Court Opinion

ID: 9939635
Source: CourtListenerOpinion
Date Created: 2024-02-11 15:09:56.230879+00
Date Added: 2024-06-11T13:41:39.577879
License: Public Domain

Supreme Court of Texas
                            ══════════
                             No. 23-0534
                            ══════════

                            Mario Rodriguez,
                               Appellant,

                                   v.

              Safeco Insurance Company of Indiana,
                                Appellee

   ═══════════════════════════════════════
        On Certified Question from the United States
           Court of Appeals for the Fifth Circuit
   ═══════════════════════════════════════

                      Argued October 4, 2023

      JUSTICE BLACKLOCK delivered the opinion of the Court.

      The Fifth Circuit asks the following certified question: “In an
action under Chapter 542A of the Texas Prompt Payment of Claims Act,
does an insurer’s payment of the full appraisal award plus any possible
statutory interest preclude recovery of attorney’s fees?” As explained
below, the answer is yes.
                                   I.
      The certified question arises from a dispute between a
homeowner, Mario Rodriguez, and his insurance company, Safeco
Insurance Company of Indiana. On May 25, 2019, a tornado struck
Rodriguez’s home.         Safeco issued a payment of $27,449.88, which
Rodriguez accepted.         Rodriguez’s counsel told Safeco it owed an
additional $29,500 and threatened to sue.
       Rodriguez sued on June 18, 2020. He brought several claims,
including breach of contract and statutory claims under the Insurance
Code. We understand the parties to agree that Chapter 542A of the
Insurance Code governs any attorney’s fees award Rodriguez might seek
for any of his claims. Safeco removed the case to federal court, alleging
diversity jurisdiction.
       After an unsuccessful mediation, Safeco invoked the insurance
policy’s appraisal provision. 1 On April 5, 2022, the appraisal panel
valued the damage at $36,514.52. On April 12, 2022, after subtracting
prior payments and other amounts, Safeco issued a check to Rodriguez
for $32,447.73, which it viewed as full payment of the appraisal amount
due under the policy. Rodriguez does not dispute that Safeco fully paid
the appraised amount or that Safeco did so in a timely fashion in
response to the appraisal. At the same time, Safeco paid an additional
$9,458.40, which it claimed would cover any interest possibly owed on
the appraised amount.

       1 The policy’s appraisal provision says that either the insured or insurer

can demand an appraisal, then each selects an appraiser, and then the two
appraisers select an umpire. The two appraisers “shall then resolve the issues
surrounding the loss [and] appraise the loss,” or, if the appraisers disagree,
they will submit the matter to the umpire, and then “any two of these
three . . . shall determine the amount of the loss.”

                                       2
      Safeco moved for summary judgment, arguing that its full
payment of the appraisal plus interest should put an end to the
litigation, including any attempt by Rodriguez to recover attorney’s fees.
Safeco contended that section 542A.007 of the Insurance Code foreclosed
Rodriguez’s request for attorney’s fees. Section 542A.007 provides:
      (a) Except as otherwise provided by this section, the
      amount of attorney’s fees that may be awarded to a
      claimant in an action to which this chapter applies is the
      lesser of:
             (1) the amount of reasonable and necessary
             attorney’s fees supported at trial by sufficient
             evidence and determined by the trier of fact to have
             been incurred by the claimant in bringing the action;
             (2) the amount of attorney’s fees that may be
             awarded to the claimant under other applicable law;
             or
             (3) the amount calculated by:
                     (A) dividing the amount to be awarded in the
                     judgment to the claimant for the claimant’s
                     claim under the insurance policy for damage
                     to or loss of covered property by the amount
                     alleged to be owed on the claim for that
                     damage or loss in a notice given under this
                     chapter; and
                     (B) multiplying the amount calculated under
                     Paragraph (A) by the total amount of
                     reasonable and necessary attorney’s fees
                     supported at trial by sufficient evidence and
                     determined by the trier of fact to have been
                     incurred by the claimant in bringing the
                     action.
      The parties disputed the calculation of attorney’s fees under
subsection (a)(3).   Safeco argued that its pre-trial payment of the

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appraised amount plus any possible statutory interest fully discharged
its obligations to Rodriguez under the insurance policy, which means
there will never be a “judgment to the claimant . . . under the insurance
policy” on which to base the calculation described by subsection (a)(3).
The district court agreed with Safeco and dismissed the case. 2022 WL
6657888 (N.D. Tex. Oct. 3, 2022).
       Rodriguez appealed to the Fifth Circuit, which certified the
question quoted above. 74 F.4th 352 (5th Cir. 2023); see TEX. CONST. art.
V, § 3-c; TEX. R. APP. P. 58.1. As the Fifth Circuit noted, courts are split
on this question.      Some have held that Chapter 542A precludes
attorney’s fees when an insurer pays the appraised amount under the
insurance policy, 2 while other courts have held that such a payment does

       2  See Kester v. State Farm Lloyds, No. 02-22-00267-CV, 2023 WL
4359790, at *3 (Tex. App.—Fort Worth July 6, 2023, pet. dism’d by agr.);
Rosales v. Allstate Vehicle & Prop. Ins. Co., 672 S.W.3d 146, 153 (Tex. App.—
Dallas 2023, pet. filed); McCall v. State Farm Lloyds, No. 3:22-CV-1712-B,
2023 WL 5311485, at *1 (N.D. Tex. Aug. 17, 2023); Morakabian v. Allstate
Vehicle & Prop. Ins. Co., No. 4:21-CV-100-SDJ, 2023 WL 2712481, at *5 (E.D.
Tex. Mar. 30, 2023); Arnold v. State Farm Lloyds, No. H-22-3044, 2023 WL
2457523, at *5 (S.D. Tex. Mar. 10, 2023); Kahlig Enters., Inc. v. Affiliated FM
Ins. Co., No. SA-20-CV-01091-XR, 2023 WL 1141876, at *8 (W.D. Tex. Jan. 30,
2023); Royal Hosp. Corp. v. Underwriters at Lloyd’s London, No. 3:18-cv-102,
2022 WL 17828980, at *10 (S.D. Tex. Nov. 14, 2022); Atkinson v. Meridian Sec.
Ins. Co., No. SA-21-CV-00723-XR, 2022 WL 3655323, at *8 (W.D. Tex. Aug. 24,
2022); White v. Allstate Vehicle & Prop. Ins. Co., No. 6:19-cv-00066, 2021 WL
4311114, at *10 (S.D. Tex. Sept. 21, 2021); Trujillo v. Allstate Vehicle & Prop.
Ins. Co., No. H-19-3992, 2020 WL 6123131, at *6 (S.D. Tex. Aug. 20, 2020);
Gonzalez v. Allstate Vehicle & Prop. Ins. Co., 474 F. Supp. 3d 869, 876 (S.D.
Tex. 2020); Pearson v. Allstate Fire & Cas. Ins. Co., No. 19-CV-693-BK, 2020
WL 264107, at *4 (N.D. Tex. Jan. 17, 2020).

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not necessarily preclude attorney’s fees. 3 For the following reasons, we
conclude that section 542A.007 of the Insurance Code prohibits an
award of attorney’s fees when an insurer has fully discharged its
obligations under the policy by voluntarily paying the appraised
amount, plus any statutory interest, in compliance with the policy’s
appraisal provisions.
                                      II.
                                      A.
       Chapter 542 of the Insurance Code imposes deadlines for the
payment of certain insurance claims. TEX. INS. CODE §§ 542.057–.059.
Failure to meet these deadlines results in statutory liability for interest
and “reasonable and necessary attorney’s fees.”               Id. § 542.060.
Subchapter B of Chapter 542, which contains these provisions and
others, is sometimes called the “Prompt Payment of Claims Act.” See,
e.g., Lazos v. State Farm Lloyds, 601 S.W.3d 783, 783 (Tex. 2020).
       In 2017, the Legislature added Chapter 542A to the Insurance
Code. See TEX. INS. CODE §§ 542A.001–.007. 4 Chapter 542A governs

       3 See Saleme v. State Farm Lloyds, No. 1:18-CV-00632-MAC-ZJH, 2021

WL 4206177, at *5 (E.D. Tex. Aug. 27, 2021); Ahmad v. Allstate Fire & Cas.
Ins. Co., No. 4:18-CV-4411, 2021 WL 2211799, at *4 (S.D. Tex. June 1, 2021);
Martinez v. Allstate Vehicle & Prop. Ins. Co., No. 4:19-CV-2975, 2020 WL
6887753, at *2 (S.D. Tex. Nov. 20, 2020); Moncivais v. Allstate Tex. Lloyds, No.
5-18-CV-00525-OLG-RBF, 2020 WL 5984058, at *5 (W.D. Tex. Oct. 8, 2020);
Mancha v. Allstate Tex. Lloyd’s, No. 5:18-cv-00524-OLG, 2020 WL 8361926, at
*3 (W.D. Tex. Feb. 26, 2020); Gonzalez v. Allstate Fire & Cas. Ins. Co., No. SA-
18-CV-00283-OLG, 2019 WL 13082120, at *6 (W.D. Tex. Dec. 2, 2019).
       4 Although the certified question refers to Chapter 542A as part of the

“Texas Prompt Payment of Claims Act,” that label is more commonly
associated with Subchapter B of Chapter 542. See, e.g., Lazos, 601 S.W.3d at

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first-party claims by an insured that arise “from damage to or loss of
covered property caused, wholly or partly, by forces of nature, including
an earthquake or earth tremor, a wildfire, a flood, a tornado, lightning,
a hurricane, hail, wind, a snowstorm, or a rainstorm.”                         Id.
§ 542A.001(2)(C). When it applies, Chapter 542A changes the rules
applicable to the litigation of certain statutory and common-law claims
against insurers, including claims asserting violations of Chapter 542’s
prompt-payment requirements. Id. § 542A.002 (describing applicability
of Chapter 542A). We understand the parties to agree that Chapter
542A governs Rodriguez’s claims.
       Among its many other provisions, Chapter 542A limits the
recovery of attorney’s fees. Id. § 542A.007 (quoted above). Rodriguez
acknowledges that section 542A.007’s restrictions on attorney’s fees
apply to his claims. He likewise does not dispute that Safeco has paid
the full appraisal amount plus interest. With these undisputed matters
established, we understand the Fifth Circuit to ask a purely legal
question about Chapter 542A’s effect on the availability of attorney’s
fees: Does Chapter 542A prohibit the recovery of attorney’s fees when
an insurer in Safeco’s position has paid the full appraisal award plus
any possible statutory interest? The answer is yes.
       We need not and should not seek the answer from any source
other than the statute’s plain language. The Legislature’s “voted-on
language is what constitutes the law, and when a statute’s words are

783. Of course, various provisions of the Insurance Code governing insurance
litigation may overlap and interact with one another irrespective of their
association with a particular legislative act. In pursuit of clarity, we will refer
to the section and chapter numbers of the Insurance Code.

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unambiguous and yield but one interpretation, ‘the judge’s inquiry is at
an end.’” Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632,
635 (Tex. 2013) (quoting Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson,
209 S.W.3d 644, 651–52 (Tex. 2006)).
      Although the mathematical calculation described by section
542A.007(a)(3) is somewhat detailed, it is not unclear or ambiguous.
The allowable amount of attorney’s fees is “calculated by . . . [first]
dividing the amount to be awarded in the judgment to the claimant for
the claimant’s claim under the insurance policy for damage to or loss of
covered   property”    by   another    amount.       TEX.   INS.   CODE
§ 542A.007(a)(3)(A). The fraction generated by this initial step (which
can be greater or less than 1) is then multiplied “by the total amount of
reasonable and necessary attorney’s fees supported at trial . . . .” Id.
§ 542A.007(a)(3)(B).
      When the statutorily required calculation is applied to
Rodriguez’s case, a problem arises at the first step of the formula.
Because the insurer has already paid all amounts owed under the
insurance policy plus any possible statutory interest, there is not and
never will be an “amount to be awarded in the judgment to the claimant
for the claimant’s claim under the insurance policy.” See Ortiz v. State
Farm Lloyds, 589 S.W.3d 127, 132–33 (Tex. 2019) (holding that an
insurer’s payment of the appraisal award discharges its obligations
under the policy). When there is no “amount to be awarded in the
judgment to the claimant for the claimant’s claim under the insurance
policy,” the numerator of the fraction described by subsection (a)(3)(A)
does not exist—which means the fraction’s value is zero (or

                                   7
non-existent).    Multiplying this zero-value by another number, as
required in the calculation’s second step, can never yield a non-zero
amount of attorney’s fees. As a result, in this case and others like it,
there will never be a non-zero amount of permissible attorney’s fees
under the formula described in section 542A.007(a)(3).
       Section 542A.007(c) reinforces the mathematical result already
dictated by subsection (a)(3).       It says: “The court may not award
attorney’s fees to the claimant if the amount calculated under
Subsection (a)(3)(A) is less than 0.2.” In cases like this one, “the amount
calculated under Subsection (a)(3)(A)” is less than 0.2. Subsection (c)
therefore operates as an affirmative bar on any award of attorney’s fees
to a claimant in Rodriguez’s position.         In other words, even if the
zero-value of the fraction described by subsection (a)(3)(A) left the door
open to some other method of calculating attorney’s fees, subsection (c)
closes that door by prohibiting courts from awarding fees to the claimant
when the subsection (a)(3)(A) calculation yields a result less than 0.2, as
is the case here. 5

       5 If the result of the calculation under (a)(3) is non-existent—as opposed

to zero—a math stickler might argue that because there is no amount at all,
we cannot say that the amount is less than 0.2. Of course, the statute is
concerned with calculating amounts of money, not with number theory. We do
not think the mathematical distinction between a zero value and a
non-existent value makes any difference to the statutory calculation. “[T]he
amount of attorney’s fees that may be awarded to a claimant in an action to
which this chapter applies is the lesser of” the three amounts described by
subsections (a)(1), (a)(2), and (a)(3). TEX. INS. CODE § 542A.007(a) (emphasis
added). Whether in theory the amount described by subsection (a)(3) has a
zero value or a non-existent value, in practice the amount of money such a
calculation makes available in attorney’s fees will always be less than any
non-zero amount of money.

                                       8
      It might be argued that Safeco’s payment of the appraisal amount
plus any possible statutory interest does not necessarily foreclose the
possibility of a non-zero “judgment to [Rodriguez] for [his] claim under
the insurance policy.” But our recent decision in Ortiz, which involved
an analogous appraisal provision, squarely forecloses that possibility.
Ortiz, 589 S.W.3d at 127. In that case, Ortiz submitted a claim for wind
and hail damage. Ortiz and State Farm disagreed over the amount due
under the policy. After Ortiz sued, State Farm invoked the contractual
appraisal process. We held “that an insurer’s payment of an appraisal
award in the face of similar allegations of pre-appraisal underpayment
forecloses liability on a breach of contract claim.”    Id. at 132.   We
continued, “Thus, an enforceable appraisal award, like the one issued in
this case, is binding on the parties with respect to that amount. . . .
Having invoked the agreed procedure for determining the amount of
loss, and having paid that binding amount, State Farm complied with
its obligations under the policy.” Id. at 132–33 (emphasis added).
      As in Ortiz, in this case there is no further amount that Rodriguez
can recover in a “judgment to [Rodriguez] for [his] claim under the
insurance policy.” TEX. INS. CODE § 542A.007(a)(3)(A) (emphasis added).
This is so because Safeco has discharged its liability under the policy by
paying the appraisal amount plus any possible statutory interest. In
other words, Safeco has “complied with its obligations under the policy,”
Ortiz, 589 S.W.3d at 133, so there is no remaining “amount to be
awarded in the judgment to the claimant for the claimant’s claim under
the insurance policy,” TEX. INS. CODE § 542A.007(a)(3)(A). As a result,
no attorney’s fees are available under section 542A.007(a)(3)’s formula.

                                    9
      It makes no difference that insurers who pay appraisal awards
under their policies may remain subject to the possibility of a judgment
for claims other than a “claim under the insurance policy for damage to
or loss of covered property.” Id. It is the possibility of a judgment on
that claim, rather than the possibility of a judgment on related statutory
or common-law claims, that matters in section 542A.007(a)(3)’s formula.
Our decision in Barbara Technologies Corp. v. State Farm Lloyds
recognizes that an insurer’s full payment of an appraisal award does not
necessarily foreclose liability for a variety of claims insureds might
bring. 589 S.W.3d 806, 827 (Tex. 2019). The parties and several helpful
amici focus considerable attention on Barbara Tech. But Ortiz, which
issued the same day as Barbara Tech, clarified that full payment of an
appraisal award does discharge the insurer’s liability for a claim under
the insurance policy.    Moreover, Barbara Tech—which was decided
under the law as it existed prior to Chapter 542A—is primarily
concerned with how and when an insurer’s liability is established. Id.
at 809, 813, 820. Section 542A.007(a)(3), on the other hand, is concerned
not with whether the insurer is liable but with whether there is “an
amount to be awarded in the judgment” against the insurer for a claim
under the insurance policy. As explained above, there is not and never
will be a money judgment on Rodriguez’s claim under his insurance
policy, so attorney’s fees are unavailable.
      We therefore agree with the many federal district courts that
have held the same, including the district court in this case. As one
court succinctly put it: “The plain language of Section 542A.007(a)
makes clear that payment of the appraisal award [plus any possible

                                    10
statutory interest] extinguishes a plaintiff’s right to attorney’s
fees . . . . Because [the insured] received payment of the appraisal
award which covers his claim under the insurance policy, he necessarily
has no remaining ‘claim under [his] insurance policy.’” Morakabian v.
Allstate Vehicle & Prop. Ins. Co., No. 4:21-CV-100-SDJ, 2023 WL
2712481,    at   *5   (E.D.   Tex.   Mar.   30,   2023)    (citing   section
542A.007(a)(3)(A) and Ortiz).
                                     B.
      Rodriguez and supporting amici contend that the Legislature
could not have intended Safeco’s interpretation of Chapter 542A, which
they fear will lead to abusive and unfair practices by insurance
companies. The federal district court’s reasoning in Gonzalez v. Allstate
Fire & Insurance Co. exemplifies this line of argument:
      Allstate’s interpretation of § 542A.007 would mean that
      insurers could systematically avoid liability for TPPCA
      attorney’s fees by (i) first, paying only a small fraction of
      the alleged claim amount to a claimant, (ii) second,
      invoking appraisal, and (iii) third, only following appraisal,
      paying the difference and any interest owed to the
      claimant. Although it is true that the Texas legislature
      intended to place a limit on attorney’s fees through
      § 542A.007, there is no indication that the Texas
      legislature intended to read attorney’s fees out of [the]
      statute for all practical purposes.
No. SA-18-CV-00283-OLG, 2019 WL 13082120, at *6 (W.D. Tex. Dec. 2,
2019) (footnote omitted).
      Rather than speculate about whether the Legislature intended
recovery of attorney’s fees to be likely, unlikely, or impossible, we should
instead stick with the bedrock principle that the Legislature intends the
courts to follow its instructions as written.       In this instance, the

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Legislature has required the use of a mathematical formula that yields
zero attorney’s fees in cases like Rodriguez’s. Whatever else judges or
litigants may believe the Legislature intended when it enacted Chapter
542A, we know with certainty that the Legislature instructed courts to
use the mathematical formula described in section 542A.007(a)(3) when
determining the amount of attorney’s fees available to plaintiffs like
Rodriguez. Whether we think the Legislature envisioned or anticipated
the practical consequences of its attorney’s-fees formula is beside the
point. Much could be said about the oft-debated concept of “legislative
intent,” but this point is certain: The Legislature intends courts to follow
its instructions. Few legislative instructions are as inescapable as a
math formula. If the Legislature does not like the consequences of the
instructions it has given the courts, it obviously has every right to
change them.
      “[I]t is not for courts to decide if legislative enactments are wise
or if particular provisions of statutes could be more effectively worded to
reach what courts or litigants might believe to be better or more
equitable results.” In re Dep’t of Fam. & Protective Servs., 273 S.W.3d
637, 645 (Tex. 2009). We have, however, often said that statutes should
be construed to avoid genuinely absurd results. Molinet v. Kimbrell, 356
S.W.3d 407, 411 (Tex. 2011); City of Rockwall v. Hughes, 246 S.W.3d
621, 625–26 (Tex. 2008). But “the absurdity safety valve is reserved for
truly exceptional cases, and mere oddity does not equal absurdity.”
Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 630 (Tex. 2013).
Instead, the result must land in the realm of the “unthinkable or
unfathomable.” Id.

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      The unavailability of attorney’s fees in cases like this one—or in
any case—comes nowhere close to an unthinkable or unfathomable
result. The default rule is the American Rule, under which parties pay
their own attorney’s fees. Ashford Partners, Ltd. v. ECO Res., Inc., 401
S.W.3d 35, 41 (Tex. 2012). To the extent attorney’s fees are available at
all in cases like this one, they are only available because the Legislature
has created an exception to the American Rule. The Legislature’s later
decision to restrict—or to eliminate entirely—an exception of its own
creation and thereby to move back toward the default American Rule
raises no absurdity concerns.
      For these reasons, the answer to the certified question is yes.

                                         James D. Blacklock
                                         Justice

OPINION DELIVERED: February 2, 2024

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