Old American Insurance Company v. Lincoln Factoring, LLC

ACCEPTED
02-17-00186-CV
SECOND COURT OF APPEALS
FORT WORTH, TEXAS
12/21/2017 5:50 PM
DEBRA SPISAK
CLERK

02-17-00186-CV FILED IN
2nd COURT OF APPEALS
__________________________________________________________________
FORT WORTH, TEXAS
12/21/2017 5:50:29 PM
COURT OF APPEALS DEBRA SPISAK
Clerk
SECOND DISTRICT OF TEXAS AT FORT WORTH
__________________________________________________________________

OLD AMERICAN INSURANCE COMPANY

Appellant

v.

LINCOLN FACTORING, LLC

Appellee
__________________________________________________________________

Appeal from County Court at Law No. 1, Tarrant County, Texas
Hon. Don Pierson presiding (2015-005979-1)
__________________________________________________________________

APPELLEE’S BRIEF
__________________________________________________________________

MICHAEL G. ENGFER FRANK GILSTRAP
Texas Bar No. 24085296 Texas Bar No. 07964000
6145 Wedgwood Drive Hill Gilstrap, PC
Fort Worth, Texas 76133 1400 West Abram Street
817-850-9800 Arlington, Texas 76013
817-850-9801 fax 817-261-2222
mike@sryp.net 817-861-4685 fax
fgilstrap@hillgilstrap.com

ATTORNEYS FOR APPELLEE

ORAL ARGUMENT REQUESTED
 PARTIES AND COUNSEL

Appellant Old American Insurance Co.

David R. Sweat (appeal)
3705 West Green Oaks Blvd., Suite C
Arlington, Texas 76016

Andrew W. Seibert (trial)
Seibert Law Firm PC
6001 W. I20, Suite 205
Arlington, Texas 76017

Appellee Lincoln Factoring, LLC

Frank Gilstrap (appeal)
Hill Gilstrap, PC
1400 West Abram Street
Arlington, Texas 76013

Michael Engfer (trial and appeal)
6145 Wedgwood Drive
Fort Worth, Texas 76133

Judges Hon. Sergio L. DeLeon
Justice of the Peace, Place 5
350 West Belknap, Suite 112
Fort Worth, Texas 76196-0247

Hon. Don Pierson, Judge
County Court at Law No. 1
100 W. Weatherford St., Room 490
Fort Worth, Texas 76196-0240

1
 TABLE OF CONTENTS

PARTIES AND COUNSEL ......................................................................................1 

TABLE OF CONTENTS ...........................................................................................2 

INDEX OF AUTHORITIES......................................................................................6 

STATEMENT OF THE CASE ................................................................................13 

FACTS .....................................................................................................................14 

The “death benefit” and the suicide exclusion ..............................................14

The ADB and the additional exclusions ........................................................14

The death and the assignment ........................................................................15

Lincoln makes a claim ...................................................................................15

The three claims .............................................................................................16

Old American delays payment ......................................................................17

Lincoln sues and Old American pays ............................................................18

The litigation ..................................................................................................18

The judgment .................................................................................................19

SUMMARY OF THE ARGUMENT ......................................................................19

Merits .............................................................................................................20

Coverage ..............................................................................................20

Insurance Code ....................................................................................20

2
 Bad faith ..............................................................................................21

Treble damages....................................................................................21

Prompt payment ..................................................................................21

Misrepresentation ................................................................................22

Declaratory Judgment..........................................................................22

Forfeiture .............................................................................................23

Preservation .........................................................................................23

Capacity” and “standing” ..............................................................................23 

a.  Old American’s complaints involve capacity, not standing. .......24 

b.  The claims were assigned, and they were assignable. .................24 

c.  Direct standing under the Insurance Code. ..................................25 

ARGUMENT PART ONE: MERITS.....................................................................25 

1.  Old American was required to pay the $10,000 “death benefit”
when it received proof that the insured had died, regardless of
cause-of-death. ...............................................................................................25

2.  Bad faith: Old American’s obligation to pay the $10,000 death benefit was
“reasonably clear” when Lincoln first made its claim. .................................27

3.   Prompt payment: Lincoln was entitled to recover 18% interest
and attorney’s fees. ........................................................................................32 

The statute. ..........................................................................................32 

No “good faith” defense. .....................................................................33 

Application. .........................................................................................34 

4.  Old American has waived any error as to the misrepresentation claims. .....34

3
 The statute: ..........................................................................................35

Facts:....................................................................................................35 

5.  Old American also waived any error as to the award
of attorney’s fees under the Declaratory Judgments Act. .............................38

6.  Old American waived any defense under Section 1103.51
of the Insurance Code. ...................................................................................40

7.  Lincoln is entitled to recover attorney’s fees. ...............................................43

8.  Treble damages: Old American acted “knowingly.”...................................44

9.  Old American failed to preserve error as to the calculation of
interest, calculation of damages, or the award of treble damages. ................45 

ARGUMENT PART TWO: STANDING .............................................................47 

10.  Old American waived any error as to the assignment of claims
by failing to raise it in the trial court. ............................................................47

11.  Alternatively, Lincoln has standing to assert its own claims for
“bad faith” and misrepresentation under Section 541.151 of the
Code. .............................................................................................................52

12.  Lincoln has standing to assert a “prompt payment” claim
under section 542.060 of the Code. ...............................................................58

13.  Alternatively, the Insurance Code claims were assigned and
they were assignable. .....................................................................................60 

Were the claims assigned? ...........................................................60 

Were the claims assignable?.........................................................60

14.  Lincoln does not have standing as to the claim under
Section 542.003 of the Code..........................................................................64 

PRAYER ..................................................................................................................65

CERTIFICATE OF SERVICE ................................................................................66 
4
CERTIFICATE OF COMPLIANCE .......................................................................66 

5
 INDEX OF AUTHORITIES

Cases 
Aleman v. Zenith Ins. Co.,
343 S.W.3d 817 (Tex.App.--El Paso 2011, no pet.)......................................29

Allstate Ins. Co. v. Watson,
876 S.W.2d 145 (Tex.1994) ..........................................................................58

Amanda v. Ins. Co. of North Am.,
748 S.W.2d 210 (Tex.1998) ..........................................................................29

American Southern Ins. Co. v. Buckley,
748 F.Supp.2d 610 (E.D.Tex.2010) ..............................................................64

Apex Fin. Corp. v. Garza,
155 S.W.3d 230 (Tex.App.--Dallas 2004, pet. denied) .................................40

Barshop v. Medina County Underground Water Conservation Dist.,
925 S.W.2d 618 (Tex.1996) ..........................................................................40

Basic Energy Service, Inc. v. D-S-B Properties, Inc.,
367 S.W.3d 254 (Tex.App.--Tyler 2011) ......................................................47

Berkley Regional Ins. Co. v. Philadelphia Indem. Ins. Co.,
No. A-10-CA-3662-SS, 2011 WL 9879170,
2011 U.S.Dist. LEXIS 155 (W.D.Tex. Apr. 27, 2011) .................................64

Brown & Brown of Texas, Inc. v. Omni Metals, Inc.,
317 S.W.3d 361 (Tex.App.--Houston [1st Dist.] 2010, pet. denied) ............58

Cash Rent-a-Car, Inc. v. Old American County Mut. Fire Ins. Co.,
No. 01-09-00021-CV, 2010 WL 143482, 2010 Tex.App. LEXIS 250
(Tex.App.--Houston [1st Dist.] Jan. 4, 2010, no pet.) ...................................60

Casso v. Brand,
776 S.W.2d 551 (Tex.1989) ..........................................................................42

Cater v. United Servs. Auto. Ass’n,
27 S.W.3d 81 (Tex.App.--San Antonio 2000, pet. denied) ...........................35

6
Ceshker v. Bankers Commercial Life Ins. Co.,
558 S.W.2d 102 (Tex.Civ.App.--Tyler 1977) ...............................................57

Ceshker v. Bankers Commercial Life Ins. Co.,
568 S.W.2d 128 (Tex.1978) ..........................................................................57

Chapparal Operating Co. v. EnergyPro, Inc.,
No. 02-16-00471-CV, 2017 Tex. App. LEXIS 10091
(Tex.App.--Fort Worth, Oct. 26, 2017, pet. filed) .........................................39

Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist.,
46 S.W.3d 880 (Tex.2001) ............................................................................25

Conley v. Tex. Bd. of Crim. Justice,
No. 03-08-00293-CV, 2010 WL 163292,
2010 Tex.App.LEXIS 3011 (Tex.App.--Austin Apr. 2, 2010, no pet.) ........39

Conn. State Dental v. Anthem Health Plans,
591 F.3d 1337 (11th Cir.2009) ......................................................................61

Countrywide Home Loans, Inc. v. Howard,
240 S.W.3d 1 (Tex.App.--Austin 2007, pet. denied) ....................................40

Cybiz, Inc. v. Gaskill, No. 14-16-00405-CV, 2017 WL 1015560, 2017 Tex.App.
LEXIS 2147 (Tex.App.--Houston [14th Dist.] March 14, 2017, no pet.) .....47

DamilerChrysler Corp. v. Enron,
252 S.W.2d 299 (Tex.2008) ..........................................................................20

Dean Vivian Homes, Inc. v. Sabera’s Plumbing and Appliances, Inc.,
615 S.W.2d 921 (Tex.Civ.App.--Waco 1981, no pet.)..................................41

Douglas-Peters v. Choe & Holen P.C.,
No. 05-15-01538-CV, 2017 WL 836848, 2017 Tex.App.LEXIS
1836 (Tex.App.--Dallas March 13, 2017, no pet.) ............... 48, 50, 52, 61, 62

Encompass Office Solutions, Inc. v. Ingenix, Inc.,
775 F.Supp. 938 (E.D.Tex.2011)............................................................ 59, 61

First Nat. Life Ins. Co. v. Vititow,
323 S.W.2d 313 (Tex.Civ.App.--Texarkana 1959, writ dism’d) ..................35

7
Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C.,
No. 05-13-00506-CV, 2015 WL 6750047, 2015 Tex.App. LEXIS
(Tex.App.--Dallas Nov. 4, 2015, no pet.) .................................... 25, 48-53, 61

Gillespie v. Nat’l Collegiate Student Loan Trust 2005-3,
No. 02-16-00124-CV, 2017 WL 2806780, 2017 Tex.App.LEXIS 5957
(Tex.App.--Fort Worth, June 29, 2017, no pet.)............................................24

Great Am. Ins. Co. v. Fed. Ins. Co.,
No. 3:04-CV-2267-H, 2006 WL 2263312, 2006 U.S.Dist. LEXIS 55038
(N.D.Tex. Aug. 8, 2006) ................................................................................64

Guinn Invs. v. Ridge Oil Co.,
73 S.W.3d 523 (Tex.App.--Fort Worth 2002, pet. denied) ...........................40

Gumpp v. Philadelphia Life Ins. Co.,
562 S.W.2d 885 (Tex.Civ.App.--San Antonio 1978, no writ) ......................35

Gusma Props., L.P. v. Travelers Lloyds Ins. Co.,
514 S.W.3d 319 (Tex.App.--Houston [14th Dist.] 2016, no pet.).................34

Harris v. American Protection Ins.,
158 S.W.3d 614 (Tex.App.--Fort Worth 2005, no pet.) ................................34

Hazlewood v. Werley,
No. 07-12-00166-CV, 2014 WL 2810215, 2014 Tex.App. LEXIS 6698
(Tex.App.--Amarillo, June 18, 2014, pet. denied) ........................................41

Hermann Hosp. v. Nat. Standard Ins. Co.,
776 S.W.2d 249 (Tex.App.--Houston [1st Dist.] 1989, writ denied) ...... 56-58

Higginbotham v. State Farm Mut. Auto Ins. Co.,
103 F.3d 456 (5th Cir.1967) ..........................................................................35

Hixson v. Pride of Texas Dist. Co., Inc.,
683 S.W.2d 173 (Tex.App.--Fort Worth 1985, no writ.) ..............................39

Hydroscience Technologies, Inc. v. Hydroscience, Inc.,
401 S.W.3d 783 (Tex.App.--Dallas 2013, pet. denied) .................................20

Jarvis v. Rocanville Corp.,
298 S.W.3d 305 (Tex. App.—Dallas 2009, pet. denied) ..............................39

8
John C. Flood of DC, Inc. v. SuperMedia, LLC,
408 S.W.3d 645 (Tex.App.--Dallas 2013, pet. denied) .......................... 51, 53

Key Life Ins. Co. v. Davis,
519 S.W.2d 403 (Tex.Civ.App.--Beaumont 1974, no writ) ..........................35

King-Mays v. Nationwide Mut. Ins. Co.,
194 S.W.3d 143 (Tex.App.--Dallas 2006, pet. denied) .................................51

KLZ Diamond Tools, Inc. v. TKG Gen. Agency, Inc.,
2016 Tex.App.LEXIS 7639 (Tex.App.--Dallas July 18, 2016, no pet.) .......66

Lamar Homes, Inc. v. Mid-Continent Cas. Co.,
242 S.W.3d 1 (Tex.2007) ..............................................................................33

Launius v. Allstate Ins. Co.,
No. 03-06-CV-0579-B, 2007 WL 113547,
2007 U.S.Dist. 28286 (N.D.Tex. Apr. 17, 2007) ..........................................64

Lee v. Rogers Agency,
517 S.W.3d 137 (Tex.App.--Texarkana 2017, no pet.) .................................63

MBM Fin. Corp. v. Woodlands Operating Co.,
292 S.W.3d 660 (Tex.2009) ................................................................... 39, 40

Montoya v. State Farm Mut. Auto Ins. Co.,
No. 16-00005 (RCL), 2016 WL 5942327, 2016 U.S.Dist. LEXIS 141
(W.D.Tex. Oct. 12, 2016) ..............................................................................64

Nootsie Ltd. v. Williamson Cty. Appraisal Dist.,
925 S.W.2d 659 (Tex.1996) ..........................................................................53

PPG Industries, Inc. v. JMB/Houston Centers Partners, Ltd.,
146 S.W.3d 79 (Tex.2004) ................................................................ 26, 62-64

Ramin’ Corp. v. Wills,
No. 09-14-00168-CV, 2015 WL 612602, 2015 Tex.App. LEXIS 10612
(Tex.App.--Beaumont Oct. 15, 2015, no pet.)...............................................41

Republic Nat. Life Ins. Co. v. Spillars,
363 S.W.2d 373, 376 (Tex.Civ.App.--Waco 1962) ......................................59

9
Ressler v. Gen. Am. Life Ins. Co.,
561 F.Supp.2d 691 (E.D.Tex. 2007) ....................................................... 29-31

Royal Globe Ins. Co. v. Bar Consultants, Inc.,
566 S.W.2d 724 (Tex.Civ.App.--Austin 1978) ....................................... 56-58

Samedan Oil Corp. v. Intrastate Gas Gathering, Inc.,
78 S.W.3d 428 (Tex.App.--Tyler 2001, pet. granted,
judgm’t vacated w.r.m.) .................................................................................47

Scottsdale Ins. Co. v. Travis,
68 S.W.3d 72 (Tex.App.--Dallas 2001, pet. denied) .....................................40

Star-Telegram, Inc. v. Doe,
915 S.W.2d 471 (Tex.1995) ..........................................................................39

State and County Mut. Fire Ins. Co. v. Walker,
228 S.W.3d 404 (Tex.App.--Fort Worth 2007, no pet.) ................................45

State Farm Life Ins. Co. v. Martinez,
216 S.W.3d 799 (Tex.2007) ..........................................................................33

Sullivan, In re,
157 S.W.3d 911 (Tex.App.--Houston [14th Dist.] 2005, no pet.).................54

Tango Transport v. Healthcare Financial Services, LLC,
322 F.3d 888 (5th Cir.2003) ..........................................................................60

Texas Farmers Ins. Co. v. Gerdes,
880 S.W.2d 215 (Tex.App.--Fort Worth 1994, writ denied).........................50

Town Ctr. Mall v. Dyer,
No. 02-14-00268-CV, 2015 Tex.App. LEXIS 10213
(Tex.App.--Fort Worth Oct. 1, 2015, pet. denied) ........................................53

U.S. Bank, N.A. v. Prestige Ford Garland, Ltd. Partnership,
170 S.W.3d 272 (Tex.App.--Dallas 2005, no pet.) .......................................42

Umar v. Scott,
991 S.W.2d 512 (Tex.App.--Fort Worth 1999, no pet.) ................................39

United States v. United Servs. Auto Ass’n,
431 F.2d 735 (5th Cir.1970), cert. denied, 400 U.S. 992 (1971) ..................59

10
Universe Life Ins. Co. v. Giles,
950 S.W.2d 48 (Tex.1997) ..................................................................... 28, 33

Vail v. Texas Farm Bureau Mut. Ins. Co.,
754 S.W.2d 129 (Tex.1988) ..........................................................................57

Vandeveter v. All American Life & Cas. Co.,
101 S.W.3d 763 (Tex.App[.--Fort Worth 2003, no pet.) ..............................29

Vertical N. Am., Inc. v. Vopak Terminal Deer Park, Inc.,
No. 14-15-01088-CV, 2017 Tex.App. LEXIS 8944
(Tex.App.--Houston [14th Dist.] Sept. 21, 2017, no pet.).............................51

Walker v. Federal Kemper Life Ins. Co.,
828 S.W.2d 442 (Tex.App.--San Antonio, Jan. 29, 1992, writ denied) ........41

Watts v. Oliver,
396 S.W.3d 124 (Tex.App.--Houston [14th Dist.] 2013, no pet.).................47

Webb v. Int’l Trucking Co.,
909 S.W.2d 220 (Tex.App.--San Antonio 1995, no writ) .............................58

Statutes 
29 U.S.C. §1132(a)(1) ........................................................................................60

TEX.CIV.PRAC. & REM. CODE §37.009 ....................................................................40

TEX.INS. CODE
§541.001 ........................................................................................58
§541.008 ........................................................................................58
§541.002(2) ........................................................................................55
§541.051(1)(A) ........................................................................................36
§541.052(a) ........................................................................................36
§541.052(b)(5) ........................................................................................36
§541.060(a)(1) ........................................................................................36
§541.060(a)(2)(A) ........................................................................................28
§541.061(1) ........................................................................................36
§541.152(a) ........................................................................................36
§541.152(a)(1) ........................................................................................45
§541.152(b) ................................................................................. 36, 45
§542.003(b)(1) ........................................................................................65
§542.005 ........................................................................................65
11
 §542.006 ........................................................................................65
§542.010 ........................................................................................65
§542.012 ........................................................................................65
§542.051(2) ........................................................................................60
§542.054 ........................................................................................33
§542.055(a)(2) & (3) .....................................................................................34
§542.058(a) ........................................................................................34
§542.060 ................................................................................. 34, 59
§1103.151 ................................................................................. 41, 42
§3.62 (repealed) ........................................................................................59
art. 21.21 §16(a) (repealed) .................................................................... 55, 56 

Acts 1951, 52nd Leg., ch. 491, amended by Acts 1957, 55th Leg., p.401, ch. 198 56

Acts 1969, 61st Leg., p.2051, ch. 706, §1 eff. June 12, 1989..................................56

Acts 1973, 63rd Leg., p.335, ch. 143, §§2(a)-2(c), eff. May 21, 1973....................56

Acts 1973, 63rd Leg., R.S., ch. 319 §1, 1973 TEX.GEN.LAWS 735.........................36

Acts 2003, 78th Leg., ch.1274 §2 (eff. April 11, 2005) ..........................................55

Rules

TEX.R.APP.P.
Rule 33.1 ........................................................................................51
Rule 33.1(a)(1)(A) ........................................................................................47
Rule 33.1(b) ........................................................................................47

TEX.R.CIV.P.
Rule 93(2) ........................................................................................51
Rule 329b(g) ........................................................................................47

12
 STATEMENT OF THE CASE

This case arises from an eight month delay in paying life insurance

proceeds. The policy was issued by Old American Life Insurance Co., the

Appellant. When the insured died, the beneficiary assigned his claim for $4,725

in policy proceeds to the funeral home, which, in turn, assigned it to Lincoln

Factoring, LLC, the Appellee.

In October of 2014, Lincoln requested payment, but Old American

refused to pay until it had a “completed” death certificate showing cause-of-death.

However, under the policy, payment did not depend on cause-of-death. Five

months later, in March of 2015, Lincoln sued Old American in Justice Court.

Three months after that, in June of 2015, Old American said that it

had received a “completed death certificate” showing cause-of-death, and it paid

the $4,725 to Lincoln. Thus, Old American delayed payment for eight months.

Lincoln continued its suit. The Justice Court ruled for Old American,

and Lincoln took a de novo appeal. In the County Court at Law, Lincoln asserted

Insurance Code claims for failure to make “prompt payment,” for “bad faith,” and

for misrepresentation. Old American counterclaimed for declaratory judgment.

The court rendered summary judgment for Lincoln awarding multiple damages,

interest and attorney’s fees. Old American has appealed.

13
 FACTS

The “death benefit” and
the suicide exclusion

On August 13, 2011, Rebecca Barnes of Washington, D.C. applied for

a life insurance policy with Old American Ins. Co., of Kansas City.1 Old

American issued a policy two days later.2 It was a “whole life policy” in the

“Initial Face Amount” of $10,000. See Policy, p.3 § 4.4, p.7 §4.6 (250, 254).3

The “death benefit” was defined as the “face amount” of $10,000. Id.

According to the policy, this initial $10,000 “death benefit” was

payable “when we receive proof of the Insured’s covered death.” Id., p.7 §5

(emphasis added). There was one cause-of-death exclusion: suicide was

“excluded from coverage for two years after the effective date.” Id., p.8 §8.3 (255).

The ADB and the
additional exclusions

The policy also provided for an “Accidental Death Benefit” (or

“ADB”) for an additional $10,000. See Benefit and Premium Schedule (251).

This ADB was payable “upon receiving proof that an insured’s death . . .

resulted directly and independently of all other causes from accidental bodily

1
See interview sheet (266).
2
See Ropp aff., p.1 (607); cover letter (242).
3
This citation is to the Clerk’s Record.

14
injury.” (257) (emphasis added). There was also a list of “Risks Not Covered,”

which excluded death from war, suicide, infection, disease, committing a felony,

drugs, flying, etc. (257). But these cause-of-death provisions applied only to the

$10,000 ADB. Id. They did not apply to the initial $10,000 “death benefit.” Id.

The death and the assignment

Rebecca Barnes, the insured, died in Washington, D.C. on September

28, 2014, three years after the policy was issued. The death certificate stated that

cause-of-death was “pending” (272). However, the funeral director signed an

affidavit stating that the “cause of death was natural or accidental” (466) (emphasis

added).

The beneficiary of the policy was named Frank Howard (323). As

fiancé of the deceased, he purchased the funeral for $4,725 (465). He paid for the

funeral by assigning $4,725 in policy proceeds to the funeral home, which in turn

assigned them to Lincoln Factoring, LLC, of Fort Worth, the Appellee (269-270).

Howard also assigned an additional $1,884.75 in policy proceeds to the cemetery,

which assigned them to American Capital Funding (352-353).

Lincoln makes a claim

On October 21, 2014 Lincoln Factoring delivered the assignments, a

claim form, the death certificate, a published announcement of death, the funeral

bill, and the funeral director’s affidavit to Old American and requested payment of

15
the $4,725. The death certificate was issued by the Department of Health of the

District of Columbia. It showed that Rebecca Barnes had died on September 28,

2014, and showed cause-of-death as “pending.” (463). American Capital Funding

also made a claim (636-638).

The three claims

At this point, there were three claims to the initial $10,000 “death

benefit.” See Ropp. aff., p.2 (324).4 Lincoln was claiming $4,725 and American

Funding was claiming $1,884.75. Id. (324, 352-353). These two claims totaled

$6,609.75. The third claimant was Frank Howard, the beneficiary, who was owed

the balance of the “death benefit” ($10,000.00 - $6,609.75 = $3,390.25). Also,

Howard had a claim to the entire $10,000 ADB (257).

Again, as to the initial $10,000 “death benefit,” there was only one

cause-of-death exclusion--suicide (255). But that exclusion had expired a year

before the death. The policy was issued on August 13, 2011; the suicide exclusion

expired two years later, on August 13, 2013; and Rebecca Barnes died a year after

that, on September 28, 2014. Accordingly, the initial $10,000 death benefit was

payable immediately, and Old American was required to distribute it as follows:

4
See also Defendant’s Resp. to Plaintiff’s Motion for Summary Judgment, p.2 ¶ 2 (595).

16
(i) $4,475 to Lincoln (ii) $1,884.75 to American Capital Funding and (iii)

$3,390.25 to Frank Howard, the beneficiary.

Matters were different as to the $10,000 ADB, which was owed solely

to Frank Howard, the beneficiary. Unlike the initial $10,000 “death benefit,”

payment of the ADB was subject to cause-of-death exclusions. See supra, p.14.

Therefore, under the policy, Old American had a right to delay payment of the

ADB until it received evidence of cause-of-death. But Old American had no right

to delay payment of the initial $10,000 “death benefit.” Even so, as we shall see,

Old American withheld both payments--the $10,000 “death benefit” and the

$10,000 ADB--until it finally received a “completed” death certificate showing

cause-of-death.

Old American delays payment

On October 23, 2014, Old American advised Lincoln that “we still

need a copy of the death certificate” (360). Specifically, it wanted “a complete

death certificate with cause and manner of death included.” Ropp aff., p.2 (608).

On December 18, 2014, Lincoln’s attorney wrote to Old American. He explained

that “[p]roof of the cause of death is not required to pay on the above policy.”

(362) (emphasis added). Old American ignored this obvious fact. Instead, on

December 30, 2014, it replied as follows:

Thank you for providing the death certificate for this claim.
However, because the cause of death is listed as being “under
17
 investigation,” we cannot conclude our claim investigation at this
time. The policy has an Accidental Death Benefit rider and the cause
of death is required information to determine if the ADB claim is
payable. Further, the underlying claim may be affected if the cause
of death is homicide or suicide.

Letter (648) (emphasis added).

The underlined language was simply wrong. The suicide exclusion

had expired, and while homicide was an excluded cause-of-death for the ADB, that

exclusion was not applicable to the initial $10,000 “death benefit.”

Lincoln sues and
Old American pays

On March 16, 2015, five months after demand, Lincoln sued Old

American in Justice Court (6). On June 19, 2015, eight months after demand, Old

American emailed Lincoln that “We have the death certificate!” (374). The email

continued: “By the way--cause of death Hypertensive Cardiovascular Disease”

(374). On June 22, Old American delivered its check for $4,725 to Lincoln (375).

Old American also paid American Corporate Funding and Frank Howard.5

The litigation

The Justice Court heard the case on September 29, 2015, and it

rendered judgment that Lincoln take nothing (96). Lincoln appealed to the County

Court at Law (97). It alleged Insurance Code claims for failure to make “prompt

5
See Old American’s summary judgment response, p.4 (597).

18
payment,” for “bad faith,” and for misrepresentation (125-135, 137-140).6 Old

American counterclaimed for declaratory judgment and attorney’s fees (101).

The judgment

The parties filed cross-motions for summary judgment and responses

(179, 311, 377, 594).7 The County Court at Law granted Lincoln’s motion, denied

Old American’s motion, and awarded $9,450 in “treble damages,” $1,050 in

interest, and $12,000 in attorney’s fees. See Order (663). It also ordered “that

judgment be entered in favor of Lincoln Factoring, LLC for all its claims, and that

Defendant Old American Insurance Company take nothing by its claims.” Id. The

Order did not state the grounds upon which it was based. Id.

SUMMARY OF THE ARGUMENT

Old American’s issues fall into two groups: “standing” and “merits.”

“Standing” involves jurisdiction, and courts should decide jurisdictional issues

first.8 But Lincoln’s arguments involve “capacity,” rather than “standing.” And in

6
Lincoln alleged both common law and statutory bad faith. See Plaintiff’s Second
Amended Petition, pp.6-7 ¶ 33 (126-127) & p.10-11 ¶ 38 (130-131). It also alleged DTPA
violations. Id., p.16 ¶¶ 45-46 (136).
7
Lincoln sought summary judgment because Old American “violated the insurance code,
breached the contract, and acted in bad faith” (180). It did not seek summary judgment under
the DTPA (185-210).
8
See, e.g., Hydroscience Technologies, Inc. v. Hydroscience, Inc., 401 S.W.3d 783, 789
(Tex.App.--Dallas 2013, pet. denied) (“Standing must be resolved before the merits of an issue
may be addressed.”) (citing DamilerChrysler Corp. v. Enron, 252 S.W.2d 299, 304 (Tex.2008)).

19
any event, Lincoln has standing directly under the Insurance Code. Both issue are

complicated. So, before venturing into the weeds, we want to show the Court

where we are going. Accordingly, we will argue “merits” first.

Merits

Coverage. As noted above, eight months elapsed from October

2014, when Old American received proof that Rebecca Barnes had died, until June

of 2015, when it paid Lincoln. During this entire period, Old American refused to

pay until it received proof of cause-of-death. But the initial $10,000 “death

benefit” was payable regardless of cause-of-death. All that was needed was proof

that Rebecca Barnes had died, and Old American received that when Lincoln first

submitted its claim. There was only one cause-of-death exclusion, to-wit: suicide.

But it had expired. See Argument, part 1, infra, p.25.

Insurance Code. An insurance policy is a contract, and once Old

American finally paid the $10,000 “death benefit,” Lincoln could not recover for

breach of contract. This is a perennial problem for insurance beneficiaries. The

insurer delays payment and then avoids liability for breach of contract by paying at

the last minute, just as in this case.

Fortunately, the Texas Insurance Code provides extra-contractual

remedies for delay in paying a claim. Specifically, a claimant can recover (i) 18%

interest and attorney’s fees under the “prompt payment” provisions of the Code

20
and (ii) damages and attorney’s fees under the “bad faith” provisions of the Code.

Also, under the Code, a claimant can recover damages and attorney’s fees for the

insurer’s misrepresentations. In this case, Lincoln can recover on all three claims.

Bad faith. The test for “bad faith” is whether the insurer’s liability

under the policy has become “reasonably clear.” In our case, Old American’s

liability was absolutely clear. The suicide exclusion had expired, and the initial

$10,000 “death benefit” was payable as soon as Old American received the claim.

Old American’s stated reason for delaying payment--that it needed evidence of

cause-of-death--was transparently false. Indeed, Old American has never said

why the initial $10,000 “death benefit” was not payable immediately.

Accordingly, Old American is liable under the “bad faith” provisions of the code

(and the common law). See Argument, part 2, infra, p.27.

Treble damages. It was Old American’s policy to delay payment

until it received a “completed” death certificate, even when payment did not

depend on cause-of-death. Lincoln’s attorney told Old American why payment

was due at once, but Old American ignored this explanation. Thus, it is

undisputed that Old American “knowingly” refused to pay, and is liable for treble

damages. See Argument, part 8, infra, p.44.

Prompt payment. Under the “prompt payment” provisions of the

Code, Old American had 60 days to pay the claim, and when it missed that

21
deadline, it became liable for 18% interest and attorney’s fees. Old American says

that there was a “good faith” disagreement over the interpretation of the policy.

But Old American has never offered any interpretation that would let it delay

payment, and in any event, “good faith” is not a defense to a “prompt payment”

claim. Once it was established that the death was covered, Old American

automatically became liable for 18% interest and attorney’s fees. See Argument,

part 3, infra, p.32.

Misrepresentation. There was evidence that, before accepting the

assignment, Lincoln asked for and received assurances from Old American that it

would pay the claim. But Old American did not address Lincoln’s

misrepresentation claim in its summary judgment response, and it has not

addressed them in this Court. Accordingly, Old American has waived any error as

to the misrepresentation claims, and the judgment must be affirmed without regard

to the merits. See Argument, part 4, infra, p.34.

Declaratory Judgment. Old American filed a counterclaim for

declaratory judgment. Under the Declaratory Judgments Act, attorney’s fees can

be awarded to either party, regardless of who prevails. Here again, Old American

has not assigned error and the attorney’s fees award must be affirmed without

reaching the merits. See Argument, part 5, infra, p.38.

22
 Forfeiture: In this Court, for the first time, Old American is

invoking an Insurance Code provision allowing forfeiture of life insurance benefits

if the beneficiary intentionally caused the death of the insured. But Old American

did not raise this issue in the trial court, and it has been waived. See Argument,

part 6, infra, p.40.

Preservation: Finally, Old American complains about the

calculation of interest and damages and the trebling of damages. But these issues

were not raised in the trial court, and any error has been waived. See Argument,

part 9, infra, p.45.

“Capacity” and “standing”

Old American is challenging Lincoln’s “standing” to seek relief under

the Insurance Code. See Appellant’s Brief, p.13 (Issues 1-3) & pp.24-32

(Argument, parts 1-5). Of course, “standing is a component of subject matter

jurisdiction that may be raised for the first time on appeal.” 9 But Old American’s

arguments do not involve “standing.” They involve “capacity.”

Old American’s argument is based on Frank Howard’s assignment to

the funeral home. First, it says that, while Howard assigned his right to policy

proceeds, he did not also assign his Insurance Code claims. See Appellant’s brief,

9
Gillespie v. Nat’l Collegiate Student Loan Trust 2005-3, No. 02-16-00124-CV, 2017
WL 2806780, 2017 Tex.App.LEXIS 5957, at *3 n.12 (Tex.App.--Fort Worth, June 29, 2017, no
pet.).

23
pp.26-27. Second, Old American says that, for public policy reasons, Howard

could not have assigned his Insurance Code claims. Id., pp.27-32. We have three

alternative responses.

a. Old American’s complaints involve capacity, not standing.

Lack of capacity is waived if it is not raised in the trial court.10 And the Fifth

Court has expressly held that (i) whether a claim has been assigned is a question of

capacity and (ii) whether a claim is assignable also involves a question of capacity.

See Fitness Evolution, L.P. v. Headhunter Fitness, L.L.C., No. 05-13-00506-CV,

2015 WL 6750047, 2015 Tex.App. LEXIS at *42-44 (Tex.App.--Dallas Nov. 4,

2015, no pet.). Because Old American did not raise either of these issues in the

trial court, they have been waived. See Argument, part 10, infra, p.47.

b. The claims were assigned, and they were assignable.

Absent contrary language, an assignment of policy benefits carries

with it an assignment of the Insurance Code claims. Accordingly, when Howard

assigned his policy benefits, he also assigned his Insurance Code claims.

As to assignability, all claims are assignable except for a few kinds of

claims which are non-assignable for public policy reasons. Old American’s

claims do not fall within that narrow group of exceptions. Old American relies on

10
Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880, 884
(Tex.2001) (challenges to lack of capacity can be waived).

24
PPG Industries, Inc. v. JMB/Houston Centers Partners, Ltd., 146 S.W.3d 79

(Tex.2004), which prohibits assignment of DTPA claims to discourage “wealthy

entrepreneurs” from trading in high dollar DTPA claims. These concerns are not

applicable here. Lincoln (and other factoring companies) provide up-front money

so that bereaved persons can afford funerals for their loved ones. In return,

Lincoln receives assignments of policy benefits. Because this business meets an

important public need, acquisition of Insurance Code claims should be facilitated,

not discouraged. See Argument, part 13, infra, p.60.

c. Direct standing under the Insurance Code. In any event,

Lincoln has standing, in its own right, to assert its claims directly under the

Insurance Code. Under section 541.151 of the Code, “bad faith” and

misrepresentation claims may be brought by “[a] person who sustains actual

damages.” And under Section 542.060 “prompt payment” claims may be brought

by the assignee of policy benefits. See Argument, parts 11 & 12, infra, pp.52-58.

ARGUMENT
PART ONE: MERITS

1. Old American was required to pay the $10,000 “death benefit” when it
received proof that the insured had died, regardless of cause-of-death.
As we have seen, Old American said (i) that it could not determine

whether Lincoln’s claim was payable without determining cause-of-death and (ii)

that it could not determine cause-of-death until it received the “completed death

25
certificate.” See supra, p.17.11 But again, the policy had two parts: the initial

$10,000 “death benefit” and the $10,000 ADB. We are only concerned with the

initial $10,000 “death benefit,” and under the policy, that was payable “when we

receive proof of the Insured’s covered death.” Policy, p.7 ¶ 5 (254) (emphasis

added).

Payment of the initial $10,000 “death benefit,” was subject to only

one cause-of-death exclusion. Suicide was “excluded from coverage for two years

after the effective date.” See supra, p.14. But this exclusion had expired.12 From

that point on, death from any cause was a “covered death.”

Accordingly, in order to receive payment, Lincoln merely had to

present proof that the insured was, in fact, dead. And the death certificate

undeniably showed that the insured was dead (even though it did not show cause-

of-death). Still, Old American refused to pay until it received a “completed” death

certificate showing cause-of-death, even though payment of the initial $10,000

“death benefit” did not depend on cause-of-death. See supra, p.16. Using this

transparently false excuse, Old American delayed payment for eight months.

11
See Response to Request for Admission, p.3 ¶ 4 (admitting that the claim would be
paid once Old American received a death certificate showing the cause and manner of death).
(295).
12
Id., pp.2-3 ¶ 6 (295-296) & p.5 ¶ 17 (297) (admitting the insurance policy had been in
force for over two years and that, if the cause of death had been suicide, the life insurance benefit
would have had to be paid).

26
 Lincoln’s claim was only for $4,725, and it could be satisfied from the

$10,000 “death benefit.” Again, Frank Howard, the beneficiary, was initially

entitled to receive the entire $10,000, but he assigned $4,725 to the funeral home

and $1,884.75 to the cemetery. Both claims could have been satisfied from the

initial $10,000 “death benefit” leaving the balance ($3,390.25) for Frank Howard.

See supra, p.16.

2. Bad faith: Old American’s obligation to pay the $10,000 death
benefit was “reasonably clear” when Lincoln first made its claim.
At common law, an insurer “violates its duty of good faith and fair

dealing by denying or delaying payment of a claim if the insurer knew or should

have known it was reasonably clear that the claim was covered.” Universe Life Ins.

Co. v. Giles, 950 S.W.2d 48, 49 (Tex.1997) (emphasis added). Similarly, under

the Insurance Code, it is an unfair practice to fail “to attempt in good faith to

effectuate a prompt, fair, and equitable settlement of . . . a claim with respect to

which the insurer’s liability has become reasonably clear.” TEX.INS.CODE

§541.060(a)(2)(A) (emphasis added).13

Old American correctly says that “the standard for statutory and

common law bad faith is the same.” Appellant’s brief, p.39.14 In both kinds of

13
See generally Giles, 950 S.W.2d at 55-56 (Tex.1997) (statutory history).
14
Id. at 55-56 (adopting common-law standard for statutory bad faith actions).

27
cases “an objective standard is utilized to determine whether a reasonable insurer

under similar circumstances would have delayed or denied payment of the claim.”

Id., p.40 (emphasis added).15 And because the standard is “objective” it can be

decided on summary judgment.

Again, it is undisputed that Old American was obligated to pay the

initial $10,000 “death benefit” when it received proof that the insured had died

regardless of cause-of-death. This occurred on October 1, 2014, when Lincoln

delivered the death certificate, the published announcement of death, the funeral

bill and the funeral director’s affidavit. See supra, p.16. At that point, Old

American’s “liability ha[d] become reasonably clear,” and its decision to delay

payment of the $10,000 “death benefit” for eight months is “bad faith” both at

common law and under the Insurance Code.

In Ressler v. Gen. Am. Life Ins. Co., 561 F.Supp.2d 691 (E.D.Tex.

2007), the insured initially purchased a $60,000 life insurance policy. Later the

coverage was increased to $100,000. Under the policy, the insurer could contest

the increased coverage amount ($40,000) if the application contained a

15
citing Amanda v. Ins. Co. of North Am., 748 S.W.2d 210, 213 (Tex.1998); Vandeveter
v. All American Life & Cas. Co., 101 S.W.3d 763, 722 (Tex.App[.--Fort Worth 2003, no pet.).
See also Appellant’s brief, p.38 (“Old American must be judged by an objective standard to
determine whether a reasonable insurer under similar circumstances would have delayed
payment of the claim.”) (citing Aleman v. Zenith Ins. Co., 343 S.W.3d 817, 822 (Tex.App.--El
Paso 2011, no pet.)).

28
misrepresentation regarding the health of the insured. That provision would

expire after two years, and it did not apply to the original coverage ($60,000). Id. at

693. The insured died a year after the coverage increase, that is, within the two-

year contestability period. Id.

The insurance company paid the $60,000, but it delayed paying the

additional $40,000 because the death certificate showed that the insured had

suffered from “severe atherosclerotic disease,” a condition not shown on the

application for the $40,000 increase in coverage. Id. The insurer asked the widow

(who was also the beneficiary) to authorize release of medical information. She

refused and sued for bad faith. Id. After the insurer obtained medical records via

discovery, it determined that the insured had made no material misrepresent-ation,

and it paid the remaining $40,000. Id. Citing a number of Texas cases, the court

held that, as to the additional $40,000 coverage, liability had not been reasonably

clear, and for this reason, the insurer had not breached its duty of good faith and

fair dealing. Id. at 696.

If Lincoln had acted in good faith--like the insurer in Ressler--it

would have paid the initial $10,000 “death benefit” (including the $4,725 to

Lincoln) and delayed paying the additional $10,000 ADB until it received proof of

cause-of-death. But in our case, Old American delayed payment of both the ADB

and the “death benefit” until it received the “completed” death certificate showing

29
cause-of-death. This would be the same as if the insurer in Ressler had delayed

payment of both the $40,000 coverage increase and the $60,000 initial coverage

until questions regarding the alleged misrepresentation in the application were

resolved. Under those circumstances, that insurer would have been liable for “bad

faith” in delaying payment of the initial $60,000. Similarly, in our case, Old

American is liable for “bad faith” in delaying payment of the initial $10,000.

Old American cites the Ropp affidavit as evidence that its “claim

procedure . . . was consistent with the standards in the insurance industry.”

Appellant’s brief, pp.37-38 (citing Ropp affidavit). But Ropp did

not say that. Rather, he said that:

It is the standard in the insurance industry to require certain
information and documentation regarding an insured’s death before
paying a claim. Where the Policy does not mention claim forms, they
are required in every claim. Additionally, a completed death
certificate, while not specifically mentioned in the Policy is also
required for all claims by Old American.

Ropp aff., p.3 (325). Thus, Ropp merely said that it is “standard in the insurance

industry” to require “certain information and documentation.” And in this case,

the only “information and documentation” needed to pay the initial $10,000 “death

benefit” was proof that the insured had died. It is undisputed that Old American

had this in October of 2014 when Lincoln first submitted its claim.

Ropp also said that it was Old American’s policy to require “a

completed death certificate . . . for all claims.” (emphasis added). While this

30
might have been Old American’s internal requirement, there is no evidence that it

is “the standard in the insurance industry” to require proof of cause-of-death when

payment does not depend on cause-of-death. On the contrary, this statement

shows that Old American acted “knowingly” thereby making it liable for treble

damages. See infra, p.44.

Old American also says that, “[w]hen the death certificate raises

questions which require further investigation, the insurer is entitled to delay

payment of the claim until a reasonable investigation is concluded.” Appellant’s

brief, p.38. But, in this case, the death certificate did not raise questions “which

require further investigation.” It showed that Rebecca Barnes had died, and that

was all that was needed to pay the initial $10,000 “death benefit.”

Further evidence of Old American’s “bad faith” is found in its

December 18, 2014 letter. We have already quoted the first paragraph of this

letter on page 17 and 18 above. That letter continued as follows:

Please provide a death certificate with the cause of death determined
(or other documentation demonstrating the cause of death) as soon as
that investigation is concluded. Once we have that information, we
can complete our claim investigation.

Letter (648) (emphasis added). Also, Ropp swore that

Lincoln Factoring never provided, or attempted to provide, “other
documentation demonstrating the cause of death.” There was no
affidavit from a loved one stating the manner of death, no medical
records, nothing ever indicating the manner or cause of death.”

31
Ropp aff., p.2 (608) (emphasis added).

This is yet another transparent falsehood. It is undisputed that, from

the outset, Old American had the funeral director’s affidavit, which stated that the

“cause of death was natural or accidental.” See supra, p.15.

3. Prompt payment: Lincoln was entitled to recover 18% interest and
attorney’s fees. See Appellant’s brief, pp.35-36.

Because Old American finally paid the claim, it says that it is not

liable for breach of contract. Even so, under the “prompt payment” provisions of

the Insurance Code, it was still liable for 18% interest and attorney’s fees.

The statute. Prompt payment statutes have been around since

Reconstruction.16 The current version, applicable here, is found in Chapter 542,

Subchapter B, of the Insurance Code, entitled “Prompt Payment of Claims.”

Specifically, we are concerned with sections 542.055, 542.058 and 542.060.

These provisions must be liberally construed to promote “the prompt payment of

insurance claims.” Id. §542.054.

Under section 542.055, the insurer has 30 days after “receiv[ing]

notice of a claim” to “commence an investigation of the claim; and request from

the claimant all items, statements, and forms that insurer reasonably believes, at

16
See generally State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799, 803-804 & nn.14-
20 (Tex.2007); Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 24-25 & nn.1-7
(Tex.2007) (Brister, J., dissenting); Universe Life Ins. v. Giles, 950 S.W.2d 48, 55-56
(Tex.1997).

32
that time, will be required.” TEX.INS.CODE §542.055(a)(2) & (3). Then, once the

insurer “receiv[es] all items, statements, and forms reasonably required,” it has 60

days to pay the claim. Id. §542.058(a). If it fails to pay within 60 days, it “shall

pay damages and other items provided n Section 542.060.” Id. §542.058(a). And

under 542.060, an insurer who fails to comply “is liable to pay . . . interest on

the amount of the claim at the rate of 18 percent per annum as damages together

with reasonable attorney’s fees.” Id. §542.060.17

No “good faith” defense. Old American says that the parties

“merely had a good faith disagreement over the wording of the policy and the

importance of having a complete death certificate.” Appellant’s brief, p.37. It’s

difficult to take this assertion seriously since Old American has never offered a

reason as to why it needed a “complete death certificate.” But even if there had

been a “good faith disagreement,” Old American would still be liable because

“good faith” is not a defense to a claim under the “prompt payment” provision.

“An insurance company’s good faith assertion of defense does not

relieve the insurer of liability for penalties for tardy payment, as long as the insurer

is finally adjudged liable.” Higginbotham v. State Farm Mut. Auto Ins. Co., 103

17
See generally Gusma Props., L.P. v. Travelers Lloyds Ins. Co., 514 S.W.3d 319, 322-
323 (Tex.App.--Houston [14th Dist.] 2016, no pet.) (summarizing operation of statute); Harris v.
American Protection Ins., 158 S.W.3d 614, 623 (Tex.App.--Fort Worth 2005, no pet.) (same).
Cf. Appellant’s brief, p.35 (last paragraph).

33
F.3d 456, 461 (5th Cir.1967).18 Accord Cater v. United Servs. Auto. Ass’n, 27

S.W.3d 81, 84 (Tex.App.--San Antonio 2000, pet. denied) (“an insurance

company’s good faith defense do[es] not relieve the insurer from liability for

damages for late payment, as long as the insurer is finally found liable for the

claim.”).19 Thus, even if Old American had had a “reasonable basis” for

withholding payment, it would still be liable for interest and attorney’s fees under

the “prompt payment” provisions.

Application. Old American withheld payment for eight months, but

ultimately admitted that the $4,725 claim was owed. Therefore, under the

“prompt payment” provisions, Old American is liable for 18% interest on the

amount of the claim for those eight months, plus attorney’s fees.

4. Old American has waived any error as to the misrepresentation claims.

18
citing Key Life Ins. Co. v. Davis, 519 S.W.2d 403, 405 (Tex.Civ.App.--Beaumont
1974, no writ).
19
See also Gumpp v. Philadelphia Life Ins. Co., 562 S.W.2d 885, 888-889 (Tex.Civ.App.
--San Antonio 1978, no writ) (“Where the 30-day demand has been made, the penalty is due if
the Insurer is ultimately held liable on the policy no matter how justifiable was the basis for its
unsuccessful defense of non-liability); First Nat. Life Ins. Co. v. Vititow, 323 S.W.2d 313, 316
(Tex.Civ.App.--Texarkana 1959, writ dism’d) (“[i]f a 30-day demand has been made, the penalty
is collectible if the insurer is finally adjudged to be liable on the policy regardless of how
justifiable its unsuccessful defense of unaliability may have appeared. The penalty flows from
the failure to pay.”) (citations omitted).

34
 The statute: Chapter 541, Subchapter B, of the Insurance Code is a

codification the Unfair Claims Settlement Practices Act.20 All together it consists

of eleven sections, each defining an unfair or deceptive act or practice. Under four

of these--Sections 541.051, 541.052, 541.060 and 541.061--it is an unfair practice

to misrepresent the terms or benefits of an insurance policy.21 The remedial

provisions for violation of Chapter 541, Subchapter B--which includes both “bad

faith” and misrepresentation--are found in Chapter 541, Subchapter D. A

violation of any of these sections entitles a plaintiff to the remedies available under

section 541.152, which include actual damages, attorney’s fees and costs.22 And if

the violation is “knowingly committed,” the damages can be trebled.23

Facts: As noted above, Lincoln submitted its claim to Old American

on October 21, 2014. See supra, p.15. Lincoln’s cover letter read as follows:

20
See Acts 1973, 63rd Leg., R.S., ch. 319 §1, 1973 TEX.GEN.LAWS 735 (codified at
TEX.INS.CODE art. 21.21), repealed Acts 2003, 78th Leg., ch. 1274 (H.B. 2922), §26(a)(1) (eff.
April 1, 2005).
21
See TEX.INS.CODE §541.051(1)(A)(It is an unfair practice to “make [a] state-ment
misrepresenting . . . the terms of the policy.”); Id. §541.052(a)(It is an unfair practice to make
“[a] statement containing an untrue, deceptive, or misleading . . . representations . . .
regarding . . . the conduct of the person’s insurance business.”); Id. §541.060(a)(1)(It is an
unfair settlement practice to “misrepresent[] to a claimant a material fact or policy provision
relating to coverage at issue.”); Id. §541.061(1)(It is an unfair practice to “misrepresent an
insurance policy by . . . making an untrue statement of material fact.”). See also id.
§541.052(b)(5) (“This section applies to [a] statement made . . . in any manner.”).
22
Id. §541.152(a).
23
Id. §541.152(b).

35
 Enclosed herewith is our assignment of the above-captioned policy
duly executed by Frank Howard, the named beneficiary. Leah of
your company verified the [following] information to us:

1. That the beneficiary entitled to the policy proceeds is the one
named above;

2. That the policy was in full force and effect and had benefits
equal to the amount of this assignment at the time of the
insured’s demise;

3. That there were no liens or loans except for against the corpus
of the insurance; and

4. That you would recognize the assignment to us and remit your
check in the payment of the proceeds of our assignment to our
office at

6145 WEDGEWOOD DRIVE
FORT WORTH, TEXAS 76133

Predicated and relying on the above representations, we have for a
valuable consideration accepted this assignment.

Letter (459).24 This letter, which was not objected to, or even controverted, is

evidence of an actionable misrepresentation under the code.

In its First Amended Petition, Lincoln made the following allegation:

Before accepting assignment of the policy proceeds and paying for the
decedent’s funeral expenses, Plaintiff contacted Defendant to verify
the legitimacy of the assignment of Frank Howard. Defendant
through its representatives Leah on October 13, 2014 assured Plaintiff
that Frank Howard was entitled to the proceeds of the policy, and
Defendant agreed that it would recognize an assignment of $4,725 of
the policy proceeds to Plaintiff and remit its check to Plaintiff for that

24
Emphasis added in the opening paragraph. Emphasis in original in closing paragraph.

36
 amount. Relying upon the representations and promises of
Defendant, Plaintiff paid Payne Funeral Support Services, LLC a
check for the funeral services for the decedent.

First Amended Petition, p.2 ¶ 6 (27). Later, Lincoln alleged additional

misrepresentations.25 In the trial court, Lincoln sought summary judgment as to

all of these misrepresentation claims.26 But Old American simply ignored these

misrepresentation claims in its summary judgment response. And, as noted above,

the trial court granted Lincoln’s summary judgment motion as to all claims without

distinguishing or identifying any particular claim. See Judgment (663).

Now, in this Court, Old American has not assigned error to the

misrepresentation claims. Indeed, Sections 541.051, 541.052, 541.060, and

541.061 are not even cited. See Appellant’s Brief, pp.27-29.

“When, as here, a party moves for summary judgment on multiple

grounds and the trial court's summary-judgment order does not specify the ground

(or grounds) on which it is based, the appellant must negate all possible grounds on

which the order could be based.” Chapparal Operating Co. v. EnergyPro, Inc., No.

02-16-00471-CV, 2017 Tex. App. LEXIS 10091, at **2-3 (Tex.App.--Fort Worth,

25
See Plaintiff’s Second Amended Petition ¶¶ 34, 35, 36, 40 & Ex. A (127-129, 132,
143). See also Lincoln’s summary judgment response, p.3 (596).
26
See Lincoln’s summary judgment motion, pp. 15-19, 23-24 (193-198, 201-202).

37
Oct. 26, 2017, pet. filed).27 Similarly, on appeal, “[w]hen an appellant fails to

challenge every ground on which the summary judgment could have been based,

[the appellate court] must affirm, regardless of the unchallenged ground's merit.”

Id.28 Therefore, this Court must affirm the judgment without reaching the merits of

the misrepresentation theory.

5. Old American also waived any error as to the award of
attorney’s fees under the Declaratory Judgments Act.

It is common practice for an insurer to sue under the Declaratory

Judgments Act to resolve coverage issues.29 And in our case Old American

counterclaimed for declaratory relief as follows:

Plaintiff knew that Defendant needed to have a completed death
certificate and that Defendant cannot require the Tarrant County
Medical Examiner’s Office (sic) to proceed more quickly in issuing
one. Defendant seeks a declaratory judgment that it was only
required to pay Plaintiff the proceeds on this event (sic) and that under
Chapter 37 of the Texas Civil Practices and Remedies Code, Plaintiff
be required to pay Defendant’s legal fees.

27
citing Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex.1995); Jarvis v.
Rocanville Corp., 298 S.W.3d 305, 313 (Tex. App.—Dallas 2009, pet. denied).
28
Accord Hixson v. Pride of Texas Dist. Co., Inc., 683 S.W.2d 173, 176 (Tex.App.--Fort
Worth 1985, no writ.) (“Where a judgment may rest upon more than one ground, the party
aggrieved must assign error to each such ground, or he has waived his right to complain of the
ruling to which no error was assigned.”). See also Umar v. Scott, 991 S.W.2d 512, 514
(Tex.App.--Fort Worth 1999, no pet.) (citing cases); Conley v. Tex. Bd. of Crim. Justice, No. 03-
08-00293-CV, 2010 WL 163292, 2010 Tex.App.LEXIS 3011, at **3-4 (Tex.App.--Austin Apr.
2, 2010, no pet.).
29
See generally MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 668
(Tex.2009) (noting that “historically, declarations of non-liability under a contract have been
among the most common suits filed under the Act.”).

38
Counterclaim, p.2 ¶ 4 (101) (emphasis added).30 Lincoln answered that

counterclaim and pleaded for “reasonable attorneys’ fees and costs.” (107).

By seeking relief under the Declaratory Judgments Act, Old American

invited being held liable for Lincoln’s attorney’s fees under that Act, which

provides, in part, as follows:

In any proceeding under this chapter, the court may award costs and
reasonable attorney’s fees as are equitable and just.

TEX.CIV.PRAC. & REM. CODE §37.009. Under this broad language, attorney’s fees

may be awarded to either party.31 Indeed, attorney’s fees may even “be awarded

to the non-prevailing party.” (emphasis added).32

The trial court awarded attorney’s fees to Lincoln without stating its

grounds (663), and that award can be upheld under the Declaratory Judgments Act.

Once again, Old American has waived any error as to the award of fees under the

30
citing Texas Uniform Declaratory Judgments Act, TEX.CIV.PRAC. & REM. CODE
§37.001, et seq.
31
See MBM Fin. Corp., 292 S.W.3d at 669 (The Declaratory Judgments Act “allows fee
awards to either party in all cases.”); Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 238 (Tex.App.-
-Dallas 2004, pet. denied) (“attorneys’ fees may be awarded to either party regardless of who
prevails, as long as the award is equitable and just.”) (citing Barshop v. Medina County
Underground Water Conservation Dist., 925 S.W.2d 618, 632 (Tex.1996)).
32
Accord Countrywide Home Loans, Inc. v. Howard, 240 S.W.3d 1, 7 (Tex.App.--Austin
2007, pet. denied) (“A court may even award costs and fees to a party who did not prevail.”)
(citing Barshop v. Medina County Underground Water Conservation Dist., 925 S.W.2d 618, 637
(Tex.1996)); Guinn Invs. v. Ridge Oil Co., 73 S.W.3d 523, 527 n.1 (Tex.App.--Fort Worth 2002,
pet. denied) (same); Scottsdale Ins. Co. v. Travis, 68 S.W.3d 72, 77 (Tex.App.--Dallas 2001, pet.
denied) (“Under the Act, attorney’s fees may be awarded to the non-prevailing party.”).

39
Declaratory judgment Act by failing to make any complaint about that award in the

trial court or in this Court. Indeed, the words “declaratory judgment” do not

appear in Old American’s summary judgment response (594-606), or the

Appellant’s brief.

6. Old American waived any defense under
Section 1103.51 of the Insurance Code.
In its brief, for the first time, Old American says that “the manner of

death would determine whether there was a possibility of forfeiture of the death

benefit by the named beneficiary under Texas Insurance Code §1103.151.”

Appellant’s Brief, p.37. That provision reads as follows:

A beneficiary of a life insurance policy or contract forfeits the
beneficiary’s interest in the policy or contract if the beneficiary is a
principal or an accomplice in willfully bringing about the death of the
insured.

TEX.INS.CODE §1103.151 (emphasis added). There are three flaws in this

argument.

First, section 1103.151, which provides for “forfeiture,” is an

affirmative defense which must be pleaded,33 and Old American did not plead this

33
See Hazlewood v. Werley, No. 07-12-00166-CV, 2014 WL 2810215, 2014 Tex.App.
LEXIS 6698, at *10 (Tex.App.--Amarillo, June 18, 2014, pet. denied) (“Fee Forfeiture as an
Affirmative Defense”); Walker v. Federal Kemper Life Ins. Co., 828 S.W.2d 442, 449 (Tex.App.
--San Antonio, Jan. 29, 1992, writ denied) (treating policy provision providing for forfeiture for
non-payment of premiums as an affirmative defense); Dean Vivian Homes, Inc. v. Sabera’s
Plumbing and Appliances, Inc., 615 S.W.2d 921, 927 (Tex.Civ.App.--Waco 1981, no pet.)
(holding that statute providing for forfeiture for charging of usurious interest was an affirmative
defense); Ramin’ Corp. v. Wills, No. 09-14-00168-CV, 2015 WL 612602, 2015 Tex.App. LEXIS
10612, at *23 (Tex.App.--Beaumont Oct. 15, 2015, no pet.) (“A party may seek forfeiture as a
40
defense (93) 34 or raise it in its summary judgment response (594-606). In an

appeal from a summary judgment ruling, a court may consider “only the theories

that were presented in writing and considered by the trial court.” U.S. Bank, N.A. v.

Prestige Ford Garland, Ltd. Partnership, 170 S.W.3d 272, 275 (Tex.App.--Dallas

2005, no pet.) (citing Casso v. Brand, 776 S.W.2d 551, 553 (Tex.1989)). For that

reason, this defense has been waived.

Second, Old American never had any reason to believe that the

beneficiary had been a “principal or an accomplice in willfully bringing about the

death of [Rebecca Barnes].” 35 Indeed, when it first made a claim, Lincoln

provided an affidavit from the funeral director saying that the “primary cause of

death was natural or accidental” (466) (emphasis added).

Third, Old American admitted that it never called the District of

Columbia police to determine if Frank Howard was under suspicion of causing the

death, and it never had any evidence that he was suspected of causing the death.36

On deposition Richard Ropp, who was in charge of Old American’s claims,

testified as to “whether or not the beneficiary was under suspicion of causing the

remedy for breach of a fiduciary duty, provided the party includes a request for forfeiture in its
pleadings.”).
34
Old American did not file an answer in the County Court at Law.
35
TEX.INS.CODE §1103.151.
36
Response to Request for Admissions, p.3 ¶¶ 4-5 (302).

41
death of Rebecca Barnes.” Ropp depo. 43/5-15 (412). As to a December 30 email

from Robin Hall, Id. 36/22 (412), Ropp testified as follows:

Q. [By Mr. Engfer] Okay. Can you read it, the part that says
what you’re referring to?

A. (Reading) In an attempt to try to get this resolved I made some
phone calls. I tried to locate a number for the beneficiary with
no luck. I called the funeral home. I called the coroner’s
office and was told that the investigation was still pending. I
also called American Capital Funding. They called the
cemetery, the cemetery called the coroner’s office. The
coroner told them to check back in the middle of January. I’ve
seen letters to both the finance companies. At this point it is a
waiting game.

Q. Okay. But that doesn’t say anything about whether or not the
beneficiary is under suspicion of causing the death of Rebecca
Barnes, correct?

A. Correct.

Q. So there was, as far as you can tell, no investigation of whether
or not the beneficiary is under suspicion of causing the death
when you read those--this e-mail, correct?

A. That e-mail may have indicated that we tried.

Q. Well, where in the e-mail does it say that they inquired on
whether the beneficiary was under suspicion of Rebecca
Barnes’ death?

A. It doesn’t.

Q. Okay, so as of March 31, 2015 [Old American] had not
investigated whether or not the beneficiary is under the
suspicion of causing the death of Rebecca Barnes, correct?

42
 A. Under--further, on the exhibit, on Page 029, the e-mail between
counsel Langland and Robin Hall--

Q. Okay. Can you read the specific part that says there was an
investigation by Old American into whether or not the
beneficiary is under suspicion of causing the death of Rebecca
Barnes? Specifically read that.

A. It doesn’t specifically say that.

Q. It doesn’t say that. It doesn’t say that anywhere on this--on
029; isn’t that correct?

A. Correct.

Id. 36/22--38/9 (emphasis added) (412-413).

7. Lincoln is entitled to recover attorney’s fees. See Appellant’s brief, p.43.

Old American’s challenge to the attorney’s fees award is quite

narrow. It says that “Lincoln is not a prevailing party in this litigation” and cannot

recover its attorney’s fees. Appellant’s brief, p.43. But as we have demonstrated,

Lincoln was the prevailing party, and it was entitled to recover attorney’s fees

under the Insurance Code and under the Declaratory Judgments Act.

Aside from arguing that it should be the prevailing party, Old

American has made no complaint about the attorney’s fees award. Lincoln

supported its claim for attorney’s fees with an attorney’s affidavit (306). Old

American did not object to that affidavit or present any evidence to create a fact

issue. Old American does not contend that the attorney’s fees were not

43
“reasonable and necessary” or that they were not “equitable and just.” 37 Nor does

it contend that the evidence of attorney’s fees was not properly segregated.

Indeed, its summary judgment response does not even mention attorney’s fees.

Thus, the attorney’s fees award must be upheld if the court affirms any part of our

Insurance Code claim. Indeed, under the Declaratory Judgments Act, it must be

affirmed even if the court reverses as to all of our claims, since the trial court can

award fees even to the non-prevailing party. See supra, p.38.

8. Treble damages: Old American acted “knowingly.”
As previously noted, our statutory bad faith claim is based on Section

541.060 of the Insurance Code. That provision is entitled “Unfair Settlement

Practices,” and it is found in Chapter 541, Subchapter B of the Code. The

remedial provisions are found in Chapter 541, Subchapter D. Under these

provisions “[a] plaintiff who prevails in an action under this subchapter may

obtain: . . . actual damages, plus court costs and reasonable and necessary

attorney’s fees.” TEX.INS.CODE §541.152(a)(1). And if the defendant “knowingly

committed the act complained of,” a court “may award” up to “three times the

amount of actual damages.” Id. §541.152(b).

37
See generally State and County Mut. Fire Ins. Co. v. Walker, 228 S.W.3d 404, 407
(Tex.App.--Fort Worth 2007, no pet.) (“Whether the fees are reasonable and necessary are
questions of fact; whether awarding the fees and costs is equitable and just is a question of
law.”).

44
 As we have seen, the test for “bad faith” is whether the insurer “knew

or should have known” that liability was “reasonably clear.” See supra, n.16. The

test for treble damages is whether the insurer “knew.” Here it is undisputed that

Old American “knew” that the initial $10,000 was payable immediately. Early on,

Lincoln’s lawyer explained why payment of the claim did not depend on cause-of-

death. Even so, Old American expressly refused to pay the claim until it received

evidence of cause-of-death. Indeed, as we have seen, it was Old American’s

policy to require a “completed” death certificate for “all claims,” even in cases

such as our where payment did not depend on cause-of-death. See supra, p.30.

Also, in the trial court, Old American did not even complain about the trebling of

damages, as we shall now demonstrate.

9. Old American failed to preserve error as to calculating damages and as
to awarding treble damages. See Appellant’s brief, pp.41-42, 43-45.

As to the award of actual damages, Old American says that it should

receive credit for the $4,725 paid after suit was filed. See Appellant’s brief, p.41-

42. And, as we have seen, it is also complaining about the award of treble

damages. Id., p.42. Finally, it says that the trial court erred in calculating interest

under the prompt payment provisions. Id., pp.43-45.

Old American did not preserve error as to any of this. Its summary

judgment response is completely silent on these issues (594-604). The actions that

Old American is now complaining about were set forth in the judgment (663).

45
That was where the trial court awarded “treble damages” in the amount of $9,450.

This appears to result from the following calculations:

$4,725 x 3 = $14,175
$14,175 - $4,725 = $9,450

It was also there, in the judgment, that the trial court awarded the $1,050 in interest

that Old American now says was excessive.

To preserve error, Old American should have made these complaints

to the trial court. See Rule 33.1(a)(1)(A), TEX.R.APP.P. Old American could have

done this by moving to modify the judgment under Rule 329b(g), TEX.R.CIV.P.38

Old American did not do this. Nor did it make any other complaint about these

rulings. Accordingly, it has waived any error in the calculation of interest,39 the

award of treble damages,40 and the calculation of damages.41

38
See Rule 33.1(b), TEX.R.APP.P.
39
See Watts v. Oliver, 396 S.W.3d 124, 133-134 (Tex.App.--Houston [14th Dist.] 2013,
no pet.) (holding that complaint about calculation of interest may not be raised for the first time
on appeal). Cybiz, Inc. v. Gaskill, No. 14-16-00405-CV, 2017 WL 1015560, 2017 Tex.App.
LEXIS 2147, at *12 (Tex.App.--Houston [14th Dist.] March 14, 2017, no pet.).
40
See Samedan Oil Corp. v. Intrastate Gas Gathering, Inc., 78 S.W.3d 428, 457-458
(Tex.App.--Tyler 2001, pet. granted, judgm’t vacated w.r.m.) (punitive damages).
41
See Basic Energy Service, Inc. v. D-S-B Properties, Inc., 367 S.W.3d 254, 262-264
(Tex.App.--Tyler 2011) (withdrawn pursuant to settlement).

46
 ARGUMENT
PART TWO: STANDING

10. Old American waived any error as to the assignment of claims by failing
to raise it in the trial court. See Appellant’s brief, pp.26-29.

Old American’s “standing” arguments concern Frank Howard’s

assignment to the funeral home. See supra, p.15. First, Old American says that

Howard only assigned his right to the policy proceeds; he did not also assign his

Insurance Code claims.42 Second, Old American says that, for public policy

reasons, Howard could not assign his Insurance Code claims.43

Both issues--whether the claim was assigned and whether it was

assignable--are questions of capacity, not standing. Unlike lack of standing, lack

of capacity is waived if it is not raised in the trial court. And since Old American

did not raise either issue in the trial court, they have been waived. Two recent

cases from the Fifth Court of Appeals are directly in point. See Fitness Evolution,

L.P. v. Headhunter Fitness, LLC, No. 05-13-00506-CV, 2015 Tex.App.LEXIS

11496 (Tex.App.--Dallas Nov. 4, 2015, no pet.), and Douglas-Peters v. Choe &

Holen P.C., No. 05-15-01538-CV, 2017 WL 836848, 2017 Tex.App.LEXIS 1836,

at *23 (Tex.App.--Dallas March 13, 2017, no pet.).

42
See Appellant’s brief, p.27 (“Frank Howard clearly reserved his right . . . to pursue
any statutory claims he might have under the Texas Insurance Code.”).
43
Id., p.28 (arguing that any “such assignment would be invalid as a matter of law.”).

47
 In the first case, Fitness Evolution leased space in a shopping center

from Gleneagles; and Joseph Mulroy guaranteed the lease. See Fitness Evolution,

2015 Tex.App.LEXIS 11496, at *8. Fitness Evolution assigned the lease to

Headhunter Fitness, which could not pay the rent. Id. at *9-*10. In 2007, Fitness

Evolution sued Headhunter Fitness, and Headhunter Fitness filed a third-party

action against Mulroy. Id. at *10.

While that suit was in progress, Headhunter Fitness negotiated with

Sagebrush Partners to lease space in a different shopping center. Id. at *11-*12.

Headhunter Fitness asked Gleneagles to release it from the original lease, but

Gleneagles refused. Id. at *13-*14. At that point, the suit settled. Id. at *16-*17.

In 2011, Mulroy and Fitness Evolution filed a new suit against

Headhunter Fitness and Sagebrush. Id. at *19-*22. Mulroy, as assignee of

Gleneagles, claimed that Sagebrush had tortiously interfered with the original lease

(between Gleneagles and Fitness Evolution). Id. at *21 & *22 n.13. The trial

court granted summary judgment denying that tortious interference claim. Id. at

*34. Mulroy appealed.

On appeal, Sagebrush argued that Mulroy could not recover as the

assignee of Gleneagles. Id. at *52-*53. In so doing, Sagebrush addressed the

same two issues that we are concerned with in our case. First, Sagebrush argued

that Gleneagles had “not specifically assign[ed]” the tortious interference claim to

48
Mulroy. Id. at *53.44 Second, Sagebrush argued that purported assignment of the

tortious interference claim “is void because it goes against public policy.” Id. at

*55.45 The court of appeals rejected both arguments for the same reason: they

involved question of capacity, not standing; and Sagebrush had not raised these

issues in the trial court. Id. at *54-*56. Therefore, they had been waived.

As to the first issue--“the scope of Gleneagles’s assignment to

Mulroy”--the court noted that, while “Sagebrush . . . referred to this as an issue

of ‘standing,’ it is actually a challenge to whether Mulroy, as assignee of

Gleneagles’s claims, can recover in the capacity in which he sued.” Id. at *57

(emphasis added).

Texas law is clear that a challenge to a party’s privity of contract is a
challenge to capacity, not standing. . . . While the question of
whether a party is entitled to sue on a contract is often informally
referred to as a question of ‘standing’ it is not truly a standing issue
because it does not affect jurisdiction.” . . .

Fitness Evolution, 2015 Tex.App.LEXIS 11496, at *42 (citations omitted). 46 But

44
See also, Fitness Evolution, 2015 Tex.App. LEXIS 11496, at 56 (arguing that the
purported assignment “does not specifically assign a tortious interference with an existing
contract claim.”).
45
Sagebrush argued that “public policy prohibits Mulroy, as assignee of Gleneagles’s
claims, from recovering on the assigned causes of action because Gleneagles’s tortious
interference with an existing contract claims were not capable of assignment due to the fact that
Mulroy, individually, was also the guarantor of the lease.” Fitness Evolution, 2015 Tex.App.
LEXIS 11496, at *55 (citing Texas Farmers Ins. Co. v. Gerdes, 880 S.W.2d 215, 218 (Tex.App.-
-Fort Worth 1994, writ denied).
46
Accord Douglas Peters, 2017 Tex.App.LEXIS 1836 at 21-22. See also Vertical N.
Am., Inc. v. Vopak Terminal Deer Park, Inc., No. 14-15-01088-CV, 2017 Tex.App. LEXIS 8944
49
Sagebrush had

not file[d] a verified pleading challenging the capacity of Mulroy, as
assignee of Gleneagles’s claim, to sue on this basis, nor do they brief
this lack of capacity on appeal. This issue was not preserved in the
trial court. Accordingly, we do not address the merits of this
argument . . .

Id. at *56-*57.47 On this point the Court cited its earlier opinion in John C. Flood

of DC, Inc. v. SuperMedia, LLC, 408 S.W.3d 645, 650-652(Tex.App.--Dallas

2013, pet. denied).48

Similarly, as to the second issue, Sagebrush contended “that the

assignment of Gleneagles’s claims is void because it goes against public policy.”

Id. at *54-*55. But here again, the court held that “[t]his argument challenges the

qualifications of Mulroy, as assignee of Gleneagles’s claim, to litigate

Gleneagles’s claim.” Id. at *55.

Although the Sagebrush Group referred to this as an issue of
“standing” it is actually a challenge to whether Mulroy, as assignee of
Gleneagles’s claim, can recover in the capacity in which he sued.

Id. at 53 (emphasis added).49 Once again, however,

[t]his issue was not preserved in the trial court. Accordingly, we do

at *3 (Tex.App.--Houston [14th Dist.] Sept. 21, 2017, no pet.) (“A challenge to who owns a
claim raises the issue of capacity, not standing.”).
47
citing Rule 33.1, TEX.R.APP.P. See also Rule 93(2), TEX.R.CIV.P. (requiring verified
plea of lack of capacity).
48
See also King-Mays v. Nationwide Mut. Ins. Co., 194 S.W.3d 143, 145 (Tex.App.--
Dallas 2006, pet. denied) (applying same reasoning to claim of subrogation).
49
citing John C. Flood, 408 S.W.3d at 640.

50
 not reach the merits of this argument that the Sagebrush Group labels
as “standing.”

Id. at 56.

In Douglas-Peters, a law firm owned a claim against a former client

for unpaid attorney’s fees. 2017 Tex.App. LEXIS 1836, at *5-*6. It assigned the

claim to a new law firm; and the new firm sued the former client for the unpaid

fee. Id. at *6-*7. The former client contended that the assignment

is void because it is against public policy. She argues that the
assignment of claims by attorneys against their clients are a “legal
corollary” to the assignment of legal malpractice claims, which is
against public policy.”

Id. at *27. Here again, the court held that this question--whether assignment of

claims for unpaid attorney’s fees violates public policy--involved a question of

capacity, not standing. Id. at **21-22 (citing cases).

Unlike Fitness Evolution, the court in Douglas-Peters held that the

issue of capacity had been preserved. Therefore, the court could “address

Douglas-Peters’ capacity arguments.” Id. at *25. Even so, the former client had

not adequately briefed the public policy issue, and for this reason, the court

declined the “invitation to invalidate the assignment of claims for attorneys’ fees

on the basis of public policy.” Id. at *28.

In our case, Old American is making these same arguments. It says

(i) that Frank Howard never assigned his Insurance Code claim and (ii) that his

Insurance Code claim could not be assigned on public policy grounds. But, as in
51
Fitness Evolution, these issues were never raised in the trial court.

Old American never filed a verified pleading under Rule 93(2).50

Nor did it raise this issue in its summary judgment response (594-606).51 Old

American did not raise the “capacity” issue--which it erroneously calls a

“standing” issue--until it filed its brief in this Court, and for that reason, both

arguments--whether the claim was assigned and whether it was assignable--have

been waived. See Nootsie Ltd. v. Williamson Cty. Appraisal Dist., 925 S.W.2d

659, 662 (Tex.1996) (holding that “Nootsie first questioned the district’s capacity

in its briefing before this Court. Therefore, Nootsie has waived its complaint

about capacity.”).52

11. Alternatively, Lincoln has standing to assert its own claims for “bad
faith” and misrepresentation under Section 541.151 of the Code.

According to Old American, Lincoln is contending (i) that Frank

Howard, the beneficiary, assigned his Insurance Code claims to Lincoln and (ii)

that Lincoln is asserting the assigned claims. And because those claims have not

been assigned (and because they are not assignable), Lincoln has no standing, or so

50
See Defendant’s Original Answer (93). Old American never filed an answer in the
County Court at Law. See docket sheet (665).
51
Cf. John C. Flood, 408 S.W.3d at 655 (“The problem with appellant’s argument is that
their response to appellee’s summary judgment motions did not raise the issue of SuperMedia’s
lack of capacity to bring suit.”).
52
Accord Town Ctr. Mall v. Dyer, No. 02-14-00268-CV, 2015 Tex.App. LEXIS 10213,
at **7-8 (Tex.App.--Fort Worth Oct. 1, 2015, pet. denied).

52
the argument goes. See Appellant’s brief, pp.26-27. We have just demonstrated

that both arguments involve lack of capacity, not lack of standing, and they have

been waived. See supra, p.47. Now, in the alternative, we say that Lincoln has

standing to assert its own claims directly under the Code. In other words, standing

is conferred by statute. 53

In this part of the argument, we will address Section 541.151 of the

Insurance Code, which gives Lincoln standing to sue for “bad faith” and

misrepresentation. And in part 12, we will address section 542.060, which gives

Lincoln standing to sue for failure to make “prompt payment.”

As previously noted, the Code provisions prohibiting “bad faith” and

misrepresentation are found in Chapter 541, Subchapter B, of the Code. The

remedial provisions are found in Chapter 541, Subchapter D, entitled “Private

Action for Damages.” Section 541.151, entitled “Private Action for Damages

Authorized,” reads as follows:

A person who sustains actual damages may bring an action against
another person for those damages caused by the other person engaging
in an act or practice:

(1) defined by [Chapter 541] Subchapter B [of the Insurance

53
See generally In re Sullivan, 157 S.W.3d 911, 915 (Tex.App.--Houston [14th Dist.]
2005, no pet.) (holding that “the judge-made criteria regarding standing do not apply when the
Texas Legislature has conferred standing through a statute. In statutory standing cases, such as
this, the analysis is a straight statutory construction of the relevant statute to determine upon
whom the Texas Legislature has conferred standing and whether the claimant in question falls in
that category.”) (internal citations omitted).

53
 Code] to be an unfair method of competition or an unfair
or deceptive act or practice in the business of insurance;
or

(2) specifically enumerated in Section 17.46(b), Business &
Commerce Code, as an unlawful deceptive trade practice
if the person bringing the action shows that the person
relief on the act or practice to other person’s detriment.

TEX.INS. CODE §541.151 (emphasis added). 54 Here we are concerned with sub-

paragraph (1), which provides a remedy for Lincoln’s “bad faith” and

misrepresentation claims.55

To recover for an unfair practice, as defined by Chapter 541,

Subchapter B, of the Code (which includes “bad faith” and misrepresentation), one

must qualify as “a person” under the following statutory definition:

“Person” means an individual, corporation, association, partnership,
reciprocal or interinsurance exchange, Lloyd’s plan, fraternal benefits
society, or other legal entity engaged in the business of insurance,
including an agent, broker, adjuster, or life and health insurance
counselor.

TEX.INS.CODE §541.002(2) (emphasis added).

The phrase “engaged in the business of insurance” does not restrict

the definition of “person.” Rather, it expands that definition to include those

54
See Acts 2003, 78th Leg., ch.1274 §2 (eff. April 11, 2005) (repealing TEX.INS.CODE
art. 21.21 §16(a)).
55
Again, Lincoln did not seek summary judgment under the DTPA, which is the subject
of sub-paragraph (2). See supra, p.10 n.7.

54
“engaged in the business of insurance.” This issue was decided in 1978, when the

statute read as follows:

Any person who has been injured by another’s engaging in any of the
practices declared in Section 4 of this Article or in rules or regulations
lawfully adopted by the Board [of Insurance] under this Article to be
unfair methods of competition and unfair and deceptive acts or
practices in the business of insurance or in any practice defined by
Section 17.46 of the Business and Commerce Code, as amended, as an
unlawful deceptive trade practice may maintain an action against a
company or companies engaging in such act or practices.

TEX.INS.CODE art. 21.21 §16(a).56 Under that version of the statute, “person” was

also defined as follows:

“Person” shall mean any individual, corporation, association,
partnership, . . . and any other legal entity engaged in the business
of insurance . . .

Id. §2(a) (emphasis added).57

Initially, the lower courts held that the phrase “engage in the business

of insurance” limited the scope of “persons” who could sue. For example, one

court held that:

Art. 21.21 does not confer a private cause of action upon individuals
for alleged unfair practices. One must be “engaged in the business of
insurance” to bring suit under art. 21.21, TEX.INS.CODE.

56
See Acts 1951, 52nd Leg., ch. 491, amended by Acts 1957, 55th Leg., p.401, ch. 198;
Acts 1969, 61st Leg., p.2051, ch. 706, §1 eff. June 12, 1989; Acts 1973, 63rd Leg., p.335, ch.
143, §§2(a)-2(c), eff. May 21, 1973 (quoted at Hermann Hosp., 776 S.W.2d at 251).
57
quoted at Royal Globe, 566 S.W.2d at 726.

55
Ceshker v. Bankers Commercial Life Ins. Co., 558 S.W.2d 102, 104 (Tex.Civ.App.

--Tyler 1977) (emphasis added).58 But the Supreme Court disagreed:

We disapprove the [above] holding which construed the Code to limit
the term “person” to one who is engaged in the business of insurance.

Ceshker v. Bankers Commercial Life Ins. Co., 568 S.W.2d 128, 129 (Tex.1978).

Accord Royal Globe Ins. Co. v. Bar Consultants, Inc., 566 S.W.2d 724, 726

(Tex.Civ.App.--Austin 1978) (“The Texas Supreme Court in a recent per curiam

opinion disapproved a court of civil appeals’ restrictive reading of the definition of

‘person’ as used in Section 16 of Article 21.21 of the Insurance Code”), aff’d, 577

S.W.2d 688 (Tex.1979); Hermann Hosp. v. Nat. Standard Ins. Co., 776 S.W.2d

249, 251 (Tex.App.--Houston [1st Dist.] 1989, writ denied) (“The Texas Supreme

Court, in 1978, held that this statute does not require that the injured party be a

person who is engaged in the business of insurance.”).

By way of example, an insured party is obviously not “engaged in the

business of insurance.” Even so, in 1988, the Supreme Court held that an insured

party was also a “person” who could sue under article 21.21 §16(a). See Vail v.

Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129, 134 (Tex.1988). This issue

has now been decided. Any person or entity has standing to sue for an unfair

practice defined by Chapter 541, Subchapter B, which includes “bad faith” and

58
writ ref’d, n.r.e., 568 S.W.2d 128 (Tex.1978).

56
“misrepresentation.” 59

Despite this broad statutory language, the Supreme Court has limited

the definition of “person” in one kind of case, to-wit: “bad faith” claims brought

by a “third party.” In Allstate Ins. Co. v. Watson, 876 S.W.2d 145 (Tex.

1994), the Court held that a car wreck plaintiff could not sue the defendant’s

liability carrier under article 21.21 §16(a) because the plaintiff was asserting a

“third-party” claim. Watson, 876 S.W.2d at 149-150. There were practical reasons

for this decision. To allow a third-party plaintiff to sue under article 21.21 would

place conflicting duties on the insurer. The insurer would owe one set of duties to

its insured and another set of duties to the third party. Watson, 876 S.W.2d at 150.

Accordingly, a “third-party” claimant asserting a “bad faith” claim did not qualify

as a “person,” despite the broad statutory language.

But Watson applies only to “bad faith” claims. On the other hand, the

courts have allowed third-party claimants to sue for misrepresentation.60 In any

event, Lincoln is not a “third-party” claimant, that is, it is not adverse to the estate

59
See also TEX.INS. CODE §541.001 & 541.008 (Chapter 541 “shall be liberally construed
and applied to promote the underlying purposes” which are to prohibit “unfair or deceptive act or
practices” in the “business of insurance.”).
60
See generally Royal Globe Ins. Co. v. Bar Consultant, 577 S.W.2d 688 (Tex.1979);
Hermann Hosp. v. Nat. Standard Ins. Co., 776 S.W.2d 249 (Tex.App.--Houston [1st Dist.] 1989,
writ denied); Webb v. Int’l Trucking Co., 909 S.W.2d 220 (Tex.App.--San Antonio 1995, no
writ); Brown & Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361 (Tex.App.--Houston
[1st Dist.] (2010, pet. denied).

57
of Clara Barnes, the insured, or to Frank Howard, the beneficiary.

12. Lincoln has standing to assert a “prompt payment” claim under
section 542.060 of the Code. See Appellant’s Brief, pp.30-32.

As previously noted, the “prompt payment” claim is based in Sections

542.055 and 542.058 of the Insurance Code. See supra, p.32. The remedy reads

as follows:

If an insurer that is liable for a claim under an insurance policy is not
in compliance with this subchapter, 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% a year as damages, together with
reasonable attorney’s fees.

TEX.INS.CODE §542.060 (emphasis added). In United States v. United Servs. Auto

Ass’n, 431 F.2d 735 (5th Cir.1970), cert. denied, 400 U.S. 992 (1971), the child of

an Air Force officer received treatment at a government hospital, and “the United

States brought suit on the medical payment provision of the officer’s automobile

insurance policy.” The United States sued the insurance company for penalties and

interest under TEX.INS.CODE §3.62, the predecessor of the current statute. Id. at 2.

In affirming an award against the insurance company, the Fifth Circuit held that

the United States was “a ‘holder’ of the policy within the terms of the Texas

statute.” Id. at 3.61

61
citing Republic Nat. Life Ins. Co. v. Spillars, 363 S.W.2d 373, 376 (Tex.Civ.App.--
Waco 1962), rev’d on other grounds, 368 S.W.2d 92 (Tex.1963). See generally Encompass
Office Solutions, Inc. v. Ingenix, Inc., 775 F.Supp.2d 938, 947-948 & n.1 (E.D.Tex.2011).

58
 Similarly, under ERISA, “[a] civil action may be brought by a

participant or beneficiary.” 29 U.S.C. §1132(a)(1) (emphasis added), and a health

care provider, or its assignee, can sue under this provision to collect benefits owed

to covered employees. See Tango Transport v. Healthcare Financial Services,

LLC, 322 F.3d 888, 889-890 (5th Cir.2003) (allowing financial service company to

sue on claims assigned by ERISA participant).

In reaching these decisions, courts have reasoned that “granting

derivative standing to the assignee of health care providers helps plan participants

and beneficiaries by encouraging providers to accept participants who are unable to

pay up front.” Id. at 894. Thus, “to bar healthcare providers from assigning their

rights under ERISA . . . would chill health care providers’ willingness to accept

a patient.” Id. Similarly, a lender “will only be willing to purchase an assignment

from a healthcare provider if they can be assured that they will be afforded

standing to sue for reimbursement.” Id.

Old American cites Cash Rent-a-Car, Inc. v. Old American County

Mut. Fire Ins. Co., No. 01-09-00021-CV, 2010 WL 143482, 2010 Tex.App.

LEXIS 250 (Tex.App.--Houston [1st Dist.] Jan. 4, 2010, no pet.), for the

proposition that “only [the] insured could assert a claim under Chapter 542.”

Appellant’s brief, p.31. But that decision was based on a provision denying

“prompt payment” to third-party claimants. See TEX.INS.CODE §542.051(2)

59
(“Claim” means a first party claim that is made by an insured or policy holder”)

(emphasis added). Again, Lincoln is not a third-party claimant. See supra, p.58.

13. Alternatively, the Insurance Code claims
were assigned and they were assignable.
Were the claims assigned? “Absent specific circumstances, causes

of action in Texas are fully assignable.” Fitness Evolution, 2015 Tex.App. LEXIS

11496, at *43.62 It is undisputed that Howard assigned his benefits under the

policy. and “[a]n assignment to receive payment of benefits necessarily

incorporates the right to seek payment. [T]he right to receive benefits would be

hollow without such enforcement capabilities.” Encompass Office Solutions, Inc. v.

Ingenix, Inc., 775 F.Supp. at 949.63

Were the claims assignable? Most kinds of claims are assignable,

but in a few kinds of cases

an assignment may be invalidated by the courts because it is found to
offend public policy. The Texas Supreme Court has held that certain
types of assignments are invalid because they violate public policy:
(1) an assignment of a cause of action that works to collude against an
insurance carrier; (2) an assignment of a legal malpractice claim; (3)
an assignment that creates a Mary Carter agreement; (4) an
assignment of the Plaintiff’s cause of action to a joint tortfeasor of the
defendant; and (5) an assignment of interest in an estate that distorts
the true positions of beneficiaries.

62
Accord Douglas-Peters, 2017 Tex.App.LEXIS 1836, at *22.
63
quoting Conn. State Dental v. Anthem Health Plans, 591 F.3d 1337, 1352 (11th Cir.
2009).

60
Douglas-Peters, 2017 Tex.App. LEXIS at *23 (citing PPG Industries, 146 S.W.2d

at 87 n.31.

PPG Industries involved a building, completed in 1978, which

included more than 12,000 windows manufactured and installed by PPG. Id. at 83.

PPG replaced some of the windows in 1982. Id. The building was sold in 1989

and all of the seller’s warranties were assigned to the purchaser. More window

problems appeared in 1991, and the purchaser for breach of warranty. Id. The jury

awarded $4.7 million as damages. Id. “The trial court trebled the award under the

mandatory provisions of the 1973 DTPA.” Id. PPG appealed. The Supreme

Court upheld the award of actual damages for breach of warranty but it reversed

the award of treble damages under the DTPA because the original owner’s DTPA

claim was not assignable on public policy grounds. Id. at 83-84.

In an opinion by Justice Scott Brister, the court distinguished between

“plac[ing] the power of treble damages in the hands of aggrieved parties” and

“plac[ing] it in the hands of those considering litigation for commercial profit.” Id.

at 85 (emphasis added). Thus, the Court held that “the DTPA claim could not be

assigned lest they fall into the hands of “arbitrageurs” or “wealthy entrepreneurs,”

who “buy DTPA claims cheap and sell them dear.” Id. at 86-87 (emphasis added).

These concerns are not applicable to our case.

Lincoln is not an “arbitrageur” or “wealthy entrepreneur” who “buys

61
claims cheap and sell them dear.” Rather, like other factoring companies which

operate in this area, Lincoln merely provides up-front cash to pay for funerals. By

assigning rights under a life insurance policy, a beneficiary can, at a difficult time,

obtain ready cash to provide a funeral for a loved one. The same policy arguments

that underlying “derivative standing” in ERISA cases are also at work here.

Allowing factoring companies to have standing will help provide funerals to those

“who are unable to pay up front.” To bar the beneficiaries of those insurance

policies from assigning their rights under the Insurance Code will chill a factoring

company’s willingness to provide up-front cash for funerals. See supra, p.59.

Moreover, PPG Industries involved a DTPA claim, but in our case

Lincoln did not seek or obtain summary judgment under the DTPA. Old

American says that the court in Lee v. Rogers Agency, 517 S.W.3d 137 (Tex.App.--

Texarkana 2017, no pet.), “held that the owner of a life insurance policy could not

validly assign his [bad faith] claims to a trustee.” Appellant’s brief, p.28. But Lee

did not involve the validity of assignment. Rather, in that case, insurance code

claims were “relinquished when the policies were transferred to [a] Trust.” Id. at

146.

The Lee opinion does contain a lengthy footnote noting that “the

Supreme Court has not addressed whether Insurance Code claims are assignable.”

517 S.W.3d at 146 n.3 (emphasis added). It does, however, note that some federal

62
courts have extended the PPG holding to Insurance Code claims. Two of these

cases involve assignability of “bad faith” claims.64 The footnote also notes that

federal district courts have taken opposite positions as to the assignability of

“prompt payment claims.” 65 Certainly, in this regard, the notion that “wealthy

entrepreneurs” would somehow traffic in claims for 18% interest and attorney’s

fees is ridiculous. In our case, public policy factors weigh in favor of

assignability.

Yet, life insurance companies, like Old American, are obviously

willing to treat factoring companies no differently from the way they treated

beneficiaries before the enactment of the Insurance Code. They hold on to the

money until the last minute, and when they are finally sued, they simply pay up

and say that they have complied with the insurance contract. But they have not

complied with extra contractual duties imposed by the Insurance Code, and this

Court should hold that “prompt payment” claims in this case are assignable.

64
See Great Am. Ins. Co. v. Fed. Ins. Co., No. 3:04-CV-2267-H, 2006 WL 2263312,
2006 U.S.Dist. LEXIS 55038, at *29-*30 (N.D.Tex. Aug. 8, 2006); Launius v. Allstate Ins. Co.,
No. 03-06-CV-0579-B, 2007 WL 113547, 2007 U.S.Dist. 28286, at *14-*15 (N.D.Tex. Apr. 17,
2007). Old American also cites Montoya v. State Farm Mut. Auto Ins. Co., No. 16-00005
(RCL), 2016 WL 5942327, 2016 U.S.Dist. LEXIS 141, 322, at *18 (W.D.Tex. Oct. 12, 2016).
See Appellant’s Brief, p.31.
65
Cf. Berkley Regional Ins. Co. v. Philadelphia Indem. Ins. Co., No. A-10-CA-3662-SS,
2011 WL 9879170, 2011 U.S.Dist. LEXIS 155, 852, at *22-*27 (W.D.Tex. Apr. 27, 2011); with
American Southern Ins. Co. v. Buckley, 748 F.Supp.2d 610 (E.D.Tex.2010).

63
14. Lincoln does not have standing as to the claim under Section 542.003
of the Insurance Code. See Appellant’s brief, pp.29-30.

We also alleged that Old American made misrepresentations in

violation of Section 542.003 of the Insurance Code, which prohibits an insurer

from “knowingly misrepresenting to a claimant pertinent facts or policy provisions

relating to coverage at issue.” TEX.INS.CODE §542.003(b)(1). See Motion, pp.25-

340 (203-208). This particular provision is found in Chapter 542, Subchapter A,

which concerns dealings between insurers and the Texas Department of Insurance.

It requires an insurer to keep a record of complaints and to report them to the

Department.66 Also, the Department has authority to investigate handling of

claims and to issue cease and desist orders and to recover attorney’s fees.67 The

remedy for this subchapter in found in Section 542.012, which allows recovery of

attorney’s fees. As it turns out, that remedy is only available to the Department of

Insurance, and we now concede that we do not have standing to assert this

particular claim for misrepresentation.

In this regard, a number of courts have held that there is no private

cause of action under Chapter 542, Subchapter A; and Old American cites those

cases on pages 29 and 30 of its brief. However, one of these cases goes too far,

66
Id. §542.005 & 542.006.
67
Id. §542.010 & 542.012.

64
saying that there is no private cause of action for all of Chapter 542. See KLZ

Diamond Tools, Inc. v. TKG Gen. Agency, Inc., 2016 Tex.App.LEXIS 7639, at *19

(Tex.App.--Dallas July 18, 2016, no pet.) (“Chapter 542 does not provide a private

cause of action for violations of its terms.”). That statement is dicta, and it is

overbroad. Like all of the cases cited by Old American, that case involved Section

542.003. And of course, Section 542.003 falls into Chapter 542, Subchapter A.

By contrast, the law is well settled that there is a private cause of action for bad

faith and misrepresentation claims, which fall under Chapter 542, Subchapter B.

PRAYER

The judgment of the trial court should be affirmed. Costs should be

adjudged against Old American.

Respectfully submitted,

/s/ Frank Gilstrap 07964000

HILL GILSTRAP, P.C.
1400 West Abram Street
Arlington, Texas 76013
(817) 261-2222
(817) 274-9724 fax
fgilstrap@hillgilstrap.com
ATTORNEY FOR APPELLEE

65
 CERTIFICATE OF SERVICE

I hereby certify that on December 21, 2017 a copy of the foregoing

Appellee’s Brief was served on the following counsel of record:

David R. Sweat
3705 W. Green Oaks Blvd., Ste. C
Arlington, Texas 76016

/s/ Frank Gilstrap

CERTIFICATE OF COMPLIANCE

I certify that this brief was prepared using Microsoft Word 2013, and

that, according to that program’s word-count function, the sections covered by

TRAP 9.4(i)(1) contain 12,667 words.

/s/ Frank Gilstrap

66