Opinion
CIVIL ACTION NO. 5:18-CV-116
2020-03-31
TRI INVESTMENTS, INC., Plaintiff, v. UNITED FIRE & CASUALTY COMPANY, Defendant.
Jeffrey L. Raizner, Amy Bailey Hargis, Andrew P. Slania, Benjamin C. Wickert, Raizner Slania LLP, Houston, TX, for Plaintiff. David P. Andis, Gauntt Koen Binney & Kidd LLP, Spring, TX, Robert F. Scheihing, Brock Guerra Strandmo Dimaline Jones P.C., San Antonio, TX, Marcel C. Notzon, III, The Notzon Law Firm, Laredo, TX, for Defendant.
Jeffrey L. Raizner, Amy Bailey Hargis, Andrew P. Slania, Benjamin C. Wickert, Raizner Slania LLP, Houston, TX, for Plaintiff.
David P. Andis, Gauntt Koen Binney & Kidd LLP, Spring, TX, Robert F. Scheihing, Brock Guerra Strandmo Dimaline Jones P.C., San Antonio, TX, Marcel C. Notzon, III, The Notzon Law Firm, Laredo, TX, for Defendant.
MEMORANDUM & ORDER
Diana Saldaña, United States District Judge
This lawsuit involves a first-party insurance claim brought by Plaintiff Tri-Investments, Inc. against its insurer, Defendant United Fire & Casualty Company. (Dkt. 1.) Plaintiff alleges that Defendant wrongfully refused to compensate it for property damage caused by a 2017 wind and hailstorm in violation of (1) the Texas Insurance Code, (2) the Texas Deceptive Trade Practices Act (DTPA), (3) Parties’ policy agreement ("Policy" or "Agreement") and (4) the duty of good faith and fair dealing. (Dkt. 1 at 13–17.) In response, Defendant argues that it did not breach the Agreement because (1) the storm damage to Plaintiff's property is "cosmetic" in nature and thus subject to the Agreement's "Cosmetic Damage Exclusion"; (2) much of the structural (i.e. non-cosmetic) damage to Plaintiff's property resulted from "other excluded causes" besides the 2017 hailstorm; and (3) Plaintiff's failure to "allocate" between covered and excluded sources of damage is fatal to its entire claim. (Dkt. 4 at 6–10; Dkt. 45 at 1–2.) Defendant further argues that Plaintiff's statutory and bad-faith dealing claims fail because Defendant did not breach the Agreement or act unreasonably. (Dkt. 45 at 1.)
Now pending are Plaintiff's "Partial Motion for Summary Judgment on Defendant's Affirmative Defense of Cosmetic Damage Exclusion" (Dkt. 33) and Defendant's motion for summary judgment on all of Plaintiff's claims (Dkt. 45). Plaintiff's motion seeks a ruling that the evidence before the Court cannot, as a matter of law, support Defendant's application of the Cosmetic Damage Exclusion. (Dkt. 33.) Defendant seeks the inverse outcome, i.e. a ruling that the Agreement's Cosmetic Damage Exclusion operates to bar Plaintiff's claim for breach of contract. (Dkt. 45 at 1–2.) Defendant also seeks summary judgment on Plaintiff's bad-faith and statutory claims. (Id. ) Both motions have been fully briefed, and Parties’ have had ample opportunity to provide summary judgment evidence. (See Dkts. 33, 42, 45, 48, 52, 63, 74.)
Having considered the filings and the applicable law, the Court finds that (1) both Plaintiff's breach of contract claim and Defendant's affirmative defense present triable issues of fact, and (2) Defendant is entitled to summary judgment on Plaintiff's bad faith dealing, Texas Insurance Code and DTPA claims.
Background
A. The Policy
Plaintiff owns and operates two commercial freight terminals located at 442 Logistic Drive, Laredo, TX 78045 and 301 Flecha Lane, Laredo, TX 78045 (collectively "Properties"). (Dkt. 1.) To protect these Properties, Plaintiff purchased Commercial Property Insurance Policy Number 85318342 from Defendant United Fire. (Dkt. 1, Ex. 1.) The Policy provides coverage for various types of property damage, including damage resulting from wind and hail. (Id. ) The Policy was in force from April 15, 2017 until April 15, 2018 (Policy Period). (Id. )
The Policy contains a variety of limitations and exclusions, including an exclusion for cosmetic hail damage (Cosmetic Damage Exclusion). The language of the Cosmetic Damage Exclusion is as follows:
We [United Fire] will not pay for loss or damage caused by the peril of hail that alters the physical appearance of any part of any roof covering made of metal but does not result in damage that allows the penetration of water through the roof covering or does not result in the failure of the roof covering to perform its intended function to keep out elements over an extended period of time. This exclusion applies to roof coverings including the roofing material exposed to weather, its underlayments applied for moisture protection and all flashings required in application of the roof covering.
Hail damage to roof coverings that results in damage that will allow the penetration of water through the roof covering or that results in the failure of the roof covering to perform its intended function to keep out elements over an extended period of time is not subject to this exclusion.
(Dkt. 1, Ex. 1 at 41 (emphasis in original).) The Policy also contains exclusions for damage resulting from (1) wear and tear; (2) rust/corrosion; (3) "settling, cracking, shrinking or expansion [of construction materials]"; (4) faulty or inadequate design; and (5) defects related to construction, renovation or maintenance. (Dkt. 1, Ex. 1 at 29–38; see Dkt. 4 at 6–9.)
The Court requests that Defendant follow Plaintiff's example and provide page numbers in future citations to its exhibits, especially in citations to the Agreement. (Compare Dkt. 4 at 6 with Dkt. 33 at 6.)
B. Plaintiff's Insurance Claim
On May 21, 2017, a wind and hailstorm struck Webb County, Texas, damaging Plaintiff's Properties. (Dkt. 1 at 5.) On May 30, 2019, Plaintiff filed two insurance claims with Defendant, which acknowledged Plaintiff's claims one day later. (Dkt. 33, Ex. 1.) Combined, the two claims seek $950,420.73 in compensation. (Dkt. 1, Ex. 2 at 4.) Upon receipt of Plaintiff's claims, Defendant dispatched David Scott Walton (Walton) to evaluate the damage to the Properties. (Dkt. 45, Exs. 3–4.) In addition to Walton, Defendant retained the engineering firm, BSC Forensics, and the EPI Materials Testing Group to prepare reports on Plaintiff's claims. (Dkt. 45 at 3–4; Dkt. 45, Exs. 4–5, 7) Based on these reports and information provided by Walton, Defendant concluded that Plaintiff was entitled to approximately $32,000 in compensation, but that the remainder of Plaintiff's claims were barred by various exclusions, including the Cosmetic Damage Exclusion and the Doctrine of Concurrent Causation. (Id. at 3; Dkt. 45, Exs. 3–4.) Plaintiff brought this lawsuit to recover the difference. (Dkt. 1.)
Parties should draw no legal or factual conclusions from the Court's use of the word "damage" and its derivatives (e.g. damaged, damaging) in this Order. The Court takes no position as to whether the alleged damage to Plaintiff's Properties was structural or cosmetic in nature. The Court also takes no position on the precise cause of the alleged damage to Plaintiff's Properties.
The Court estimated the value of Plaintiff's claim by combining the sums Plaintiff claimed in its initial Proof of Loss. (Dkt. 1, Ex. 2.) Defendant rejects this Proof of Loss, and the amount of Plaintiff's damages is therefore contested. (Id. ) Accordingly, Parties may draw no legal or factual conclusions from the estimate stated above. In the event that Defendant is found liable, the Court takes no position on the amount of damages due Plaintiff.
Legal Standards
A. Summary Judgment
Federal Rule of Civil Procedure 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is proper if 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). "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 State of Tex. , 560 F.3d 316, 326 (5th Cir. 2009) (quoting Hamilton v. Segue Software Inc. , 232 F.3d 473, 477 (5th Cir. 2000) ). "An issue as to a material fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ " Seacor Holdings, Inc. v. Commonwealth Ins. Co. , 635 F.3d 675, 680 (5th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).
The movant may satisfy the initial burden of showing that there is no genuine fact issue by merely pointing out the absence of evidence supporting the nonmovant's case. Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548. The burden then shifts to the nonmovant to show the existence of a genuine fact issue for trial. Lincoln Gen. Ins. Co. v. Reyna , 401 F.3d 347, 349 (5th Cir. 2005) (citing Celotex , 477 U.S. at 321–25, 106 S.Ct. 2548 ). To bear this burden, the nonmovant must go beyond the pleadings and identify specific evidence in the record supporting its position. Littlefield v. Forney Indep. Sch. Dist. , 268 F.3d 275, 282 (5th Cir. 2001) ; Forsyth v. Barr , 19 F.3d 1527, 1533 (5th Cir. 1994). "The [nonmovant] cannot preclude summary judgment by raising ‘some metaphysical doubt as to the material facts, conclusory allegations, unsubstantiated assertions, or by only a scintilla of evidence.’ " Avina v. JP Morgan Chase Bank, N.A. , 413 F. App'x 764, 767 (5th Cir. 2011) (quoting Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) ).
In determining whether there is a genuine fact issue, the court must view the evidence in the light most favorable to the nonmovant, making all inferences in their favor. HEI Res. E. OMG, Joint Venture v. Evans , 413 F. App'x 712, 715 (5th Cir. 2011) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). Before finding that there are no genuine fact issues, the court must be satisfied that no reasonable trier of fact could find for the nonmovant, or, in other words, that the evidence favoring the nonmovant is insufficient to enable a reasonable jury to return a verdict in their favor. Norwegian Bulk Transp. A/S v. Int'l Marine Terminals P'ship , 520 F.3d 409, 411-12 (5th Cir. 2008). When making this determination, the court must avoid making credibility determinations. Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (discussing identical standards in judgment as a matter of law).
B. Coverage Disputes and the Doctrine of Concurrent Causation
"Texas courts"—and federal courts sitting in diversity in Texas—"interpret insurance policies according to the rules of contract construction." de Laurentis v. United Services Auto Ass'n , 162 S.W.3d 714, 721 (Tex. App. 2005). To determine the scope of insurance coverage, "the court examines the policy as a whole in order to ascertain the true intent of the parties." Hahn v. United Fire & Cas. Co. , 2017 WL 1289024, *7 (W.D. Tex. Apr. 6, 2017) (citing Utica Nat. Ins. Co. of Tex. v. Am. Indem. Co. , 141 S.W.3d 198, 202 (Tex. 2004) ). As a general matter, the party asserting that coverage exists—typically the insured—bears the burden of proof. Evanston Ins. Co. v. Lapolla Indus., Inc. , 93 F. Supp. 3d 606, 612 (S.D. Tex. 2015). Once this burden is met, however, the burden shifts to the insurer to prove that an exclusion precludes coverage. Id. ; see Tex. Ins. Code § 554.002 (explaining that "[l]anguage of exclusion ... constitutes an avoidance or affirmative defense" that the insurer must prove).
Because insurance policies are contracts, an insurer may be liable for breach if it improperly denies coverage based on an exclusion. See de Laurentis , 162 S.W.3d at 721 (applying rules of contract interpretation to insurance policy); Hahn , 2017 WL 1289024, at * 1 (deciding action for breach of contract based on insurance denial). To prevail in an action for breach of contract, a plaintiff must show "(1) existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of contract by the defendant and (4) damages." Smith Intern., Inc. v. Egle Group, LLC , 490 F.3d 380, 387 (5th Cir. 2007) (citation omitted) (summarizing Texas law on breach of contract). Failure to prove any element of this cause of action defeats liability for breach. Id.
Further, under the Doctrine of Concurrent Causation, a party seeking contractual damages for an insurer's failure to cover a loss may "recover only that portion of the damage caused solely by the covered peril(s)." Nat'l Union Fire Ins. of Pittsburgh, Pa. v. Puget Plastics Corp. , 735 F. Supp. 2d 650, 669 (S.D. Tex. 2010) (citing Wallis v. United Servs. Auto Ass'n , 2 S.W.3d 300, 302–03 (Tex. App 1999) ). Thus, when "covered and non-covered perils combine.... [f]ailure to provide evidence upon which a jury or court can allocate damages between those that resulted from covered perils and those that did not is fatal to an insured party's claim." Id. The insured party bears the burden of "segregating the damage attributable solely to the covered event." Wallis , 2 S.W.3d at 303. Allocation of loss need not, however, be made with "mathematical precision." Hahn , 2017 WL 1289024, at *8 (citing Wallis , 2 S.W.3d at 304 ). Rather, an insured will be deemed to have met its burden so long as there is "some reasonable basis on which a jury can evaluate what percentage of loss was created by the covered cause of loss." Id.
C. Bad Faith and DTPA Claims
"[In] most circumstances, an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract." Liberty Nat. Fire Ins. Co. v. Akin , 927 S.W.2d 627, 629 (Tex. 1996). Nonetheless, because "insurance coverage claims and bad faith claims are by their nature independent," it is at least possible for a plaintiff to prevail on a bad faith claim without first proving breach of contract. Id. (citing Viles v. Security Nat. Ins. Co. , 788 S.W.2d 566, 567 (Tex. 1990) ). To prove bad faith denial of coverage, a plaintiff must show that "(1) there was an absence of reasonable basis for denying or delaying benefits under the [insurance] policy and (2) the carrier knew or should have known there was not a reasonable basis for denying the claim or delaying payment of the claim." Republic Ins. Co. v. Stoker , 903 S.W.2d 338, 340 (Tex. 1995) (internal citations omitted). This standard is difficult to meet, generally requiring a showing that an insurer engaged in an act "so extreme that it would cause injury independent of the policy claim." Tesoro Refining & Marketing Co., LLC. v. Nat. Union Fire Ins. Co. of Pittsburgh, PA , 96 F. Supp. 3d 638, 652 (W.D. Tex. 2015) (internal citations omitted). Mere negligence in the performance of contractual duties is not enough to prove bad faith. Higginbotham v. State Farm Mut. Auto Ins. Co. , 103 F.3d 456, 460 (5th Cir. 1997) (noting that "Texas law does not recognize a cause of action for negligent claims handling").
The Fifth Circuit applies this same, high standard to "extra-contractual tort claims" like those brought under the DTPA and the Texas Insurance Code. Id. (holding that Insurance Code and DTPA claims "require the same predicate for recovery as bad-faith causes of action"); see Hahn , 2017 WL 1289024, at * 11 (denying DTPA claim where the plaintiff had not shown its claim was denied in bad faith).
Discussion
Plaintiff and Defendant each move for summary judgment on the Cosmetic Damage Exclusion. (Dkts. 33, 45.) Defendant also moves for summary judgment on (1) Plaintiff's breach of contract claim; (2) Plaintiff's bad-faith dealing claim; (3) Plaintiff's DTPA claim; and (4) Plaintiff's claims under the Texas Insurance Code. (Dkt. 45 at 1–2.) The Court addresses each of these claims in turn, beginning with Parties’ cross-motions on the Cosmetic Damage Exclusion. (Dkts. 33, 45.)
A. Cosmetic Damage Exclusion
1. Plaintiff's Motion
In its motion, Plaintiff argues that summary judgment is "mandatory" because Defendant cannot "produce evidence of [an] essential element of its affirmative defense," i.e. of the Cosmetic Damage Exclusion. (Dkt. 33 at 5 (citing TruGreen Landcare, LLC v. Scott , 512 F. Supp. 2d 613, 623 (N.D. Tex. 2007).) According to Plaintiff, Defendant has not only failed to produce evidence in support of the application of the Cosmetic Damage Exclusion but also admitted that the exclusion does not apply. (Dkt. 33 at 6-7.) In support of this assertion, Plaintiff cites notes from Defendant's claims file, in which Defendant's adjustor, Walton, and his supervisor, Ken Kauffman (Kauffman), appear to describe the damage to the Properties as "structural" (i.e. non-cosmetic). (See, e.g., Dkt. 33, Ex. 2 at 4-6 ("Matt [Spiekerman with BSC Forensics] stated that structural damage was found to the polyurethane roof," "Two buildings where metal roofs appear to have damage beyond cosmetic," and "both roofs appear to have sustained structural damage.").) In light of these notes, Plaintiff argues that any evidence Defendant presents in support of the Cosmetic Damage Exclusion would "directly contradict" Defendant's previous findings and is thus "not sufficient to satisfy the specific language of the exclusion." (Dkt. 33 at 7-8.)
In response, Defendant argues that (1) Plaintiff "cherry-picks" and misconstrues the statements in the claim file notes, which were in fact requests for further investigation; (2) Defendant is in no way bound by statements in its claim file; and (3) the claim file notes do not represent final coverage decisions. (Dkt. 42 at 10–19.) In addition to these arguments, Defendant provides the Court with two engineering reports from BSC Forensics (Dkt. 42, Exs. 3–4), a metallurgical analysis of roof panels from the two Properties (Dkt. 42, Ex. 5), an "expert" analysis of its claims process by an external consultant (Dkt. 42, Ex. 2), and declarations by Walton and Kaufmann (Dkt. 42, Ex. 7–8.). The BSC Forensics Reports conclude that the damage sustained at the Properties was cosmetic in nature and/or attributable to causes other than the May 2017 hailstorm (Dkt. 42, Ex. 3 at 10–11; Ex. 4 at 10); the metallurgical analysis finds that the roof panels were unaffected and remain functional (Dkt. 42, Ex. 5 at 18–19); and the consultant declares that Plaintiff's claim was properly handled (Dkt. 42, Ex. 2 at 10–11). For their part, Walton and Kaufman aver that they never intended their statements in the claim file to constitute binding determinations of Plaintiff's rights under the Policy. (Dkt. 42, Ex. 7 at 1; Dkt. 42, Ex. 8 at 2.)
In light of the foregoing, the Court finds that Defendant has produced evidence in support of each element of the Cosmetic Damage Exclusion. While the evidence Plaintiff pulls from the claim file is arguably probative, Plaintiff cites no caselaw to show that a jury would be legally bound to ignore the equally significant expert evidence Defendant presents in support of the exclusion. On the contrary, Texas law makes clear that "conditions ... going to [the scope of] coverage of the policy ... may not be waived by implication" and thus that an insurer is not prevented from asserting a coverage exception merely because it made a statement suggesting coverage might exist. International Ins. Co. v. Jataine , 495 S.W.2d 309, 316 (Tex. App. 1973) (holding that insurer could not be estopped from pleading coverage exclusion); see also Fitzpatrick v. Fire Ins. Exchange , 2000 WL 567101, at *4, 2000 Tex. App. LEXIS 3020, at *11 (Tex. App. May 10, 2000) (noting that "estoppel may not be used to change, enlarge or otherwise rewrite the risks covered by a policy," and holding that the insurer was not estopped from pleading coverage exclusion). Consequently, the Court finds that a jury must be allowed to weigh Defendant's evidence in support of the exclusion against the evidence Plaintiff pulls from the claim file.
Moreover, the Court finds that a reasonable jury could find the conclusions in Defendant's expert reports and declarations more credible than Plaintiff's claim file excerpts. Accordingly, Plaintiff has not shown that Defendant's affirmative defense presents no genuine issue of material fact. See Fed. R. Civ. P. 56(a).
2. Defendant's Motion
Like Plaintiff, Defendant believes it is entitled to summary judgment on the issue of cosmetic damage. In support of its motion, Defendant argues that "the only legally admissible sources of causation evidence [on the issue of cosmetic damage] are [Defendant's] experts" and cites the reports described in the preceding section. (Dkt. 45 at 7.) When Defendant wrote these words, its position may have been defensible. At present, however, Defendant's claim is belied by the record. In opposition to Defendant's request for summary judgment on the Cosmetic Damage Exclusion, Plaintiff restates its evidence from the claim file and submits the testimony of two experts: Thomas Irmiter, a contractor, consultant and building code official, and Robert Hinojosa, a professional engineer and registered roof consultant. (Dkt. 48, Exs. 2, 2A 2B, 2C, 33A.) In their jointly prepared reports on the Properties (Dkt. 48, Exs. 2B (Report for 442 Logistic), 2C (Report for 301 Flecha)), Irmiter and Hinojosa conclude "based on weather research and an inspection of the building[s] themselves," that "damage on the roof[s] was consistent" with hail damage, and "both hail and wind damage were found on the roof." (Dkt. 48, Ex. 2B at 13–16; Dkt. 48, Ex. 2C at 14-17; see also Dkt. 48, Ex. 2 at 4, 6 and Ex. 3 at 5–7.) Specifically, they assert that winds from the May 2017 storm "exceeded the design of the roof and wall cladding components" at the Flecha Lane location, and that hail caused leaks at the Logistics Drive location. (Id. )
Defendant has previously challenged the admission of Irmiter and Hinojosa's reports into evidence. (Dkt. 44.) On November 15, 2019, the Court overruled the bulk of Defendant's objections and admitted their testimony. (Dkt. 82.) The Court will therefore consider Irmiter and Hinojosa's testimony for purposes of summary judgment. It will not, however, consider the excluded portions of the testimony, which relate to (1) the issue of premature corrosion and (2) the definition of "damage." (See Dkt. 82 at 11–13.)
The Court cannot say at this stage whether Plaintiff or Defendant's experts make the better case. To do so would require the Court to make credibility determinations, something it is explicitly forbidden from doing on summary judgment. See Sanderson Plumbing Prods. , 530 U.S. at 150, 120 S.Ct. 2097. Nonetheless, it is clear that Plaintiff's arguments raise more than a "metaphysical doubt" about the cosmetic nature of the damage to its Properties, and that Irmiter and Hinojosa's reports contain more than a "scintilla of evidence." JP Morgan Chase Bank, 413 F. App'x at 767. Accordingly, the Court must deny Defendant's request for summary judgment on the Cosmetic Damage Exclusion.
B. Breach of Contract and Allocation of Loss
Defendant makes two arguments in support of its request for summary judgment on Plaintiff's breach of contract claim. First, Defendant argues that it did not breach the Policy because it correctly denied coverage based on the Cosmetic Damage Exclusion. (Dkt. 45 at 1.) Second, Defendant argues that Plaintiff fails to state a claim under the Policy because Plaintiff cannot allocate between covered and noncovered damages. (Dkt. 45 at 10.) Because the Court has already found that the Cosmetic Damage Exclusion presents a triable issue, the Court addresses only Defendant's second argument.
In support of its request for summary judgment, Defendant cites evidence showing that multiple storms occurred in the vicinity of the Properties during the Policy Period. (Dkt. 45 at 1.) It also cites excerpts from its BSC Forensics Reports, which attribute the damage to Plaintiff's Properties to (1) mechanical damage, (2) wear and tear, and (3) deficient installation and maintenance. (Dkt. 45 at 11, Ex. 5 at 10-11 and Ex.6 at 9.) Defendant then asserts that Plaintiff has provided no evidence that would allow a jury to allocate damages among these three causes and the May 2017 hailstorm, thereby defeating its claim. (Id. at 11.) See Hamilton Properties v. Am. Ins. Co. , 643 F. App'x 437, 442 (5th Cir. 2016) (finding no breach of contract where plaintiff "[pointed] to no evidence describing or quantifying hailstorm damage" during the covered period).
In response, Plaintiff argues that (1) it has introduced evidence that a storm occurred and caused at least some damage to the Properties, and (2) this showing is sufficient to transform allocation into a triable issue of fact. (Dkt. 48 at 15.) See Presswood v. Allstate Vehicle & Prop. Ins. Co. , 2017 WL 7051074, at *4, 2017 U.S. Dist. LEXIS 145712, at *10 (E.D. Tex. August 11, 2017) ("Courts have recognized that allocation is almost always a fact question; it is only where the insured cannot produce any evidence at all with regard to allocation that [the insured's] claims are subject to judgment as a matter of law on that basis."). The Court agrees with Plaintiff that judgment on the allocation issue would be premature. (See Dkt. 48 at 19.) Though Plaintiff has the burden to prove that allocation is possible, this burden is a light one, which Plaintiff may meet using either circumstantial evidence or expert testimony. Presswood , 2017 WL 7051074, at *4-5, 2017 U.S. Dist. LEXIS 145712, at *11–12 (denying summary judgment on allocation because the plaintiff's expert found that portion of loss was covered); Lyons v. Millers Cas. Ins. Co. of Tex. , 866 S.W.2d 597, 600–01 (Tex. 1966) (relying on "testimony of neighbors" and other circumstantial evidence to show allocation). Simply put, there is no requirement that Plaintiff allocate its damages with "mathematical precision" so long as there is some evidence to show that a particular "peril" caused damage. Hahn , 2017 WL 1289024, at *8.
Here, Plaintiff has provided both circumstantial evidence and expert testimony to show that the storm caused damage. Specifically, Plaintiff submits the testimony of Irmiter and Hinojosa, who declare that they "considered the other potential causes [of damage] raised by the consultants for the insurance company and ruled them out," concluding instead that the May 2017 hailstorm caused damage. (Dkt. 48, Ex. 2 at 8; Dkt. 48, Ex. 3 at 6.) Plaintiff also submits a declaration from the Properties’ owner, Juan Ruiz, who claims he observed roof damage one day after the hailstorm that was not visible before the storm. (Dkt. 48, Ex. 1 at 2.) Because a jury could reasonably conclude based on this evidence that some—or even all—of the damage caused to Plaintiff's Properties occurred due to the May 2017 hailstorm, the Court finds that Plaintiff has presented evidence sufficient to allow a jury to allocate damages among the May 2017 hailstorm and the other causes Defendant cites. Accordingly, Defendant's request for summary judgment on allocation and breach of contract must be denied.
For the sake of completeness, the Court notes that Hamilton Properties , 643 F. App'x at 437, is distinguishable from the present case. In Hamilton Properties , the plaintiff attempted to allocate losses based on an inspection conducted four years after the storm event in question. Id. at 441–442. Accordingly, the court there did not find the testimony of his experts credible. Id. Here, by contrast, Declarant Juan Ruiz avers that he visited the Properties shortly after the May 2017 hailstorm (see Dkt. 48, Ex. 1), and the Court has explicitly ruled that Irmiter and Hinojosa's testimony is "based on sufficient facts and data, [is] sufficiently reliable and [is] admissible." (Dkt. 82 at 10.) Accordingly, the Court finds that Plaintiff's evidence, unlike the evidence tendered in Hamilton Properties , is sufficient to raise a triable issue of fact.
C. Bad Faith and Statutory Claims
Defendant makes three arguments in support of its request for summary judgment on Plaintiff's bad-faith and statutory claims. First, it argues that it cannot be found liable on any of these claims because it did not violate the terms of the Policy. (Dkt. 45 at 12.) In the alternative, it argues that its disagreement with Plaintiff is a "bona-fide coverage dispute" that cannot support a finding of bad-faith. (Dkt. 45 at 13-14.) See State Farm Fire & Cas. Co. v. Simmons , 963 S.W.2d 42, 44 (Tex. 1998). Finally, Defendant argues that there is no evidence that it violated the Texas Insurance Code, let alone that it did so "knowingly." (Dkt. 45 at 15.) Because the Court finds that Plaintiff's breach of contract claim presents a triable issue of fact, only Defendant's second and third arguments are addressed below.
To show bad faith, Plaintiff must demonstrate that "(1) there was an absence of reasonable basis for denying or delaying payment of benefits under the [insurance] policy and (2) the carrier knew or should have known there was not a reasonable basis for denying the claim or delaying payment of the claim." Stoker , 903 S.W.2d at 340. Defendant argues that (1) its claims investigation and expert reports provide a reasonable basis for denial, and (2) assuming its denial of coverage lacked justification, it had no reason to know that this was the case. (Dkt. 45 at 14-16.) In response, Plaintiff argues that Defendant's expert reports do not furnish a reasonable basis because they appear to contradict the notes in Defendant's claim file (see Dkt. 48; see also Dkt. 33, Ex. 2 at 4, 6) and must therefore have been "formulated afterwards as the basis for creating a ‘bona fide coverage dispute.’ " (Dkt. 48 at 25.) Plaintiff also introduces the testimony of Stephen Strzelec, a "claims practices expert," who opines that "[Defendant] ... failed to meet minimum industry standards" because the denial of Plaintiff's claim was done "prior to the completion of a reasonable investigation" and instead "was based in part on assumptions, speculation and conjecture," and "was incomplete, improper and failed to deny specific damages based on specific exclusions and/or limitation[.]" (Dkt. 48, Ex. 4 at 34.)
To the extent that Plaintiff's argument relies on the discrepancy between the claim file and Defendant's expert reports, the Court finds it unpersuasive. As noted above, Defendant is not estopped from denying coverage merely because a note in its claim file supports a finding that the damage to Plaintiff's property should be covered. Accordingly, the Court will not base a finding of bad faith on Defendant's choice to commission additional expert reports before reaching a final coverage decision. On the contrary, the Court notes that Defendant's decision to consult with additional experts before making a final coverage decision speaks to the thoroughness of its investigation. See Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co. , 801 F.3d 512, 527 (5th Cir. 2015) (noting that insurer's retention of expert "to take a second look [at coverage decision] .... demonstrates an effort on [insurer's] part to obtain an expert opinion on a complicated coverage issue").
Moreover, Strzelec's testimony does nothing to alter the Court's conclusion on this point. In his report (Dkt. 48, Ex. 4), Strzelec states that Defendant should not have relied on the BSC Forensics engineering report:
[The claim file's summary of the] engineer report [from BSC Forensics] is a red flag to management that the claim is not being reasonably evaluated. The engineer report does make assumptions that the interior leaks are not caused by a covered peril, but does not provide discussion as to what other cause would have resulted in the leaks right after the wind/hail event. Further, the report does not address any reduction of life of the roof as damage.
(Id. at 19.) While not improper, this opinion comes dangerously close to merely restating Plaintiff's argument that Defendant's expert reports are less credible than the statements in the claim file. See Robroy Indus.—Tex., LLC. v. Thomas & Betts Corp. , 2017 WL 1319553, at *10 (E.D. Tex. Apr. 10, 2017) (noting that expert testimony should not merely restate exhibits already in the record and become "a vehicle through whom the party can summarize its case for the jury, with the imprimatur of an expert"). Here, although Strzelec's declaration runs 35 pages, the majority of the document is merely a timeline and restatement of the claims process. In his limited analysis, Strzelec relies on conclusory assertions that engineers "clearly" attempted to assist Defendant (Dkt. 48, Ex. 4 at 15) and that "it is clear" that Defendant engaged in bad faith conduct. (Id. at 34).
Yet Strzelec's summary at times contradicts his conclusions that the denial constituted bad faith because it was premature and not adequately justified. Strzelec's summary, instead, shows that Defendant made the claim determination based on expert engineering reports, which concluded some damage was cosmetic and other damage was traceable to other causes. (Id. at 9-14). For example, one report attributed some of the ceiling damage at 301 Flecha Lane to improper installation, air conditioner operation, aging, and improper support. (Id. at 10-11). Strzelec's summary also shows that Defendant, at times, acted against its own interest "based off" the engineering reports that Strzelec seeks to discredit. (Id. at 18) ("My reasoning for the temporary repairs was based off the engineers recommendation to mitigate additional water damage.").
Just as importantly, Strzelec's report appears to concede that Defendant did, in fact, respond to the alleged "red flag" Strzelec identifies. (Dkt. 48, Ex. 4 at 19.) In his report, Strzelec cites claim file notes indicating that Defendant made its engineering expert available to Plaintiff's public claim adjustor "to discuss damage," but that the public adjustor's engineer failed to attend the meeting. (Id. at 27.) Although the Court draws no inferences from either Party's conduct at this meeting—which allegedly occurred on April 6, 2018—the Court does find that Defendant's willingness to produce its engineer for a meeting with Plaintiff's public adjustor is at least some evidence of an attempt to discuss Plaintiff's concerns before reaching a final claim decision. (Id. ) The report also notes that Defendant sought access to Plaintiff's property in order to acquire roof samples for a metallurgical examination, further undermining Strzelec's claim that Defendant failed to respond adequately to his "red flags." (See Dkt. 48, Ex. 8 at 27-29.)
Finally, even if the Court were to interpret Strzelec's conclusions as Plaintiff wishes, his report would prove only that Defendant should have conducted further investigation of Plaintiff's claim. Such evidence may be used to show that Defendant's denial of Plaintiff's claim was premature and thus potentially incorrect. It does not , however, show "the omission in [Defendant's experts’] investigation is of such magnitude as to affirmatively cast doubt on the insurer's basis for denial." Thompson v. Zurich Am. Ins. Co. , 664 F.3d 62, 68 (5th Cir. 2011) (granting summary judgment for insurer on bad-faith claim). On the contrary, the Court previously determined that Strzelec's report was admissible in part because it addressed only Defendant's response to its engineers’ findings, not the accuracy of the engineers’ underlying conclusions. (Dkt. 82 at 6 (explaining that "[the] Court does not interpret Strzelec's opinions as attempting to provide engineering opinions").) His testimony cannot now be used to establish that Defendant was actually wrong to rely on the conclusions in its expert reports, let alone that Defendant knew its experts were unreliable and endorsed their conclusions in bad faith. See Higginbotham , 103 F.3d at 460 (holding that "Texas law does not recognize a cause of action for negligent claims handling").
In light of the foregoing, the Court finds that Plaintiff has submitted at most a "scintilla of evidence" to show that Defendant's reliance on its expert reports was inherently "unreasonable," and thus that it acted in bad-faith by relying on them. See Stoker , 903 S.W.2d at 340. Defendant's request for summary judgment on Plaintiff's claim of bad faith must therefore be granted.
Further, the Court's grant of summary judgment on Plaintiff's bad-faith claim compels a grant of summary judgment on Plaintiff's DTPA and Texas Insurance Code claims as well. See Higginbotham , 103 F.3d at 460 (holding that DTPA and Texas Insurance Code claim require a showing of bad faith as a "predicate for recovery"); Hahn , 2017 WL 1289024, at * 11 (denying DTPA and Insurance Code claims where the plaintiff could not show bad faith). As explained above, neither Plaintiff's unpersuasive "claim-file estoppel" argument nor Strzelec's minimal analysis provide a sufficient basis for a jury to find that Defendant "knew" its experts’ analyses were false and relied on them in bad faith. Accordingly, the Court finds that Plaintiff has not presented evidence sufficient to raise an issue of material fact as to whether Defendant (1) "knew or should have known that there was no reasonable basis for denial," or (2) purposefully conducted a "pretextual" investigation of Plaintiff's claim. See Tesoro Refining & Marketing Co. , 96 F. Supp. 3d at 652. Thus, even if Defendant's denial of Plaintiff's claim was incorrect, there is "no genuine dispute of material fact as to whether there was a reasonable basis for the denial" and consequently, no extra-contractual recovery. Hahn , 2017 WL 1289024, at * 11. Defendant's motion for summary judgment on Plaintiff's DTPA and Texas Insurance Code claims is therefore granted.
To the contrary, the record reflects that Defendant commissioned expert reports, visited the property and attempted to meet with Plaintiff. (See e.g. , Dkt. 45 at 3–4; Dkt. 45, Exs. 4–5, 7; Dkt. 48, Ex. 4 at 19.) Aside from Strzelec superficial analysis, which merely summarizes the differences between Parties’ experts’ positions, Plaintiff fails to provide evidence that Defendant "ignored information that would have rendered liability for the claim reasonably clear". See Tesoro Refining & Marketing Co. , 96 F. Supp. 3d at 652. As explained above, the claim-file note has no legal effect on Defendant's right to contest coverage, so the Court cannot say that the its mere existence renders liability "reasonably clear." See generally Jataine , 495 S.W.2d at 316. Rather, the Court's analysis of the breach of contract issue shows that the fact and extent of Defendant's liability under the Policy is credibly disputed. Finally, Defendant's investigation is not an act "so extreme that it would cause injury independent of the policy [denial]," and therefore not a freestanding basis for extra-contractual recovery. See Tesoro Refining & Marketing Co. , 96 F. Supp. 3d at 652.
Conclusion
For the foregoing reasons, the Court finds that (1) both Plaintiff's breach of contract claim and Defendant's affirmative defense of Cosmetic Damage Exclusion raise genuine issues of material fact, (2) Defendant's denial of Plaintiff's insurance claim was not in bad faith, and (3) Plaintiff's extracontractual and statutory claims fail in light of Defendant's good faith denial and the existence of a genuine dispute regarding Defendant's contractual liability. Accordingly, Plaintiff's "Partial Motion for Summary Judgment on Defendant's Affirmative Defense of Cosmetic Damage Exclusion" (Dkt. 33) is hereby DENIED, while Defendant's "First Motion for Summary Judgment Against Plaintiff" (Dkt. 45) is GRANTED IN PART and DENIED IN PART. Specifically, Defendant's motion (Dkt. 45) is DENIED as to Count 4 of Plaintiff's Complaint (Dkt. 1) but GRANTED as to the remaining counts (1, 2, 3, 5, 6 and 7).
IT IS SO ORDERED.