United States Court of Appeals,
Fifth Circuit.
No. 92-2665.
Georganne ROBINSON, Plaintiff-Appellant,
v.
STATE FARM FIRE & CASUALTY COMPANY, Defendant-Appellee.
Feb. 3, 1994.
Appeal from the United States District Court for the Southern District of Texas.
Before VAN GRAAFEILAND,* SMITH and WIENER, Circuit Judges.
VAN GRAAFEILAND, Circuit Judge:
Georganne Robinson, who secured a judgment against State Farm Fire & Casualty Company
("State Farm") for a fire loss covered by a State Farm policy, appeals from the district court's
direction of a verdict in favor of State Farm on all of Robinson's non-contractual claims and its
summary dismissal of her cause of action for alleged negligent claim handling. Robinson also
challenges various interlocutory orders, a post-trial motion for a new trial based on the district judge's
failure to recuse himself, and the district court's calculation of attorney's fees that were included in
the judgment. We affirm in part and remand in part.
Robinson is a homeowner who at the time of the incidents involved herein was insured under
a Texas standard homeowner's policy issued by State Farm. Robinson's home was heavily damaged
by two separate fires which occurred within a six-month period of time. The losses resulting from
the first fire were paid. In calculating her losses from the second fire, Robinson arrived at a total
figure of $164,395.54. This included $57,803.86 for structural damage, $73,871.68 for damage to
the contents, and $32,720.00 for additional living expenses. State Farm's calculations produced
figures of $15,539.02 for the structure and $10,722.00 for the contents. In addition, State Farm
claimed a credit of $20,595.69 against the demand for additional living expenses for payments it had
made, directly or indirectly, to Robinson. Following a jury trial, final judgment was entered in
*
Senior Circuit Judge of the Second Circuit, sitting by designation.
Robinson's favor in the amount of $34,363.29 plus $25,000.00 in attorney's fees.
Looking at the foregoing summary of the parties' contentions, one is led to wonder why the
district court's docket sheet contains more than one hundred entries and why the case took six days
to try. At the attorney's fee hearing, the district judge commented that the case was "over-worked,"
"over-prepared," and "over-done." After reading the record and Robinson's heavily-footnoted 40-
page appellant brief and 21-page reply brief in which nine alleged errors of the trial court are
discussed, we are inclined to agree. This overkill is the result of the efforts of Robinson's attorney
to prove a breach of State Farm's common law duty of good faith and fair dealing, as created in
Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987), and a violation of
the interrelated provisions of sections 17.46 and 17.50 of the Texas Deceptive Trade Practices Act
and Article 21 of the Texas Insurance Code.
In Arnold, supra, the Texas Supreme Court held that insurers must deal fairly and in good
faith with their insured in the processing and payment of claims. 725 S.W.2d at 167. In Aranda v.
Insurance Co. of North Am., 748 S.W.2d 210 (Tex.1988), the Texas Supreme Court enlarged on the
elements of this claim, stating that in order to prevail on a claim for the breach of the duty of good
faith and fair dealing an insured must show:
(1) the absence of a reasonable basis for denying or delaying payment of the benefits
of the policy and (2) that the [insurer] knew or should have known that there was not a
reasonable basis for denying the claim or delaying payment of the claim.
Id. at 213. In defining the specific elements of this common law claim, the Aranda court also stated
that, under its test, insurers "maintain the right to deny invalid or questionable claims and will not be
subject to liability for an erroneous denial of a claim." Id. In other words, the existence of a "bona
fide controversy is a sufficient reason for failure of an insurer to make a prompt payment of a loss
claim." St. Paul Lloyd's Ins. Co. v. Fong Chun Huang, 808 S.W.2d 524, 526 (Tex.App.—Houston
[1st Dist.] 1991, writ denied). See also St. Paul Guardian Ins. Co. v. Luker, 801 S.W.2d 614, 618
(Tex.App.—Texarkana 1990, no writ); Dixon v. State Farm Fire & Casualty Co., 799 F.Supp. 691,
694 (S.D.Tex.1992).
The Texas Insurance Code and the Deceptive Trade Practices Act are in large measure
statutory fleshings-out of the already existing, common law requirements. Among an insurer's
practices specifically condemned by the Code is "Compelling policyholders to institute suits to
recover amounts due under its policies by offering substantially less than the amounts ultimately
recovered in suits brought by them." Unfair Claim Settlement Practices Rules $ .003(5). Because
Robinson places substantial reliance on this provision, we dispose of it before addressing the general
issue of good faith and reasonableness. As above stated, the judgment below was for $34,363.29.
State Farm's offer was $26,261.02 and Robinson's demand was $164,395.54. Assuming for the sake
of argument that State Farm's offer was "substantially less" than the amount of the judgment, this was
not what compelled Robinson to institute suit. Rather, it was Robinson's greatly excessive demand.
There was nothing for the jury to consider on this issue, and the district court correctly rejected
Robinson's claim based on Rule .003(5).
Robinson's general contentions of bad faith are equally without merit. State Farm based its
payment offers on estimates prepared by an experienced insurance adjuster and also by two
contractors who had prepared estimates on the first fire. It thus had a reasonable basis for its offers
and had no reason to doubt that it had a reasonable basis. Because a bona fide dispute then existed
as to the amount of Robinson's loss, there can be no claim of bad faith on State Farm's part.
Robinson's only argument in support of her contention that State Farm acted unreasonably
was that State Farm allegedly used an improper method of calculating the combined damage from the
two fires by assessing the damages separately and paying the total of the two assessments. Robinson
contends that State Farm should have calculated the amount owed her for the damage caused by the
second fire by valuing the total loss, t hen subt racting out the first fire payments and treating the
difference as the second fire loss. This method of calculation would have to be based on assumptions
that payments for the first loss were accurate and not limited in amount by policy limitations, and that
all of the damage disclosed after the second fire was caused by the two fires and nothing else,
assumptions that are unwarranted in the instant case. State Farm's offers were based on estimates
prepared by an experienced adjuster and two contractors. Needless to say, their figures were much
closer to the amounts actually awarded than were Robinson's. There was no evidence upon which
a jury could make a finding of bad faith or unreasonableness, and the district court did not err in
directing a verdict in favor of State Farm on these issues.
The district court likewise did not err in summarily dismissing Robinson's claim that State
Farm was negligent in its handling of Robinson's claim. See United Services Automobile Ass'n v.
Pennington, 810 S.W.2d 777, 783-84 (Tex.App.—San Antonio 1991, writ denied).
Robinson's subsidiary contentions require little comment. Her claim that District Judge Black
should have recused himself because he was a State Farm policyholder borders on the trivial. In the
first place, Robinson was informed of this fact before the trial commenced and did not seek recusal
until after the trial was over. See United States v. York, 888 F.2d 1050, 1055-56 (5th Cir.1989).
Secondly, because the outcome of the instant proceeding would not have so substantially affected the
value of Judge Black's interest as a policyholder to require his recusal if State Farm were a mutual
company, see 28 U.S.C. § 455(d)(4)(iii), it certainly would not require his recusal if, as was the fact,
State Farm was a stock company. We find nothing in Judge Black's conduct and rulings to warrant
a charge of bias. See Phillips v. Joint Legislative Committee on Performance & Expenditure Review,
637 F.2d 1014, 1019-21 (5th Cir.1981), cert. denied, 456 U.S. 960, 102 S.Ct. 2035, 72 L.Ed.2d 483
(1982).
We discern no prejudicial abuse of discretion in any of the eight evidentiary rulings that
Robinson challenged. See Harrell v. DCS Equip. Leasing Corp., 951 F.2d 1453, 1464 (5th
Cir.1992). At the outset, we note that some o f the evidence claimed to have been improperly
excluded was in fact not excluded, or was rejected because it was not proper rebuttal evidence. See
Cates v. Sears Roebuck & Co., 928 F.2d 679, 685 (5th Cir.1991). Furthermore, the district judge
quite properly attempted to limit the proof to the dispo sitive issues in the case and to exclude
evidence whose probative value was not outweighed by its tendency to delay the trial or
prejudiciously obfuscate the issues. To the extent, if any, that there was error, it was harmless error
that did not deprive Robinson of a fair trial.
The district court did not err in denying Robinson's belated motion to amend her complaint
by adding two adjusters and an agent as additional defendants, thus divesting the district court of
diversity jurisdiction and permitting Robinson to seek a remand to state court. Further justification
for this ruling can be found in the apparent unlikelihood that Robinson had any claims against the
named individuals. See Ayoub v. Baggett, 820 F.Supp. 298 (S.D.Tex.1993). Similarly, the district
court did not err in refusing to permit Robinson to amend her complaint to include claims arising out
of the first fire. Final payment of all claims arising out of the first fire had been made on June 20,
1989, more than two years prior to the motion to amend.
A district court's rulings on discovery motions are largely discretionary and will be reviewed
only when they are arbitrary or clearly unreasonable. Mayo v. Tri-Bell Indus., Inc., 787 F.2d 1007,
1012 (5th Cir.1986). The district court weighed Robinson's demands against the evidence already
produced and the issues being litigated, and decided that further discovery was unnecessary and
largely irrelevant. There was no prejudicial error here.
Having disposed of Robinson's meritless claims of error, we now come to her two contentions
that have some substance: (1) the computations that the district court made in transposing the jury's
verdict into the judgment and (2) the procedure followed by the court in determining the attorney's
fee.
THE JUDGMENT
The jury was not asked to render a general verdict. Instead, by means of special
interrogatories it was asked to determine the losses for damage to the dwelling and the contents and
to state the amount of additional living expenses t o which Robinson was entitled. The judge
instructed the jury t hat when he got the jury's dollar values he would sit down with the lawyers,
because there were deductions and po licy limits to be considered. He told the jury not to be
concerned with amounts that had been paid "because we can deduct that." The jury computed the
losses for damage to the structure at $22,500.00 and to the contents at $26,000.00. It computed
additional living expenses to be $37,112.00. In adjusting the figure for additional living expenses,
the court deducted $4,392.00 because the jury's award was that much in excess of the policy limits.
An additional $20,595.69 was deducted because it already had been paid. According to the record,
between the rendition of the verdict and the entry of judgment, State Farm sent Robinson a check for
$26,261.02, the amount of its damage computation. The $34,363.29 judgment is the difference
between that payment and the redacted jury award.
We have no problem with the result thus reached. We are satisfied, however, that the
judgment contains an error in its direction for the computation of interest. State Farm did not make
a valid unconditional tender of the $26,261.02 until shortly before judgment was entered. See
Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1164-65 (5th Cir.1976). Accordingly, in addition to
the amount of prejudgment interest directed to be computed in the judgment, Robinson was entitled
to prejudgment interest on the $26,261.02 up until the date it was paid. The judgment should be
amended accordingly.
ATTORNEY'S FEES
In determining whether the district court properly calculated attorney's fees, we need not
answer the as-yet unanswered question whether state or federal law controls the calculation of fees
as distinguished from their entitlement. See Powell v. Old Southern Life Ins. Co., 780 F.2d 1265,
1267-68 (5th Cir.1986). This is because the Texas courts look to many of the same factors as do the
federal courts in making attorney-fee awards. See Atlantic Richfield Co. v. Manges, 702 F.2d 85,
87 (5th Cir.1983). The district court below received evidence relating to a number of these factors
but then, after stating that plaintiff's attorney had "built this case far out of proportion," continued
"I'm going to award a reasonable amount of attorney's fees solely because I want Ms. Robinson to
have the amount that she would have gotten if she had settled this case many years ago. I'm going
to award 25,000 dollars in attorney's fees." Whether we look to federal or state law for guidance,
this was not an adequate explanation concerning the appropriateness of the award. Accordingly, the
award of attorney's fees must be vacated and the matter remanded to the district court for a more
adequate explanation of the result reached. In making this remand, we do not imply that the
$25,000.00 figure is not a proper one. On the present record, we are not in a position to say.
CONCLUSION
We AFFIRM the judgment appealed from in all respects except for the above discussed
provision for computing prejudgment interest and the award of attorney's fees. As to the interest
award, we direct that the computation of prejudgment interest should include interest on $26,261.02.
As to the award of attorney's fees, we REMAND for a further and more complete statement by the
district court as to how it arrived at the figure of $25,000.00.
No costs to either side on this appeal.
Robinson v. State Farm Fire & Casualty Co.
Court: Court of Appeals for the Fifth Circuit
Date filed: 1994-02-03
Citations: 13 F.3d 160
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