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Click here for the full text of this decision FACTS:On July 1, 1999, Edward H. Brainard II was killed when his vehicle was involved in a head-on collision with a rig owned by Premier Well Service Inc. His widow Lilith Brainard and their five children (collectively, Brainard) brought a wrongful death action against Premier and sought underinsured motorist (UIM) benefits from Trinity Universal Insurance Co. under a policy issued to the family business, Brainard Cattle Co. Trinity paid Brainard $5,000 under the policy’s personal injury protection (PIP) provision but requested further information supporting the UIM claim. Brainard alleges she submitted the information and performed all conditions precedent to receiving the benefits, but Trinity never paid. Eventually, Brainard joined Trinity as a defendant, alleging breach of contract, breach of the common law duty of good faith, violations of the Texas Deceptive Trade Practices Act and violations of Texas Insurance Code Arts. 21.21 and 21.55. On Dec. 7, 2000, Brainard and Premier settled Brainard’s claims for $1 million, Premier’s policy limit, and Premier was subsequently dismissed from the suit. When Brainard demanded that Trinity also tender the $1 million UIM policy limit, Trinity countered with an offer of $50,000. The trial court severed Brainard’s extra-contractual claims, which remain pending, and the parties proceeded to trial on the UIM contract. A jury found that Premier’s negligence caused the accident and awarded Brainard $1,010,000 for pecuniary loss, funeral expenses, loss of companionship and society, and mental anguish. The jury also awarded $100,000 for attorneys’ fees. The trial court applied a $1,005,000 credit for Brainard’s settlement and PIP benefits and signed a judgment against Trinity for the remaining $5,000 in damages plus $100,000 in attorneys’ fees. On appeal, Trinity challenged the attorneys’ fees award. Brainard, by cross appeal, alleged the trial court erred in refusing to award prejudgment interest on the $1,010,000 in actual damages. The 7th Court of Appeals reversed that portion of the trial court’s judgment awarding attorneys’ fees and affirmed the denial of prejudgment interest. HOLDING:Affirmed in part, reversed and remanded in part. The Texas Supreme Court found that UIM insurance covers prejudgment interest that the underinsured motorist would owe the insured. The 7th Court of Appeals erred in affirming the trial court’s judgment denying Brainard this recovery, the court held. The court explained how to calculate prejudgment interest under the Texas Insurance Code. The beginning principal is $1,010,000, the amount of damages determined by the jury, the court stated, minus the $5,000 PIP credit, which reduced the principal before prejudgment interest began to accrue. Thus, the court stated, interest accrued on $1,005,000 between the point when Brainard filed suit and received the $1,000,000 settlement. After the settlement, the court applied a $1,000,000 credit, which altered the computation of interest. During the period from the settlement to Trinity’s offer of $50,000, interest accrued on the principal remaining after application of the $1,000,000 credit ($5,000 in this case). Finally, the court stated, because Brainard could have accepted Trinity’s settlement offer, which ended up amounting to more than the amount Brainard received from Trinity following the $1 million settlement credit, interest ceased to accrue on that date of Trinity’s settlement offer. In other words, the court explained, if judgment for a claimant is equal to or less than the amount of a settlement offer of the defendant, prejudgment interest does not accrue on the amount of the judgment during the period that the offer may be accepted. As for attorneys’ fees, the court found that because UIM insurance utilizes tort law to determine coverage, the insurer’s contractual obligation to pay benefits does not arise until liability and damages are determined. Thus, the court found that because the contract did not require Trinity to pay UIM benefits before Premier’s negligence and underinsured status were determined, Brainard did not present a contract claim before the trial court rendered its judgment and the court of appeals correctly concluded that Brainard is not entitled to recover attorney’s fees under Texas Civil Practice & Remedies Code �38.002(3). OPINION:Jefferson, C.J., delivered the opinion of the court. O’Neill and Johnson, J.J., did not participate in the decision.

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