Filed: Sep. 16, 2020
Latest Update: Sep. 17, 2020
Summary: 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
Summary: 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 ..
More
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.
2
Case: 19-50656 Document: 00515567651 Page: 3 Date Filed: 09/16/2020
No. 19-50656
[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
3
Case: 19-50656 Document: 00515567651 Page: 4 Date Filed: 09/16/2020
No. 19-50656
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.
4
Case: 19-50656 Document: 00515567651 Page: 5 Date Filed: 09/16/2020
No. 19-50656
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
5
Case: 19-50656 Document: 00515567651 Page: 6 Date Filed: 09/16/2020
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.
6
