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Cox Operating, LLC v. St. Paul Surplus Lines Insurance Co.

United States District Court, Fifth Circuit

January 10, 2014

COX OPERATING, L.L.C., Plaintiff,
v.
ST. PAUL SURPLUS LINES INSURANCE COMPANY, Defendant.

MEMORANDUM OPINION AND ORDER

GRAY H. MILLER, District Judge.

Pending before the court are plaintiff's and defendant's motions to alter or amend judgment. Dkts. 550, 553. After considering the parties' arguments and the applicable law, the court is of the opinion that defendant's motion should be DENIED and plaintiff's motion should be GRANTED in part.

I. BACKGROUND

Following a 23 day jury trial, the jury rendered a verdict in favor of plaintiff, Cox Operating L.L.C. ("Cox"), awarding Cox $9, 465, 103.22 in damages for amounts owed by St. Paul Surplus Lines Insurance Company ("St. Paul") for pollution cleanup costs covered under the applicable excess insurance policy. The court entered an order and final judgment on August 16, 2013, awarding Cox damages and statutory penalty interest based on the jury's verdict, and prejudgment and post-judgment interest. Dkts. 526, 527. Specifically, the court assessed statutory penalty interest against St. Paul based on the jury's findings that it failed to comply with the Texas Prompt Payment of Claims Act, TEX. INS. CODE § 542.051, et seq. ("TPPCA"). The court found that the penalty interest should begin accruing on October 15, 2006-75 days after the jury found St. Paul had all of the information it required to secure final proof of loss on Cox's claim. The court further rejected St. Paul's objections to the jury award on the bases that the jury awarded Cox double recovery for amounts paid by other insurers and clean-up costs submitted one year after the completion of the pollution work.

Both parties have filed competing motions to alter or amend the court's judgment. Cox argues that the court should alter the judgment to reflect an earlier accrual date for the penalty interest under the TPPCA. St. Paul reurges its previous arguments that the judgment erroneously includes amounts paid by other insurers and excessive statutory and prejudgment interest.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 59(e) allows a party to move the court to alter or amend a judgment no later than ten days after the entry of the judgment. Amendment of a judgment is an "extraordinary remedy." Templet v. HydroChem Inc ., 367 F.3d 473, 479 (5th Cir. 2004). The moving party must present compelling reasons for the court to reconsider its judgment and "must clearly establish either a manifest error of law or fact or must present newly discovered evidence." Simon v. United States , 891 F.2d 1154, 1159 (5th Cir. 1990). The court has considerable discretion to grant or deny a motion to alter or amend the judgment under Rule 59(e). Hale v. Townley , 45 F.3d 914, 921 (5th Cir. 1995).

III. ANALYSIS

The parties' motions are largely a restatement of arguments that have been addressed by the court in its Memorandum Opinion and Order dated August 16, 2013, entering final judgment in this case. Dkt. 526. With one exception, the court finds no reason to disturb its ruling and final judgment in this case.

A. Texas Prompt Payment of Claims Act

The parties reurge this court to adopt vastly different views of the proper accrual date for the statutory penalty interest under the TPPCA. The case law on this subject arguably supports both positions, leaving the court with little definitive guidance as to the proper accrual date. However, without further guidance from the Texas Supreme Court or Fifth Circuit, the court must make a decision that gives effect to the jury's verdict and applies the statute in the terms expressed by the Texas legislature. Thus, upon further consideration of the cases analyzing the TPPCA and the parties' additional briefing, the court has concluded that an amendment to the judgment is warranted with respect to the TPPCA penalty interest accrual date.

Based on the jury's finding that St. Paul immediately violated its claims-handling obligations under Section 542.055, the court has focused its attention on those cases wherein a violation of Section 542.055 was found. And, while the jurisprudence is not wholly consistent as to the proper accrual date, the court is persuaded that the penalty interest should begin accruing 60 days after St. Paul received notice of the claim and failed to commence an investigation and request all items, statements, and forms that St. Paul reasonably believed would be required from Cox. This amended accrual date will give effect to each of the jury's findings and the statutory provisions at issue.

Relevant to the court's analysis, Section 542.055 requires that not later than the 30th business day[1] after the date the insurer receives notice of a claim, "the insurer shall: (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 § 542.055. Section 542.058 further provides that "if an insurer, after receiving all items, statements, and forms reasonably requested and required under Section 542.055" delays payment of the claim for more than 60 days, then the "insurer shall pay damages and other items as provided by Section 542.060." Id. § 542.058(a). It is under Section 542.060(a) that "the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages" if the insurer is liable for a claim under an insurance policy and fails to comply with the TPPCA. Id. § 542.060(a).

As noted above, few courts have addressed statutory penalty interest under the TPPCA where a violation of Section 542.055 occurred. In Philadelphia Indemnity , the insured notified the insurer regarding its claim, and the insurer failed to make a timely request for additional information within the statutory deadline. Phila. Indem. Ins. Co. v. C.R.E.S. Mgmt., L.L.C. , 2001 WL 1100218, *3 (S.D. Tex. 2011) (Atlas, J.). The insurer asserted that it had not violated the TPPCA because it requested information numerous times and the insured continued to supplement and revise its losses for months after notice of the claim. Id. The court rejected this position, finding that the statute did not provide a defense in the case of subsequent revisions to the insured's loss. Id. The court noted "[u]nder the statute's plain language, if [the insurer] had made a timely request for items, it could have obtained additional time for review of the claims, because after such timely request [the insurer] would have been obligated ...


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