When an insurer pays the full amount of an appraisal award plus statutory interest, the insured is precluded from recovering attorney's fees under Chapter 542A of the Texas Insurance Code, according to a recent decision from the
Chapter 542A governs first-party claims that arise from "damage to or loss of covered property caused, wholly or partly, by forces of nature[.]" Section 542A.007 governs the recovery of attorney's fees for actions brought under Chapter 542A and states that attorney's fees awarded to the claimant are calculated as the lesser of:
- the amount of reasonable and necessary attorney's fees supported by sufficient evidence,
- the amount of attorney's fees that may be awarded to the claimant under other applicable law, or
- the amount calculated by (a) dividing the amount to be awarded in the judgment to the claimant under the insurance policy by the amount alleged to be owed on the claim, then (b) multiplying the amount calculated in part (a) by the amount of reasonable and necessary attorney's fees supported by sufficient evidence.
At issue in Rodriguez v.
"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?"
The
In the absence of any unpaid award or outstanding interest, the calculation of attorney's fees under § 542A.007(a)(3) will always equal zero. And because zero will always be the "lesser of" the three methods of calculating attorney's fees under Ch. 542A, when an insurer pays the full appraisal award plus any possible statutory interest that could be owed to the insured, the insured's claim for attorney's fees under Ch. 542A is precluded.
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