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The University of Texas School of Law Continuing Legal Education ▪ 512.475.6700 ▪ utcle.org

PRESENTED AT

20th Annual Insurance Law Institute

November 12-‐13, 2015 Dallas, Texas

Using the New Pattern Jury Charge

Insurance Contract Questions

Mark L. Kincaid Author Contact Information: Mark L. Kincaid George Brothers Kincaid & Horton, L.L.P. Austin, Texas

[email protected] 512.499-‐0999

MARK L. KINCAID GEORGE BROTHERS KINCAID & HORTON LLP

1100 Norwood Tower, 114 West 7th Street, Austin, Texas 78701

(512) 499-0999

Mark Kincaid is a partner in George Brothers Kincaid & Horton, L.L.P., where he represents consumers and businesses in consumer, insurance, and deceptive trade practices litigation.

GBKH is recognized in Best Lawyers for high-stakes commercial litigation, including intellectual property, securities, insurance, professional liability, media, and First Amendment disputes. Mark Kincaid is listed in Best Lawyers for his extensive work in commercial and insurance litigation.

Mark has extensive experience representing consumers and businesses in insurance disputes, and in a broad array of civil litigation. Mark represents insureds and claimants in cases involving liability insurance, life insurance, errors and omissions, directors and officers, homeowners, commercial property, automobile, commercial automobile, health, disability, employment practices, advertising injury, title, and excess insurance. Mark represents consumers and businesses in professional liability suits and other financial and commercial litigation.

Mark is board-certified by the Texas Board of Legal Specialization in Civil Trial Law, Consumer & Business Law, and Civil Appellate Law. He represents clients as trial lawyer, appellate advocate, expert, advisor, and negotiator in individual cases, class actions, and mass torts. Mark also assists other lawyers in representing clients with complex insurance issues.

Mark Kincaid successfully argued the landmark Texas cases establishing the right of first party insureds to sue for unfair insurance settlement practices (Vail v. Texas Farm Bureau) and the right of insureds under liability policies to sue for an insurer’s unfair refusal to settle (Rocor v. National Union).

In 1994, Mark Kincaid was appointed by Governor Ann Richards to head the Office of Public Insurance Counsel, a state agency that advocates for insurance consumers.

Mark Kincaid teaches Insurance Litigation as an Adjunct Professor at the University of Texas School of Law. He has served as chair of the Consumer Law Council of the State Bar of Texas, and as a member of the Insurance Law Council. Mark Kincaid co-authors West’s Texas Practice Guide: Insurance Litigation (2000-present). In addition, Mark has been a member of the Pattern Jury Charge Committee for Business, Consumer, Insurance & Employment Law since 1995, serving as chair from 2009 to 2011.

Mark’s colleagues have given him an “AV” rating in the Martindale-Hubbell Law Directory, and have designated him a Super Lawyer in the 2003 through 2015 surveys of Texas lawyers published by Law & Politics Media and the publishers of Texas Monthly magazine.

TEXAS

PATTERN JURY CHARGES

Business • Consumer

Prepared by the

COMMITTEE

on

PATTERN JURY CHARGES

of the

STATE BAR OF TEXAS

Austin 2014

Insurance • Employment

CONTRACTS PJC 101.1

37

PJC 101.1 Basic Question—Existence

QUESTION ______

Did Paul Payne and Don Davis agree [insert all disputed terms]?

[Insert instructions, if appropriate.]

Answer “Yes” or “No.”

Answer: _______________

COMMENT

When to use. PJC 101.1 submits the issue of the existence of an agreement. Itshould be used if there is a dispute about the existence of an agreement or its terms anda specific factual finding is necessary to determine whether the agreement constitutesa legally binding contract. (See the discussion of consideration and essential termsbelow.) Usually PJC 101.1 will apply in cases involving oral agreements, oral modifi-cation of written agreements, and agreements based on several written instruments.

Broad-form submission. The broad form of this question follows the mandate ofTex. R. Civ. P. 277, which states: “In all jury cases the court shall, whenever feasible,submit the cause upon broad-form questions.”

In some cases an even broader question that combines issues of both existence andbreach of an agreement may be appropriate. For example:

Did Don Davis fail to comply with the agreement, if any?

In such a case, however, care should be taken that the submission does not ask the juryto decide questions of law, which must be determined by the court alone. MCI Tele-communications Corp. v. Texas Utilities Electric Co., 995 S.W.2d 647, 650–51 (Tex.1999) (construction of unambiguous contract is question of law for court).

Accompanying instructions. In most cases, the court should instruct the jury toconsider the facts and circumstances surrounding the contract’s execution. See PJC101.3.

Essential terms. To be enforceable, a contract must be reasonably definite andcertain. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992);Kirkwood & Morgan, Inc. v. Roach, 360 S.W.2d 173, 175 (Tex. Civ. App.—San Anto-nio 1962, writ ref’d n.r.e.). Failure to agree on or include an essential term renders acontract unenforceable. T.O. Stanley Boot Co., 847 S.W.2d at 221. The court shouldinclude in PJC 101.1 all disputed terms essential to create an enforceable agreement. A

PJC 101.1

38

CONTRACTS

disputed nonessential term should also be included if it is the basis of the plaintiff’sclaim for damages.

Some omitted terms supplied by law. Some omitted terms will be supplied byapplication of law, and the failure to include those terms will not render the agreementinvalid. See, e.g., PJC 101.10 (instruction on time of compliance) and 101.13 (instruc-tion on price). In such cases it is not necessary to secure a jury finding on the parties’agreement to those terms, and they should not be included in PJC 101.1 unless theirabsence will be confusing to the jury. See America’s Favorite Chicken Co. v. Samaras,929 S.W.2d 617, 625 (Tex. App.—San Antonio 1996, writ denied). The circumstancesof each case will determine whether it is appropriate to include instructions such asthose contemplated by PJC 101.10 and 101.13.

Agreement contemplating further negotiations or writings. During negotia-tions, the parties may agree to some terms of the agreement with the expectation thatother terms are to be agreed on later. Such an expectation may not prevent the agree-ment already made from being an enforceable agreement if the circumstances indicatethat the parties intended to be bound. Scott v. Ingle Bros. Pacific, Inc., 489 S.W.2d 554,555–56 (Tex. 1972); see also Simmons & Simmons Construction Co. v. Rea, 286S.W.2d 415 (Tex. 1955); but see Ski River Development, Inc. v. McCalla, 167 S.W.3d121, 134 (Tex. App.—Waco 2005, pet. denied) (when contract left material and essen-tial terms for future negotiation, agreement was not definite and specific and, there-fore, was not enforceable). In such a case, the basic issue submitted in PJC 101.1should be modified to inquire whether the parties intended to bind themselves to anagreement that includes the terms initially agreed on. Scott, 489 S.W.2d at 555. Caselaw suggests the following question:

Did Paul Payne and Don Davis intend to bind themselves to anagreement that included the following terms:

[Insert disputed terms.]

See Scott, 489 S.W.2d at 555; see also Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768,814 (Tex. App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.), cert. dismissed, 485 U.S.994 (1988) (applying New York law).

A similar issue is presented if the parties reach preliminary agreement on certainmaterial terms yet also contemplate a future written document. Whether the partiesintended to be bound in the absence of execution of the final written document is ordi-narily a question of fact. Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744 (Tex.1988). The Foreca opinion approves the following submission in such a case:

Do you find that the writings of September 2, 2001, and October19, 2001, constituted an agreement whereby [insert disputed terms]?

CONTRACTS PJC 101.1

39

The court cited comment c to section 27 of the Restatement (Second) of Contracts(1981) as setting forth circumstances that may be helpful in determining whether acontract has been formed. Foreca, S.A., 758 S.W.2d at 746 n.2. The court did not makeit clear, however, whether these considerations should be included in the jury instruc-tions.

Insurance contracts. In an insurance case when there is a written insurance pol-icy, the existence of the agreement is not disputed, so the general question in PJC101.1 is unnecessary. Alternate questions suitable for insurance disputes that focus onwhether claims are covered by specific contract language are found in PJC 101.57–101.59.

PJC 101.6

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CONTRACTS

PJC 101.6 Conditions Precedent (Comment)

Conditions precedent defined. “A condition precedent may be either a conditionto the formation of a contract or to an obligation to perform an existing agreement.Conditions may, therefore, relate either to the formation of contracts or to liabilityunder them.” Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.1976). “A condition precedent is an event that must happen or be performed before aright can accrue to enforce an obligation.” Centex Corp. v. Dalton, 840 S.W.2d 952,956 (Tex. 1992).

Conditions precedent to an obligation to perform are acts or events that are to occurafter the contract is made and that must occur before there is a right to immediate per-formance and before there can be a breach of contractual duty. Hohenberg Bros. Co.,537 S.W.2d at 3.

Creation of condition precedent. Although no particular words are necessary tocreate a condition, terms such as “if,” “provided that,” and “on condition that” usuallyconnote a condition rather than a covenant or promise. Absent such a limiting clause,whether a provision represents a condition or a promise must be gathered from thecontract as a whole and from the intent of the parties. Temple-Eastex Inc. v. AddisonBank, 672 S.W.2d 793, 798 (Tex. 1984); Hohenberg Bros. Co., 537 S.W.2d at 3.

Conditions not favored. To prevent forfeitures, courts are inclined to construeprovisions as covenants rather than as conditions. PAJ, Inc. v. Hanover Insurance Co.,243 S.W.3d 630, 636 (Tex. 2008); Criswell v. European Crossroads Shopping Center,Ltd., 792 S.W.2d 945, 948 (Tex. 1990); Rogers v. Ricane Enterprises, 772 S.W.2d 76,79 (Tex. 1989); Henshaw v. Texas Natural Resources Foundation, 216 S.W.2d 566,570 (Tex. 1949).

Insurance cases. These principles apply to insurance contracts. Harwell v. StateFarm Mutual Automobile Insurance Co., 896 S.W.2d 170, 173–74 (Tex. 1995). Foradditional discussion, see PJC 101.59.

CONTRACTS PJC 101.56

89

PJC 101.56 Insurance Contracts Distinguished from Other Contracts (Comment)

In most insurance breach-of-contract cases, there is no dispute about whether theparties had an agreement, because the insurance policy is the agreement. In thesecases, the general PJC 101.1 question asking whether the parties had an agreement isunnecessary.

Common disputed issues are whether an event is covered or excluded by specificpolicy language, whether another contractual defense or limitation applies, or theamount of the covered loss. The following alternative questions focus on those issues.

PJC 101.57 asks whether the insurer breached the agreement by failing to pay acovered claim, which is defined by the applicable policy language.

If the jury finds breach of the agreement, then PJC 101.58 asks the jury to deter-mine causation and damages. The question asks the amount of the covered loss, if any,and instructs the jury to exclude any amount that was not covered. Because PJC101.58 asks only about the amount of policy benefits, when consequential damagesare sought, a separate question and instructions on damages as in PJC 115.3–115.5 arealso required.

Often there is no dispute that the insurer has not paid the insured, so that a findingof covered damages necessarily means that the insurer failed to comply with the agree-ment. When it is stipulated or undisputed that a finding of covered damages estab-lishes the insurer’s breach, the preliminary liability question in PJC 101.57 may beomitted, because the finding of covered damages in 101.58 is sufficient to establishliability.

PJC 101.59 asks whether a loss or event is excluded by specific policy language.The question may be adapted to submit other limitations, avoidances, and policydefenses.

PJC 101.57

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CONTRACTS

PJC 101.57 Insurance Contracts—Compliance—Specific Policy Language

QUESTION ______

Did Insurer, Inc. fail to comply with the agreement?

Insurer, Inc. failed to comply with the agreement if it failed to pay for [all]the damages, if any, [that were caused (partly/solely) by/that resulted from/because of] the [description of covered loss, event, or cause].

[Insert instructions and definitions, if appropriate.]


Answer: _______________

COMMENT

When to use. The above question may be submitted to determine whether theinsurer breached the agreement by failing to pay a covered loss. Conditioned on anaffirmative answer, this question will be followed by PJC 101.58, which submitscausation and policy benefits as damages. Additional questions are required for anyalleged consequential damages and attorney’s fees, as set out in PJC 115.3–115.5 andPJC 115.47.

Because nonpayment of an excluded loss is not a failure to comply with the agree-ment, this question should not be used when the application of an exclusion is the soledisputed issue. Instead, PJC 101.59 should be used in such a case.

The word all should be included if the insurer has paid benefits but there is a dis-pute about whether the insurer paid all that was owed.

If the existence of an agreement is disputed, PJC 101.1 should be submitted beforethis question.

Source of question. The above question is based on PJC 101.2 and is adaptedfrom jury questions based on specific policy language mentioned in the followingcases: National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. HudsonEnergy Co., 811 S.W.2d 552, 554–55 & n.3 (Tex. 1991); Union Mutual Life InsuranceCo. v. Meyer, 502 S.W.2d 676, 677–79 (Tex. 1973); Employers Mutual Casualty Co.of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 706–07 (Tex. 1962); and Telepak v.United Services Automobile Ass’n, 887 S.W.2d 506, 507 (Tex. App.—San Antonio1994, writ denied).


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Description of covered loss/instructions based on policy language. Thedescription of covered loss submitted to the jury should include any coverage lan-guage and any exception to an exclusion on which the insured relies. When instruc-tions are given, they generally should follow the terms in the policy. InternationalTravelers Ass’n v. Marshall, 114 S.W.2d 851, 852 (Tex. 1938); Mutual Life InsuranceCo. of New York v. Steele, 570 S.W.2d 213, 217 (Tex. Civ. App.—Houston [14th Dist.]1978, writ ref’d n.r.e.).

It may be error to submit an instruction that does not sufficiently track the policylanguage. See Aetna Life Insurance Co. v. McLaughlin, 380 S.W.2d 101, 105 (Tex.1964); New York Underwriters Insurance Co. v. Coffman, 540 S.W.2d 445, 450 (Tex.Civ. App.—Fort Worth 1976, writ ref’d n.r.e.). But any error may be harmless if thedeviation is not material. See Coffman, 540 S.W.2d at 450–51; Truck InsuranceExchange v. Ballard, 343 S.W.2d 953, 957–59 (Tex. Civ. App.—Austin 1961, writref’d n.r.e.).

An instruction that submits policy language but unduly emphasizes one part is erro-neous. Nelson, 361 S.W.2d at 706–07 (question overemphasized “settling” in phrase“settling, shrinkage or expansion”).

It is not error to omit policy language about an element that is undisputed. SeeNational County Mutual Fire Insurance Co. v. Wallace, 673 S.W.2d 410, 411–12 (Tex.App.—Houston [1st Dist.] 1984, no writ); U.S. Fire Insurance Co. v. Skatell, 596S.W.2d 166, 169 (Tex. Civ. App.—Texarkana 1980, writ ref’d n.r.e.).

While instructions based on policy language may be helpful, they are not alwaysrequired. In State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451–52 (Tex. 1997), thecourt held that it was not error to refuse instructions that would have tracked the policywhen the policy was in evidence, the relevant language was presented to the jury anddiscussed at length, and there was no dispute about the meaning of the policy terms. Inother circumstances, including instructions that submit the relevant policy languagemay assist the jury.

Instruction based on judicial construction or definition. It may be necessary todeviate from the exact policy language to correctly submit an issue, for example, whenthe language has been judicially construed or qualified. See Southern Farm BureauLife Insurance Co. v. Dettle, 707 S.W.2d 271, 272–73 (Tex. App.—Amarillo 1986, nowrit) (instruction added word “intentional” to policy definition of suicide, to conformto judicial decisions); Slocum v. United Pacific Insurance Co., 615 S.W.2d 807, 810(Tex. Civ. App.—Houston [1st Dist.] 1981, writ ref’d n.r.e.) (deviation to instruct juryon court’s interpretation was proper).

If the court construes the meaning of a contract term, the jury should be given aninstruction with that interpretation. See PJC 101.7.

The court also may submit a definition of a term not defined by the policy. See, e.g.,Nelson, 361 S.W.2d at 706–07, 709 (“normal” and “partial collapse”); Robinson v.

PJC 101.57

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CONTRACTS

Aetna Life Insurance Co., 276 S.W. 900, 902 (Tex. Comm’n App. 1925, judgm’tadopted) (“apoplexy”); Brooks v. Blue Ridge Insurance Co., 677 S.W.2d 646, 651–52(Tex. App.—Amarillo 1984, writ ref’d n.r.e.) (“tenant”).

It is not error for the trial court to decline to submit definitions of common terms.See Prudential Insurance Co. of America v. Uribe, 595 S.W.2d 554, 563–64 (Tex. Civ.App.—San Antonio 1979, writ ref’d n.r.e.) (trial court did not define “duties” or “pas-senger”).

Causation. Insurance policies may cover losses “caused by,” “resulting from,” or“because of” a covered event, or some other causation standard. The causation lan-guage should be modified to conform to the policy.

“Partly” or “solely”—concurrent causation and allocation. Depending on thepolicy language, a loss may be covered if it is partially caused by a covered risk, evenif damage was also caused by an excluded risk, to the extent the damage can be allo-cated between the causes. See Utica National Insurance Co. of Texas v. AmericanIndemnity Co., 141 S.W.3d 198, 204 (Tex. 2004). Under the concurrent causation doc-trine, when the insurer pleads an exclusion under the policy, the insured must get juryfindings that damage was caused solely by the covered risk or segregate the damagecaused by the insured peril from that caused by an excluded peril. Travelers IndemnityCo. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971). PJC 101.58 allocates damages byasking the amount of damage caused by the covered risk and instructing the jury not toconsider damage caused by an excluded risk.

If there is no question of covered versus excluded causes, it is unnecessary toinclude the words “partly” or “solely.”

In other cases, policy language may provide that a loss is covered only if it is causedsolely by a covered risk, exclusive of all other causes. See, e.g., Meyer, 502 S.W.2d at677–79 (coverage for death resulting from bodily injury independent of all othercauses). In such a case the word “solely” should be included in the question and“partly” should not.

Burden of proof—separate question for exclusions and other defenses. Thisquestion puts the burden of proof on the insured. A separate question could askwhether the loss resulted from an excluded cause or fit within some other limitation,avoidance, or defense. See PJC 101.59. Separate questions may be required, becausethe insured has the initial burden to show that a loss is covered, Employers CasualtyCo. v. Block, 744 S.W.2d 940, 944 (Tex. 1988), and then the insurer has the burden toestablish any exclusions. Tex. R. Civ. P. 94; Tex. Ins. Code § 554.002. This question,placing the burden on the insured, would also be proper to submit any exception to anexclusion that would bring the loss back within coverage. Telepak, 887 S.W.2d at 507–08.


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PJC 101.58 Insurance Contracts—Coverage and Damages Question—Specific Policy Language

QUESTION ______

What sum of money, if any, if paid now in cash, would fairly and reasonablycompensate Paul Payne for his [unpaid] damages [, if any,] [that were caused(partly/solely) by/that resulted from/because of] the [description of coveredloss, event, or cause]?

[Do not include in your answer damages, if any, caused by (description ofexcluded cause.)]

[Insert other instructions and definitions, if appropriate.]

Answer in dollars and cents for damages, if any.

Answer: _______________

COMMENT

When to use. PJC 101.58 determines the amount of damages, if any, caused by acovered event. If PJC 101.57 is submitted, PJC 101.58 should be predicated on a“Yes” answer to PJC 101.57.

PJC 101.58 may be submitted without PJC 101.57 when the parties’ dispute focuseson whether a loss is covered or on the amount of the covered loss. Because PJC 101.58does not ask whether the insurer failed to comply with the agreement, the question isproper without 101.57 only when it is stipulated or undisputed that, if there was a cov-ered loss, the insurer breached the agreement by failing to pay it.

If damages are not disputed, the words if any should be omitted.

When an excluded cause would limit recovery, the trial court may submit the exclu-sion by instructing the jury not to include excluded damages. Union Mutual Life Insur-ance Co. v. Meyer, 502 S.W.2d 676 (Tex. 1973) (trial court may submit exclusion byinstruction). The “do not include” instruction should not be used in cases in which noexcluded cause is at issue. The instruction also should not be used when an exclusionis not disputed but recovery is sought based on an exception to an exclusion.

The above question determines the amount of benefits, if any, owed under the pol-icy, so a separate question on direct damages is not required. Additional questions arerequired for any alleged consequential damages and attorney’s fees. Pattern questionsare set out in PJC 115.3–115.5 and PJC 115.47.

PJC 101.58

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CONTRACTS

Multiple coverage provisions. If the loss is potentially covered by more than onepolicy provision, the question should be modified to include each disputed provision.Similarly, when more than one type of covered damage is alleged, the question may bemodified to allow separate answers for the amount of each type of damage. See PJC115.3.

Source of questions. The question is based on PJC 115.3, which submits contractdamages. See also Crisp v. Security National Insurance Co., 369 S.W.2d 326, 327–28(Tex. 1963); New York Underwriters Insurance Co. v. Coffman, 540 S.W.2d 445, 453(Tex. Civ. App.—Fort Worth 1976, writ ref’d n.r.e.); Commercial Insurance Co. ofNewark, N.J. v. Colvert, 425 S.W.2d 34, 36–37 (Tex. Civ. App.—Fort Worth 1968, nowrit).

When there is no dispute that the insurer’s failure to pay would breach the contractif a certain loss or event occurred:

• The charge may ask about a disputed fact that determines coverage underspecific policy language. See, e.g., Houston Fire & Casualty Insurance Co. v.Walker, 260 S.W.2d 600, 601–02 (Tex. 1953) (whether lightning struck tree); Cox v.National Life & Accident Insurance Co., 420 S.W.2d 213, 215 (Tex. Civ. App.—ElPaso 1967, writ ref’d n.r.e.) (whether insured was not in sound health).

• The charge may ask about a fact that determines coverage under a statu-tory provision. See, e.g., Guevara v. Guevara, No. 04-01-00326-CV, 2002 WL562179, at *2 (Tex. App.—San Antonio Apr. 17, 2002, pet. denied) (not designatedfor publication) (whether beneficiary murdered insured, which under statute wouldforfeit benefits).

• The charge may ask whether an admitted event satisfies specific policylanguage. See, e.g., Progressive County Mutual Insurance Co. v. Boyd, 177 S.W.3d919, 920 (Tex. 2005) (whether accident involved “uninsured motor vehicle”).

The question is adapted from jury questions based on specific policy language men-tioned in the following cases: National Union Fire Insurance Co. of Pittsburgh, Penn-sylvania v. Hudson Energy Co., 811 S.W.2d 552, 554–55 & n.3 (Tex. 1991); UnionMutual Life Insurance Co. v. Meyer, 502 S.W.2d 676, 677–79 (Tex. 1973); EmployersMutual Casualty Co. of Des Moines, Iowa v. Nelson, 361 S.W.2d 704, 706–07 (Tex.1962); and Telepak v. United Services Automobile Ass’n, 887 S.W.2d 506, 507 (Tex.App.—San Antonio 1994, writ denied).

Causation. Insurance policies may cover losses “caused by,” “resulting from,” or“because of” a covered event, or some other causation standard. The causation lan-guage should be modified to conform to the policy.

“Partly” or “solely”—concurrent causation and allocation. Depending on thepolicy language, a loss may be covered if it is partially caused by a covered risk, evenif damage was also caused by an excluded risk, to the extent the damage can be allo-


95

cated between the causes. See Utica National Insurance Co. of Texas v. American Indemnity Co., 141 S.W.3d 198, 204 (Tex. 2004). Under the concurrent causation doc-trine, when the insurer pleads an exclusion under the policy, the insured must get jury findings that damage was caused solely by the covered risk or segregate the damage caused by the insured peril from that caused by an excluded peril. Travelers Indemnity Co. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971). PJC 101.58 allocates damages by asking the amount of damage caused by the covered risk and instructing the jury not to consider damage caused by an excluded risk.


In other cases, policy language may provide that a loss is covered only if it is causedsolely by a covered risk, exclusive of all other causes. See, e.g., Meyer, 502 S.W.2d at677–79 (coverage for death resulting from bodily injury independent of all othercauses). In such a case the word “solely” should be included in the question and“partly” should not.

Instructions based on policy language. The comments accompanying PJC101.57 regarding the description of covered loss, instructions based on policy lan-guage, and instruction based on judicial construction or definition also apply to PJC101.58.

“Do not include” instruction on excluded or paid damages. When an exclu-sion is at issue, the jury should be instructed not to include damages, if any, from theexcluded cause. Any instruction should follow the policy language on which theinsurer relied, subject to the other rules set out above.

When no exclusion is at issue, or when the dispute is over whether an exception tothe exclusion applies, the “do not include” instruction should be omitted.

When the jury hears evidence that the insurer has partially paid the loss, the juryshould be instructed not to include in its answer any sums that have already been paid,to avoid confusion about whether the insurer is entitled to or will receive a credit.Alternatively, the jury could simply be asked to determine the amount of unpaid dam-ages.

Instructing jury on measure of damages. It may be appropriate to instruct thejury on the measure of damages under the applicable policy provision. See U.S. FireInsurance Co. v. Stricklin, 556 S.W.2d 575, 582 (Tex. Civ. App.—Dallas 1977), writref’d n.r.e. sub nom. 565 S.W.2d 43 (Tex. 1978) (trial court should instruct jury on dif-ference in value as measure of damages); New York Underwriters Insurance Co. v.Coffman, 540 S.W.2d 445, 453 (Tex. Civ. App.—Fort Worth 1976, writ ref’d n.r.e.)(“daily loss of rental income” defined); Commercial Insurance Co. of Newark, N.J. v.Colvert, 425 S.W.2d 34, 38 (Tex. Civ. App.—Fort Worth 1968, no writ) (“reasonablecash market value”).

PJC 101.58

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When a damage limitation in the policy is raised by the evidence, it is error not toinstruct the jury. Hibernia Insurance Co. v. Starr, 13 S.W. 1017 (Tex. 1890). It is alsoerror not to instruct the jury on failure to mitigate, when raised by the evidence. EagleStar & British Dominions Insurance Co. of London, England v. Head, 47 S.W.2d 625,630 (Tex. Civ. App.—Amarillo 1932, writ dism’d w.o.j.). A defensive mitigationinstruction is found at PJC 115.8.

Many property policies impose a duty on the insured after a loss to protect the prop-erty from further damage and make reasonable and necessary repairs to protect theproperty. See Carrizales v. State Farm Lloyds, 518 F.3d 343, 349–50 (5th Cir. 2008)(construing Texas law). Mitigation costs, therefore, are a recoverable element of dam-ages, as in other contract cases. PJC 115.4 provides an instruction for recovering miti-gation expenses.

Burden of proof—separate question for exclusions and other defenses. Thisquestion puts the burden of proof on the insured. A separate question could askwhether the loss resulted from an excluded cause or fit within some other limitation,avoidance, or defense. See PJC 101.59. Separate questions may be required, becausethe insured has the initial burden to show that a loss is covered, Employers CasualtyCo. v. Block, 744 S.W.2d 940, 944 (Tex. 1988), and then the insurer has the burden toestablish any exclusions. Tex. R. Civ. P. 94; Tex. Ins. Code § 554.002. This question,placing the burden on the insured, would also be proper to submit any exception to anexclusion that would bring the loss back within coverage. Telepak, 887 S.W.2d at 507–08.


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PJC 101.59 Insurance Contracts—Exclusions, Limitations, Avoidance, and Other Affirmative Defenses—Specific Policy Language

QUESTION ______

[Were Paul Payne’s damages] [Was the (loss) (event) (other description)] [, ifany,] caused [partly or solely] by [description of excluded cause]?

[Insert instructions and definitions, if appropriate.]


Answer: _______________

COMMENT

When to use. An insurer has the burden to plead and prove any exclusion, limita-tion, avoidance, or other affirmative defense. Tex. R. Civ. P. 94; Tex. Ins. Code§ 554.002. The submission of a policy exclusion may require a separate question.Union Mutual Life Insurance Co. v. Meyer, 502 S.W.2d 676, 679 (Tex. 1973). Whenthe insurer’s exclusion, limitation, or other defense to coverage would be a completebar to recovery, this question would be proper to submit the defense. When the defensemerely limits recovery, PJC 101.58 should be used to allocate damages between cov-ered and excluded causes. The proper sequence of these questions may depend on thefacts of the particular case.

When it is stipulated or undisputed that the insurer is liable for a certain amount ofdamages under the agreement unless the jury finds an exclusion or other defense, thisquestion is sufficient to determine liability and damages. When liability or damagesare otherwise disputed, the insured should also submit and obtain findings on affirma-tive issues as in PJC 101.57 and 101.58.

If damages are not disputed, the words if any should be omitted.

Defenses. The general PJC contract questions submit defenses by asking whetherthe failure to comply was “excused” and then instructing on excuses, such as the plain-tiff’s material breach, anticipatory repudiation, waiver, estoppel, duress, mistake, andso forth. See PJC 101.21–101.42. The question could be modified to ask about anydefense that would excuse the insurer from payment, other than a policy exclusion (seethe question above) or the failure of the insured to perform a condition or covenant(see PJC 101.60):

PJC 101.59

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CONTRACTS

QUESTION ______

Was Insurer, Inc.’s failure to comply excused?

[For its failure to comply to be excused, Insurer, Inc. must show(insert exception, limitation, avoidance, or other affirmativedefense).]


Answer: _______________

Instruction on exclusion or limitation. When the evidence raises an exclusionor limitation on liability, the court should give a proper instruction. Hibernia Insur-ance Co. v. Starr, 13 S.W. 1017 (Tex. 1890).

When submitting specific questions based on policy exclusions, it may be necessaryto instruct the jury on judicial interpretation of specific policy language. For example,in Aetna Life Insurance Co. v. McLaughlin, 380 S.W.2d 101, 102 (Tex. 1964), thesupreme court decided which rule to follow in determining whether suicide by theinsured barred recovery under an accidental death policy. After adopting the majorityrule, the court held that the trial court’s instruction following the minority rule waserroneous. McLaughlin, 380 S.W.2d at 105. See also Republic National Life InsuranceCo. v. Heyward, 536 S.W.2d 549, 556–57 (Tex. 1976) (judicial construction of “acci-dental death”); International Travelers Ass’n v. Marshall, 114 S.W.2d 851, 852–53(Tex. 1938) (instruction on judicial construction of “accidental means”).

“Partly” or “solely”—concurrent causation and allocation. Depending on thepolicy language, a loss may be covered if it is partially caused by a covered risk, evenif damage was also caused by an excluded risk, to the extent the damage can be allo-cated between the causes. See Utica National Insurance Co. of Texas v. AmericanIndemnity Co., 141 S.W.3d 198, 204 (Tex. 2004). Under the concurrent causation doc-trine, when the insurer pleads an exclusion under the policy, the insured must get juryfindings that damage was caused solely by the covered risk or segregate the damagecaused by the insured peril from that caused by an excluded peril. Travelers IndemnityCo. v. McKillip, 469 S.W.2d 160, 162 (Tex. 1971).


In other cases, policy language may provide that a loss is covered only if it is causedsolely by the covered risk, exclusive of all other causes. See, e.g., Meyer, 502 S.W.2dat 677–79 (coverage for death resulting from bodily injury independent of all othercauses). In such a case the word “solely” should be included in the question and“partly” should not. Also in such a case, a finding that the loss was caused solely or


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partly by an excluded cause would preclude recovery, and it would be proper to condi-tion the damage question on a negative finding on the exclusion.

PJC 101.60

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CONTRACTS

PJC 101.60 Insurance Contracts—Conditions Precedent and Prejudice (Comment)

Burden of proving compliance. “A party seeking to recover under a contractbears the burden of proving that all conditions precedent have been satisfied.” Associ-ated Indemnity Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 283 (Tex. 1998).“Conversely, if an express condition is not satisfied, then the party whose performanceis conditioned is excused from any obligation to perform.” Solar Applications Engi-neering, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010); see Harwell v.State Farm Mutual Automobile Insurance Co., 896 S.W.2d 170, 173–74 (Tex. 1995).

Conditions precedent defined; creation of condition precedent; conditions notfavored. These principles are discussed at PJC 101.6.

Prejudice—burden of proof. An insured’s failure to comply with a conditionprecedent does not relieve the insurer of liability unless that failure prejudices theinsurer, and the insurer has the burden to show prejudice. Prodigy CommunicationsCorp. v. Agricultural Excess & Surplus Insurance Co., 288 S.W.3d 374, 382–83 (Tex.2009); PAJ, Inc. v. Hanover Insurance Co., 243 S.W.3d 630, 636 (Tex. 2008); Har-well, 896 S.W.2d at 174.

Form of questions. If there is a fact issue about whether the insured compliedwith a condition precedent, a question similar to PJC 101.57 and 101.58 that tracks thecontract language and places the burden on the insured should be submitted:

QUESTION ______

Did Paul Payne [notify the insurer of the suit/give notice of theclaim as soon as practicable/etc.]?

See Prodigy Communications Corp., 288 S.W.3d at 382–83; Harwell, 896 S.W.2d at174.

If raised by the evidence, a question asking whether the insurer was prejudicedshould be submitted, conditioned on a finding that the insured failed to comply. SeeProdigy Communications Corp., 288 S.W.3d at 382–83; Harwell, 896 S.W.2d at 174.

QUESTION ______

Was Insurer, Inc. prejudiced by Paul Payne’s failure to [notify theinsurer of the suit/give notice of the claim as soon as practicable/etc.]?

When to use. These questions would be proper if failure to comply with a condi-tion precedent precludes liability. When the remedy for failure to comply with a condi-tion precedent is abatement, the matter would be handled before trial, so no jury


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question should be submitted. See Philadelphia Underwriters’ Agency of Fire Insur-ance Ass'n of Philadelphia v. Driggers, 238 S.W. 633, 635 (Tex. 1922) (failure to sub-mit to examination after loss did not bar recovery but merely suspended right untilcomplied with).

Instructions based on policy language. The principles regarding tracking policylanguage found in PJC 101.57–101.59 should be followed.

Excuse. If the court determines that the insurance case presents an instance inwhich failure to comply with the condition precedent may be excused, the court shouldcharge the jury with the elements of excuse. See, e.g., Employers Casualty Co. v. ScottElectric, 513 S.W.2d 642 (Tex. Civ. App.—Corpus Christi 1974, no writ); Proctor v.Southland Life Insurance Co., 522 S.W.2d 261 (Tex. Civ. App—Fort Worth 1975,writ ref’d n.r.e.); Dairyland County Mutual Insurance Co. v. Roman, 486 S.W.2d 847(Tex. Civ. App—San Antonio 1972), aff’d, 498 S.W.2d 154 (Tex. 1973).

PJC 101.24

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CONTRACTS

PJC 101.24 Defenses—Instruction on Waiver

Failure to comply by Don Davis is excused if compliance is waived by PaulPayne.

Waiver is an intentional surrender of a known right or intentional conductinconsistent with claiming the right.

COMMENT

When to use. PJC 101.24 is appropriate to submit the affirmative defense ofwaiver. It may also be appropriate, in slightly different form, as an element of theplaintiff’s cause of action, because waiver is an independent ground of recovery. SeeMiddle States Petroleum Corp. v. Messenger, 368 S.W.2d 645, 654 (Tex. Civ. App.—Dallas 1963, writ ref’d n.r.e.). The Committee believes that an instruction on waivershould be submitted if the issue is raised by the evidence. But see Island RecreationalDevelopment Corp. v. Republic of Texas Savings Ass’n, 710 S.W.2d 551 (Tex. 1986)(affirming judgment notwithstanding lack of submission of waiver).

Source of definition. The definition is adapted from United States Fidelity &Guaranty Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (Tex. 1971); see alsoGage v. Langford, 582 S.W.2d 203, 207 (Tex. Civ. App.—Eastland 1979, writ ref’dn.r.e.) (definition of waiver incorrectly omitted “intentionally” from phrase “giving up,relinquishment, or surrender of some known right”).

Distinguished from estoppel. The supreme court has emphasized the unilateralcharacter of waiver and distinguished it from estoppel:

[W]aiver is essentially unilateral in its character; it results as a legal conse-quence from some act or conduct of the party against whom it operates; noact of the party in whose favor it is made is necessary to complete it. It neednot be founded upon a new agreement or be supported by consideration,nor is it essential that it be based upon an estoppel.

Massachusetts Bonding & Insurance Co. v. Orkin Exterminating Co., 416 S.W.2d 396,401 (Tex. 1967).

UCC article 2 cases. A waiver affecting an executory portion of the agreementmay be retracted on reasonable notification that strict performance will be required.Tex. Bus. & Com. Code § 2.209(e) (Tex. UCC).

Waiver and estoppel in insurance cases. The rules of waiver and estoppel applydifferently in insurance cases. The principle has been stated as follows:

Waiver and estoppel may operate to avoid forfeiture of a policy, but theyhave consistently been denied operative force to change, re-write and


63

enlarge the risks covered by a policy. In other words, waiver and estoppelcannot create a new and different contract with respect to risks covered bythe policy.

Ulico Casualty Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 780 (Tex. 2008) (quotingGreat American Reserve Insurance Co. v. Mitchell, 335 S.W.2d 707, 708 (Tex. Civ.App.—San Antonio 1960, writ ref’d)). If the court determines that the insurance casepresents an instance in which waiver or estoppel may apply, those issues may be sub-mitted. See Riggs v. Sentry Insurance, 821 S.W.2d 701, 705 (Tex. App.—Houston[14th Dist.] 1991, writ denied) (approving estoppel instructions); Preferred RiskMutual Insurance Co. v. Rabun, 561 S.W.2d 239, 243–44 (Tex. Civ. App.—Austin1978, writ dism’d) (finding elements of waiver by insurer’s agent).

PJC 101.25

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CONTRACTS

PJC 101.25 Defenses—Instruction on Equitable Estoppel

Failure to comply by Don Davis is excused if the following circumstancesoccurred:

1. Paul Payne

a. by words or conduct made a false representation or concealedmaterial facts, and

b. with knowledge of the facts or with knowledge or informationthat would lead a reasonable person to discover the facts, and

c. with the intention that Don Davis would rely on the false rep-resentation or concealment in acting or deciding not to act; and

2. Don Davis

a. did not know and had no means of knowing the real facts and

b. relied to his detriment on the false representation or conceal-ment of material facts.

COMMENT

When to use. PJC 101.25 submits the affirmative defense of equitable estoppel.

Source of definition. The elements of estoppel are adapted from Gulbenkian v.Penn, 252 S.W.2d 929, 932 (Tex. 1952); see also Nelson v. Jordan, 663 S.W.2d 82, 87(Tex. App.—Austin 1983, writ ref’d n.r.e.) (listing elements). For a general discussionof equitable estoppel, see Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d834 (Tex. 1968).

Equitable estoppel distinguished from other types of estoppel. Equitableestoppel differs from other types of estoppel because it requires some deception prac-ticed on a party who was misled to his injury. Bocanegra v. Aetna Life Insurance Co.,605 S.W.2d 848, 851 (Tex. 1980). That party, however, must show his justifiable reli-ance on the representation. Kuehne v. Denson, 219 S.W.2d 1006, 1008–09 (Tex. 1949).

Estoppel based on silence. Estoppel may also be based on silence or inaction,rather than on affirmative misrepresentations, if one under a duty to speak or act hasby his silence or inaction misled the opposing party to his detriment. Smith v. NationalResort Communities, Inc., 585 S.W.2d 655, 658 (Tex. 1979); Scott v. Vandor, 671S.W.2d 79, 87 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.). If estoppel isbased on something other than affirmative misrepresentations, a different instructionshould be substituted for PJC 101.25.


65


Waiver and estoppel may operate to avoid forfeiture of a policy, but theyhave consistently been denied operative force to change, re-write andenlarge the risks covered by a policy. In other words, waiver and estoppelcannot create a new and different contract with respect to risks covered bythe policy.


PJC 101.26

66

CONTRACTS

PJC 101.26 Defenses—Instruction on Duress

Failure to comply by Don Davis is excused if the agreement was made underduress caused by Paul Payne.

Duress is the mental, physical, or economic coercion of another, causing thatparty to act contrary to his free will and interest.

COMMENT

When to use. PJC 101.26 is appropriate if one party claims the agreement is void-able because it was made under duress. It may also be used in slightly different lan-guage to submit an affirmative claim for rescission. As a general rule, a party seekingcancellation or rescission must do equity by restoring the other party to his originalstatus. Texas Co. v. State, 281 S.W.2d 83, 91 (Tex. 1955); Freyer v. Michels, 360S.W.2d 559, 562 (Tex. Civ. App.—Dallas 1962, writ dism’d). It is not clear whetherthis rule applies if the doctrine is asserted as a defense.

Source of definition. The definition is derived from Black Lake Pipe Line Co. v.Union Construction Co., 538 S.W.2d 80, 85 n.2 (Tex. 1976), overruled on othergrounds by Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989); Brooks v. Tay-lor, 359 S.W.2d 539, 542 (Tex. Civ. App.—Amarillo 1962, writ ref’d n.r.e.); andHousing Authority of City of Dallas v. Hubbell, 325 S.W.2d 880, 905 (Tex. Civ.App.—Dallas 1959, writ ref’d n.r.e.).

Caveat. Unless the alleged coercion can legally constitute duress, PJC 101.26should not be submitted. “It is never duress to threaten to do that which a party has alegal right to do.” Ulmer v. Ulmer, 162 S.W.2d 944, 947 (Tex. 1942). Filing or threat-ening to file a civil suit cannot, as a matter of law, constitute duress. Continental Casu-alty Co. v. Huizar, 740 S.W.2d 429, 430 (Tex. 1987). The vice arises only if extortivemeasures are employed or if improper demands are made in bad faith. Matthews v.Matthews, 725 S.W.2d 275, 279 (Tex. App.—Houston [1st Dist.] 1986, writ ref’dn.r.e.); Sanders v. Republic National Bank, 389 S.W.2d 551, 555 (Tex. Civ. App.—Tyler 1965, no writ); see also Mitchell v. C.C. Sanitation Co., 430 S.W.2d 933 (Tex.Civ. App.—Houston [14th Dist.] 1968, writ ref’d n.r.e.). State National Bank v. FarahManufacturing Co., 678 S.W.2d 661 (Tex. App.—El Paso 1984, judgm’t dism’d byagr.), gives a general overview of this topic. A threat to file criminal prosecution mayconstitute duress even if the threatened party is guilty of the crime. Eggleston v. Hum-ble Pipe Line Co., 482 S.W.2d 909, 916 (Tex. Civ. App.—Houston [14th Dist.] 1972,writ ref’d n.r.e.); Pierce v. Estate of Haverlah, 428 S.W.2d 422, 425 (Tex. Civ. App.—Tyler 1968, writ ref’d n.r.e.).

Economic duress. If economic duress is alleged, this instruction should be sub-mitted only if the party against whom duress is charged was responsible for the other

PJC 101.41

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CONTRACTS

PJC 101.41 Question on Promissory Estoppel

QUESTION ______

Did Paul Payne substantially rely to his detriment on Don Davis’s promise,if any, and was this reliance foreseeable by Don Davis?


Answer: _______________

COMMENT

When to use. The doctrine of promissory estoppel may be invoked as a cause ofaction. It is appropriate if a promisee has acted to his detriment in reasonable relianceon an otherwise unenforceable promise. The theory supplies a remedy enabling aninjured party to be compensated for “foreseeable, definite and substantial reliance.”Wheeler v. White, 398 S.W.2d 93, 96–97 (Tex. 1965). See PJC 115.6 for a question onpromissory estopppel—reliance damages.

Source of question. Wheeler, 398 S.W.2d at 96–97; see also English v. Fischer,660 S.W.2d 521, 524 (Tex. 1983) (requisites of promissory estoppel are “(1) a prom-ise, (2) foreseeability of reliance thereon by the promisor, and (3) substantial relianceby the promisee to his detriment”); Restatement (Second) of Contracts § 90 (1981).

Exception to statute of frauds. This doctrine also can be used as a plea in avoid-ance of a statue-of-frauds defense. “Moore” Burger, Inc. v. Phillips Petroleum Co.,492 S.W.2d 934, 937–40 (Tex. 1972).


Waiver and estoppel may operate to avoid forfeiture of a policy, but theyhave consistently been denied operative force to change, re-write andenlarge the risks covered by a policy. In other words, waiver and estoppelcannot create a new and different contract with respect to risks covered bythe policy.


PJC 101.8

50

CONTRACTS

PJC 101.8 Instruction on Ambiguous Provisions

It is your duty to interpret the following language of the agreement:

[Insert ambiguous language.]

You must decide its meaning by determining the intent of the parties at thetime of the agreement. Consider all the facts and circumstances surrounding themaking of the agreement, the interpretation placed on the agreement by the par-ties, and the conduct of the parties.

COMMENT

When to use. If the court determines that the contract contains ambiguous lan-guage, PJC 101.8 should accompany PJC 101.1.

If a contract is unambiguous or if it is ambiguous but parol evidence of circum-stances is undisputed, construction of the contract is an issue for the court. Brown v.Payne, 176 S.W.2d 306, 308 (Tex. 1943); In re Hite, 700 S.W.2d 713, 718 (Tex.App.—Corpus Christi 1985, writ ref’d n.r.e.). “Whether a contract is ambiguous is aquestion of law for the court to decide.” Lopez v. Muñoz, Hockema & Reed, L.L.P., 22S.W.3d 857, 861 (Tex. 2000); see also Dynegy Midstream Services, Ltd. Partnership v.Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009). If the court determines that the con-tract is ambiguous, the parties’ intent is a fact issue. J.M. Davidson, Inc. v. Webster,128 S.W.3d 223, 229 (Tex. 2003); Columbia Gas Transmission Corp. v. New Ulm Gas,Ltd., 940 S.W.2d 587, 589 (Tex. 1996).

Insurance cases. When an insurance contract is ambiguous and the court resolvesthe uncertainty favorably to the insured as a matter of law, there is no question for thejury. See Progressive County Mutual Insurance Co. v. Kelley, 284 S.W.3d 805, 808(Tex. 2009); National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Hud-son Energy Co., 811 S.W.2d 552, 555 (Tex. 1991). The preceding instruction about theintent of the parties would not be correct in such a case.

Intent must be understandable. Parties to a contract must express their inten-tions understandably. See City of Houston v. Williams, 353 S.W.3d 128, 138, 143–44(Tex. 2011); Montgomery County Hospital District v. Brown, 965 S.W.2d 501, 502(Tex. 1998). To be enforceable, a contract must be sufficiently certain to enable thecourt to determine the legal obligations of the parties. T.O. Stanley Boot Co. v. Bank ofEl Paso, 847 S.W.2d 218, 221 (Tex. 1992); Bendalin v. Delgado, 406 S.W.2d 897, 899(Tex. 1966).

Parties’ interpretation given great weight. The most significant rule of contrac-tual interpretation is that great, if not controlling, weight should be given to the par-

CONTRACTS PJC 101.8

51

ties’ interpretation. The court and the jury should assume that parties to a contract arein the best position to know what they intended by the language used. James Stewart& Co. v. Law, 233 S.W.2d 558, 561 (Tex. 1950); see also Trinity Universal InsuranceCo. v. Ponsford Bros., 423 S.W.2d 571, 575 (Tex. 1968). One factor to be consideredin determining the parties’ interpretation is their conduct. Consolidated EngineeringCo. v. Southern Steel Co., 699 S.W.2d 188, 192–93 (Tex. 1985).

PJC 101.9

52

CONTRACTS

PJC 101.9 Trade Custom (Comment)

Instruction may be appropriate. Texas law is not clear on whether trade customis merely evidentiary and not appropriate for jury instruction or whether it may in factform the basis for a proper instruction. Such an instruction would be used to augmentor modify PJC 101.1 or 101.2. It could inquire whether a particular custom or usageexisted and, if it existed, whether the parties intended that it would affect a contractterm. Lambert v. H. Molsen & Co., 551 S.W.2d 151, 154 (Tex. Civ. App.—Waco 1977,writ ref’d n.r.e.) (“The [trial] court instructed the jury . . . that if it found . . . that thecustom and usage actually existed, then it could be considered by the jury towarddetermining the parties’ contractual intent.”). The court in Lambert did not expresslyapprove the instruction used by the trial court, but the opinion does provide an exam-ple of the form of a trade-custom instruction. See also Tennell v. Esteve Cotton Co.,546 S.W.2d 346 (Tex. Civ. App.—Amarillo 1976, writ ref’d n.r.e.); Englebrecht v.W.D. Brannan & Sons, Inc., 501 S.W.2d 707 (Tex. Civ. App.—Amarillo 1973, no writ)(discussing submission of instructions on custom).

Evidence of trade custom may aid interpretation of ambiguous contract.Evidence of custom may be admitted to aid in the interpretation of a contract if thecontract is ambiguous, imprecise, incomplete, or inconsistent, but such evidence is notadmissible to contradict, restrict, or enlarge what otherwise needs no explanation.Miller v. Gray, 149 S.W.2d 582, 583–84 (Tex. 1941); Energen Resources MAQ, Inc. v.Dalbosco, 23 S.W.3d 551, 557 (Tex. App.—Houston [1st Dist.] 2000, pet. denied);PGP Gas Products, Inc. v. Reserve Equipment, Inc., 667 S.W.2d 604, 607–08 (Tex.App.—Austin 1984, writ ref’d n.r.e.).

UCC article 2 cases. Trade custom, course of dealing, and course of performanceare relevant in determining the meaning of the agreement. See Tex. Bus. & Com. Code§§ 1.303, 2.202 (Tex. UCC).

Insurance cases. When an insurance contract is ambiguous and the court resolvesthe uncertainty favorably to the insured as a matter of law, there is no question for thejury. See Progressive County Mutual Insurance Co. v. Kelley, 284 S.W.3d 805, 808(Tex. 2009); National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Hud-son Energy Co., 811 S.W.2d 552, 555 (Tex. 1991). While evidence of trade usage orcustom might be considered by the court in construing the policy, there will not be ajury question when the court construes the language as a matter of law. See NationalUnion Fire Insurance Co. of Pittsburgh, Pennsylvania v. Hudson Energy Co., 780S.W.2d 417, 423–24 (Tex. App.—Texarkana 1989), aff’d, 811 S.W.2d 552 (Tex.1991) (trial judge interpreted policy and there was no fact issue about parties’ intent).The standard PJC instruction on trade custom to interpret an ambiguous contractwould not be correct in such a case.

DAMAGES PJC 115.3

325

PJC 115.3 Question on Contract Damages

[Insert predicate, PJC 115.1.]

QUESTION ______

What sum of money, if any, if paid now in cash, would fairly and reasonablycompensate Paul Payne for his damages, if any, that resulted from such failureto comply?

Consider the following elements of damages, if any, and none other.

[Insert appropriate instructions. See samples in PJC 115.4 and instructions in PJC 115.5.]

Do not add any amount for interest on damages, if any.

Answer separately in dollars and cents for damages, if any.

1. [Element A] sustained in the past.

Answer: _______________

2. [Element A] that, in reasonable probability, will be sustained in thefuture.

Answer: _______________

3. [Element B] sustained in the past.

Answer: _______________

4. [Element B] that, in reasonable probability, will be sustained in thefuture.

Answer: _______________

COMMENT

When to use. PJC 115.3 should be predicated on a ‘‘Yes” answer to PJC 101.2and may be adapted for use in most breach-of-contract cases by the addition of appro-priate instructions setting out legally available measures of damages. See PJC 115.4and 115.5. If only one measure of damages is supported by the pleadings and proof,the measure may be incorporated into the question.

PJC 115.3

326

DAMAGES

Instruction required. PJC 115.3 may not be submitted without an instruction onthe appropriate measures of damages. See Jackson v. Fontaine’s Clinics, Inc., 499S.W.2d 87, 90 (Tex. 1973). See PJC 115.4 and 115.5 for sample instructions.

Causation. The phrase “resulted from” is derived from McKnight v. Hill & HillExterminators, Inc., 689 S.W.2d 206, 209 (Tex. 1985).

Parallel theories. If the breach-of-contract cause of action is only one of severaltheories of recovery submitted in the charge and any theory has a different legal mea-sure of damages to be applied to a factually similar claim for damages, a separate dam-ages question for each theory may be submitted and the following additionalinstruction may be included earlier in the charge:

In answering questions about damages, answer each question sep-arately. Do not increase or reduce the amount in one answer becauseof your answer to any other question about damages. Do not specu-late about what any party’s ultimate recovery may or may not be.Any recovery will be determined by the court when it applies the lawto your answers at the time of judgment.

Elements of damages submitted separately. The Committee generally recom-mends that multiple elements of damages be separately submitted to the jury. HarrisCounty v. Smith, 96 S.W.3d 230, 233–34 (Tex. 2002) (broad-form submission of multi-ple elements of damages may lead to harmful error if there is a proper objection rais-ing insufficiency of the evidence to support one or more of the elements submitted);see also Tex. Civ. Prac. & Rem. Code § 41.008(a) (“In an action in which a claimantseeks recovery of damages, the trier of fact shall determine the amount of economicdamages separately from the amount of other compensatory damages.”). Separatingeconomic from noneconomic damages is required to allow the court to apply the limitson recovery of exemplary damages based on economic and noneconomic damages asrequired by Tex. Civ. Prac. & Rem. Code § 41.008(b).

Further, “[p]rejudgment interest may not be assessed or recovered on an award offuture damages.” Tex. Fin. Code § 304.1045 (wrongful death, personal injury, or prop-erty damage cases); see also Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc.,962 S.W.2d 507, 514, 530 (Tex. 1998) (reconciling equitable prejudgment interestwith statutory prejudgment interest); Perry Roofing Co. v. Olcott, 744 S.W.2d 929, 931(Tex. 1988) (unliquidated damages in contract cases). Therefore, separation of pastand future damages is required.

Elements considered separately. Golden Eagle Archery, Inc. v. Jackson, 116S.W.3d 757, 770 (Tex. 2002), provides an instruction for cases involving undefined orpotentially overlapping categories of damages. In those cases, the following languageshould be substituted for the instruction to consider each element separately:

DAMAGES PJC 115.3

327

Consider the following elements of damages, if any, and noneother. You shall not award any sum of money on any element if youhave otherwise, under some other element, awarded a sum of moneyfor the same loss. That is, do not compensate twice for the same loss,if any.

Prejudgment interest. Instructing the jury not to add interest is suggestedbecause prejudgment interest, if recoverable, will be calculated by the court at the timeof judgment. If interest paid on an obligation is claimed as an element of damages, itmay be necessary to modify the instruction on interest.

Insurance cases. If the court submits a single question like PJC 101.58 thatincludes liability, causation, and damages, then a separate question like PJC 115.3 isnot needed to determine the amount of policy benefits that are owed. However, if con-sequential damages are alleged in addition to policy benefits, then a separate questionlike PJC 115.3 is needed to determine the consequential damages.

This question may be used to submit both direct and consequential damages in aninsurance case when the court submits breach of contract questions that do not decidedamages, such as PJC 101.57. The question should be modified to reflect the propercausation standard based on the insurance contract language and to instruct the jury onwhat damages to include and exclude. For example:

QUESTION ______

What sum of money, if any, if paid now in cash, would fairly andreasonably compensate Paul Payne for his [unpaid] damages [, ifany,] [that were caused (partly/solely) by/that resulted from/becauseof] the [description of covered loss, event, or cause/such failure tocomply]?

Consider the following elements of damages, if any, and noneother.

[Insert appropriate instructions that describe the covered loss or event found in answer to PJC 101.57, and any consequential damages.

See samples in PJC 115.4 and instructions in PJC 115.5.]

[Do not include in your answer damages, if any, caused by(description of excluded cause.)]

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