Interest and Attorneys’ Fees? – Saved by the Federal Rules of Civil Procedure

In a recent decision from a United States District Court, the trial court had to decide whether the insured was owed statutory interest and attorneys’ fees even though the insured did not properly plead for the interest or fees. In Agredano v. State Farm Lloyds, the insured prevailed on their breach of contract claim.¹ After the trial, the court had to decide if the insured was allowed to recover statutory interest and attorneys’ fees.

The court discussed that attorneys’ fees are recoverable only if allowed by statute or contract. The insurance policy did not allow the recovery of attorney fees so the insured would only be entitled to attorneys’ fees if awarded by statute. The insureds argued that two statues allowed for the recovery of attorneys’ fees, the Civil Practice & Remedies Code and the Texas Insurance Code. The court examined the Texas Civil Practices and Remedies Code chapter and determined that it did not allow for the recovery.

The court next looked at the Texas Insurance Code and agreed with the insured’s case met the prerequisites of the statue to recover. However, the court held that the insured failed to plead claims under the statute or requested damages under the statue as a basis to recover. The court referenced that the order on defendants’ Motions for Summary Judgment stated that the only claim surviving the motion was the plaintiffs’ breach-of-contract claim.

The case ultimately had a happy ending for the insured as the court held that despite failing to request relief under the Texas Insurance Code in their pleadings, the insureds are entitled to attorneys’ fees and statutory interest under Federal Rule of Civil Procedure 54. The court looked at the text of Rule 54 in “[e]very [non-default] final judgment should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.”²

So, if the fees and interest provided for in the Texas Insurance Code are characterized as “relief” and if the insureds are entitled to that relief, then they may receive those fees and that interest despite not demanding them in their pleadings. The court looked at caselaw and determined that the Fifth Circuit observed that the Texas Supreme Court had frequently referred to the interest and fees imposed by the Insurance Code as a penalty that applies automatically if the claim is not paid within the period allowed.

Because the insureds satisfied all of the Insurance Code’s substantive requirements, they were entitled to that relief. Therefore, under Federal Rule 54(c), the final judgment for the insureds should grant that relief to them despite their failure to demand it in their pleadings.
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¹ Agredano v. State Farm Lloyds, No. 15-CV-01067 (W.D. Tex.—San Antonio Div. July 25, 2018).
² FED. R. CIV. P. 54(c).