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Texas fast payment of damages law confirmed as a strictly responsible statute | Legal insurance blog for property insurance



A Brief Statement of Relevant Facts:

U.S. Court of Appeals for the Fifth Circuit in Agredano v. State Farm Lloyds No. 19-50656 (September 16, 2020), has confirmed that the Texas Insurance Code §542.060, Texas Prompt Payment of Claims Act (“TPPCA”), is a strict liability statute. Here, Agredano sued State Farm Lloyds ("State Farm") according to their homeowners' insurance for wind damage in their homes. The district court issued State Farm a partial summary judgment on all the insured's claims, except for breach of contract. A jury found for the insured due to violation of the contract claim.

Despite the fact that Agredano did not specifically invoke Chapter 542 (TPPCA) Exemption, the District Court granted TPPCA Exemption under Federal Rule of Civil Procedure 54 (c). This rule provides that the final judgment shall "grant the relief to which each party is entitled, even if the party has not demanded this relief in its pleadings." Shortly afterwards, the district court reversed its decision and denied TPPCA exemption to Agredano based on the Fifth Circuit's unpublished opinion of Chavez v. State Farm Lloyds 746 F. App & # 39; x 337 (5th Cir. 201

8), which claims that if an insurance code claim in unbelievable faith has been rejected in the correct manner by the district court, there can be no recovery according to section 542.060.

Two issues are addressed in this opinion

  1. What constitutes sufficient submission from the TPPCA ?; and
  2. Whether a breach of the bad faith provisions of the Texas Insurance Code is a necessary condition for Section 542.060 TPPCA relief.

What constitutes a sufficient call to the TPPCA? regulations must first be cited.

Section 542.058 brings an action against insurers delaying payment of claims:

[I] f an insurer, after receiving all objects, statements and forms reasonably requested and required under section 542.055, delays the payment of the claim for a period which: exceeds the period specified in 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 in accordance with section 542.060.

Section 542.060 provides for damages for their claims plus 18% interest for delay in paying the claim as a breach of the above:

[T] the insurer is obliged to pay the holder of the insurance or the beneficiary y make claims under the policy, in addition to the claim amount, interest on the compensation amount of 18 percent per year as damages, together with reasonable and necessary law firms.

Turning to the Fifth Circuit after the trial, the plaintiffs claimed that they had invoked section 542.060 relief for the language when they appealed for their right to a "18th [p] singular [i] interest under Ch. 542 of the Texas Insurance Code ”and“ [a] ttorneys fees. The Fifth Circuit found that the plaintiff's submissions were sufficient for several reasons:

  • The Twombly / Iqbal "probability" standard was met because that standard does not require magic words or detailed facts in general and only prohibits speculative claims as a request for TPPCA default interest.
  • State Farm was not surprised by the request and in fact the plaintiff had communicated its request in a discovery response and in its summary decisions State Farm had referred the plaintiff's claim under Chapter 542 of the Texas Insurance Code. [19659016] In this matter, the Fifth Circuit concluded that "the statutory interest claim was not incorrectly invoked." In answer to this question, the Fifth Circuit Chavez no longer found good law in this matter and confirmed the twin's Supreme Court 2019 in Texas opinions from Barbara Techs. Corp v. State Farm Lloyds 589 S.W.3d 127 (Tex. 2019) and Ortiz v. State Farm Lloyds 589 S.W.3d 127 (Tex. 2019). In these statements, the Texas Supreme Court wrote: "Nothing in the TPPCA would exclude an insurance company 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 at 819; Ortiz at 135. The Fifth Circuit thus confirmed from these Texas Supreme Court rulings that the TPPCA is treated as a strict liability statute and that it is not necessary for a plaintiff to prove that the insurer acted wrongly or in bad faith to obtain TPPCA relief granted. The court reaffirmed that the charter only requires a demonstration of liability under the insurance and the insurer's failure to comply with the time requirements. See e.g. Biasatti v. GuideOne Nat’l Ins. Co. 601 S.W.3d 792, 794-95 (Tex. 2020) (analysis of the plaintiff's TPPCA claim separately from its infidelity). The fifth district concluded:

    The district court erred in finding that Chavez excluded the plaintiff's claims for 18% penalty and law firms under Chapter 542. (footnote omitted). Consequently, we REVOLUTE that decision and call for conclusions and the introduction of a new judgment consistent with this opinion. (Emphasis in original.)

    This opinion is important for its confirmation of the Texas Supreme Court's opinions of Barbara Tech and Ortiz and the finding that the TPPCA is a strict liability law under Texas law.


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