Court Opinion

ID: 9682111
Source: CourtListenerOpinion
Date Created: 2023-08-24 08:05:30.256573+00
Date Added: 2024-06-11T18:17:37.512095
License: Public Domain

PHILLIPS, Chief Justice,
dissenting on Motion for Rehearing.
I respectfully dissent. The court’s opinion asserts that the Vails are entitled to recover treble damages under three different theories of recovery. Each theory is predicated upon a confusing statutory analysis that is difficult to understand, and with which I cannot agree. Even to begin its labored journey through the Deceptive Trade Practices Act and the Insurance Code, the court must ignore the failure of the Vails to plead their causes of action properly and to obtain the findings necessary to support them. The end result is an opinion that apparently opens the door to the possibility of an award of treble damages in virtually every case in which an insurer contests the claims of its insured. I am convinced that the Legislature, in passing the Deceptive Trade Practices Act and the Insurance Code, never intended such a result.
The court bases all three theories of recovery on a single pleading by the Vails, to wit:
In the alternative, Defendant violated Tex.Bus. & Com.Code, § 17.50(a)(4) by employing or using acts which violate art. 21.21 of the Texas Insurance Code, or rules and regulations issued by the State Board of Insurance under said art. 21.21, as follows:
(b) By engaging in the practices contrary to Sec. 4 of Insurance Board Order 18663, Sec. (a), which acts were unfair or deceptive as defined by art. 21.21-2, Sec. 2(d) by not attempting in good faith to effectuate fair, and equitable settlements on claims submitted in which liability had become reasonably clear.
From this lone pleading, the court finds that Texas Farm violated the Deceptive Trade Practices Act in three respects:
(1) it violated Board Order 18663, Sec. 4(a), in that it committed an unfair or deceptive act as defined by Tex.Ins.Code art. 21-21-2, § 2(d);
(2) it violated Board Order 18663, Sec. 4(b), in that it engaged in a trade practice determined by law to be an unfair or deceptive act or practice in the business of insurance;
(3) it committed an unlisted deceptive trade practice under Tex.Bus. & Com. Code, § 17.46(b).
At the outset, I join in Justice Gonzalez’ dissent insofar as it applies to the first alleged violation by Texas Farm. I believe that Chitsey v. National Lloyds Ins. Co., 738 S.W.2d 641 (Tex.1987), forecloses a holding that Texas Farm’s denial of the Vails’ claim meets the “frequency” requirements of both Board Order 41454 and Tex. Ins.Code, art. 21.21-2.
As regards the second alleged violation, that Texas Farm violated Section 4(b) of Board Order 18663,1 find no basis whatsoever for the court’s conclusion. In the first *140place, this theory was not pled. The Vails’ pleadings refer only to section 4(a) of that Board Order, not the portion upon which the court relies.
Moreover, our opinions in Arnold v. National County Mut. Ins. Co., 725 S.W.2d 165, 167 (Tex.1987) and Aranda v. Insurance Co. of North America, 748 S.W.2d 210, 213 (Tex.1988), do not amount to a “determination by law” that good faith failure to settle a claim is “an unfair or deceptive act or practice in the business of insurance.” State Bd. of Ins., 28 Tex.Admin. Code § 21.3(b) (July 22, 1982) [Board Order 18663, § 4b]. In Chitsey, this court wrote: “The words ‘determined by law’ call for at least a state agency, if not legislative, determination and not just a jury finding.” 738 S.W.2d at 643. The court now holds “this court is empowered to determine whether conduct constitutes an unfair or deceptive act.” I agree with this statement in principle, but find it inapposite to the case before us.
Undoubtedly, this court might be confronted with a case in which it is called upon to determine whether a particular trade practice is “an unfair or deceptive act or practice in the business of insurance” pursuant to Board Order 18663, § 4(b). Having made such a determination, the decision of this court could properly be relied upon by parties alleging a violation of Board Order 18663, § 4. Chitsey would not foreclose such a result.
Aranda and Arnold, however, do not comprise such a determination. In Arnold, this court held that “there is a duty on the part of insurers to deal fairly and in good faith with their insureds.” 725 S.W.2d at 167. In Aranda, we held that “there is a duty on the part of workers’ compensation carriers to deal fairly and in good faith with injured employees in the processing of insurance claims.” 748 S.W.2d at 213. It stretches credulity to assert, as the court does, that those holdings amount to a determination that Texas Farm’s failure to exercise good faith in the settlement of the Vail’s claim was a “deceptive act or practice in the business of insurance.” Arnold and Aranda do no more than establish common law duties of good faith and fair dealing. They are not determinations of what comprises a deceptive act or practice pursuant to Board Order 18663, § 4(b). By holding that they are, this court elevates a general common law duty to a per se statutory violation subject to treble damages.
Finally, I disagree that the Vails have established that Texas Farm’s failure to settle their claim constituted an unlisted deceptive trade practice under subsection 17.46(b) of the Deceptive Trade Practices Act. To warrant recovery for an unlisted practice, there must be a finding that the act occurred and that it was deceptive. Spradling v. Williams, 566 S.W.2d 561, 564 (Tex.1978). To meet this requirement, the court points to the jury’s finding that Texas Farm intentionally failed to exercise good faith in the settlement of the Vails’ claim. This is simply not a finding that Texas Farm’s failure to exercise good faith was a deceptive act. To obtain such a finding, the jury must have been properly instructed as to what a deceptive act is, and it must have found that the act in question was deceptive. Spradling v. Williams, 566 S.W.2d at 564. In the absence of a finding that the failure to exercise good faith was deceptive, there can be no violation of an unlisted trade practice.
Having found a violation of the Deceptive Trade Practices Act, the court holds the Vails may recover treble damages. The court holds that whether the suit was brought under the pre-1979 version of the Act, in which treble damages were mandatory, or the 1979 version of the Act, is not dispositive. At the outset, I would hold the 1979 version of the Act is applicable. The fire occurred July 15, 1979. Under the terms of the policy, the loss was not payable until 60 days after proof of loss was provided to the insurer. Further, at trial, the Vails stipulated that the date of denial of their claim was September 10, 1979. Both of these dates are after August 27, 1979, the date on which the 1979 version of the Act took effect.
The award of treble damages under the 1979 Act is within the discretion of the trier of fact. TEX.BUS. & COM. CODE *141§ 17.50(b); Martin v. McKee, 663 S.W.2d 446, 448 (Tex.1984). Thus, an award of treble damages cannot be made absent a special issue thereon. Id. Since the Vails neither requested nor obtained such an issue, they may not be awarded treble damages. Further, the required issue may not be deemed found by the trial court under TEX.R.CIV.P. 279, because treble damages under the Deceptive Trade Practices Act constitute an independent ground of recovery. Id.
The court nevertheless seeks to impose treble damages by incorporating the treble damages provision of article 21.21 of the Insurance Code into the Deceptive Trade Practices Act. This is untenable. The DTPA permits a consumer to maintain an action where:
any of the following constitutes a producing cause of actual damages:
(4) the use or employment by an person of an act or practice in violation of Article 21.21, Texas Insurance Code, as amended....
TEX.BUS. & COM.CODE, § 17.50(a)(4) (emphasis added). The court ignores this plain language by holding that subsection 17.50(a)(4) “incorporated article 21.21 of the Insurance Code in its entirety.” This reading yields the absurd result of holding that for violations of subsection 17.50(a)(4) treble damages are mandatory, because mandatory in the Insurance Code, while for violations of all other portions of the DTPA, treble damages are discretionary. Plainly, the Legislature intended to incorporate into the DTPA only what it stated, the “acts or practices” enumerated in Tex. Ins.Code, art. 21.21, not the remedies provided for under that statute.
In conclusion, I find no support for the court’s award of treble damages in this suit. Believing that the judgment of the court of appeals was correct, I dissent.
CULVER, J., joins in this dissent.