Old American Insurance Company v. Lincoln Factoring, LLC ( 2018 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-17-00186-CV
___________________________
OLD AMERICAN INSURANCE COMPANY, Appellant
v.
LINCOLN FACTORING, LLC, Appellee
On Appeal from County Court at Law No. 1
Tarrant County, Texas
Trial Court No. 2015-005979-1
Before Gabriel, Kerr, and Birdwell, JJ.
Opinion by Justice Birdwell
OPINION
Lincoln Factoring, LLC, the assignee of a portion of benefits under a life
insurance policy, filed a lawsuit that principally concerned the timeliness of appellant
Old American Insurance Company’s payment of the benefits. Old American had
insisted on receiving a final, complete death certificate that specified the insured’s
cause of death before paying the benefits, which it paid during the pendency of the
litigation; Lincoln Factoring had insisted on receiving the benefits upon proof of the
insured’s death. Proceeding under a theory that Old American paid the benefits eight
months too late, Lincoln Factoring pleaded claims for violations of chapters 541 and
542 of the Texas Insurance Code, violations of the Deceptive Trade Practices-
Consumer Protection Act (DTPA), breach of contract, and breach of the common
law duty of good faith and fair dealing. Resolving opposing motions for summary
judgment, the trial court’s final judgment awarded Lincoln Factoring treble damages,
attorney’s fees, and interest—but no actual damages—for Old American’s failure to
promptly pay the benefits. On grounds of legal insufficiency and standing, we
conclude that as a matter of law, Lincoln Factoring cannot recover damages on the
claims it pleaded. We therefore reverse the trial court’s judgment and render a take-
nothing judgment.
Background
Rebecca Barnes bought a life insurance policy from Old American in 2011.
The policy carried a general benefit of $10,000 upon her death and an additional
2
$10,000 benefit upon proof that her death was “accidental” as defined by the policy.
Old American agreed to pay the death benefit when it received proof of Barnes’s
“covered death.” The policy did not contain a homicide exclusion—no language
expressly precluded the payment of benefits to a beneficiary who killed the insured.
While the policy excluded coverage if Barnes committed suicide within two years of
the policy’s effective date, she was still living two years after she bought the policy,
and this exclusion therefore became inapplicable.
Barnes died on September 28, 2014. Her original, incomplete death certificate,
issued by the District of Columbia, where she resided at the time of her death, stated
that the manner of her death was pending investigation.
On October 12, 2014, Frank Howard—Barnes’s fiancé and the policy’s sole
beneficiary—assigned his entitlement to $4,725 of the proceeds to Payne Support
Services, a funeral home.1 Howard authorized Payne Support Services or its assigns to
act for him “with full power to make collection of, compromise, settle[,] and [receive]
. . . the proceeds” of Barnes’s policy. On the same day, Payne Support Services
assigned its entitlement to the $4,725 in proceeds to Lincoln Factoring. Lincoln
Factoring sent the notarized assignments and the claim form to Old American.
Howard also assigned the entitlement to $1,884.75 of the proceeds to Heritage
1
See Tex. Est. Code Ann. § 122.201 (West Supp. 2018) (“A person who is
entitled to receive property . . . as a beneficiary under a life insurance contract . . . may
assign the property or interest in property to any person.”).
3
Memorial Cemetery, which reassigned that entitlement to American Capital Funding,
LLC.2
On October 21, 2014, Lincoln Factoring sent Old American a letter purporting
to confirm a verbal representation that Old American would recognize the partial
assignment of the right to benefits to Lincoln Factoring and that Old American would
“remit [a] check in payment of the proceeds.” Two days later, Old American
acknowledged receipt of the claim but stated in a letter that it “need[ed] a copy of the
death certificate” to pay it.
In December 2014, Lincoln Factoring sent a demand letter to Old American.
Lincoln Factoring asserted that Old American’s decision to wait for a final
determination of the cause of death before paying the policy’s proceeds was an “out
of contract demand [that Old American had] no basis to make.” Lincoln Factoring’s
letter stated in part,
Your company has no right to demand of the claimant under a
policy more information concerning the death of the insured than is
called for by the terms of the contract or is required by the known and
established uses of the insurance business . . . .
A PENDING DEATH CERTIFICATE is proof of death
sufficient for your company to pay the proceeds. . . .
....
Thus, three individuals or entities—Howard, Lincoln Factoring, and American
2
Capital Funding—eventually made claims for proceeds under Barnes’s policy. Only
Lincoln Factoring sued Old American for delaying payment of the proceeds.
4
Under Texas [law], you have a duty to conduct an investigation
which includes a phone call to the local police department to determine
if the cause of death will be ruled a homicide and if it is, is the
beneficiary a suspect.[3]
If the beneficiary is not a suspect[,] you have no basis to hold the
claim up. . . . I will make only one demand for payment. If your payment
is not forthcoming and if no arrangements are made to satisfy the debt, I
will proceed to file a lawsuit immediately against you to collect this debt
by all lawful means.
Approximately two weeks later, on December 30, 2014, Old American
informed Lincoln Factoring that it was still delaying payment of the benefits. Old
American’s letter to Lincoln Factoring stated,
Thank you for providing the death certificate for this claim.
However, because the cause of death is listed as still being “under
investigation,” we cannot conclude our claim investigation at this time.
The policy has an accidental death benefit rider and the cause of death is
required information to determine if the [accidental death benefit] claim
is payable. Further, the underlying life claim may be affected if the cause
of death is homicide or suicide.
Please provide a death certificate with the cause of death
determined . . . as soon as that investigation is concluded.
A little more than a week later, Old American sent a letter to Lincoln Factoring
stating that Old American still had not received a completed death certificate and that
once Old American received the certificate, it would “proceed with [Lincoln
3
Although Barnes’s policy did not contain a homicide exclusion, Texas’s “slayer
statute” provides that a “beneficiary of a life insurance policy or contract forfeits the
beneficiary’s interest in the policy or contract if the beneficiary is a principal or an
accomplice in wilfully bringing about the death of the insured.” Tex. Ins. Code Ann.
§ 1103.151 (West 2009); see Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 152 (2001)
(stating that slayer statutes have been adopted by nearly every state and that such
statutes have a “long historical pedigree”).
5
Factoring’s] request for benefits.” Old American sent similar letters to Lincoln
Factoring in February 2015, March 2015, and April 2015.
In March 2015, in a justice court, Lincoln Factoring sued Old American.
Lincoln Factoring asserted that in Old American’s delay of paying the benefits, it had
violated several provisions within chapters 541 and 542 of the Texas Insurance Code;
had committed actionable misrepresentations; had acted negligently; had violated the
DTPA;4 had breached the insurance policy; had committed conversion; had breached
the common law duty of good faith and fair dealing; and had tortiously and
negligently interfered with property rights. Lincoln Factoring asked for damages of
$4,725, the amount of proceeds due under the partial assignment.
Old American received Barnes’s final death certificate in June 2015. The
certificate described her cause of death as hypertensive cardiovascular disease. Within
days of receiving the final certificate, Old American paid all benefits under the policy.
Lincoln Factoring amended its pleading. In the amended pleading, Lincoln
Factoring conceded that Old American had paid the benefits but still asserted claims
for the recovery of “the interest due, legal fees[,] and money for [Old American’s]”
alleged breach of the insurance policy; its alleged violation of the DTPA; its alleged
breach of the duty of good faith and fair dealing; and its alleged violations of the
Texas Insurance Code.
4
See Tex. Bus. & Com. Code Ann. §§ 17.41–.63 (West 2011 & Supp. 2018).
6
After a trial, the justice court signed a judgment decreeing that Lincoln
Factoring take nothing. Lincoln Factoring perfected a de novo appeal to the trial
court.5
In the trial court, Lincoln Factoring again amended its petition. In Lincoln
Factoring’s second amended petition—its final pleading—it alleged that Old
American had delayed payment of benefits “based on terms that . . . were not in the
life insurance policy[,] were not defined in the . . . policy[,] and were adverse to state
statutes. In addition, [Old American] failed to reasonably investigate the life insurance
claim and made misrepresentations to delay payment.” Lincoln Factoring pleaded
claims for breach of contract, breach of the duty of good faith and fair dealing, and
violations of the DTPA and of several provisions of chapters 541 and 542 of the
Texas Insurance Code.
Each party filed a motion for summary judgment. Lincoln Factoring argued
that its lawsuit was
about an insurance company who delayed payment of a life insurance
policy for eight months based on terms that . . . were not in the life
insurance policy; were not defined in the life insurance policy; and were
adverse to state statutes. In addition, the insurance company failed to
reasonably investigate the life insurance claim and made
misrepresentations about the life insurance policy to delay payment.
After considering the motions and responses to the motions, the trial court
granted Lincoln Factoring’s motion and denied Old American’s motion. The court
See Tex. R. Civ. P. 506.1(a), (h), 506.3.
5
7
ordered that “judgment be entered in favor of Lincoln Factoring . . . for all its claims.”
In its judgment, the trial court did not award Lincoln Factoring any actual damages.
But the court ordered Old American to pay Lincoln Factoring $9,450 in “treble
damages,” $1,050 in “interest,” attorney’s fees of $12,000, and costs. Old American
brought this appeal.
As a Matter of Law, Lincoln Factoring Is Not Entitled to Relief
on the Claims it Pleaded
On appeal from the trial court’s judgment, Old American raises several issues
that relate to Lincoln Factoring’s standing, the merits of Lincoln Factoring’s claims,
and the relief that the trial court awarded on those claims. Old American asserts that
we should render a take-nothing judgment because Lincoln Factoring has “no right of
recovery . . . on any claim in its pleadings.” For the reasons that we explain below, we
agree.
Lincoln Factoring’s claims under chapter 541 and for violation of the common
law duty of good faith and fair dealing6
In its briefing on appeal, Old American contends that we should render a take-
nothing judgment because, among other reasons, Lincoln Factoring did not sustain
any actual damages as a result of Old American’s acts or omissions related to its
chapter 541 and good-faith-and-fair-dealing claims, and without an award of actual
On appeal, Lincoln Factoring asserts that it did not seek summary judgment
6
on its DTPA claim and appears to abandon that claim. To the extent, however, that
Lincoln Factoring has not abandoned its DTPA claim, the analysis in this section of
the opinion would apply with the same force to the DTPA claim.
8
damages, Lincoln Factoring could not obtain treble damages or other relief.7 We hold,
as explained below, that with respect to Lincoln Factoring’s claims under chapter 541
and for violation of the common law duty of good faith and fair dealing, (1) the trial
court did not award actual damages; (2) under the evidence in this case, the trial court
could not award actual damages; and (3) without an award of actual damages, the trial
court could not award treble damages or other relief, including attorney’s fees. We
therefore conclude that the trial court erred as a matter of law by granting relief to
Lincoln Factoring on these claims.
7
Old American raises these arguments in its seventh and ninth issues of its
opening brief. In the summary of the argument in its opening brief, Old American
asserts, “Lincoln [Factoring] did not sustain any actual damages . . . . Therefore, there
is no basis for treble damages . . . .” Later in the body of its opening brief, Old
American argues, “Lincoln [Factoring] has no actual damages as a matter of law and
there is no legal basis for an award of treble damages.”
We recognize that Old American did not raise issues concerning damages in
the trial court. But a summary-judgment nonmovant may raise, for the first time on
appeal, the legal sufficiency of evidence supporting grounds for relief presented by the
movant. See Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 512
(Tex. 2014); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979)
(“[T]he non-movant needs no answer or response to the motion to contend on appeal
that the grounds expressly presented to the trial court by the movant’s motion are
insufficient as a matter of law to support summary judgment.”); see also Clear Lake Ctr.,
L.P. v. Garden Ridge, L.P., 416 S.W.3d 527, 540 (Tex. App.—Houston [14th Dist.]
2013, no pet.) (stating that a summary-judgment movant has the burden to
conclusively establish its damages); First Select Corp. v. Grimes, No. 02-01-00257-CV,
2003 WL 151940, at *3 (Tex. App.—Fort Worth Jan. 23, 2003, no pet.) (mem. op.)
(stating the same). We construe Old American’s seventh and ninth issues as
challenging the legal sufficiency of the evidence to justify any award of damages on
Lincoln Factoring’s claims under chapter 541 and for breach of the duty of good faith
and fair dealing.
9
Section 541.151 of the insurance code allows a person “who sustains actual
damages” from a defendant’s unfair or deceptive insurance practice8 to bring an action
“for those damages.” Tex. Ins. Code Ann. § 541.151 (West 2009) (emphasis added). A
plaintiff who prevails in an action under section 541.151 may obtain “the amount of
actual damages, plus court costs and reasonable and necessary attorney’s fees.” Id.
§ 541.152(a)(1) (West Supp. 2018). Also, such a plaintiff may obtain treble damages—
“an amount not to exceed three times the amount of actual damages”—if the
defendant committed the unfair or deceptive act knowingly. Id. § 541.152(b); see
Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 9 (Tex. 1991) (stating that an award of
treble damages is “punitive in nature and designed to deter violations” of the
insurance code). Texas law also recognizes a cause of action for damages for a breach
of the common law duty of good faith and fair dealing owed by insurers to insureds
and beneficiaries. See Viles v. Sec. Nat’l Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990);
Arnold v. Nat’l Cty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167–68 (Tex. 1987).
Chapter 541 claims and claims for breach of the duty of good faith and fair
dealing are tort claims that are independent from a claim for breach of an insurance
contract. See USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018). To
8
Subchapter B of chapter 541—sections 541.051 through 541.061—delineates
unfair and deceptive insurance practices that may serve as grounds for a lawsuit under
section 541.151. See Tex. Ins. Code Ann. §§ 541.051–.061 (West 2009 & Supp. 2018).
Lincoln Factoring pleaded claims under sections 541.051, 541.052, 541.060, and
541.061.
10
recover any damages beyond policy benefits for such claims, the “statutory violation
or bad faith must cause an injury that is independent from the loss of benefits.” Nat’l
Sec. Fire & Cas. Co. v. Hurst, 523 S.W.3d 840, 848 (Tex. App.—Houston [14th Dist.]
2017, pet. filed) (“It is undisputed that Hurst had a right to receive benefits under the
insurance policy, and we have held that he received those benefits . . . . In order to
recover any damages beyond policy benefits, the statutory violation or bad faith must
cause an injury that is independent from the loss of benefits.”); see Menchaca, 545
S.W.3d at 500 (“[A]n insurer’s statutory violation does not permit the insured to
recover any damages beyond policy benefits unless the violation causes an injury that
is independent from the loss of the benefits.”); Biasatti v. GuideOne Nat’l Ins. Co., No.
07-17-00044-CV, 2018 WL 3946352, at *3 (Tex. App.—Amarillo Aug. 16, 2018, pet.
filed) (“[A]n insured can recover actual damages caused by the insurer’s statutory
violation or bad-faith conduct only if the damages are separate from and differ from
benefits under the policy. Consequently, we disagree that the requisite ‘independent
injury’ can be predicated on policy benefits which have already been paid.”); Turner v.
Peerless Indem. Ins. Co., No. 07-17-00279-CV, 2018 WL 2709489, at *4 (Tex. App.—
Amarillo June 5, 2018, no pet.) (mem. op.) (“[W]hen benefits are paid per the contract
. . . , an insured may still pursue extra-contractual causes of action but only when they
are not founded upon the loss or injury allegedly covered by the policy. That is, they
must be founded on an act that caused injury independent of the policy claim.”); see
also Powell Elec. Sys., Inc. v. Nat’l Union Fire Ins. Co., No. H-10-993, 2011 WL 3813278,
11
at *9 (S.D. Tex. Aug. 29, 2011) (granting summary judgment for the insured on its
breach-of-contract claim but for the insurer on common-law and statutory claims
because the insured “failed to allege damage independent of the damages arising from
the underlying breach of the insurance contract”); Zhu v. First Cmty. Ins. Co., 543
S.W.3d 428, 438 (Tex. App.—Houston [14th Dist.] 2018, pet. filed) (holding that a
plaintiff could not assert a chapter 541 claim as a matter of law because the plaintiff
had “received the benefits to which he was entitled under the policy and ha[d] not
alleged any act so extreme as to cause independent injury”).
Here, perhaps because the evidence conclusively showed that Old American
paid all benefits under Barnes’s insurance policy, the trial court did not award any
actual damages. And under the cases cited above, the trial court could not have awarded
such damages because the record does not contain any allegation or proof that
Lincoln Factoring suffered an injury that was independent of the benefits it sought
under the policy; instead, the record conclusively shows that the damages for which
Lincoln Factoring pleaded and presented evidence flowed from the denial of policy
benefits.9 See Menchaca, 545 S.W.3d at 500 (explaining that an injury is not
“independent” from the right to receive policy benefits if the injury “flows” or
9
In Lincoln Factoring’s original petition that it filed in justice court, it pleaded
for damages of $4,725, the amount due under the partial assignment of the policy.
Lincoln Factoring sought the same actual damages in its first amended petition, also
filed in justice court. In its second amended petition, its live pleading, Lincoln
Factoring did not plead that it sustained an injury that was not associated with Old
American’s delay of paying benefits under the policy.
12
“stems” from the denial of that right); Hurst, 523 S.W.3d at 848. Thus, with respect to
Lincoln Factoring’s claims under chapter 541 and for breach of the duty of good faith
and fair dealing, we hold both that (1) the evidence is legally insufficient to prove any
actual damages, and (2) as a matter of law under the facts presented, where there is no
allegation or evidence of an independent injury, such damages cannot be awarded.
Although the trial court did not award actual damages, it awarded $9,450 in
“treble damages” and $12,000 in attorney’s fees, presumably under section 541.152.
See Tex. Ins. Code Ann. § 541.152(a)(1), (b). But without an award of actual damages,
the trial court could not award treble damages. See id. § 541.152(b) (stating that when a
defendant knowingly commits an act that violates chapter 541, the “the trier of fact
may award an amount not to exceed three times the amount of actual damages” (emphasis
added)); Allstate Indem. Co. v. Hyman, No. 06-05-00064-CV, 2006 WL 694014, at *11
(Tex. App.—Texarkana Mar. 21, 2006, no pet.) (mem. op.) (stating that section
541.152 “limits a plaintiff's recovery to three times actual damages”); Household Fin.
Corp. III v. DTND Sierra Invs., LLC, No. 04-13-00033-CV, 2013 WL 5948899, at *12
(Tex. App.—San Antonio Nov. 6, 2013, no pet.) (mem. op.) (“In the absence of
actual damages, there is nothing to treble.”). Thus, the trial court’s award of $9,450 in
“treble damages” in the absence of an award of actual damages cannot be sustained.
Further, without awarding actual damages, the trial court could not award attorney’s
fees under chapter 541, and the award of $12,000 in attorney’s fees is likewise not
13
sustainable.10 See Tex. Ins. Code Ann. § 541.152(a)(1); State Farm Life Ins. Co. v. Beaston,
907 S.W.2d 430, 437 (Tex. 1995); Guidry v. Envtl. Procedures, Inc., 388 S.W.3d 845, 860
(Tex. App.—Houston [14th Dist.] 2012, pet. denied) (“A plaintiff who does not
recover actual damages cannot recover attorneys’ fees under the Insurance Code.”).
For all of these reasons, assuming, without deciding, that Lincoln Factoring
proved otherwise meritorious claims11 of Old American’s unfair or deceptive
insurance practices under chapter 541 and of Old American’s breach of the common
law duty of good faith and fair dealing, we hold that as a matter of law under the
evidence contained within the record, Lincoln Factoring is not entitled to relief based
on those claims. Thus, we sustain Old American’s seventh and ninth issues, and we
will reverse the trial court’s judgment with respect to those claims and render
judgment for Old American.12 See Tex. R. App. P. 47.1; Beaston, 907 S.W.2d at 435–38
Lincoln Factoring alternatively contends that the trial court could have
10
awarded attorney’s fees in response to a declaratory judgment counterclaim asserted
by Old American. See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 2015). As
Old American asserts, however, Lincoln Factoring did not seek summary judgment
for attorney’s fees on that basis; we cannot affirm a summary judgment on a ground
not moved upon. See Stiles v. Resolution Tr. Corp., 867 S.W.2d 24, 26 (Tex. 1993).
Lincoln Factoring argues that Old American waived challenges to the merits
11
of some of the chapter 541 claims. Because we assume, without deciding, that the
chapter 541 claims were meritorious on liability, we need not examine the argument
of waiver. See Tex. R. App. P. 47.1
12
Although Old American did not seek summary judgment on the damages
issue, under the particular circumstances presented here that foreclose relief, it “would
be a useless and idle ceremony to reverse and remand,” so we render judgment “in
accord with . . . the inevitable result.” See Parrish v. Frey, 44 S.W. 322, 325–26 (Tex.
14
(declining to address the merits of a jury’s finding that defendants engaged in an
unfair or deceptive insurance practice because the only damages awarded by the jury
were reversible for a reason independent of the liability finding).
Lincoln Factoring’s claims under chapter 542
In its second issue, which concerns Lincoln Factoring’s chapter 542 claims, Old
American contends that under the plain language of the provisions under which
Lincoln Factoring sued, Lincoln Factoring does not have standing.13 Lincoln
Factoring brought claims under sections 542.003, 542.055, 542.056, and 542.058 of
the insurance code. Old American argues that Lincoln Factoring lacks standing under
section 542.003 because that section does not provide for a private cause of action.
Old American further contends Lincoln Factoring lacks standing under the other
sections because claims under those sections may only be brought by an insured or a
named beneficiary. We agree with these contentions.
“Standing” is a question of law that generally concerns whether a plaintiff has a
sufficient justiciable interest in a suit’s outcome to be entitled to a judicial
Civ. App.—Austin 1898, writ ref’d); see also Mackey v. Lucey Products Corp., 239 S.W.2d
607, 608 (Tex. 1951) (“The law does not require the doing of a vain and useless thing,
and by our opinions and judgments we will not so require.”); Ware v. Miller, 82 S.W.3d
795, 804 (Tex. App.—Amarillo 2002, pet. denied) (“As a matter of public policy,
courts do not require performance of useless acts.”).
13
Old American did not challenge Lincoln Factoring’s standing in the trial
court. Because standing is a component of subject matter jurisdiction, it may be
challenged for the first time on appeal. Meyers v. JDC/Firethorne, Ltd., 548 S.W.3d 477,
484 (Tex. 2018).
15
determination. In re H.S., 550 S.W.3d 151, 155 (Tex. 2018). If a plaintiff does not have
standing to assert a claim, a court lacks subject-matter jurisdiction to decide it. Id.; see
Heckman v. Williamson Cty., 369 S.W.3d 137, 150 (Tex. 2012) (“Standing is a
constitutional prerequisite to suit.”).
When standing has been conferred by statute, the statute serves as the proper
framework for the standing analysis. In re Russell, 321 S.W.3d 846, 856 (Tex. App.—
Fort Worth 2010, orig. proceeding [mand. denied]). In such a case, we must determine
“upon whom the Texas Legislature conferred standing and whether the claimant in
question falls in that category.” In re Sullivan, 157 S.W.3d 911, 915 (Tex. App.—
Houston [14th Dist.] 2005, orig. proceeding [mand. denied]). “For statutory standing
to apply, the plaintiff must allege and show how he has been injured or wronged
within the parameters of the statutory language.” Hernandez v. Truck Ins. Exch., 553
S.W.3d 689, 698 (Tex. App.—Fort Worth 2018, pet. filed).
Section 542.003, a provision within the Unfair Claim Settlement Practices Act,14
states that an insurer may “not engage in an unfair claim settlement practice” and
provides a list of practices that are unfair. Tex. Ins. Code Ann. § 542.003(a)–(b). The
Act provides for administrative enforcement of its terms by the Texas Department of
Insurance and does not explicitly create a private cause of action for violations. Id.
§§ 542.008–.012. State and federal courts in Texas have repeatedly held that violations
See Tex. Ins. Code Ann. §§ 542.001–.014 (West 2009 & Supp. 2018).
14
16
of the Act, including violations of section 542.003, may not be litigated through a
private lawsuit brought against the insurer. See Terry v. Safeco Ins. Co. of Am., 930 F.
Supp. 2d 702, 714 (S.D. Tex. 2013) (“The Terrys’ claims fail because there is no
private right of action under the Unfair Settlement Practices Act.”); Great Am. Assur.
Co. v. Wills, No. SA-10-CV-353-XR, 2012 WL 3962037, at *2 (W.D. Tex. Sept. 10,
2012) (agreeing that “only the Texas Department of Insurance can bring a claim
under section 542.003”); First Am. Title Ins. Co. v. Patriot Bank, No. 01-14-00170-CV,
2015 WL 2228549, at *7 (Tex. App.—Houston [1st Dist.] May 12, 2015, no pet.)
(mem. op.) (holding that there is no private cause of action for violations of section
542.003). We agree with these decisions and hold that Lincoln Factoring does not
have standing to litigate a claim under section 542.003.15
Lincoln Factoring also pleaded causes of action under subchapter B of chapter
542, which concerns the prompt payment of “claims.” See Tex. Ins. Code Ann.
§§ 542.051–.061 (West 2009 & Supp. 2018). When an insurer is liable for not
promptly paying a “claim” under the provisions of subchapter B, the trial court may
order the insurer to pay the amount of the “claim” and “interest on the amount of the
claim at the rate of 18 percent a year as damages.” Id. § 542.060(a).16
15
Lincoln Factoring concedes the same, stating with respect to its claim under
section 542.003 that a “remedy is only available to the Department of Insurance.”
16
We presume that the trial court’s $1,050 award of “interest” flowed from
section 542.060(a).
17
Under the statute’s explicit language, a “claim” that is subject to the provisions
of subchapter B is a first-party claim that is “made by an insured or policyholder
under an insurance policy or contract or by a beneficiary named in the policy or contract” and
that “must be paid by the insurer directly to the insured or beneficiary.” Id. § 542.051(2)(A)–
(B); see also id. §§ 542.055, .056, .058 (delineating requirements for the processing and
payment of a “claim”), § 542.060 (providing for a cause of action when an insurer is
liable for a “claim” and violates a provision of the subchapter); State Farm Life Ins. Co.
v. Martinez, 216 S.W.3d 799, 802 (Tex. 2007) (stating that the “statute defines a ‘claim’
to . . . limit coverage to beneficiaries named in the policy”). Under the plain meaning
of subchapter B,17 only a beneficiary named in a policy or contract may sue for an
insurer’s acts with respect to a “claim.” See Martinez, 216 S.W.3d at 802; see also DeLeon
v. Lloyd’s London, 259 F.3d 344, 354 (5th Cir. 2001) (stating that the prompt payment
statute concerns the “relationship between the insurer and the ‘named’ beneficiary—
not the lawful, yet unnamed beneficiary,” and holding that the statutory interest
17
We apply the plain meaning of a statute as expressed through its language
unless a different meaning is apparent or unless doing so would lead to an absurd
result. State v. T.S.N., 547 S.W.3d 617, 621 (Tex. 2018). We also note that the penal
character of insurance code remedies supports limiting the scope of plaintiffs who
may plead for them. See Houston Sash & Door Co. v. Heaner, 577 S.W.2d 217, 222 (Tex.
1979) (stating that civil statutes “of a penal nature are to be strictly construed” and
holding that forfeiture provisions of a usury statute were “restricted to the immediate
parties to the transaction”); Micrea, Inc. v. Eureka Life Ins. Co. of Am., 534 S.W.2d 348,
354 (Tex. Civ. App.—Fort Worth 1976, writ ref’d n.r.e.) (“Our statutes relative to
penalty are to be enforced strictly in accordance with their terms. Rights of redress
provided thereby are therefore to be restricted . . . .”).
18
penalty did not apply because the plaintiff was not named in the policy as a
beneficiary); Sparkman v. Reliastar Life Ins. Co., No. 13-03-00500-CV, 2008 WL
2058216, at *9 (Tex. App.—Corpus Christi May 15, 2008, pet. denied) (mem. op.)
(stating that the prompt-payment provisions limit causes of action “to a beneficiary
named in the policy” and concluding that the provisions did not “provide relief to a
party who [was] not named a beneficiary in the policy or contract but [was] merely
deemed [a] proper beneficiary after litigation”).18 We reject Lincoln Factoring’s
contention that its position among the category of claimants who may sue under
chapter 542 is a matter of capacity, which cannot be litigated for the first time on
appeal, rather than a matter of standing, which can. See Sullivan, 157 S.W.3d at 915; cf.
Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C., No. 05-13-00506-CV, 2015 WL
6750047, at *17–18 (Tex. App.—Dallas Nov. 4, 2015, no pet.) (mem. op. on reh’g)
(holding that the assignability of a common law claim was an issue of capacity, not
standing, and that the capacity issue had not been preserved through a verified
pleading in the trial court).
We hold that Lincoln Factoring, which was not the insured, policyholder, or
beneficiary named in the policy or contract—but rather was a partial and successive
The cases that Lincoln Factoring relies on to support its standing to assert a
18
chapter 542 prompt payment claim are inapposite because those cases discuss
provisions of other statutes and do not address the definition of a “claim” under
section 541.051. See, e.g., Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 890–
91 (5th Cir. 2003) (discussing standing under a federal statute).
19
assignee of benefits from the named beneficiary—does not have standing to assert
prompt payment claims under sections 542.055, 542.056, and 542.058. See Tex. Ins.
Code Ann. § 542.051(2)(A). Thus, we sustain Old American’s second issue, which
requires us to reverse the trial court’s $1,050 award of “interest.”
Lincoln Factoring’s breach of contract claim
Finally, Old American contends in its fourth issue, as it argued in the trial court,
that its payment of proceeds to Lincoln Factoring, albeit later than Lincoln Factoring
requested, forecloses Lincoln Factoring’s claim for breach of contract.19 Lincoln
Factoring appears to concede as much, stating, “An insurance policy is a contract, and
once Old American finally paid the $10,000 ‘death benefit,’ Lincoln could not recover
for breach of contract.” The elements of a breach of contract claim are the existence
of a valid contract, performance or tendered performance by the plaintiff, breach of
the contract by the defendant, and resulting damages to the plaintiff. Rice v. Metro. Life
Ins. Co., 324 S.W.3d 660, 666 (Tex. App.—Fort Worth 2010, no pet.). We hold that
because Old American fully paid the benefits under Barnes’s life insurance policy,
Lincoln Factoring, the partial assignee of the beneficiary’s interest in the policy,
cannot prove a breach of the contract and succeed on its breach of contract claim. See
Minn. Life Ins. Co. v. Vasquez, 192 S.W.3d 774, 776 (Tex. 2006) (“As the claim was paid
An assignee of insurance benefits may sue an insurer for breach of contract.
19
See 1 Lincoln Fin. Co. v. Am. Family Life Assur. Co. of Columbus, No. 02-12-00516-CV,
2014 WL 4938001, at *4 (Tex. App.—Fort Worth Oct. 2, 2014, no pet.) (mem. op.).
20
shortly after suit was filed, no breach of contract claim remains.”); see also Ressler v.
Gen. Am. Life Ins. Co., 561 F. Supp. 2d 691, 697 (E.D. Tex. 2007) (“Even assuming a
breach of contract claim was pleaded, the court finds summary judgment on such a
claim to be proper as Defendant has paid the Policy in full and the investigation
causing the delay in payment was as a matter of law not a breach of the Policy.”). To
the extent that the trial court’s final judgment rests on Lincoln Factoring’s breach of
contract claim, we hold that it is erroneous and sustain Old American’s fourth issue.
Conclusion
For all of these reasons, based on principles of evidentiary insufficiency and
standing, we hold that as a matter of law, Lincoln Factoring is not entitled to relief on
the claims that it pleaded. Having sustained Old American’s second, fourth, seventh,
and ninth issues, which are dispositive,20 we reverse the trial court’s final judgment
and render a take-nothing judgment.
/s/ Wade Birdwell
Wade Birdwell
Justice
Delivered: November 8, 2018
20
We decline to address Old American’s other issues. See Tex. R. App. P. 47.1.
21