Opinion
Civil Action No. G-04-251.
March 18, 2005
ORDER GRANTING DEFENDANT STATE FARM LLOYDS'S MOTIONS FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION TO STRIKE
This lawsuit arises out of a homeowners' insurance claim by Robert and Charlotte Thornton ("Plaintiffs") for damage to their home allegedly caused by seismic testing and mold. Now before the Court are three Motions for Summary Judgment by Defendant State Farm Lloyds ("Defendant") and a Motion to Strike Plaintiff's Response by Defendant. For the following reasons, Defendant's Motions for Summary Judgment are GRANTED and Defendant's Motion to Strike is DENIED.
The Motions are Defendant's Motion for Partial Summary Judgment on Plaintiffs' Contractual Causes of Action Related to Their Alleged Seismic Damages, Defendant's Motion for Partial Summary Judgment on Plaintiffs' Contractual Cause of Action Regarding Alleged Mold Damages, and Defendant's Motion for Partial Summary Judgment on Plaintiffs' Extra-Contractual and Common Law Causes of Action Related to Alleged Mold and Seismic Damage Claims.
I. Background
On January 13, 2001, Plaintiffs felt and heard an explosion near their home. (C. Thornton Dep. at 23.) Plaintiffs believed this was due to seismic testing in the area. Within a few weeks, Plaintiffs noticed some cracks in the walls, plumbing leaks, and mold. (C. Thornton Dep. at 31, 42-43.) On June 13, 2001, Plaintiffs reported damage (although not the plumbing leaks and mold) to their homeowners' insurance carrier, Defendant. (Patterson Aff. at 1; C. Thornton Dep. at 66.) Defendant assigned the claim to Kelly Ballard ("Ballard"), who contacted Plaintiffs on June 15, 2001. (Patterson Aff. at 1.) On June 28, 2001, Defendant had Nelson Architectural Engineers ("Nelson") inspect Plaintiffs' home. (Patterson Aff. at 2.) Ballard received Nelson's report on September 7, 2001. The report found that seismic testing did not cause the damage to Plaintiffs' home, but that soil movement, something not covered by Plaintiffs' insurance policy, caused the damage. (Def.'s Ex. C-2.) On September 28, 2001, Defendant informed Plaintiffs that Defendant denied their claim. (Patterson Aff. at 2.) Defendant sent Nelson's report to Plaintiffs, contacted them again on November 19, 2001, to discuss the denial, and sent a letter to Plaintiffs informing them that the damage would not be covered. (Def.'s Ex. C-3 and C-4.)On June 18, 2003, Plaintiffs sued the seismic testing company. Plaintiffs then sued Defendant in the 253rd Judicial District Court of Chambers County, Texas on November 25, 2003, and Defendant removed to this Court on April 16, 2004. Plaintiffs allege that Defendant breached the insurance contract; violated the Texas Deceptive Trade Practices Act, Tex. Bus. Com. Code Ann. § 17.46(b) (Vernon 2002) ("DTPA"); violated Tex. Ins. Code Ann. Art. 21.21 and 21.55 (Vernon 2001); breached their duty of good faith and fair dealing; were negligent and grossly negligent in failing to repair or remediate Plaintiffs' home before it became saturated with mold; were negligent in hiring and supervising the claims adjusters; caused Plaintiffs mental anguish; and defrauded Plaintiffs. Defendant moves for summary judgment on all causes of action.
Plaintiffs also sued Ballard, but they non-suited him on August 9, 2004.
II. Summary Judgment Standard
Summary judgment is appropriate if no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986). When one party moves for summary judgment, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S. Ct. at 2512. "[T]he plaintiff must present affirmative evidence in order to defeat a properly supported motion for summary judgment." Id. at 257, 106 S. Ct. at 2514; see also Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). Once the moving party has shown that there are no issues of material fact, the nonmoving party must "go beyond the pleadings" to show that a genuine issue exists. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). "We do not, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts." Id. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. See Anderson, 477 U.S. at 247-48, 106 S. Ct. at 2510. Therefore, the Court must decide whether Plaintiffs have brought forth sufficient evidence — not allegations in the pleadings — to support a jury finding in their favor.
Nevertheless, if the evidence is such that a reasonable fact-finder could find in favor of the nonmoving party, summary judgment should not be granted. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). Determining credibility, weighing evidence, and drawing reasonable inferences are left to the trier of fact. See Anderson, 477 U.S. at 255, 106 S. Ct. at 2513.
III. Breach of Contract
Plaintiffs allege that Defendant breached the insurance contract by failing to investigate their claims, failing to honestly inform them about their claims and the amount due them, losing documents to avoid payment, failing to pay even though the obligation was clear, hiring biased experts, leaving them in their home with life-threatening mold, and generally trying to avoid liability. Defendant argues, first, that it has no obligation at all under the policy because Plaintiffs failed to timely notify Defendant of the loss as required by the policy. The policy states that the holder must "give prompt written notice to [Defendant] of the facts relating to the claim." (Def.'s Ex. B.)
If an insured violates the notice provision of an insurance policy, under Texas law, the insurer is absolved of responsibility for the claim. See Nan Travis Mem'l Hosp. v. St. Paul Fire Marine Ins. Co., 394 F.2d 112, 113 (5th Cir. 1968); Flores v. Allstate Texas Lloyd's Co., 278 F. Supp. 2d 810, 815 (S.D. Tex. 2003). When the facts are undisputed, a court can declare a delay in notice unreasonable as a matter of law. See Flores, 278 F. Supp. 2d at 815.
Plaintiffs knew about the damage sometime in January 2001, but waited until June 13, 2001, to notify Defendant. (R. Thornton Dep. at 8; C. Thornton Dep. at 31-33.) Particularly given that Plaintiffs complain of mold, something that spreads quickly, and other deteriorating conditions, such a delay significantly prejudiced Defendant. Plaintiffs state that they were attempting to discover what company performed the seismic testing, but that is not a sufficient reason for a five-to six-month delay in notifying Defendant. The Court finds the delay unreasonable as a matter of law. See, e.g., McPherson v. St. Paul Fire Marine Ins. Co., 350 F.2d 563, 565 (5th Cir. 1965) (holding a 54-day delay unreasonable). Because Plaintiffs failed to comply with the notice requirements of their insurance policy, Defendant owes no duty to Plaintiffs as to these claims.
Plaintiffs' Original Petition states that the claim was made on January 13, 2001, but Charlotte Thornton admitted in her deposition that this was not true. (C. Thornton Dep. at 81-82.)
Also, Defendant states that Plaintiffs have never made a claim for mold damage. (Patterson Aff. at 2.) Plaintiffs state in their Response that Defendant admits that a separate claim for mold was not necessary, but Plaintiffs offer no sworn testimony or other statement from Defendant supporting this, and Defendant's Motions for Summary Judgment clearly state the opposite. Plaintiffs also argue that they informed Nelson of the mold problem and that Nelson photographed the mold. (R. Thornton Dep. at 7-9.) However, no such photographs appear in Nelson's report, and Plaintiffs admit that they never directly told Defendant about the mold. (C. Thornton Dep. at 71-72.) Plaintiffs also admit that no mold claim was ever filed on behalf of Plaintiffs. (Pls' First Am. Answers, Request No. 4.) Plaintiffs further admit that they never asked Defendant to have anyone come inspect their plumbing and drain problems. (R. Thornton Dep. at 37.) Since Plaintiffs admit that they knew of the mold and plumbing problems in January 2001, their failure to notify Defendant of these losses until the filing of this suit — a two-year delay — is decidedly unreasonable as a matter of law. (C. Thornton Dep. at 71.) Defendant owes Plaintiff no duty for the mold damage because Plaintiffs did not comply with the timely notice requirement of their policy.
Defendant argues that the mold damage is not covered by the policy at all. Plaintiffs argue that it is covered under the "ensuing loss" exclusion to the mold exclusion. This issue is currently before the Texas Supreme Court. See Fiess v. State Farm Lloyds, 392 F.3d 802, 809 (5th Cir. 2004) (certifying question to Texas Supreme Court); see also Flores, 278 F. Supp. 2d at 814, n. 3 (discussing conflicting case law). However, since Plaintiffs failed to timely notify Defendant of both the seismic testing and mold claims, this issue is irrelevant.
Even if Plaintiffs had complied with the notice requirements of the policy, Defendant argues that Plaintiffs have not presented more than a scintilla of evidence to support their claims. Plaintiffs have failed to offer any evidence to substantiate their claims other than one Plaintiff's affidavit, in which he simply concludes that seismic testing did cause the damage to his home and that Defendant breached the contract. In contrast, Defendant has presented Nelson's report, written by licensed professional engineers, which states that earth movement, not seismic testing, caused the damage. (Def.'s Ex. C-2.) This refutes Plaintiffs' claims that Defendant did not investigate their claim and that Defendant failed to pay a clear obligation.
Plaintiffs argue that Defendant has the burden of proving that the damage fits within one of the policy exclusions, so Plaintiffs should not have to present any evidence as to the cause of their losses. Plaintiffs have the initial burden of proving that their claim "is potentially within [the] policy's coverage." Sentry Ins. v. R.J. Weber Co., 2 F.3d 554, 556 (5th Cir. 1993). Then Defendant bears the burden of showing that the loss fits within an exclusion (in this case the exclusion for damages caused by earth movement). See Tex. Ins. Code Ann. § 21.58(b) (Vernon XXXX); Primrose Operating Co. v. Nat'l Am. Ins. Co., 382 F.3d 546, 553 (5th Cir. 2004). The Nelson report fulfills that burden. Then, the burden returns to Plaintiffs to prove that the exclusion does not apply. See Primrose, 382 F.3d at 553; Telepak v. United Servs. Auto. Assoc., 887 S.W.2d 506 (Tex.App.-San Antonio 1994, writ denied).
Plaintiffs have not offered any evidence other than Plaintiffs' own non-expert assertions to counter Nelson's report that earth movement, not seismic testing, caused Plaintiffs' loss. See Fed.R.Evid. 701 (a lay witness may not testify to an opinion based on scientific or technical knowledge); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) ("[U]nsubstantiated assertions are not competent summary judgment evidence.). Since the deadline for Plaintiffs to designate their experts and tender their reports has passed, the Court assumes that Plaintiffs have had ample time to find experts and conduct discovery. However, Plaintiffs have not designated any experts on the issue of what caused the alleged foundation damage — their experts will all testify as to the necessity and cost of various repairs. Plaintiffs do not contest that their policy does not cover damage caused by earth movement. Defendant has borne its burden of showing that this policy exclusion applies, and Plaintiffs have not created a genuine issue of material fact on that issue.
Defendant has also presented the depositions of both Plaintiffs, Robert and Charlotte Thornton, in which Plaintiffs admit that they have no evidence or specific examples of Defendant losing documents, hiring biased experts, failing to give them honest information about their claims, or breaching the contract in any other manner. (R. Thornton Dep. at 33-35, 64; C. Thornton Dep. at 70, 82-83.) Plaintiffs also admitted that they have not had anyone inspect the mold to determine whether it is life-threatening, as they claim in their Original Petition. (C. Thornton Dep. at 72, 83-84.) Plaintiffs simply have not presented any evidence in this case to support their claims. Defendant has presented sufficient evidence to show that there is no genuine issue of material fact as to whether Defendant breached its contract with Plaintiffs. Because of this and because Plaintiffs failed to comply with the notice requirements of their insurance policy, Defendant's Motions for Summary Judgment as to all breach of contract claims are hereby GRANTED.
Defendant points out that Plaintiffs have never proven any mold damage. They have not had any expert examine the house to determine whether an unusual amount of mold is present, nor have they presented any other actual evidence of mold.
IV. Statutory and Tort Claims
Plaintiffs allege that Defendant violated Tex. Ins. Code Ann. Art. 21.21 (Vernon 2001), relating to deceptive acts, and the DTPA. These statutes prohibit a seller from representing that a product has benefits which it does not have, representing that a contract grants rights which it does not grant, and engaging in unfair settlement practices relating to an insurance claim.Plaintiff Charlotte Thornton stated in her deposition that when she and her husband purchased the policy, Defendant gave them the impression that they would take care of anything that came up, but she also testified that she understood that the homeowners' policy did not cover all possible damage to the home. (C. Thornton Dep. at 85-86.) In their First Amended Answers to Defendant's First Request for Admissions, Request No. 11, Plaintiffs stated that Defendant "represented that Plaintiffs' dwelling was insured against all perils," but this is directly contradicted by Plaintiff Charlotte Thornton's own deposition testimony and the clear language of the insurance policy. Plaintiffs have no evidence for their assertion that Defendant misrepresented the benefits of the policy.
Plaintiffs have not been able to point to any statement by Defendant that misrepresented a material fact or policy provision relating to this claim. See Art. 21.21 § 3(10); see also Hogue v. United Olympic Life Ins. Co., 39 F.3d 98, 101 (5th Cir. 1994) (holding that mere "puffery" does not constitute actionable misrepresentation). Plaintiffs' unsubstantiated allegations do not suffice to create a genuine issue of material fact as to whether Defendant violated those statutes.
Plaintiffs next allege that Defendant violated Tex. Ins. Code Ann. Art. 21.55 (Vernon 2001), which requires insurance companies to timely pay, investigate, and/or reject claims. Defendant has offered evidence that Ballard responded to the claim within two days of Plaintiffs' notifying Defendant, and that Defendant promptly arranged for an inspection of the home. (Def.'s Ex. C-4.) Shortly after receiving the report from Nelson, Defendant informed Plaintiffs that Defendant had rejected their claim and gave Plaintiffs the reasons for that action. Plaintiffs have offered no evidence to contradict Defendant's time line, and in fact, Plaintiff Charlotte Thornton admitted that the only evidence she had of Defendant purposely avoiding its obligation to pay was that Defendant did not pay her claim. (C. Thornton Dep. at 84.) Any delay in denying Plaintiffs' claim can be attributed to Defendant's need to conduct an investigation. See Estrada v. State Farm Mut. Auto. Ins. Co., 897 F. Supp. 321, 323 (W.D. Tex. 1995). Defendant's actions were those of a reasonable insurance company. Defendant has shown that there is no genuine issue of material fact as to its timely response, investigation, and denial of Plaintiffs' claim. Additionally, since Plaintiffs' failure to timely notify Defendant of their claims absolved Defendant of any responsibility for those claims, Plaintiffs' claim under § 21.55 fails as a matter of law. See Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d 847, 861 (5th Cir. 2003); Higginbotham v. State Farm Mut. Auto Ins. Co., 103 F.3d 456, 461 (5th Cir. 1997).
Tex. Ins. Code Ann. Art. 21.21 § 3(10) requires the same actions from insurance companies.
Plaintiffs have also claimed that Defendant breached its duty of good faith and fair dealing and that Defendant exhibited bad faith in failing to pay Plaintiffs' claim. As discussed above, Defendant has no duty to pay Plaintiffs' claims for alleged seismic damages and mold. Since Defendant has no duty to pay, Defendant's failure to pay cannot, as a matter of law, constitute bad faith. See Higginbotham, 103 F.3d at 460; see also Estrada, 897 F. Supp.at 323 (holding that even a genuine controversy over the insurer's duty to pay precludes a finding of bad faith). The Texas Supreme Court has also held that a insured's bad faith claim typically fails absent a finding that the insurer has breached the contract. See Liberty Nat'l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996). As discussed above, Defendant did not breach the insurance contract. Defendant has shown that no genuine issue of material fact exists as to Plaintiffs' bad faith claims.
As to Plaintiffs' claims for negligence and gross negligence, Texas does not recognize a claim for negligent claims handling. See Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 258 F.3d 345, 352 (5th Cir. 2001); Higginbotham, 103 F.3d at 460. Therefore, as a matter of law, Plaintiffs' claim is insufficient. Plaintiffs claim that Defendant negligently allowed their home to fill with mold, but Plaintiffs waited almost six months to notify Defendant of any damage to their home at all, and Defendant has shown that Plaintiffs never made a mold claim. And, as noted above, Plaintiffs have not produced any evidence of an unusual level of mold in their home. Even if Defendant had a duty to pay Plaintiffs for the alleged damages, Plaintiffs, not Defendant, caused the delay in attending to the mold. Plaintiffs also claim that Defendant was negligent in hiring and supervising its claims representatives, specifically Ballard, but Plaintiffs have not identified any negligent behavior on the part of Defendant. (R. Thornton Dep. at 66.) Defendant has shown that no genuine issue of material fact exists as to Plaintiffs' negligence and gross negligence claims.
While it is not clear whether Plaintiffs intend this as a separate cause of action or a measure of damages, Plaintiffs claim that Defendant caused them mental anguish. In his deposition, Plaintiff Robert Thornton described this anguish as the stress of having to see the damage to his house on a daily basis, knowing that he could not afford repairs, having to deal with the lawsuit, and not being able to have his friends over for parties. (R. Thornton Dep. at 82.) This in no way rises to the level of mental anguish that might be compensable. Mental anguish "is more than mere disappointment, anger, resentment, or embarrassment." Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995) (holding that plaintiffs did not experience compensable mental anguish over flooding in their home). In a claim for damages based on mental anguish, a plaintiff must provide verifiable evidence of unusual distress, such as reports from psychiatrists, medication records, or a decreased ability to earn a living. Plaintiffs have presented no such evidence. (C. Thornton Dep. at 89; Pls' First Am. Answers, Request Nos. 6-8.) Even if Plaintiffs did have such evidence, they do not have any viable tort claim upon which to base damages for mental anguish. Defendant has shown that no genuine issue of material fact exists as to Plaintiffs' claims for mental anguish.
Finally, Plaintiffs make a claim for fraud. The elements of a fraud claim are: (1) a material misrepresentation that was false; (2) knowledge of that falsity or reckless disregard for the truth; (3) intention to induce reliance on the representation; and (4) actual and justifiable reliance on the misrepresentation resulting in injury. See Ernst Young v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). Plaintiffs have not identified any false statements by Defendant, nor have they shown any reliance on statements by Defendant that resulted in injury. (R. Thornton Dep. at 67-69, 84; C. Thornton Dep. at 80-81.) Defendant has shown that no genuine issue of material fact exists as to Plaintiffs' fraud claim. Because Defendant has shown that no genuine issue of material fact exists as to any of Plaintiffs' statutory or common law claims, Defendant's Motion for Summary Judgment as to these claims is hereby GRANTED.
V. Motion to Strike
Defendant moves to strike Plaintiffs' Response to Defendant's Motions for Summary Judgment because Plaintiffs filed their Response several days after the end of the response period permitted by L.R. 7.3 and L.R. 7.4. However, because the Court wishes to consider all the evidence and arguments in deciding a motion for summary judgment, the Court declines to strike the Response.Defendant also asks that the Court strike certain portions of the affidavit of Robert Thornton as legal conclusions, impermissible hearsay, and opinions on technical matters by a non-expert. See Fed.R.Evid. 602, 701, 704, 802. Again, the Court declines to strike these portions because the Court wishes to consider all available evidence in deciding these Motions for Summary Judgment. The Court is also well aware of the standards for evidence used to support or refute a motion for summary judgment. See, e.g., Fed.R.Civ.P. 56(c), (e); Martin v. John W. Stone Oil Distrib. Inc., 819 F.2d 547, 549 (5th Cir. 1987). In reviewing Plaintiffs' Response and Robert Thornton's affidavit, the Court gave appropriate weight to the type of evidence presented. Defendant's Motion to Strike is therefore respectfully DENIED.
VI. Conclusion
Plaintiffs' real complaint is that Defendant has refused to pay for certain damage to their home, but Defendant has shown that the damage is not covered by Plaintiffs' homeowners' policy. Although Plaintiffs allege that Defendant acted in bad faith, it is Plaintiffs' continued pursuit of this action that actually borders on bad faith. Defendant's Motions for Summary Judgment are hereby GRANTED. All claims against Defendant are DISMISSED WITH PREJUDICE. All Parties are to bear their own taxable costs, expenses, and attorneys' fees incurred herein to date. A Final Judgment addressing this and all claims will be entered contemporaneously with this Order.IT IS SO ORDERED.