Insurance lawyers need to read this 2020, opinion from the United State Fifth Circuit Court of Appeals. It is a good opinion for attorneys who represent policy holders. The opinion is styled, Jesus Agredano: Margaret Agredano v. State Farm Lloyds.
The Agredando’s sued State Farm after State Farm denied their claim for windstorm damage to their home. The District Court granted summary judgment in favor of State Farm on various causes of action but allowed the Agredano’s breach of contract claim to be presented to a jury, which granted a verdict in the Agredano’s favor. Althoughm the Agredano’s had sought attorney’s fees and statutory interest of 18%, the District Court ruled that the failure to specifically plead relief under Texas Insurance Code, Section 542.060 barred the requested relief and entered judgment only in the amount of the breach of contract damages found by the jury, together with pre-judgment and post judgment interest. This appeal was filed. This Court reversed and remanded to the District Court for reconsideration consistent with this opinion.
Two provisions of the Texas Insurance Code are relevant. Section 542.058 provides a cause of action against insurers who delay paying claims:
[I]f an insurer, after receiving all items, statements, and forms reasonably requested and required under Section 542.055, delays payment of the claim for a period exceeding the period specified by other applicable statutes or, if other statutes do not specify a period, for more than 60 days, the insurer shall pay damages and other items as provided by Section 542.060.
Section 542.060, in turn, allows insureds to seek damages in the amount of the claim, plus 18% interest, for such delays:
[T]he insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney’s fees.
State Farm argues that the Agredano’s failed to plead a claim for the TPPCA interest under 542.060 because the Agredano’s did not “specifically request” such a claim, that is, the Agredano’s did not cite the statute or quote the language of the statute. As a result, the District Court originally granted the Agredano’s Chapter 542 relief under Federal Rule of Civil Procedure 54(c), providing that the final judgment should “grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.” Shortly thereafter, our court issued an unpublished (and, therefore, non-precedential) decision in Chavez v. State Farm Lloyds, which concluded that, because the bad faith insurance code claims had been properly dismissed by the district court, Chavez could not recover under 542.060. As a result of the Chavez decision, the district court reversed its ruling in this case and denied the 542.060 relief.
The Agredano’s pleaded that they submitted their claim and that it was denied. They further pleaded entitlement to an “18% penalty interest pursuant to Ch. 542 of the Texas Insurance Code” and “attorney’s fees.” The only relevant statute entitling an insured to an 18% penalty is 542.060. While the pleading could have been more robust, the Twombly/Iqbal “plausibility” standard does not require magic words or detailed facts in most cases. Instead, it prohibits speculative claims, which the request for a TPPCA penalty interest clearly is not.
In addition to the lack of pleading deficit, this is not a situation where State Farm was surprised by the Agredanos’ request. State Farm never brought a Rule 12(e) claim that it did not understand the pleadings and, indeed, it clearly was aware of the 542.060 claim because the Agredano stated it in their discovery responses and State Farm argued in its summary judgment motion that the Agredano’s had sought “causes of action based upon Chapter . . . 542 of the Texas Insurance Code.” This Court concluded that the statutory interest claim was not improperly pleaded.