Three Times Actual Damages – How That Works

Insurance law attorneys in Dallas and the Fort Worth area need to be able to discuss how trebling of damages works in insurance cases. The Texarkana Court of Appeals issued a 2006 opinion that helps to understand this issue. The style of the case is, Allstate Indemnity Company v. Hyman. Here is some of the relevant information.
The insured was involved in an automobile accident resulting in severe damage to the vehicle. The insured filed a claim with Allstate, but thought Allstate’s offer was inadequate. The insured also filed a lawsuit against the driver of the other car and settled. The insured brought suit against Allstate for breach of contract. The jury in the trial court found in favor of the insured that Allstate breached the contract by not paying and also found a knowing violation of the Texas Insurance Code. The jury awarded actual damages of $21,600.00 ($18,000.00 for the vehicle and $3,600.00 for a rental vehicle for a reasonable period of time), enhanced damages of $54,000.00 and also awarded $25,000.00 in attorney fees. The trial court ordered an offset in the amount of the insured’s settlement with the other driver. Both sides appealed.
This appeals court affirmed the trial court’s judgment that Allstate was liable for breach of contract and a violation of the Texas Insurance Code, but reformed the judgment to provide for an award of $63,300.00 for damages. Rejecting Allstate’s argument that the insured never triggered its duty to pay the claim because the insured failed to provide information and failed to cooperate, the court determined that the information sought by Allstate was not pertinent to the investigation of the claim and the decision to accept or not accept the claim, but was a procedure that Allstate would follow after it accepted liability for the loss. The court agreed with the insured’s belief that if it signed the requested power of attorney, it would be agreeing to the amount Allstate wanted to pay and the insured would be left with no recourse. The court also rejected Allstate’s argument that the insured impaired it’s right of subrogation against the other driver. The court focused on the policy language, “if we make a payment,” and noted that in this instance Allstate had not made a payment, and thus was not entitled to recover its subrogation rights. The court determined that the amount of recovery by the insured in its settlement with the other driver was less than the amount the jury had determined was the actual value of the insured’s vehicle, thus holding that Allstate was entitled to an offset against the damage award in the amount of the value of the vehicle, less the deductible. In making its determination, the court examined the “one recovery rule” and the “made-whole doctrine.” The court next addressed Allstate’s alleged violation of the Texas Insurance Code and found that there was evidence to support the jury’s findings that Allstate made post-loss misrepresentations and that the insured was entitled to extra-contractual damages. In a matter of first impression, the court determined that the Texas Insurance Code capped the plaintiff’s recovery at three times the actual damages, not three times the actual damages plus additional damages, including court costs and attorney’s fees. Lastly, the court, in determining that Allstate was entitled to an offset, applied the offset only after trebling the actual damages stating that if it applied the offset before trebling the damages, “there would effectively be no punitive award.”