Legislative Changes to 18.001 and What it Means to You

It’s fall in an odd-numbered year and that means only one thing in Texas–lawyers have a whole host of new and updated rules to learn after the recent legislative session.

One of the most substantive changes occurred in Chapter 18.001 of the Civil Practice and Remedies Code. In the good old days (three months ago) a plaintiff could file an affidavit from a medical provider stating the amount charged for the services was reasonable and the medical services provided were necessary. If this affidavit was timely filed 30 days prior to trial (or 30 days prior to the date evidence was heard at trial), then the affidavit alone would be sufficient evidence to support a finding of fact that the amounts charged were reasonable and necessary. Once filed, the burden was then on the defendant to show the charges were not reasonable and necessary by filing a controverting affidavit within 30 days of being served with the plaintiff’s affidavit. If the defendant did not file their own controverting affidavit within 30 days, then the defendant would not be able to contest the necessity and reasonableness of the charges at trial.

HB 1693 changes all of that.

The deadlines surrounding the new rule are the most important change. Now, plaintiffs must serve their 18.001 affidavit on a defendant within 90 days of the defendant filing an answer. This is vastly different than the previous 30 day before trial (first hearing of evidence) deadline and will result in fewer defendants being rushed to file a controverting affidavit on the eve of trial.

If a court orders, or a portion of the Texas Rules of Civil Procedure set, the plaintiff’s expert designation earlier than 90 days after the defendant files its original answer, then plaintiff must serve its 18.001 affidavit by the earlier expert designation deadline. Simply put, if a court orders a plaintiff’s expert designation on a date 60 days after the defendant’s answer, then the plaintiff must file its 18.001 affidavit by its expert designation deadline, rather than the 90 days.

A defendant now has 120 days after the date they file their answer to serve their controverting affidavit. Similar to the rules for plaintiffs, defendants will have to serve their controverting affidavit earlier if a court orders the defendant’s expert designation for a time earlier than 120 days after defendant’s answer.

Practically speaking, this change will result in defendants receiving more complete sets of medical records at an earlier stage of litigation and it’s likely that service of 18.001 affidavits will now be included in agreed scheduling orders, removing doubt and adding efficiency to the litigation process.

Calculating Supersedeas Security

Calculating Supersedeas Security

If a party to a lawsuit wants to appeal the trial court’s judgment, it has to post security in the form of a supersedeas bond to suspend enforcement of the judgment during the appeal.  In Top Cat Ready Mix, LLC v. Alliance Trucking, LP, et al., the Texas Fifth District Court of Appeals recently addressed the proper calculation of the amount of the supersedeas bond.

Instructions for calculating the amount of the supersedeas bond are set forth in Chapter 52 of the Texas Civil Practice & Remedies Code.  Pursuant to the statute, “the amount of the security must equal the sum of:  1) the amount of compensatory damages awarded in the judgment; 2) interest for the estimated duration of the appeal; and 3) costs awarded in the judgment.”  Tex. Civ. Prac. & Rem. Code §52.006(a).  Unfortunately, the phrase “compensatory damages” is undefined.  In Top Cat Ready Mix, the court was tasked with interpreting the phrase “compensatory damages.”

The issue addressed in Top Cat Ready Mix is whether an award of contractual pre-judgment interest should be included as “compensatory damages” for purposes of calculating the amount of a supersedeas bond under Chapter 52.  The trial court’s judgment awarded the plaintiff $315,087.21 in “actual damages,” $198,739.63 in “contractual pre-judgment interest,” $70,000 in attorneys’ fees, and post-judgment interest.  The defendant superseded the judgment pending its appeal by posting a cash deposit in the amount of $371,802.90, reflecting the “actual damages” award, but not taking into account the “contractual pre-judgment interest.”  The plaintiff filed a Motion to Review Supersedeas Security with the appellate court seeking to increase the amount of the bond to include the “contractual pre-judgment interest.”

In its opinion dated December 27, 2018, the Texas Fifth District Court of Appeals concluded that the phrase “compensatory damages” includes contractual pre-judgment interest.  The court turned to the Black’s Law Dictionary, the Texas Finance Code, and the Texas Supreme Court’s opinion in In re Nalle Plastics Family Limited Partnership, 406 S.W.3d 168 (Tex. 2013) to reach its conclusion.  While pre-judgment interest is “compensatory,” it is not considered an element of damage.  However, in its opinion, the court drew a distinction between pre-judgment interest and contractual interest.  “’Contract interest’ means interest that an obligor has promised or agreed to pay to a creditor under a written contract of the parties.  The term does not include judgment interest.”  Tex. Fin. Code §301.002(a)(1).  The court held, “While pre-judgment interest might not be compensatory damages, ‘contractual interest’ is ‘a part of the debt, as much so as the principal.’”  (citing First Nat’l Bank v. J.I. Campbell Co., 114 S.W. 887, 890 (Tex. Civ. App. – San Antonio 1908, no writ).  Therefore, “contractual interest” is a “compensatory damage” for the purpose of calculating the amount of a supersedeas bond, while statutory “pre-judgment interest” is not.

The court’s opinion in Top Cat Ready Mix, LLC v. Alliance Trucking, LP, et al. provides guidance in both the drafting of judgments and the posting of security for an appeal.  When the amount of “pre-judgment interest” to be awarded is based upon the parties’ contract, it should be noted in the judgment as “contractual interest” and not as “pre-judgment interest.”  If the award recites the nature of the interest clearly, there should be less argument over the proper security needed to suspend enforcement of a judgment during appeal.

Contact Saunders, Walsh & Beard at 214-919-3555 for help with complex litigation matters by one of our AV-Rated attorneys in McKinney, TX.

Robert Garrey Joins Saunders Walsh and Beard as a New Partner

New Litigation Attorney Joins Collin County Firm

Saunders, Walsh & Beard is happy to announce the addition of Mr. Robert “Bob” Garrey as a Partner.

Bob’s business litigation expertise consists of trying cases in state and federal court in Texas and across the nation involving a broad range of commercial, real estate and financial/lending disputes, business torts, trade secret misappropriation, oil and gas, defamation/invasion of privacy cases, and litigation resulting from competitive bidding for state and federal government outsourcing contracts. Bob frequently represents startups, technology companies, and their executives in private company disputes, fiduciary litigation and arbitration, and has often been retained by out of state law firms to serve as local counsel in state and federal court matters in Texas.

In the employment arena, Bob has successfully represented companies and individuals involved in Trade Secret and Non-compete disputes, FLSA and ERISA class actions, departing executive compensation, commission and severance disputes, discrimination claims and EEOC investigations.

Welcome Bob!

View Bob’s bio here

Warning to Restoration Contractors and Roofers: The Old Way of Doing Business is Over.

On August 3, 2017, the 2nd District Court of Appeals in Fort Worth granted class certification against Lon Smith Roofing (LSRC), a prominent North Texas Roofer, for violation of the Texas Public Insurance Adjusting Act. Given the direction the courts in North Texas have gone in the past few years, the ruling is not a surprise. It is a warning to restoration contractors in general, and roofers in particular, that the old way of doing business is over. Contractors that negotiate with, or even represent themselves as able and willing to negotiate with, insurance adjusters do so at their own peril. (read more)

By way of background, in September 2013, the Keys sued LSRC asking the court to declare their contract void and to order the return – to them – of all monies their insurance company paid to the roofer. It’s important to remember that this is not a lawsuit about whether the roof was properly or timely installed. The roof doesn’t leak, the color isn’t wrong, the roofer didn’t damage the driveway or flower beds, or fail to respond to warranty claims. This lawsuit, which is a continuation of a dispute that started in 2011, is about language that, until recently, was commonly found in roofing contracts throughout the state of Texas.  Language that I still routinely see in roofing contracts today.

The Keys asked the 236th District Court in Tarrant County to approve them to act as representative plaintiffs in a class action lawsuit against LSRC. On October 15, 2015, the district court judge signed an order granting the class certification. That order was immediately appealed. Last week, after almost two years, the appellate court issued its ruling upholding the class certification on the Keys’ claim for the “return” of all monies paid to the roofer as part of their declaratory judgment claim (violation of Public Insurance Adjuster’s Statute/Insurance Code 4102) and the DTPA claim that provides for the potential for treble damages for violation of Texas Insurance Code 541 (unfair methods of competition and unfair or deceptive acts or practices). Class certification was denied for the DTPA claim for unconscionability.

The appellate court’s decision can, and likely will, be appealed to the Texas Supreme Court, who can choose to review that ruling, or to leave it undisturbed. In the meanwhile, the ruling upholding class certification is a further step in the continuum of cases favoring consumers to the detriment of restoration contractors. In discussing the facts supporting its decision to uphold the class certification, the court cited to testimony from Mr. Keys that the roofer “never told him that he could or should get a public insurance adjuster involved in his roof-damage claim under his homeowners’ policy” and that the homeowner “understood that [Roofer] was contracting to discuss his insurance claim with his insurer and was also contracting to repair his roof.“

Some groups are claiming this as a victory for consumers. Whatever your perspective on this issue, what is clear is that lawsuits claiming violations of the Public Insurance Adjuster (PIA) law have just been given a big boost via class certification.

What does mean for those of you working in the restoration contracting community? First, what happened to this roofer could have happened to any number of other roofers using the same or similar language in their contracts. Or any roofer negotiating claims with insurance adjusters. The ability to initiate class action lawsuits will embolden plaintiff’s attorneys to pursue similar claims against restoration contractors and roofers since they’ll only have to prove the representative plaintiff’s claim rather than the claims of every plaintiff taking part in the class action suit (one plaintiff – multiple verdicts). The cost to defend against a lawsuit of this type, win or lose, is extremely expensive. Further, if you lose, you not only have to write a check to the property owner for anything paid to you by them or their insurance company, sometimes tripled depending on whether the violation is determined to be knowing or intentional, you’ll also have to pay their legal fees, which will almost certainly greatly exceed the cost of the roof, to potentially every owner you sold for the last ten years (the span of the Keys/LSRC class action certification).

What should you do? Make sure your contract doesn’t contain any of the language the courts have determined violates the PIA statute. Include language in your contracts that specifically puts the owner on notice that you are not offering to and will not provide any PIA services. Don’t hold yourself out as an insurance expert. Understand and be ready to educate owners about their rights and options for dealing with insurance adjusters (attorney, appraisal, public insurance adjuster), making referrals where appropriate to ethical attorneys, appraisers, and public insurance adjusters who can advocate for the homeowner without taking away your sale. Restrict your conversations with insurance adjusters to answering questions regarding your scope and price – don’t negotiate the claim with the insurance adjuster.

Karen, you say, you don’t know what it’s like out in the real world. But I do understand, including that the majority of “negotiations” are initiated by the insurance adjuster. However, this PIA law isn’t going away. Instead, it is being vigorously and strictly enforced in the courts and by TDI, and the ramifications to your business cannot be ignored.

SWB Wins Insurance Coverage for Clients in Federal Court


Congratulations to our firm’s clients, Phil and Susan Swartztrauber, for winning a court order obtaining insurance coverage against Travelers Casualty and Surety Company of America.

The case was handled by Alex Beard.  The Swartztraubers were board members of their Home Owners Association (HOA), and were sued for alleged defamation in an underlying suit filed by the HOA’s President.  Travelers insured the HOA, but refused to provide the Swartztraubers with a defense to the defamation suit.

U.S. District Judge David Hittner disagreed, and ruled that Travelers breached its policy contract, and violated the Texas Prompt Payment Statute, by failing to provide the Swartztraubers with a defense.  So, Travelers will have to pay for the defense, legal fees and costs of the coverage case, as well as the underlying lawsuit.

Great work, Alex!