Justice Boyd announced the Court's judgment and delivered the Court's opinion as to Parts I, II, and III.A, in which Chief Justice Hecht, Justice Green, Justice Guzman, Justice Lehrmann, Justice Devine, and Justice Brown joined, a plurality opinion as to Parts III.B and III.C, in which Chief Justice Hecht, Justice Lehrmann, and Justice Devine joined, and an opinion as to Parts III.D, III.E, III.F, and III.G, in which Justice Lehrmann and Justice Devine joined.
Having granted Petitioner's motion for rehearing, we withdraw the judgment and opinion we issued on April 7, 2017. We unanimously reaffirm the legal principles and rules announced in that opinion, but we disagree on the procedural effect of those principles in this case. Because a majority of the Court agrees to reverse the court of appeals' judgment and remand the case to the trial court for a new trial, our disposition remains the same.
In our first opinion, we sought to fulfill our duty to eliminate confusion regarding the Court's previous decisions addressing insureds' claims against their insurance companies. As presented in this case, the primary issue is whether the insured can recover policy benefits based on the insurer's violation of the Texas Insurance Code even though the jury failed to find that the insurer failed to comply with its obligations under the policy. We sought to clarify the Court's previous decisions by announcing five rules addressing the relationship between contract claims under an insurance policy and tort claims under the Insurance Code. We unanimously reaffirm those rules today and provide additional guidance in response to the parties' arguments on rehearing. We also concluded in our first opinion that the trial court erred in this case by disregarding the jury's answer to Question 1, in which the jury failed to find that the insurer failed to comply with its obligations under the policy. We unanimously reaffirm that holding as well.
In light of the parties' understandable confusion regarding the Court's previous decisions, we decided in our first opinion to remand the case for a new trial in the interest of justice without addressing the procedural effect of our holdings in this case. We address those issues today, but we reach three different conclusions. JUSTICE GREEN, JUSTICE GUZMAN, and JUSTICE BROWN conclude that the jury's answer to Question 1 is dispositive as to the plaintiff's
After Hurricane Ike struck Galveston Island in September 2008, Gail Menchaca contacted her homeowner's insurance company, USAA Texas Lloyds, and reported that the storm had damaged her home. The adjuster USAA sent to investigate Menchaca's claim found only minimal damage. Based on the adjuster's findings, USAA determined that its policy covered some of the damage but declined to pay Menchaca any benefits because the total estimated repair costs did not exceed the policy's deductible.
The parties tried the case to a jury. Question 1 of the jury charge, which addressed Menchaca's breach-of-contract claim, asked whether USAA failed "to comply with the terms of the insurance policy with respect to the claim for damages filed by Gail Menchaca resulting from Hurricane Ike." The jury answered "No." Question 2, which addressed Menchaca's
Both parties moved for judgment in their favor based on the jury's verdict. USAA argued that because the jury failed to find in answer to Question 1 that USAA failed to comply with the policy, Menchaca could not recover for "bad faith or extra-contractual liability as a matter of law." Menchaca argued that the court should enter judgment in her favor based on the jury's answers to Questions 2 and 3, neither of which required a "Yes" answer to Question 1. The trial court disregarded Question 1 and entered final judgment in Menchaca's favor based on the jury's answers to Questions 2 and 3. The court of appeals affirmed, 2014 WL 3804602,
The parties agree that the damages the jury found in response to Question 3 represent the amount of insurance policy benefits the jury concluded USAA "should have paid" to Menchaca. USAA contends that Menchaca cannot recover any amount of policy benefits because the jury failed to find that USAA breached its obligations under the policy. Although the jury did find that USAA violated the Insurance Code, USAA contends that Menchaca cannot recover policy benefits based on that
Courts and commentators have expressed confusion over our decisions in this area, and over our statements in Castañeda and Vail in particular.
The first of these principles is that an "insurance policy is a contract" that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed. RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015); see also Tex. Ass'n of Ctys. Cty. Gov't Risk Mgmt. Pool v. Matagorda Cty., 52 S.W.3d 128, 131 (Tex. 2000) (noting that an "insurance policy ... defines the parties' rights and obligations"). Generally, we construe a policy using the same rules that govern the construction of any other contract. See Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex. 2008) (citing Forbau v. Aetna Life Ins., Co., 876 S.W.2d 132, 133 (Tex. 1994)). An insurance policy, however, is a unique type of contract because an insurer generally "has exclusive control over the evaluation, processing[,] and denial of claims," and it can easily use that control to take advantage of its insured. Arnold v. Nat'l Cty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987). Because of this inherent "unequal bargaining power," we concluded in Arnold that the "special relationship" between an insurer and insured justifies the imposition of a common-law duty on insurers to "deal fairly and in good faith with their insureds." Id.
Similar to that common-law duty, the Insurance Code supplements the parties' contractual rights and obligations by imposing procedural requirements that govern the manner in which insurers review and resolve an insured's claim for policy benefits. See, e.g., TEX. INS. CODE § 541.060(a) (prohibiting insurers from engaging in a variety of "unfair settlement practices"). The Code grants insureds a private action against insurers that engage in certain discriminatory, unfair, deceptive, or bad-faith practices, and it permits insureds to recover "actual damages ... caused by" those practices, court costs, and attorney's fees, plus treble damages if the insurer "knowingly" commits the prohibited act. Id. §§ 541.151, .152; Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 441 (Tex. 2012).
An insured's claim for breach of an insurance contract is "distinct" and "independent" from claims that the insurer violated its extra-contractual common-law and statutory duties. See Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996) ("Insurance coverage claims and bad faith claims are by their nature independent."); Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 666 (Tex. 1995) (noting that a bad-faith claim is "distinct" from a suit for breach of the policy); Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995) ("[A] policy claim is independent of a bad faith claim."). A claim for breach of the policy is a "contract cause of action," while a common-law or statutory bad-faith claim "is a cause of action that sounds in tort." Twin City, 904 S.W.2d at 666; see also Viles v. Sec. Nat'l Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990) ("[A] breach of the duty of good faith and fair dealing will give rise to a cause of action in tort that is separate from any cause of action for breach of the underlying insurance contract."). But the claims are often "largely interwoven," and the same evidence is often "admissible on both claims." Akin, 927 S.W.2d at 630.
The primary question in this case is whether an insured can recover policy benefits as "actual damages" caused by an insurer's statutory violation absent a finding that the insured had a contractual right to the benefits under the insurance policy. Generally, the answer to this question is "no," but the issue is complicated and involves several related questions. In an effort to clarify these issues, we distill from our decisions five distinct but interrelated rules that govern the relationship between contractual and extra-contractual claims in the insurance context. First, as a general rule, an insured cannot recover policy benefits as damages for an insurer's statutory violation if the policy does not provide the insured a right to receive those benefits. Second, an insured who establishes a right to receive benefits under the insurance policy can recover those benefits as actual damages under the Insurance Code if the insurer's statutory violation causes the loss of the benefits. Third, even if the insured cannot establish a present contractual right to policy benefits, the insured can recover benefits as actual damages under the Insurance Code if the insurer's statutory violation caused the insured to lose that contractual right. Fourth, if an insurer's statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages for that injury even if the policy does not grant the insured a right to benefits. And fifth, an insured cannot recover any damages based on an insurer's statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.
Some courts have read Stoker to hold that no claim for any kind of bad-faith conduct can exist if the policy does not cover the insured's loss. But Stoker involved only a claim for bad-faith denial of the insureds' claim for benefits. We clarified this point the following year in Akin: "While Stoker held that a judgment for the insurer on the coverage claim prohibits recovery premised only on bad faith denial of a claim, it does not necessarily bar all claims for bad faith." 927 S.W.2d at 631 (citing Stoker, 903 S.W.2d at 342) (emphases added). Thus, a more accurate statement of the rule we announced in Stoker is that "there can be no claim for bad faith [denial of an insured's claim for policy benefits] when an insurer has promptly denied a claim that is in fact not covered." Stoker, 903 S.W.2d at 341.
Although Stoker involved only a bad-faith-denial claim, we have since applied
In the present case, the jury found that USAA violated the Code by denying the claim without conducting a reasonable investigation. See TEX. INS. CODE § 541.060(a)(7) (providing that an insurer that "refus[es] to pay a claim without conducting a reasonable investigation with respect to the claim" commits an unfair settlement practice). In our early decisions, we mentioned this type of statutory violation but did not specifically address whether the general rule applies to such a claim. In Stoker, we expressly stated that the general rule should not "be understood as retreating from the established principles regarding the duty of an insurer to timely investigate its insureds' claims." 903 S.W.2d at 341. But we did not cite any authority for those "established principles." Instead, we merely noted, "These circumstances are not present in this case." Id.
We did address something akin to an improper-investigation claim, however, in Castañeda. The insured in that case sued her insurer alleging statutory violations "arising out of the denial of her claim for benefits under a health insurance policy and the manner in which her claim was handled." 988 S.W.2d at 191. But she did not assert a claim for breach of contract or seek a finding that the policy covered her claim. Id. at 196, 201. Instead, she argued that she was entitled to recover damages "equivalent to policy benefits" based on the jury's finding that the insurer violated the statute by failing to acknowledge communications about the claim and by failing "to adopt reasonable standards for investigating claims." Id. at 198 (emphasis added). We found no evidence that the insurer violated the statute in either manner. Id. at 192. We also explained that, even if there had been evidence of a violation, a "failure to properly investigate a claim is not a basis for obtaining policy benefits." Id. at 198 (citing Stoker, 903 S.W.2d at 341). We ultimately rendered judgment for the insurer because "no support in the evidence for any of the extra-contractual claims" existed and because the insured "did not plead and did not obtain a determination [that the insurer] was liable for breach of the insurance contract." Id. at 201. We held similarly in Boyd, 177 S.W.3d at 922. Because the claim there was predicated on the accident being covered under the insurance policy, when the trial court granted a take-nothing judgment on the insured's breach-of-contract claim, the insured's failure-to-fairly-investigate claim failed as well. Id. at 920-21; see also In re Allstate Cty. Mut. Ins. Co., 447 S.W.3d 497, 501 (Tex. App. — Houston [1st Dist.] 2014, orig. proceeding) (citing Boyd for the proposition that an "insurer generally cannot be liable for failing to settle or investigate a claim that it has no contractual duty to pay").
Here, Menchaca contends that she can recover policy benefits as damages resulting from USAA's statutory violation because that claim is independent from her claim for policy breach. The court of appeals agreed, reasoning that the statute "imposes a duty on an insurer, above and beyond the duties established by the insurance policy itself, to conduct a reasonable investigation prior to denying a claim," and thus "USAA could have fully complied with the contract even if it failed to reasonably investigate Menchaca's claim." 2014 WL 3804602. While we agree with the court's premise that USAA could have complied with the policy even if it failed to reasonably investigate the claim, we reject its conclusion just as we expressly rejected it in Stoker. Although we accepted the argument's premise that "a policy claim is independent of a bad faith claim," we found that the "asserted conclusion ... does not necessarily follow," at least when the claim seeks benefits "not covered by the policy." Stoker, 903 S.W.2d at 340-41.
The reason we reject Menchaca's independent-claims argument — indeed, the very reason for the general rule — derives from the fact that the Insurance Code only allows an insured to recover actual damages "caused by" the insurer's statutory violation. TEX. INS. CODE § 541.151. "Actual damages" are the common-law damages the insured sustains "as a result of" the statutory violation. Kish v. Van Note, 692 S.W.2d 463, 466 (Tex. 1985) (citing Smith v. Baldwin, 611 S.W.2d 611, 617 (Tex. 1980)). If the insurer violates a statutory provision, that violation — at least generally
Relying on these decisions, USAA contends that the general rule applies here and Menchaca cannot recover policy benefits based on a statutory violation because the jury failed to find that USAA "breached" the insurance contract. In response, Menchaca argues that she can avoid the general rule by obtaining a finding that the policy "covers" her losses, and she did not have to obtain a finding that USAA "breached" the policy to recover under the statute. Our precedent is confusing on this point because we have actually used both phrases to describe the general rule. See, e.g., JAW the Pointe, 460 S.W.3d at 599 (holding that insured could not recover benefits as statutory damages because "the policy did not cover the insured's losses") (emphasis added); Page, 315 S.W.3d at 532 ("There can be no liability under [the Insurance Code] if there is no coverage under the policy.") (emphasis added); Chrysler, 297 S.W.3d at 254 (holding that insured could not recover extra-contractual damages because the insurer "did not breach the insurance contract") (emphasis added); Boyd, 177 S.W.3d at 920-21 (concluding that a take-nothing judgment on a breach-of-contract claim negated recovery of benefits as statutory damages); Castañeda, 988 S.W.2d at 201 (holding that insured could not recover statutory damages "equivalent to policy benefits" because she did not plead or establish that the insurer "was liable for
In at least a general sense, no relevant distinction exists between "breach" and "coverage" in this context because no breach can occur unless coverage exists, and a breach necessarily occurs if coverage exists and the insurer fails to pay the amount covered. If the policy does not cover the insured's loss, the insurer does not breach the policy by failing to pay benefits for that loss because the insured is not entitled to those benefits. Conversely, if the policy does cover the loss,
In a more specific sense, however, an important distinction does exist, at least to the extent the term "breach" is used to refer specifically to a breach-of-contract claim. Here, for example, USAA contends that, even if its policy covered Menchaca's loss, Menchaca could not recover policy benefits unless she prevailed on her breach-of-contract claim under Question 1. According to USAA, in other words, an insured can only recover policy benefits as damages on a breach-of-contract claim and can never recover policy benefits as damages on a statutory-violation claim.
We disagree. Although our prior decisions refer interchangeably to both "breach" and "coverage," our focus in those cases was on whether the insured was entitled to benefits under the policy, because an insurer's statutory violation cannot "cause" the insured to suffer the loss of benefits unless the insured was entitled to those benefits. But if the insured was entitled to the benefits and the insurer's statutory violation caused the insured to lose those benefits, the statute authorizes the insured to recover those benefits as "actual damages ... caused by" the statutory violation, even if the insured does not submit a separate breach-of-contract claim. TEX. INS. CODE § 541.151. Thus, although we have referred to both "breach" and "coverage," what matters for purposes of causation under the statute is whether the insured was entitled to receive benefits under the policy. While an insured cannot recover policy benefits for a statutory violation unless the jury finds that the insured had a right to the benefits under the policy, the insured does not also have to prevail on a separate breach-of-contract claim based on the insurer's failure to pay those benefits. As we explain further in the following sections, if the jury finds that the policy entitles the insured to receive the benefits and that the insurer's statutory violation resulted in the insured not receiving those benefits, the insured can recover the benefits as "actual damages ... caused by" the statutory violation. See id.
Nevertheless, an insurer's obligation to pay policy benefits and the insured's right to receive them derive solely from the insurance policy's terms: "If the loss is
The second rule from our precedent is that an insured who establishes a right to receive benefits under an insurance policy can recover those benefits as "actual damages" under the statute if the insurer's statutory violation causes the loss of the benefits. This rule, a logical corollary to the general rule, is what we recognized in Vail. The insureds in Vail sued their insurer for common-law bad faith and statutory violations (but not for breach of contract), alleging a "bad faith failure to pay the claim" and seeking "the full amount" of policy benefits plus statutory damages. 754 S.W.2d at 130. The jury found that the insurer violated the statute by failing to "attempt[] in good faith to effectuate a prompt, fair, and equitable settlement" when "liability had become reasonably clear," and breached its common-law duty of good faith and fair dealing by failing "to exercise good faith in the investigation and processing of the claim." Id. at 134. Based on these findings, the trial court awarded benefits in the amount of the "full policy limit" plus treble that amount, attorney's fees, and prejudgment interest. Id. at 131.
The insurer argued that the insureds could not recover policy benefits as damages for statutory violations because "the amount due under the policy solely represents damages for breach of contract and does not constitute actual damages in relation to a claim of unfair claims settlement practices." Id. at 136. We rejected that argument and held that "an insurer's unfair refusal to pay the insured's claim causes damages as a matter of law in at least the amount of the policy benefits wrongfully withheld." Id. We explained that the insureds "suffered a loss ... for which they were entitled to make a claim under the insurance policy," and that loss was "transformed into a legal damage" when the insurer "wrongfully denied the claim." Id. "That damage," we held, "is, at minimum, the amount of policy proceeds wrongfully withheld by" the insurer. Id. Because the Insurance Code provides that the statutory remedies are cumulative of other remedies, we concluded that the insureds could elect to recover the benefits under the statute even though they also could have asserted a breach-of-contract claim. Id.
USAA contends, and some Texas courts have concluded, that we later rejected the Vail rule in Castañeda and Stoker, and thus an insured can never recover policy benefits as actual damages for statutory or common-law bad-faith violations. See, e.g., Mai v. Farmers Tex. Cty. Mut. Ins. Co., No. 14-07-00958-CV, 2009 WL 1311848, at *6 (Tex. App. — Houston [14th Dist.] May 7, 2009, pet. denied) (mem. op.) ("This position, that expected policy benefits can equate to bad faith damages, has been firmly rejected by the Texas Supreme Court."). The Fifth Circuit reached the same conclusion in Parkans International, LLC v. Zurich Insurance Co., holding that, in light of Castañeda, there "can be no recovery for extra-contractual damages for mishandling claims unless the complained of actions or omissions caused injury independent of those that would have resulted from a wrongful denial of policy benefits." 299 F.3d 514, 519 (5th Cir. 2002). The Fifth Circuit later relied on Parkans
We did not reject the Vail rule in Stoker or in Castañeda. While we could have made the point more clearly, the distinction between the cases is that the parties in Vail did not dispute the insured's entitlement to the policy benefits, and the only issue was whether the insured could recover those benefits as actual damages caused by a statutory violation. Vail, 754 S.W.2d at 136. The rule we announced in Vail was premised on the fact that the policy undisputedly covered the loss in that case, and the insurer therefore "wrongfully denied" a "valid claim." Id. at 136-37 (emphases added).
By contrast, in Castañeda, the insured did not establish and the insurer did not concede that the insured had a right to benefits under the policy. To the contrary, the insured "never sought and did not receive any contractual relief," Castañeda, 988 S.W.2d at 196, and never even alleged that the insurer "was liable for breach of the insurance contract," id. at 201. Instead,
In short, Stoker and Castañeda stand for the general rule that an insured cannot recover policy benefits as damages for an insurer's extra-contractual violation if the policy does not provide the insured a right to those benefits. Vail announced a corollary rule: an insured who establishes a right to benefits under the policy can recover those benefits as actual damages resulting from a statutory violation. We clarify and affirm both of these rules today.
A third rule that our precedent recognizes is that an insured can recover benefits as actual damages under the Insurance Code even if the insured has no right to those benefits under the policy, if the insurer's conduct caused the insured to lose that contractual right. We have recognized this principle in the context of claims alleging that an insurer misrepresented a policy's coverage, waived its right to deny coverage or is estopped from doing so, or committed a violation that caused the insured to lose a contractual right to benefits that it otherwise would have had. In each of these contexts, the insured can recover the benefits even though it has no contractual right to recover them because the benefits are actual damages "caused by" the insurer's statutory violation.
In the first context, we have recognized that an insurer that violates the statute by misrepresenting that its policy provides coverage that it does not in fact provide can be liable under the statute for such benefits if the insured is "adversely affected" or injured by its reliance on the misrepresentation. See Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688, 694 (Tex. 1979).
The second context in which the benefits-lost rule might apply involves claims based on waiver and estoppel. We have explained that waiver and estoppel cannot be used to re-write a policy so that it provides coverage it did not originally provide. Ulico, 262 S.W.3d at 775. But if the insurer's statutory violations prejudice the insured, the insurer may be estopped "from denying benefits that would be payable under its policy as if the risk had been covered." Id. Under such circumstances, the insured may recover "any damages it sustains because of the insurer's actions," even though the policy does not cover the loss. Id. at 787.
Finally, the benefits-lost rule may apply when the insurer's statutory violation actually caused the policy not to cover losses that it otherwise would have covered. See, e.g., JAW the Pointe, 460 S.W.3d at 602. The insured in JAW the Pointe sought policy benefits to cover its costs to demolish and rebuild an apartment complex that sustained significant damage from Hurricane Ike. See id. at 599. The primary insurance policy covered three hundred otherwise unrelated apartment complexes but limited the total coverage to $25 million per occurrence. Id. When the insurer denied the insured's claim for some of the losses, the insured filed suit asserting claims for both breach of contract and statutory violations. Id. at 601. As the parties continued efforts to resolve their dispute, the insurer continued paying claims filed by the other covered apartment complexes until the insurer reached the policy's $25 million limit. Id. The insurer then filed for summary judgment on the insured's contract claim, arguing that it no longer had a contractual duty to cover the losses because it had paid the policy limits. Id. at 600. The insured did not oppose the motion and the trial court granted it, leaving only the statutory claims for trial. Id. A jury found that the insurer had violated the statute, and based on those violations the trial court awarded the insured both actual damages in the form of the policy benefits and additional statutory damages based on the insurer's "bad faith" statutory violations. Id. at 601-02.
The insurer appealed, arguing that the insured could not recover policy benefits or statutory damages because the policy did not cover the insured's losses. See id. at 602. But instead of relying on the policy limits to defeat coverage, the insurer argued that the policy never covered the losses even before the insurer paid the limits because a policy exclusion
The fourth rule from our precedent derives from the fact that an insurer's extra-contractual liability is "distinct" from its liability for benefits under the insurance policy. See Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210, 214 (Tex. 1988), overruled on other grounds by Ruttiger, 381 S.W.3d at 441. In Stoker, after we announced the general rule that "there can be no claim for bad faith when an insurer has promptly denied a claim that is in fact not covered," we explained that we were not excluding "the possibility that in denying the claim, the insurer may commit some act, so extreme, that would cause injury independent of the policy claim." 903 S.W.2d at 341 (citing Aranda, 748 S.W.2d at 214).
There are two aspects to this independent-injury rule. The first is that, if an insurer's statutory violation causes an injury independent of the insured's right to recover policy benefits, the insured may recover damages for that injury even if the policy does not entitle the insured to receive benefits. Id. We recognized this in Twin City, explaining that some extra-contractual claims may not "relate to the insurer's breach of contractual duties to pay covered claims" and may thus "give rise to different damages." 904 S.W.2d at 666 n.3. If such damages result from an independent injury "caused by" the insurer's statutory violation, the insured can recover those damages, just as insureds have always been able to recover "compensatory damages for the tort of bad faith" under the common law. Moriel, 879 S.W.2d at 17. Thus, an insured can recover actual damages caused by the insurer's bad-faith conduct if the damages "are separate from and ... differ from benefits under the contract." Twin City, 904 S.W.2d at 666 (identifying mental anguish damages as an example). We reaffirmed this aspect of the independent-injury rule in Castañeda, recognizing that "there might be liability for damage to the insured other than policy benefits or damages flowing from the denial of the claim if the insured mishandled a claim." 988 S.W.2d at 198. We concluded that the insured could not recover anything in that case, however, because "none of the [insurer's] actions or inactions... was the producing cause of any damage separate and apart from those that would have resulted from a wrongful denial of the claim." Id.
This aspect of the independent-injury rule applies, however, only if the
The second aspect of the independent-injury rule is that an insurer's statutory violation does not permit the insured to recover any damages beyond policy benefits unless the violation causes an injury that is independent from the loss of the benefits. Thus, we held in Twin City that an insured who prevails on a statutory claim cannot recover punitive damages for bad-faith conduct in the absence of independent actual damages arising from that conduct. 904 S.W.2d at 666; see also Powell Elec. Sys., Inc. v. Nat'l Union Fire Ins. Co., 2011 WL 3813278, at *9 (S.D. Tex. Aug. 29, 2011) (granting summary judgment for the insured on its breach-of-contract claim but for the insurer on common-law and statutory bad-faith claims because the insured "failed to allege damage independent of the damages arising from the underlying breach of the insurance contract").
Our reference in Stoker to "the possibility" that a statutory violation could cause an independent injury suggested that a successful independent-injury claim would be rare, and we in fact have yet to encounter one. See, e.g., Mid-Continent Cas. Co. v. Eland Energy, Inc., 709 F.3d 515, 521-22 (5th Cir. 2013) ("The Stoker language has frequently been discussed, but in seventeen years since the decision appeared, no Texas court has yet held that recovery is available for an insurer's extreme act, causing injury independent of the policy claim. ..."). This is likely because the Insurance Code offers procedural protections against misconduct likely to lead to an improper denial of benefits and little else. See, e.g., TEX. INS. CODE § 541.060 (prohibiting an insurer from "requiring a claimant as a condition of settling a claim to produce the claimant's federal income tax returns"). We have further limited the natural range of injury by insisting that an injury is not "independent" from the insured's right to receive policy benefits if the injury "flows" or "stems" from the denial of that right. See Castañeda, 988 S.W.2d at 199. Today, although we reiterate our statement in Stoker that such a claim could exist, we have no occasion to speculate what would constitute a recoverable independent injury.
The fifth and final rule is simply the natural corollary to the first four rules: An insured cannot recover any damages based on an insurer's statutory violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits. Castañeda, 988 S.W.2d at 198; see also Lundstrom v. United Servs. Auto. Ass'n-CIC, 192 S.W.3d 78, 96 (Tex. App. — Houston
In its motion for rehearing in this case, USAA urges us to provide additional guidance on how parties should submit claims for policy benefits to a jury, particularly when the insured asserts both a breach-of-contract claim and a statutory-violation claim and seeks policy benefits as damages for both. The guidance we can provide at this point is necessarily limited, however, because the proper submission depends on the disputed facts and issues in each case. There is, for example, no one single proper way to submit a breach-of-contract claim to a jury. See Haas Drilling Co. v. First Nat'l Bank in Dall., 456 S.W.2d 886, 889 (Tex. 1970) (noting that "latitude is permitted in the wording of special issues" on breach-of-contract claims).
A breach-of-contract claim can involve any one or more of numerous discrete issues,
For statutory-violation claims, the Pattern Jury Charge (PJC) Committee recommends a question asking whether the insurer "engage[d] in any unfair or deceptive act or practice that caused damages to" the insured, along with instructions defining "unfair or deceptive practice" as to each alleged but disputed act the Insurance Code prohibits, like misrepresentations, false, deceptive, or misleading statements, and unfair settlement practices. See id., PJC 102.14, 102.16 102.17, 102.18. A second question is also required, predicated on a yes answer to the first, asking the jury to determine the amount of actual damages "caused by such unfair or deceptive act or practice." Id., PJC 115.13. For this question, the Committee recommends that an insured who seeks to recover policy benefits for a statutory violation should expressly submit "policy benefits" as an element of damages, unless "both the amount and causation of policy benefits as damages are conclusively established." Id., PJC 115.13 cmt. We generally agree with
As USAA points out, submitting both a breach-of-contract claim and a statutory-violation claim in the same jury charge can create the risk of conflicting answers. An insured who seeks to recover policy benefits on a breach-of-contract claim must ask the jury to determine the amount of policy benefits lost as a result of the insurer's failure to comply with the insurance policy. Id., PJC 115.3 & cmt. And an insured who seeks to recover policy benefits on a statutory-violation claim must ask the jury to determine the amount of benefits lost as a result of the insurer's act or practice that violates the statute. Id., PJC 115.13 & cmt. For both claims, the jury must find that the insured was entitled to the benefits under the policy. If the jury's answers to questions on one liability theory establish that the insured was not entitled to any policy benefits or was paid all policy benefits to which she was entitled, an answer on the other liability theory that the insured was entitled to benefits would create an irreconcilable and even fatal conflict. See Arvizu v. Estate of Puckett, 364 S.W.3d 273, 276 (Tex. 2012).
To avoid such a conflict, the court should ensure that the jury answers the entitlement-to-benefits question only once. Here, the trial court may have done best to simply submit Question 2 (to establish that USAA violated the statute) and Question 3 (to establish both that the statutory violation caused Menchaca actual damages in the form of policy benefits and that USAA breached the contract by failing to pay benefits Menchaca was entitled to under the policy), without submitting Question 1 at all. Alternatively, the court might have first asked the jury whether Menchaca was entitled to receive benefits under the policy, and then conditioned the remaining questions on a "Yes" answer to that first question. Yet another effective alternative may have been to instruct the jury that, because Menchaca seeks only to recover benefits under the policy, USAA did not fail to comply with the policy and Menchaca incurred no damages as a result of any statutory violation unless Menchaca was entitled to benefits under the policy. We offer these proposals — without the benefit of the parties' specific arguments or objections — as examples of how the court might have avoided a potential conflict, but we leave it to the parties and the trial court to determine how best to submit the claims on remand.
Having clarified the governing rules, we now apply them to the case before us. As explained above, the jury in this case (1) failed to find in answer to Question 1 that USAA failed to comply with its obligations under the insurance policy; (2) found in answer to Question 2 that USAA violated
Ever since the jury returned its verdict, the parties have disputed the effect of its answers. Relying on the jury's answer to Question 1, USAA has contended that Menchaca cannot recover any policy benefits for a statutory violation because she did not prevail on her breach-of-contract claim. Meanwhile, Menchaca has consistently argued that she can recover the award of policy benefits even though she did not prevail on her breach-of-contract claim because the jury found in answer to Questions 2 and 3 that USAA violated the statute and the violation caused Menchaca to incur damages in the form of policy benefits that USAA "should have paid" to Menchaca.
USAA's argument overlooks the fact that — as we have clarified today — an insured need not prevail on a separate breach-of-contract claim to recover policy benefits for a statutory violation. Instead, as we have explained, the insured can prevail under the entitled-to-benefits rule or the benefits-lost rule if she establishes (1) the insurer violated the statute and (2) the violation resulted in her loss of benefits she was entitled to under the policy. Menchaca contends she obtained those findings through Questions 2 and 3. But if USAA "should have paid" policy benefits to Menchaca and did not, then the jury's answers to Questions 2 and 3 conflicted with the jury's answer to Question 1 because USAA necessarily failed to comply with the policy.
The trial court noted this apparent conflict before it dismissed the jury, but both parties took the position that no conflict existed. After the court received the verdict and asked for USAA's response, USAA replied: "We accept the verdict, Your Honor." Menchaca then began explaining why she did not believe the jury's answers conflicted. The trial court asked USAA whether it believed the court should "call the jury back" and have it "reconcile" its answers. USAA replied that calling the jury back "would be totally inappropriate. If it was per se irreconcilable it never should have been submitted to them." The trial court apparently agreed and discharged the jury. At the hearing on USAA's motion for entry of judgment, the trial court raised the conflict issue again, asking whether the jury's answers to Questions 1 and 2 conflicted. It asked Menchaca:
Menchaca responded, "no, there's not [a conflict] based upon what the jury found in damages." Ultimately, the trial court side-stepped the issue by disregarding the jury's answer to Question 1 and entered judgment for Menchaca based on the jury's answers to Questions 2 and 3.
USAA asserts that the trial court erred by disregarding the jury's answer to Question 1. We unanimously agree. But a majority of the Court concludes that the answer to Question 1 creates an irreconcilable and fatal conflict with the answers to Questions 2 and 3. And a plurality concludes that a judgment based on a fatal conflict does not constitute fundamental error, so parties must preserve the error
After both parties argued that the jury's answers did not create a conflict, the trial court decided to disregard Question 1 because it was "poorly worded" and "incomprehensible." Specifically, the court explained that Question 1:
The court of appeals affirmed the trial court's decision to disregard Question 1 but for different reasons. First, the court concluded it was impossible to know why the jury answered "No" to the question. See 2014 WL 3804602. In the court of appeals' view, the jury could have answered "No" because it mistakenly believed that USAA could only "fail to comply with the terms of the insurance policy" if it failed to pay the amount that USAA subjectively believed it had to pay. See id. Second, it concluded that the jury's "No" answer to Question 1 did not "definitively establish that there was no coverage" because USAA agreed that the policy provided coverage for Menchaca's losses and that the amount of the losses did not exceed the policy's deductible. See id. Finally, the court concluded that the jury's finding in answer to Question 2 that USAA violated the statute rendered its answer to Question 1 immaterial because Question 3 "instructed the jury to award the same damages regardless of which theory of liability was adopted." See id.
We conclude that the trial court erred by disregarding the jury's answer to Question 1. "A trial court may disregard a jury finding only if it is unsupported by evidence ... or if the issue is immaterial." Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994) (citing C. & R. Transp., Inc. v. Campbell, 406 S.W.2d 191, 194 (Tex. 1966)). Contrary to the court of appeals' analysis, the fact that the court cannot determine the reasons for a jury's answer does not permit the court to disregard that answer. Here, the jury's answer to Question 1 was neither unsupported by the evidence nor immaterial.
First, in light of USAA's evidence that Menchaca's damages were less than the amount of her deductible, at least some
Second, Question 1 was not immaterial. A jury answer is immaterial when the question "should not have been submitted, or when it was properly submitted but has been rendered immaterial by other findings." Spencer, 876 S.W.2d at 157 (citing C. & R. Transp., 406 S.W.2d at 194). Contrary to the trial court's conclusion, that a question is defective does not render the jury's answer immaterial. See id. (concluding that, "while [a question] was defective, it was not immaterial."). Question 1 was material because Menchaca sued USAA for breach of the insurance policy as well as for statutory violations, and she sought to recover on either claim. The jury's answers to Questions 2 and 3 did not render its "No" answer to Question 1 immaterial because Menchaca chose to use Question 1 as the basis for prevailing on her breach-of-contract claim. We therefore conclude that the court of appeals erred by affirming the trial court's decision to disregard the jury's answer to Question 1.
USAA insists that, in light of our agreement that the trial court erred in disregarding the jury's answer Question 1, we must reverse and render judgment in USAA's favor. It argues, correctly, that Menchaca effectively cannot recover policy benefits if USAA did not breach the policy. It also points out, correctly, that Menchaca did not secure that finding in Question 1. But USAA ignores — or at least misconstrues — the effect of the jury's answers to Questions 2 and 3, in which the jury found that USAA's Insurance Code violation caused Menchaca damages of $11,350, representing the difference "between the amount USAA should have paid Gail Menchaca for her Hurricane Ike damages and the amount that was actually paid." This award, USAA agrees, constitutes an award of "policy benefits." The jury's finding that USAA's statutory violation resulted in Menchaca's loss of $11,350 in policy benefits that USAA "should have paid" necessarily constitutes a finding that Menchaca was entitled to receive those benefits under the policy.
USAA argues that we cannot read the jury's answer to Question 3 as a finding that Menchaca was entitled to policy benefits because Question 3 was "merely a damages question." In fact, however, Question 3 was a causation-and-damages question, requiring the jury to determine the amount of Menchaca's loss "that resulted from" either USAA's contractual breach or its statutory violation.
This holding does not "suggest[] an exception to the no-recovery rule," as the Dissent proposes. Post at 526 (GREEN, J., dissenting). The no-recovery rule requires an insured to establish a right to receive benefits under the policy or an injury independent of a right to benefits. Castañeda, 988 S.W.2d at 198. Here, Menchaca obtained two conflicting findings: one, in Question 1, that she did not have the right to receive policy benefits, and two, in Question 3, that she did have the right to policy benefits. If Question 3 did not contain that finding, there no conflict would exist. The Dissent also tacitly acknowledges this by noting that the trial court "eliminated any conflict when it decided to disregard Question 1." Post at 531 (GREEN, J., dissenting).
Nevertheless, relying primarily on our decisions in Castañeda and Missouri Pacific Railroad Co. v. Whittenburg & Alston, 424 S.W.2d 427, 430 (Tex. 1968), USAA contends that the answer to the "damages question" (Question 3) cannot conflict with or negate the answer to the "liability question" (Question 1). We do not agree that these cases are controlling here. Citing first to the court of appeals' opinion in Castañeda, USAA notes that the portion of the damages question that related to the plaintiff's alleged "loss of benefits" in that case instructed the jury that "`loss of benefits' means the amount of benefits due under the policy," and yet we concluded there that the insured was not entitled to policy benefits. See Provident Am. Ins. Co. v. Castañeda, 914 S.W.2d 273, 281 (Tex. App. — El Paso 1996), rev'd, 988 S.W.2d 189.
USAA contends that this instruction is indistinguishable from the instruction the trial court gave here. We do not agree that the jury's answer to the "damages question" in Castañeda was equivalent to the jury's answer to Question 3 here. Nor do we agree that it could have independently constituted a finding that the insured in Castañeda was entitled to policy benefits. Although the Castañeda charge defined "loss of benefits" to mean benefits "due under the policy," the charge in that case asked the jury to determine the amount that would compensate the insured for the damages, if any, resulting from both the insured's "loss of credit reputation" and
Whittenburg is distinguishable for similar reasons. Whittenburg involved a shipper's action against a carrier for damages the carrier allegedly caused to the shipper's tomatoes while transporting them by rail from Laredo to Canada. See 424 S.W.2d at 428. The first question asked the jury whether the tomatoes "were in worse condition" when they arrived in Canada "than they should have been, considering their quality and condition at Laredo," and the jury answered "No." Id. at 428-29. The second question presented the carrier's defensive theory, asking whether "the condition of the tomatoes" when they arrived in Canada "was due entirely" to (a) their condition when delivered in Laredo, (b) the "operation of natural laws upon such tomatoes," or (c) the "inherent tendency, if any there be, of the tomatoes to deteriorate and decay." Id. at 429. To that question the jury answered "Yes." Id. In answer to the third and fourth questions, the jury found that the tomatoes' actual market value when they arrived in Toronto was $2,092.23, but would have been $3,339.28 if they had been delivered "in the condition in which they should have been delivered." Id.
We see the distinction between Whittenburg and this case in Whittenburg's second question, in response to which the jury found that the condition of the tomatoes when they arrived in Toronto was "due entirely" to a cause for which the carrier could not be liable. Id. Although the jury found the tomatoes were worth less upon arrival than they "should have been," that finding could not support liability, causation, or damages because their condition upon arrival was "due entirely" to other causes. Here, by contrast, the jury's finding in answer to Question 3 of an amount that USAA "should have paid" cannot be attributed to anything other than USAA's obligation under the policy to pay that amount to Menchaca. We therefore conclude that the jury's answer to Question 3 necessarily constitutes a finding that Menchaca was entitled to receive those benefits under the policy.
We next consider whether the jury's answer to Question 1 creates an irreconcilable and fatal conflict with its answers to Questions 2 and 3. "In reviewing the jury findings for conflict, the threshold question is whether the findings are about the same material fact." Bender v. S. Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex. 1980) (citing Pearson v. Doherty, 143 Tex. 64, 183 S.W.2d 453, 455 (1944)). Here, the jury's answer to Question 3 (USAA "should have paid" $11,350 in policy benefits to Menchaca) necessarily addresses the same material fact as its answer to Question 1 (USAA "fail[ed] to comply with the terms of the insurance policy"), because both requested findings on whether USAA failed to pay benefits Menchaca was entitled to under the policy. The answers
A court "must `reconcile apparent conflicts in the jury's findings' if reasonably possible in light of the pleadings and evidence, the manner of submission, and the other findings considered as a whole." Id. (quoting Ford v. Carpenter, 147 Tex. 447, 216 S.W.2d 558, 562 (1949)). If the court can reasonably construe the findings in a way that harmonizes them, it must do so "when possible." Id. Here, however, the findings are irreconcilable. Menchaca urges us to reconcile them by construing the jury's "No" answer to Question 1 as merely "a failure to find" that USAA failed to comply with the policy, as opposed to an affirmative finding that USAA did not fail to comply with the policy. See Grenwelge v. Shamrock Reconstructors, Inc., 705 S.W.2d 693, 694 (Tex. 1986) (per curiam) (explaining that a failure to find liability is not the same as an affirmative finding of compliance). But we have previously rejected this very argument. Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 679 (Tex. 1973) ("The inconsistency [giving rise to a conflict] exists in this verdict whether the answer is a failure to find, or a finding, according to the preponderance of the evidence."). Although the jury did not affirmatively find that USAA complied with its policy obligations, its answer to Question 1 confirms its conclusion that Menchaca "failed to carry [her] burden of proof" to establish that USAA failed to comply with the policy's terms. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989).
Conversely, we could attempt to construe the jury's answer to Question 3 as something other than a finding that Menchaca was entitled to policy benefits. We might, for example, speculate that the jury awarded $11,350 as the amount the jury believed USAA "should have paid" Menchaca as a matter of equity or charity, rather than as a policy obligation. But any such effort would require mere speculation and an assumption that the jury ignored the questions and instructions the trial court provided. The trial court asked the jury to determine the amount of damages Menchaca incurred as a result of USAA's contractual breach or statutory violation and instructed the jury to determine that amount based on the difference "between the amount USAA should have paid Gail Menchaca for her Hurricane Ike damages and the amount that was actually paid." As both parties agree, the amount the jury awarded represents the amount of benefits the jury determined USAA "should have paid" to Menchaca under the policy.
When an irreconcilable conflict involves one jury answer that would require a judgment in favor of the plaintiff and another that would require a judgment in favor of the defendant, the conflict is fatal. Little Rock Furniture Mfg. Co. v. Dunn, 148 Tex. 197,222 S.W.2d 985, 991 (1949).
Our determination that the verdict contained a fatal conflict does not end the inquiry. Of course, a trial court should not enter judgment based on a verdict containing a fatal conflict until "the disputed question of fact ... has been resolved." Meyer, 502 S.W.2d at 679. But we must decide whether we can consider a trial court's error in entering such a judgment when neither party has objected to the conflict.
Generally, as "a prerequisite to presenting a complaint for appellate review, the record must show that ... the complaint was made to the trial court by a timely request, objection, or motion." TEX. R. APP. P. 33.1(a)(1)(A). This rule "conserves judicial resources by giving trial courts an opportunity to correct an error before an appeal proceeds," promotes "fairness among litigants" by prohibiting them from surprising their opponents on appeal, and furthers "the goal of accuracy in judicial decision-making" by allowing the parties to "develop and refine their arguments" and allowing the trial court to "analyze the questions at issue." In re B.L.D., 113 S.W.3d 340, 350 (Tex. 2003).
An exception to the preservation-of-error requirement applies when the alleged error is "fundamental." "Except for fundamental error, appellate courts are not authorized to consider issues not properly raised by the parties." Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 577 (Tex. 2006). Thus, "we have used the term `fundamental error' to describe situations in which an appellate court may review error that was neither raised in the trial court nor assigned on appeal." B.L.D., 113 S.W.3d at 350. Beginning in the 1800s, we held that a trial court's entry of a judgment based on inconsistent or insufficient jury answers constitutes fundamental error because the error is "an error of law apparent on the face of the record," Van Valkenberg v. Ruby, 68 Tex. 139, 3 S.W. 746, 748 (1887), courts are not "permitted to speculate" about a jury's intentions, Moore v. Moore, 67 Tex. 293, 3 S.W. 284, 285-86 (1887), and the law deprives courts of "the power to render judgment, which is given by law and not by consent of the parties," Radford v. Auto. Underwriters of Am., 299 S.W. 852, 853 (Tex. Comm'n App. 1927) (internal citations omitted).
In the decades that followed these decisions, the courts of appeals applied the fundamental-error doctrine in numerous cases, concluding that a jury verdict containing a fatal conflict constitutes fundamental error requiring a new trial even if no party complained of or preserved the error.
Shortly before we decided Little Rock Furniture, however, we began to reconsider the fundamental-error doctrine in light of recent statutory revisions and our adoption of the Texas Rules of Civil Procedure. See Ramsey v. Dunlop, 146 Tex. 196, 205 S.W.2d 979, 982-83 (1947). The fundamental-error doctrine "in civil actions arose in Texas under old statutes that stated that cases on appeal could be reviewed `on an error in law either assigned or apparent on the face of the record.'" Pirtle, 629 S.W.2d at 920 (citing 2 GAMMEL'S LAWS OF TEXAS 1562 (1898); 3 GAMMEL'S LAWS OF TEXAS 393 (1898)).
Soon after our decisions in Little Rock Furniture and Ramsey, we warned that cases "discussing fundamental error decided before the adoption of the Rules of Civil Procedure in 1941 must be considered in the light of changes in the concept of fundamental error made by the adoption of the new rules." Lewis v. Tex. Emp'rs' Ins. Ass'n, 151 Tex. 95, 246 S.W.2d 599, 600 (1952). The result of those changes, we later explained, is that the scope of "truly fundamental" error is "much narrower" than it was before the 1941 amendments. McCauley, 304 S.W.2d at 266; see also Estate of Pollack v. McMurrey, 858 S.W.2d 388, 394 (Tex. 1993) (noting that we have since "taken a more restrictive view of fundamental error").
Before we clearly restricted the application of the fundamental-error doctrine to jurisdictional and public-interest errors in McCauley, courts of appeals continued to rely on Little Rock Furniture to hold that a fatal conflict in jury answers creates a fundamental error that appellate courts may review even if unassigned.
Until today, this Court has never cited, relied on, or discussed Meyer as authority on any issue. Only three courts of appeals have ever cited it, and none cited it as authority on the issue of whether error based on conflicting jury answers is fundamental or must be preserved.
We next consider how and when a party must properly preserve error based on a fatal conflict in a jury verdict. rule 295, entitled "Correction of Verdict," provides that if a jury's answers "are in conflict," the trial court must give the jury written instructions regarding the nature of the conflict "and retire the jury for further deliberations." TEX. R. CIV. P. 295. In light of this rule, some early court of appeals decisions held that, to preserve error based on conflicting jury answers, the party must object to the conflict before the
In Murphree, however, while holding that the jury answers in that case did not conflict, we noted that the petitioner admitted that "it did not assign in its motion for new trial any error as to conflict," and that there "was no assignment of error contained in the motion for new trial sufficient to bring this question to the trial court's attention." Murphree, 357 S.W.2d at 748 (emphasis added). Based on these statements, some courts held that a party asserting a conflict on appeal must have preserved the argument by objecting to the conflict in its motion for new trial. See, e.g., Sands Motel, 358 S.W.2d at 674 (stating that Murphree "held that failure to assign the conflict as error in a motion for new trial waived any complaint and precluded a consideration of it on appeal"); Sutton, 405 S.W.2d at 833 (refusing to consider appellants' conflict argument "since this point was not raised in their motion for new trial"). A few years later, in Duke, we cited Murphree in support of our holding that "it was necessary to file a motion for new trial assigning as error the entry of judgment on conflicting jury findings." 424 S.W.2d at 898.
Following these decisions, the Fort Worth Court of Appeals held that an appellant can preserve a conflict objection by filing a motion for new trial and need not object before the court discharges the jury. McDonald, 762 S.W.2d at 939-40. The McDonald court expressed dissatisfaction with its own holding, however, opining that "Murphree neither explicitly nor implicitly stated such a rule" and was "simply misconstrued," and that the "previous rule" requiring an objection before the jury is discharged was "better law." Id. at 940. Nevertheless, the court concluded that its holding was required because it was "clearly made the law in Duke." Id. The Fort Worth court later overruled McDonald, however, see Kitchen, 181 S.W.3d at 473, and since then, the courts of appeals have consistently held that "a party waives any complaint regarding any alleged conflict in the jury's answers by failing to voice this complaint before the jury is discharged." Meek v. Onstad, 430 S.W.3d 601, 605-06 (Tex. App. — Houston [14th Dist.] 2014, no pet.).
As the courts of appeals have since explained, the issue of whether a new-trial motion is required is no longer relevant because the current, revised version of rule 324 "does not require that a party file a motion for new trial to complain on appeal that there is an alleged conflict in the jury's answers." Meek, 430 S.W.3d at 606-07; see also Roling, 840 S.W.2d at 109-10. But more importantly, while we held in Duke that a new-trial motion was necessary to preserve error, we did not address whether it was independently sufficient. See Meek, 430 S.W.3d at 607 n.2 (explaining that Duke does not support the proposition that "raising this complaint for the first time in a motion for new trial is sufficient" to preserve error). We did not address that issue in Duke because the petitioner had in fact objected to the conflicting answers before the trial court discharged the jury. 424 S.W.2d at 897; see also Torres, 928 S.W.2d at 245 (noting that, in Duke, "counsel for the plaintiffs did move that the jury retire for further deliberations based on an alleged conflict in the verdict"); Roling, 840 S.W.2d at 109 (noting that "the plaintiff in Duke had requested the trial court to retire the jury for further deliberations"). In short, as most all of the courts of appeals have recognized, we did not hold in Murphree or Duke that a party is not required to raise conflicting jury answers before the trial court discharges the jury to preserve error on that point, and the Fort Worth court "in McDonald misconstrued Duke" as holding otherwise. Roling, 840 S.W.2d at 110.
We agree with the courts of appeals that to preserve error based on fatally conflicting jury answers, parties must raise that objection before the trial court discharges the jury. As we have explained, our "procedural rules are technical, but not trivial." Burbage v. Burbage, 447 S.W.3d 249, 258 (Tex. 2014). They require timely error preservation because affording trial courts an opportunity to consider and rule on alleged error "conserves judicial resources and promotes fairness by ensuring that a party does not neglect a complaint at trial and raise it for the first time on appeal." Id. When the alleged error is an incomplete, nonresponsive, or conflicting jury verdict, rule 295 requires the trial court to correct that error by providing additional instructions and retiring the jury "for further deliberations." TEX. R. CIV. P. 295. Once the court has discharged the jury, it cannot reform the conflicting answers as rule 295 requires. See Roling, 840 S.W.2d at 109 ("Once the jury is discharged, a conflict in the jury's answers cannot be reformed."). As the Austin Court of Appeals has explained, "What the jury intended by findings that potentially conflict is best determined by the jury itself," and that is the solution rule 295 requires. Springs Window Fashions, 184 S.W.3d at 867.
The Dissent claims that rule 295 allows for other preservation mechanisms because the rule states that a trial court "may direct [the verdict] to be reformed."
As mentioned, rule 295 provides the procedure for resolving incomplete and nonresponsive jury verdicts as well as those containing conflicting answers. TEX. R. CIV. P. 295. Addressing incomplete verdicts, we have long held that a judgment will not be reversed "unless the party who would benefit from answers to the issues objects to the incomplete verdict before the jury is discharged, making it clear that he desires that the jury redeliberate on the issues or that the trial court grant a mistrial." Fleet v. Fleet, 711 S.W.2d 1, 3 (Tex. 1986); see also Continental Cas. Co. v. Street, 379 S.W.2d 648, 650 (Tex. 1964) (holding party failed to preserve error because he "did not object to the acceptance of the jury verdict as incomplete, and thus by timely objection afford the trial court the opportunity, before the jury was discharged, of correcting the error (if such it was) of accepting the verdict with the issues unanswered"). We conclude that the same error-preservation requirement applies when a party complains of a judgment based on conflicting jury answers.
Having concluded that the entry of a judgment based on fatally conflicting jury answers does not constitute fundamental error and that the error must be preserved by an objection asserted before the court discharges the jury, we must now address who bore the burden of preservation and the proper disposition of this case in light of the fact that neither USAA nor Menchaca timely objected. Amicus for USAA
When we held in our early decisions that fatally conflicting jury answers constitute fundamental error, we reasoned that the error is fundamental in part because appellate courts lack the power to render a judgment based on conflicting answers. See Radford, 299 S.W. at 853 (stating that the law deprives the courts of "the power to render judgment ... which is given by
Under our modern, rules-based, restricted fundamental-error doctrine, however, we have discarded these concerns in favor of the efficiency and fairness our error-preservation requirement provides. Now, as before, courts "must `reconcile apparent conflicts in the jury's findings' if reasonably possible in light of the pleadings and evidence, the manner of submission, and the other findings considered as a whole." Bender, 600 S.W.2d at 260 (quoting Ford, 216 S.W.2d at 562). And if a trial court concludes it cannot reconcile the conflict, it must provide additional instructions and retire the jury for further deliberations. TEX. R. CIV. P. 295. But if the court does not identify a conflict and no party raises it before the court discharges the jury, the conflict provides no basis for reversal on appeal, even if it is "fatal." The failure to preserve the error does not merely prevent the parties from raising the conflict on appeal, it prevents the appellate courts from considering the conflict or treating it as a basis for reversing the trial court's judgment. Columbia Med. Ctr., 290 S.W.3d at 211 ("Appellate judges have much less discretion [than trial courts] because they are limited to the issues urged and record presented by the parties."); Mack Trucks, 206 S.W.3d at 577 ("Except for fundamental error, appellate courts are not authorized to consider issues not properly raised by the parties."); C.O.S., 988 S.W.2d at 765 ("Generally, our civil rules of procedure and our decisions thereunder require a party to apprise a trial court of its error before that error can become the basis for reversal of a judgment.").
Here, USAA raised numerous objections, both to the proposed charge before its submission and to the jury's answers after the jury returned its verdict. But USAA failed to properly preserve any error based on conflicting jury answers before the trial court discharged the jury. As a result, the trial court discharged the jury without giving it the opportunity to resolve its conflicting answers. The trial court then attempted to resolve the conflict by disregarding the jury's failure to find a breach of contract. USAA properly preserved its argument that the court erred in disregarding that answer, and we have agreed with USAA that the trial court erred. We have disagreed, however, with USAA's argument that Menchaca's failure to prevail on her contract claim automatically negates the findings she obtained on her statutory claim. We are thus left with a judgment based on fatally conflicting jury answers, but since neither party preserved that error, we cannot consider the conflict as a basis for reversing the trial court's judgment.
Having concluded that the trial court and court of appeals erred in disregarding the jury's answer to Question 1, we are left with findings that support the judgment in Menchaca's favor based on statutory violations but that also contain a fatal conflict. We could render judgment for Menchaca based on the jury's verdict because USAA failed to preserve that conflict. In the interest of justice, however, we could also "remand the case to the trial
USAA has steadfastly maintained that Menchaca cannot recover policy benefits for a statutory violation unless she also obtains a finding that USAA "breached" the insurance policy or that USAA's statutory violation caused an injury independent of her right to benefits. At trial, USAA objected to the charge's failure to condition Question 2 on a "Yes" finding to Question 1 and objected to the submission of Question 3 on the ground that "Texas courts have held that extra[-]contractual damages need to be independent from policy damages." After the jury returned its verdict, USAA argued that it should prevail because "the jury found `NO' breach of contract" and awarded only policy benefits. After the trial court entered its judgment, USAA argued in its motion for new trial that Menchaca cannot recover in the absence of a finding of breach because she did not seek damages "separate and apart from those sought under the breach of contract theory." Although we have clarified today that a plaintiff does not have to prevail on a separate breach-of-contract claim to recover policy benefits for a statutory violation, the confusing nature of our precedent precludes us from faulting USAA for the position it has maintained throughout this litigation. Moreover, although USAA failed to preserve any objection based on the jury's conflicting answers, Menchaca agreed with USAA that the answers did not conflict, and neither the parties nor the trial court had the benefit of the guidance we have provided today regarding the preservation of such error. Under these circumstances, we conclude that justice requires that we reverse and remand the case to the trial court for a new trial.
For the reasons explained, we reverse the court of appeals' judgment and remand the case to the trial court for a new trial in the interest of justice.
Chief Justice Hecht filed a concurring opinion.
Justice Blacklock concurs in the judgment without opinion.
Justice Green filed a dissenting opinion in which Justice Guzman and Justice Brown joined as to Parts I, II, and IV, and a plurality opinion as to Part III, in which Chief Justice Hecht, Justice Guzman, and Justice Brown joined.
Justice Johnson did not participate in the decision.
Chief Justice Hecht, concurring in the judgment.
I join Parts I, II, III-A, III-B, and III-C of JUSTICE BOYD's plurality opinion and
USAA and Menchaca have both argued, each consistently throughout, in the trial court, the court of appeals, and now this Court, that the jury answers in the verdict do not conflict. The Court unanimously disagrees. JUSTICE BOYD would hold that the trial court cannot render judgment on fatally conflicting jury answers, and I agree. The trial court erred in rendering judgment for Menchaca. But JUSTICE BOYD would also hold that the error is not reversible unless the appellant objected in the trial court. Since USAA was the appellant and did not object in the trial court, JUSTICE BOYD concludes that it is not entitled to reversal. But USAA could not object, consistent with its position that the jury answers do not conflict. Menchaca took the same position, and had the trial court picked USAA to win, she, too, could not complain on appeal because she, like USAA, could not have objected. Thus, in JUSTICE BOYD's view, if neither side thinks jury answers conflict, and an appellate court later disagrees, the party for whom the trial court erroneously rendered judgment wins. I disagree that an objection was necessary in this situation for the reasons given by JUSTICE GREEN in Part III of his dissent. In my view, because USAA and Menchaca each insists on rendition of a favorable judgment, and judgment cannot be rendered for either based on the conflicting answers in the jury verdict, the case must be retried. I do not agree with JUSTICE BOYD that the parties' confusion about the law requires a retrial in the interest of justice. Rather, a retrial is the only way to correct the trial court's error given the parties' erroneous positions.
JUSTICE GREEN would render judgment for USAA because Menchaca, as plaintiff, had the burden of obtaining findings to support a judgment in her favor and failed to do so. I disagree. Menchaca obtained the findings she needed. The jury's answers to Questions 2 and 3 — that USAA underpaid her $11,350 in policy benefits because it did not reasonably investigate her claim — supported a judgment in her favor. But the jury's answers to those questions conflicted with its answer to Question 1. The answers to Questions 2 and 3 establish that USAA failed to comply with its policy, yet the jury refused to make that finding in answer to Question 1. Menchaca cannot prevail because the jury answers were conflicting, not because they were insufficient.
Accordingly, I join in the Court's judgment remanding the case to the trial court for further proceedings.
JUSTICE GREEN, joined by JUSTICE GUZMAN and JUSTICE BROWN as to Parts I, II, and IV, dissenting, and joined by CHIEF JUSTICE HECHT, JUSTICE GUZMAN, and JUSTICE BROWN as to Part III, delivering a plurality opinion.
The Court's opinion outlines five rules governing the relationship between contractual and statutory claims. See 545 S.W.3d at ___. Under those five rules, I would hold that USAA Texas Lloyds Company is entitled to judgment in its favor because the plaintiff, Gail Menchaca, failed to prove that USAA was contractually obligated to pay benefits under the homeowners policy — a requisite showing to recover policy benefits for a violation of the Texas Insurance Code. See id. at ___ Because Menchaca failed to meet her burden of proof and failed to obtain a jury verdict that could support judgment in her favor, I would render judgment for USAA.
Three jury questions and answers are relevant here. Jury Question 1, which Menchaca insisted upon submitting despite the trial court's concerns and later urged the trial court to disregard,
In answering "no," the jury thus rejected Menchaca's assertion that USAA breached the policy.
Jury Question 2 relates to extra-contractual liability and provided a list of potential statutory violations:
"Unfair or deceptive act or practice" means any one or more of the following:
Thus, the only liability finding against USAA was for failure to conduct a reasonable investigation. See TEX. INS. CODE § 541.060(a)(7) ("It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to engage in the following unfair settlement practices with respect to a claim by an insured or beneficiary: ... refusing to pay a claim without conducting a reasonable investigation with respect to the claim....").
Concerned about a potential conflict between the jury's answers to Questions 1 and 2,
Finally, Question 3, which was submitted over USAA's objection:
USAA contends that Question 3 was merely a damages question, and the trial court seemed to agree.
In answer to Question 2, the jury found that USAA violated the Insurance Code by failing to investigate Menchaca's claim properly. As the Court's opinion explains, to recover for that statutory violation,
The jury's answer to Question 1 represents the jury's conclusion that Menchaca failed to satisfy her burden of proof on her claim that USAA breached the policy. See id. at 509 (agreeing that the answer to Question 1 "confirms [the jury's] conclusion that Menchaca `failed to carry [her] burden of proof to establish that USAA failed to comply with the policy's terms" (citing Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989))). In other words, the jury rejected Menchaca's claim that the policy required USAA to do something that it failed to do. Had the jury determined that USAA owed Menchaca any unpaid benefits due under the policy, the jury could only have answered Question 1 "yes." More specifically, had the jury determined that Menchaca's damages from Hurricane Ike exceeded her deductible, the jury would have had to return a "yes" answer to Question 1. Because the jury answered "no," however, we can conclude only that USAA's Insurance Code violation did not cause Menchaca to lose any benefits that she was due under the policy. In fact, as the Court acknowledges, the jury's answer is supported by evidence that the amount of Menchaca's loss was less than the policy's deductible, id. at ___, so the policy did not obligate USAA to pay Menchaca anything. Menchaca cannot use a statutory violation theory of recovery to recover the very same contract damages that the jury specifically rejected. Cf. City of Brownsville v. Alvarado, 897 S.W.2d 750, 752-53 (Tex. 1995) (holding that jury's "no" answer to liability question rendered submission of question involving plaintiff's negligence immaterial).
This result is consistent with the Court's no-recovery rule, 545 S.W.3d at ___, and with our holding in Provident American Insurance Co. v. Castañeda, 988 S.W.2d 189 (Tex. 1998), which I believe govern this case. Under the no-recovery rule, an insured cannot recover any damages for an insurer's statutory violation without establishing either the right to receive policy benefits or an independent injury. 545 S.W.3d at ___. An insurer's statutory violation does not, by itself, establish an entitlement to policy benefits. See Castañeda, 988 S.W.2d at 198, 201 (recognizing that "failure to properly investigate a claim is not a basis for obtaining policy benefits" and rendering judgment for the insurer whose conduct was not "the producing cause of any damage separate and apart from those that would have resulted from a wrongful denial of the claim"); Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 666 n.3 (Tex. 1995) ("[S]ome acts of bad faith, such as a failure to properly investigate a claim or an unjustifiable delay in processing a claim, do not necessarily relate to the insurer's breach of its contractual duties to pay covered claims, and may give rise to different damages."). Menchaca could have sought damages for an independent injury, but she chose not to. Instead, she sought
The Court's general rule yields the same result. Under the general rule, if the insured does not have a right to benefits under the policy, she cannot recover policy benefits as damages for an insurer's statutory violation. Id. at ___. The jury's answer to Question 1 rejected Menchaca's claim that she has a right to unpaid benefits under the policy. Therefore, under the general rule, Menchaca is not entitled to recover policy damages for USAA's Insurance Code violation.
The plaintiff bears the burden of proving her case and obtaining jury findings to support a judgment in her favor. See United Scaffolding, Inc. v. Levine, 537 S.W.3d 463, 480-81 (Tex. 2017) (recognizing that the burden to secure proper findings to support a theory of recovery is on the plaintiff); BP Am. Prod. Co. v. Red Deer Res., LLC, 526 S.W.3d 389, 395 n.4 (Tex. 2017) (explaining that the Court did not need to resolve the issue of conflicting jury findings because the plaintiff did not obtain a finding in its favor that could support a judgment against the defendant); Grenwelge v. Shamrock Reconstructors, Inc., 705 S.W.2d 693, 694 (Tex. 1986) (holding that the jury's failure to find that the defendant breached the contract "merely means that the [plaintiffs] failed to carry their burden of proving the fact"); Vestal v. Gulf Oil Corp., 149 Tex. 487, 235 S.W.2d 440, 442 (1951) (recognizing that on an ultimate issue, "the burden rested on the petitioners to plead and prove and secure a jury finding"); Little Rock Furniture Mfg. Co. v. Dunn, 148 Tex. 197, 222 S.W.2d 985, 990 (1949) (explaining that before a party is entitled to judgment in its favor, it must satisfy its burden of obtaining jury findings in its favor on every essential element of its claim). When the plaintiff does not discharge that burden, judgment cannot be rendered in her favor. See Union Mut. Life Ins. Co. v. Meyer, 502 S.W.2d 676, 679 (Tex. 1973); Little Rock Furniture Mfg. Co., 222 S.W.2d at 990. Here, Menchaca has not discharged her burden and is not entitled to a damages award for USAA's statutory violation. As a result, there is no reason to remand the case.
The Court's remand suggests an exception to the no-recovery rule — that an insured may recover policy benefits as damages for a statutory violation despite an insured's failure to prove entitlement to policy benefits and a jury's answer that the insurer did not breach any of its obligations under the policy. When the jury found liability on only one basis — a statutory violation — and the plaintiff failed to prove entitlement to policy benefits and failed to seek damages for an independent injury, the plaintiff is not entitled to recover any damages. Applying the Court's five rules to the facts of this case, I would hold that USAA is entitled to judgment in its favor.
Generally, a party should object to conflicting answers before the trial court dismisses the jury. The absence of such an objection, however, should not prohibit us from reaching the issue of irreconcilable conflicts in jury findings. I disagree with JUSTICE BOYD's suggestion that a defendant's failure to object in a case such as this requires judgment for the plaintiff or
Texas Rule of Civil Procedure 295 provides a mechanism for trial courts to resolve conflicting jury findings by sending the jury back for further deliberations. That rule provides that "[i]f [a] purported verdict is defective, the court may direct it to be reformed." TEX. R. CIV. P. 295 (emphasis added). The rule goes on to explain how the court must direct reformation if it chooses to do so:
Id. JUSTICE BOYD focuses on "shall" in that sentence, concluding that the only remedy for conflicting jury answers is for the trial court to direct further jury deliberations. 545 S.W.3d at 518. But that ignores "may" in the preceding sentence — "the court may direct [the verdict] to be reformed." TEX. R. CIV. P. 295 (emphasis added). The comment to Rule 295 explains:
Id. cmt. (emphasis added). So if the jury's answers conflict, the trial court may direct the jury to deliberate further, and if the trial court chooses to do so, additional jury instructions must be given in writing. Rule 295 does not mandate that conflicts not resolved through further deliberations are waived; the rule simply mandates written instructions in the event that the court decides to have the jury deliberate further to reform the verdict. Rule 295 does not prohibit a court from exercising another option, however: If the plaintiff insisted on submitting its claims in a way that cannot support the plaintiff's claim for recovery in light of the jury's answers, nobody objects to the jury's answers, and both parties insist there is no conflict, the trial court may enter judgment for the defendant without running afoul of the rule.
If the trial court opts not to direct reformation of the verdict, as Rule 295 allows, but instead enters judgment, an option JUSTICE BOYD does not recognize, JUSTICE BOYD believes that Rule 295 prohibits an appellate court from disturbing that judgment absent an objection to conflicting jury answers. 545 S.W.3d at ___. According to JUSTICE BOYD, the Rule 295 verdict-reformation process is the only remedy for conflicting jury answers, and that process is triggered only if the party who would later challenge judgment on the verdict
JUSTICE BOYD bases his preservation standard on cases involving incomplete verdicts, extending the rule in those cases to cases involving conflicting jury answers. Id. at 519. We have held that a "party who would benefit from answers" to questions the jury left blank must object to the incomplete verdict, "making it clear that he desires that the jury redeliberate on the issues or that the trial court grant a mistrial." Fleet v. Fleet, 711 S.W.2d 1, 3 (Tex. 1986); see Cont'l Cas. Co. v. Street, 379 S.W.2d 648, 650 (Tex. 1964) (holding that error was not preserved when the plaintiff "did not object to the acceptance of the jury verdict as incomplete, and thus by timely objection afford the trial court the opportunity, before the jury was discharged, of correcting the error (if such it was) of accepting the verdict with the issues unanswered"). This is because "a judgment cannot be based on a verdict containing unanswered issues, supported by some evidence, unless the issues are immaterial." Fleet, 711 S.W.2d at 3 (citing Powers v. Standard Acc. Ins. Co., 144 Tex. 415, 191 S.W.2d 7 (1946)); see TEX. R. CIV. P. 301 ("The judgment of the court shall conform to the pleadings, the nature of the case proved and the verdict, if any. ..."). So it makes sense to require a party to object to an incomplete verdict when answers to additional questions are necessary to a judgment in that party's favor. In that context, as soon as the jury returns its verdict, both the nature of the objection and the party who must object become clear. The same cannot be said in the case of conflicting jury answers, where the jury has answered all necessary and material questions, each party reasonably believes the verdict supports a judgment, neither party believes it would benefit from additional jury deliberations, and "the complaining party" cannot be ascertained until after the trial court enters its judgment, sometimes days or weeks later.
Recognizing that difficulty, Menchaca's counsel raised the possibility of conflicting answers before the jury was dismissed, attempting to argue that any conflict would not be irreconcilable. When the trial court made clear its view that the proper time for that argument would be later at a
The Court reviewed conflicting answers under just such circumstances in Little Rock Furniture Manufacturing Co. v. Dunn, 222 S.W.2d at 988-91. In that case, the trial court asked both parties before dismissing the jury whether there was a conflict between answers, and both parties said no. Id. at 988. Before receiving the verdict, the trial court again asked the parties if they thought there were any conflicts, and the parties again said no. Id. When the issue of irreconcilable conflict was later raised, the trial court refused to grant a mistrial or a new trial. Id. Despite the trial court having given the parties multiple opportunities to object to conflicting jury answers and the parties choosing not to do so, this Court considered the issue of conflicting findings and whether the judgment must be set aside. Id. at 988-91. Although the disposition in that case was based on the holding that the conflict in jury answers not fatal, the Court was very clear that its ruling should not be interpreted as support for waiver in the case of an irreconcilable conflict: "We do not hold, however, that in a case of a fatal conflict in answers the parties can waive the conflict."
As support for a preservation standard requiring an objection to conflicting findings before jury dismissal, JUSTICE BOYD cites the inapplicability of the fundamental-error exception to our preservation of error rules. 545 S.W.3d at ___. JUSTICE BOYD relies primarily on a single sentence in a 1962 case: "The entry of judgment by a trial court on conflicting findings does not constitute fundamental error." Murphree, 357 S.W.2d at 749. But the Court in Murphree never applied that sentence to the facts of the case, and the Court certainly never held that only an objection before jury dismissal would allow an appellate court to consider whether a judgment based on conflicting findings can stand. In fact, the opinion suggests that "assignment of error contained in [a] motion for new trial sufficient to bring this question to the trial court's attention" might have avoided a waiver problem. Id. at 748-49. This Court later explained our Murphree ruling, but again we did not hold that only an objection before jury dismissal would preserve error as to conflicting answers. See St. Louis Sw. Ry. Co. v. Duke, 424 S.W.2d 896, 898 (Tex. 1967). Rather, we explained that "[a]ssuming, without deciding, that there was an irreconcilable conflict in the jury answers, it was necessary to file a motion for new trial assigning as error the entry of judgment on conflicting jury findings" when no motion for judgment notwithstanding the verdict or to disregard special issue findings had been filed. Id. (explaining Murphree, 357 S.W.2d at 744). Thus, to the extent that preservation is required under Murphree, this Court has recognized other mechanisms by which the conflict complaint can be preserved for appeal, including a motion to disregard specific findings, motion for judgment notwithstanding the verdict, and motion for new trial alleging erroneous entry of judgment based on entry of conflicting jury findings. Although I do not believe our preservation requirements prevent us from ruling in USAA's favor or even from considering the issue of conflicting jury answers in this case, I do believe that USAA's post-verdict motions were sufficient "to bring this question [of conflicting answers] to the trial court's attention" and thus preserved error.
As in Little Rock Furniture, the trial court here practically invited the parties to object before the jury was dismissed. See 222 S.W.2d at 987-88. Despite Menchaca's counsel noting a conflict in the jury's answers, neither party objected because they each believed they had won. And as in Little Rock Furniture, that should not prevent us from considering whether the verdict can support a judgment in the plaintiff's favor. Id. at 989-91. This is especially true when a judgment has never been based on the entire verdict, but on the jury answers that had not been disregarded.
We should resolve this case by deciding the simple question of whether Menchaca met her burden to prove and obtain findings that USAA's statutory violation caused her to lose benefits that USAA owed under the policy. Based on the jury's answers to Questions 1, 2, and 3, the answer is no.
Just as we can affirm a judgment in the plaintiff's favor when we determine that the answers do not conflict irreconcilably, id. at 991, I would hold that we can enter judgment in the defendant's favor when the answers establish that the plaintiff did not satisfy her burden of proof and is not entitled to any recovery.
For the reasons expressed above, I would render judgment that Menchaca take nothing on her claims.
Stoker, 903 S.W.2d at 341.
TEX. R. CIV. P. 295 (modified).
Because it was impossible to know which party would later complain of the court's judgment, JUSTICE BOYD's preservation standard apparently would require both parties to object to conflicting answers to ensure that appellate courts are not bound by a judgment entered on fatally conflicting answers.
