Court Opinion

ID: 9671872
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:44:12.50161+00
Date Added: 2024-06-11T18:13:44.948629
License: Public Domain

OPINION
GRANT, Justice.
This is a bad faith insurance case with liability premised on violations of the Insurance Code. Maryland Insurance Company appeals from a judgment rendered in favor of its insured, Head Industrial Coatings and Services, Inc., and also appeals from a take-nothing judgment rendered against it on its third-party action against Gans & Smith Insurance Agency. The primary issues on ap*223peal involve the existence of a viable cause of action under the Insurance Code for unfair claims settlement practices and bad faith conduct by an insurer on a third-party liability policy, the sufficiency of the evidence to support the jury’s determination that Maryland engaged in unfair or deceptive acts, the amount of the jury finding of damages, the effect of a settlement agreement, and the assessment of a statutory interest penalty against Maryland because of its tardy payment of a claim.
Head Industrial Coatings and Services, Inc. is one of two family-owned businesses that together provide vacuuming, sandblasting, and coating services to various industries, including Texas Utilities (TU), that utilize storage tanks and towers. As a prerequisite to working for TU, Head agreed to indemnify TU for any injury claims arising out of services Head performed and to purchase contractual liability insurance coverage to protect TU against claims arising out of work performed by Head at TU facilities.
Head contacted its local insurance agent, Hermes Payne of Gans & Smith Insurance Agency, and purchased a commercial general liability policy with a $500,000 policy limit. Maryland Insurance Company was the insurance carrier. Head intended to purchase contractual liability insurance as part of the policy and communicated this intent to Payne, who is one of the owners of Gans & Smith. There is evidence indicating that Head paid the premiums for a policy that included the contractual liability insurance. Payne committed a clerical error, however, and the policy actually issued to Head did not include the proper endorsement to create such coverage.
The underlying cause of the present litigation is a suit filed in 1989 against TU and Head by Don Nelson, a Head employee, who was injured while working on TU’s premises during the time period covered by the insurance policy. The suit papers were forwarded to Maryland’s Dallas claims office. Maryland assigned the matter to one of its claims adjusters, Bob Smith, and also employed an attorney to defend Head against Nelson’s claims.
In February 1990, TU sent a demand letter to Head, requesting that Head indemnify TU and provide it with a defense in the Nelson suit as agreed, and later filed a cross-claim against Head in the Nelson suit based on contractual indemnity. Head forwarded the demand letter to Smith. Smith consulted an attorney, who correctly opined that TU’s cross-claim was not covered under the general commercial liability policy issued to Head. The claims adjuster sent Head a reservation-of-rights letter advising Head of potential coverage problems concerning both Nelson’s personal injury claims and any contractual indemnity claims. Head contacted Payne, who assured Head that TU’s contractual liability claim was covered.
After receiving a copy of the reservation-of-rights letter, Payne reviewed the file and discovered his error in failing to secure insurance coverage to protect TU. Payne was embarrassed and attempted to contact a friend, Tom Southard, who is the Texas claims ' manager for Maryland Insurance Company. Payne left a message requesting that Southard call him about a problem with a claim, but did not specify what claim was troublesome. Southard did not return the call and denied receiving the message. Payne made no further effort to inform Maryland about the error. Some time after the judgment was rendered in the Nelson suit (over two years later), Payne finally talked to Southard but did not disclose his error in excluding the promised contractual liability coverage from Head’s policy. Payne explained that by the time he spoke with Southard he was represented by an attorney and did not know what he could or could not tell Southard.
The attorney Maryland hired to represent Head in the Nelson suit contacted Smith, the claims adjuster, and said that Boyce Head, the president of Head Industrial, was irate because he had been promised contractual liability coverage. Southard testified that insureds tend to be upset when coverage is denied. Southard also testified that copies of all communications were sent to Gans & Smith and that, in his experience, an agent who believes that the adjuster is wrong in his assessment of coverage usually contacts the *224claims adjustment office with his concerns. Southard had known Payne to raise such coverage questions in the past.
In May 1990, Maryland denied coverage for the contractual liability claim asserted by TU. Maryland’s denial of coverage also caused Head to lose the coverage it had under an excess insurance policy issued by another company.
The Nelson suit proceeded to trial before the court. In May 1992, the trial court rendered judgment in favor of Nelson against TU, and in favor of TU on its indemnity cross-claim against Head for approximately $1,889,000, which is the amount of Nelson’s judgment plus TU’s attorney’s fees and costs. In the meantime, Head had filed suit against Maryland, Payne, and Gans & Smith in 1991, alleging wrongful denial of its claim under the commercial liability policy.
Head moved for and was granted a nonsuit without prejudice in August 1992, after entering into two settlement agreements. In the first, Nelson, TU, TU’s workers’ compensation carrier, and Head entered into a settlement arrangement whereby Head assigned its rights against Maryland to Nelson and guaranteed Nelson a recovery of $500,-000. In exchange, Nelson promised not to execute against Head’s assets.1 In the second settlement agreement, executed by Head, TU, and Gans & Smith, Gans & Smith guaranteed $500,000 to Head. In return, Head promised to hold Gans & Smith harmless as to any amounts in excess of $500,000 and to indemnify Gans & Smith as to any claims brought against it by Maryland. Head then refiled suit against Maryland and dropped Payne and Gans & Smith from the case. Maryland, asserting that its agent had breached its fiduciary duties as well as the agency agreement, brought Gans & Smith back into the suit as a third-party defendant.
In a deposition in April 1993, Payne testified about the clerical error and promises of contractual liability coverage made to Head. At trial, some three years after the denial of coverage, Maryland admitted that Head’s claim should have been honored and represented to the court and jury that it was willing to pay the policy benefits. The trial court found that contractual liability coverage existed as a matter of law and did not submit the coverage issue to the jury.
The jury found that Maryland had engaged in various unfair or deceptive acts in violation of the Insurance Code, but had not acted knowingly.2 The jury awarded Head actual damages of $1,800,000. The jury found that Gans & Smith had not breached any fiduciary duty owed to Maryland and had not breached its agency contract with Maryland.
The trial court rendered judgment against Maryland for Head’s actual damages plus defense costs that Head incurred in TU’s cross-action in the Nelson suit. The trial court also imposed a statutory penalty under *225Article 21.55 of the Insurance Code.3 A take-nothing judgment was rendered against Maryland in its third-party action.
VIABILITY OF A CAUSE OF ACTION
Maryland contends that the trial court erred in rendering judgment on the jury’s finding that it failed to attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claim against its insured because allegations of unfair claims settlement practices do not give rise to a private cause of action. The jury question was based on Article 21.21-2 of the Insurance Code, which regulates claims settlement practices. See Tex.Ins.Code Ann. art. 21.21-2 (Vernon 1981 & Supp.1995).
The Texas Supreme Court has expressly held that Article 21.21-2 is subject to enforcement only by the State Board of Insurance and does not give rise to a private cause of action. See American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847 & nn. 10-11 (Tex.1994); Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 148 & n. 6 (Tex.1994); see also CNA Ins. Co. v. Scheffey, 828 S.W.2d 785, 791 (Tex.App. —Texarkana 1992, writ denied). Head Industrial concedes this point in its brief. This point of error is sustained.
Maryland also challenges the existence of a cause of action under the Insurance Code for an insurance carrier’s failure to process a claim in good faith and breach of the duty of good faith and fair dealing. Maryland cites Watson, 876 S.W.2d 145. In Watson, the Texas Supreme Court ruled that third parties do not have standing to proceed directly against an insurance company under Section 16 of Article 21.21 of the Insurance Code for unfair claims settlement practices. Id. at 150. The court emphasized that its decision in Vail4 was predicated upon the special insurer-insured relationship. Id. at 149. The court reaffirmed Vail as the law governing claims for alleged unfair claims settlement practices brought by insureds against their insurers, but determined that a third-party claimant has no basis for demanding the extracontractual obligations imposed on insurers under Article 21.21 with regard to their insureds. Id. Unlike the Watson situation, Head Industrial is the named insured in the policy issued to it by Maryland.5
Through Board Order 18663, promulgated by the State Board of Insurance, conduct determined pursuant to law to be an unfair or deceptive act or practice in the insurance business is actionable under Article 21.21 of the Insurance Code. See 28 Tex.Admin.Code § 21.3 (West 1994) (State Bd. of Ins.); see also Tex.Ins.Code Ann. art. 21.21, § 16 (Vernon Supp.1995) (making actionable any conduct defined in Board rules or regulation as unfair or deceptive). The Texas Supreme Court has held that an insurer’s failure to deal fairly and in good faith with its insured — a determination that encompasses an insurer’s lack of good faith in processing a claim — is an unfair or deceptive act. See Vail v. Texas Farm Bureau Ins. Co., 754 S.W.2d 129, 135 (Tex.1988); Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210 (Tex.1988); Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165 (Tex.1987). This holding is a determination pursuant to law, thus making the issue of an insurer’s bad faith actionable under the Insurance Code. Vail, 754 S.W.2d at 135.
In the recent case of Texas Farmers Insurance Company v. Soriano, the Texas Supreme Court stated that it had never recognized a cause of action for a breach of the duty of good faith and fair dealing when the insurer failed to settle third-party claims against its insured. Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312 (Tex.1994). It observes that this standard of care owed by *226insurers to the insureds was in suits involving first-party claims. Id. at 817 (citing Arnold, 725 S.W.2d at 167). This is dicta in the Soriano case because it was not raised on appeal. See id.
If there is no breach of duty, then there can in turn be no statutory claim for unfair or deceptive acts based on that breach of duty. But to hold that a duty extends only to an insured under first-party policies is incomprehensible. The duty of good faith and fair dealing is premised both on the special relationship between an insured and his insurer and on the fact that the insurance company has exclusive control over the evaluation, processing, and denial of claims. Arnold, 725 S.W.2d at 167. It is illogical to say that an insurer who has a contract with its insured and has the same exclusive control over processing a claim does not owe a good faith duty to its insured merely because the policy is one covering the insured’s liability to others.
The special relationship that underlies the Arnold, Aranda, and Vail decisions, as recognized and reaffirmed in the Watson decision, exists in the present case despite the fact that the underlying policy provides liability coverage. This Court has recently stated it will continue to follow Vail “until the Texas Supreme Court tells us that it is not to be followed in a case involving an insured.” Crum & Forster, Inc. v. Monsanto Co., 887 S.W.2d 103 (Tex.App.— Texarkana 1994, no writ). We concluded in the Monsanto case that the Supreme Court had not closed the door to suits under the Insurance Code in cases dealing with an insured as in the case of Vail. Because there is a special relationship between an insured and insurer, the court will follow Vail and hold that the breach of the duty of good faith and fair dealing owed to an insured, even as in this case one covered by a liability policy, can constitute an unfair or deceptive act or practice pursuant to law and can subject a carrier to liability under Article 21.21 of the Insurance Code. This point of error is overruled.
BAD FAITH
Maryland contends that there is no evidence or factually insufficient evidence to support the jury finding that it engaged in unfair or deceptive acts or practices by failing to process a claim in good faith and failing to comply with its duty of good faith and fair dealing to Head. In reviewing a no evidence point, the reviewing court considers only the evidence supporting the jury’s findings and disregards all contrary evidence and inferences. National Union Fire Ins. v. Dominguez, 878 S.W.2d 373, 376 (Tex.1994). If there is any evidence of probative force to support the finding, the point is overruled and the finding upheld. In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). When reviewing the factual sufficiency of the evidence to support the jury’s verdict, we examine all of the evidence and set aside the verdict only if it is so against the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).
To establish a bad faith cause of action, the plaintiff must show that there was no reasonable basis for the denial of or delay in processing his claim and must further show that the carrier knew or should have known that fact.6 Union Bankers Ins. Co. v. Shelton, 889 S.W.2d 278 (Tex.1994); Aranda, 748 S.W.2d at 213. Reviewing the legal sufficiency of the evidence to support a bad faith claim presents the appellate courts with a “conundrum” in that the record must be reviewed for no evidence of a negative fact— the absence of a reasonable basis for the insurer’s denial of the claim or delay in payment or processing. Lyons v. Millers Casualty Ins. Co. of Texas, 866 S.W.2d 597, 600 (Tex.1993); see also Dominguez, 873 S.W.2d at 376.
*227Gans & Smith told Head that contractual liability insurance was part of its policy and continued to make such assurances to Head after Nelson filed suit and TU filed its cross-action. The trial court held that the facts established as a matter of law that coverage for contractual indemnity existed. The issue of bad faith, however, focuses on the reasonableness of the insurer’s conduct and not on the validity of the claim. Lyons, 866 S.W.2d at 601. The evidence adduced by the plaintiff in support of a bad faith action must relate to the tort issue of no reasonable basis for the insurer’s conduct, not just to the contract issue of coverage. Id. at 600; see also Dominguez, 873 S.W.2d at 376.
A great distinction exists between an insurer’s contractual liability under the policy and a claim of bad faith regarding delay or denial of a claim under the policy. See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10,17 (Tex.1994); Lyons, 866 S.W.2d at 600-01. Carriers retain the right to deny invalid or questionable claims and will not be subject to liability for acting in bad faith merely because the denial of such a claim is eventually determined to be erroneous. Aranda, 748 S.W.2d at 213. If an insurer denies what is later determined to be a valid claim under a contract of insurance, the insurer must respond in actual damages up to the policy limits; however, as long as an insurer has a reasonable basis to deny or delay payment of the claim, even if that basis is eventually determined to be erroneous, the insurer is not liable for the tort of bad faith. Lyons, 866 S.W.2d at 600.
The first element of a bad faith action, the absence of a reasonable basis, requires an objective determination of whether a reasonable insurer under similar circumstances would have delayed or denied the policy benefits. Dominguez, 873 S.W.2d at 376. Whether a reasonable basis exists is judged by the facts before the insurer at the time the claim was denied. Viles v. Security Nat’l Ins. Co., 788 S.W.2d 566, 567 (Tex.1990). To be legally sufficient, the evidence, when viewed in the light most favorable to the verdict, must be such as to permit the logical inference that the insurer had no reasonable basis to deny or delay paying the claim and knew or should have known that fact. Lyons, 866 S.W.2d at 600. Only after an appellate court has determined what potential basis an insurance company had for denying a claim can the court then conduct a meaningful review of the evidence. Dominguez, 873 S.W.2d at 377.
From the outset, Maryland challenged the contractual liability claim because the policy, as issued, did not provide coverage for that type of claim. In fact, the policy issued expressly denies that such coverage is provided. Payne’s error in not including the requested endorsement is undisputed, but this became more than a clerical error when Payne did nothing to correct the error. The adjuster, even though notified of Head’s contentions, never asked Payne if there had been an error in issuing the policy.
A carrier is liable to the insured for acts of its agents that breach a duty of good faith and fair dealing. Natividad v. Alexsis, Inc., 875 S.W.2d 695 (Tex.1994). Payne’s silence was tantamount to misrepresentation, because he was aware that coverage was being denied because of his failure to correct his error. Knowing misrepresentation by an agent meets the “knowingly” requirements of the DTPA and Insurance Code. Underwriters Life Ins. Co. v. Cobb, 746 S.W.2d 810 (Tex.App.—Corpus Christi 1988, no writ); see also Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96 (Tex.1994). The evidence shows that Maryland knew or should have known that there was no reasonable basis for denying coverage. These points of error are overruled.
KNOWING CONDUCT
Head contends that the agent’s admitted knowledge constituted corporate knowledge as a matter of law, which would entitle Head to additional damages under the Insurance Code. Thus, Head contends that the jury’s failure to find that the conduct was done knowingly was a nullity, and Head had requested the trial court to ignore this jury finding and to enter such a finding as a matter of law. Head contends that the trial court erred in Jury Question 2, which asked if Maryland engaged in conduct knowingly, *228by failing to give the requested instruction and by not submitting such an instruction in any form. Maryland responds that just because the agent knew did not mean that its conduct was done knowingly by the corporation.
A corporation is a legal fiction and can act only through its agents. Underwriters Life Ins. Co. v. Cobb, 746 S.W.2d at 821. The general rule of agency law is that notice to an agent, when the agent is acting within the scope of his authority with respect to a matter over which his authority extends, constitutes notice to the principal. Southern Farm Bureau Casualty Ins. Co. v. Allen, 388 F.2d 126 (6th Cir.1967); University State Bank v. Gifford-Hill Concrete Corp., 431 S.W.2d 561 (Tex.Civ.App.—Fort Worth 1968, writ ref'd n.r.e.). The knowledge of the agent is the knowledge of the company itself. Traders & General Ins. Co. v. Lucas, 281 S.W.2d 188 (Tex.Civ.App.— Galveston 1955, writ ref'd n.r.e.). The test is whether the agent was acting within the scope of the agency relationship, not whether the principal authorized the specific wrongful act. Celtic Life Ins. Co., 885 S.W.2d at 99.
Head requested an instruction on the doctrine of imputed knowledge7 in connection with Jury Question 2, in which the jury was asked to decide if Maryland engaged in its wrongful conduct knowingly. Head asked that the jury be instructed that knowledge by its agent would be imputed to Maryland.
The jury was instructed that knowingly means “actual awareness of the falsity, deception, or unfairness of the conduct in question. Actual awareness may be inferred where objective manifestations indicate that a person acted with actual awareness.” This instruction follows the definition of knowingly set out in both the DTPA and the Insurance Code. See Tex.Bus. & Com.Code Ann. § 17.45(9) (Vernon 1987); Tex.Ins.Code Ann. art. 21.21, § 2 (Vernon Supp.1995). An instruction on agency may have been appropriate, but it would not contain the lengthy wording requested by Head and should contain a limitation of “knowledge within the scope of the agency.”
At trial, Maryland took the position that the requested imputed-knowledge instruction conflicted with the statutory definition of knowingly. In State Farm Fire & Casualty Company v. Gros, the court was dealing with the same definition of knowingly, but found that the knowledge of its agent was attributable to State Farm Insurance Company. State Farm Fire & Casualty Co. v. Gros, 818 S.W.2d 908 (Tex.App.—Austin 1991, no writ). In the case of La Sara Grain Company v. First National Bank of Mercedes, the Texas Supreme Court held that a corporation is bound by the knowledge of its agent if that knowledge came to him in the course of the agent’s employment. La Sara Grain Co. v. First Nat’l Bank of Mercedes, 673 S.W.2d 558 (Tex.1984). This determination was made in showing that the bank was not acting in good faith. The Commission of Appeals set forth in Mays v. First State Bank of Keller the well-settled rule of law in Texas which charges the principal with knowledge possessed by the agent in those cases in which the officer or agent is the sole representative of a corporation in the transaction *229in question. Mays v. First State Bank of Keller, 247 S.W. 845, 846 (Tex.Comm’n App. 1923, judgm’t adopted). As the Texas Supreme Court said in Wellington Oil Company of Delaware v. Maffi, “The rule has been announced by this court that a principal, whether a corporation or natural person, is not affected by a notice which comes to the agent or officer unless such knowledge came to him while he was transacting the business of his principal.” Wellington Oil Co. of Delaware v. Maffi 136 Tex. 201, 150 S.W.2d 60, 63 (1941) (emphasis added). The quotation goes on to say that if the agent is “representing his principal in the transaction to which his knowledge relates, the principal will not be permitted to avail himself of the benefits of his agent’s services without being charged with his knowledge.” Id. (citing many Texas cases).
In the present case, Gans & Smith was the local recording agent for Maryland. Such agents are vested with authority coextensive with that of the insurer insofar as writing insurance is concerned. Blakely v. American Employers’ Ins. Co., 424 F.2d 728 (5th Cir.1970); American Nat’l Life Ins. Co. v. Montgomery, 640 S.W.2d 346 (Tex.App.—Beaumont 1982, writ ref'd n.r.e.). A local recording agent has the authority to speak and act for the company and to transact all insurance business which that company is authorized to transact under its permit from the state. Home Ins. Co. of New York v. Roberts, 129 Tex. 178, 100 S.W.2d 91 (1937). In Shatter v. Commercial Standard Insurance Company, the Texas Supreme Court said that the purpose of this section in the Insurance Code was to vest local recording agents with authority coextensive with that of the insurance company insofar as writing insurance is concerned and to remove all questions of the local agent’s actual or apparent authority from the field of cavil or dispute. Shaller v. Commercial Standard Ins. Co., 158 Tex. 143, 309 S.W.2d 59 (1958); see also Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688 (Tex.1979). The agent’s knowledge is, therefore, imputed to the principal. There is no dispute in the present case that Gans & Smith was an authorized recording agent and the policy that should have been issued was within the authority of that agency. Corporations, as well as natural persons, are responsible for the knowledge possessed by those whom they appoint as agents. Dixon v. United States Fidelity & Guar. Co., 293 S.W. 291 (Tex.Civ.App.—Texarkana 1926, writ dism’d). Because of the nature of a corporation, it cannot transact any business except through its agents. Because a corporation operates through individuals, privity and knowledge of individuals at a certain level of responsibility must be deemed privity and knowledge of the organization; otherwise, it could always limit its liability. Continental Oil Co. v. Bonanza Corp., 706 F.2d 1365 (5th Cir.1983). Where the level of responsibility begins must be discerned from the circumstances of each case. Id.
There is no dispute that Gans & Smith was an authorized recording agent for Maryland, that the policy that should have been issued was within the scope of that agent’s authority, and that Payne was acting on behalf of the recording agent. There is also no dispute in the record that Payne had full knowledge of the policy that he had issued more than three years before the suit, that he had knowledge of the correct policy that he should have issued, and that he had been aware for more than three years that a claim had been denied under the erroneous policy. These factors being undisputed and uncontested, Head was entitled to a determination as a matter of law that the violation of the Insurance Code had been done knowingly.
DUE PROCESS ARGUMENT
Maryland takes the position that civil punishment to which Head would be entitled by a determination that the conduct was done knowingly cannot be taken against a principal based solely upon vicarious or imputed knowledge or intent. It refers to the McGuff rule.8 King v. McGuff 149 Tex. 432, *230234 S.W.2d 408 (1960). The McGuff ease dealt with punitive damages for malicious misconduct of a servant in a common-law negligence action. The present case deals with damages under Article 21.21, § 16(b)(1) of the Insurance Code, which specifically authorizes a recovery of three times the amount of actual damages. This recovery is not dependent on the rules of common-law negligence, but rather depends on the existence of corporate knowledge. In State Farm Fire & Casualty Company v. Price, State Farm argued that the procedure for assessing additional damages under the Insurance Code and the DTPA was a violation of due process and equal protection under the constitution. State Farm Fire & Casualty Co. v. Price, 845 S.W.2d 427 (Tex.App.—Amarillo 1992, writ dism’d by agr.). The court determined that such permissible damages under the statutes for knowing violations did not violate the due process and equal protection provisions of the constitution. We find that such a recovery in the present case does not violate Maryland’s constitutional rights. This argument is overruled.
PROXIMATE CAUSE
Maryland further contends that submitting the issue of breach of the duty of good faith and fair dealing as a statutory violation, instead of as a common-law tort, allowed Head to circumvent its burden to prove proximate causation to recover damages for Maryland’s breach of duty. The common-law tort for breach of the duty of good faith and fair dealing requires proof that the carrier’s lack of good faith proximately caused damages to the insured. See Aranda, 748 S.W.2d at 215. In the present case, however, the case was submitted to the jury as one involving unfair or deceptive acts in violation of the Texas statutes, not as a common-law tort. Unfair or deceptive acts or practices in the insurance industry are governed by Article 21.21, § 16 of the Insurance Code, which permits an injured party to recover actual damages resulting from wrongful conduct. Tex.Ins.Code Ann. art. 21.21, § 16(a) (Vernon Supp.1995). In conformity with the statute, the jury was asked what damages resulted from Maryland’s unfair or deceptive acts.
Maryland did not object to the omission of the proximate causation element prior to the charge being read to the jury. See Tex.R.Civ.P. 272. Failing to timely complain of the omission waives error. Tex.R.Civ.P. 274; see also Tex.R.Civ.P. 279; Ramos v. Frito-Lay, Inc., 784 S.W.2d 667, 668 (Tex.1990) (omitted element of ground of recovery, when not requested or objected to, deemed found in support of judgment if supported by some evidence). This point of error is overruled.
CONFLICTING JURY FINDINGS
Maryland contends that the jury’s findings regarding its unfair or deceptive acts are in irreconcilable conflict.9 In reviewing jury findings for conflict, the threshold question is whether the findings are about the same material fact. Bender v. Southern Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex.1980). It is our duty to harmonize jury findings whenever possible. Id. The jury’s answers cannot be struck down if there is any reasonable basis on which they can be reconciled. Id. Irreconcilable conflict is fatal, fundamental error requiring the judgment to be set aside. Little Rock Furniture Mfg. Co. v. Dunn, 148 Tex. 197, 222 S.W.2d 985, 991 (1949).
All five subparts to Question 1 constituted unfair or deceptive practices or acts under *231the DTPA. Jury Question 1(1) seemed general, but could be considered apart from the other specific acts or practices. Question 1(1) instructed the jury that:
False, misleading, or deceptive act or practice” means any act or series of acts that have the tendency to deceive an average ordinary person, even though that person may have been ignorant, unthinking, or gullible.
The jury answered, “No.” Maryland’s deceptiveness, or lack thereof, is a different fact issue than that at issue in the other subparts of the liability question.
Maryland also argues that the jury’s refusal to find that Maryland did not promptly and equitably pay a claim conflicts with the jury’s findings that Maryland unreasonably denied a claim in breach of its duty of good faith and fair dealing and failed to process a claim in good faith. Maryland informed the jury of its willingness to accept responsibility to pay the policy benefits. From this, the jury may have believed the evidence showed that when those in charge of paying the claim found out that Payne had made a clerical error, then they, on behalf of Maryland, were willing to abide by the policy and pay the claim when the liability became clear. The jury, however, might also have reasonably believed that Maryland, had it conducted a more thorough investigation at the time it processed the claim by getting the information from its agent, could have discovered its liability earlier.
The jury’s answers can be harmonized and are not in fatal conflict. These points of error are overruled.
DAMAGES
Maryland also contends that the trial court erred by rendering judgment against Maryland based on the jury’s answer to Question 3, the damages question, because there was insufficient evidence that Head sustained damages of $1,800,000 as a result of Maryland’s conduct and further contends that the trial court erred as a matter of law by rendering judgment in excess of the policy limits based upon a legally improper measure of damages.
In connection with the damages question, the jury was instructed to consider only the judgment rendered in the Nelson suit. Don Nelson recovered a judgment for $1,820,-894.93 in his personal injury action, and TU recovered a judgment against Head for $1,820,894.93 plus TU’s attorney’s fees of $68,500.44. In the present suit, the jury found that Maryland’s unfair or deceptive conduct resulted in $1,800,000 in damages to its insured.
The Insurance Code permits a plaintiff to recover actual damages sustained as a result of another’s unfair or deceptive acts. Tex.Ins.Code Ann. art. 21.21, § 16(a). The plaintiff must prove that the damages alleged were factually caused by the defendant’s unfair or deceptive conduct. Crawford & Co. v. Garcia, 817 S.W.2d 98, 101 (Tex.App.— El Paso 1991, writ denied); First American Title Co. v. Prato, 783 S.W.2d 697, 701 (Tex.App.—El Paso 1989, writ denied); see also Izaguirre v. Texas Employers’ Ins. Ass’n, 749 S.W.2d 550, 553 (Tex.App.—Corpus Christi 1988, writ denied) (holding, in common-law bad faith suit, that damages awarded must be result of insurer’s bad faith acts). Damages resulting from the underlying injury that forms the basis for the insurance claim are not a proper part of the recovery because these are not damages resulting from the insurer’s misconduct. See Tex.Ins.Code Ann. art. 21.21, § 16(a); Izaguirre, 749 S.W.2d at 553. This was not a Stowers10 case where it was shown that the underlying case could have been settled within the policy limits. Furthermore, there is no evidence to show that if Maryland had provided a defense the outcome of the underlying suit would have been different. The cases cited by Head to establish that the amount of the judgment in the underlying suit was the correct amount of damages are either cases in which the Stowers doctrine applied (there was an offer to settle within the policy limits) or cases in which the under*232lying judgment was within the policy coverage.
There was no evidence that Maryland’s misconduct resulted in $1,800,000 in damages to Head. Head was liable to TU for the amount of the underlying personal injury judgment because of the indemnity agreement it had with TU. Even if Maryland had covered the claim, the extent of contractual liability coverage was $600,000. Head contends that Maryland’s denial of the claim resulted in Head’s also losing $500,000 under an excess coverage policy issued by another carrier. The excess policy was contingent on the existence of a primary policy. However, there was no showing that Head could not collect on the excess policy after establishing the existence of the primary policy. Thus, Head has not shown a loss of the excess coverage. The proper legal measure of damages was limited to the $500,000 loss on the primary policy, which Maryland has conceded, and the cost of defending the suit, which was $37,792.
Maryland also contends that the trial court erred in awarding Head $37,792 for its defense costs and attorney’s fees incurred in the underlying lawsuit. Maryland contends that the trial court could not unilaterally award this amount to Head because a fact issue existed and Head failed to obtain a jury finding thereon.
The attorneys, at the suggestion of Head’s trial counsel, agreed that the issue of those defense costs and attorney’s fees on the underlying suit would be submitted to the court. An agreement that is made in open court and entered of record is enforceable. See Tex.R.Civ.P. 11. Maryland agreed to submit the issue to the trial court and cannot complain about that submission on appeal. This point of error is overruled.
STATUTORY PENALTY
Maryland questions the trial court’s assessment of an eighteen percent statutory penalty against Maryland under authority of Article 21.55 of the Texas Insurance Code, which provides that the penalty may be assessed when an insurer fails to comply with the article. Tex.Ins.Code ANN. art. 21.55, § 6 (Vernon Supp.1995). Article 21.55 imposes a duty on the insurer to promptly acknowledge and pay claims, but applies only to claims filed with the insurer on or after September 1,1991. See Act of May 27,1991, 72nd Leg., R.S., ch. 242, § 13.09, 1991 Tex. GenLaws 939, 1134. Although the statute does not define what constitutes filing a claim, the Austin Court of Appeals has held that an insured’s actions in providing the insurance company with the notice specified in the policy constitutes filing a claim. Mid-Century Ins. Co. v. Barclay, 880 S.W.2d 807, 810 (Tex.App.—Austin 1994, writ denied).
Head’s policy with Maryland requires the insured to give the company written notice containing sufficient particulars of the claim. Head asserts that the penalty provision applies because the written notice required under the policy was not satisfied until October 1991, when Maryland was served with Head’s original petition. Head filed the original petition in July 1991. In February of 1990, however, TU had demanded that Head provide TU with a defense and indemnity in the Nelson action. The demand was forwarded to Maryland’s claims adjuster. By May of 1990, Maryland had sent Head a letter denying contractual liability coverage under the policy and notifying Head that it would have to hire its own attorney to represent it in TU’s cross-action. This all occurred more than a year before the effective date of the statute. Because Head’s claim for contractual liability coverage was presented to and denied by Maryland before enactment of the statute, the trial court erred in assessing the statutory penalty against Maryland.
MARYLAND’S THIRD-PARTY ACTION
Maryland contends that it conclusively established its third-party action against its agent, Gans & Smith, as a matter of law. The jury failed to find that Gans & Smith breached its fiduciary duty or breached the agency agreement. In the alternative, Maryland challenges the jury’s negative answers as being against the great weight and preponderance of the evidence.
When examining the legal sufficiency of the evidence to support jury findings on which the appellant had the burden *233of proof, the appellate court first examines the record for evidence to support the jury’s answers and ignores all evidence to the contrary. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). If there is no evidence, the reviewing court then examines the entire record to determine if the contrary proposition is established as a matter of law. Id. When evaluating assertions that a jury’s finding is against the great weight and preponderance of the evidence, the appellate court weighs all of the evidence and sets aside the jury’s adverse finding only if it is so contrary to the overwhelming weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d at 176.
Although Maryland has several points of error regarding the jury’s failure to find that Gans & Smith breached its agency agreement, these points are not argued in Maryland’s brief. Maryland does not cite to the agreement, nor does it cite to evidence to support its breach of contract allegations. The argument under these points pertains only to Maryland’s allegations that Gans & Smith breached its fiduciary duties. A party does not preserve a complaint for review unless the party asserts the complaint in a point of error and supports it by argument and authorities in its brief. See Tex.R.App.P. 74(d), (f); Trinity Univ. Ins. Co. v. Fidelity & Casualty Co., 837 S.W.2d 202, 205 (Tex.App.—Dallas 1992, no writ); Kimmell v. Burnet County Appraisal Dist., 835 S.W.2d 108, 109 (Tex.App.—Austin 1992, writ dism’d w.o.j.) (per curiam). We overrule Maryland’s points concerning the agency agreement and instead turn our attention to the jury’s failure to find that Gans & Smith breached its fiduciary duty.
Inherent in any agency relationship is the fiduciary duty owed by an agent to his principal. Hartford Casualty Ins. Co. v. Walker County Agency, Inc., 808 S.W.2d 681, 687 (TexApp. — Corpus Christi 1991, no writ); Republic Bankers Life Ins. Co. v. Wood, 792 S.W.2d 768, 778 (TexApp. — Fort Worth 1990, writ denied). One occupying a fiduciary relationship to another must measure his conduct by high equitable standards, not by the standards required in dealings between ordinary parties. Kinzbach, Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 514 (1942).
Fundamental agency law requires that the agent is bound to disclose to his principal all material facts coming to his knowledge which affect the transaction upon which he represents the principal. City of Fort Worth v. Pippen, 439 S.W.2d 660, 665 (Tex.1969); Crane v. Colonial Holding Corp., 57 S.W.2d 316, 320 (Tex.Civ.App.—Amarillo 1933, no writ); see generally 3 Tex.JuR.3d Agency § 119 (1980). An insurance agent is liable when he breaches the fiduciary duty he owes the insurer under an agency contract. American Indem. Co. v. Baumgart, 840 S.W.2d 634 (Tex.App. — Corpus Christi 1992, no writ). If an agent fails to exercise reasonable care, diligence, and judgment, as the result of which failure his principal is damaged, the agent may be held responsible for such damage sustained by the principal. See generally 3 Tex.Jur.3d Agency § 127 (1980). When the injury forming the basis for a judgment against tortfeasors results from a violation of duty that one of the tortfeasors owes to the other, the person owing the duty may be required to indemnify the other person in full for whatever damages he has been compelled to pay. Tobin & Rooney Plastering Co. v. Giles, 418 S.W.2d 598 (Tex.Civ.App.—Texarkana 1967, no writ).
Looking first to see if there is any evidence to support the jury’s failure to find that Gans & Smith breached its fiduciary duty, we find that there is some evidence in favor of Gans & Smith by the testimony of Payne that he had tried to call Maryland several times, and on at least one occasion left word for someone at Maryland to return his call. This is some evidence that the agency did not breach its fiduciary duty.
Looking at all of the evidence to determine the great weight question, we find that Payne’s testimony about his failure to notify Maryland of his error in issuing the policy was strong evidence that there was a breach of fiduciary duty. As an agent, Payne, acting on behalf of Gans & Smith, owed Maryland a duty to notify them concerning the policies that had been sold and any error in those *234policies. The only evidence that Payne made an effort to notify the company was that he telephoned the adjuster and left word for the adjuster to call him back. The adjuster denies having received any information about the call. There was evidence, including Payne’s admission, that Payne had failed to notify Maryland about his error, even though he was aware that Maryland was rejecting the claim on this basis. For over three years, Maryland denied coverage to Head because Payne had not informed the company of his error. Applying the standard as previously set forth, we have determined that the jury’s finding that Gans & Smith did not breach its fiduciary duty was against the great weight and preponderance of the evidence.
THE SETTLEMENT AGREEMENTS
No Requests for Relief in Trial Court
First, for the purpose of this section and the following section, we have found no reference in the briefs or in the record to any objection made to the trial court or request for relief made to the trial court concerning the two settlement agreements, except the motions in limine and the discussion before the court asking the court to determine their legal effect upon the jury’s findings. Maryland filed a motion in limine to exclude any references before the jury to the first settlement agreement involving Nelson. Head filed a motion to exclude “any suit or settlement ... related to any third-party claims arising out of the incident made the basis of this suit,” “any settlement negotiations and agreements,” and “reference to any assignment of claim by Head Industrial Coatings & Services, Inc. to Don Nelson.” Thus, it appears that both parties asked the court to keep the first settlement agreement from being introduced before the jury. The judge granted both motions. Neither party sought to introduce the agreement or objected to the trial judge’s ruling. The only place that the first settlement agreement appears in the record is as an exhibit attached to a request for admissions. It was never offered into evidence. The second agreement between Head, TU, and Gans & Smith was introduced as a third-party defendant’s exhibit, but was tendered for the court only, not for the jury. There is no indication that the trial court gave any effect to either one of these settlement agreements.
The Settlements’ Effect on Head’s Damages
Maryland contends that the record conclusively establishes that Head sustained no actual damages as a result of the insurance policy’s failure to include a contractual liability endorsement. Maryland bases this contention on the existence of two settlement agreements entered into by Head, the first among Nelson, TU, Head, and TU’s workers’ compensation carrier; the second among TU, Head, and Gans & Smith.
The first settlement agreement assigns Head’s rights against Maryland to Nelson with an agreement not to execute against Head’s assets. There is no evidence and no allegation that the first settlement agreement and the resulting judgment was the result of fraud or collusion among the parties. Texas law has long recognized the right of assignment. The rights of the person who was a plaintiff at the time of commencement of the suit are ordinarily in issue, and a recovery by him inures to the benefit of the transferee to the extent of the plaintiff’s interest. Hearne v. Erhard, 33 Tex. 60 (1870). In Texas, the juries are not told that the liability carrier is a party actually hable when the act of the insured is the determining factor in establishing liability. Just as in the present case, the liability is determined by litigation between the two principal parties based upon contract or other cause of action. If by agreement or assignment this liability inures to the benefit of a third party, this does not, on its face, create fraud or collusion. It, in fact, expedites the judicial process by avoiding separate trials on each step of the process. Maryland should not be absolved from liability because of this agreement not to execute on Head’s assets. In fact, this agreement does not absolve Head from liability. Instead, Head guarantees that if American General is not required to pay the $500,000 policy limit, Head guaran*235tees that amount to be paid to Nelson.11 Therefore, under this agreement Head could be liable for $500,000 and have damages in that amount unless Maryland is required to pay damages to Head in that amount. Therefore, this agreement did not absolve Head from actual damages from the failure of the insurance policy to include a contractual liability endorsement.
Maryland argues that the second settlement agreement negates any damages obtained by Head because Head is assured of being indemnified for the first $500,000 by Gans & Smith. When there is a settling defendant, this does not mean there were not damages in the transaction. This means under the one-satisfaction rule, the nonsettling defendant is entitled to receive credit on any judgment against it for amounts already recovered under settlements with other defendants. Any settlements must be applied after the trebling of actual damages when Article 21.21, § 16 of the Insurance Code is applied. Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 9 (Tex.1991). This point of error is overruled.
Maey Caeter Contentions
In a related point of error, Maryland contends that this lawsuit, verdict, and judgment are the result of an illegal Mary Carter agreement, citing the Texas Supreme Court’s decision in Elbaor v. Smith, 845 S.W.2d 240 (Tex.1992).
A Mary Carter agreement exists when the settling defendant retains a financial stake in the plaintiffs recovery and remains a party at the trial of the case. Elbaor, 845 S.W.2d at 247. This occurs when the settling defendant, who remains a party, guarantees the plaintiff a minimum payment, which may be offset in whole or in part by an excess judgment recovered at trial. Id at 247; see General Motors Corp. v. Simmons, 558 S.W.2d 855, 858 (Tex.1977),12 overruled on other grounds by Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 427 (Tex.1984). Mary Carter agreements are void as violative of sound public policy. Elbaor, 845 S.W.2d at 250.
The first agreement involving Nelson was not a Mary Carter agreement. It did not involve a settling defendant retaining a financial stake in the plaintiffs recovery and remaining as a party during the trial of the case. The first agreement does not meet the requirements of a Mary Carter agreement because there was no party defendant remaining in the suit who had made a deal with the plaintiff.
This second agreement is more than a release. It contains specific language that Head will hold Gans & Smith harmless from any contribution or indemnity sought by Maryland. The following language is a part of that settlement agreement:
In consideration for the Agent’s [Gans & Smith] covenant to defend and indemnify Head and TU Electric Defendants as more specifically described in the following paragraphs, TU Electric Defendants and Head hereby agree upon full satisfaction and release of any Judgment or Claims against TU Electric Defendants and Head growing out of or connected with this litigation or the alleged accident which is the subject of this litigation, to compromise, settle, and fully release, and forever discharge Gans & Smith Insurance Company (sic) and its employees, insurers, and representatives, as well as all other persons, firms, or organizations in privity with same, whether named herein or not, of and from any and all claims, demands, controversies, actions, or causes of action which they have held or *236may now or in the future own or hold for damages, losses, costs, expenses, of any kind or nature, whether known or unknown, arising from or in any way growing out of or resulting from or to result from the injury or claim of Nelson referred to above or the lack of insurance coverage for such claim, or for any matter relating to any insurance claim involving such accident or injury.
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... Head agrees to indemnify and hold the Agency harmless of and from any claims for contribution or indemnity which may be asserted against the Agency by American General or any other party in connection with claims which may be filed by Nelson, TU Electric Defendants, and Head against American General or other third parties regarding the factual circumstances set forth herein. It is, however, expressly understood, that the Agency will provide its own defense and not be indemnified for legal expenses or other costs of litigation which may be incurred in connection with the defense of any such actions for contribution or indemnity.
(Emphasis added.)
Gans & Smith has strongly contended on rehearing that its guaranteed payment of $600,000 to Head was not contingent upon Head failing to recover from Maryland. In other words, Gans & Smith contends on rehearing that it was to pay the $600,000 under the agreement even if Maryland also paid the $600,000 out of the policy coverage. The following language is taken from the second settlement agreement:
In consideration for the mutual promises set forth herein, the Agency hereby agrees to provide such insurance benefits, including a defense and such indemnity benefits up to the amount of American General’s policy limit of $500,000, including the contractual liability coverage which the parties herein stipulate were agreed to be included in the American General Fire & Casualty Insurance Policy No. GL68810122. The release set forth in this Settlement Agreement notwithstanding, it is understood that the Agency will provide such benefits and accept all obligations connected with such insurance as would be applicable to any proper insurer under the prevailing statutory and common law of the state of Texas applicable at the time of the signing of this Settlement Agreement, including settlement for the policy limits, if it appears that the financial interests of the insureds Head and TU Electric Defendants require protection by such settlement and if the Plaintiff will accept such settlement.
(Emphasis added.)
The argument by Gans & Smith that the payment of $500,000 to Head was not contingent upon whether Maryland paid the $500,-000 out of policy coverage is not consistent with the position that Gans & Smith took initially in its brief in this cause of action. In its brief, Gans & Smith stated as follows:
In the aggregate, these agreements left Gans & Smith with no exposure. The release from Head eliminated Gans & Smith’s exposure to Head. Head’s promise to indemnify Gans & Smith eliminated Gans & Smith’s exposure to Maryland. Moreover, Maryland agreed not to seek indemnity from Gans & Smith for the first $500,000. Gans & Smith’s only other exposure is the promise to step into Maryland’s shoes and provide $500,000 in contractual-liability coverage. But by agreeing to fill its own shoes and provide this coverage, Maryland relieved Gans & Smith of this obligation.
(Emphasis added.)
Whether Gans & Smith’s guarantee of the $500,000 to Head is contingent upon whether Maryland pays the $500,000 on the insurance is ambiguous in the settlement agreement.
The second settlement agreement differs from a standard Mary Carter agreement because the defendant, Gans & Smith, was dismissed by the plaintiff as a defendant in the lawsuit. Maryland, however, had no choice to protect its interest but to bring Gans & Smith back into the suit by a third-party claim cross-action. In Bristol-Myers Co. v. Gonzales, the Texas Supreme Court found that it was not a valid distinction from other Mary Carter cases that the plaintiff had taken a nonsuit against the settling defendant and that the settling defendant re*237mained a party in the case only by virtue of a nonsettling defendant’s plea for indemnity and contribution. 561 S.W.2d 801, 805 (Tex. 1978).
Maryland complains because the trial court did not declare this agreement void, but the trial court was never asked to do so. During arguments on the motions for judgment, counsel for Maryland stated that,
These two are in bed with each other. They were in bed with each other from the time they settled with each other, so the fact that this party supports the view of that party, it might have to do with their view of truth and justice, or it might have to do with their settlement agreement, so I would like to place that in at least proper context.
The Supreme Court in Elbaor requires the complaining party on appeal to have preserved the error. 845 S.W.2d at 251. The parties put the agreements before the court for a ruling only for the legal effect of the settlement agreements on the final judgment. They did not ask that it be declared void. The following statements were made to the court:
MR. DUNN [attorney for Head]: And then the right, in the event that Maryland Insurance Company should obtain a finding, or depending upon what the findings by the jury are, the right of release and/or extinguishment between the Gans and Smith and Head is going to be submitted to the Court for the Court to determine the legal effect of those jury issues on whatever judgment that I get against Maryland Insurance Company and whatever issues that they get answered by the jury on their claim against Gans and Smith.... In effect, that cross-claim and the effect of our agreement with them as to what extent that is released and what amount, will be an issue that will be submitted to the Court.
MR. MCREA [attorney for Maryland]: ... Maryland Casualty has posed as an affirmative defense that same settlement agreement, asserting that to the extent there is an obligation for Head to indemnify Gans and Smith, that Head’s claims against Maryland are extinguished in the same amount.
(Emphasis added.) Thus, the parties requested the trial court to rule on the effect of the settlement agreement on the final judgment in the case in the event that Gans & Smith was found liable to Maryland, but Maryland did not ask the court to hold the settlement agreement void.
Maryland cannot now have the entire judgment declared void on the basis that the settlement agreements were a taint to the proceeding because Maryland did not seek such a relief in the trial court. The first request to declare the settlement agreements void was made on appeal, which was too late for the relief sought. This did not preserve the error as required in Elbaor. This point of error is overruled. The application of the settlement agreement as an offset will be determined on remand dependent upon the outcome of the third-party action of Maryland against Gans & Smith.13
POSTJUDGMENT INTEREST
Maryland questions the trial court’s award of postjudgment interest at a variable interest rate rather than a fixed rate. To award postjudgment interest at a rate that varies from month to month is at odds with the language of the statute governing post-judgment interest, which requires that the judgment state the rate of interest to be earned on the judgment and also provides for annual compounding. Tex.Rev.Civ.Stat.Ann. art. 5069-1.05, §§ 2, 3(b) (Vernon Supp.1995). The trial court erred in awarding interest at a variable rate.
The judgment is reformed to provide for the accrual of postjudgment interest at the fixed rate of 10%, compounded annually. Tex.Rev.Civ.StatAnn. art. 5069-1.05, §§ 2, 3(a) (Vernon Supp.1995).
A part of Head’s damage was the prejudgment interest on $500,000 in the underlying lawsuit, which began accruing November 10, *2381990. This prejudgment interest ended in the underlying suit at the entry of judgment in the underlying suit May 11, 1992. The prejudgment interest in the underlying suit could only run on the $600,000 policy amount until a judgment was granted. Then, because of a special policy provision, 10% interest will run on the entire $1,889,896.37 from May 11, 1992, until the date of judgment in the present case. This is based on a provision in the insurance policy, which provides that in addition to covering the defense costs incurred in the underlying action, Maryland will be required to pay
all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the company has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the company’s liability thereon.
(Emphasis added.)
Maryland has not paid, tendered, or deposited with the court the $500,000 policy limits; therefore, postjudgment interest on the underlying judgment accrued at the rate of 10%, compounded annually until the judgment in the present case (December 9,1993), and it is part of the policy benefits Maryland is obligated to pay. See Tex.Rev.Civ.Stat. Ann. art. 6069-1.05, § 2. Interest, whether labeled prejudgment or postjudgment, cannot overlap.
ATTORNEY’S FEES
The jury also awarded Head 40% of its recovery as reasonable and necessary attorney’s fees. Attorney’s fees are available to a prevailing party in an Insurance Code action or contract action. Tex.Ins.Code Ann. art. 21.21, § 16 (Vernon Supp.1995); Tex.Civ. PRAC. & Rem.Code Ann. § 38.001 (Vernon 1986). The recoverable attorney’s fees will consist of 40% of the total of Head’s actual damages, which include the principal, interest, and attorney’s fees on the underlying suit and double the total.
CONCLUSION
We reverse and remand the portion of this cause involving the third-party action by Maryland against Gans & Smith for a new trial. We reverse and remand the judgment by Head against Maryland for limited modification. The judgment for Head against Maryland will be modified by reducing the actual damages to $500,000, plus attorney’s fees of $37,792, for the underlying suit, plus prejudgment interest of 10% in the underlying suit on the policy amount of $500,000 from November 10, 1990 until May 11, 1992, plus 10% interest from May 11, 1992 on $1,889,-395.37 until December 9, 1993, the date of the judgment in the present case, plus double the foregoing amounts, plus 40% of the total as attorney’s fees in the present case, plus postjudgment interest on the entire amount of the judgment from the date of the judgment. In the event that Gans & Smith is found liable to Maryland, then this amount will be subtracted from Head’s judgment against Maryland because Head has agreed to hold Gans & Smith harmless and indemnify it for any claim of contribution by Maryland.

. This settlement agreement was never offered in evidence.

. The multi-part liability question and its answers are as follows:

QUESTION NO. 1

Did Maryland Insurance Company engage in any unfair or deceptive act or practice?
"Unfair or deceptive act or practice” means any of the following:
1. Engaging in any false, misleading, or deceptive acts or practices.
Answer "Yes” or “No.”
ANSWER: No
2. Not attempting in good faith to effectuate a prompt, fair, and equitable settlement of a claim when liability has become reasonably clear.
Answer "Yes" or "No.”
ANSWER: Yes
3. Failing to process a claim in good faith.
Answer "Yes" or "No.”
ANSWER: Yes
4. Failing to promptly and equitably pay a claim when liability becomes reasonably clear.
Answer "Yes” or "No.”
ANSWER: No
5. Failing to comply with its duty of good faith and fair dealing to Head Industrial Coatings & Services, Inc.
A party fails to comply with its duty of good faith and fair dealing when — without a reasonable basis, it denies a claim, and it knew or should have known, based on its duty to thoroughly investigate claims, that there was no reasonable basis for the denial.
Answer "Yes” or "No.”
ANSWER: Yes

. Tex.Ins.Code Ann. art. 21.55, amended by Act of May 27, 1991, 72nd Leg., ch. 242, § 11.03(a), 1991 Tex.Gen.Laws 1043.

. Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129 (Tex.1988).

. We disagree with the dissent because this is not a case of unfair claims settlement practices, because our determination does not allow us to find errors and provide relief not preserved and requested in the trial court, and because neither this court nor the trial court participated in fraud upon the judicial system. The dissent's effort to stretch Watson beyond its holding is surprising in light of his article, Charles Bleil & Susan Bleil, Sorry, Ms. Watson, 28 Trial Lawyers Forum 5 (1994).

. Although the bad faith claims were presented as specific types of unfair or deceptive conduct, they involve the same two-prong predicate for recovery as the common-law tort action. See Emmert v. Progressive County Mut. Ins. Co., 882 S.W.2d 32, 36 (Tex.App.— Tyler 1994, writ denied); State Farm Lloyds, Inc. v. Polasek, 847 S.W.2d 279, 282 n. 2 (Tex.App.—San Antonio 1992, writ denied); see also State Farm Lloyds Ins. Co. v. Maldonado, No. 04-93-00046-CV, slip op. at 8-9, 1994 WL 498682 (Tex.App.— San Antonio Sept. 14, 1994, n.w.h.).

. The requested instruction was as follows:
You are instructed that a corporation can act only through its agents, servants or employees. A corporation is bound by its agent’s acts that are expressly, apparently, or impliedly authorized by the corporation. You are further instructed that a corporation is bound by the knowledge of its agents if that knowledge came to the agent in the course of his or her employment. [Cites omitted.] An attorney hired by an insurance company to defend an insured, and attorneys hired to represent the insurance company are agents of the insurance company. [Cites omitted.]
You are further instructed that the knowledge of an agent is imputed to and binding upon the insurance company, and the insur-anee company is estopped by the knowledge of its agent from denying coverage. [Cites omitted.]
You are further instructed that, under Texas law, a Local Recording Agent is a person or firm engaged in soliciting and writing insurance, being authorized by an insurance company to solicit business, and to write, assign, execute and deliver policies of insurance, and to bind insurance companies on insurance risks. Knowledge of a Local Recording Agent is imputed to and binding upon the insurance company, and the insurance company is es-topped by the knowledge of its Local Recording Agent from denying coverage. [Cites omitted.]

. "CT]he general rule prevailing in Texas may, for the purposes of this suit, be stated the same as in the Restatement, Torts, § 909, as follows:
'Punitive damages can properly be awarded against a master or other principal because of an act by an agent if, but only if,
*230‘(a) the principal authorized the doing and the manner of the act, or
'(b) the agent was unfit and the principal was reckless in employing him, or
'(c) the agent was employed in a managerial capacity and was acting in the scope of employment, or
'(d) the employer or a manager of the employer ratified or approved the act.’"
King v. McGuff, 149 Tex. 432, 234 S.W.2d 403, 405 (1950).

. Our determination that Maryland had knowledge through its agent Payne negates the jury’s answer to Question 2 and therefore we do not address its potential conflicts with other answers. Because the answer to Jury Question 1(2) is not relied upon for the holding by this court, we do not address any potential conflicts (dealt with not attempting in good faith to effectuate settlement when liability became clear).

. G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex.Comm'n App.1929, holding approved).

. The following language appears in Section b of the settlement agreement:
Head’s financial guarantee expressed herein below that if for any reason a court of final jurisdiction shall rule that American General does not owe insurance benefits or damages to Head or TU Electric Defendants in connection with the matters referred to in this agreement and Nelson is therefore unsuccessful in recovering an amount of up to the $500,000 policy limit of American General, then Head guarantees that an amount of up to $500,000, but no more, shall be paid to Nelson by Head or its representatives, to assure that Nelson’s recovery in this action is not less than $500,000.

. This case, predating Elbaor, held that when a settling defendant had a financial interest in the outcome of a lawsuit as a result of Mary Carter agreement, this was a proper subject for disclosure by direct evidence or cross-examination.

. If Gans & Smith is found liable to Maryland, then because of Head’s agreement to indemnify Gans & Smith, the responsibility returns at last to Head, and Head is directed to collect from itself, which means any recovery above the policy amount becomes a nullity.