Opinion
EP-18-CV-61-KC
2019-06-06
CHARTER SCHOOL SOLUTIONS, Plaintiff, v. GUIDEONE MUTUAL INSURANCE COMPANY, Defendant.
Joe A. Spencer, Jr., Attorney at Law, El Paso, TX, Kevin N. Colquitt, Mazin A. Sbaiti, Sbaiti & Company PLLC, Dallas, TX, for Plaintiff. Jenna Zwang, R. Chad Geisler, Ryan C. Bueche, Germer Beaman and Brown P.L.L.C., Austin, TX, for Defendant.
Joe A. Spencer, Jr., Attorney at Law, El Paso, TX, Kevin N. Colquitt, Mazin A. Sbaiti, Sbaiti & Company PLLC, Dallas, TX, for Plaintiff.
Jenna Zwang, R. Chad Geisler, Ryan C. Bueche, Germer Beaman and Brown P.L.L.C., Austin, TX, for Defendant.
ORDER
KATHLEEN CARDONE, UNITED STATES DISTRICT JUDGE
On this day, the Court considered Defendant GuideOne Mutual Insurance Company's Motion for Full and Final Summary Judgment (the "Motion") in the above-captioned case. ECF No. 30. For the reasons set forth herein, the Motion is GRANTED in part and DENIED in part.
I. BACKGROUND
Unless otherwise noted, the following facts are not contested. This case involves an insurance coverage dispute regarding hail damage to property that Plaintiff currently owns at 9405 Betel Drive, El Paso, Texas (the "Property"). The Property was formerly owned by a church, Iglesia Puerta del Cielo ("Iglesia"). Complaint ¶ 44, ECF No. 1. Iglesia purchased a policy from Defendant to insure the Property against hail damage for between September 1, 2013, until October 23, 2016, (the "Policy"). Id. at ¶ 21; Mot. Ex. B.
In October 2015, a hail storm struck El Paso. Compl. ¶ 12. The parties dispute the extent to which the Property was damaged during this hail storm. The parties agree, however, that a second hail storm struck the Property in November 2016, and that this storm caused at least some damage. See Def.'s Proposed Undisputed Facts p. 2, ECF No. 38; Pl.'s Proposed Undisputed Facts p. 2, ECF No. 43.
The precise date of the storm is unclear from the record. Plaintiff's Complaint alleges the storm occurred on October 20–21, 2015. Compl. ¶ 12. Yet, Plaintiff's expert witness reported that the damaging storm occurred on October 6, 2015. Mot. Ex. D. This discrepancy is irrelevant at this stage, however, because it is undisputed that Defendant insured the Property throughout October 2015. See Pl.'s Proposed Undisputed Facts p. 2, ECF No. 43. The Court refers to the relevant storm as the "October 2015 storm" or "October 2015 hail storm" in this Order.
On December 2, 2016, Iglesia filed a voluntary petition for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Western District of Texas. Resp. Ex. 1, at 4. The bankruptcy court granted the trustee's motion to sell the Property to Plaintiff on January 31, 2017. Id. at 49–50.
On February 6, 2017, Iglesia filed a claim with Defendant for hail damage to the Property's roof (the "Claim"). Resp. Ex. 10, at 1. On February 24, 2017, the bankruptcy trustee and Plaintiff signed a formal agreement assigning to Plaintiff all claims and proceeds under the Policy. Resp. Ex. 1, at 303–07. The bankruptcy court reviewed this agreement and ordered that Plaintiff "is the rightful holder of claims under and beneficiary of proceeds from the Policy and is the proper party with which to address any claims under the Policy," and that "GuideOne Insurance is directed to address any claims under the Policy and pay proceeds resulting from any claims to [Charter School Solutions]." Id. at 117.
The record shows that Defendant was served notice of the bankruptcy court proceedings that lead to this bankruptcy court order. See Supp. Cert. of Service, ECF No. 63, Ex. 5. Furthermore, Defendant's internal records reflect that it was aware the Policy had been assigned to Plaintiff during Iglesia's bankruptcy proceedings. Resp. Ex. 10, at 7.
Meanwhile, Defendant assigned an independent adjustor, Rose Hernandez, to evaluate the Claim. Resp. Ex. 10, at 13. Hernandez inspected the Property in February 2017 and "confirm[ed] the actual date of loss for [October 2015]." Resp. Ex. 15. Defendant subsequently assigned the Claim to Mike Ellison, who worked on Defendant's large loss team. Resp. Ex. 10, at 12. Ellison also inspected the Property and "found that the entire roof structure was damaged by hail." Id. at 11. Ellison hired an outside engineer, Jim Koontz, to evaluate the roof. Id. at 9. Koontz reported that the roof's damage resulted from the November 2016 hail storm. Id. He further opined that "the roof was not damaged in October 2015." Id.
Defendant denied the Claim on June 7, 2017, because it had "determined the damage to the roof at the [Property] did not occur during the policy period," and therefore, "no coverage existed for the hail claim presented." Resp. Ex. 16. On December 14, 2017, Plaintiff sent Defendant a letter demanding $1,824,193.62 to cover the claimed damage and its attorneys' fees. Mot. Ex. E, at 2. Defendant declined to meet this demand, explaining Iglesia was the "Named Insured" under the Policy, whose rights and duties could not be assigned to Plaintiff. Resp. Ex. 18.
On February 19, 2018, Plaintiff filed this lawsuit, which asserts five causes of action against Defendant: breach of contract, breach of the duty of good faith and fair dealing, violations of chapters 541 and 542 of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code § 17.41 et seq. Compl. ¶¶ 43–140. Defendant has filed the instant Motion, arguing it is entitled to summary judgment as a matter of law on each of Plaintiff's claims. See generally Mot.
II. DISCUSSION
A. Standard
A court must enter summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Weaver v. CCA Indus., Inc. , 529 F.3d 335, 339 (5th Cir. 2008). "A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law." Sossamon v. Lone Star St. of Tex. , 560 F.3d 316, 326 (5th Cir. 2009) (quoting Hamilton v. Segue Software, Inc. , 232 F.3d 473, 477 (5th Cir. 2000) (per curiam)). A dispute about a material fact is genuine only "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Ellison v. Software Spectrum, Inc. , 85 F.3d 187, 189 (5th Cir. 1996).
"[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex , 477 U.S. at 323, 106 S.Ct. 2548 ; Wallace v. Tex. Tech. Univ. , 80 F.3d 1042, 1046–47 (5th Cir. 1996). To show the existence of a genuine dispute, the nonmoving party must support its position with citations to "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials[,]" or show "that the materials cited [by the movant] do not establish the absence ... of a genuine dispute, or that [the moving party] cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c).
The court resolves factual controversies in favor of the nonmoving party; however, factual controversies require more than "conclusory allegations," "unsubstantiated assertions," or "a ‘scintilla’ of evidence." Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Further, when reviewing the evidence, the court must draw all reasonable inferences in favor of the nonmoving party and may not make credibility determinations or weigh evidence. Man Roland, Inc. v. Kreitz Motor Express, Inc. , 438 F.3d 476, 478–79 (5th Cir. 2006) (citing Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) ). Thus, the ultimate inquiry in a summary judgment motion is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson , 477 U.S. at 251–52, 106 S.Ct. 2505.
B. Non-Assignment Clause
Defendant first argues that Plaintiff lacks standing to bring this lawsuit because Iglesia, not Plaintiff, is the "Named Insured" under the Policy. Mot. 15.
The Policy contains a non-assignment clause, which provides that Iglesia's "rights and duties ... may not be transferred without [GuideOne's] written consent except in the case of death of an individual Named Insured." Mot. Ex. F, at 7. And, because Defendant never consented to Iglesia transferring the Policy to Plaintiff during its bankruptcy proceedings, Defendant contends that Plaintiff may not sue under the Policy. Mot. 15. Plaintiff disagrees, arguing the Bankruptcy Code authorizes the trustee to assign the debtor's executory contracts, irrespective of any non-assignment clause. Resp. 15–16 (citing 11 U.S.C. § 365(f) ). In response, Defendant suggests the Policy was no longer an executory contract when Iglesia filed for bankruptcy and, therefore, the Policy could not be assigned to Plaintiff. Reply 9–10.
In its Response to Plaintiff's Sur-Reply, Defendant also argues the assignment was invalid because the bankruptcy court lacked subject-matter jurisdiction to issue its August 7, 2017, order that Plaintiff "is the rightful holder of claims under and beneficiary of proceeds from the Policy." Resp. to Sur-Reply p. 2–3, ECF No. 69. Defendant suggests this is so because it was Plaintiff, not the bankruptcy trustee, that moved the court to issue the order. Id. However, Defendant provides no authority to support this argument, and the Court is aware of none. While Defendant generally cites to 11 U.S.C. § 365 for the proposition that only "the Trustee or Debtor" may assume an executory contract, that statute does not speak to the subject-matter jurisdiction of the bankruptcy court. Further, Defendant's characterization of the statute appears inaccurate; section 365(a) references only the trustee's ability to assume an executory contract, not the debtor's ability to do so. See 11 U.S.C. § 365(a).
Because Defendant cites no authority to support its argument, the Court will not consider it. See Hyer v. Colvin , No. 15-297-GMS, 2016 WL 5719683, at *11 (D. Del. Sept. 29, 2016) (declining to consider a party's argument because the party failed to cite authority in support); Kenny v. Colvin , No. A-15-CV-509-AWA, 2016 WL 1369592, at *5 (W.D. Tex. Apr. 6, 2016) (finding an argument waived because it was not supported with authority); Bose v. Wahl Clipper Corp. , No. 11-06087 MMM, 2012 WL 12861186, at *6 n.25 (C.D. Cal. Mar. 29, 2012) (same).
The Bankruptcy Code permits the bankruptcy trustee to assign an executory contract of the debtor to a third party, notwithstanding a provision in the contract that "prohibits, restricts, or conditions the assignment of such contract." 11 U.S.C. § 365(f)(1) ; see Matter of Provider Meds, LLC , 907 F.3d 845, 851 (5th Cir. 2018). While the Bankruptcy Code does not define an "executory contract," the Fifth Circuit has explained that a contract is executory if "performance remains due to some extent on both sides and if at the time of the bankruptcy filing, the failure of either party to complete performance would constitute a material breach of the contract, thereby excusing the performance of the other party." Provider Meds , 907 F.3d at 851 (internal quotation marks omitted); see also In re Am. Magnesium Co. , 488 F.2d 147, 152 (5th Cir. 1974) ("An executory contract is one in which a party binds himself to do or not do a particular thing, whereas an executed contract is one in which the object of the agreement is already performed."). State law determines whether a remaining contractual obligation is material and whether the failure to perform constitutes a material breach. In re Texscan Corp. , 976 F.2d 1269, 1272 (9th Cir. 1992).
For purposes of the Bankruptcy Code, an insurance policy is a contract. In re Fort Worth Osteopathic Hosp., Inc. , 387 B.R. 706, 713 n.14 (Bankr. N.D. Tex. 2008) ; see also Nat'l Union Fire Ins. Co. v. Crocker , 246 S.W.3d 603, 606 (Tex. 2008) ("Insurance policies are written contracts."). However, courts are split about whether an insurance policy that expired or terminated before the debtor filed for bankruptcy can qualify as an executory contract under 11 U.S.C. § 365. Several bankruptcy courts have held that "when an insurance contract has been terminated prior to the date of filing of the [bankruptcy] petition, there remains no existing contract, executory or otherwise," for the trustee to assign. In re CVA Gen. Contractors, Inc. , 267 B.R. 773, 778 (Bankr. W.D. Tex. 2001) ; accord In re Surfside Resort and Suites, Inc. , 344 B.R. 179, 187 (Bankr. M.D. Fla. 2006) ; In re Firearms Imp. and Exp. Corp. , 131 B.R. 1009, 1014 (Bankr. S.D. Fla. 1991) ; Matter of Fed. Press Co., Inc. , 104 B.R. 56, 66 (Bankr. N.D. Ind. 1989). Other courts have recognized that an expired insurance contract may still be executory if the parties' failure to perform any remaining contractual obligations would constitute a material breach and excuse the other party's performance. Fort Worth Osteopathic Hosp. , 387 B.R. at 713 n.14 ; Texscan Corp. , 976 F.2d at 1272.
Here, the Court finds that the Policy is an executory contract that could properly be assigned to Plaintiff during Iglesia's bankruptcy proceedings. See 11 U.S.C. § 365(f) ; Provider Meds , 907 F.3d at 851. It is undisputed that Defendant cancelled the Policy on October 23, 2016—more than one month before Iglesia filed its bankruptcy petition. Mot. Ex. B; Resp. Ex. 1. Although Iglesia was no longer required to pay premiums once the Policy's coverage period ended, premiums were only part of Iglesia's consideration for Defendant's coverage. Resp. Ex. 12, at 4. The Policy explicitly conditioned Defendant's coverage upon Iglesia's adherence to "all terms" in the Policy. Id. These include certain "loss conditions" that Iglesia was required to satisfy before Defendant could be liable, such as the duty to give Defendant "prompt notice of the loss or damage" and the duty to "[c]ooperate with [Defendant] in the investigation or settlement of the claim." Id. at 66. Defendant, in turn, was required to "pay for covered loss within 30 days" of receiving a sworn proof of loss, so long as Iglesia complied with the Policy's terms. Id. at 32.
As explained further below, Texas law provides that compliance with an insurance policy's prompt-notice provision "is a condition precedent, the breach of which voids policy coverage." Hamilton Props. v. Am. Ins. Co. , 643 F. App'x 437, 440 (5th Cir. 2016) (quoting Blanton v. Vesta Lloyds Ins. Co. , 185 S.W.3d 607, 611 (Tex. Ct. App. 2006) ). A policy's cooperation clause is also a condition precedent, and its breach may "discharge ... the insurer's obligations under the policy." Am. Nat'l Cty. Mut. Ins. Co. v. Medina , No. 05-16-01062-CV, 2018 WL 4037357, at *2 (Tex. Ct. App. Aug. 22, 2018) (citing Progressive Cty Mut. Ins. Co. v. Trevino , 202 S.W.3d 811, 815–16 (Tex. Ct. App. 2006) ; see Quorum Health Resources, LLC v. Maverick Cty. Hosp. Dist. , 308 F.3d 451, 468–69 (5th Cir. 2002) ; U.S. Cas. Co. v. Schlein , 338 F.2d 169, 173 (5th Cir. 1964). Moreover, an insurer that improperly denies coverage breaches its duty to indemnify. Data Specialties, Inc. v. Transcon. Ins. Co. , 125 F.3d 909, 911 (5th Cir. 1997) (citing Emp'rs Cas. Co. v. Block , 744 S.W.2d 940, 944 (Tex. 1988) ). This constitutes a material breach. PAJ, Inc. v. Hanover Ins. Co. , 243 S.W.3d 630, 633 (Tex. 2008) (explaining that materiality depends upon "the extent to which the nonbreaching party will be deprived of the benefit that it could have reasonably anticipated from full performance"). The Court therefore finds that at the time Iglesia filed for bankruptcy, both Iglesia and Defendant had ongoing obligations under the Policy and, pursuant to state law, the failure of either party to complete performance would constitute a material breach, thereby excusing the other party's performance. See Provider Meds , 907 F.3d at 851 ; Texscan Corp. , 976 F.2d at 1272. The Policy was thus an executory contract when Iglesia filed its bankruptcy petition. See Provider Meds , 907 F.3d at 851.
This conclusion is not changed by the fact that the Policy's coverage period had ended before Iglesia filed for bankruptcy and premiums were no longer due. A contract may still be executory even if there are no longer payments due. The bankruptcy court in In re TM Village, Ltd. , for example, determined a contract to purchase a home was executory even though the buyer had prepaid in full prior to the bankruptcy filing. In re TM Vill., Ltd. , 598 B.R. 851, 859 (Bankr. N.D. Tex. 2019). There, the parties "still had material obligations" under the contract, including the buyer's duty to "execute and deliver any notices, statements, certificates, affidavits, loan documents, and other documents ... necessary for the closing of the sale" and the seller's duty to deliver title. Id. at 858–59. The court explained that the failure of either party to complete performance would constitute a material breach, rendering the contract executory. Id. at 859 ; see also Fort Worth Osteopathic Hosp. , 387 B.R. at 713 n.14 (reasoning that an insurance policy could be executory if both parties had ongoing material obligations, even if all premiums had been paid).
Moreover, the Court is not persuaded by the bankruptcy court decisions that have held an expired or terminated insurance policy was not an executory contract. See Surfside Resort , 344 B.R. at 187 ; CVA Gen. Contractors , 267 B.R. at 778 ; Firearms Imp. , 131 B.R. at 1014 ; Fed. Press , 104 B.R. at 66. While each of these cases dealt with an insurance policy that no longer required the insured to pay premiums, the Policy in this case is distinguishable. To begin, the court in CVA General Contractors decided the insurance policy was non-executory because "future performance obligations no longer existed under the contract as of the date of the bankruptcy filing." 267 B.R. at 779. And while two other cases involved policies with conditions that remained in effect after expiration, the courts found that breach of those conditions would not excuse the other party's performance. See Firearms Imp. , 131 B.R. at 1014 ; Fed. Press , 104 B.R. at 66–67. Here, by contrast, the parties had continuing material obligations under the Policy when Iglesia filed for bankruptcy.
Further, several of these bankruptcy court cases state that "the ‘sole basis’ for holding an insurance policy to be an executory contract [is] the continuing obligation of the debtor to make premium payments." CVA Gen. Contractors , 267 B.R. at 779 ; Firearms Imp. , 131 B.R. at 1013. This rule conflicts with the Fifth Circuit's broader definition of an executory contract, which asks only whether "performance remains due to some extent on both sides and ... the failure of either party to complete performance would constitute a material breach ...." Provider Meds , 907 F.3d at 851 (emphasis added). Indeed, as other courts have recognized, an insurance contract might still impose material obligations upon the parties, apart from premium payments, to render the contract executory. See Fort Worth Osteopathic Hosp. , 387 B.R. at 713 n.14 ; Texscan Corp. , 976 F.2d at 1272 ; see also In re Select-A-Seat Corp. , 625 F.2d 290, 292 (9th Cir. 1980) (finding a licensing agreement to be executory because, even though the fee due under the agreement had been paid, that fee did not represent full consideration for the other party's performance). Because the Policy here imposed ongoing material obligations, and the failure of either party to complete performance would constitute a material breach under Texas law, the Policy was an executory contract when Iglesia filed for bankruptcy. See Provider Meds , 907 F.3d at 851. As an executory contract, the Policy could be assigned to Plaintiff. See id. at 856. The Court thus denies Defendant's motion for summary judgment on the ground that Plaintiff lacks standing to sue under the Policy.
C. Prompt-Notice Requirement
Defendant maintains that it cannot be liable under the Policy, which required the insured to provide "prompt notice of the loss or damage." Mot. 5–6 (citing Mot. Ex. F, at 66). Defendant argues Iglesia breached this requirement by filing the Claim more than fifteen months after the October 2015 hail storm, and that this delay prejudiced Defendant's ability to investigate the Claim and repair any damage before it worsened. Id. at 7–13. Plaintiff counters that even if Iglesia violated the Policy's prompt-notice provision, this did not prejudice Defendant and, therefore, Defendant cannot avoid liability. Resp. 8–13.
Under Texas law, compliance with an insurance policy's prompt-notice provision "is a condition precedent, the breach of which voids policy coverage." Hamilton Props. , 643 F. App'x at 440 (quoting Blanton , 185 S.W.3d at 611 ). However, the insured's breach does not absolve the insurer from liability unless the lack of prompt notice prejudiced the insurer. Ridglea Est. Condo. Ass'n v. Lexington Ins. Co. , 415 F.3d 474, 479 (5th Cir. 2005) (citing Hernandez v. Gulf Grp. Lloyds , 875 S.W.2d 691, 693 (Tex. 1994) ). Therefore, to prevail on summary judgment, Defendant must establish there is no dispute of material fact that (1) Iglesia breached the Policy's prompt-notice provision, and (2) Defendant suffered prejudice as a result. See id.
1. Unreasonable delay
An insurer has a right to demand prompt notice as a condition to liability under a policy. Alaniz v. Sirius Intern. Ins. Corp. , 626 F. App'x 73, 76 (5th Cir. 2015) (citing Dairyland Cnty. Mut. Ins. Co. v. Roman , 498 S.W.2d 154, 157 (Tex. 1973) ). Where, as here, the policy does not define "prompt notice," Texas courts construe this phrase to mean "notice must be given within a reasonable time" after damage occurs. See Ridglea , 415 F.3d at 479 (quoting Stonewall Ins. Co. v. Mod. Expl., Inc. , 757 S.W.2d 432, 435 (Tex. Ct. App. 1988)). "What constitutes a reasonable amount of time depends on the facts and circumstances in each particular case." Alaniz , 626 F. App'x at 76 (quoting Stonewall , 757 S.W.2d at 435 ). "While generally a question of fact, reasonableness becomes a question of law if the facts are undisputed." Id. (quoting Cont'l Sav. Ass'n v. U.S. Fid. & Guar. Co. , 762 F.2d 1239, 1243 (5th Cir. 1985) ).
The parties agree that Iglesia filed the Claim on February 6, 2017, approximately fifteen months after the October 2015 hail storm that Plaintiff alleges totaled the roof. Mot. 7; Compl. ¶ 31. Defendant argues this delay was unreasonable as a matter of law. Mot. 7. Plaintiff does not dispute that Iglesia failed to give reasonably prompt notice, but contends Defendant waived its prompt-notice defense by failing to assert it in the denial letter. Resp. 4–8.
In Texas, an insurer that denies a claim for reasons unrelated to late notice may waive its prompt-notice defense. Farmers Ins. Exch. v. Nelson , 479 S.W.2d 717, 721–22 (Tex. Civ. App. 1972). However, the Texas Supreme Court has recognized an exception to this waiver rule: an insurer's "total denial of liability on any grounds, after the time for filing the proof of loss had expired," does not waive the prompt-notice defense. U.S. Fid. & Guar. Co. v. Bimco Iron & Metal Corp. , 464 S.W.2d 353, 357 (Tex. 1971) ; accord Ridglea , 415 F.3d at 477.
Because there is no dispute that Iglesia violated the Policy's prompt-notice requirement, the Court finds Iglesia's fifteen-month delay was unreasonable as a matter of law. See Montemayor v. St. Farm Lloyds , No. 1:15-cv-173, 2016 WL 4921553, at *3 (S.D. Tex. Apr. 7, 2016) (finding a two-year delay unreasonable because plaintiff did not argue otherwise); Flores v. Allstate Tex. Lloyd's Co. , 278 F. Supp. 2d 810, 820 (S.D. Tex. 2003) ("Plaintiffs' failure to notify [insurer] for six months ... was not ‘prompt’ or reasonable as a matter of law."). Moreover, because Iglesia filed the Claim after the period for prompt notice, Defendant's subsequent general denial of liability did not waive its prompt-notice defense. See Ridglea , 415 F.3d at 478 ; Stonewall Ins. , 757 S.W.2d at 436. Therefore, the Court turns to the question of prejudice. See Ridglea , 415 F.3d at 479.
2. Prejudice
To be excused from performance and prevail on summary judgment, it is not enough for the insurer to show unreasonable delay; the insurer must also prove it was prejudiced as a result. Ridglea , 415 F.3d at 480 (citing Hernandez , 875 S.W.2d at 693 ). This prejudice requirement is rooted in "the principle that one party is excused from performing under a contract only if the other party commits a material breach." Greene v. Farmers Ins. Exch. , 446 S.W.3d 761, 767 (Tex. 2014). A breach is material only if it "deprive[s] the insurer of the benefit that it reasonably could have anticipated from full performance by the insured." Id. at 768. Therefore, prejudice generally requires a showing that the recognized purposes of prompt notice have been impaired. Berkley Reg'l Ins. Co. v. Phila. Indem. Ins. Co. , 690 F.3d 342, 347 (5th Cir. 2012) (quoting Blanton , 185 S.W.3d at 612 ).
The primary purpose of prompt notice allows the insurer "to investigate the incident close in time to the occurrence, while the evidence is fresh, and so that it may accurately determine its rights and liabilities under the policy (and take appropriate remedial action)." Alaniz , 626 F. App'x at 78 (citing Stonewall , 757 S.W.2d at 435 ; Blanton , 185 S.W.3d at 615 ). An insurer must offer "more than the mere fact that it cannot employ its normal procedures in investigating and evaluating the claim." Trumble Steel Erectors, Inc. v. Moss , 304 F. App'x 236, 244 (5th Cir. 2008) (quotation omitted). Instead, it must show it was prejudiced "in some tangible way." Berkley , 690 F.3d at 349. In Hamilton Properties , for example, the insurance company suffered prejudice when the insured waited nineteen months to file a claim. 643 F. App'x at 441. The insurer attempted an investigation, but ultimately denied the claim because multiple hail storms had struck the property during the intervening period and it "could not determine what caused the damage or when the claimed damage occurred." Id. at 439.
Finally, while the existence of prejudice is "generally a question of fact," the court may decide the issue on summary judgment "if the undisputed facts establish prejudice sufficient to relieve an insurer of its obligations." Galvan v. Great Lakes Reinsurance PLC , No. 7:14-CV-645, 2015 WL 12552009, at *3 (S.D. Tex. Apr. 15, 2015) (quoting St. Paul Guardian Ins. Co. v. Centrum G.S. Ltd. , 383 F. Supp. 2d 891, 902 (N.D. Tex. 2003) ).
Defendant argues it suffered prejudice from Iglesia's delay in two ways: (1) the delay caused difficulties investigating the Claim; and (2) damage to the Property worsened between the October 2015 hail storm and when Iglesia filed the Claim, thereby increasing the roof's repair costs. Mot. 8. Plaintiff disputes each of Defendant's prejudice arguments. Resp. 8–15.
Defendant first argues the delay prevented it "from inspecting the property immediately after the October 2015 storm," and, because the parties agree that a damaging hail storm occurred in November 2016, Defendant could not "properly evaluate and segregate any covered October 2015 claims versus any uncovered November 2016 claims." Id. at 10–11. Thus, Defendant maintains, there "is no way" to distinguish which storm caused which damage. Id. at 13. Defendant also argues the delay resulted in "the loss of valuable information," such as "faded memories" of available witnesses "related to prior hail damage, prior leaks, prior repairs, etc." Id. at 11–12.
Defendant further contends it was prejudiced because Iglesia's delay prevented it from repairing the roof before its condition deteriorated. Mot. 8–10. Defendant cites the report of Steve Mayor, Plaintiff's expert, explaining that damage from the October 2015 hail storm allowed subsequent rains to seep into the roof's interior envelope, further damaging the Property. Mot. 9 (citing Mot. Ex. D). Defendant also notes that Mayor testified during his deposition that over time the hail damage would "expand until [the roof] eventually fails" from "pervasive leaking and water damage." Mot. 9 (citing Mot. Ex. J, at 129:11–130:24). Additionally, Defendant's internal adjustor, Mike Ellison, has affirmed that the cost to repair the roof increased by $115,694.91 between October 2015 and when Iglesia filed the Claim. Mot. Ex. M ¶ 12. Therefore, according to Defendant, Iglesia's delay resulted in tangible, measurable prejudice. Mot. 8–9.
In response, Plaintiff notes that Defendant's experts and representatives were able to determine which hail storm destroyed the roof. Resp. 11–14 (citing Resp. Exs. 7, 10, 15). Plaintiff emphasizes that no one who investigated the Claim reported that too much time had elapsed, nor that Iglesia's delay caused any difficulty in evaluating the loss. Resp. 11. Plaintiff notes that Defendant denied the claim without any mention of Iglesia's unreasonable delay or resulting prejudice. Id. Instead, the denial letter stated unequivocally that Defendant had "determined the damage to the roof at the [Property] did not occur during the policy period." Id. (quoting Resp. Ex. 16).
Defendant's independent adjustor, Rose Hernandez, visited the Property shortly after Iglesia filed the Claim and indicated that the loss occurred in October 2015. Resp. Ex. 15 p. 1. Subsequently, Defendant's outside engineer, Jim Koontz, inspected the roof and reported that the damage occurred in November 2016. Resp. Ex. 10 p. 9. Defendant has not argued that this inconsistency prejudiced it in any way. See Mot. 8–13; Reply 6–7.
Plaintiff also points to Mayor's report and sworn declaration, stating that the roof had been so severely damaged by the October 2015 that it required a complete and immediate replacement. Resp. 9; Resp. Ex. 5 ¶ 10; Mot. Ex. D, at 12, 14. And, because Plaintiff seeks only the cost to replace the roof, it argues that Defendant's liability has not increased since October 2015. Resp. 10. Therefore, even accepting Defendant's argument that the Property's condition worsened, because Plaintiff does not seek compensation for any collateral damage, Plaintiff maintains that Defendant did not suffer prejudice from the delayed notice. Id.
The Court finds that there are material fact issues related to prejudice that preclude summary judgment; Defendant has not established it was prejudiced as a matter of law. See Galvan , 2015 WL 12552009, at *3. There is evidence that Defendant was able to investigate the Claim and determine that the damage occurred outside the policy coverage period. See Resp. Ex. 16, at 2. None of the experts that Defendant assigned to the Claim reported that they were unable to evaluate the Property's condition or determine which storm caused the damage. See generally Resp. Exs. 7, 10, 15. Moreover, there are contested issues of fact as to whether Defendant was able to "accurately determine its rights and liabilities" under the Policy. See Alaniz , 626 F. App'x at 78. Indeed, unlike the insurance company in Hamilton Properties , there is evidence that Defendant definitively concluded it was not liable because the claimed damage occurred outside the policy period. Resp. Ex. 16; see Hamilton Props. , 643 F. App'x at 439.
Additionally, drawing all reasonable inferences in favor of Plaintiff as the nonmoving party, the Court finds that Defendant has not shown summary judgment to be appropriate on the issue of prejudice due to the deterioration of the Property caused by the delay. See Man Roland , 438 F.3d at 478–79. While the parties seemingly agree that the roof's condition worsened in the months following the October 2015 hail storm, see Mot. 8; Resp. 10, Defendant has not established as a matter of law that it suffered prejudice as a result. Defendant relies upon Ellison's affidavit explaining that Iglesia's delay caused $115,694.91 in additional costs to repair the roof. Mot. Ex. M. ¶ 12. However, Plaintiff marshals evidence to show the damages it seeks have not increased since the October 2015 hail storm. Resp. 9–10. Mayor reported that the October 2015 hail storm totaled the roof, necessitating a complete replacement. Mot. Ex. D, at 12, 14; Resp. Ex. 5 ¶ 10. And, because Plaintiff's requested contractual damages are limited to the roof's replacement costs, see Resp. 11, there is a genuine dispute regarding the material fact of Defendant's prejudice. See Fed. R. Civ. P. 56(a) ; Celotex , 477 U.S. at 322, 106 S.Ct. 2548.
Finally, Defendant cites several cases to support its position that it is entitled to summary judgment on its prompt-notice defense. Mot. 8–13 (citing Montemayor , 2016 WL 4921553 ; Camacho v. Lloyds , No. 7:14-CV-581, 2015 WL 12532736 (S.D. Tex. Sep. 4, 2015) ; Galvan , 2015 WL 12552009 ; Alaniz , 626 F. App'x 73 ). These cases are inapposite because the parties in each did not dispute the facts establishing prejudice. See Montemayor , 2016 WL 4921553, at *3 ; Camacho , 2015 WL 12532736, at *3 ; Galvan , 2015 WL 12552009, at *4 ; Alaniz , 626 F. App'x at 79. Here, by contrast, Plaintiff provides evidence to contest each of Defendant's prejudice arguments. Resp. 8–15.
In sum, then, because Defendant has not shown "the undisputed facts establish prejudice" as a matter of law, summary judgment is denied as to Defendant's prompt-notice defense. See Galvan , 2015 WL 12552009, at *3 ; St. Paul Guardian , 383 F. Supp. 2d at 902 ; see also Anderson , 477 U.S. at 251–52, 106 S.Ct. 2505 (explaining that the essential inquiry on summary judgement is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law").
D. Plaintiff's Extra-Contractual Claims
Defendant next argues broadly it is entitled to summary judgment on Plaintiff's extra-contractual claims under the Texas Insurance Code, the Texas Deceptive Trade Practices Act, and common law because it has no obligations under the Policy. Mot. 14–15. This argument hinges upon the Court accepting Defendant's prompt-notice and non-assignment defenses and excusing Defendant's performance. Id. ; Reply 8–9. While there is a general rule in Texas that an insured cannot recover policy benefits for an insurer's statutory or extra-contractual violation "if the insured does not have a right to those benefits under the policy," see USAA Tex. Lloyds Co. v. Menchaca , 545 S.W.3d 479, 490 (Tex. 2018), as explained above, Defendant has not shown that Plaintiff holds no rights under the Policy. Defendant's argument therefore fails, and the Court denies Defendant summary judgment generally as to Plaintiff's extra-contractual claims.
E. Texas Deceptive Trade Practices Act ("DTPA") Claim
Plaintiff's Complaint charges Defendant with engaging in deceptive trade practices in its handling of the Claim, thereby violating the DTPA, Tex. Bus. & Com. Code § 17.41 et seq. Compl. ¶¶ 133–40. Defendant argues it is entitled to summary judgment on Plaintiff's DTPA claim because Plaintiff did not purchase the Policy and, therefore, lacks standing under the statute. Mot. 16–17. Plaintiff counters that it has standing under the DTPA because it was assigned the Policy during Iglesia's bankruptcy proceedings. Resp. 18.
The DTPA makes it unlawful to perform "false, misleading, or deceptive acts or practices in the conduct of any trade or commerce." Tex. Bus. & Com. Code Ann. § 17.41(a). The elements of a cause of action under the DTPA are: "(1) the plaintiff is a consumer, (2) the defendant engaged in false, misleading or deceptive acts, and (3) these acts constituted a producing cause of the consumer's damages." Doe v. Boys Clubs of Greater Dall., Inc. , 907 S.W.2d 472, 478 (Tex. 1995) (citing Tex. Bus. & Com. Code § 17.50(a)(1) ). Whether the plaintiff qualifies as a consumer and therefore has standing is a question of law that may be resolved on summary judgment. Ortiz v. Collins , 203 S.W.3d 414, 424 (Tex. Ct. App. 2006).
Plaintiff argues it was assigned the right to sue under the DTPA during Iglesia's bankruptcy. Resp. 18. This argument runs counter to Texas Supreme Court precedent, which holds that "DTPA claims generally cannot be assigned by an aggrieved consumer to someone else." PPG Indus., Inc. v. JMB/Hous. Ctrs. Partners Ltd. P'ship. , 146 S.W.3d 79, 92 (Tex. 2004). In PPG Industries , the original owner of a building contracted with a window manufacturer to install windows throughout the building. Id. at 83. Several years later, the plaintiff purchased the building from the original owner, and received a general assignment of the building's warranties. Id. When problems with the windows later arose, the plaintiff sued the window manufacturer under the DTPA. Id. The Texas Supreme Court decided the plaintiff did not gain DTPA standing through assignment because that "would defeat the primary purpose of the statute—to encourage individual consumers to bring such suits themselves." Id. at 82 ; see also Dewayne Rogers Logging, Inc. v. Propac Indus., Ltd. , 299 S.W.3d 374, 387 (Tex. Ct. App. 2009) (holding that plaintiff did not have DTPA standing by way of a subrogation or assignment). In light of this precedent, the Court concludes that Plaintiff may not rely on the Policy's assignment to claim standing under the DTPA. See PPG Indus., Inc. , 146 S.W.3d at 92 ; Dewayne Rogers , 299 S.W.3d at 387.
Moreover, Plaintiff's DTPA standing argument is premised solely upon assignment. Compl. ¶¶ 17–25, 133–34; Resp. 18. Plaintiff does not assert that it otherwise acquired any DTPA claims against Defendant by becoming a subsequent owner of the Property. See generally Compl.; Resp. 18. Neither does Plaintiff allege it "sought or acquired" the Policy from Defendant, nor that it filed the Claim. Cf. Jones v. Star Hous., Inc. , 45 S.W.3d 350, 356 (Tex. Ct. App. 2001) (holding that to establish standing under the DTPA, a plaintiff must show it "sought or acquired goods or services by purchase or lease," and that those goods and services form the basis of the complaint). The Court therefore finds that Plaintiff has not shown it is a consumer under the DTPA, or otherwise has standing to sue under that statute. See PPG Indus. , 146 S.W.3d at 86–87 ; Jones , 45 S.W.3d at 356. As a result, the Court grants Defendant summary judgment as to Plaintiff's DTPA claim. See PPG Indus. , 146 S.W.3d at 92 ; Dewayne Rogers , 299 S.W.3d at 387.
F. Plaintiff's Causation Claims
The heart of this case is whether the Property's roof sustained damage when the Policy was in effect. Mot. 17. Plaintiff has designated Steve Mayor to give his expert opinions about the cause and timing of the damage. See Pl.'s Designation of Expert Witnesses p. 2, ECF No. 19. Defendant subsequently moved to exclude Mayor under the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). See Def.'s Mot. to Exclude, ECF No. 26. Defendant now argues that if the Court grants its Motion to Exclude, "Plaintiff can present no competent evidence that the Property was damaged by hail in October 2015." Mot. 17. However, the Court has denied Defendant's Motion to Exclude, see Order, ECF No. 131, so Defendant's argument necessarily fails. Accordingly, the Court denies Defendant summary judgment on this theory.
Defendant also argues that the Court should award it summary judgment if the Court grants its Motion to Strike, ECF No. 29. Mot. 17. However, the Court denied the Motion to Strike as moot, after Defendant informed the Court that the Motion to Strike had become moot upon Plaintiff's substitution of expert witnesses. See Text Order, January 25, 2019; Def.'s Reply Regarding Mot. to Strike p. 1, ECF No. 40.
III. CONCLUSION
For the foregoing reasons, Defendant's Motion, ECF No. 30, is GRANTED in part and DENIED in part.