Prompt Pay Act And Appraisal

The Texas Prompt Payment of Claims Act (TPPCA) sets forth rules for payment of claims and penalties for violation of those rules.  Here is a case that deals with the TPPCA when there is an appraisal involved.  The case is from the Northern District of Texas, Dallas Division, and is styled, Corinne Pearson v Allstate Fire and Casualty Insurance Co.

In February 2019, Pearson filed suit against Allstate alleging violations of the TPPCA and breach of contract and bad faith.  We will look at the TPPCA claim.  Allstate obtained an abatement of the case pending an appraisal of the damage to Pearson’s property.  In June the parties notified the Court that the appraisal was completed and Allstate filed this summary judgment motion.

The facts in evidence here were that Pearson had a policy with Allstate.  Pearson timely submitted a claim for damages.  After an inspection by Allstate there resulted a repair estimate that was lower than the policy deductible and this lawsuit was filed.

Allstate timely invoked the appraisal pursuant to the terms of the policy and appraisers were appointed by both parties.  The appraisal award set the amount of loss at $24,188.63.  Pursuant to the terms of the policy, Allstate was required to pay the award within five business days and it did so.

Pearson asserts that Allstate has not established as a matter of law that it is not liable under the Policy, and a fact issue exists as to whether Allstate violated the TPPCA by delaying payment for more than 60 days after receiving the information it needed to decide the claim.  Pearson asserts that, at a minimum, she is entitled to damages in the form of attorneys’ fees.

Allstate replies that whether it violated the TPPCA is irrelevant because it paid Pearson for any damages she could have recovered under the TPPCA, including any interest accrued during the alleged delay in payment.  As to Pearson’s claim for attorneys’ fees, Allstate argues that she is entitled to none because (1) the method by which TPPCA attorneys’ fees are calculated results in a zero sum, as Allstate paid all of the policy benefits it owed pursuant to the Award, pursuant to Insurance Code, Section 542A.007(a)(3)(A).

The TPPCA, codified in chapter 542 of the Code, imposes procedural requirements and deadlines on insurance companies to promote the prompt payment of claims.  To prevail on a claim for attorneys’ fees under the TPPCA, an insured must first establish the insurer’s liability under the applicable policy.

Assuming, that Pearson can make that showing, there are no attorneys’ fees to recover.  In September 2017, section 542A.007 of the Code took effect.  That provision adopted a new method for determining the amount of attorneys’ fees that a court may award a claimant under the TPPCA and provides that the award must be the lesser of:

(1) the amount of reasonable and necessary attorney’s fees supported at trial by sufficient evidence and determined by the trier of fact to have been incurred by the claimant in bringing the action;

(2) the amount of attorney’s fees that may be awarded to the claimant under other applicable law; or

(3) the amount calculated by:(A) dividing the amount to be awarded in the judgment to the claimant for the claimant’s claim under the insurance policy for damage to or loss of covered property by the amount alleged to be owed on the claim for that damage or loss in a notice given under this chapter . . ..

Because Pearson chose to exercise the appraisal clause only after filing this lawsuit and Allstate has satisfied its obligation under the clause, the last provision is the only one that is applicable.  It results in the lowest fee award possible —zero dollars —because there is no money judgment in Pearson’s favor.  Allstate is thus entitled to summary judgment on Pearson’s TPPCA claim.