UNITED STATES COURT OF APPEALS For the Fifth Circuit

No. 99-40181

TEXAS MUNICIPAL LEAGUE, ETC., ET AL.,

Plaintiffs,

CITY OF PASADENA, CITY OF BEAUMONT,

Plaintiffs-Appellants-Cross-Appellees,

VERSUS

HARTFORD LIFE & ACCIDENT INSURANCE COMPANY, HARTFORD FIRE INSURANCE COMPANY,

Defendants-Appellees-Cross-Appellants.

Appeals from the United States District Court For the Southern District of Texas (B-91-CV-166) September 27, 2000 Before KING, Chief Judge, GARWOOD and DeMOSS, Circuit Judges.

PER CURIAM:*

This consolidated appeal involves what are essentially two

different cases arising out of the Texas Municipal League Benefits

Risk Pool’s (“TML Risk Pool”) insurance and administration

* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. contracts with Hartford Life and Accident Insurance Company and

Hartford Fire Insurance Company (collectively “Hartford”). In the

first case, the City of Pasadena (“Pasadena”) appeals the district

court’s final judgment, following entry of a judgment on partial

findings under Federal Rule of Civil Procedure 52(c), providing

that Pasadena take nothing for its breach of contract claim and its

claims under the Texas Deceptive Trade Practices and Consumer

Protection Act (“DTPA”),

-

17.854, and Texas Insurance Code article 21.21 § 16(a). Hartford

cross-appeals, arguing that the district court erred in not

ordering restitution by Pasadena to Hartford for overpayment under

their contract.

In the second case, the City of Beaumont (“Beaumont”)

challenges the district court’s denial of attorney’s fees despite

its finding in favor of Beaumont’s breach of contract claim against

Hartford. Beaumont further contends that the district court erred

in reducing the damages award and in failing to find a violation of

article 21.21-2 of the Texas Insurance Code. Hartford cross-

appeals, maintaining that the district court improperly concluded

that Hartford breached its contract with Beaumont.

I. BACKGROUND

In 1979, the TML Risk Pool, an affiliate of the Texas

Municipal League, was formed to procure and manage health insurance

2 for the employees of member-city governmental entities. Pasadena

and Beaumont were members of the TML Risk Pool. In 1986, the TML

Risk Pool placed its health insurance program out for bid. As a

result, Hartford forwarded a proposal (“Proposal”) and was

ultimately selected as the insurer and claims administrator. After

the bid process, Hartford, the TML Risk Pool, and various other

interested parties including some member cities negotiated a series

of agreements to govern their relationships.

In late September 1991, the TML Risk Pool filed suit against

Hartford in Cameron County District Court for damages arising from

Hartford’s alleged malfeasance or nonfeasance with respect to the

health insurance program. Hartford removed the action to federal

court on the basis of diversity. Thereafter, Beaumont intervened

as an individually-named plaintiff in the TML Risk Pool lawsuit

while Pasadena filed a separate suit. In response to Pasadena’s

action, Hartford filed a counterclaim against Pasadena, seeking to

recoup damages for the overpayment of medical claims. Ultimately,

Beaumont and the TML Risk Pool’s lawsuit was consolidated with

Pasadena’s suit. That consolidated case proceeded to a bench trial

in February 1996. During trial, the TML Risk Pool settled with

Hartford, but Pasadena and Beaumont continued with their claims.

A. Pasadena’s Claims Against Hartford

In 1986, Pasadena hired Hartford to administer Pasadena’s

self-funded health insurance program and to provide excess

3 coverage. Pasadena, Hartford, and the TML Risk Pool executed three

contracts: 1) an Administrative Services Agreement (“ASO”); 2) an

Individual Stop-Loss Contract (“ISL”); and 3) an Aggregate Stop-

Loss Contract (“ASL”). Pasadena remained a self-funded entity, but

under the ASO, Hartford had to administer the payment of bills

received from medical providers. Under the ISL and the ASL,

Hartford had to provide excess insurance coverage, which required

Hartford to pay the costs of individuals above a certain amount and

the aggregate costs of all benefits above a certain amount.

Prior to entering the agreements with Hartford, Pasadena had

established a Preferred Provider System (“PPO”) in 1984. Under the

PPO, medical providers had agreed to certain percentage discounts

off their standard charges in exchange for Pasadena’s recommending

those providers. An outside vendor, CAPPCare,2 was hired by

Pasadena to administer the PPO. Before Hartford began

administering Pasadena’s health insurance claims, the medical

providers had been responsible for submitting already discounted

bills. During Hartford’s administration of Pasadena’s health

insurance plan, however, the PPO providers’ bills did not include

a discount.

Several months after the start of Hartford’s tenure,

Pasadena’s health insurance plan became underfunded, resulting in

substantial losses. Believing that the result of the losses were

2 Originally, Pasadena contracted with Southeast Medical Service (“SEMS”) to administer the PPO. CAPPCare later purchased SEMS.

4 due to Hartford’s failure to apply the PPO discount on the bills

submitted by the medical providers, Pasadena filed suit against

Hartford. Pasadena’s amorphous complaint seemed to raise three

claims: 1) under the ASO and Hartford’s Proposal, Hartford should

have taken the PPO discount from the bills submitted by the medical

providers; 2) pursuant to Hartford’s administrative

responsibilities under the ASO and the Proposal, Hartford should

have discovered that the shortfall occurred from the failure to

take the PPO, and it should have instituted a program to secure the

health insurance plan’s financial stability; and 3) in the

alternative, the Proposal included representations regarding the

services to be provided that ultimately proved untrue, and those

representations constituted DTPA and Texas Insurance Code

violations. The case went to trial, but after Pasadena presented

its case, the district court ruled pursuant to Rule 52(c) that

Hartford did not breach its contract with Pasadena because Hartford

did not have any knowledge that non-discounted bills would be

submitted and because the ASO did not require Hartford to ascertain

that fact.2 Furthermore, the district court held against Hartford

in its counterclaim to recoup from Pasadena alleged overpayments

made by Hartford due to Pasadena’s exceeding its ISL and ASL limits

sooner than if discounted PPO payments had been made.

2 Two different judges comprised the district court that heard the TML Risk Pool suit. Judge Reavley entered several pre-trial orders, while Judge Newblatt conducted the trial and entered the final judgments. Both sat by designation.

5 Both Pasadena and Hartford appeal the district court’s

rulings.

B. Beaumont’s Claims Against Hartford

Hartford’s contract with Beaumont ran from October 1, 1986

through September 30, 1989. Beaumont’s relationship with Hartford

was governed by a Minimum Premium Agreement (“MPP”), which

incorporated a delayed funding mechanism, excess insurance

coverage, and claims processing by Hartford. Under the MPP,

Beaumont funded the health claims of its municipal employees and

their eligible dependents (collectively “participants”) up to an

agreed maximum by reimbursing Hartford for medical claims that

Hartford processed and paid. Beaumont funded the claims by

remitting payments to Hartford on a delayed basis rather than in

advance. The insurance coverage related to Hartford’s agreement to

cover with its own funds claims that exceeded certain limits.

Three limits existed under the MPP. First, the Individual

Participant Liability Limit (“IPLL”) limited Beaumont’s liability

for each individual’s claims. Second, the Aggregate Plan Liability

Limit (“APLL”) limited Beaumont’s liability for all participants’

health claims in a contract year. And third, if Beaumont so chose,

the Plan Benefit Extension Limit (“PBEL”) could limit Beaumont’s

liability for health claims after termination of the MPP.

In early 1989, Beaumont decided to become self-insured and to

terminate its relationship with Hartford effective September 30,

6 1989. When Beaumont intervened in the TML Risk Pool suit, it

asserted various claims ranging from breach of contract to DTPA

violations. Of those claims, most were dismissed before trial.

The only claim to survive and be addressed by the district court

was Beaumont’s breach of contract claim under the MPP. In general,

that claim concerned the payment of claims in the final year of the

contractual relationship, specifically the medical expenses

incurred before the termination date but not paid on or before that

date. Beaumont contended that Hartford was liable for those claims

and, as a result, argued that those claims should have been

included in any calculation of the APLL for the final contract

year. Because those claims would have added to any excess beyond

the APLL limit, Beaumont sought reimbursement of its funds. At

trial, the district court agreed with Beaumont and awarded

$371,868.41 in damages. After post-trial motions for

reconsideration, the district court reduced that amount to

$346,421.70, but did not award Beaumont attorneys’ fees or treble

damages under the Insurance Code. The district court, however, did

award Beaumont pre-judgment interest accruing as of October 30,

1989, thirty days after the MPP expired.

Both Beaumont and Hartford appeal.

II. DISCUSSION

A. Pasadena v. Hartford

7 Pasadena presents three main issues on appeal. The first two

concern Pasadena’s claims against Hartford for overpayment of

health insurance claims to medical providers, while the last issue

refers to Hartford’s cross-appeal against Pasadena for restitution.

We review the first two issues apart from the last.

1. Pasadena’s Two Claims Against Hartford

The district court entered the final judgment as to Pasadena’s

claims after it first granted Hartford’s motion for judgment on

partial findings under Rule 52(c).3 Accordingly, we review the

judgment under the standard reserved for a Rule 52(c) ruling. See

Downey v. Denton County, Tex.,

(5th Cir. 1997).

The factual findings are reviewed for clear error, while the

district court’s legal conclusions are subject to de novo review.

Id. & n. 5. The construction of an unambiguous contract is a

question of law.4 See Tarrant Distribs. Inc. v. Heublein Inc.,

(5th Cir. 1997).

3 Rule 52(c) provides: If during a trial without a jury a party has been fully heard on an issue and the court finds against the party on that issue, the court may enter judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue, or the court may decline to render any judgment until the close of all the evidence. Such a judgment shall be supported by findings of fact and conclusions of law as required by subdivision (a) of this rule. 4 Neither Pasadena or Hartford asserts that the ASO is ambiguous.

8 On appeal, Pasadena asserts that the district court erred in

dismissing two of the three claims that were apparently raised in

district court.5 First, Pasadena re-urges one of the two breach of

contract claims, arguing that pursuant to Hartford’s administrative

responsibilities under the ASO and the Proposal, Hartford should

have discovered that the shortfall in the health insurance plan

occurred from the failure to take the PPO discounts and, therefore,

should have instituted a program to secure the health insurance

plan’s financial stability. Second, Pasadena contends, in the

alternative, that the Proposal included representations regarding

the services to be provided that ultimately proved untrue and that

constituted DTPA and Texas Insurance Code violations.

With respect to the breach of contract claim, Pasadena

primarily maintains that Hartford breached subsections I(e) and

I(f) of the ASO.6 Pasadena also asserts that Hartford breached

pre-contract statements, in the form of the Proposal, that were

5 The nature and extent of Pasadena’s claims is unclear because of the ambiguous nature of its complaint and briefing. But it is clear that Pasadena does not appeal the breach of contract claim specifically charging that Hartford had a specific contractual duty to take the PPO discounts. 6 Sections I(e) and I(f) provide: (e) [Hartford] agree[s] to provide actuarial services including (i) annual cost projections, (ii) cost projections for Plan modifications; and (iii) estimates of reserve amounts required to fund the Plan on a current basis. (f) [Hartford] agree[s] to provide Plan design services including assistance to Plan benefit design based on coverage adequacy, cost control effectiveness, and medical or economic developments.

9 allegedly integrated into the ASO, but at other times, Pasadena

disaffirms any contention that the Proposal was a part of the

contract. Whatever is Pasadena’s position, we find that the

Proposal was not a part of the contract because of the following

“merger” clause in the ASO:

“This Agreement, the Request for Benefit Administration Services, and the attached copy of The Plan, together with any amendments to The Plan, constitute the entire Agreement between [Pasadena] and [Hartford].”

“[I]n the absence of fraud, mistake, or accident, the parol

evidence rule is particularly applicable where the written contract

contains a recital that the contract encompasses the ‘entire

agreement between the parties’, or a similarly worded merger

provision.” Boy Scouts of America v. Responsive Terminal Sys.,

(Tex. App.—Dallas 1990, writ denied) (citations

omitted); see also Super-Cold Southwest Co. v. Elkins,

(Tex. 1942). The ASO contains “a similarly worded merger

provision.” Therefore, we conclude that the pre-contract

negotiations did not become part of the contract between Hartford

and Pasadena.

As a result, we must look only to subsections I(e) and I(f) of

the ASO to determine if Hartford should have discovered that the

shortfall in the health insurance plan occurred from the failure to

take the PPO discounts and that, therefore, Hartford should have

instituted a program to secure the health insurance plan’s

financial stability. By their plain terms, subsections I(e) and

10 I(f) do not obligate Hartford to discover that the failure to take

the PPO discounts might cause the shortfall or to institute some

program to secure the health insurance plan’s financial stability.

Rather, subsection I(e) discusses Hartford’s duty to provide

actuarial services while subsection I(f) requires Hartford to

service the health insurance plan and to provide certain cost

control adequacy assistance. Any obligation to account for the PPO

discounts so as to ensure a viable health plan does not comport

with the actual requirements of the two subsections, nor is there

sufficient evidence suggesting that any failure to comply with the

plain terms of those subsections lead to Pasadena’s damages.7

Hence, we see no breach by Hartford of subsections I(e) and I(f) of

the ASO and find no error on the part of the district court.

Pasadena’s second claim on appeal relates to Hartford’s pre-

contractual representations in the form of the Proposal. Pasadena

contends that those representations violated subsections

17.46(b)(5) and (6) of the DTPA8 and, consequently, article 21.21

7 In essence, Pasadena’s claim for breach of subsections I(e) and I(f) is nothing more than another attempt to recoup damages for the failure to take PPO discounts, which the ASO clearly does not require and which formed the basis of the other breach of contract claim that was not appealed to this Court. Therefore, just as the district court’s implied finding that Hartford was under no obligation to take the PPO discounts or to ascertain whether it had such an obligation disposed of the non-appealed breach of contract claim, that finding necessarily disposed of Pasadena’s claim for breach of subsections I(e) and I(f). 8 Subsection 17.46(b)(5) makes “representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a

11 § 16(a) of the Texas Insurance Code.9 To recover under its DTPA

claims, Pasadena must establish that it was a consumer of goods or

services, that Hartford violated one of the two “laundry list”

provisions Pasadena relies upon, and that the “laundry list”

violation(s) was the producing cause of Pasadena’s injuries.10 See

Americom Distributing v. ACS Comm.,

(5th Cir.

1993); see also Tex. Bus. & Com. Code § 17.50(a).

Again, like Pasadena’s other claim on appeal, it is clear that

the DTPA action is just another attempt to recoup damages for the

failure to take PPO discounts, which the district court found was

not a breach by Hartford. In Pasadena’s case, the only damages

were essentially the damages resulting from the failure to take the

PPO discounts. There is insufficient evidence of any other

damages, and there is no demonstrable link between any DTPA

person has a sponsorship, approval, status, affiliation, or connection which he does not” a “false misleading, or deceptive act[] or practice[].” Similarly, subsection 17.46(b)(7) provides that “representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another” is also a “false, misleading, or deceptive act[] or practice[].” 9 Article 21.21 § 16(a) incorporates the “laundry list” of violations listed in section 17.46 of the DTPA as actionable insurance code violations. Thus, Pasadena’s Insurance Code claim necessarily depends upon its DTPA claim. 10 “Producing cause” means “a substantial factor which brings about the injury and without which the injury would not have occurred.” Doe v. Boys Clubs of Greater Dallas, Inc.,

(Tex. 1995). Foreseeability is not required, but cause- in-fact is. See

The complained of conduct, however, need not be the sole producing cause.

12 misrepresentations and the losses incurred by Pasadena. Pasadena’s

losses stemmed from the failure to take PPO discounts, and the

district court rightly found no liability on Hartford’s part for

that failure. Accordingly, we conclude that the district court did

not err when it denied any recovery to Pasadena.

2. Hartford’s Restitution Claim

Hartford seeks restitution for the excess funds it paid on the

non-discounted bills to the PPO health care providers. Hartford

claims that the district court’s finding that it did not know of

the non-PPO billing compels the conclusion that Pasadena owes

Hartford restitution. The district court disagreed, concluding

that the errors were attributable to CAPPCare, the PPO

administrator, and that no evidence established an agency

relationship between Pasadena and CAPPCare. Accordingly, the

district court concluded that CAPPCare’s errors were not

attributable to Pasadena and could not form the basis for an award

of restitution.

Under Texas law, “[g]enerally, a party who pays funds under a

mistake of fact may recover restitution of those funds if the party

to whom payment was made has not materially changed his position in

reliance thereon.” Bryan v. Citizens Nat’l Bank,

(Tex. 1982). “The purpose of such restitution is to prevent

unconscionable loss to the party paying out the funds and unjust

enrichment to the party receiving the payment.”

The excess

13 payments Hartford complains of, although benefitting Pasadena and

its employees, were made to the PPO health care providers, who

accepted the full bill despite being enrolled in the PPO plan.

Hence, those medical providers are the ones who have been enriched

by the failure to take the PPO discounts. Unlike the medical

providers, Pasadena cannot be said to have been unjustly enriched

or to have benefitted from the overpayments.11 Pasadena itself

ultimately paid its full annual deductible under the ASO. Thus,

Hartford’s restitution claim fails, and we affirm the district

court’s judgment with respect to that claim.12

B. Beaumont v. Hartford

Of the various issues presented in the dispute between

Beaumont and Hartford, we first focus on Hartford’s claim that the

district court misinterpreted the MPP because a ruling favorable to

Hartford necessarily disposes of all the issues, except one.13

1. Whether Hartford Breached the MPP

On cross-appeal, Hartford contends that the district court

11 Hartford states that it paid Pasadena several hundred thousand dollars in compensation, but those dollars constituted reimbursements that were required for having exceeded the ASL and ISL limits and were actually funds repaid to Pasadena for its, not Hartford’s, expenditures. 12 Hartford also seeks attorneys’ fees based on a successful restitution claim. The claim for attorneys’ fees goes no further than the restitution claim. 13 The affected issues are Beaumont’s claim for attorney’s fees, Beaumont’s appeal of the reduction of its damages, and Hartford’s appeal of the prejudgment interest award. The only non-susceptible issue concerns Beaumont’s claim under the Texas Insurance Code.

14 erroneously concluded that Hartford breached the MPP. After trial,

the district court entered certain findings regarding the MPP and

whether Beaumont or Hartford was responsible for the medical

expenses incurred before the termination date, September 30, 1989,

but not paid on or before that date. Beaumont had contended that

Hartford was liable for those claims and, as a result, argued that

those claims should have been included in any calculation of the

APLL for the final contract year. Because those claims would have

added to any excess beyond the APLL limit, Beaumont sought

reimbursement of its funds.

In finding in favor of Beaumont, the district court applied a

multi-prong analysis. First, the district court considered section

214 of the MPP. Among other things, that section provides that

“[i]f an expense is incurred while this Agreement is in effect, but

is not paid before the date this Agreement terminates, its

disposition shall be determined by the terms of paragraph 3(d) of

this Agreement.” The district court found, and all parties agreed,

the reference to “paragraph 3(d)” was a scrivener’s error and was

intended to be “paragraph 3(g).”

14 “This agreement shall apply to the claims of participants for the benefits: (a) For which such participants are covered under the Group Policy(ies); and (b) Which become due while this Agreement is in effect. If an expense is incurred while this Agreement is in effect, but is not paid before the date this Agreement terminates, its disposition shall be determined by the terms of paragraph 3(d) of this Agreement.”

15 As a result, the district court next examined section 3(g).

That section states:

(g) After this Agreement terminates, [Beaumont’s] obligation to provide funds for payment of Plan benefits shall cease upon transfer by [Beaumont’s] bank to [Hartford’s] bank, in accordance with paragraph 7 of this Agreement, Federal Funds sufficient to satisfy benefits paid up to the date of termination. After that, [Hartford] will pay all benefits which are due or become due under the Group Policy(ies). However, [Beaumont] agrees to reimburse [Hartford] for such payments, subject to a maximum reimbursement of the lesser of: (i) The amount of such benefits, plus the administrative costs of their payment; or (ii) The Plan Benefit Extension Limit as shown in the schedule or as amended in accordance with paragraph 10 of this Agreement. The amount of the Plan Benefit Extension Limit shall be secured to [Hartford] by [Beaumont’s] letter of credit or other collateral acceptable to [Hartford]. [Hartford] may call [Beaumont’s] letter of credit or other acceptable collateral as may be required to satisfy the preceding conditions of this paragraph 3(g).”

Instead of stopping with this provision to address Beaumont’s

contractual claim, the district court then proceeded to review

section 3(f), which, as the district court also noted, became

operative upon termination of the MPP. Section 3(f) reads:

“(f) After this Agreement terminates, [Beaumont’s] obligation to provide funds for the payment of benefits to Participants, as described herein, shall cease with the payment of funds sufficient to satisfy all such benefits paid or payable to Participants up to the date of termination of this Agreement.

After parsing through both sections 3(f) and 3(g), the

district court attempted to address Beaumont’s allegations

regarding those claims that were incurred but not paid by the

termination date. The district court interpreted the two sections

16 as covering two different types of “incurred but not paid by the

termination date” claims. The district court found section 3(f) as

requiring Beaumont to provide funds to satisfy benefits paid or

payable up to the date of termination. It further defined the

“payable” claims as those claims that had been incurred by the

participants and received by Hartford. Concomitantly, the district

court ruled that under section 3(f), Hartford must have had the

obligation to pay those claims that were paid and to pay those

claims that had been incurred by the participants and received by

Hartford.15 As for section 3(g), the district court determined that

that section required Beaumont to provide funds sufficient to

satisfy claims that had been paid up to the termination date.

Moreover, it noted that section 3(g) provided Beaumont with the

option to have Hartford “pay all benefits which are due or become

due.” If Beaumont were to elect that option, then it had to

reimburse Hartford the lesser of either the amount of such benefits

plus their administrative costs, or the PBEL. The district court

surmised that the elective language in section 3(g) referred to the

payment of claims that had been incurred by the participants but

that had not been received by Hartford before the termination date.

15 In concluding this, the district court questioned whether Hartford could receive monies for benefits payable but not paid during the benefit year. According to the district court, Beaumont clearly had to reimburse Hartford for the benefits that Hartford had paid out. That necessarily implied that if Beaumont were going to reimburse Hartford for benefits that were payable, then Hartford had the obligation to pay those payable benefits.

17 Accordingly, the district court found that section 3(f)

governed claims incurred and due as of September 30, 1989, while

section 3(g) dealt with claims incurred but not due on that date.

Since Beaumont chose not to have Hartford pay claims under section

3(g), the district court believed that section 3(f) controlled and

that, therefore, Hartford had to pay for claims that had been

incurred by participants and that had been received by Hartford

before the termination date. As the paid claims apparently

exceeded the APLL, any obligation on the part of Hartford to pay

the payable claims for the 1988-89 contract year amounted to

damages for Beaumont.16

16 In finding in favor of Beaumont and awarding damages, the district court reconsidered a prior summary judgment ruling, by a different judge sitting as the district court, in which the district court found that under section 3(d), only paid claims were to be considered when calculating the PLL. Section 3(d) provides: “If, at the end of any Contact Year, the cumulative amount of benefits [Hartford] ha[s] paid on [Beaumont’s] behalf, and for which [Beaumont] ha[s] reimbursed us in accordance with paragraph 7 of this Agreement, with respect to all Participants exceeds the Plan Liability Limit for that Contract Year, [Hartford] agrees to reimburse to [Beaumont] the amount of such excess. However, this amount will be reduced by any monthly payments due [Beaumont] or made by [Hartford] to [Beaumont], during the Contract Year, in accordance with this Agreement.” Beaumont had argued that any benefits becoming due within the contract year should be accounted for in determining whether the APLL had been reached because section 3(a) referred to the APLL and that section talked about Beaumont’s liability for benefits that become due. Conversely, Hartford had maintained that section 3(d) only provided for the consideration of “paid” claims in determining whether the APLL had been reached. The district court agreed with Hartford, concluding that section 3(d) was the applicable section and that that section unambiguously referred only to “paid” claims when calculating the APLL. But in revisiting the summary judgment ruling, the district court held that “contract year,” as used in

18 On cross-appeal, Hartford maintains that the district court’s

ruling was in error. First, Hartford contends that section 2 of

the MPP unambiguously (once the scrivener’s error is taken into

account) states that incurred but unpaid claims at the end of the

agreement fall under section 3(g). Section 3(g) requires that any

payments made by Hartford after September 30, 1989 would be

reimbursed by Beaumont to the lesser of the costs plus

administrative fees or the PBEL, provided Beaumont elected that to

occur. Beaumont, however, did not choose that option; rather, it

chose one of Hartford’s competitors to pay the claims. Second,

Hartford argues that the district court improperly read “paid or

due” into section 3(g) when the plain language refers only to “paid

claims.” Thus, any payable claims should not have been counted

towards the APLL, and Hartford should not have had to pay for those

incurred but unpaid claims that exceeded the APLL.

Despite Beaumont’s and the district court’s attempts to

harmonize the MPP and make it appear reasonable, we agree with

Hartford’s interpretation of the MPP, which better follows the

agreement’s plain language. The district court’s initial

interpretation of section 3(d) at the summary judgment stage was

correct. When calculating the annual APPL, only the “paid” claims

section 3(d), encompassed more than claims paid in a calendar year and that the terms had to be defined by other provisions in the MPP. Consequently, the district court determined that a “contract year” included all transactions within that year and the consequences that may take place after the end of that year as a result of those transactions.

19 counted. More importantly, section 2 explicitly states what

happens to incurred but unpaid claims on September 30, 1989: they

are disposed of under section 3(g), not section 3(f) and 3(g) as

the district court and Beaumont contend. Neither explains how one

gets to section 3(f) given section 2's plain language (and

correction of the scrivener’s error). In addition, section 3(f)

focuses on Beaumont’s responsibility to provide funds for paid and

payable claims up to the end of the agreement. It does not mention

how the “payable” claims will be allocated between Beaumont and

Hartford. Instead, section 2 reveals that section 3(g) provides

the mechanism through which those claims will be disposed. Hence,

we conclude that the district court misinterpreted the MPP and

render judgment in favor of Hartford on Beaumont’s breach of

contract claim.

With our conclusion that Hartford did not breach the MPP, the

only remaining live issue in the dispute between Beaumont and

Hartford is whether Hartford violated article 21.21-2 of the Texas

Insurance Code.

2. Beaumont’s Claim Under Article 21.21-2 of the Texas Insurance Code and Treble Damages

Beaumont alleges that Hartford violated article 21.21-2 of the

Texas Insurance Code17 by knowingly misrepresenting pertinent policy

17 The Insurance Code provision at issue reads as follows: Sec. 2. (a) No insurer doing business in this state under the authority, rules and regulations of this code shall engage in unfair settlement practices. (b) Any of the following acts by an insurer shall be

20 provisions when, in response to Beaumont’s 1993 request for a copy

of its MPP, Hartford mailed to Beaumont a copy of a 1987 agreement

(which was an updated version of the 1986 MPP) that was never

consummated by the parties. Beaumont contends that the actual 1986

agreement signed by the parties, the only one ever in effect,

contained materially different provisions. The most important

difference was that the 1987 MPP removed the PBEL from the

agreement. Moreover, Beaumont asserts that Hartford attached the

signature page from the 1986 agreement to the 1987 agreement sent

to Beaumont. As a result of Hartford’s alleged violation of

article 21.21-2, Beaumont seeks treble damages as allowed under the

Texas Insurance Code. The district court, however, concluded that

Hartford did not engage in a deceptive act, and treble damages were

not awarded.

Hartford presses two reasons for upholding the district

court’s judgment: (1) Beaumont suffered no damages as a result of

receiving the 1987 MPP, as required for recovery under the Texas

Insurance Code; and (2) there was no evidence of knowing conduct.

In its reply brief, Beaumont admits that it “incurred no additional

damages by virtue of Hartford’s deceptive acts.” Instead, Beaumont

constitute unfair settlement practices: (1) Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue; Tex. Ins. Code Ann. art. 21.21-2, §§ 2(a) & (b)(1) (Vernon Supp. 2000). The earlier version of article 21.21-2 is quite similar to the current version, and for purposes of this case, the difference does not alter the outcome.

21 appears to argue that Hartford’s breach of contract and 1993

misrepresentation of the MPP were part-and-parcel of the same

damages suffered by Beaumont.

Under Texas law, however, an insured cannot recover treble

damages for a mere breach of contract. See State Farm Fire & Cas.

Ins. Co. v. Vandiver,

(Tex. App.—Waco 1998, no

pet.) (citations omitted). Beaumont had the burden of establishing

that it sustained actual injuries as a result of the conduct it

alleges was prohibited by the Texas Insurance Code. See Walker v.

Federal Kemper Life Assurance Co.,

(Tex.

App.—San Antonio 1992, writ denied); First Am. Title Co. of El Paso

v. Prata,

(Tex. App.—El Paso 1989, writ

denied). As Beaumont seems to admit, there is no evidence that

Hartford’s alleged misrepresentation in 1993 caused any injury

other than what Beaumont had already suffered in 1989 by Hartford’s

allegedly improper failure to pay claims.

Beaumont’s reliance on Fort Worth Mortgage v. Abercrombie,

(Tex. App.—Houston [14th Dist.] 1992, no writ), is

unavailing. The Abercrombies had purchased a mortgage protection

policy which would have paid their house payments for up to 300

months in the event Mr. Abercrombie became disabled. In 1986, Mr.

Abercrombie became permanently disabled, but the insurance only

covered one year of house payments. It turned out that the policy

they originally signed had been canceled in 1979 and substituted

22 with a policy with less benefits. As the court noted, the

switching of policy benefits without notice caused, at a minimum,

“confusion or misunderstanding.”

. In contrast to the

present case, the switch in Abercrombie caused the damages. Here,

the damages Beaumont complains of occurred in 1989, when Hartford

failed to pay claims under the contract, while the alleged

misrepresentation did not take place until 1993.

As for Hartford’s second contention, there is conflicting

evidence as to whether Hartford committed a knowing deception. To

knowingly misrepresent, “a person must think to himself at some

point, ‘Yes, I know this is false, deceptive, or unfair to him, but

I’m going to do it anyway.’” St. Paul Surplus Lines Ins. Co. v.

Dal-Worth Tank Co.,

(Tex. 1998) (per curiam).

Moreover, knowingly “means actual awareness of the falsity,

deception, or unfairness of the conduct in question.”

.

Although “actual awareness” may be inferred by objective

manifestations, it “does not mean merely a person knows what he is

doing; rather, it means that a person knows that what he is doing

is false, deceptive, or unfair.”

. The only evidence

supportive of Beaumont’s position is Hartford’s sending, in 1993,

the 1987 agreement, allegedly with 1986's signature form. But

Hartford’s own files revealed no 1986 signature page attached to

the 1987 contract.

For the foregoing reasons, we affirm the district court’s

23 judgment denying Beaumont treble damages for its claim under

article 21.21-2 of the Texas Insurance Code.

III. CONCLUSION

After a careful review of the briefs and relevant portions of

the record, we find no error on the part of the district court’s

ruling that Pasadena take nothing for its claims against Hartford.

Moreover, we conclude that the district court did not err when it

denied restitution to Hartford. Accordingly, we affirm the

district court’s judgment with respect to Pasadena’s and Hartford’s

claims against each other.

As for Beaumont’s dispute with Hartford over the funding and

administration of Beaumont’s health insurance plan, we affirm the

district court’s ruling that Hartford did not violate article

21.21-2 of the Texas Insurance Code, but we find that the district

court misinterpreted the MPP and, therefore, reverse and render

judgment in favor of Hartford on Beaumont’s breach of contract

claim.

24