is not adverse to the estate

59 See also T EX .I NS

. C ODE §541.001 & 541.008 (Chapter 541 “shall be liberally construed and applied to promote the underlyi ng purposes” which are to prohibi t “unfair or deceptive act or practices” in the “business of insurance.”).

60 See generally Royal Globe Ins. Co. v. Bar Consultant , 577 S.W.2d 688 (Tex.1979); Hermann Hosp. v. Nat. Standard Ins. Co. , 776 S.W.2d 249 (Tex.App.--Houston [1st Dist.] 1989, writ denied); Webb v. Int’l Trucking Co. , 909 S.W.2d 220 (Tex.App.--San Antonio 1995, no writ); Brown & Brown of Tex., Inc. v. Omni Metals, Inc. , 317 S.W.3d 361 (Tex.App.--Houston [1st Dist.] (2010, pet. denied).58 of Clara Barnes, the insured, or to Frank Howard, the beneficiary. 12. Lincoln has standing to assert a “prompt payment” claim under section 542.060 of the Code. See Appellant’s Brief, pp.30-32. As previously noted, the “prompt payment” claim is based in Sections 542.055 and 542.058 of the Insurance Code. See supra , p.32. The remedy reads as follows: If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter , the insurer is liable to pay the holder of the policy or the bene ficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18% a year as damages, together with reasonable attorney’s fees.
T EX .I NS .C ODE §542.060 (emphasis added). In United States v. United Servs. Auto
Ass’n , 431 F.2d 735 (5th Cir.1970), cert. denied , 400 U.S. 992 (1971), the child of an Air Force officer received treatment at a government hospital, and “the United States brought suit on the medical payment provision of the officer’s automobile insurance policy.” The United States sued the insurance company for penalties and interest under T EX .I NS .C ODE §3.62, the predecessor of the current statute. Id . at 2. In affirming an award against the insuran ce company, the Fifth Circuit held that the United States was “a ‘holder’ of the policy within the terms of the Texas
statute.” Id . at 3. 61

61 citing Republic Nat. Life Ins. Co. v. Spillars , 363 S.W.2d 373, 376 (Tex.Civ.App.-- Waco 1962), rev’d on other grounds , 368 S.W.2d 92 (Tex.1963). See generally Encompass Office Solutions, Inc. v. Ingenix, Inc. , 775 F.Supp.2d 938, 947-948 & n.1 (E.D.Tex.2011).59 Similarly, under ERISA, “[a] civil action may be brought by a participant or beneficiary.” 29 U.S.C. §1 132(a)(1) (emphasis added), and a health care provider, or its assignee, can sue under this provision to collect benefits owed to covered employees. See Tango Transport v. Healthcare Financial Services,
LLC , 322 F.3d 888, 889-890 (5th Cir.2003) (allo wing financial service company to sue on claims assigned by ERISA participant). In reaching these decisions, courts have reasoned that “granting derivative standing to the assignee of health care providers helps plan participants and beneficiaries by encouraging providers to accept participants who are unable to pay up front.” Id. at 894. Thus, “to bar healthcar e providers from assigning their rights under ERISA . . . would chill health care providers’ willingness to accept a patient.” Id . Similarly, a lender “will only be willing to purchase an assignment from a healthcare provider if they can be assured that they will be afforded standing to sue for reimbursement.” Id. Old American cites Cash Rent-a-Car, Inc. v. Old American County
Mut. Fire Ins. Co. , No. 01-09-00021-CV, 2010 WL 143482, 2010 Tex.App. LEXIS 250 (Tex.App.--Houston [1st Dist.] Jan. 4, 2010, no pet.), for the proposition that “only [the] insured c ould assert a claim under Chapter 542.” Appellant’s brief, p.31. But that decision was based on a provision denying “prompt payment” to third-party claimants. See T EX .I NS .C ODE §542.051(2)60 (“Claim” means a first party claim that is made by an insured or policy holder”) (emphasis added). Again, Lincoln is not a third-party claimant. See supra , p.58. 13. Alternatively, the Insurance Code claims were assigned and they were assignable. Were the claims assigned? “Absent specific circumstances, causes of action in Texas are fully assignable.” Fitness Evolution , 2015 Tex.App. LEXIS 11496, at *43. 62 It is undisputed that Howard assigned his benefits under the policy. and “[a]n assi gnment to receive payment of benefits necessarily incorporates the right to seek payment. [T]he right to receive benefits would be hollow without such enforcement capabilities.” Encompass Office Solutions, Inc. v. Ingenix, Inc. , 775 F.Supp. at 949. 63 Were the claims assignable? Most kinds of claims are assignable, but in a few kinds of cases an assignment may be invalidated by the courts because it is found to offend public policy. The Texas S upreme Court has held that certain types of assignments are invalid be cause they violate public policy: (1) an assignment of a cause of acti on that works to collude against an insurance carrier; (2) an assignment of a legal malpractice claim; (3) an assignment that creates a Ma ry Carter agreement; (4) an assignment of the Plaintiff’s cause of action to a joint tortfeasor of the defendant; and (5) an assignment of inte rest in an estate that distorts the true positions of beneficiaries.

62 Accord Douglas-Peters , 2017 Tex.App.LEXIS 1836, at *22.

63 quoting Conn. State Dental v. Anthem Health Plans , 591 F.3d 1337, 1352 (11th Cir. 2009).61 Douglas-Peters , 2017 Tex.App. LEXIS at *23 ( citing PPG Industries , 146 S.W.2d
at 87 n.31. PPG Industries involved a building, completed in 1978, which included more than 12,000 windows manufactured and installed by PPG. Id. at 83. PPG replaced some of the windows in 1982. Id. The building was sold in 1989 and all of the seller’s warra nties were assigned to the purchaser. More window problems appeared in 1991, and the purchaser for breach of warranty. Id . The jury awarded $4.7 million as damages. Id. “The trial court trebled the award under the mandatory provisions of the 1973 DTPA.” Id. PPG appealed. The Supreme Court upheld the award of actual damages for breach of warranty but it reversed the award of treble damages under the DT PA because the original owner’s DTPA claim was not assignable on public policy grounds. Id . at 83-84. In an opinion by Justice Scott Brister, the court distinguished between “plac[ing] the power of treble damages in the hands of aggr ieved parties” and “plac[ing] it in the hands of those cons idering litigation for commercial profit.” Id. at 85 (emphasis added). Thus, the Court held that “the DTPA claim could not be assigned lest they fall into the hands of “arbitrageurs” or “wealthy entrepreneurs,” who “buy DTPA claims chea p and sell them dear.” Id. at 86-87 (emphasis added). These concerns are not app licable to our case. Lincoln is not an “arbitrageur” or “wealthy entrepreneur” who “buys62 claims cheap and sell them dear.” Ra ther, like other factor ing companies which operate in this area, Lincol n merely provides up-front cash to pay for funerals. By assigning rights under a life insurance polic y, a beneficiary can, at a difficult time, obtain ready cash to provide a funeral for a loved one. The sa me policy arguments that underlying “derivative standing” in ER ISA cases are also at work here. Allowing factoring companies to have standi ng will help provide funerals to those “who are unable to pay up front.” To ba r the beneficiaries of those insurance policies from assigning their rights under the Insurance Code will chill a factoring company’s willingness to provide up-front cash for funerals. See supra, p.59. Moreover, PPG Industries involved a DTPA claim, but in our case Lincoln did not seek or obtain summa ry judgment under the DTPA. Old American says that the court in Lee v. Rogers Agency , 517 S.W.3d 137 (Tex.App.-- Texarkana 2017, no pet.), “held that the ow ner of a life insurance policy could not validly assign his [bad faith] claims to a trustee.” Appellant’s brief, p.28. But Lee did not involve the validity of assignment. Rather, in that case, insurance code claims were “relinquished when the po licies were transferred to [a] Trust.” Id. at 146. The Lee opinion does contain a lengthy footnote noting that “the Supreme Court has not addres sed whether Insurance Code claims are assignable.” 517 S.W.3d at 146 n.3 (emphasis added). It does, however, note that some federal63 courts have extended the PPG holding to Insurance Code claims. Two of these cases involve assignability of “bad faith” claims. 64 The footnote also notes that federal district courts ha ve taken opposite positions as to the assignability of “prompt payment claims.” 65 Certainly, in this regard, the notion that “wealthy entrepreneurs” would somehow traffic in claims for 18% interest and attorney’s fees is ridiculous. In our case, public policy factors weigh in favor of assignability. Yet, life insurance companies, like Old American, are obviously willing to treat factoring companies no di fferently from the way they treated beneficiaries before the enactment of the Insurance Code. Th ey hold on to the money until the last minute, and when they are finally sued, they simply pay up and say that they have complied with the insurance contract. But they have not complied with extra contractual duties im posed by the Insurance Code, and this Court should hold that “prompt payment” claims in this case are assignable.

64 See Great Am. Ins. Co. v. Fed. Ins. Co. , No. 3:04-CV-2267-H, 2006 WL 2263312, 2006 U.S.Dist. LEXIS 55038, at *29-*30 (N.D.Tex. Aug. 8, 2006); Launius v. Allstate Ins. Co. , No. 03-06-CV-0579-B, 2007 WL 113547, 2007 U.S.Di st. 28286, at *14-*15 (N.D.Tex. Apr. 17, 2007). Old American also cites Montoya v. State Farm Mut. Auto Ins. Co. , No. 16-00005 (RCL), 2016 WL 5942327, 2016 U.S. Dist. LEXIS 141, 322, at *18 (W.D.Tex. Oct. 12, 2016). See Appellant’s Brief, p.31.

65 Cf. Berkley Regional Ins. Co. v. Philadelphia Indem. Ins. Co. , No. A-10-CA-3662-SS, 2011 WL 9879170, 2011 U.S.Dist. LEXIS 155, 852, at *22-*27 (W.D.Tex. Apr. 27, 2011); with American Southern Ins. Co. v. Buckley , 748 F.Supp.2d 610 (E.D.Tex.2010).64 14. Lincoln does not have standing as to the claim under Section 542.003 of the Insurance Code. See Appellant’s brief, pp.29-30. We also alleged that Old Ameri can made misrepresentations in violation of Section 542.003 of the Insura nce Code, which prohibits an insurer from “knowingly misrepresenting to a claima nt pertinent facts or policy provisions relating to covera ge at issue.” T EX .I NS .C ODE §542.003(b)(1). See Motion, pp.25- 340 (203-208). This particular provision is found in Chapter 542, Subchapter A, which concerns dealings between insurers a nd the Texas Department of Insurance. It requires an insurer to keep a record of complaints and to report them to the Department. 66 Also, the Department has aut hority to investigate handling of claims and to issue cease and desist or ders and to recover attorney’s fees. 67 The remedy for this subchapter in found in Section 542.012, which allows recovery of attorney’s fees. As it turn s out, that remedy is only available to the Department of Insurance, and we now concede that we do not have standing to assert this particular claim for misrepresentation. In this regard, a number of courts have held that there is no private cause of action under Chapter 542, Subchapt er A; and Old American cites those cases on pages 29 and 30 of its brief. Ho wever, one of these cases goes too far,

66 Id . §542.005 & 542.006.

67 Id . §542.010 & 542.012.65 saying that there is no private cause of action for all of Chapter 542. See KLZ Diamond Tools, Inc. v. TKG Gen. Agency, Inc. , 2016 Tex.App.LEXIS 7639, at *19 (Tex.App.--Dallas July 18, 2016, no pet.) (“Chapter 542 does not provide a private cause of action for violations of its terms. ”). That statement is dicta, and it is overbroad. Like all of the cases cited by Old American, that case involved Section 542.003. And of course, Section 542.003 fa lls into Chapter 542, Subchapter A. By contrast, the law is well settled that th ere is a private cause of action for bad faith and misrepresentation claims, which fall under Chapter 542, Subchapter B.
PRAYER The judgment of the trial court shoul d be affirmed. Costs should be adjudged against Old American. Respectfully submitted,
/s/ Frank Gilstrap 07964000 HILL GILSTRAP, P.C. 1400 West Abram Street Arlington, Texas 76013 (817) 261-2222 (817) 274-9724 fax fgilstrap@hillgilstrap.com ATTORNEY FOR APPELLEE66 CERTIFICATE OF SERVICE I hereby certify that on Decembe r 21, 2017 a copy of the foregoing Appellee’s Brief was served on th e following counsel of record: David R. Sweat 3705 W. Green Oaks Blvd., Ste. C Arlington, Texas 76016 /s/ Frank Gilstrap
CERTIFICATE OF COMPLIANCE I certify that this brief was prep ared using Microsoft Word 2013, and that, according to that program’s word-count function, the sections covered by TRAP 9.4(i)(1) contain 12,667 words. /s/ Frank Gilstrap