Norris v. State Farm Mutual Automobile Insurance Co. , 2004 Tex. App. LEXIS 3433 ( 2004 )

MEMORANDUM OPINION

BILL VANCE, Justice.

Jimmie R. Norris (“Norris”) appeals from a take-nothing judgment in a suit against State Farm Mutual Automobile Insurance Company (“State Farm”) to collect under the underinsured motorist (“UIM”) provision of his insurance policy. Norris challenges the trial court’s failure to award prejudgment interest and attorney’s fees. Following our decision in Allstate Indemnity Co. v. Collier and that of the Eastland Court in Menix v. Allstate Indemnity Co., we find that Norris is entitled to both. Therefore, we will reverse the judgment.

On December 8, 1997, Norris was injured in a car accident. After settling his claim against Allen Johnston, the other driver, for $40,000, Norris sued State Farm to collect under the UIM provision of his insurance policy. A jury determined that: (1) Johnston’s negligence proximately caused the accident; (2) Norris suffered $51,200 in damages from the accident; and (3)Norris’s reasonable and necessary attorney’s fees were $11,500 for trial preparation, $5,000 for appeal to the court of appeals, and $7,000 for appeal to the Supreme Court. Because Johnston’s insurance policy limit was $50,000 and because State Farm had previously paid Norris $5,000 under the personal injury protection (“PIP”) provision of Norris’s policy, the court determined that State Farm was entitled to $55,000 in settlement credits. Finding that the credits exceeded the damages verdict, the court rendered a take-nothing judgment in favor of State Farm. Norris contends that he was entitled to prejudgment interest on $51,200, as well as attorney’s fees.

Allstate Indemnity Co. v. Collier

Norris’s first issue asserts that the court erred by failing to award prejudgment interest, citing Allstate Indemnity Co. v. Collier for the proposition that he is entitled to have prejudgment interest added to his damages before deducting any settlement credits. Allstate Indem. Co. v. Collier, 983 S.W.2d 342, 344 (Tex.App.-Waco 1999, pet. dism. agr.). We agree. In Collier, we affirmed a judgment that included prejudgment interest where the jury’s determination of damages was less than the tortfeasor’s liability insurance. Id. at 343-44. Prejudgment interest was added to the jury’s damages, then the settlement credit was deducted. Id. Thus, the in Collier reflected:

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Post-Collier Cases

In 2000, the Texas Supreme Court addressed the issue of prejudgment interest in the context of UIM coverage in Henson v. Southern Farm Bureau, 17 S.W.3d 652 (Tex.2000). The Supreme Court held that no contractual obligation to pay under the UIM provisions arose until the jury established the tortfeasor’s liability, i.e., that an insurer cannot breach its duty to pay prior to a jury verdict establishing the tortfea-sor’s liability. Id. at 654. However, we do not believe that Henson bars all prejudgment interest, because the Court also said, “And the insurers do not dispute that had the trial court awarded prejudgment interest against the tort defendants, the insurers would be obligated to pay the entire judgment including that portion awarded for prejudgment interest, to the extent of policy limits.” Id. at 653.

As the Eastland Court of Appeals aptly noted, there are two distinct types of prejudgment interest that may be involved in a UIM case: Cavnar-type and Henson-type. Menix v. Allstate Indem. Co., 83 S.W.3d 877, 879-80 (Tex.App.-Eastland 2002, pet. denied). Menix, the injured plaintiff, sued the underinsured tortfeasor and Allstate, Menix’s UIM insurer. Id. at 879. After settling with the tortfeasor for policy limits of $20,000, she continued her suit against Allstate to recover UIM benefits. Id. Menix’s UIM policy limit was also $20,000. Id. Prior to trial, the parties stipulated: (1) the tortfeasor was the sole proximate cause of the accident; (2) the tortfeasor had paid Menix $20,000; (3) Allstate had paid Menix $2,500 for personal injury protection (PIP) benefits; and (4) Allstate would be liable for all damages between $22,500 and $42,500. Id. After a jury determined Menix’s actual damages were $27,800, she requested prejudgment interest and attorney’s fees. Id. The trial court denied this request, reduced the damage award by the stipulated credits, and rendered judgment for Menix in the amount of $5,300 ($27,800 less $22,500). Id. Menix appealed, among other things, the court’s failure to award prejudgment interest and attorney’s fees. Id.

The Eastland Court identified two independent types of prejudgment interest that may be involved in a UIM case: Cav-nar- type prejudgment interest, which is that amount awarded as damages in a personal injury action, and Henson-type prejudgment interest, which is that amount that could be awarded against an insurer for breach of contract when the insurer fails to pay amounts the insured is legally entitled to recover under a UIM provision. Id. at 879-80. Noting that Me-nix’s UIM policy limits exceeded the damages found by the jury, the court held that Menix was entitled to the “additional damages of Cavnar-type prejudgment interest” on the jury’s actual damages award, provided that the judgment could not exceed her UIM policy limits. Id. at 880. Thus, the court remanded the case to the trial court to enter a judgment for Menix for:

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Following Menix, we conclude that Henson does not bar Cavnar-type prejudgment interest in UIM cases. Thus, based on Collier and Menix, Norris is entitled to judgment for:

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If Norris’s total damages exceed the credits allowed to State Farm, he is entitled to a judgment for the difference, not to exceed the UIM limits of his policy. We sustain Norris’s first issue.

ATTORNEY’S FEES

Following our decision in Allstate Ins. Co. v. Lincoln, we also find that Norris is entitled to attorney’s fees. Allstate Ins. Co. v. Lincoln, 976 S.W.2d 873, 876 (Tex.App.-Waco 1998, no pet.). We sustain issue two.

CONCLUSION

We reverse the judgment and, because the parties do not agree on the amount of prejudgment interest, remand the cause for a determination by the trial court of the amount of the judgment to be entered in Norris’s favor, including Cavnar-type prejudgment interest, post-judgment interest, and attorney’s fees as found by the jury-

Chief Justice GRAY dissenting.