Summary
holding insurer's liability under same policy provision was zero
Summary of this case from Melancon v. State Farm Mut. Auto. Ins. Co.Opinion
No. 01-04-00174-CV
Opinion issued April 27, 2006.
On Appeal from the 11th District Court, Harris County, Texas, Trial Court Cause No. 2002-60190.
Panel consists of Justices TAFT, KEYES, and HANKS.
MEMORANDUM OPINION
Appellant, Robert Marley, challenges the trial court's judgment in favor of appellee, Allstate Insurance Company. In his sole issue, Marley contends that the trial court erred by failing to add prejudgment interest to his damage award before offsetting the award with settlement credits and personal injury protection benefits. We affirm the judgment of the trial court.
Background
Marley was involved in an automobile accident with Christina Zamora. Zamora settled with Marley for $25,000 and signed a release of all claims against her. Allstate, Marley's automobile insurance carrier, also paid Marley $2,934 under the personal injury protection ("PIP") provision of his automobile policy. Later, Marley sued Allstate for underinsured motorist ("UIM") benefits and alleged that Allstate had breached its duty of good faith and fair dealing.Following a trial, the jury found in favor of Marley and awarded him $25,058 in actual damages and $7,500 in attorney's fees. Marley moved for the judgment to be entered and requested that he receive prejudgment interest in the amount of $6,099.12, which the tortfeasor would have been obligated to pay in a direct action. The trial court denied Marley's request for prejudgment interest and rendered a take-nothing judgment against him because the damages awarded by the jury did not exceed the sum of Zamora's liability limits plus the PIP benefits Allstate paid him. Allstate paid Marley $1,712.85 in taxable court costs, as ordered by the trial court.
This total included damages for medical expenses, out-of-pocket expenses, lost wages, physical pain and mental anguish, physical impairment, and loss of earning capacity.
Prejudgment Interest
In his sole issue, Marley contends that the trial court erred by failing to add prejudgment interest to his damage award before offsetting the award with settlement credits and personal injury protection benefits. Specifically, Marley argues that a judgment in a UIM claim must include, as part of the damage award, the prejudgment interest that the tortfeasor would have been obligated to pay in a direct action to the extent that such additional damages do not exceed appellant's UIM policy limit. We disagree.
We review a challenge to a trial court's decision regarding prejudgment interest using an abuse-of-discretion standard, giving limited deference to the trial court's application of the law to the facts. Purcell Constr., Inc. v. Welch, 17 S.W.3d 398, 402 (Tex.App.-Houston [1st Dist.] 2000, no pet.). Under this standard, we will not disturb a trial court's findings on factual issues unless the trial court reasonably could have reached only one decision and it failed to do so. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). However, "a trial court has no discretion in determining what the law is or applying the law to the facts." Id. at 840.
A trial court "is permitted, but not required, to award prejudgment interest under the authority of a statute . . . or under an equitable theory, or under both." Larcon Petroleum, Inc. v. Autotronic Sys., Inc., 576 S.W.2d 873, 879 (Tex.Civ.App.-Houston [14th Dist.] 1979, no writ); see also Johnson Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998) (stating that two legal sources for an award of prejudgment interest include general principles of equity and an enabling statute).
Here, we cannot say that the trial court abused its discretion by not awarding prejudgment interest to Marley, and he has not identified any statute or contractual provision supporting an award of prejudgment interest. In his brief, Marley directs us to a statute that allows a judgment in wrongful death, personal injury, or property damage cases to earn prejudgment interest. See Tex. Fin. Code Ann. § 304.102 (Vernon Supp. 2005). Marley argues that this statute allows prejudgment interest to be awarded as additional damages. This statute, however, does not apply to Marley's case against his insurer, Allstate.
This type of prejudgment interest is often referred to as " Cavnar-type" interest after the Texas Supreme Court case that first announced the rule allowing such interest. Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex. 1985).
The Texas Supreme Court has previously addressed the issue of whether an insurer owes prejudgment interest in addition to policy benefits under uninsured/underinsured motorists policies. Henson v. Southern Farm Bureau Cas. Ins. Co., 17 S.W.3d 652, 653-54 (Tex. 2000). The court held in Henson that the relationship between the insured and his insurance company was that of contracting parties, and therefore, their respective duties were established by the insurance contract. Id. at 653. The court concluded that, because prejudgment interest is awarded not as punishment for the defendant, but to fully compensate the injured party, "the insurers owe prejudgment interest on top of the policy benefits only if they withheld those benefits, in breach of the insurance contract." Id. at 654. Because no contractual duty was breached in that case, the court found that Henson was not entitled to receive prejudgment interest on top of the benefits that he was otherwise entitled to receive from the insurers. Id.
Under these UIM contracts, the insurance companies are obligated to pay uninsured/underinsured motorist's benefits to the extent of the policy limits. Id.
The theory of applying prejudgment interest to insurers only when benefits are withheld has been referred to as " Henson-type" interest in subsequent case law. See Menix v. Allstate Indem. Co., 83 S.W.3d 877, 880 (Tex.App.-Eastland 2002, pet. denied). Marley has denied that he is seeking Henson-type prejudgment interest.
Like the parties in Henson, the relationship between Marley and Allstate is that of contracting parties. Thus, section 304.102 of the Texas Finance Code, which authorizes prejudgment interest in wrongful death, personal injury, and property damage cases, is inapplicable as to Allstate. See Tex. Fin. Code Ann. § 304.102 (Vernon Supp. 2005) (formerly Tex. Rev. Civ. Stat. art. 5069-1.05, § 6(a)); see also Keneco Energy, 962 S.W.2d at 529-30 (holding that section 304.102, allowing statutory prejudgment interest, applies to wrongful death, personal injury, and property damage cases).
In this case, the trial court's decision to deny prejudgment interest was also consistent with the terms of Marley's UIM endorsement. Article 5.06-1 of the Texas Insurance Code, which is entitled "Uninsured or Underinsured Motorist Coverage," applies to Marley's UIM endorsement. See Tex. Ins. Code art. 5.06-1 (Vernon 2004). Part C, "Limit of Liability" section A(II) of Marley's UIM endorsement provides, in pertinent part, that,
Subject to the maximum, our limit of liability will be the lesser of:
a. The difference between the amount of a covered person's damages for bodily injury or property damage and the amount paid or payable to that covered person for such damages, by or on behalf of persons or organizations who may be legally responsible; and
b. The applicable limit of liability for this coverage.
The difference between Marley's actual damages ($25,058) and the amount "paid . . . for such damages, by or on behalf of persons or organizations who may be legally responsible" ($27,934) is negative $2,876. Because negative $2,876 is less than the applicable policy limit of $20,000, Allstate's liability in this case was zero.
Moreover, under Texas law, a setoff provided under the statute, such as a settlement credit, is to be subtracted from the amount of actual damages incurred as a result of the negligence of the underinsured motorist, rather than from the limits specified in the UIM's insurance policy. Stracener v. United Serv. Auto. Ass'n, 777 S.W.2d 378, 380 (Tex. 1989). Here, the jury determined that Marley's actual damages were $25,058. Before the jury's award of any actual damages, Marley received $25,000 from Zamora and a total of $2,934 from Allstate, as compensation for the damages incurred in the accident. We conclude that the trial court properly deducted these amounts from the amount of actual damages, pursuant to the terms of article 5.06-1 of the Texas Insurance Code. See Stracener, 777 S.W.2d at 380. Accordingly, we hold that the trial court's action in applying Zamora's prior settlement credit and Allstate's PIP payments to the amount of actual damages found by the jury, without awarding any prejudgment interest, was consistent with the construction of article 5.06-1 of the Texas Insurance Code. We further hold that the trial court's action was consistent with terms of Marley's insurance contract with Allstate.
We have not overlooked Marley's reference to the Menix v. Allstate Indem. Co., 83 S.W.3d 877 (Tex.App.-Eastland 2002, pet. denied). We do not, however, consider the Menix case controlling because it does not reference Stracener, nor does it discuss a provision such as the one found in Marley's UIM endorsement entitled "Limit of Liability."
We overrule Marley's sole issue.
Conclusion
We affirm the judgment of the trial court.