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Primrose Operating Co. v. National American Ins. Co.

United States District Court, N.D. Texas, Lubbock Division

July 15, 2003

Primrose Operating Company
v.
National American Ins. Co.

          ORDER

          SAMUEL CUMMINGS, District Judge.

         On this date the Court considered the Motion for Entry of Judgment filed May 28, 2003, by Primrose Operating Company ("Primrose") and CADA Operating, Inc. ("CADA") (collectively "Plaintiffs"). National American Insurance Company's ("Defendant") Response to Plaintiffs' Motion for Entry of Judgment was filed June 13, 2003. Plaintiffs filed no reply. After considering all the relevant arguments and evidence, the Court GRANTS, to the extent more fully set forth below, Plaintiffs' Motion for Entry of Judgment.

         DISCUSSION

         On May 20, 2003, the jury rendered its verdict in this case in favor of Plaintiffs and against Defendant. Specifically, the jury found as follows:

1. Defendant breached its agreement with Primrose under the Primrose Policy when Defendant refused to provide Primrose with a defense in the underlying Senn litigation;
2. Defendant breached its agreement with CADA under the CADA Policy when Defendant refused to provide CADA with a defense in the underlying Senn litigation;
3. The sum of $183, 741.78, not including interest, would fairly and reasonably compensate Primrose for the damages that resulted from Defendant's breach of the Primrose Policy;
4. The sum of $225, 761.74, not including interest, would fairly and reasonably compensate CADA for the damages that resulted from Defendant's breach of the CADA policy;
5. Defendant failed to acknowledge receipt of Primrose's claim, failed to commence any investigation of the claim, and failed to request from Primrose all items, statements, and forms that Defendant reasonably believed, at that time, would be required from Primrose within 15 days after receipt of the notice of claim in violation of article 21.55, section 2 of the Texas Insurance Code; and
6. Defendant failed to notify Primrose within 15 business days of Defendant's acceptance or rejection of the claim in violation of article 21.55, section 3(a) of the Texas Insurance Code.

         Primrose seeks judgment on the jury verdict of $183, 741.78, plus statutory damages, prejudgment and postjudgment interest, attorneys' fees incurred through trial, and conditional attorneys' fees should Defendant unsuccessfully appeal this Court's judgment. CADA seeks judgment on the jury verdict of $225, 761.74, prejudgment and postjudgment interest, attorneys' fees incurred through trial, and conditional attorneys' fees should Defendant unsuccessfully appeal this Court's judgment.

         Primrose Statutory Damages

         Because the jury found that Defendant violated article 21.55, sections 2 and 3(a), of the Texas Insurance Code, Primrose seeks $63, 124.12 in statutory damages pursuant to article 21.55, section 6. Defendant asserts, however, that Primrose miscalculated the statutory damages. Specifically, Defendant argues that section 6 statutory damages must be calculated as a simple percentage, not compounded; that the statutory damages must be determined to have accrued as the attorneys' fees were earned, not from the date of Defendant's violation; and that prejudgment interest may not be assessed against the portion of the judgment comprised of statutory damages.

         Article 21.55, section 2, provides, in pertinent part, that an insurer shall not later than the 15th day after receipt of notice of a claim . . .

1. acknowledge receipt of the claim;
2. commence any investigation of the claim; and
3. request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant.

TEX. INS. CODE ANN. art. 21.55, § 2 (Vernon Supp. 2003).

         Defendant does not dispute that it received Primrose's claim under the Primrose Policy on August 6, 2001. Thus, for Defendant to have timely complied with article 21.55, section 2, Defendant must have acknowledged receipt of the claim, commenced any investigation of the claim, and requested from Primrose all required items, statements, and forms on or before August 21, 2001. The jury determined that Defendant failed to do so in violation of article 21.55, section 2.

         Article 21.55, section 3(a) provides, in pertinent part, that an insurer shall

notify a claimant in writing of the acceptance or rejection of the claim not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer, in order to secure final proof of loss.

Id. § 3(a).

         The jury determined that Defendant violated article 21.55, section 3(a), because Defendant failed to notify Primrose of Defendant's acceptance or rejection of Primrose's claim within the statutory time limit.

         Article 21.55, section 6 provides as follows:

Damages. Sec. 6. In all cases where a claim is made pursuant to a policy of insurance and the insurer liable therefor is not in compliance with the requirements of this article, such insurer shall be liable to pay the holder of the policy, or the beneficiary making a claim under the policy, in addition to the amount of the claim, 18 percent per annum of the amount of such claim as damages, together with reasonable attorney fees. If suit is filed, such attorney fees shall be taxed as part of the costs in the case.

Id. § 6.

         This Court agrees "the statute is simple and its language unambiguous" and interpretation of the statute must be consistent with its underlying purpose and the policies it promotes. Northwestern Nat'l County Mut. Ins. Co. v. Rodriguez,18 S.W.3d 718, 721 (Tex.App.-San Antonio 2000, pet. denied); Dunn v. Southern Farm Bureau Cas. Ins.,991 S.W.2d 467, 474 (Tex.App.-Tyler 1999, pet. denied). The underlying purpose of article 21.55, section 6, is to "ensure prompt payment of insurance claims by penalizing the insurer when the insurer fails to follow the steps required by the article." J. C. Penney Life Ins. Co. v. Heinrich,32 S.W.3d 280, 289 (Tex.App.-San Antonio 2000, pet. denied) (internal citation omitted). In addition, the statute provides that "[t]his article shall be ...


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