The First Court of Appeals in Houston affirmed an analysis that involved math and application of the Texas Insurance Code. In Jones v. Allstate Vehicle & Property Insurance Company, 2022 Tex. App. LEXIS 8896 (Tex. App.—Houston [1st Dist.] Dec. 6, 2022, no pet.), the policyholder appealed a take-nothing judgment in favor of the insurer in a dispute over a partial denial of a homeowners claim. The policyholder sued her insurer for breach of contract, violation of the Texas Insurance Code, and breach of the duty of good faith and fair dealing. At trial, the jury found that the insurer failed to comply with the policy, engaged in unfair and deceptive trade practices, and failed to comply with the duty of good faith and fair dealing. The jury found that $6,935 would fairly and reasonably compensate the policyholder for the insurer’s conduct. The jury also found that the policyholder incurred $27,000 in reasonable and necessary attorney’s fees.
The trial court accepted the jury’s findings, but rendered a take-nothing judgment in favor of the insurer and awarded the insurer its costs. The trial court reasoned that the insurer had already paid $4,670.67 on the policyholder’s claim. The trial court also noted that a deductible of $3,040 applied to the policyholder’s claim. Because these amounts, when combined, exceeded the damages found by the jury, the trial court ordered that the policyholder was not entitled to any damages or other relief.
On appeal, the policyholder asserted that Texas Insurance Code §541.152(a)(1) entitled her to an award of attorney’s fees. The statute provides that a prevailing plaintiff may obtain “the amount of actual damages, plus costs and reasonable and necessary attorney’s fees.” The court of appeals assumed without deciding that such language mandated an award of attorney’s fees. The court of appeals surveyed authorities and held that a plaintiff must obtain a judgment in her favor and be awarded something, either monetary or equitable, to qualify as a prevailing party. Conversely, the court of appeals noted that a defendant that secured a take-nothing judgment is a prevailing party.
The court of appeals also discussed disputes over the standard of review and the reporter’s record that are beyond the scope of this blog post.
The policyholder conceded in the court of appeals that the trial court was correct in not awarding damages due to offsets. Nevertheless, she argued that she had prevailed because she obtained favorable jury findings. She emphasized a public policy argument, that an award of attorney’s fees was necessary under the Texas Insurance Code to punish insurers for wrongdoing and protect consumers.
The court of appeals rejected the policyholder’s argument. The court of appeals noted tension between Texas authorities regarding whether complete offsets of jury awards precluded attorney’s fees awards. The court of appeals distinguished those authorities that would have allowed an award of attorney’s fees by noting that they involved claims and counter-claims, unlike the instant case. Surveying authorities, the court of appeals treated the pretrial insurance payments like pretrial settlement payments. The court of appeals opined that the insurer thus paid the full amount it owed to the policyholder on her claims before the trial even began. This meant that the policyholder did not prevail and cannot recover her attorney’s fees.
The court of appeals hinted that the outcome might have been different if the insurer had asserted the affirmative defense of offset and if the jury charge had been presented and decided differently. In any event, Jones underscores how crucial it is for both sides to accurately and realistically evaluate their cases before proceeding to trial. Further, even if the court of appeals had allowed an award of attorney’s fees, it may not have allowed an award of $27,000 on a recovery of $6,935.