Court Opinion

ID: 4566274
Source: CourtListenerOpinion
Date Created: 2020-09-17 00:00:24.425472+00
Date Added: 2024-06-11T08:40:22.145205
License: Public Domain

Case: 19-50656      Document: 00515567651          Page: 1     Date Filed: 09/16/2020

           United States Court of Appeals
                for the Fifth Circuit
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                                                       September 16, 2020
                                    No. 19-50656                          Lyle W. Cayce
                                                                               Clerk

   Jesus Agredano; Margaret Agredano,

                                                             Plaintiffs—Appellants,

                                       versus

   State Farm Lloyds,

                                                             Defendant—Appellee.

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 5:15-CV-1067

   Before Higginbotham, Elrod, and Haynes, Circuit Judges.
   Haynes, Circuit Judge:
          Jesus   and    Margaret    Agredando      (“Plaintiffs”)     sued     their
   homeowners’ insurance company, State Farm Lloyds (“State Farm”) after
   it denied their claim for windstorm damage to their home. Relevant here, the
   district court granted summary judgment in favor of State Farm on various
   causes of action but allowed Plaintiffs’ breach of contract claim to be
   presented to a jury, which granted a verdict in Plaintiffs’ favor. Although the
Case: 19-50656          Document: 00515567651            Page: 2       Date Filed: 09/16/2020

                                          No. 19-50656

   Plaintiffs had sought attorney’s fees 1 and “statutory interest of 18%[,]” the
   district court (after originally granting this relief) ruled that the failure to
   specifically plead relief under Texas Insurance Code § 542.060 (the Texas
   Prompt Payment of Claims Act or “TPPCA”) barred the requested relief
   and entered judgment only in the amount of the breach of contract damages
   found by the jury, together with regular pre-judgment and post-judgment
   interest. Plaintiffs timely appealed. 2 We REVERSE and REMAND for
   reconsideration consistent with this opinion.
         I.          The Pleading
              Two provisions in the Texas Insurance Code are relevant to our
   analysis. Section 542.058 of the Texas Insurance Code 3 provides a cause of
   action against insurers who delay paying claims:
              [I]f an insurer, after receiving all items, statements, and forms
              reasonably requested and required under Section 542.055,
              delays payment of the claim for a period exceeding the period
              specified by other applicable statutes or, if other statutes do not
              specify a period, for more than 60 days, the insurer shall pay
              damages and other items as provided by Section 542.060.
   Section 542.060, in turn, allows plaintiffs to seek damages in the
   amount of their claim—plus 18% interest—for such delays:

              1
              The district court concluded that Chapter 38 of the Texas Civil Practice and
   Remedies Code, which provides for recovery of attorney’s fees for breach of contract, did
   not apply to State Farm because it was neither an “individual nor a corporation.” Plaintiffs
   do not appeal this conclusion.
              2
              The district court had diversity jurisdiction over the case. We have jurisdiction
   over the appeal under 28 U.S.C. § 1291. The only questions we decide here are pure
   questions of law, such that de novo review applies. GIC Servs., L.L.C. v. Freightplus USA,
   Inc., 866 F.3d 649, 666 (5th Cir. 2017).
              3
           Plaintiffs seek penalties under § 542.060 for delaying payment of their claim for
   more than 60 days, in violation of § 542.058.

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          [T]he insurer is liable to pay the holder of the policy or the
          beneficiary making the claim under the policy, in addition to
          the amount of the claim, interest on the amount of the claim at
          the rate of 18 percent a year as damages, together with
          reasonable and necessary attorney’s fees.
          State Farm argues that the Plaintiffs failed to plead a claim for the
   TPPCA interest under § 542.060 because Plaintiffs did not “specifically
   request” such a claim, that is, Plaintiffs did not cite the statute or quote the
   language of the statute. As a result, the district court originally granted
   Plaintiffs Chapter 542 relief under Federal Rule of Civil Procedure 54(c),
   providing that the final judgment should “grant the relief to which each party
   is entitled, even if the party has not demanded that relief in its pleadings.”
   Shortly thereafter, our court issued an unpublished (and, therefore, non-
   precedential) decision in Chavez v. State Farm Lloyds, 746 F. App’x 337 (5th
   Cir. 2018), which concluded that, because the bad faith insurance code claims
   had been properly dismissed by the district court, Chavez could not recover
   under § 542.060. As a result of the Chavez decision, the district court
   reversed its ruling in this case and denied the § 542.060 relief.
          Plaintiffs pleaded that they submitted their claim and that it was
   denied. They further pleaded entitlement to an “18% [p]enalty [i]nterest
   pursuant to Ch. 542 of the Texas Insurance Code” and “[a]ttorney’s fees.”
   The only relevant statute entitling an insured to an 18% penalty is § 542.060.
   While the pleading could have been more robust, the Twombly/Iqbal
   “plausibility” standard does not require magic words or detailed facts in
   most cases. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v.
   Twombly, 550 U.S. 544, 570 (2007); see also Littell v. Hous. Indep. Sch. Dist.,
   894 F.3d 616, 622 (5th Cir. 2018) (acknowledging that a complaint cannot be
   speculative); Jacked Up, L.L.C. v. Sara Lee Corp., 854 F.3d 797, 810 (5th Cir.
   2017) (explaining that plaintiffs need only give “fair notice” of a claim against

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   the defendant). 4 Instead, it prohibits speculative claims, which the request
   for a TPPCA penalty interest clearly is not.
              In addition to the lack of pleading deficit, this is not a situation where
   State Farm was surprised by the Plaintiffs’ request. State Farm never
   brought a Rule 12(e) claim that it did not understand the pleadings and,
   indeed, it clearly was aware of the § 542.060 claim because the Plaintiffs
   stated it in their discovery responses and State Farm argued in its summary
   judgment motion that the Plaintiffs had sought “causes of action based upon
   Chapter[] . . . 542 of the Texas Insurance Code[.]” We conclude that the
   statutory interest claim was not improperly pleaded.
        II.          Recoverability
              We now turn to the question Chavez addressed: whether a violation
   of the bad faith provisions of the Texas Insurance Code is a necessary
   prerequisite to § 542.060 relief. Chavez held as follows: “Although Chavez
   claimed Texas Insurance Code violations, the district court dismissed them
   by granting a partial summary judgment. The district court correctly ruled
   Chavez could not continue to seek relief for the statutory claims that were no
   longer viable.” 746 F. App’x at 343.                No caselaw was cited for this
   proposition, and it is contrary to the Texas Supreme Court’s holding in
   Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242 S.W.3d 1, 16 (Tex.
   2007):
            The prompt-payment statute provides that an insurer, who is
            “liable for a claim under an insurance policy” and who does
            not promptly respond to, or pay, the claim as the statute
            requires, is liable to the policy holder or beneficiary not only for
            the amount of the claim, but also for “interest on the amount

              4
             There are some causes of action, such as fraud, that do require particularity, see
   Fed. R. Civ. P. 9(b), but no one contends this is one of them.

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          of the claim at the rate of eighteen percent a year as damages,
          together with reasonable attorney’s fees.”
   See also Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co., 801 F.3d
   512, 518 (5th Cir. 2015) (not requiring a showing of violation of the bad faith
   claims of the Texas Insurance Code to recover under the TPPCA). Other
   prior decisions treated the provision as a strict liability statute. See e.g.,
   Prudential Ins. Co. v. Durante, 443 S.W.3d 499, 512–13 (Tex. App.—El Paso
   2014, pet. denied) (overruling a challenge to an 18 percent statutory interest
   award because the insurer had an obligation to pay within 60 days and
   violated § 542.058 by not doing so); U.S. Fire Ins. Co. v. Lynd Co., 399 S.W.3d
   206, 222 (Tex. App.—San Antonio 2012, pet. denied) (affirming an 18
   percent statutory interest award because there was legally sufficient evidence
   that the insurer was liable and violated Chapter 542).
          However, we need not decide if Chavez was wrong when it was
   decided because subsequent Texas Supreme Court cases make clear that
   Chavez is no longer good law on this point. The Texas Supreme Court
   recently stated that “[n]othing in the TPPCA would excuse an insurer from
   liability for TPPCA damages if it was liable under the terms of the policy but
   delayed payment beyond the applicable statutory deadline[.]” Barbara Techs.
   Corp. v. State Farm Lloyds, 589 S.W.3d 806, 819 (Tex. 2019); see also Ortiz v.
   State Farm Lloyds, 589 S.W.3d 127, 135 (Tex. 2019) (“[A]n insurer’s
   payment of an . . . award does not as a matter of law bar an insured’s claims
   under” the TPPCA.). That court clearly treated the TPPCA as a strict
   liability provision. See Barbara Techs. Corp., 589 S.W.3d at 813 (“To prevail
   under a claim for TPPCA damages under section 542.060, the insured must
   establish: (1) the insurer’s liability under the insurance policy, and (2) that
   the insurer has failed to comply with one or more sections of the TPPCA in
   processing or paying the claim.”). Put another way, it is not necessary for a
   plaintiff to prove that the insurer acted wrongfully or in bad faith. See Biasatti

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                                            No. 19-50656

   v. GuideOne Nat’l Ins. Co., 601 S.W.3d 792, 794–95 (Tex. 2020) (analyzing
   the plaintiff’s TPPCA claim separately from its bad faith claim). The statute
   requires only liability under the policy and a failure to comply with the timing
   requirements of the TPPCA.
           As a result, we conclude that the district court erred in holding that
   Chavez barred Plaintiffs’ claims for the 18% penalty and attorney’s fees under
   Chapter 542. 5 Accordingly, we REVERSE that decision and REMAND
   for findings and entry of a new judgment consistent with this opinion.

           5
               In its pre-Chavez ruling, the district court rejected another defense to the
   statutory penalty, specifically, that Plaintiffs did not submit a proper, written notice of their
   claim to the State Farm. We find no error in this conclusion.

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