Chapter 542A and the Importance of the Presuit Notice Letter
Chapter 542A of the Texas Insurance Code applies to wind and hail claims filed on or after September 1, 2017, as a response to concerns raised regarding the handling of insurance claims arising out hailstorms and other forces of nature. The goal of Chapter 542A was to “mitigate the growing trend of abusive severe weather event lawsuits” and to address the growing number of weather-related lawsuits against property insurers, which “is motivated by profit, not actual damages to real property, and should be discouraged.”
The statute applies to first-party claims made against an insurer covering damage to real property that arise from damage caused, wholly or partly, by forces of nature. Pursuant to Section 542A.003, the claimant must provide written notice to the insurer not later than the 61st day before the date the claimant files suit against the insurer, unless notice is impracticable. The notice must include a statement of the acts or omissions giving rise to the claim, the specific amount alleged to be owed by the insured, the amount of reasonable and necessary attorney’s fees, and a statement that a copy of the notice was provided to the claimant (if being submitted by an attorney).
Failure to provide the required notice pursuant to Section 542A.003 results in abatement, if the insurer timely files a plea in abatement. This is a similar remedy as that allowed under Chapter 541 and the Texas Deceptive Trade Practices Act. However, Section 542A.007(d) introduced more significant consequences:
If a defendant in an action to which this chapter applies pleads and proves that the defendant was entitled to but was not given a presuit notice stating the specific amount alleged to be owed by the insurer under Section 542A.003(b)(2) at least 61 days before the date the action was filed by the claimant, the court may not award to the claimant any attorney’s fees incurred after the date the defendant files the pleading with the court. A pleading under this subsection must be filed not later than the 30th day after the date the defendant files an original answer in the court in which the action is pending.
In J.P. Columbus Warehousing, Inc. v. United Fire & Casualty Co., No. 5:18-cv-00100, 2019 WL 453378 (S.D. Tex. January 15, 2019), the Southern District of Texas, in a matter of first impression, granted relief pursuant to Section 542A.007(d) in response to Defendant’s Motion to Deny Plaintiff’s Claim for Attorney’s Fees Pursuant to Chapter 542A of the Texas Insurance Code. In that case, Plaintiff filed suit against its insurer related to two separate claims arising from two separate storms. It was undisputed that Plaintiff failed to send a presuit notice, but Plaintiff argued that it was impractical to send the notice because the statute of limitations was about to run on the first claim. The Court found that it was not impracticable for Plaintiff to send the presuit notice, noting that Chapter 542A provided that someone other than an attorney may provide the notice and that Plaintiff had retained a public adjuster more than 7 months prior to the expiration of the statute of limitations. Having found that Defendant had proven that it was entitled to but did not receive the required notice, the Court ordered that Plaintiff not receive attorney’s fees incurred after August 2, 2018, the date Defendant filed its motion.
The statute requires that the insurer “plead and prove” that it did not receive the notice to which it was entitled, and the consequence of failure to provide notice are that the court shall not award attorney’s fees incurred after the date the insurer files the pleading. Because of the scant amount of case law on this new law, it is not clear whether the attorney’s fees are capped based on when Section 542A.007 is pled (such as in an answer) or when the insurer files a motion proving its entitlement to the relief provided under that Section. In J.P. Columbus, the Court capped attorney’s fees based on the date the defendant filed its motion seeking to cap the damages. However, this was the first time that the insurer raised Section 542A.007; there was no reference to the statute in the insurer’s answer.
Based on a strict reading of the statute, it appears that the pleading asserting Section 542A.007 must be filed within 30 days of the original answer, but that the motion seeking enforcement of that provision and proving the insurer’s entitlement to it may be filed later.
A recent case from the Southern District of Texas also highlights the importance of the presuit notice letter. In Taboada v. State Farm Lloyds, No. 2:18-CV-543, 2019 WL 4200639 (S.D. Tex. Sept. 5, 2019), Plaintiffs sent several non-compliant notice letters, the first of which expressly protested the legislative requirements. Initially, State Farm filed a plea in abatement, which Plaintiffs did not oppose. When the next letter was again non-compliant, the Court issued an Order requiring a new notice and a statement of compliance to be filed after service of the notice. The Court noted that Plaintiffs’ notice letters were inconsistent, alleged different amounts in controversy, failed to include an estimate of damages (though they referenced one), and failed to specifically identify the alleged violations of Chapter 541 of the Texas Insurance Code. The Court was further bothered by the fact that Plaintiffs’ failure to comply caused significant delays in the case. After providing Plaintiffs with five opportunities to comply with the substantive requirements for the notice letters as set out in Sections 542A.003 and 541.154, the Court ultimately dismissed Plaintiffs’ extra-contractual claims “for failure to provide notice of the conduct on which they are based.”
We will continue to monitor the developing case law regarding this important statute.