
 
OPINION
No. 04-05-00291-CV
AIG AVIATION, INC. and National Union Fire Insurance Co. ,
Appellants
v.
HOLT HELICOPTERS, INC., 
Appellee
From the 38th Judicial District Court, Uvalde County, Texas
Trial Court No. 02-12-23,349-CV
Honorable Antonio G. Cantu , Judge Presiding


Opinion by: Rebecca Simmons , Justice
Dissenting Opinion by:  Sarah B. Duncan, Justice


Sitting: Sarah B. Duncan, Justice
  Phylis J. Speedlin, Justice
  Rebecca Simmons , Justice


Delivered and Filed: April 26, 2006


AFFIRMED 


 The primary issue on appeal is whether the insured, Holt Helicopters, Inc., whose aircraft sustained damages while
operated by a pilot, without the flight experience required by the policy, may recover when there is no causal connection
between the accident and the pilot's lack of experience.  The trial court ruled, as a matter of law, that the insured could
recover unless the insurer proved a causal connection.  On appeal, AIG Aviation, Inc. and National Union Fire Insurance
Co. (hereinafter AIG) contend the trial court erred in: (1) ruling, as a matter of law, that proof of causation between the
accident and the undisputed breach of the insurance policy was required; (2) imposing additional statutory damages in the
absence of legally and factually sufficient evidence of a violation of the Insurance Code; and (3) awarding Holt attorney's
fees.  We affirm the trial court's judgment.  
Background 
 Holt Helicopters sued to recover for the loss of one of its helicopters covered under National Union Fire Ins. Co.'s property
insurance policy issued through AIG Aviation Inc.   Holt's Robinson R-22 Beta II helicopter crashed while herding cattle
near Redrock, New Mexico on October 30, 2001.  Holt submitted a claim to AIG for the property damage and following an
investigation of the crash, AIG sent a letter denying coverage due to the pilot's lack of experience.  Holt sued AIG for
breach of contract, wrongful denial of its claim, and violations of the Insurance Code.  At the time of the accident, Fred
Graff, an employee of Holt, was the pilot of the helicopter.  Item five of the policy declarations includes an amendment
titled "Pilot Warranty Completion."  The amendment provides coverage for the helicopter while piloted by Larry Holt or
two other employees, but it does not reference Graff.  In addition to the named pilots, the amendment also provides that the
aircraft may be piloted by:
[a]ny commercial pilot with rotary wing ratings properly certificated by the FAA having a minimum of 1,000 logged flying
hours in rotary wing aircraft, including 100 hours of which are in Robinson R22 model aircraft. (1)
 Within the exclusions section of the insurance policy it states: "This policy does not apply . . .[t]o any Insured while the
aircraft is in flight. . .if piloted by other than the pilot or pilots designated in the Declarations."  Graff, as the pilot at the time
of the accident, had only 685 logged flying hours rather than the required 1,00 0 hours and was not listed as a pilot in the
"Pilot Warranty Completion."
 Both parties filed cross motions for summary judgment to determine whether AIG could deny coverage based on the policy
without establishing a causal connection between the crash and Graff's lack of experience.  Granting Holt's motion for
partial summary judgment, the trial court found that there was coverage under the policy unless AIG proved that Graff's lack
of required flight time was a cause of the accident. (2) 
 The remaining issues were submitted to a jury.  The  jury found that AIG did not establish a causal connection between the
breach of the Open Pilot Warranty relating to the flight time and the accident, a finding AIG does not contest before this
court.  The jury also found AIG engaged in unfair or deceptive acts that caused damages to Holt and knowingly refused to
pay a claim without conducting a reasonable investigation of the claim. The trial court awarded Holt: (1) $65,000 for
property damage; (2) $36,574.20 in statutory interest damages; (3) $10,159.50 in prejudgment interest; (4) $130,000 in
statutory damages for knowingly violating provisions of the Insurance Code; (5) $282,910 in attorney's fees for trial
counsel; and (6) additional contingent attorney's fees relating to a successful response on appeal.  
The Law on Causation
 AIG brings forth two arguments as to why the trial court erred in ruling that causation between the breach and the accident
was required.  First, AIG contends the Texas Supreme Court's rationale in Puckett v. U. S. Fire Insurance Co., reviewing
causation in aviation insurance contracts, is no longer viable.  678 S.W.2d 936 (Tex. 1984).  Second, even if the rationale is
still viable,Puckett is not applicable.  Because whether causation is required is a pure question of law, the trial court's
conclusion is reviewed de novo.  Natividad v. Alexsis, 875 S.W.2d 694, 699 (Tex. 1994).  
 


The Puckett Case  


 
 In Puckett, the Texas Supreme Court specifically addressed  "whether an insured's failure to have his plane inspected need
be the cause of an accident in order for the insurance company to avoid liability under an aviation policy for damages
resulting from that accident."  Puckett, 678 S.W.2d at 937.  Puckett failed to conduct an annual inspection in order to
maintain a valid airworthiness certificate as required by the insurance policy.  Id.  Approximately a month after the
airworthiness certificate expired, Puckett's airplane crashed.  Id.  Both parties stipulated that the lack of a valid certificate
did not have a causal connection to the crash.  Id.  
 Reversing the appellate court, the Texas Supreme Court held that "an insurer cannot avoid liability under an aviation
liability policy unless [the breach] is either the sole or one of several causes of the accident."  Id. at 938.  The court
acknowledged that the policy did not require a causal connection between the breach and the accident.  However, the court
further determined that to deny coverage when the breach of contract in no way contributes to the loss would be
unconscionable and thus against public policy.  Id.  Finally, the court relied on a "anti-technicality" statute, covering fire
insurance policies, as an indication that the public policy in Texas disfavored denying coverage based on a policy breach
that did not contribute to the loss.  Id.  
 


 Puckett's Viability  


 
 AIG argues that Puckett's rationale requiring causation is no longer viable and requests that this court "call for" Puckett to
be overruled.  AIG argues that the majority of jurisdictions do not require causation and Puckett contradicts the long
standing rule that courts should give effect to the plain meaning of an unambiguous contract.  Furthermore, that former and
current statutes do not support Puckett's rationale.  Holt claims Puckett is still good law in Texas.  We agree with Holt
thatPuckett remains binding precedent in Texas. (3) 
 In challenging Puckett's viability, AIG firmly relies on two principles that the Puckett court acknowledged.  First, the court
recognized that the majority of jurisdictions do not require causation. Puckett, 678 S.W.2d at 938.  Second, under general
rules of contract, the court acknowledged that it has a duty to give full effect to the plain meaning of an unambiguous
insurance contract.  Id. Nonetheless, the court determined that the better rule was to require causation and that even with
unambiguous contracts, courts must still determine whether contractual terms violate public policy. Id.  Because the Texas
Supreme Court refuted these challenges in its opinion we will not revisit these claims. (4) 
 AIG also argues that the  "anti-technicality" statute supporting the causation requirement inPuckett is no longer applicable
here.  The Puckett court did rely, in part, on Section 6.14 of the Insurance Code (5) as an indication that the public policy of
the State required causation in analogous situations.  Id. at 938.  AIG claims Section 6.14 of the Insurance Code has been
recodified to Section 862.054 and fails to describe the State's public policy on aviation insurance contracts.  AIG points out
that Section 862.054, (6) like its predecessor, relates to fire and personal property insurance and if the Legislature intended to
expand its application they would have done so at the time they recodified Section 6.14.  
 Although AIG's points are well taken, we disagree that the amended anti-technicality statute changes Puckett's application. 
First, as Holt points out, at the time of the accident Section 6.14, not Section 862.054, was in effect.  Repealed by Acts
2001, 77th Leg., ch. 1419 § 31(a), eff. June 1, 2003.  Second, the fact that Sections 6.14 and 862.054 may relate only to fire
or personal property insurance is inconsequential considering the Puckett court specifically acknowledged that the
anti-technicality statute covers fire insurance policies but the statute evidences a public policy applicable to aviation
contracts.  Puckett, 678 S.W.2d at 938.  Finally, AIG's argument that the Legislature intended to exclude commercial
aviation insurances policies when it recodified  Section 6.14 to Section 862.054 because it failed to specifically mention
aviation contracts, is unsupported by the legislative history.  See  House Comm. on State Affairs, Bill Analysis, Tex. H.B.
2811, 77th Leg., R.S. (2001).  The Legislature intended to do nothing more than recodify the prior section.   The bill
analysis of the enrolled version of House Bill 2811, which enacted Section 862.054, and the corresponding House
committee report state "[t]he substance of the law has not been altered. The sole purpose of these provisions is to compile
the relevant law, arrange it in a logical fashion, and rewrite it without altering its meaning or legal effect."  House Comm.
on State Affairs, Bill Analysis, Tex. H.B. 2811, 77th Leg., R.S. (2001).  As such, the Legislature has met on numerous
occasions since the helicopter crash without changing the substantive legal effect and meaning of Section 6.14. 
 Given  AIG's challenges to Puckett's viability fail to present any reasoning that the Puckettcourt did not consider, we
decline to overrule Puckett. 
 


Puckett's Application 


 
 AIG contends that even if Puckett remains good law in Texas it is not applicable in this case. Primarily, AIG claims the
requirement that the operating pilot have a minimum of 1,000 logged flying hours was a factor in insuring the aircraft and
establishing the premium.  Thus, excluding coverage based on the pilot's lack of the minimum flying hours, does not
amount to denying coverage on the basis of a mere technicality as in Puckett.  We disagree that Puckett is distinguishable.  
 First, a comparison of the facts in Puckett with this case indicates that requiring an airworthiness certificate is as much a
basis of the bargain of an insurance contract as the Open Pilot Warranty. (7)  The insurance policy in Puckett unambiguously
provided "there is no coverage under the policy if the aircraft['s]. . .airworthiness certificate is not in full force and effect." 
Id. at 938. The policy required Puckett to annually inspect the aircraft, which Puckett failed to do.  The policy, like the one
in this case, did not require a causal connection between the breach of the policy and the accident.  Id.  The only reasonable
purpose for requiring an airworthiness certificate, and specifically an annual inspection, is to limit the insurer's liability
caused by an inappropriately maintained and unsafe aircraft.  The Puckett court did not determine that the airworthiness
certificate was not a basis of the bargain, rather it held that a breach of the clause without a finding of causation violated
public policy.  Id.  
 Similarly, AIG's Open Pilot Warranty limited its liability caused by pilot error or negligence of a less experience pilot.  See,
e.g., United States Aviation Underwriters, Inc. v. Cash Air, Inc., 568 N.E.2d 1150, 1152 (Mass. 1991) (stating "the
condition has the worthwhile effect of pressuring an insured, at its peril, to be certain that aircraft are flown by experienced
and qualified pilots").  Both the airworthiness certificate and the Open Pilot Warranty address key safety concerns and
appear as an essential part of an insurance contract in determining the acceptable risks to insure and at what premium. 
Here, the jury determined that there was no causal connection between the breach of the Open Pilot Warranty and the
accident, while in Puckett both parties stipulated that there was no causation. (8)  Consequently, under these facts, Puckett is
indistinguishable in that both an airworthiness certificate and an Open Pilot Warranty formed the basis of the bargain.  
 The attempt to distinguish Puckett because an airworthiness certificate is a "mere technicality" and pilot experience is not,
is without merit.  Puckett's reference to a mere technicality does not describe the safety value or weight of an airworthiness
certificate or a particular contract provision.  Rather, it is the phrase used to describe the policy breach (the "technicality")
that results in the denial of coverage when the cause of the loss is covered by the policy.  
 The technicality or unrelated breach is the basis of the "anti-technicality" statute referred to in Puckett.  Puckett, 678
S.W.2d at 938.  The statute does not distinguish between the variety of provisions in a fire policy, rather it requires the
breach of the policy to contribute to the loss before coverage is denied.  Id.  It is the unrelated breach, whatever it might be,
that is the technicality not the specific fire policy provision.  Thus, under a fire policy the requirement of occupancy is a
technicality under the statute if it does not contribute to the loss.  See Aetna Ins. Co. v. Lewis, 204 S.W. 1170 (Tex. Civ.
App.--Austin 1918, writ ref'd) (holding the "anti-technicality" statute is applicable to a defense that the building in which
the insured property was located was vacant, in violation of a promissory warranty, if the violation did not contribute to the
loss).  Likewise inPuckett it is not the airworthiness certificate or the Open Pilot Warranty in this case that are the
technicalities.  Both are important safety features but both are "technicalities" when they are not the cause of the loss.  
 Finally, the public policy rationale supporting the Puckett decision is equally pertinent in this case.   AIG's sole reason for
denying coverage is due to the breach of the Open Pilot Warranty that a jury found did not cause the accident.  It follows,
then, that but for the breach of the Open Pilot Warranty the accident would be covered.   In Puckett the court determined
that because the accident was covered by the policy it would be against public policy, in that situation, to allow the insurer
to escape liability merely because of a nonsubstantive breach.  Puckett, 678 S.W.2d at 938.  Under these circumstances, 
Puckett's public policy rationale is applicable in order to prevent the insurer, AIG, from obtaining a windfall by denying
coverage for a risk it undertook to insure and for which Holt paid for.  See Puckett, 678 S.W.2d at 938 (agreeing that to
allow "an insurance company to avoid liability when the breach of contract in no way contributes to the loss is
unconscionable and ought not be permitted"). 
 As a result, because the facts in Puckett are analogous to this case we conclude even if AIG's Open Pilot Warranty was a
basis of the bargain, under Puckett, a breach of such provision without a causal connection to the accident cannot support a
denial of coverage.  Therefore, pursuant toPuckett, denying coverage in this situation would be against public policy.  
 


Burden of Proof on Causation 


 
 The trial court determined that AIG must prove that the breach of the Open Pilot Warranty caused the accident.  Holt
claims that AIG waived any error relating to the trial court's assignment of the burden of proof  because it did not properly
present the issue on appeal pursuant to Rule of Appellate Procedure 38.1(h).  AIG asserts that it has not waived its argument
because it has consistently urged that the Open Pilot Warranty is a condition precedent to coverage and not an avoidance,
affirmative defense, or an exception to coverage.  AIG's argument that the Open Pilot Warranty is a condition precedent
complies with Rule 38.1(h).
   Holt relies on Article 21.58(b) in disclaiming the burden of proof for causation.  Tex. Ins. Code art. 21.58(b) (Vernon
1991) (repealed eff. April 1, 2005). Whereas AIG asserts Article 21.58(b) does not impose a burden that it has to prove
causation rather only that an exclusion or exception to coverage applied.  Article 21.58(b) states: 
In any suit to recover under a contract of insurance, the insurer has the burden of proof as to any avoidance or affirmative
defense that must be affirmatively pleaded under the Texas Rules of Civil Procedure.  Any language of exclusion in the
policy and any exception to coverage claimed by the insurer constitutes an avoidance or affirmative defense.  
Id. 
As such, AIG does not directly contest the trial court's assignment of the burden of proof as it relates to an avoidance or
affirmative defense. (9)  AIG does state, however, that the Open Pilot Warranty is a condition precedent not an avoidance,
affirmative defense, or an exception to coverage.  As a condition precedent, AIG claims, there was simply no coverage from
the inception of the flight.  It seems AIG is arguing that because the Open Pilot Warranty was a condition precedent it is
outside the realm of Puckett-since it dealt with exclusions-and implicitly Article 21.58(b). (10)  However, even assuming the
Open Pilot Warranty was a condition precedent, none of the cases AIG provides directly support its proposition and at least
one appellate court in Texas, implicitly, disagrees. 
 In Fidelity & Casualty Co. of N.Y. v. Burts Brothers, Inc., the court determined that the insurer needed to establish a causal
connection between the breach of the insurance clause requiring certain minimum pilot qualifications and the accident.  744
S.W.2d 219, 222 (Tex. App.-Houston [1st Dist.] 1988, writ denied).  In Fidelity the pilot operating the helicopter at the time
of the crash lacked the minimum logged flying hours and commercial pilot license required by the insurance policy.  Id. 
The pilot had only 200 hours of flying time and a private pilot license when the policy required a minimum of 2,000 logged
flying hours and a commercial pilot license.  Id. at 221. 
  In Fidelity the court concluded that in order for the insured to have coverage on its helicopter there had to be a qualified
pilot as the insurance policy required.  Id. at 222 (stating "[w]e conclude that the policy is subject to only one reasonable
interpretation: the policy does not afford coverageunless the pilot has the qualifications and ratings set out in Item 7 of the
policy") (emphasis added). Nonetheless, the court required the insurer to prove a causal connection between the breach and
the accident in order to establish its entitlement to summary judgment.  Id.   Implicitly, the court held that even if an insured
failed to meet a condition precedent of coverage the insurer must still bear the burden of establishing a causal connection in
order to avoid liability.  See Southwell v. Univ. of the Incarnate Word, 974 S.W.2d 351, 358 (Tex. App.--San Antonio 1998,
pet. denied) (defining a condition precedent as "an event that must occur before a right can accrue to enforce an
obligation").    
 While AIG is unable to provide any Texas authority in support of its proposition, it cites to cases from other jurisdictions. 
However, a review of those cases indicates that they are distinguishable and fail to support AIG's proposition.  At best, these
cases support AIG's proposition that in order to avoid liability under a breach of the basis of the bargain, causation should
not be required.  See Aviation Charters, Inc. v. Avemco Ins. Co., 784 A.2d 712, 714 (N.J. 2001); Schneider Leasing, Inc. v.
U. S. Aviation Underwriters, Inc., 555 N.W.2d 838, 842 (Iowa 1996) ; U. S. Aviation Underwriters, Inc. v. Cash Air, Inc.,
568 N.E.2d 1150, 1152 (Mass. 1991).  Thus, none of the cases AIG provides support the proposition that a condition
precedent in an insurance policy is outside the realm of Puckett or Article 21.58(b).  Accordingly, we overrule AIG's first
issue.  
Legal and Factual Sufficiency Challenges
 


Standard and Scope of Review 


 
 In reviewing the legal sufficiency of the evidence, we consider the evidence in the light most favorable to the challenged
finding, except if the jurors could not disregard the contrary evidence.See State Farm Fire & Cas. Co. v. Simmons, 963
S.W.2d 42, 44 (Tex. 1998) (stating that in determining if the evidence is legally sufficient to support a bad faith judgment
that the insurer did not conduct an objective and reasonable investigation "we resolve all conflicts in the evidence and draw
all inferences in favor of the jury's findings").   In reviewing a finding of an essential negative fact-no reasonable
investigation-we inquire whether the evidence, viewed in the light most favorable to Holt, permits the logical inference that
AIG did not conduct a reasonable investigation prior to denying the claim.   See Lyons v. Millers Cas. Ins. Co., 866 S.W.2d
597, 600 (Tex. 1993) (acknowledging the conundrum of reviewing the record "to evaluate an insurer's claim that there is 'no
evidence' of a negative fact").  When factual sufficiency of the evidence is challenged, we consider all of the evidence, both
in support of and contrary to the challenged implied finding, and




uphold the verdict unless it is so weak as to be clearly wrong and manifestly unjust.  Cain v. Bain, 709 S.W.2d 175, 176
(Tex. 1986) (per curiam).  
 


Statutory Damages 


 
 The jury was asked to determine whether AIG refused to pay Holt's property damage claim without conducting a
reasonable investigation of the claim and whether AIG did so knowingly.  The jury answered in the affirmative on both
questions and the trial court awarded statutory damages pursuant to former Section 21.21 (11) and 21.55 (12) of the Insurance
Code.  As part of a prohibited laundry list under Section 21.21 it is an unfair settlement practice to refuse to pay for a claim
without conducting a reasonable investigation.  Tex. Ins. Code Ann. art. 21.21 (Vernon Supp. 2004-05).  Reasonableness, is
an objective standard focusing on whether a reasonable insurer under the circumstances would have acted in a similar
manner.  Aranda v. Ins. Co. of North America, 748 S.W.2d 210, 213 (Tex. 1988).  
 AIG concluded that Holt's property damage claim was not covered because of the pilot's lack of experience.  Presumably,
AIG determined that Graff committed pilot error attributable to him having less than 1,000 logged flying hours and this lack
of experience was the sole or one of several causes of the accident.  In this context, whether AIG conducted a reasonable
investigation is correlated to the reasonableness of its basis for denying the claim.  If AIG's basis for denying the claim is
reasonable in light of its investigation then its investigation must have been reasonable. Conversely, if its basis for denying
the claim is unreasonable, its investigation would fail to meet the reasonable standard in Article 21.21.  
 The evidence indicates that during AIG's investigation of the crash, AIG knew it would have to show a causal connection
between the pilot's lack of flying hours and the accident. (13)  In an internal communication between Robert McNabb and
James Watt, vice presidents for AIG, McNabb wrote: 
[i]f we require a causal connection it is probably there: above 5000 feet the engine correlator does not function very well. 
This flight was the pilot's first flight to any altitude exceeding 5000 feet. . . .I am advised that. . .no causal connection [may
be] required. . . .  In Texas that would be news to me. . . . 


McNabb admitted that by November 8, 2001, and prior to the adjuster's visit to the crash site, McNabb had determined that
a causal connection between the pilot's insufficient experience and the accident existed.  On November 8, 2001, McNabb
wrote another email to Watt stating: 
I have also asked adjuster to visit crash site and document the terrain involved with an eye toward documenting the file for
adequacy of investigation should we become involved in coverage litigation.  In summary, we seem to be faced with a weak
causal connection argument, but a clear indication that we had never heard of this pilot and would never have agreed to
insure him without certain specific requirements.  


When asked what he meant by causal connection, McNabb stated that "[j]ust whether or not the pilot's [sic] failing to have
been identified in the policy and not meeting the Open Pilot Warranty had anything to do with the accident."  McNabb
testified that his sole source of information was what the independent adjuster, Patrick Montgomery, provided.  However,
no one examined the engine internally to see if engine malfunction contributed or caused the accident.  Further, McNabb
agreed that investigating what the rotor RPM was at the time of the accident could be an important factor 


in determining whether the aircraft was operating properly at the time of the accident but did not inquire or make any efforts
to find out.  
 As the investigator and adjuster for AIG, Patrick Montgomery was not requested, nor did he determine the cause of the
accident.  Montgomery's investigation apparently revealed that the accident occurred at high density altitude which would
have made it more difficult to operate the helicopter.  At the time of Montgomery's deposition, he testified that he worked
for AIG since 1991 or 1992 as an attorney and beginning in July 2001 as a consultant.  Since July 2001 Montgomery had
conducted a total of about 30 investigations, 25 or so for AIG, and only five relating to helicopter accidents.  
 He further testified that he met with Graff and the passenger and recorded their statements, as he customarily did, but was
unaware of the location of the tapes or whether he transcribed the tapes.  Montgomery stated he did not recall providing any
information to AIG about the effect of Graff having 685 logged flying hours instead of 1,000 on the accident.  When asked
if he would go back and conduct an additional investigation before feeling confident to give opinions about the cause of the
accident he stated: "Well, if I were asked to determine the cause of the accident, yes, I would do additional investigation."  
 As part of his investigation, Montgomery went out to the crash site and took a number of pictures of the aircraft but did not
recall testing, inspecting, or examining the aircraft for mechanical malfunction.  Montgomery testified that in conducting his
investigation he did not recall inspecting the drive belts on the engine, transmission, or the tail rotor blades.  He did not
inspect the engine, lower RPM lights, RPM audio system and did not test the fuel or the fuel filter.  Importantly, Mr. 


Holt, as a designated expert, testified that a power loss at that altitude can be attributed to a number of mechanical
malfunctions, apparently, none of which were investigated.  
 Montgomery sent this minimal information to McNabb who concluded that the crash was caused by Graff's inexperience in
operating the helicopter at high altitude.  McNabb then informed James Watt, vice president of AIG's hull claims division,
that he recommended that the claim be denied.  Watt also concluded, solely based on the limited information provided by
Montgomery, that the pilot's lack of experience contributed to the accident and denied Holt's claim.  


 At trial AIG's expert, Warren Wandel, testified that the pilot's lack of experience in high-hot conditions contributed to the
accident.  Notably, the Open Pilot Warranty did not specifically require flight experience in high-hot conditions.  But,
Wandel also testified that 40 hours of flight time in high-hot conditions would provide sufficient experience.  Graff had
over 40 hours of flight time in high-hot conditions.  Ultimately, Wandel was not able to conclusively determine whether
Graff's insufficient flight hours contributed to the crash.  Since AIG denied Holt's claim on the basis of pilot error, it would
seem, and the jury was free to infer, that a reasonable investigation should have inquired into Graff's experience in high-hot
conditions and should have discovered that he had over 40 hours in such conditions.  Based on AIG's expert testimony, the
jury could have reasonably concluded that if AIG had conducted a reasonable investigation it would have ruled out pilot
error.  On the other hand, Holt's expert, Colonel William Lawrence, with an equally impressive background, testified that
the pilot's "failure to have a total of a thousand generic rotary wing aircraft hours had no effect on th[e] accident." 
Lawrence concluded that Graff's lack of 315 generic flying hours did not cause the accident rather "some kind of a power
loss or some kind of wind gust" was the cause.  Lawrence stated that Graff's response to what appeared to be a power failure
was the correct action to take.  Lawrence also testified that in his opinion the better trained pilots were those who flew in
solely one type of aircraft.  Significantly, Graff had 650 of his 685 flight hours in the type of helicopter involved in the
accident.  In rejecting AIG's causal connection theory as unreasonable, the jury was free to infer that with 650 flight hours in
an R-22 helicopter, Graff was as equally qualified as a pilot with 1,000 generic flight hours, and that AIG's investigation did
not indicate pilot error. 
 Finally, there was some evidence that AIG acted knowingly.  The insurance code and the DTPA both define "knowingly"
as "actual awareness" of the falsity, unfairness, or deception.  Tex. Ins. Code Ann. art. 21.21 § 2(c) (Vernon Supp.
2004-05); Tex. Bus. & Com. Code Ann. § 17.45(9) (Vernon 2002).  AIG knew that in order to deny Holt's claim based on
the breach of the Open Pilot Warranty it needed to establish a causal connection between Graff's lack of 1,000 flying hours
and the accident.  McNabb stated that "it was a reasonable conclusion to draw that this particular accident in the Robinson
R22, had he had more flight hours and experience, might not have happened."  The jury may have accepted McNabb's
general conclusion but could reasonably have taken issue with how Montgomery's investigation indicated that Graff
committed pilot error and how it contributed to the accident.  Particularly, considering AIG's investigation did not
reasonably indicate any pilot error caused the accident.  McNabb's hypothesis appears reasonable before AIG's investigation
but not thereafter.  Consequently, there is some evidence to support the jury finding that AIG knowingly failed to conduct a
reasonable investigation before denying Holt's claim.  
 Based on the evidence, the jury could have concluded that AIG knowingly conducted an outcome-oriented investigation.  It
was reasonable for the jury to infer that Montgomery's investigation did not indicate sufficient information for either
McNabb or Watt to reasonably conclude that there was pilot error, much less that pilot error due to lack of the 1,000 logged
flying hours contributed to the accident.


 The evidence provides, at least, a basis for reasonable minds to reach the conclusion that AIG knowingly refused to pay
Holt's claim without conducting a reasonable investigation.  Consequently, the evidence permits the logical inference that
AIG, knowingly, failed to conduct a reasonable investigation.  See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.
2005).  Further, examining all of the evidence we are unable to conclude that the evidence that supports the jury's finding is
so weak as to be clearly wrong and manifestly unjust.  Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). Accordingly, we
overrule AIG's second issue.  


 


Attorney's Fees Award 




 
 AIG asserts we must also reverse the award of attorney's fees and render that Holt take nothing or remand if we sustain any
of AIG's issues on appeal.  However, having determined that AIG's challenges on appeal fail to present reversible error we
overrule AIG's conditional issue. 


Conclusion 


 Based on the foregoing, we affirm the trial court's judgment.  






       Rebecca Simmons , Justice
1.  The parties referred to this provision of the amendment, which delineates required experience rather than a specific pilot,
as the "Open Pilot Warranty."  
2.  The court specifically found: "[t]here is coverage under the policy unless Defendants can establish a causal connection
between a breach of the policy and the accident."  
3.  While it is questionable if the Texas Supreme Court will continue to follow the rational in Puckett, we are bound by
existing precedent as an intermediate appellate court.     
4.  Justice Pope's dissent in Puckett clearly articulates AIG's points.  
5.  Section 6.14 of the Texas Insurance Code states:    


No breach or violation by the insured of any warranty, condition or provision of any fire insurance policy, contract of
insurance, or applications therefore, upon personal property, shall render void the policy or contract, or constitute a defense
to a suit for loss thereon, unless such breach or violation contributed to bring about the destruction of the property.  


 Repealed by Acts 2001, 77th Leg., ch. 1419 § 31(a), eff. June 1, 2003.   
6. Section 862.054 states 


Unless the breach or violation contributed to cause the destruction of the property, a breach or violation by the insured of a
warranty, condition, or provision of a fire insurance policy or contract of insurance on personal property, or of an
application for the policy or contract: (1) does not render the policy or contract void; and (2) is not a defense to a suit for
loss. 


 Tex. Ins. Code Ann. § 862.054 (Vernon 2003).  
7.  Another exclusion under AIG's policy in this case "is if the airworthiness certificate of the aircraft is not in full force and
effect."
8. As discussed below, AIG had the burden of proof that the breach of the Open Pilot Warranty was the sole or one of
several causes of the accident.  The jury charge in this case defines causal connection as "the breach of the Open Pilot
Warranty was a cause of the accident, and without which, the accident would not have occurred.  There may be more than
one cause of the accident."   If the jury charge submitted the wrong causation element it was incumbent upon the party
carrying the burden of proof, AIG, to object and submit a corrected version.   While AIG objected to the charge as imposing
the causation burden of proof on AIG, it is questionable whether the objection was specific enough to bring to the court's
attention that the charge carried an erroneous causation element.  In any event, on appeal, AIG does not complain about any
jury charge error.  
9. In their brief AIG states "[a]pplying the plain language of [Section 21.58(b)], the burden imposed on AIG and National
Union is simply to prove the applicability of an exclusion or exception, not that a breach of a policy provision was a cause
of the loss."  
10.  While AIG asserts that the Open Pilot Warranty is a condition precedent and not an exclusion it fails to specify how
this distinction caused the trial court to commit error.  Courts addressing the distinction between a condition precedent,
warranties, conditions subsequent, or exclusions in an insurance policy have done so in an effort to determine if their
"anti-technicality" statute or public policy requiring causation apply.  See, e.g., Edmunds v. Avemco Ins. Co., 492 F. Supp.
970, 974 (D.C. Mass. 1980); American States Ins. Co. v. Byerly Aviation Inc., 456 F. Supp. 967, 970 (S.D. Ill. 1978);
Global Aviation Ins. Managers v. Lees, 368 N.W.2d 209, 211 (Iowa Ct. App. 1985);Security Mutual Cas. Co. v. O'Brien,
662 P.2d 639, 640-41 (N.M. 1983).  
11. Act of June 7, 1951, 52nd Leg., R.S., ch. 491, 1951 Tex. Gen. Laws 868; amended by Act of April 25, 1957, 55th Leg.,
R.S., ch. 198, § 4, 1957 Tex. Gen. Laws 401 (subsequent amendments omitted), repealed by Act of May 22, 2003, 78th
Leg., R.S., ch. 1274, § 26(a)(1), 2003 Tex. Gen. Laws 3611, 4138 (current version at Tex. Ins. Code Ann. § 541.060
(Vernon 2005)).
12.  Act of May 27, 1991, 72nd Leg., R.S., ch. 242, § 11.03(a), 1991 Tex. Gen. Laws 939, 1045 (subsequent amendments
omitted), repealed by Act of May 22, 2003, 78th Leg., R.S., ch. 1274, § 26(a)(1), 2003 Tex. Gen. Laws 3611, 4138 (current
version at Tex. Ins. Code Ann. § 542.060 (Vernon 2005)).
13. Irrespective of the causation element required in the jury charge, we evaluate the reasonableness of  AIG's conduct in
investigating the claim under the causation element required in Puckett. 
