IN THE SUPREME COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

═════════_= 52;══

No. 04-0537

═════════_= 52;══

Lilith Brainard, et = al.,=20 Petitioners,

Trinity Universal = Insurance=20 Company, Respondent

═════════_= 52;══════════= ══════════ = 552;══════════= ;══════════&#= 9552;

On Petition for Review from = the

Court of Appeals for the Seventh = District of=20 Texas

═════════_= 52;══════════= ══════════ = 552;══════════= ;══════════&#= 9552;

Argued April 14,=20 2005

Chief Justice Jefferson = delivered the=20 opinion of the Court.

Justice O=92Neill and Justice Johnson did not = participate in=20 the decision.

This case=20 presents the following issues: (1) whether uninsured/underinsured = motorist (UIM)=20 insurance covers prejudgment interest that the underinsured motorist = would owe=20 the insured in tort liability; (2) if so, how to apply settlement and = personal=20 injury protection (PIP) credits to the interest calculation; and (3) the = circumstances under which an insured may recover attorney=92s fees from = the UIM=20 insurer under Chapter 38 of the Civil Practice and Remedies Code. We = hold that:=20 (1) UIM insurance covers this prejudgment interest; (2) under the = =93declining=20 principal=94 formula, each credit is applied according to the date on = which it was=20 received; and (3) the insured may recover attorney=92s fees under = Chapter 38 only=20 if the insurer does not tender UIM benefits within thirty days after the = trial=20 court signs a judgment establishing the liability and underinsured = status of the=20 other motorist. We reverse the court of appeals=92 judgment in part, = affirm in=20 part, and remand this case to the trial court to calculate prejudgment = interest=20 consistent with this opinion.

Background

On = July 1,=20 1999, Edward H. Brainard II was killed when his vehicle was involved in = a=20 head-on collision with a rig owned by Premier Well Service, Inc. His = widow,=20 Lilith Brainard, and their five children (collectively, Brainard) = brought a=20 wrongful death action against Premier and sought UIM benefits from = Trinity=20 Universal Insurance Company under a policy issued to the family = business,=20 Brainard Cattle Company. Trinity paid Brainard $5,000 under the = policy=92s PIP=20 provision but requested further information supporting the UIM claim. = Brainard=20 alleges she submitted the information and performed all conditions = precedent to=20 receiving the benefits, but Trinity never paid. Eventually, Brainard = joined=20 Trinity as a defendant, alleging breach of contract, breach of the = common law=20 duty of good faith, violations of the Deceptive Trade Practices-Consumer = Protection Act, and violations of Insurance Code articles 21.21 and = 21.55.

On = December=20 7, 2000, Brainard and Premier settled Brainard=92s claims for = $1,000,000,=20 Premier=92s policy limit, and Premier was subsequently dismissed from = the suit.=20 When Brainard demanded that Trinity also tender the $1,000,000 UIM = policy limit,=20 Trinity countered with an offer of $50,000. The trial court severed = Brainard=92s=20 extra-contractual claims, which remain pending, and the parties = proceeded to=20 trial on the UIM contract. A jury found that Premier=92s negligence = caused the=20 accident and awarded Brainard $1,010,000 for pecuniary loss, funeral = expenses,=20 loss of companionship and society, and mental anguish. The jury also = awarded=20 $100,000 for attorney=92s fees.

The = trial=20 court applied a $1,005,000 credit for Brainard=92s settlement and PIP = benefits,=20 and signed a judgment against Trinity for the remaining $5,000 in = damages plus=20 $100,000 in attorney=92s fees. On appeal, Trinity challenged the = attorney=92s fees=20 award, and Brainard, by cross appeal, alleged the trial court erred in = refusing=20 to award prejudgment interest on the $1,010,000 in actual damages. The = court of=20 appeals reversed that portion of the trial court=92s judgment awarding = attorney=92s=20 fees and affirmed the denial of prejudgment interest. 153 S.W.3d 508, = 513.=20 Because both points have engendered disagreement among the courts of = appeals, we=20 granted Brainard=92s petition for review. 48 Tex. Sup. Ct. J. 439 (Mar. = 11,=20 2005).

Recovery of=20 Prejudgment Interest

The = Insurance=20 Code requires insurers to offer Texas motorists UIM coverage and = mandates that=20 such coverage:

provide=20 for payment to the insured of all sums which he shall be legally = entitled to=20 recover as damages from owners or operators of underinsured motor = vehicles=20 because of bodily injury or property damage in an amount up to the limit = specified in the policy, reduced by the amount recovered or recoverable = from the=20 insurer of the underinsured motor vehicle.

Tex. Ins. Code art. = 5.06-1(5). A=20 motorist is underinsured if his or her liability insurance is = insufficient to=20 pay for the injured party=92s actual damages. Stracener v. United = Servs. Auto.=20 Ass=92n, 777 S.W.2d 378, 380 (Tex. 1989). Because the jury valued = Brainard=92s=20 damages at $1,010,000, and Premier=92s liability policy limit was = $1,000,000,=20 Premier was underinsured. The trial court correctly applied the sum of = Premier=92s=20 $1,000,000 liability limit and Brainard=92s $5,000 PIP recovery as an = offset to=20 actual damages. Mid-Century Ins. Co. of Tex. v. Kidd, 997 S.W.2d = 265, 271=20 (Tex. 1999); Stracener, 777 S.W.2d at 380. Thus, Trinity does not = dispute=20 that the $5,000 difference is covered under Brainard=92s UIM policy. The = issue is=20 whether, in addition to this amount, UIM insurance covers prejudgment = interest=20 that Premier would owe on the $1,010,000 in actual damages. We conclude = that it=20 does.

Prejudgment=20 interest is awarded to fully compensate the injured party, not to punish = the=20 defendant. Cavnar v. Quality Control Parking, Inc., 696 S.W.2d = 549, 552=20 (Tex. 1985), superseded in part by statute, Act of June 3, 1987, = 70th=20 Leg., 1st C.S., ch. 3, _ 1, 1987=20 Tex. Gen. Laws 51, 51-52, as recognized in Johnson & Higgins of = Tex.,=20 Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (Tex. 1998) and = C=20 & H Nationwide, Inc. v. Thompson, 903 S.W.2d 315, 327 (Tex. = 1994). It is=20 =93=91compensation allowed by law as additional damages for lost use of = the money=20 due as damages during the lapse of time between the accrual of the claim = and the=20 date of judgment.=92=94 Johnson & Higgins, 962 S.W.2d at 528 = (quoting=20 Cavnar, 696 S.W.2d at 552). By statute, =93[a] judgment in a = wrongful=20 death, personal injury, or property damage case earns prejudgment = interest.=94=20 Tex. Fin. Code =A7 = 304.102. Thus,=20 if Brainard obtained a judgment against Premier for past damages = resulting from=20 the collision, Premier would be liable for prejudgment interest. Whether = Brainard may recover this interest from Trinity is governed by their UIM = insurance contract.

In = language=20 closely tracking article 5.06-1(5), Brainard=92s policy states that = Trinity will=20 pay =93damages which [Brainard] is legally entitled to recover from=94 = Premier. We=20 have consistently viewed prejudgment interest as falling within the = common law=20 meaning of damages, and Trinity does not argue that the Legislature or = the=20 parties intended the term to convey a narrower meaning. Tex. Ins. Code art. = 5.06-1(5); see,=20 e.g., Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, = 898 (Tex.=20 2000) (citing Cavnar, 696 S.W.2d at 552-54). Two courts of = appeals have=20 held that prejudgment interest constitutes damages that the insured is = =93legally=20 entitled to recover=94 from the underinsured motorist. Norris v. = State Farm=20 Mut. Auto. Ins. Co., __ S.W.3d __, __ (Tex. App.=97Waco 2004, pet. = granted);=20 Menix v. Allstate Indem. Co., 83 S.W.3d 877, 880 (Tex. = App.=97Eastland=20 2002, pet. denied); Allstate Indem. Co. v. Collier, 983 S.W.2d = 342, 343=20 (Tex. App.=97Waco 1998, pet. dism=92d by agr.).

Trinity=92s=20 primary argument to the contrary, upon which the court of appeals = relied,=20 emphasizes that the UIM policy, like article 5.06-1(5), requires Trinity = to pay=20 only those damages which the insured is legally entitled to recover = =93because of=20 bodily injury or property damage.=94 153 S.W.3d at 512; see also = Tex. Ins. Code art. = 5.06-1(5). Trinity=20 contends that this qualification negates coverage for prejudgment = interest=20 because the essence of prejudgment interest is compensation for lost use = of=20 money, not damages from bodily injury. Further, Trinity suggests that = Brainard=92s=20 interpretation of the UIM endorsement would require the insurer to cover = all=20 damages assessed against the underinsured motorist, yet the courts of = appeals=20 have held that UIM insurance does not cover punitive damages. See, = e.g.,=20 Milligan v. State Farm Mut. Auto. Ins. Co., 940 S.W.2d 228, 232 = (Tex.=20 App.=97Houston [14th Dist.] 1997, writ denied); State Farm Mut. Auto. = Ins. Co.=20 v. Shaffer, 888 S.W.2d 146, 148 (Tex. App.=97Houston [1st Dist.] = 1994, writ=20 denied); Vanderlinden v. United Servs. Auto. Ass=92n Prop. = & Cas.=20 Ins. Co., 885 S.W.2d 239, 242 (Tex. App.=97Texarkana 1994, writ = denied).

Trinity=92s=20 argument fails for several reasons. First, although several courts of = appeals=20 have held that UIM insurance does not cover punitive damages assessed = against=20 the underinsured motorist, none reached this result by adopting = Trinity=92s narrow=20 interpretation of damages =93because of bodily injury.=94 In fact, their = reasoning=20 effectively supports UIM coverage for prejudgment interest. In = Shaffer,=20 the court concluded that the phrase =93because of bodily injury=94 was = ambiguous=20 because it could mean that the damages must (a) literally derive from a = bodily=20 injury or (b) arise as a result of bodily injury. Shaffer, 888 = S.W.2d at=20 148-49. If this language were ambiguous and had been drafted by the = insurance=20 company, precedent would require that it be interpreted to favor the = insured.=20 Nat=92l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, = 555 (Tex.=20 1991). Most UIM provisions, however, recite nearly the exact text of = article=20 5.06-1(5). For that reason, the Shaffer court inquired into the = statute=92s=20 legislative intent, which it found addressed in one of this Court=92s = opinions. In=20 Stracener, we concluded that the Legislature sought to protect=20 =93conscientious motorists from =91financial loss caused by negligent = financially=20 irresponsible motorists.=92=93 Stracener, 777 S.W.2d at 382 = (quoting Act of=20 Oct. 1, 1967, 60th Leg., R.S., ch. 202, =A7 3, 1967 Tex. Gen. Laws 448, = 449).=20 Accordingly, the court of appeals observed that a primary purpose of UIM = insurance is compensatory; it protects against financial loss. = Shaffer,=20 888 S.W.2d at 149. Other courts of appeals have added that neither = deterring=20 wrongful conduct nor punishing the defendant is accomplished when the = UIM=20 insurer pays punitive damages assessed against the underinsured = motorist.=20 Milligan, 940 S.W.2d at 231; Vanderlinden, 885 S.W.2d at = 240-42.=20 Thus, they have held that neither the language of article 5.06-1(5) nor = public=20 policy supports coverage of punitive damages.

We = have=20 already noted that prejudgment interest serves to compensate the injured = party,=20 not to punish the defendant. Johnson & Higgins, 962 S.W.2d at = 528;=20 Cavnar, 696 S.W.2d at 552. This distinction is apparent in the = rule that=20 =93[p]rejudgment interest may not be assessed or recovered on an award = of=20 exemplary damages.=94 Tex. = Civ. Prac.=20 & Rem. Code =A7 41.007. Article 5.06-1(5)=92s compensatory = purpose is=20 well served when the insured obtains, in addition to actual damages, any = prejudgment interest that the underinsured motorist would owe the = insured.=20 Trinity=92s attempt to give the phrase =93because of bodily injury=94 an = artificially=20 literal meaning=97so as to establish a nexus requirement that eliminates = coverage=20 for prejudgment interest=97has no basis in the statute=92s history or = our precedent,=20 under which article 5.06-1 is liberally construed to protect persons who = are=20 legally entitled to recover damages from underinsured motorists.=20 Stracener, 777 S.W.2d at 382.

Moreover,=20 Trinity=92s rigid reading proves too much, for it would entail splitting = hairs=20 even among purely compensatory damages, such as those for mental anguish = and=20 loss of society. Article 5.06-1(5) states that the insurer will pay the = insured=20 =93all sums which he shall be legally entitled to recover as damages = from owners=20 or operators of underinsured motor vehicles because of bodily injury or = property=20 damage.=94 Tex. Ins. = Code. art.=20 5.06-1(5). The qualification =93because of bodily injury or property = damage=94=20 merely underscores that UIM insurance is compensatory. In addition, it = clarifies=20 what should be obvious=97that only injuries and damages caused by the = motor=20 vehicle accident are covered=97because if the qualification is omitted, = the policy=20 would not exclude damages arising from unrelated incidents and = transactions=20 between the parties. In sum, while it is true that prejudgment interest = accrues=20 over time because of lost use of money, it is equally accurate to say = that it=20 constitutes additional compensatory damages for the insured=92s bodily = injury and=20 property damage.

Trinity=92s=20 alternative argument against coverage for prejudgment interest is based = on the=20 contractual aspect of a UIM claim. Franco v. Allstate Ins. Co., = 505=20 S.W.2d 789, 791-92 (Tex. 1974) (noting that, =93although ultimate = recovery in this=20 type of action depends upon proof of damages due to the tort of an = uninsured=20 third party, the cause of action against the insurer arises by reason of = the=20 written contract=94). If the claim is purely contractual, as Trinity = contends,=20 then Finance Code section 304.102, which authorizes prejudgment interest = in=20 wrongful death, personal injury, and property damage cases, would have = no=20 application in this case. Tex. = Fin. Code=20 =A7 304.102. The court of appeals adopted this approach, citing = our=20 decision in Henson v. Southern Farm Bureau Casualty Insurance = Company, 17=20 S.W.3d 652, 653 (Tex. 2000), as additional support for the view that = =93the=20 relationship between the Brainards and Trinity is that of contracting = parties.=94=20 153 S.W.3d at 513.

The = reference=20 to Henson deserves further discussion because our reasoning in = that case=20 clarifies the issues presented here. Henson was a passenger in a truck = driven by=20 Millican, which collided with a vehicle driven by Contreras. = Henson, 17=20 S.W.3d at 652. Henson sued Millican and Contreras for negligence and, = before=20 establishing liability, settled with Contreras for $20,000=97her = liability=20 insurance limit. Id. at 652-53. A jury attributed one hundred = percent of=20 the negligence to Contreras and assessed Henson=92s damages at $133,842. = Id. at 653. Within thirty days of the judgment, Henson and = Millican=92s UIM=20 insurers tendered $45,000=97their combined UIM policy limits. Id. = Henson,=20 however, refused the payment and demanded prejudgment interest on top of = the=20 policy limits, alleging the interest began to accrue against the = insurers from=20 the earlier of 180 days after he gave notice of his claim or the day he = filed=20 suit against them. Id. at 653-54.

The = issue in=20 Henson was whether prejudgment interest accrued on the = insured=92s=20 contractual claim for UIM benefits. The prejudgment interest which = Henson could=20 recover from Contreras in tort liability was not at issue, as the = damages=20 assessed by the jury already exceeded the UIM policy limit. We examined = the=20 insurer=92s obligation to pay damages which the insured is =93legally = entitled to=20 recover=94 from the underinsured motorist and concluded that there is no = contractual duty to pay benefits until the liability of the other = motorist and=20 the amount of damages suffered by the insured are determined. Id. = at=20 653-64. Thus, we held that a UIM claim does not earn prejudgment = interest until=20 the insurer breaches the contract by withholding benefits after the = insured has=20 obtained a judgment establishing the liability and underinsured status = of the=20 other motorist. Id. at 654. The jury could have found that = Contreras was=20 not negligent or that Henson=92s damages did not exceed Contreras=92s = liability=20 insurance limit, precluding any recovery of UIM benefits. Id. = Because the=20 insurers tendered the benefits promptly after the jury made its = findings, no=20 contractual duty was breached, and Henson was not entitled to receive = the=20 benefits earlier than he did. Id. The question we answer = today=97whether=20 UIM insurance covers the prejudgment interest an underinsured motorist = would owe=20 the insured=97was not before us in Henson.

Under section=20 304.102, Premier would be liable for prejudgment interest on $1,010,000. = Tex. Fin. Code =A7 304.102. = The fact that=20 Brainard=92s suit against Trinity is based on contract in no way renders = the=20 statute inapplicable. On the contrary, the UIM policy effectively = incorporates=20 the statute by requiring Trinity to pay damages which Brainard is = =93legally=20 entitled to recover=94 from Premier. Section 304.102, like the law of = negligence,=20 is necessary to determine the liability of the underinsured motorist. = The UIM=20 policy, however, controls Trinity=92s obligations. Because Brainard = obtained a=20 judgment establishing the negligence and underinsured status of Premier, = the=20 contract requires Trinity to pay benefits. Henson, 17 S.W.3d at = 654.

Accordingly,=20 we hold that UIM insurance covers prejudgment interest that the = underinsured=20 motorist would owe the insured. The court of appeals erred in affirming = the=20 trial court=92s judgment denying Brainard this recovery.

III

Calculation of Prejudgment Interest

The = parties=20 do not challenge the calculation of actual damages; they agree that the = trial=20 court properly deducted Brainard=92s $1,000,000 settlement and $5,000 = PIP recovery=20 from the jury=92s $1,010,000 verdict, resulting in Trinity=92s liability = for $5,000.=20 Mid-Century Ins. Co., 997 S.W.2d at 271; Stracener, 777 = S.W.2d at=20 380. Instead, the issue concerns how to apply these credits when = calculating=20 prejudgment interest. Based on the jury=92s verdict, Premier would have = been=20 liable for $1,010,000 in actual damages, plus prejudgment interest on = this=20 amount. Having concluded that UIM insurance covers this interest, we = turn now to=20 its calculation.

Brainard=92s=20 suit against Premier was for wrongful death. In a wrongful death case,=20 prejudgment interest accrues beginning on the 180th day after the = defendant=20 receives written notice of the claim or the day suit is filed, whichever = occurs=20 first, and ending on the day preceding the date judgment is rendered. = Tex. Fin. Code =A7 304.104. = In this case,=20 the prejudgment interest period commenced on January 19, 2000, when = Brainard=20 filed suit against Premier. Because the trial court signed its judgment = on=20 January 15, 2003, the period ended on January 14. Id. Prejudgment = interest is computed as simple interest with a rate equal to the = postjudgment=20 interest rate applicable at the time judgment is rendered. Id. = =A7=A7=20 304.103, 304.104. The trial court=92s judgment set the rate at ten = percent.

Brainard=20 contends that prejudgment interest is calculated on the entire = $1,010,000 before=20 applying credits. Accordingly, she seeks $263,430 in prejudgment = interest=97ten=20 percent interest on $1,010,000 from January 19, 2000, until August 29, = 2002, the=20 date the parties moved to enter judgment.[1] In Brainard=92s view, the = interest is=20 added to the jury=92s verdict before deducting settlement and PIP = credits, so that=20 the credits do not affect the prejudgment interest calculation. Trinity = objects,=20 arguing that Brainard should not continue to earn interest on $1,010,000 = in=20 damages despite having already received $1,005,000 in compensation. We=20 agree.

We = recently=20 touched on this issue in Battaglia v. Alexander, 177 S.W.3d 893, = 908-09=20 (Tex. 2005), in which we held that the trial court erred in calculating=20 prejudgment interest on total damages before deducting payments that the = plaintiff received from settling defendants. Although Battaglia = involved=20 health care liability claims subject to section 16.02 of former Revised = Civil=20 Statutes article 4590i, we established a framework that resolves the = issue=20 presented here. We reiterated that prejudgment interest is compensation = =93=91for=20 lost use of the money due as damages during the lapse of time between = the=20 accrual of the claim and the date of judgment.=92=94 Id. at 907 = (quoting=20 Cavnar, 696 S.W.2d at 552). Therefore, compensation other than = for lost=20 use of money is not interest but a windfall for the claimant and a = penalty to=20 the defendant. Id. We concluded that, to satisfy the purpose of=20 prejudgment interest, settlements must be credited periodically, = according to=20 the date they are received. Id. at 907-08. This approach, known = as the=20 =93declining principal=94 formula, is the proper way to apply credits in = the=20 calculation of prejudgment interest. Id. at 909 (overruling in = part C=20 & H Nationwide, Inc. v. Thompson, 903 S.W.2d 315, 327 (Tex. = 1994)).

In=20 Battaglia, we concluded that =93[a] settlement payment should be = credited=20 first to accrued prejudgment interest as of the date the settlement = payment was=20 made, then to =91principal,=92 thereby reducing or perhaps eliminating = prejudgment=20 interest from that point in time forward.=94 Id. at 908. Thus, as = we=20 explain below, each credit applies first to the accrued interest and = then to the=20 principal, with each credit establishing a new interval. At each new = interval,=20 interest continues to accrue only on the remaining principal because = under the=20 general prejudgment interest provisions, =93interest is computed as = simple=20 interest and does not compound.=94 Tex.=20 Fin. Code =A7 304.104.

Under the=20 =93declining principal=94 formula, the trial court is to consider the = date on which=20 the insured received each payment. Trinity paid Brainard $5,000 in PIP = benefits=20 shortly after the July 1, 1999 collision. Because there is no dispute = that this=20 payment was made sometime in July, well before the prejudgment interest = period=20 commenced, we may assume it was July 31. Brainard settled with Premier = for=20 $1,000,000=97its liability insurance limit=97on December 7, 2000. On = March 9, 2001,=20 Trinity offered to settle with Brainard for $50,000. See Tex. Fin. Code =A7 304.106. = Two weeks=20 later, in a letter to Brainard=92s counsel, Trinity confirmed that the = offer would=20 remain open. Because Brainard=92s $5,000 recovery did not exceed = Trinity=92s=20 settlement offer, prejudgment interest did not accrue on the judgment = after=20 March 9, 2001. Id. =A7 304.105(a) (=93If judgment for a claimant = is equal to=20 or less than the amount of a settlement offer of the defendant, = prejudgment=20 interest does not accrue on the amount of the judgment during the period = that=20 the offer may be accepted.=94). Following are the relevant dates:

A. =20 07/31/1999 Brainard receives $5,000 PIP=20 payment

B. =20 01/19/2000 Prejudgment interest period = begins when=20 Brainard files suit

C. =20 12/07/2000 Brainard receives $1,000,000=20 settlement

D. =20 03/09/2001 Trinity offers Brainard = $50,000

Brainard is=20 entitled to recover prejudgment interest on the damages caused by = Premier=92s=20 negligence. The beginning principal is $1,010,000=97the amount of = damages=20 determined by the jury. The $5,000 PIP credit reduced the principal = before=20 prejudgment interest began to accrue. Thus, during the period from B to = C,=20 interest accrued on $1,005,000. At point C, the $1,000,000 credit is = applied=20 first to accrued prejudgment interest and then to principal. During the = period=20 from C to D, interest accrued on the principal remaining after = application of=20 the $1,000,000 credit. At point D, Brainard could have accepted = Trinity=92s=20 settlement offer, and interest ceased to accrue on that date. Trinity is = liable=20 for the remaining sum, up to Brainard=92s UIM policy limit, of the = uncredited=20 principal plus the uncredited interest that accrued from point C to = point D.=20 Tex. Ins. Code art. = 5.06-1(5).

We = remand=20 this case to the trial court to modify the judgment in accordance with = this=20 opinion.

Attorney=92s=20 Fees

The = final=20 issue is whether Brainard may recover attorney=92s fees on her contract = claim. The=20 court of appeals reversed that portion of the trial court=92s judgment = awarding=20 Brainard $100,000 in attorney=92s fees. 153 S.W.3d at 510-11.

Attorney=92s=20 fees are recoverable from an opposing party only as authorized by = statute or by=20 contract between the parties. Travelers Indem. Co. v. Mayfield, = 923=20 S.W.2d 590, 593 (Tex. 1996). Chapter 38 of the Civil Practice & = Remedies=20 Code permits an insured to recover attorney=92s fees incurred in a = successful=20 breach of contract suit against the insurer unless the insurer is liable = for the=20 fees under a different statutory scheme. Tex. Civ. Prac. & Rem. Code = =A7=A7=20 38.001(8), 38.006; Grapevine Excavation, Inc. v. Maryland Lloyds, = 35=20 S.W.3d 1, 5 (Tex. 2000). Because no other statutory scheme applies, = Brainard=20 seeks to recover the fees under Chapter 38.

Under section=20 38.002, Brainard must show that: (1) she was represented by counsel; (2) = she=20 presented the claim to Trinity; and (3) Trinity failed to pay the just = amount=20 owed within thirty days of presentment. Tex. Civ. Prac. & Rem. Code = =A7=20 38.002. Brainard contends that her suit is like any other breach of = contract=20 suit, and therefore, presentment occurred on February 15, 2000, the day = she made=20 a claim for UIM benefits. Three courts of appeals support her position.=20 See Norris v. State Farm, __ S.W.3d at __; State Farm = Mut.=20 Auto. Ins. Co. v. Nickerson, 130 S.W.3d 487, 490 (Tex. = App.=97Texarkana 2004,=20 pet. granted); Allstate Ins. Co. v. Lincoln, 976 S.W.2d 873, 876 = (Tex.=20 App.=97Waco 1998, no pet.); Whitehead v. State Farm Mut. Auto. Ins. = Co.,=20 952 S.W.2d 79, 88-89 (Tex. App.=97Texarkana 1997), rev=92d on other = grounds,=20 988 S.W.2d 744 (Tex. 1998); Novosad v. Mid-Century Ins. Co., 881 = S.W.2d=20 546, 552 (Tex. App.=97San Antonio 1994, no writ). Trinity, on the other = hand,=20 argues that a UIM policy is different because the insurer=92s duty to = pay does not=20 arise until the underinsured motorist=92s liability, and the insured=92s = damages,=20 are legally determined. Five courts of appeals, including the court of = appeals=20 in this case, agree. See De La Garza v. State Farm Mut. Auto. = Ins.=20 Co., 175 S.W.3d 29, 34 (Tex. App.=97Dallas 2005, pet. denied); = Menix v.=20 Allstate Indem. Co., 83 S.W.3d 877, 882 (Tex. App.=97Eastland 2002, = pet.=20 denied); Sprague v. State Farm Mut. Auto. Ins. Co., 880 S.W.2d = 415, 416=20 (Tex. App.=97Houston [14th Dist.] 1993, writ denied); Sikes v. = Zuloaga, 830=20 S.W.2d 752, 753 (Tex. App.=97Austin 1992, no writ).

This issue=20 turns on the language in Chapter 38 requiring that =93payment for the = just amount=20 owed must not have been tendered before the expiration of the 30th day = after the=20 claim is presented.=94 Tex. = Civ. Prac.=20 & Rem. Code =A7 38.002(3). The purpose of presentment is to = allow the=20 opposing party a reasonable opportunity to pay a claim without incurring = an=20 obligation for attorney=92s fees. Jones v. Kelley, 614 S.W.2d 95, = 100 (Tex.=20 1981). Thus, an essential element to recovery of attorney=92s fees under = Chapter=20 38 in a suit based on contract is =93the existence of a duty or = obligation which=20 the opposing party has failed to meet.=94 Ellis v. Waldrop, 656 = S.W.2d 902,=20 905 (Tex. 1983). The UIM insurer is obligated to pay damages which the = insured=20 is =93legally entitled to recover=94 from the underinsured motorist. = Tex. Ins. Code art. = 5.06-1(5). As=20 discussed above, we have determined that this language means the UIM = insurer is=20 under no contractual duty to pay benefits until the insured obtains a = judgment=20 establishing the liability and underinsured status of the other = motorist.=20 Henson, 17 S.W.3d at 653-54. Neither requesting UIM benefits nor = filing=20 suit against the insurer triggers a contractual duty to pay. Id. = Where=20 there is no contractual duty to pay, there is no just amount owed. Thus, = under=20 Chapter 38, a claim for UIM benefits is not presented until the trial = court=20 signs a judgment establishing the negligence and underinsured status of = the=20 other motorist.

Of = course,=20 the insured is not required to obtain a judgment against the tortfeasor. = State Farm Mut. Auto. Ins. Co. v. Matlock, 462 S.W.2d 277, 278 = (Tex.=20 1970). The insured may settle with the tortfeasor, as Brainard did in = this case,=20 and then litigate UIM coverage with the insurer. But neither a = settlement nor an=20 admission of liability from the tortfeasor establishes UIM coverage, = because a=20 jury could find that the other motorist was not at fault or award = damages that=20 do not exceed the tortfeasor=92s liability insurance. See Henson, = 17 S.W.3d=20 at 654. Brainard=92s contention that a UIM policy is to be treated like = other=20 contracts, for which damages are liquidated in a judicial proceeding and = attorney=92s fees incurred are recoverable, misinterprets the nature of = UIM=20 insurance. The UIM contract is unique because, according to its terms, = benefits=20 are conditioned upon the insured=92s legal entitlement to receive = damages from a=20 third party. Unlike many first-party insurance contracts, in which the = policy=20 alone dictates coverage, UIM insurance utilizes tort law to determine = coverage.=20 Consequently, the insurer=92s contractual obligation to pay benefits = does not=20 arise until liability and damages are determined. Id.

Because the=20 contract did not require Trinity to pay UIM benefits before Premier=92s = negligence=20 and underinsured status were determined, Brainard did not present a = contract=20 claim before the trial court rendered its judgment, and the court of = appeals=20 correctly concluded that Brainard is not entitled to recover = attorney=92s fees=20 under Chapter 38.

Conclusion

We = reverse=20 the portion of the court of appeals=92 judgment that denied Brainard = prejudgment=20 interest, affirm the portion that denied attorney=92s fees, and remand = this case=20 to the trial court to calculate prejudgment interest consistent with = this=20 opinion. Tex. R. App. P. = 60.2(a),=20 (d).

_______________________

Wallace B.=20 Jefferson

Chief Justice=20

OPINION=20 DELIVERED: December 22,=20 2006 &nb= sp; &nbs= p; = ; = =20

^[1] As explained above, however, the relevant = date is that=20 of the trial court=92s judgment, rather than when the parties moved for = entry of=20 judgment.