Opinion ID: 894821
Heading Depth: 1
Heading Rank: 3

Heading: Is Interpleader an Exception to the Statute?

Text: State Farm also argues that the prompt payment statute does not apply when rival claims require an insurer to file an interpleader. Since at least 1874, there have been Texas statutes punishing an insurer's failure to pay promptly. [14] Until 1991, these statutes generally provided that if a life insurance claim was not paid within 30 days, the insurer had to pay penalty interest of 12 percent and attorney's fees to the policy beneficiary. [15] Throughout this same period, Texas common law provided that an insurer faced with rival claims to policy proceeds could interplead the funds, join the rivals who claimed them, and be discharged from further liability. [16] Under the common law, a stakeholder is entitled to recover its attorney's fees from the deposited funds unless there were no rival claimants or the interpleader was unreasonably delayed. [17] Thus, Texas statutes have long punished insurers for delays beyond 30 days, while the common law punishes them only for unreasonable delays  an unspecified period that depends on the facts of each case. Generally, these two rules have operated in harmony: insurers interpleading within 30 days collected fees consistent with both rules, and those who unreasonably delayed interpleading paid penalties consistent with both. But in some cases the different standards inevitably overlapped. Thus, for example, in Great American Reserve Insurance Co. v. Sanders , an insurer filed its interpleader 37 days after receiving a claim  more than 30 days, but less than an unreasonable delay. [18] As both parties could not collect fees in such cases without partially frustrating both rules, one had to yield. For many years, Texas courts held that the statute must yield to the common law  that an interpleader filed within a reasonable time did not subject the insurer to the statutory penalties regardless of the statutory deadlines. [19] But in 1991, the Legislature changed the prompt payment statute, raising the penalty interest to 18 percent and the deadline for payment (in most cases) to 60 days. [20] Neither the statute nor the legislative history mention interpleader, or the purpose for the amendments other than those obvious from the facial changes. For several reasons, we hold that the interpleader exception to the prompt payment statute did not survive the 1991 changes. First and foremost, the statute itself makes no such exception. While we generally presume the Legislature accepts judicial interpretations of a statute by reenacting it without substantial change, [21] we do not make that presumption when there have been substantial changes, [22] or when it would contradict the statute's plain words. [23] Here, the 1991 amendments made substantial changes, and plainly require an insurer who fails to pay policy proceeds within 60 days to pay penalties too. Creating an exception for interpleaders filed after this deadline would mean simply ignoring the statute in some cases. Second, prompt payment statutes before 1991 were considered penal in nature and strictly construed. [24] But in the 1991 amendments the Legislature provided that the statute shall be liberally construed to promote its underlying purpose. [25] While exempting interpleaders might be consistent with a strict construction, it is inconsistent with a liberal one. [26] Third, compliance with the statute would not frustrate the primary purposes behind interpleader. As already noted, the common-law rule has long punished unreasonable delays by barring recovery of attorney's fees; imposing other penalties too is not inconsistent with that policy. Nor is the Legislature's choice of 60 days at the outer limit for reasonable delay; legislatures generally have the prerogative of setting such bright-line rules, and the vulnerability of insureds justifies special protection in the insurance context. [27] Some delay before filing an interpleader may benefit all concerned, if settlement can be reached before lawyers must be hired and pleadings filed. [28] But given recent increases in avenues for communication and dispute resolution, it is hard to argue that the statute's safe-harbor of 60 days  double the period allowed throughout most of Texas history  is insufficient. To sum up, continuing to recognize an interpleader exception to the prompt payment statute would frustrate its purpose in some cases, while removing the exception would allow the purposes of both the statute and interpleader to be fulfilled. Accordingly, we hold that State Farm's interpleader did not render the statute inapplicable.