Texas High Court Allows Prompt Payment Claim Against State Farm Lloyds

By | April 28, 2020

Texas’ high court recently reversed the ruling of an appeals court in a case involving whether an insurer’s payment of an appraisal award negates an insured’s claim against the carrier under the Texas Prompt Payment of Claims Act (TPPCA).

In Juan Alvarez v. State Farm Lloyds, the Texas Supreme Court said the appeals court was wrong to deny Alvarez the right to pursue his prompt payment claim because State Farm had paid an appraisal award for damages to Alvarez’s residential property caused by wind and hail.

After the initial inspection of Alvarez’s property, the State Farm found that the damage to the property fell below the insured’s deductible. Upon a second inspection, the insurer revised the estimate and paid Alvarez an amount State Farm had determined to be appropriate.

Alvarez disagreed with the insurer’s assessment of the property damage and sued for a greater amount than State Farm had paid under his policy, among other things.

“In response, State Farm successfully moved the trial court to compel appraisal. The appraisal award exceeded State Farm’s prior estimates. State Farm accordingly paid the award to Alvarez and subsequently moved for summary judgment on all of Alvarez’s claims,” the court’s opinion explains.

Both the trial court and the court of appeals had previously sided with State Farm, “holding that (1) payment of an appraisal award entitled an insurer to summary judgment on all of the insured’s contractual and extra-contractual claims and (2) our decision in USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018), did not change that conclusion,” the opinion states.

During the interim between the lower court decisions and Alvarez’s appeal to the Texas Supreme Court, however, the court reaffirmed in two cases — Barbara Technologies Corp. v. State Farm Lloyds and Ortiz v. State Farm Lloyds — that just because an insurer paid an appraisal award “does not as a matter of law bar an insured’s claims under the Prompt Payment Act.”

Alvarez originally had sued State Farm for “breach of contract, breach of the duty of good faith and fair dealing, unjust enrichment, negligence, negligent misrepresentation” and certain violations of the state’s insurance code. Following the Barbara Technologies and Ortiz decisions, Alvarez amended his position to eliminate all his claims against State Farm except for the claim for prompt payment damages under the TPPCA.

“Although Alvarez did not expressly allege a TPPCA claim in his original petition, he alleged that he was entitled to 18% statutory interest (which reflects the statutory interest rate for violations of the TPPCA) and argued in his no-evidence motion for partial summary judgment that he was entitled to TPPCA damages. State Farm appeared to acknowledge this claim, too, arguing in its own summary-judgment motion that it was not subject to TPPCA damages,” according to the court’s written opinion.

Thus, the Texas Supreme Court justices concluded, “to the extent State Farm suggests Alvarez failed to preserve his TPPCA claim, State Farm is mistaken.”

The court remanded to the case to the trial court to consider Alvarez’s claim under the TPPCA in light of the court’s decisions in the Barbara Technologies and Ortiz.

The court published its opinion in Juan Alvarez v. State Farm Lloyds on April 17.


Topics Texas Claims

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