Court Opinion

ID: 7800464
Source: CourtListenerOpinion
Date Created: 2022-08-15 00:19:28.292603+00
Date Added: 2024-06-11T16:29:05.715230
License: Public Domain

.Reversed and Remanded, and Opinion filed August 11, 2022.

                                           In The

                       Fourteenth Court of Appeals

                                   NO. 14-20-00585-CV

                 TEXAS FAIR PLAN ASSOCIATION, Appellant

                                              V.
                                ADIL AHMED, Appellee

                      On Appeal from the 190th District Court
                              Harris County, Texas
                        Trial Court Cause No. 2016-09336

                                      OPINION

       In Barbara Technologies Corp. v. State Farm Lloyds, the supreme court
determined that an insurer’s payment of an appraisal value past the statutory
deadline for payment under Insurance Code chapter 542, subchapter B (the
“Prompt Payment Act”) does not entitle the insurer to summary judgment on an
insured’s claim brought under the Act.1 Barbara Techs., 589 S.W.3d 806 (Tex.

       1
         Tex. Ins. Code Ann. §§ 542.051–.061. While subchapter B does not include a short title,
we refer to it, as other courts have, as the Prompt Payment Act for ease of reference.
2019). The case before this court presents a related question that appears to be an
issue of first impression in Texas courts—does payment of an appraisal award plus
payment of estimated interest due under the Prompt Payment Act entitle an insurer
to summary judgment on an insured’s claims under the Act, thereby absolving the
insurer from paying attorney’s fees that otherwise would be due under the Act? We
conclude the answer to this question is no.

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

                                I.   BACKGROUND

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

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

       In 2019, while this case was still pending in the trial court, the Supreme
Court of Texas decided Barbara Technologies. Texas FAIR Plan then made an

       2
           Ahmed’s other claims were voluntarily dismissed later in the lawsuit.
       3
         As explained by the supreme court, “appraisal clauses are uniformly included in most
forms of property insurance policies. Virtually every property insurance policy for both
homeowners and corporations contains a provision specifying ‘appraisal’ as a means of resolving
disputes about the ‘amount of loss’ for a covered claim. An appraisal clause like the one used
here appears in almost every homeowners, automobile, and property policy in Texas.” State
Farm Lloyds v. Johnson, 290 S.W.3d 886, 888–89 (Tex. 2009) (quotations and citations
omitted). In this case, the policy’s appraisal provision states, in relevant part:
       If you and we fail to agree on the actual cash value, amount of loss, or cost of
       repair or replacement, either can make a written demand for appraisal. Each will
       then select a competent, independent appraiser and notify the other of the
       appraisers identity within 20 days of receipt of the written demand. The two
       appraisers will choose an umpire, if they cannot agree upon an umpire within 15
       days, you or we may request that the choice be made by a judge of a district court
       of a judicial district where the loss occurred. The two appraisers will then set the
       amount of loss, stating separately the actual cash value and loss to each item. . . .
       If the appraisers fail to agree, they will submit their differences to the umpire. An
       itemized decision agreed to by any two of these three and filed with us will set the
       amount of the loss. Such award shall be binding on you and us.

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

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

                                  II.   ANALYSIS

A. Standard of review

      In issues 1 and 2, Texas FAIR Plan challenges the trial court’s rulings on the
parties’ competing summary-judgment motions on the issue of Texas FAIR Plan’s
liability under the Prompt Payment Act. We review summary judgments de novo,

      4
          Texas FAIR Plan does not challenge the no-evidence summary judgment on its
defenses, and we do not disturb that portion of the trial court’s summary-judgment order.

                                           4
taking as true all evidence favorable to the nonmovant, and indulging every
reasonable inference and resolving any doubts in the nonmovant’s favor. Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When both parties
move for summary judgment on the same issue, the reviewing court considers the
evidence presented by both parties, determining all questions presented. Id.; see
Barbara Techs., 589 S.W.3d at 811 (reviewing competing summary-judgment
motions on issue of Prompt Payment Act liability).

B. The Prompt Payment Act

      The Prompt Payment Act “imposes several key requirements on insurers”:

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

Barbara Techs., 589 S.W.3d at 812–13. In other words, an insurer may be liable
under the Prompt Payment Act if it does not pay a valid claim within 60 days after
receiving all items and information reasonably requested and necessary to make a
determination regarding the claim. Tex. Ins. Code Ann. § 542.058(a). In such

                                           5
cases, the insurer is required to pay “the amount of the claim, interest on the
amount of the claim at the rate of 18 percent a year as damages, together with
reasonable and necessary attorney’s fees.” Tex. Ins. Code Ann. § 542.060(a). The
question in this case is whether an insurer may avoid liability under the Act by
voluntarily paying both the appraisal amount and the statutory interest that would
be due for a late payment under the Act.

C. Texas FAIR Plan’s summary-judgment motion

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

      We begin with Barbara Technologies, which has strikingly similar facts: an
insurer initially determined a claim was below the policy deductible and paid
nothing. 589 S.W.3d at 809. After the insured sued, the insurer invoked the
appraisal process to determine the value of the damages. Id. The appraisal came
back over the deductible. Id. at 810. The insurer paid the appraisal value, well past
the statutory deadline if measured from the date of proof of loss, but within the
deadline if measured from the date of appraisal. Id. The San Antonio Court of
Appeals affirmed summary judgment in favor of the insurer, holding that a
“plaintiff could not sustain a claim under the [Prompt Payment Act] when it [is]
undisputed that the insurer had paid the appraisal award.” Barbara Techs. Corp. v.
State Farm Lloyds, 566 S.W.3d 294, 296 (Tex. App.—San Antonio 2017), rev’d,
589 S.W.3d 806 (Tex. 2019).

      The supreme court reversed and “disapproved” of the reasoning of the San
Antonio Court of Appeals and other courts holding that an insurer could discharge
                                           6
liability under the Prompt Payment Act by paying an appraisal award: “Nothing in
the [Prompt Payment Act] would excuse an insurer from liability for [Prompt
Payment Act] damages if it was liable under the terms of the policy but delayed
payment beyond the applicable statutory deadline, regardless of use of the
appraisal process.” Barbara Techs., 589 S.W.3d at 819.5 The supreme court based
its reasoning on the peculiar features of the appraisal process, a process that is not
addressed in the Prompt Payment Act. See id. at 820.

       To determine how appraisals should be treated under the Act, the supreme
court detailed the features of appraisals. The court explained that “an insurer’s use
of the policy’s appraisal process represents a willingness to resolve a dispute
outside of court—often without admitting liability on the claim, or even
specifically disclaiming liability—similar to a settlement.” Id. Because payment of
the appraisal award constitutes neither an admission of liability under the policy
nor a judicial determination of liability, the mere fact that the insurer paid the
appraisal award is not determinative of liability, a core inquiry in a Prompt
Payment Act claim. Id. at 823 (“payment of the appraisal value neither established
liability under the policy nor foreclosed [Prompt Payment Act] damages”).
Accordingly, the insurer’s payment of an appraisal award “did not conclusively
establish that it is not liable for [the insured’s] claim, as it must to avoid [Prompt
Payment Act] damages as a matter of law under section 542.060.” Id.

       That brings us to the question in this case: what if an insurer pays both an
appraisal award and the estimated statutory interest that would be due under the
Prompt Payment Act? Applying Barbara Technologies, a federal district court

       5
          The relevant enforcement provision in Barbara Technologies is the same as the
provision in this case. See Tex. Ins. Code Ann. § 542.060. The supreme court did not address the
interplay between section 542.060 and other enforcement provisions of the Prompt Payment Act,
nor is such analysis necessary here.

                                               7
recently determined that payment of an appraisal award plus payment of estimated
statutory interest—as Texas FAIR Plan did here—likewise does not discharge a
Prompt Payment Act claim. See Martinez v. Allstate Vehicle & Prop. Ins. Co., No.
4:19-CV-2975, 2020 WL 6887753, at *2 (S.D. Tex. Nov. 20, 2020) (Ellison, J.).
Echoing the characterization in Barbara Technologies that an appraisal is “similar
to a settlement,” the Martinez court reasoned that dismissing a Prompt Payment
Act claim on the basis that the insurer had paid an appraisal award along with
statutory interest calculated on the basis of that appraisal would be akin to forcing
on the insured a settlement that the insured did not agree to:

      Allstate’s position effectively amounts to an argument that it settled
      Martinez’s [Prompt Payment Act] claim [by paying the appraisal
      amount and statutory interest]. But Martinez clearly disputes this
      argument. And, under Texas law, for Allstate’s payment to Martinez
      to constitute a settlement of the [Prompt Payment Act] claim, there
      must be evidence of a mutual intent to avoid litigation by accepting a
      contract and relinquishing the relevant legal claims. See, e.g., Priem v.
      Shires, 697 S.W.2d 860, 863–64 (Tex. [App.—Austin] 1985[, no
      writ]). Here, there is no such evidence. Rather, there is simply a claim
      that Allstate sent a payment to Martinez that may or may not
      constitute the full amount of the interest owed to her under the
      [Prompt Payment Act]. Even if Allstate had sent Martinez ten times
      her putative [Prompt Payment Act] damages, the Court would not be
      entitled to dismiss Martinez’s [Prompt Payment Act] claim absent
      evidence of a mutual intent to settle that claim. Martinez remains
      entitled to pursue her [Prompt Payment Act] claim, even if her
      damages—should she prevail—will need to be offset by any
      overpayment Allstate previously rendered to Martinez. Therefore,
      Allstate’s first argument fails.

Id. As discussed in Martinez, and following the logic of Barbara Technologies, we
conclude that, while advance payment of an appraisal award and statutory interest
may entitle an insurer to an offset, it does not entitle the insurer to summary
judgment on an insured’s Prompt Payment Act claim. To conclude otherwise

                                          8
would be to subject the insured in this case, Ahmed, to a settlement to which he did
not agree.

       We overrule issue 1.

D. Ahmed’s summary-judgment motion

       In issue 2, Texas FAIR Plan challenges the trial court’s summary judgment
in Ahmed’s favor. Texas FAIR Plan argues that the trial court reversibly erred by
determining that it was liable for Ahmed’s claim, thereby subjecting it to Prompt
Payment Act damages, as a matter of law.

       Ahmed argues that the evidence is conclusive as to Texas FAIR Plan’s
liability for the claim because, in Ahmed’s view, Texas FAIR Plan “accepted” his
claim, thereby admitting its liability under the Prompt Payment Act. Ahmed bases
his argument on language in Barbara Technologies that liability arises when an
insurer “accepts” a claim or is adjudicated liable for it. See 589 S.W.3d at 819–20.
As proof that Texas FAIR Plan admittedly accepted the claim, Ahmed points to
Texas FAIR Plan’s letter to Ahmed from September 2015 in which it states that it
“has accepted the hail damage to the south and west facing slopes of the roof and
the water damage to the master bedroom,” though the letter then goes on to explain
that the damage is below the policy deductible, and accordingly it was “unable to
make a payment on your claim.”6

       6
          Ahmed also notes that the parties later submitted agreed post-trial findings of fact, one
of which states, “It is undisputed [Texas FAIR Plan] accepted the claim, and that it gave notice
of its intent to pay, and paid $13,193.78 on November 4, 2016.” The trial court, however,
omitted this finding from its signed findings of fact. In any event, this proposed finding could not
have been a ground for summary judgment, as it was submitted after the trial court signed its
order granting Ahmed’s traditional-summary-judgment motion. See McConnell v. Southside
Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993) (traditional-summary-judgment motion
“must stand or fall on the grounds expressly presented in the motion”) (discussing Tex. R. Civ.
P. 166a(c)).
       In his summary-judgment motion, Ahmed also points to language in Texas FAIR Plan’s
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       Based on this language, it appears Texas FAIR Plan “accepted” that the
damage at issue was covered by the policy but did not “accept” that it had any
liability under the policy to pay the claim, which is the touchstone of the Prompt
Payment Act inquiry. See Tex. Ins. Code Ann. § 542.060(a) (providing for
damages “if an insurer that is liable for a claim under an insurance policy is not in
compliance with this subchapter”) (emphasis added). As explained more fully by
the supreme court, an insurer “accepts” a claim for Prompt Payment Act purposes
when it determines it must “pay” something in response to the claim:

       We see no way under the language of the [Prompt Payment Act] that
       an insurer can be “liable” on the claim within the meaning of section
       542.060 until it (1) has completed its investigation, evaluated the
       claim, and come to a determination to accept and pay the claim or
       some part of it; or (2) been adjudicated liable by a court or arbitration
       panel. If an insurer rejects a claim, it has concluded based on its
       investigation and evaluation that it owes no benefits under the policy
       and is not liable for the claim; unless and until the insurer later accepts
       the claim, thereby admitting liability, or there is a judgment that the
       insurer wrongfully rejected the claim, the insurer is not “liable for a
       claim under an insurance policy” under section 542.060.

Barbara Techs., 589 S.W.3d at 819–20 (emphasis added).

       Here, despite language that Texas FAIR Plan “accepted” the claim, we

motion for reconsideration that “[Texas FAIR Plan] fully accepted Mr. Ahmed’s hail damage
claim arising out of an April 2015 weather event.” This statement, however, appears to refer to
the same September 2015 letter discussed above, in which Texas FAIR Plan “accepted” that the
damage was covered under the policy but disclaimed liability under the policy. Accordingly, we
do not consider this statement to be so clear and unequivocal as to amount to a judicial admission
as to liability under the policy. See Mapco, Inc. v. Carter, 817 S.W.2d 686, 687 (Tex. 1991)
(“For a judicial admission to exist and be conclusive against a party it must be, among other
things, deliberate, clear and unequivocal.”).
        The remaining evidence presented in Ahmed’s summary-judgment motion shows that
Texas FAIR Plan paid the appraisal award and also sent Ahmed funds earmarked for statutory
interest, neither of which establishes Prompt Payment Act liability as a matter of law. See
Barbara Techs. Corp., 589 S.W.3d at 819–20, 826.

                                               10
conclude there is a fact issue as to whether Texas FAIR Plan admitted its
liability—that is, its obligation to pay under the policy—for purposes of the
Prompt Payment Act. Because Ahmed has not proven as a matter of law that Texas
FAIR Plan admitted that it was liable on the claim, we conclude he is not entitled
to traditional summary judgment under the Prompt Payment Act.

      We sustain issue 2. Because our disposition of this issue results in reversal
of the trial court’s judgment, we need not reach the merits of issues 3 and 4
concerning whether the trial court improperly awarded excessive attorney’s fees or
nonrecoverable damages, and accordingly we dismiss those issues as moot. See
Tex. R. App. P. 47.1.

                              III.   CONCLUSION

      Having sustained issue 2, and without reaching issues 3 and 4, we reverse
the trial court’s judgment. Concluding that neither party is entitled to summary
judgment as to Texas FAIR Plan’s liability under the Prompt Payment Act, we
remand the case to the trial court for further proceedings. Tex. R. App. P. 43.2(d);
see Barbara Techs., 589 S.W.3d at 829 (remanding Prompt Payment Act case for
further proceedings when neither of parties’ competing summary-judgment
motions on insurer’s liability was meritorious).

                                       /s/    Charles A. Spain
                                              Justice

Panel consists of Justices Wise, Spain, and Hassan.

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