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finding reasonable an insurer's preappraisal payment 8.12 times smaller than the appraisal award
Summary of this case from Randel v. Travelers Lloyds of Tex. Ins. Co.Opinion
Civil Action No. 4:19-CV-02576
2020-06-19
Evilia GONZALEZ, Plaintiff, v. ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY, Defendant.
Adam Dennis Lewis, Christopher Jake Balser, Jacob Mansour Karam, Noah Michael Wexler, Roland Thomas Christensen, Arnold Itkin LLP, Houston, TX, for Plaintiff. Sara E. Inman, W. Neil Rambin, Susan E. Egeland, Faegre Drinker, Biddle & Reath LLP, Dallas, TX, for Defendant.
Adam Dennis Lewis, Christopher Jake Balser, Jacob Mansour Karam, Noah Michael Wexler, Roland Thomas Christensen, Arnold Itkin LLP, Houston, TX, for Plaintiff.
Sara E. Inman, W. Neil Rambin, Susan E. Egeland, Faegre Drinker, Biddle & Reath LLP, Dallas, TX, for Defendant.
MEMORANDUM OPINION AND ORDER
Kenneth M. Hoyt, United States District Judge
I. INTRODUCTION
Pending before the Court is the defendant's, Allstate Vehicle and Property Insurance Company ("Allstate"), motion for summary judgment. (Dkt. No. 10). The plaintiff, Evilia Gonzalez (the "plaintiff"), has filed a response in opposition to Allstate's motion for summary judgment (Dkt. No. 11) and Allstate has filed a reply (Dkt. No. 14). After having carefully considered the motion, response, reply, the undisputed facts, the record and the applicable law, the Court determines that Allstate's motion for summary judgment should be GRANTED .
The plaintiff maintains that Allstate's motion for summary judgment is premature and alternatively, requests a continuance to conduct material discovery concerning her claims.
II. FACTUAL BACKGROUND
This case arises out of an insurance dispute concerning the plaintiff's claim for damages to her residential property arising from Hurricane Harvey. The plaintiff, a Texas resident, is the owner of a homeowners insurance policy, policy No. 000829339295 (the "Policy"), issued by Allstate, insuring certain real property located at 19506 Cypressthorn Lane, Katy, Texas 77449 (the "property") for the policy period beginning November 22, 2016 through November 22, 2017. The Policy contains a dwelling coverage limit in the amount of $202,737, with a coverage limit in the amount of $20,274 for other structures. On September 6, 2017, the plaintiff filed a claim with Allstate, reporting that the covered property sustained wind damage from Hurricane Harvey on or about August 23, 2017. On September 25, 2017, Allstate's Adjuster Zuleka Edwards performed an initial inspection of the property and adjusted the loss, denoting interior, fence and roof damages to the covered property.
On January 5, 2018, Allstate Adjuster Rodney Bradshaw performed a second inspection of the property with the plaintiff's contractor present and prepared an estimate for damages, representing the replacement value of one sheet of roof sheathing. Bradshaw made no further allowance for roof shingles in his estimate since Allstate had already covered the roof damage via a prior claim filed by the plaintiff. The plaintiff, nevertheless, failed to replace the roof. After applying the applicable deductible, Allstate issued payment to the plaintiff totaling $2,146.50, which included a payment in the amount of $2,066.09 for other structures, along with a payment in the amount of $80.41 for the dwelling. In addition, Allstate issued a formal denial letter to the plaintiff explaining that it could not provide coverage for the damages sustained to the plaintiff's roof because it had previously made a payment to the plaintiff for a full roof replacement under a prior claim filed by her with a December 13, 2016 date of loss. Allstate further advised the plaintiff that unless she could provide documentation substantiating that a roof replacement had, in fact, been completed, it was unable to provide coverage to replace the roof again.
On June 6, 2019, the plaintiff filed the instant action against Allstate in the 157th Judicial District Court of Harris County, Texas, alleging claims for breach of contract, violations of Chapters 541 and 542 of the Texas Insurance Code and a claim for attorney's fees. On July 17, 2019, Allstate timely removed the action to this Court on the basis of diversity jurisdiction.
Allstate's removal is timely as it was served with the plaintiff's Original Petition on June 20, 2019.
On September 11, 2019, the plaintiff invoked the appraisal clause under the Policy and appointed Bobby Crowson as her appraiser. Allstate, however, on October 1, 2019, declined the plaintiff's request for appraisal, asserting that the plaintiff had waived her right to appraisal due to her unreasonable delay in invoking it. The plaintiff, thereafter, filed a motion to compel appraisal and abate the proceedings pending completion of the appraisal process, which this Court granted on December 2, 2019. (See Dkt. No. 8). On December 8, 2019, Allstate designated Kevin Maxwell as its appraiser. On February 6, 2020, Allstate received the Appraisal Award, dated January 31, 2020, setting the replacement cost value of the loss for the dwelling at $23,641.61 and the actual cost value at $21,363.69. On February 7, 2020, Allstate issued payment to the plaintiff in the amount of $17,440.11, which represented the replacement cost value under the Appraisal Award minus the $4,055 deductible and its prior payment of $2,146.50. Allstate also issued a second check to the plaintiff in the amount of $3,941.95 to cover any additional interest allegedly owed to the plaintiff.
Allstate now moves for a summary judgment on the plaintiff's claims.
III. SUMMARY JUDGMENT STANDARD
Rule 56 of the Federal Rules of Civil Procedure authorizes summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to the party's case and on which that party bears the burden at trial. See Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The movant bears the initial burden 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 ; see also Martinez v. Schlumber, Ltd. , 338 F.3d 407, 411 (5th Cir. 2003). Summary judgment is appropriate where the pleadings, the discovery and disclosure materials on file, and any affidavits show "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).
If the movant meets its burden, the burden then shifts to the nonmovant to "go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Stults v. Conoco, Inc. , 76 F.3d 651, 656 (5th Cir. 1996) (citing Tubacex, Inc. v. M/V Risan , 45 F.3d 951, 954 (5th Cir. 1995) ; Little , 37 F.3d at 1075 ). "To meet this burden, the nonmovant must ‘identify specific evidence in the record and articulate the ‘precise manner’ in which that evidence support[s] [its] claim[s].’ " Stults , 76 F.3d at 656 (citing Forsyth v. Barr , 19 F.3d 1527, 1537 (5th Cir.), cert. denied , 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed.2d 127 (1994) ). It may not satisfy its burden "with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence." Little , 37 F.3d at 1075 (internal quotation marks and citations omitted). Instead, it "must set forth specific facts showing the existence of a ‘genuine’ issue concerning every essential component of its case." Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n, Intern. , 343 F.3d 401, 405 (5th Cir. 2003) (citing Morris v. Covan World Wide Moving, Inc. , 144 F.3d 377, 380 (5th Cir. 1998) ).
"A fact is material only if its resolution would affect the outcome of the action, ... and an issue is genuine only ‘if the evidence is sufficient for a reasonable jury to return a verdict for the [nonmovant].’ " Wiley v. State Farm Fire and Cas. Co. , 585 F.3d 206, 210 (5th Cir. 2009) (internal citations omitted). When determining whether a genuine issue of material fact has been established, a reviewing court is required to construe "all facts and inferences ... in the light most favorable to the [nonmovant]." Boudreaux v. Swift Transp. Co., Inc. , 402 F.3d 536, 540 (5th Cir. 2005) (citing Armstrong v. Am. Home Shield Corp. , 333 F.3d 566, 568 (5th Cir. 2003) ). Likewise, all "factual controversies [are to be resolved] in favor of the [nonmovant], but only where there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Boudreaux , 402 F.3d at 540 (citing Little , 37 F.3d at 1075 (emphasis omitted)). Nonetheless, a reviewing court is not permitted to "weigh the evidence or evaluate the credibility of witnesses." Boudreaux , 402 F.3d at 540 (quoting Morris , 144 F.3d at 380 ). Thus, "[t]he appropriate inquiry [on summary judgment] 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.’ " Septimus v. Univ. of Hous. , 399 F.3d 601, 609 (5th Cir. 2005) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 251 – 52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).
IV. ANALYSIS AND DISCUSSION
A. The Plaintiff's Breach of Contract Claim
As a threshold matter, the plaintiff asserts a breach of contract claim against Allstate premised on its failure and refusal to pay her certain benefits due under the Policy. (See Dkt. No. 1, Ex. D. at 3, ¶ 14). Specifically, the plaintiff maintains that Allstate breached the terms of the Policy by wrongfully denying and/or underpaying her claim. (Id. ). Allstate moves for judgment as a matter of law on the plaintiff's breach of contract claim, asserting that its payment of the appraisal award estops the plaintiff from maintaining a breach of contract claim. "Texas courts have long held that appraisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award." Franco v. Slavonic Mut. Fire Ins. Ass'n , 154 S.W.3d 777, 786 (Tex. App.–Houston [14 Dist.] 2004) (citing Providence Lloyds Ins. Co. v. Crystal City Indep. Sch. Dist. , 877 S.W.2d 872, 875 (Tex. App.-San Antonio 1994, no writ) ). "Under Texas law, when an insurer makes timely payment of a binding and enforceable appraisal award, and the insured accepts the payment, the insured is ‘estopped by the appraisal award from maintaining a breach of contract claim against [the insurer].’ " Blum's Furniture Co., Inc. v. Certain Underwriters at Lloyds London , 459 Fed.Appx. 366, 368 (5th Cir. 2012) (quoting Franco , 154 S.W.3d at 787 ); see also Breshears v. State Farm Lloyd's , 155 S.W.3d 340, 343 (Tex. App.-Corpus Christi 2004, no pet.) (the insured "may not use the fact that the appraisal award was different than the amount originally paid as evidence of breach of contract, especially when the contract [she] claim[s] is being breached provides for resolution of disputes through appraisal"). "By payment of the full amount of an appraisal award, the insurer ‘complie[s] with every requirement of the contract, [and] it cannot be found to be in breach.’ " Nat'l Sec. Fire & Cas. Co. v. Hurst , 523 S.W.3d 840, 845 (Tex. App. 2017) (quoting Breshears , 155 S.W.3d at 344 ) (other citations omitted).
Here, in the absence of evidence raising a genuine issue of material fact as to a ground for setting aside the appraisal award in this case, the plaintiff, having accepted payment of the appraisal award minus applicable offsets, is estopped from pursuing a breach of contract claim against Allstate. See Hurst , 523 S.W.3d at 845. ("Generally, tender of the full amount owed pursuant to the conditions of an appraisal clause is all that is required to estop the insured from raising a breach of contract claim."). The plaintiff has failed to introduce evidence indicating that she has not been adequately compensated.
Indeed, the uncontroverted evidence in the record establishes that plaintiff invoked the appraisal clause under the Policy and the parties submitted to appraisal, each appointing its own appraiser. On or about January 31, 2020, the appraisers agreed on the amount of loss and executed an Appraisal Award with a replacement cost value of $23,641.61 and an actual cost value of $21,363.69. On February 7, 2020, Allstate tendered payment to the plaintiff pursuant to the Appraisal Award in the amount of $17,440.11, which represented the replacement cost value under the Appraisal Award minus any applicable deductible and prior payments. Allstate also issued a second payment to the plaintiff for interest in the amount of $3,941.95. The plaintiff accepted timely payment of the binding and enforceable Appraisal Award minus offsets from Allstate and, thus, is estopped from maintaining a breach of contract claim against it. See Ortiz v. State Farm Lloyds , 589 S.W.3d 127, 129 (Tex. 2019), reh'g denied (Dec. 13, 2019) (an "insurer's payment of [an appraisal] award bars the insured's breach of contract claim premised on failure to pay the amount of the covered loss."); see also Devonshire Real Estate & Asset Mgmt., LP v. Am. Ins. Co. , No. 3:12-CV-2199-B, 2014 WL 4796967, at *15 (N.D. Tex. Sept. 26, 2014) (citing Scalise v. Allstate Texas Lloyds , No. 7:13–CV–178, 2013 WL 6835248, at *5 (S.D. Tex. Dec. 20, 2013)) ("Under Texas insurance law, however, ‘where the parties disagree on the amount of loss and submit to the contractual appraisal process to resolve that dispute, and the insurer pays all covered damages determined by the award, the insured may not then argue that the initial failure to pay those damages equates to a breach of the contract.’ "). Consequently, Allstate is entitled to judgment as a matter of law on the plaintiff's breach of contract claim.
B. The Plaintiff's Extra-Contractual Claims
In addition to her breach of contract claim against Allstate, the plaintiff asserts claims against Allstate for common-law and statutory bad faith and for a violation of the prompt payment provisions of the Texas Insurance Code § 542.
1. The Plaintiff's Bad Faith Claims
Allstate maintains that it is entitled to a summary judgment on the plaintiff's extra-contractual claims for bad faith because the plaintiff has no right to additional policy benefits and has not alleged an independent injury. This Court agrees. The Texas Insurance Code provides an insured with a private right of action against an insurer that engages in certain "discriminatory, unfair, deceptive, or bad-faith practices, and it permits insureds to recover ‘actual damages ... caused by’ those practices, court costs, and attorney's fees, plus treble damages if the insurer ‘knowingly’ commits the prohibited act." USAA Texas Lloyds Co. v. Menchaca , 545 S.W.3d 479, 488 (Tex. 2018) (citing Tex. Ins. Code §§ 541.151, 541.152 ). The Texas Supreme Court, in Ortiz , however, recently held that an "insurer's payment of [an appraisal] award ... bars the insured's common law and statutory bad faith claims to the extent the only actual damages sought are lost policy benefits." Ortiz , 589 S.W.3d at 129.
In Menchaca , the Texas Supreme Court enunciated five discrete, but correlated "rules that govern the relationship between contractual and extra-contractual claims in the insurance context[:]"
First, as a general rule, an insured cannot recover policy benefits as damages for an insurer's statutory violation if the policy does not provide the insured a right to receive those benefits. Second, an insured who establishes a right to receive benefits under the insurance policy can recover those benefits as actual damages under the Insurance Code if the insurer's statutory violation causes the loss of the benefits. Third, even if the insured cannot establish a present contractual right to policy benefits, the insured can recover benefits as actual damages under the Insurance Code if the insurer's statutory violation caused the insured to lose that contractual right. Fourth, if an insurer's statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages for that injury even if the policy does not grant the insured a right to benefits. And fifth, an insured cannot recover any damages based on an insurer's statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.
545 S.W.3d at 489 (emphasis in original).
The Court, in Menchaca , also noted that there are two facets to the independent-injury rule: (1). "[I]f an insurer's statutory violation causes an injury independent of the insured's right to recover policy benefits, the insured may recover damages for that injury even if the policy does not entitle the insured to receive benefits"; and (2). "[A]n insurer's statutory violation does not permit the insured to recover any damages beyond policy benefits unless the violation causes an injury that is independent from the loss of the benefits." Menchaca , 545 S.W.3d at 499 – 500. The court emphasized, however, that a "successful independent-injury claim would be rare" and that it had "yet to encounter one." Id. at 500.
In this case, the plaintiff asserts that Allstate engaged in a substandard, outcome-oriented investigation, undervalued her damages, and performed a biased loss evaluation with regard to her claim for damages. Such claims, however, are predicated on or stem from Allstate's purported denial of policy benefits and do not constitute an independent injury. Additionally, the plaintiff has failed to allege any conduct or act by Allstate that was so extreme that it caused an injury to her separate and apart from its mere failure to render amounts due under the terms of the Policy. Undoubtedly, the plaintiff's right to receive full benefits under the Policy has been satisfied and any inadequacies have been resolved by payment of the initial amount and full appraisal award.
Further, the plaintiff's claim for consequential legal fees, costs and/or appraisal expenses, without more, will not suffice to support an independent injury. See Ortiz , 589 S.W.3d at 135 (citing In re Nalle Plastics Family Ltd. P'ship , 406 S.W.3d 168, 173 (Tex. 2013)) ("Texas law is clear that attorney's fees and costs incurred in the prosecution or defense of a claim, although ‘compensatory in that they help make a claimant whole,’ are not damages."); see also Admiral Ins. Co. v. Petron Energy, Inc. , 1 F.Supp.3d 501, 503-04 (N.D. Tex. 2014) (reasoning that an insured's payment of legal fees and increased litigation expenses in a coverage dispute with its insurer did not constitute independent injury required for unfair settlement practices claim). Thus, the plaintiff has failed to raise a genuine issue of material fact regarding her bad faith claims against Allstate and a summary judgment is appropriate.
2. The Plaintiff's Prompt Payment Claim
Allstate moves for a summary judgment on the plaintiff's prompt payment claim brought pursuant to the Texas Insurance Code, alleging that it made a reasonable pre-appraisal payment on the plaintiff's claim in compliance with The Texas Prompt Payment of Claims Act ("TPPCA"). The plaintiff maintains that given the vast disparity between Allstate's initial pre-appraisal payment amount and the appraisal amount, the length of time it took for Allstate to pay above its initial "undervaluation" and the fact that she had to retain counsel and file suit before an appraisal was ever performed, Allstate should be held liable for prompt payment penalties. Chapter 542 of the Texas Insurance Code, known as the TPPCA, requires an insurer to pay an insured's claim within 60 days of receiving all items and documents reasonably necessary to resolve the claim. See Mainali Corp. v. Covington Specialty Ins. Co. , 872 F.3d 255, 258 (5th Cir. 2017), as revised (Sept. 27, 2017) (citing Tex. Ins. Code § 542.058 ). An insurer's failure to comply with the TPPCA subjects it to the payment of "interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney's fees." Tex. Ins. Code § 542.060(a).
In Mainali , the Fifth Circuit held that no statutory violation of the TPPCA occurs if an insurer's pre-appraisal payment is reasonable. 872 F.3d at 259. The Texas Supreme Court, in Barbara Technologies , held that "when an insurer complies with the TPPCA in responding to the claim, requesting necessary information, investigating, evaluating, and reaching a decision on the claim, use of the contract's appraisal process does not vitiate the insurer's earlier determination on the claim." Barbara Technologies Corp. v. State Farm Lloyds , 589 S.W.3d 806, 823 (Tex. 2019) (citing Mainali , 872 F.3d at 258 – 59 (holding that an insurer did not violate the TPPCA when it complied with the TPPCA's requirements to investigate and evaluate a claim but later made a payment based on the appraisal)). Thus, " Barbara Technologies , [when read] in conjunction with Mainali , [has been interpreted] as standing for the proposition that, in order for an insurer to avoid a Prompt Payment Act claim by a plaintiff, the insurer must have made a reasonable pre-appraisal payment within the statutorily-provided period." Hyewon Shin v. Allstate Texas Lloyds , No. 4:18-CV-01784, slip op. at 2, 2019 WL 4170259 (S.D. Tex. Sept. 3, 2019) ; see also Crenshaw v. State Farm Lloyds , 425 F. Supp. 3d 729, 740 (N.D. Tex. 2019).
The plaintiff maintains that Allstate's pre-appraisal payment was too low and thus, unreasonable. On January 31, 2020, the appraisers determined an appraisal award of 23,641.61 which resulted in a payment of $17,440.11, which is 8.12 times greater than the initial pre-appraisal payment of $2,146.50. The Court determines Allstate's payment to be within the range of reasonableness under the circumstances. See Shin , 2019 WL 4170259, at *2 (finding an insurer's pre-appraisal payment reasonable where appraisal award was 5.6 times the pre-appraisal payment); see also Hinojos v. State Farm Lloyds , 569 S.W.3d 304 (Tex. App.-El Paso 2019) (finding an insurer's pre-appraisal payment reasonable where the award was 6.8 times the pre-appraisal payment, totaling a difference of over $22,000.) Further, even assuming Allstate's pre-appraisal payment to be unreasonable, Allstate has already tendered payment of interest to the plaintiff at the penalty rate specified in the TPPCA. Accordingly, Allstate is entitled to judgment as a matter of law on the plaintiff's claim for violation of the TPPCA.
V. CONCLUSION
Based on the foregoing analysis and discussion, Allstate's motion for summary judgment is GRANTED .
It is so ORDERED .