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by Crystal Vogt

Recently, a magistrate judge for the Eastern District of Texas recommended granting an insurer’s motion for summary judgment, holding that an insured’s claims for statutory interest and attorneys’ fees under Chapter 542 of the Texas Insurance Code do not survive the death of the insured and should be dismissed.[1] In Barron v. Century Surety Company d/b/a Century Insurance Group, the insured’s commercial building, which was insured by Century, was damaged by a winter storm.[2] A dispute arose and the insured sued Century for breach of contract, statutory bad faith, and statutory interest and attorney fees under Chapter 542.[3] The Court had previously dismissed the insured’s bad faith claims.[4]

Unfortunately, the insured passed away during the pendency of the lawsuit, and his wife replaced him as the administratrix of his estate in this lawsuit.[5] Century then filed a Motion for Summary Judgment arguing that none of the insured’s extra-contractual claims survive his death because they are penal and personal in nature.[6] The Court noted that “[i]n general, statutory interest and attorney fees under chapter 542 are penal in nature and, as a result, do not survive [the death of an insured]. A statute is penal if it ‘permits a recovery ... for the purpose of enforcing obedience to the mandate of the law. In contrast, a statute is remedial if the recovery is permitted as a remedy for the injury or loss suffered. Neither statutory interest nor attorney fees are designed to remediate harm from a plaintiff’s injury.’”[7] As a result, the administratrix could not recover attorney’s fees or statutory interest under Chapter 542 based on the magistrate’s recommendation. However, the magistrate judge did note that Century’s Motion for Summary Judgment did not address the insured’s claim for breach of contract, and that the administratrix may be able to recover attorney’s fees under that cause of action.[8]

The facts in this one are rather unique, but the magistrate’s analysis is a reminder that insurance contracts are, in fact, personal contracts and under Texas law cannot be transferred.

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[1] Barron v. Century Sur. Co., No. 1:22-CV-144-MAC-ZJH, 2024 WL 4525503, at *1 (E.D. Tex. Oct. 4, 2024).

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id. at 2.

[7] Id. at 3 (internal citations omitted)

[8] Id. at 2. The administratrix filed objections to the magistrate report seeking a de novo review by the judge, however, the parties have also filed a Motion for Continuance in light of the death of the administratrix.