LOUIS HINOJOS, PETITIONER, v. STATE FARM LLOYDS AND RAUL PULIDO, RESPONDENTS
No. 19-0280
IN THE
March 19, 2021
ON
JUSTICE BLACKLOCK, joined by JUSTICE GUZMAN, dissenting.
The Court
The Court relies on the following statement from Barbara Tech: “Nothing 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, regardless of use of the appraisal process.” Ante at ___ (quoting Barbara Tech., 589 S.W.3d at 819). This sentence mirrors the statutory text by observing that an insurer who “delays payment” owes TPPCA penalties. But the question presented today is not whether insurers who “delay[] payment of a claim” violate the TPPCA. All agree they do. The question is what it means to “delay[] payment of a claim.” Barbara Tech never squarely addresses that question, other than to hold that invoking a contractual appraisal provision does not excuse an otherwise “delay[ed] payment.”
Barbara Tech itself described the question it was attempting to answer: “We must determine whether an insurer can be liable for TPPCA damages when it initially denied the claim but later paid the insured in full according to the amount of loss determined through the policy‘s appraisal process.” 589 S.W.3d at 815 (emphasis added). The Court answered that insurers who initially deny a claim and later make payment after an appraisal have “delay[ed] payment” for purposes of
Barbara Tech repeatedly states its holding as applicable to claims that have been initially “rejected” or “denied.” Id. at 809, 813, 815, 817, 820, 823, 825-28. But in today‘s case, Hinojos‘s claim was never rejected or denied. It was partially paid, on time. The closest Barbara Tech comes to addressing Hinojos‘s situation actually points in the other direction. The Court in Barbara Tech quoted at length from Breshears v. State Farm Lloyds, 155 S.W.3d 340 (Tex. App.—Corpus Christi-Edinburg 2004, pet. denied), a court-of-appeals case this Court endorsed as “persuasive.” The passage from Breshears quoted favorably in Barbara Tech is worth reproducing in full:
The Breshears argue that because of the appraisal process, they were not actually paid until after State Farm paid them the difference between the first payment and the appraisal award, which occurred long after the sixty-day statutory limit.
The Breshears also argue that by invoking the appraisal process, State Farm did not notify them as to whether it intended to pay their claim within the time required by the code. We disagree. The Breshears were paid by State Farm within the sixty-day limit, and they were notified that State Farm would pay the claim when State Farm sent them an estimate of the cost of their repairs accompanied by a check. The fact that the appraisal process was later invoked does not alter the fact that State Farm complied with the Insurance Code . . . .
Barbara Tech, 589 S.W.3d at 821-22 (quoting Breshears, 155 S.W.3d at 345).
Breshears thus involved a situation much like today‘s case. The insurer made an initial timely payment. Then later, after an appraisal, it paid more. The court of appeals rejected the Breshears’ argument that State Farm‘s later payment of the higher amount gave rise to prompt-pay liability. The court sided with State Farm and held that, by virtue of the initial timely payment that turned out to be too low, “The Breshears were paid by State Farm within the sixty-day limit,” and State Farm thereby “complied with the Insurance Code.” Id. In Barbara Tech, this Court endorsed the above-quoted passage from Breshears. Thus, far from indicating that a timely initial payment cannot satisfy
Although the Court‘s opinion relies principally on Barbara Tech and Ortiz,2 by my reading the case truly doing the heavy lifting under the Court‘s reasoning is Republic Underwriters Insurance Co. v. Mex-Tex, Inc., 150 S.W.3d 423 (Tex. 2004). Unlike Barbara Tech, Mex-Tex does deal to some extent with what it means to “delay[] payment of a claim” under the Insurance Code. Mex-Tex construed the statutory definition of “claim” in
“Claim” means a first-party claim that:
(A) is made by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract; and
(B) must be paid by the insurer directly to the insured or beneficiary.
For four reasons, the quoted language from Mex-Tex should not be understood to provide a definition of “claim” that can automatically be applied in today‘s case. First, Mex-Tex itself does not purport to do that. It does not say that the definition‘s use of the phrase “must be paid by the insurer” means that a “claim” and “the amount ultimately determined to be owed” are the same thing. Instead, it says the phrase “‘must be paid by the insurer’ . . . limits ‘claim’ to the amount ultimately determined to be owed.” (emphasis added). In other words, Mex-Tex says the “claim” on which prompt-pay damages are calculated can be no higher than “the amount ultimately determined to be owed.”
Second, the dispute the Court was resolving in Mex-Tex further demonstrates that its characterization of the word “claim” was intended to place an upward limit on the amount from which prompt-pay damages are calculated, not to restrictively define the word “claim” for all purposes in the prompt-pay statute. In Mex-Tex, the insured sought prompt-pay damages on the total amount the insurer ultimately paid. Id. at 425. The Court rejected that request, holding that prompt-pay damages could only be recovered on the amount that was paid late. Id. at 427-28. In effect, the Court held that Mex-Tex could not recover damages on more than it was owed when the prompt-pay clock ran out. Under Mex-Tex, for purposes of calculating prompt-pay liability, a “claim” can never be higher than the amount determined to be owed, but Mex-Tex says nothing about whether the amount of a “claim” can ever be lower than that amount. Considering the sentence from Mex-Tex in its context, it is clear to me that the Court did not intend to restrictively redefine the statutory word “claim” to mean only “the amount ultimately determined to be owed.”
Third, it makes no difference that the outcome of Mex-Tex was that the insurer paid prompt-pay damages even after making, as State Farm did here, an initial timely payment. The insurer in Mex-Tex never argued—as the insurer in Breshears did and as State Farm does here—that its initial payment satisfied
Fourth, and perhaps most importantly, the result of understanding the word “claim” as the Court believes Mex-Tex requires would be to make several passages in
In sum, although Mex-Tex comes closer to addressing the pertinent question than does Barbara Tech, neither case answers the question presented here: Has an insurer who timely pays a claim in the amount it decides it owes and then later agrees to pay a larger amount “delay[ed] payment of a claim“? To answer that question, we should look anew at the text of the statute. The first thing to notice about the way the prompt-pay statute uses the word “claim” is that it does so in many different ways. As indicated above, the word “claim” is used repeatedly throughout
There is, however, a strong textual indication that an insurer who timely pays “a claim or part of a claim” does not “delay[] payment of the claim” under
Even though partial payment of a claim unquestionably counts as “pay[ing] the claim” in
By my reading, the statute‘s use of the verb “delay” suggests a deliberate act. E.g., Delay, BLACK‘S LAW DICTIONARY (10th ed. 2014) (“The act of postponing or slowing“).
As I see it, the simple approach that best comports with the statutory text is that an insurer who timely pays its insured‘s claim at an amount lower than the insured would like has not “delay[ed] payment of the claim.” I acknowledge that insurance companies have an incentive to low-ball insureds and hope they will accept the initial offer. But statutory claims are available against insurers who make low offers in bad faith.
Maximum Payment of Claims Act. Its stated goal is to “promote the prompt payment of insurance claims.”
I respectfully dissent.
OPINION DELIVERED: March 19, 2021
James D. Blacklock
Justice