TEXAS SUPREME COURT REMINDS INSURERS: PAYING AN APPRAISAL AWARD MIGHT NOT SATISFY PROMPT PAYMENT ACT

Alvarez v. State Farm Lloyds
Supreme Court of Texas, No. 18-0127 (April 17, 2020)
Per Curiam opinion linked here.

Lazos v. State Farm Lloyds
Supreme Court of Texas, No. 18-0205 (April 17, 2020)
Per Curiam opinion linked here.

Biasatti v. GuideOne National Insurance Company
Supreme Court of Texas, No. 18-0911 (April 17, 2020)
Per Curiam opinion linked here.

Lyndon F. Bittle

In three per curiam opinions, the Texas Supreme Court firmly rejected the argument that by eventually paying an appraisal award, an insurer can avoid liability under the Prompt Payment of Claims Act, chapter 542 of the Texas Insurance Code.

Alvarez and Lazos both involved claims of wind and hail damage to residential property. State Farm insisted the damage did not exceed the homeowners’ deductible, so the homeowners filed suit seeking contractual and extra-contractual damages. In each case, State Farm then invoked the policy’s standard appraisal clause, the trial court ordered an appraisal that resulted in an award greater than the insurer’s initial estimate, and State Farm paid the award. The homeowners pressed for additional damages attributed to Stare Farm’s failure to pay promptly, but the trial courts and appellate courts held such damages were barred by payment of the appraisal and entered take-nothing judgments. While review of these cases was pending, the Texas Supreme Court issued two opinions clarifying USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018), which set forth rules governing the relationship between contractual and extra-contractual claims. In Barbara Technologies Corp. v. State Farm Lloyds, the Court held “payment in accordance with an appraisal is neither an acknowledgment of liability nor a determination of liability for purposes of … damages under section 542.060.” 589 S.W.3d 806, 820 (Tex. 2019). Likewise, in Ortiz v. State Farm Lloyds, the Court held “an insurer’s payment of an appraisal award does not as a matter of law bar an insured’s claims under the Prompt Payment Act.” 589 S.W.3d 127, 135 (Tex. 2019). The homeowners then amended their petitions in Alvarez and Lazos to abandon all claims except for damages under the Act. The Court reversed and remanded both cases to their respective trial courts for further proceedings.

The facts in Bisatti were similar, except that the damaged property was commercial (and State Farm was not involved). The wrinkle was that the appraisal clause in GuideOne’s policy was “unilateral”—it could be invoked only by the insurer, which had refused to do so when the policyholder requested it before the lawsuit. This distinction did not affect the viability of the policyholder’s claim under the Prompt Payment Act. The Supreme Court held, however, that its previous cases had not resolved “whether payment of an appraisal award under a unilateral clause would have the same effect” as to claims of breach of contract or bad faith. It, therefore, remanded that issue for consideration by the trial court, along with the prompt payment claim.

“BOILERPLATE” IN JUDGMENTS HAS CONSEQUENCES

B.C. v. Steak N Shake Operations, Inc.
Supreme Court of Texas, No. 17-1008 (March 27, 2020)
Per Curiam Opinion (linked here)

Ken Carroll

We’ve all included something like this in our proposed orders, submitted to the trial court at a summary judgment hearing: “After considering the pleadings, evidence, and arguments of counsel, the Court finds that the motion should be granted.” Standard. Professional. But innocuous, right? Not really, the Supreme Court tells us.

B.C., who worked at a Steak ‘n Shake, alleged her supervisor sexually assaulted her. Steak ‘n Shake moved for summary judgment, urging both traditional and no-evidence grounds. B.C. submitted a response (with over 400 pages of evidence attached) for electronic filing on the day it was due, but said “her filing was rejected ‘because one of the exhibits was not formatted for optical character recognition.’” She corrected the technical glitch and re-filed the next day—one day after the deadline, without seeking leave to file late. Steak ‘n Shake filed a reply and objected to the late filing. The trial court granted summary judgment to Steak ‘n Shake. Its summary judgment order made no mention of Steak ‘n Shake’s objection to the late-filed response and evidence, but did contain the broad recitation quoted above, that the court had “consider[ed] the pleadings, evidence, and arguments of counsel.” The court of appeals affirmed summary judgment for Steak ‘n Shake, concluding in the process that the trial court had not considered B.C.’s late-filed response and evidence, and that it could not do so on appeal.

But the Supreme Court disagreed, reversed, and remanded. The Court acknowledged that, where there is nothing in the record to indicate the trial court granted leave for a summary judgment response and evidence to be filed late, it is presumed leave was not granted and that the tardy filing was not considered by the court. But, the Court said, an appeals court should review the record thoroughly for any “affirmative indication that the trial court permitted [and considered] the late filing.” Here, it held, “the trial court’s recital that it considered the ‘evidence and arguments of counsel,’ without any limitation, is an ‘affirmative indication’ that the trial court considered B.C.’s response and the evidence attached to it.” The Court analogized to its longstanding approach when considering late-filed amended pleadings in advance of a summary-judgment hearing. Like the situation here, the rules prohibit amendment of pleadings, without leave, within seven days of a summary-judgment hearing. But “leave of court is presumed when a summary judgment [order] states that all pleadings were considered, and when, as here, the record does not indicate that an amended pleading was not considered, and the opposing party does not show surprise.” So, be careful with “boilerplate” language in proposed orders.

One more thing. You may be thinking: Was B.C.’s filing really late at all? Shouldn’t the filing of B.C.’s response simply have related back to the day before, the deadline day, when she submitted the technically defective e-filing? Unfortunately, that was not standard practice back in 2014 when B.C. attempted her e-filing. And both the Supreme Court and court of appeals ruled B.C. waived that argument because she didn’t assert it until her motion for rehearing en banc in the appeals court.