Opinion
No. 5:18–CV–412–DAE
04-03-2020
DB BROADWAY COMMONS LLC, Plaintiff, v. CENTRAL MUTUAL INSURANCE COMPANY, Defendant.
Jonathan Claude Lisenby, Gravely & Pearson, L.L.P., Mary Ann Notestine, Matthew R. Pearson, Valerie Leigh Cantu, Pearson Legal, PC, San Antonio, TX, for Plaintiff. Russell J. Bowman, Bowman & Stella, P.C., Irving, TX, for Defendant.
Jonathan Claude Lisenby, Gravely & Pearson, L.L.P., Mary Ann Notestine, Matthew R. Pearson, Valerie Leigh Cantu, Pearson Legal, PC, San Antonio, TX, for Plaintiff.
Russell J. Bowman, Bowman & Stella, P.C., Irving, TX, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
David Alan Ezra, Senior United States District Judge
Before the Court is a motion for summary judgment filed by Defendant Central Mutual Insurance Company ("Defendant" or "Central") on November 13, 2019 (Dkt. # 27). Pursuant to Local Rule CV-7(h), the Court finds this matter suitable for disposition without a hearing. After careful consideration of the memoranda and exhibits filed in support of and in opposition to the motion, the Court GRANTS Central's motion for the following reasons.
BACKGROUND
Plaintiff DB Broadway Commons LLC ("Plaintiff" or "DB Broadway") owns property located at 5231 Broadway Street in San Antonio, Texas (the "Property"), that is covered by an insurance policy issued by Central. (Dkt. # 1, Ex. A at 10.) In April 2016, Plaintiff claims that a severe wind or hailstorm caused "substantial damage" to its Property. (Id. at 9–10.) Plaintiff filed a claim with Central, and Central received notice of Plaintiff's claim on August 10, 2016. (Dkt. # 28-1.) On August 11, 2016, Central adjuster David Roberts ("Roberts") retained IAS Claims Services ("IAS") to inspect Plaintiff's property and prepare an estimate of damage observed resulting from any April 12, 2016 storm. (Id. ) Ultimately, IAS found damage of $15,151.78 to Plaintiff's property, and after the policy deductible of $12,000 was applied, Central issued a check to Plaintiff for $3,151.78, which Plaintiff negotiated on November 8, 2016. (Id. )
On November 30, 2016, Roberts received an email and contract from Plaintiff's adjuster Kelli Rogers ("Rogers"). (Id. ) On December 22, 2016, Roberts sent Rogers a copy of the estimate prepared by IAS, and that same day, Roberts received an e-mail from Rogers requesting a re-inspection of the Property. (Id. ) The property was re-inspected on January 9, 2017, and Central received the re-inspection report that contained no changed estimate from IAS on or about January 26, 2017. (Id. ) Rogers advised Central in a January 20, 2017 email that she was not in agreement with the loss determination. (Id. ) In March 2017, after an inspection pertaining to HVAC damage at the Property, Michael Taylor ("Taylor") prepared an additional estimate of Plaintiff's claim, which resulted in an actual cash value loss of $32,943.22, minus the $12,000 policy deductible and the $3,151.78 prior payment to Plaintiff by Central, resulting in an amount of $17,791. (Id. ) Central issued a payment to Plaintiff for that amount, and the check was negotiated by Plaintiff on June 5, 2017. (Id. )
Central received Plaintiff's estimate on April 9, 2018, for an amount of $268,743.85. (Dkts. ## 27, 28-1.) That estimate was enclosed in the April 5, 2018, demand letter from Plaintiff's counsel (the same date that Plaintiff filed the original lawsuit in state court). (Id. ) Central was not in agreement with the amount of loss being claimed by Plaintiff, and Central's attorney emailed Plaintiff's counsel on April 28, 2018, advising that Central disagreed with the loss amount and was invoking appraisal. (Id. )
On April 5, 2018, Plaintiff filed a civil action against Central and Taylor in the 57th Judicial District Court of Bexar County, Texas. (Dkt. # 1, Ex. A at 8.) In its Original Petition, Plaintiff asserted causes of action against Central for: (1) breach of contract; (2) violations of Sections 541 and 542 of the Texas Insurance Code, Tex. Ins. Code §§ 541 & 542; and (3) bad faith under Texas common law. (Id. at 11–12.) Further, Plaintiff asserted causes of action against Taylor, individually, for violations of Sections 541.060(a)(2)(A) and (a)(7) of the Texas Insurance Code. (Id. at 12–13.)
On May 6, 2018, Central removed the case to this Court. (Dkt. # 1 at 1–2.) On June 5, 2018, Plaintiff filed a Motion to Remand. (Dkt. # 6.) On June 15, 2018, Central filed a Motion to Compel Appraisal and a Motion to Abate. (Dkt. # 12.) This Court granted Central's motion and ordered Plaintiff to submit to appraisal under the insurance contract. (Dkt. # 18.) The Court administratively closed the case on August 14, 2018, while the parties went through the appraisal process. (Id. )
In its order, the Court also dismissed Taylor from the lawsuit. (Dkt. # 18.)
On July 5, 2019, the parties filed a joint status report regarding appraisal. (Dkt. # 19.) According to the status report, an appraisal award was rendered on June 26, 2019, and Central overnighted "Check Nos. 921562 for $105,369.55, and 921563 for $26,130.95, both payable to DB Broadway Commons, LLC and Texas Capital Bank N.A. & Gravely & Pearson LLP," on July 1, 2019, to Plaintiff's counsel. (Id. )
Plaintiff asserts that this appraisal award is "more than eight times Defendant's original evaluation of the loss." (Dkt. # 31.) While true, the Court finds that the key calculation needed here is the difference between the actual pre-appraisal amount awarded to Plaintiff ($20,943.22 in total) and the actual appraisal amount awarded to Plaintiff (which appears to be $105,369.55, deducting Defendant's prior payments and the $12,000 policy deductible). Based on the Court's calculations, the appraisal payment awarded to Plaintiff is thus about five times the amount of the pre-appraisal payment by Central, and approximately $163,374.30 less than Plaintiff's demand estimate of $268,743.85.
On August 5, 2019, Plaintiff moved to administratively reopen the case. (Dkt. # 20.) Plaintiff noted that "on June 26, 2019, an appraisal award was finalized and signed by DB Broadway's appraiser, Kyle Herring and Central's appraiser, Jack Browning; and payment was issued to DB Broadway on July 1, 2019." (Id. ) Plaintiff asserted that the "outstanding issue that still needs to be resolved is Defendant Central's liability under the Prompt Payment of Claims Act, Texas Insurance Code Chapter 542." (Id. ) Plaintiff thus requested that the Court reopen the case now that the "appraisal process has been fully resolved." (Id. ) The Court administratively reopened the case on August 6, 2019. (Dkt. # 21.) Central filed an amended answer on August 20, 2019 (Dkt. # 23) and filed a motion for summary judgment on November 13, 2019 (Dkt. # 27). Plaintiff responded on November 27, 2019, (Dkt. # 31), and Central filed a reply on December 1, 2019 (Dkt. # 33) and filed a notice of the finality of two Texas Supreme Court decisions that may have bearing upon this case on January 30, 2020 (Dkt. # 34).
LEGAL STANDARD
"Summary judgment is appropriate only if ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Vann v. City of Southaven, 884 F.3d 307, 309 (5th Cir. 2018) (citations omitted); see also Fed. R. Civ. P. 56(a). "A genuine dispute of material fact exists when the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ " Bennett v. Hartford Ins. Co. of Midwest, 890 F.3d 597, 604 (5th Cir. 2018) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "The moving party ‘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.’ " Nola Spice Designs, LLC v. Haydel Enter., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).
"Where the non-movant bears the burden of proof at trial, ‘the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating ... that there is an issue of material fact warranting trial.’ " Kim v. Hospira, Inc., 709 F. App'x 287, 288 (5th Cir. 2018) (quoting Nola Spice Designs, 783 F.3d at 536 ). While the movant must demonstrate the absence of a genuine issue of material fact, it does not need to negate the elements of the nonmovant's case. Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1076 n.16 (5th Cir. 1994) ). A fact is material if it "might affect the outcome of the suit." Thomas v. Tregre, 913 F.3d 458, 462 (5th Cir. 2019) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ).
"When the moving party has met its Rule 56(c) burden, the nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of its pleadings." Jones v. Anderson, 721 F. App'x 333, 335 (5th Cir. 2018) (quoting Duffie v. United States, 600 F.3d 362, 371 (5th Cir. 2010) ). The nonmovant must identify specific evidence in the record and articulate how that evidence supports that party's claim. Infante v. Law Office of Joseph Onwuteaka, P.C., 735 F. App'x 839, 843 (5th Cir. 2018) (quoting Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014) ). "This burden will not be satisfied by ‘some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.’ " McCarty v. Hillstone Rest. Grp., Inc., 864 F.3d 354, 357 (5th Cir. 2017) (quoting Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005) ). In deciding a summary judgment motion, the court draws all reasonable inferences in the light most favorable to the nonmoving party. Wease v. Ocwen Loan Servicing, LLC, 915 F.3d 987, 992 (5th Cir. 2019).
Additionally, at the summary judgment stage, evidence need not be authenticated or otherwise presented in an admissible form. See Fed. R. Civ. P. 56(c) ; Lee v. Offshore Logistical & Transp., LLC, 859 F.3d 353, 355 (5th Cir. 2017). However, "[u]nsubstantiated assertions, improbable inferences, and unsupported speculation are not sufficient to defeat a motion for summary judgment." United States v. Renda Marine, Inc., 667 F.3d 651, 655 (5th Cir. 2012) (quoting Brown v. City of Hous., 337 F.3d 539, 541 (5th Cir. 2003) ).
DISCUSSION
Central contends that Plaintiff is not entitled to damages under the Texas Prompt Payment of Claims Act ("PPCA") because the parties allegedly contracted-out of the requirements Texas Insurance Code Chapter 542. (Dkts. ## 27, 28-1 at 99–101.) Central argues that "Central's timely payment" in accordance with the parties' contract, "would preclude any liability on its part as a matter of law for the 18% interest and attorney's fees sought by Plaintiff under the [PPCA]." (Id. ) In support, Central argues: (1) the Texas Supreme Court's decision in Barbara Technologies Corporation v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019), reh'g denied (Dec. 13, 2019) is not controlling "because the parties contracted out of the requirements of the [PPCA], and specifically addressed by the insurance contract as to when a payment would be owed" if a party invoked appraisal; (2) the parties are free to contract out of rights created by statute under Texas law; (3) the provisions of the PPCA can be waived or altered by contract; (4) unlike in Barbara Technologies, the parties here by agreement contemplated appraisal and "contracted out of or otherwise modified the [PPCA] by establishing the time as to when payment would be owed" if a party invoked appraisal; and (5) Central's payment was timely under the Texas Changes Endorsement to the insurance contract (the appraisal payment provision that Central argues should govern this dispute). (Dkt. # 27.)
Central also argues that Plaintiff cannot bring its other alleged claims. The Court agrees and so does Plaintiff. (See Dkt. # 31 (noting that the outstanding issue is Defendant's liability under the PPCA).) The Court will only be assessing Plaintiff's PPCA claim in this order.
In response, Plaintiff asserts: (1) the language of the provision of the Texas Changes Endorsement at issue "does not waive Plaintiff's statutory rights and remedies" under Texas law; (2) alternatively, the language in the policy is ambiguous and should be construed in Plaintiff's favor; and (3) Barbara Technologies and other recent Texas case law support Plaintiff's cause of action here for "violation of the PPCA post-appraisal." (Dkt. # 31.) Central's response is particularly pointed; Central claims that Plaintiff "deliberately failed to present to the Court" that under the Texas Changes Endorsement provisions, Central has "fifteen business days from when Central receives all information requested of the insured to notify the insured in writing of the acceptance or rejection of the claim" and that Central met this deadline. (Dkt. # 33.) Central also argues that the Texas Changes Endorsement is clearly part of the policy, that DB Broadway's waiver argument fails because payment provisions in the Texas Changes Endorsement within the policy here has "been uniformly held to be clear and unambiguous," and that Plaintiff makes case law arguments that are inapplicable. (Id. )
Section 542.055(a) of the PPCA provides that not later than the fifteenth day after receiving notice of a claim, the insurer shall: (1) acknowledge receipt of the claim; (2) commence any investigation of the claim; and (3) request from the claimant all items, statements, and forms the insurer reasonably believes will be required from the claimant. Tex. Ins. Code § 542.055(a). Within fifteen business days of the insurer receiving all items, statements, and forms from the claimant, the insurer must notify the claimant in writing of the acceptance or rejection of a claim. Id. § 542.056(a). Section 542.058(a) requires the insurer to pay a claim within sixty days of receiving all of the items, statements, and forms reasonably requested and required of the claimant or else pay damages as provided by Section 542.060(a). Id. § 542.058(a). Damages include 18 percent interest on the amount of the claim per year, plus reasonable and necessary attorney's fees. Id. § 542.060(a).
Under Texas law, an insurer's payment of an appraisal award "neither establishe[s] liability under the policy nor foreclose[s] TPPCA damages under section 542.060." Barbara Techs. Corp., 589 S.W.3d at 823, 828 (noting that the "tender of the appraisal amount does not preclude TPPCA damages"). "An insurer will become liable for TPPCA damages under section 542.060 only if it (1) accepts liability or is adjudicated liable under the policy, and (2) violated a TPPCA deadline or requirement." Id. at 827–28. If, however, the insurer's pre-appraisal payment is "reasonable," there is no statutory violation of the PPCA. Mainali Corp. v. Covington Specialty Ins. Co., 872 F.3d 255, 259 (5th Cir. 2017), as revised (Sept. 27, 2017). Payments "made to comply with an appraisal award" are in "most if not all cases ... going to be paid after the 60-day window" discussed in Section 542.060(a). Id. at 258.
This Court, in alignment with other federal district courts within Texas, asserts that Barbara Technologies did not overrule Mainali. See e.g. Hyewon Shin v. Allstate Texas Lloyds, No. 4:18-CV-01784, 2019 WL 4170259, at *1 (S.D. Tex. Sept. 3, 2019) ("A district court may not, however, treat Fifth Circuit precedent as having been overruled by a state court decision unless the state court decision is unequivocal in its renunciation of the earlier circuit precedent."); Crenshaw v. State Farm Lloyds, 425 F.Supp.3d 729, 740 (N.D. Tex. 2019) ("It is evident that Barbara Technologies did not unequivocally repudiate Mainali, such that it remains controlling on district courts until further direction from the circuit.") Thus, the Court will rely upon Mainali in this order.
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Here, the timeline based on the parties' briefing to this Court is as follows:
1. Central received notice of Plaintiff's claim on August 10, 2016.
2. Central investigated the claim and Plaintiff negotiated the check for the original estimate of $3,151.78 on November 8, 2016.
3. On November 30, 2016, Plaintiff notified Central that it objected to the estimate.
4. Central re-investigated and Plaintiff negotiated the check for the second estimate of $17,791 on June 5, 2017.
5. On April 5, 2018, Plaintiff initiated a lawsuit in state court against Defendant.
6. On April 9, 2018, Central received an estimate from Plaintiff for the amount of $268,743.85 within an April 5, 2018, demand letter from Plaintiff's counsel.
7. On April 28, 2018, Central emailed Plaintiff advising that Central disagreed with the estimate and was invoking appraisal.
8. On June 15, 2018, Central moved to compel appraisal, which this Court granted on August 14, 2018.
9. On June 26, 2019, an appraisal award was rendered in the amount of $131,500.50.
10. On July 1, 2019, Defendant issued payment to Plaintiff for $105,369.55 and $26,130.95 (minus the prior payments of $20,943.22 and the policy deductible of $12,000).
(Dkts. ## 28-1, 31.)
Given the above timeline, the Court finds that pre-appraisal, Central made a timely acceptance, investigation, and payment of Plaintiff's claim, and the Court also finds that Central made a timely payment of the appraisal award. The Court finds that the payment provisions within the contract under the Texas Changes Endorsement Policy are clear, unambiguous, and enforceable. See e.g. Church on the Rock N. v. Church Mut. Ins., Co., No. 3:10-CV-0975-L, 2013 WL 497879, at *8 (N.D. Tex. Feb. 11, 2013) ("[T]he court concludes that the issue of whether its post-appraisal payments were timely is determined by the parties' agreement."). Here, under the Texas Changes Endorsement section of the policy, Defendant had fifteen business days from when it received all information requested from the insured to notify the insured in writing of the acceptance or rejection of the claim, and Defendant had five business days after an appraisal award had been made to pay for the covered loss or damage under the loss payment clause. (Dkt. # 28-1 at 99–100.) Central did not receive the estimate from Plaintiff in order to determine if appraisal was necessary or if the parties agreed until April 9, 2018, and Central responded on April 28, 2018, which was timely. Furthermore, Central issued payment on July 1, 2019, which is within five days after the appraisal was awarded on June 26, 2019.
The Court also is unpersuaded by Plaintiff's argument that Defendant "failed to make a reasonable pre-appraisal claim payment within the statutorily-provided period." (Dkt. # 31 (emphasis added).) This Court finds that the pre-appraisal claim payment was "reasonable" under Fifth Circuit law. Here, the difference between the actual pre-appraisal amount awarded to Plaintiff ($20,943.22 in total) and the actual appraisal amount awarded to Plaintiff (which appears to be $105,369.55, deducting Defendant's prior payments and the $12,000 policy deductible) is about five times the amount of the pre-appraisal payment. While reasonableness is hard to assess, the Court finds that (1) given Central's compliance in responding to the claim, investigating, and attempting to obtain necessary information from Plaintiff, and (2) given that the difference in pre-appraisal and appraisal payments is within a band of reasonableness as seen by other courts' decisions (see e.g. Hinojos v. State Farm Lloyds, 569 S.W.3d 304, 313 (Tex. App. 2019) (finding pre-appraisal payment reasonable where the appraisal award was 6.8 times the pre-appraisal payment)), the Court finds that Central made a reasonable pre-appraisal payment within the time period allotted to it under the contract.
As such, the Court finds that Plaintiff's PPCA claim fails as a matter of law, and Defendant's motion for summary judgment should be granted.
CONCLUSION
For the reasons stated, the Court GRANTS Central's Motion for Summary Judgment (Dkt. # 27). The Clerk's Office is INSTRUCTED to ENTER JUDGMENT and CLOSE THE CASE .