Credit Life Insurance And Damages

Burleson insurance attorneys will see potential new clients come in their office with issues related to “credit life” insurance. This is a type of insurance that pays off a debt in the event of the death of the insured. A 1998, Houston Court of Appeals [1st Dist.] opinion gives us something to learn about these types of policies. The style of the case is, Norman v. League City National Bank and Life of America Insurance Company. Here is what the case tell us.
Mr. Norman applied for and obtained two loans from the Bank. In connection with both loans, he applied for and obtained credit life insurance from Life of America Insurance Company. Mr. Norman died before making any payments on either loan. The Bank submitted a claim to Life of America, but the claim was denied. The Bank then filed suit against Life of America for payment under the insurance policies. The Bank also filed suit in probate court against Mr. Norman’s estate and Mrs. Norman for payment of the loans. Mrs. Norman then filed suit against the Bank and Life of America asserting claims under the Texas Insurance Code, the DTPA, and for breach of warranty. All actions by all parties were consolidated in the probate court.
The Bank and Life of America eventually settled their claims without notifying or involving Mrs. Norman. The trial court granted motions for summary judgment in part, holding that the claims asserted by Mrs. Norman were without merit as a matter of law, but the court also found Mrs. Norman was a “prevailing party” under the DTPA and was therefore entitled to recover reasonable attorney’s fees. All parties appealed.
This appeals court affirmed the judgment in part and reversed in part. The summary judgment in favor of the Bank and Life of America was proper because Mrs. Norman failed to present any evidence regarding damages that she suffered independent of having to pay the notes. She did not have to pay the notes because of the settlement between the Bank and Life of America. Mrs. Norman’s argument that she is entitled to recover mental anguish damages associated with her DTPA claim had no merit because it is raised for the first time on appeal and because she presented no evidence and requested no finding of a culpable mental state as required by the DTPA for recovery of mental anguish damages.
Only a prevailing party may recover attorney’s fees under either the DTPA or the Texas Insurance Code. Although Mrs. Norman prevailed in her defense of the Bank’s suit, in the sense that the Bank non-suited its case against her, she did not prevail on the basis of affirmative relief she sought. Therefore, she is not a prevailing party and is not entitled to recover attorney’s fees.
This case should be read carefully. There were mistakes that, if not made, would have resulted in a different outcome. An experienced Insurance Law Attorney needs to be consulted when dealing with a credit life insurance policy.