Gusma Properties, L.P. v. Travelers Lloyds Insurance Co.

514 S.W.3d 319, 91 U.C.C. Rep. Serv. 2d (West) 604, 2016 WL 7478360, 2016 Tex. App. LEXIS 13783
CourtCourt of Appeals of Texas
DecidedDecember 29, 2016
DocketNO. 14-15-00892-CV
StatusPublished
Cited by5 cases

This text of 514 S.W.3d 319 (Gusma Properties, L.P. v. Travelers Lloyds Insurance Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gusma Properties, L.P. v. Travelers Lloyds Insurance Co., 514 S.W.3d 319, 91 U.C.C. Rep. Serv. 2d (West) 604, 2016 WL 7478360, 2016 Tex. App. LEXIS 13783 (Tex. Ct. App. 2016).

Opinion

OPINION

Sharon McCally, Justice

Appellants Gusma Properties, L.P. and Gusma Investments, L.P. (collectively, the Gusma parties)1 challenge the trial court’s (a) grant of summary judgment in favor of appellee the Travelers Lloyds Insurance Company on the Gusma parties’ claim under the Texas Insurance Code’s prompt payment provisions and (b) denial of the [321]*321Gusma parties’' amended motion for partial summary judgment. Because we determine that the trial court correctly granted Travelers’ motion for summary judgment, we affirm.

I. Background

The material, underlying facts are undisputed. Travelers insured five buildings owned by Gusma Properties, L.P. that were damaged by Hurricane Ike. After Gusma Properties filed a claim for damages, Travelers. demanded appraisal. Gus-ma Properties retained attorney Ricardo A. Baca of the RAB Law Firm to assist in its claims against Travelers and to pursue the Gusma parties’ insurance claims through the appraisal process. On October 6, 2014, the appraiser issued an appraisal award in the amount of $1,850,142.93. Eight days later, Travelers tendered a check in that amount jointly payable to the RAB Law Firm, P.C. and Gusma Properties. Attorney Baca negotiated the check without .the indorsement of Gusma Properties and retained all of the funds.

When the Gusma parties learned of the converted appraisal funds, they filed suit against, inter alia, attorney Baca; Bank of America, and Citibank and Travelers to recover the appraisal-award funds. Specifically, with regard to Travelers, the Gusma parties sued for (a) breach of the insurance contract, (b) recovery on the check under Texas Business & Commerce Code section 3.309; and (c) delay damages under sections 542.051 through 542.061 of the Texas Insurance Code (the Prompt Payment provisions). The Gusma parties contend that Travelers is liable because it should have made the check payable to “RAB Law Firm, P.C., in trust as attorneys for Gus-ma Properties, L.P.”

During the course of the litigation, the Gusma parties settled with Bank of America and Citibank (the Bank defendants) for $1,850,142.93, the amount of the check issued by Travelers for the appraisal award. Then Travelers sought summary judgment on all of the Gusma parties’ claims against Travelers. The Gusma parties agreed that the settlement with the Bank defendants and the July 17, 2015 settlement payment “had the effect of satisfying Travelers’ obligation to pay the $1,850,142.93 under the Insurance Policy and the UCC.” As such, the trial court entered summary judgment for Travelers on the Gusma parties’ breach of contract claim and its negotiable instrument claims; the Gusma parties do not ask this court to reverse the summary judgment on those claims.2

However, the Gusma parties continued to pursue delay damages under the Prompt Payment provisions of the Texas Insurance Code. In both their response to Travelers’ summary judgment motion and their own motion for partial summary judgment, the Gusma parties sought delay damages for Travelers’ alleged failure to timely “discharge its obligation” to pay the [322]*322appraisal award through July 16, 2015. The Gusma parties’ theory of the prompt-payment violation claim derives entirely from overlaying the negotiable-instrument provisions in Chapter 3 of the Texas Business and Commerce Code (the “Texas UCC”) onto Travelers’ prompt-payment obligations. Travelers responds that its tender of a check to the Gusma parties’ attorney was payment to them; therefore, Travelers reasons that it complied with the Prompt-Payment provisions. On the Prompt-Payment provisions claim, the trial court denied the Gusma parties’ amended motion for partial summary judgment, granted Travelers’ motion for summary judgment, and rendered a take-nothing judgment against the Gusma parties. The Gusma parties timely appealed.

II. Analysis

A. Standard of Review

On this record of undisputed facts, we review de novo the trial court’s summary-judgment legal conclusions disposing of the Gusma parties’ Prompt-Payment provisions claim. See, e.g., Ferguson v. Bldg. Materials Corp. of Am,., 295 S.W.3d 642, 644 (Tex. 2009).

B. Governing Law

The case presents a question of first impression: Does an insurer delay payment, within the meaning of the Prompt Payment provisions, when it tenders payment to the insured’s authorized counsel in the form of a negotiable instrument that is made jointly payable to both the insured and its counsel? We agree with the trial court that the answer to this question is “no” as a matter of law. We first outline the competing principles of law.

1. Under the Prompt Payment provisions, an insurer is penalized for its delay of payment.

The Prompt Payment provisions were formerly codified as Article 21.55 of the Insurance Code; in 2003, Article 21.55 was recodified “without substantial change.” See Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 16 (Tex. 2007). We begin with the language of the provisions to determine legislative intent from the words and then, if necessary, consider the statute as a whole to harmonize all provisions. See id. at 16. To prevail on a claim for penalty interest under the Prompt Payment provisions, the insured bears the burden to prove “(1) a claim was made under an insurance policy; (2) the insurer is liable for the claim; and (3) the insurer failed to follow one or more sections of the prompt-payment statute with respect to the claim.” United Nat’l Ins. Co. v. AMJ Invs. LLC, 447 S.W.3d 1, 13 (Tex. App.-Houston [14th Dist.] 2014, pet dism’d). Travelers did not and does not challenge the first two elements.

The Prompt Payment provisions establish a series of deadlines3 for insurers in the claims-handling process. Tex. Ins. Code §§ 542.051-061. These deadlines serve the same policy: “[T]o promote the prompt payment of insurance claims.” Id. § 542.054. The provisions afford “additional damages when an insurer wrongfully refuses or delays payment of a claim.” Lamar Homes, Inc., 242 S.W.3d at 16; see Tex. Ins. Code § 542.060. As is relevant here, section 542.058 provides that if an insurer “delays payment of the claim for a period exceeding the period specified by [323]*323other 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.” Tex. Ins. Code § 542.058. Section 542.060 establishes damages, in addition to the amount of the claim, of 18% interest and reasonable attorney’s fees for failure of an insurer to be “in compliance.” Id. § 542.060.

2. Under common law agency principles, the principal bears the risk of the agent’s wrongdoing.

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514 S.W.3d 319, 91 U.C.C. Rep. Serv. 2d (West) 604, 2016 WL 7478360, 2016 Tex. App. LEXIS 13783, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gusma-properties-lp-v-travelers-lloyds-insurance-co-texapp-2016.