FIFTH CIRCUIT CERTIFIES 542A ATTORNEY FEE QUESTION TO TEXAS SUPREME COURT

As has become increasingly common in the last 15 years, the Fifth Circuit Court of Appeals recently sought guidance from the Supreme Court of Texas on an important issue of Texas Insurance Law that has not been previously addressed by the supreme court.  Rodriguez v. Safeco Ins. Co. of Indiana, 73 F.4th 352 (5th Cir. July 12, 2023) involved a tornado claim under a homeowner’s policy.  After being unsatisfied with Safeco’s payment, Rodriguez sued Safeco.

Safeco invoked appraisal, and when appraisal was complete, paid Rodriguez the amount of the appraisal award, less the deductible and the prior payment.  Safeco also paid Rodriguez an additional amount calculated to be the maximum possible penalty interest that could be due under Tex. Ins. Code Chapter 542A if the appraisal payment were considered a late payment.

Safeco then moved for summary judgment, arguing Rodriguez could not recover attorney fees under Chapter 542A because its payment of the appraisal award plus the penalty interest eliminated all remaining claims, leaving no unpaid claim on which fees could be awarded.  The district court granted Safeco’s motion.

On appeal, the Fifth Circuit acknowledged that the federal courts who have addressed this issue are split.  Although the Texas Supreme Court has held that payment of an appraisal award does not eliminate the ability to recover fees, and that pre-payment of interest does not change that rule, those cases did not involve the 2017 amendments that created Chapter 542A, which contains its own more restrictive attorney fee provisions.

Therefore, the Fifth Circuit certified the following question:

In an action under Chapter 542A of the Texas Prompt Payment of Claims Act, does an insurer’s payment of the full appraisal award plus any possible statutory interest preclude recovery of attorney’s fees?

This question is generating significant interest from both the insurance industry and the plaintiffs’ bar.  As always, we will update our readers on any developments in this case including possible amicus brief opportunities.