Summary
finding that insurance claim adjuster's failure to personally scale roof and reliance on an expert's personal observations of roof damages is not detrimental to the investigation of insured's insurance claims nor to the reasonable basis for the insurer's decisions on those claims
Summary of this case from Jajou v. Safeco Ins. Co. of Ind.Opinion
Civil Action No. 3:19-cv-00786-M
04-02-2020
GREENVILLE TOWNHOME OWNERS ASSOCIATION, INC., Plaintiff, v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.
Andrew Amberg Woellner, Michael John Bins, The Potts Law Firm LLP, Houston, TX, for Plaintiff. Stephen A. Melendi, Matthew Patrick Rigney, Tollefson Bradley Mitchell & Melendi LLP, Dallas, TX, Allison Hooker, Andrew J. Mihalick, Mayer LLP, Houston, TX, William R. Pilat, Mayer LLP, for Defendant.
Andrew Amberg Woellner, Michael John Bins, The Potts Law Firm LLP, Houston, TX, for Plaintiff.
Stephen A. Melendi, Matthew Patrick Rigney, Tollefson Bradley Mitchell & Melendi LLP, Dallas, TX, Allison Hooker, Andrew J. Mihalick, Mayer LLP, Houston, TX, William R. Pilat, Mayer LLP, for Defendant.
ORDER
BARBARA M. G. LYNN, CHIEF JUDGE
Before the Court is Defendant's Motion for Partial Summary Judgment. [ECF No. 18]. Defendant seeks summary judgment on Plaintiff's claims for violations of the duty of good faith and fair dealing and Texas Insurance Code § 541.060(a). For the following reasons, the Motion is GRANTED IN PART .
I. Factual Background
Plaintiff, Greenville Townhome Owners Association, Inc., is a homeowners association for three condominium buildings insured by Defendant, Philadelphia Indemnity Insurance Company. Plaintiff filed two insurance claims with Defendant for roof damage to one of its buildings. It first filed a claim for wind and hail damage that occurred on June 9, 2015. Defendant assigned the claim to an independent claims adjuster, Paul Prichard. Prichard inspected the roof damage from the ground, reviewed the invoices supplied by Plaintiff for the repairs, and analyzed the relevant weather reports. Prichard determined that there were some hail-related dents to the roof and a few shingles had slid out of position due to improper installation. Prichard prepared an estimate of the covered damages based on his assessment and requested authorization to hire an engineering firm.
With Defendant's authorization, Prichard hired Haag Engineering to inspect the roofs. Haag determined that there was some hail damage to metal surfaces on the roof, but that neither wind nor hail had damaged any of the shingles. Haag identified one torn shingle, but based on its weathering, concluded that the damage was not recent. Prichard then sent Defendant an estimate of $17,629.74 in covered damages, for which Defendant paid Plaintiff $2,629.74 after the $15,000 policy deductible.
Plaintiff hired a public adjusting company, which determined that Plaintiff had suffered wind damage on either June 27, 2016 or August 12, 2016, and Defendant opened a new claim for wind damage on August 12, 2016. Haag then re-inspected the property and issued a second report. Similar to the first report, Haag found that "[w]ind had not creased, torn, or removed any laminated field shingles on the roof" and that the one "torn shingle was weathered, indicating that the tear had occurred prior to August 12, 2016." [Motion Appx., ECF No. 19-1 at 1442]. Defendant notified Plaintiff that the amount of their covered loss for the August 12, 2016 claim was less than the policy deductible. Plaintiff's public adjusting company then provided Haag new weather information. Haag prepared a third report, confirming that its findings did not need to be amended in light of the new weather data. Defendant offered to send a new engineer to evaluate the roof, but there is no evidence that Plaintiff responded to the offer.
Plaintiff then brought this action alleging claims of breach of contract and violations of the duty of good faith and fair dealing and the Texas Insurance Code related to the August 12, 2016 insurance claim. Following the filing of this action, Plaintiff invoked the appraisal provision of its insurance policy.
II. Legal Standard
Summary judgment is proper when there is no genuine issue of material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Once the movant meets its initial burden to show that there is no genuine issue of material fact, the burden shifts to the nonmoving party to produce competent evidence showing the existence of a genuine issue for trial. Celotex Corp. v. Catrett , 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "When the summary judgment movant will not have the burden of proof on a claim at trial, it can obtain summary judgment by pointing the court to the absence of evidence on any essential element of the nonmovant's claim." Nunn v. State Farm Mut. Auto. Ins. Co. , 729 F. Supp. 2d 801, 805 (N.D. Tex. 2010). A court must view all evidence in the light most favorable to the party opposing the motion. Applied Med. Res. Corp. v. U.S. Surgical Corp. , 448 F.3d 1324, 1331 (Fed. Cir. 2006).
III. Appraisal
Under the terms of Plaintiff's insurance policy, the parties may invoke an appraisal process by which both parties may have an appraiser assess the claimed property damage and submit their appraisals to an umpire for a determination of the value of the insurance claim. [Response Appx., ECF No. 22-1 at 1]. Following the commencement of this action, Plaintiff invoked the appraisal provision. [Id. ] Plaintiff represents that, as of the filing of its Response, the parties were awaiting the decision of the umpire. [Response, ECF No. 22 at 4]. While Plaintiff argues that the Court's decision on Defendant's Motion should be abated in light of the pending appraisal process, Plaintiff represents that it "will be moving to formally abate the matter until the rendering of the umpire's decision." [Id. ] Plaintiff has not yet done so. Therefore, the Court will proceed with deciding Defendant's Motion, and consider whether to abate or stay this matter if Plaintiff moves for such relief.
IV. The Duty of Good Faith and Fair Dealing
An insurer who denies a claim violates the duty of good faith and fair dealing if there is "no reasonable basis for denial of a claim." Arnold v. Nat'l Cty. Mut. Fire Ins. Co. , 725 S.W.2d 165, 167 (Tex. 1987), holding modified on other grounds by Murray v. San Jacinto Agency, Inc. , 800 S.W.2d 826 (Tex. 1990). An insurer has a reasonable basis to deny an insurance claim if there is a "bona fide coverage dispute" over the claim. Provident Am. Ins. Co. v. Castaneda , 988 S.W.2d 189, 194 (Tex. 1998).
An insurer's reliance on an expert may create a reasonable basis for the insurer to deny an insurance claim. See Lyons v. Millers Cas. Ins. Co. of Texas , 866 S.W.2d 597, 601 (Tex. 1993). However, an "insurer's reliance upon an expert's report, standing alone, will not necessarily shield the carrier if there is evidence that the report was not objectively prepared or the insurer's reliance on the report was unreasonable." State Farm Lloyds v. Nicolau , 951 S.W.2d 444, 448 (Tex. 1997). Thus, "a biased investigation intended to construct a pretextual basis for denial" cannot constitute a reasonable basis to deny a claim. State Farm Fire & Cas. Co. v. Simmons , 963 S.W.2d 42, 44–45 (Tex. 1998).
It is undisputed that Defendant and Prichard retained Haag to inspect the property with respect to Plaintiff's two insurance claims. Plaintiff argues that Defendant and Prichard's reliance on Haag cannot be credited because Haag did not conduct a reasonable investigation, and instead, facilitated "an outcome-oriented adjustment." [Response at 5]. Plaintiff first argues that Prichard's inspection was inadequate because he never went on the roof. While Prichard only inspected the roof from the ground [Motion Appx. at 700], the Haag engineer climbed onto the roof during his inspections. [Id. at 587–88, 1440–41]. Prichard's failure to personally scale the roof is not detrimental to the investigation of Plaintiff's insurance claims nor to the reasonable basis for Defendant's decisions on those claims.
Although only the August 12, 2016 insurance claim is the basis of Plaintiff's causes of action, the Court will also consider Defendant's adjustment of the June 9, 2015 claim, given that the evaluations of both insurance claims formed a single larger course of conduct.
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Plaintiff further argues that an alleged discrepancy between the timing of Prichard's estimate of the value of the June 9, 2015 insurance claim and Haag's evaluation of the roof demonstrates that Haag's efforts were merely pretextual and not actually relied upon by Defendant or Prichard. Haag's first report is dated March 1, 2017. [Id. at 585]. On March 10, 2017, Prichard then emailed his estimate of the value of the June 9, 2015 claim based on Haag's first report. [Id. at 568]. Plaintiff argues, however, that Prichard's estimate was actually prepared on November 23, 2016, prior to him receiving Haag's first report.
While Plaintiff does not explain the basis for its assertion that the estimate was prepared on November 23, 2016, the estimate that Prichard sent to Defendant was marked: "Date Entered: 11/23/2016 10:19 AM." [Id. at 570]. It is unknown if the "Date Entered" is the date that the estimate was prepared, but even if it is, that date does not evidence that Haag was merely engaging in a biased and pretextual investigation that Prichard and Defendant did not intend to use. When Prichard first inspected the property, prior to Haag's first report, his "preliminary estimate" was that there was $88,447.08 in damages. [Id. at 700]. Following Haag's first report, Prichard advised Defendant that his "revised estimate" was $17,269.74. [Id. at 562]. The estimate includes line items for covered damages, but they are not numbered sequentially (4, 5, and 13). [Id. 571]. This evidence appears to indicate that Prichard prepared his initial estimate following his inspection, and then modified it by deleting those items that he believed were not covered in light of Haag's findings. This is supported by Prichard's email to Defendant, in which he explained that his estimate was "based on the scope for the hail damage based on the report from Haag Engineering." [Motion Appx. at 568]. Thus, even when making all reasonable inferences in favor of Plaintiff, the mere discrepancy in timing does not create a genuine issue of material fact as to whether Haag's inspection was a pretextual exercise that was not reasonably relied upon.
Finally, Plaintiff argues that Defendant failed to reasonably rely on Haag's assessment by ignoring Haag's conclusions of wind damage until raised by Plaintiff's public adjuster. In its first report, HAAG explained that "[w]ind has not creased, torn, or removed the laminated shingles on the roofs" and that one "torn shingle was weathered, and the tear had not happened recently." [Id. at 589]. Defendant explained these findings in its letter to Plaintiff delivering its claim determination. [Id. at 563]. After Plaintiff's public adjuster disagreed with Defendant's adjustment, Haag reinspected the roof. It came to the same conclusion that "[w]ind had not creased, torn, or removed any laminated field shingles on the roof" and that the one "torn shingle was weathered, indicating that the tear had occurred prior to August 12, 2016." [Id. at 1442]. Defendant sent two letters to Plaintiff that reiterated these findings and denying the claim as under the deductible. [Id. at 960]. In those two letters, Defendant nevertheless included the cost to replace the single worn shingle as "covered damages" in its estimate of the insurance claim value. [Id. at 960–61, 1571–72].
Given that both the first and second Haag reports found that the minimal wind damage to Plaintiff's roof was not recent, Defendant did not ignore Haag's findings by not including any wind damage when it adjusted Plaintiff's June 9, 2015 insurance claim. It is unknown why Defendant chose to cover the wind-damaged shingle when adjusting Plaintiff's August 12, 2016 insurance claim, despite Haag's finding that it had occurred prior to the claim date. However, Defendant's choice to ignore its expert for the benefit of Plaintiff does not demonstrate that it was using its expert in bad faith as a "pretextual basis for denial."
Defendant has established that it relied on the findings of Haag to adjust Plaintiff's August 12, 2016 insurance claim. Plaintiff has provided insufficient evidence to establish a genuine issue of material fact as to whether Haag engaged in a biased evaluation or Defendant and Prichard unreasonably relied on Haag's conclusions. See Lyons , 866 S.W.2d at 601 (finding no bad faith when the plaintiff "offered no evidence that the reports of [the insurer's] experts were not objectively prepared, or that [the insurer's] reliance on them was unreasonable, or any other evidence from which a factfinder could infer that [the insurer] acted without a reasonable basis and that it knew or should have known that it lacked a reasonable basis for its actions."); see also Richardson E. Baptist Church v. Philadelphia Indem. Ins. Co. , No. 05-14-01491-CV, 2016 WL 1242480, at *11 (Tex. App.—Dallas Mar. 30, 2016, pet. denied) ("There is no evidence in the record that Philadelphia Indemnity should have known its experts' estimations were inaccurate."). Accordingly, no reasonable juror could find that Defendant did not have any reasonable basis to deny Plaintiff's August 12, 2016 insurance claim, and Defendant's Motion for Summary Judgment on Plaintiff's claim for breach of the duty of good faith and fair dealing is GRANTED .
V. Violations of the Texas Insurance Code
Defendant also seeks summary judgment on Plaintiff's claims of unfair settlement practices under Texas Insurance Code § 541.060(a). Plaintiff asserts that Defendant engaged in various unfair settlement practices, including misrepresenting material facts relating to coverage under § 541.060(a)(1) ; failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of the insurance claim under § 541.060(a)(2)(A) ; failing to promptly provide Plaintiff with a reasonable explanation of the basis in the policy for its decision on the insurance claim under § 541.060(a)(3) ; failing within a reasonable time to affirm or deny coverage of the claim or submit a reservation of rights under § 541.060(a)(4) ; and refusing to pay a claim without conducting a reasonable investigation under § 541.060(a)(7). Defendant seeks summary judgment on all of these claims, arguing that the failure of Plaintiff's bad faith claim necessarily means that Plaintiff cannot sustain its claims under § 541(a).
As with a bad faith claim, a reasonable basis for denying an insurance claim may also be a defense to tort claims under the Texas Insurance Code. Emmert v. Progressive Cty. Mut. Ins. Co. , 882 S.W.2d 32, 36 (Tex. App.—Tyler 1994, writ denied). "The insurer ‘will not be faced with a tort suit [under the Texas Insurance Code] for challenging a claim of coverage if there was any reasonable basis for denial of that coverage.’ " Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co. , 801 F.3d 512, 525 (5th Cir. 2015). However, "the extracontractual claim must share ‘the same predicate for recovery as bad faith causes of action in Texas.’ " Hall Arts Ctr. Office, LLC v. Hanover Ins. Co. , 327 F. Supp. 3d 979, 1000 (N.D. Tex. 2018). The claim must be "based on the same theory which underlies the bad faith claim." State Farm Fire & Cas. Co. v. Woods , 925 F. Supp. 1174, 1180 (E.D. Tex. 1996), aff'd , 129 F.3d 607 (5th Cir. 1997).
Plaintiff's theory of liability for its bad faith claim is that Defendant failed to adequately and reasonably investigate and evaluate Plaintiff's August 12, 2016 insurance claim before denying it. This theory forms the same basis for Plaintiff's claims for failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement under § 541.060(a)(2)(A) and refusing to pay Plaintiff's insurance claim without conducting a reasonable investigation under § 541.060(a)(7). However, that theory is unrelated to Plaintiff's remaining statutory claims regarding misrepresentation of material facts relating to coverage, failing to promptly provide a reasonable explanation for the offer on the claim, and failing within a reasonable time to affirm or deny coverage of the claim or submit a reservation of rights. See Hall Arts Ctr. Office, LLC , 327 F. Supp. 3d at 1000 ("[I]t is not apparent that [the insurer's] reasonable basis for denying [the plaintiff's] claim automatically absolves it of liability regarding the promptness of making a determination.").
Defendant also argues that Plaintiff's extracontractual claims should be dismissed because they "do not extend beyond the parties' coverage dispute" and are "based solely on unpaid insurance benefits, rather than on some independent injury." [Motion Brief, ECF No. 19 at 17–18]. However, as explained above, Plaintiff's claims under the Texas Insurance Code that do not share the same theory of liability as Plaintiff's bad faith claim are unrelated to an allegedly incorrect coverage determination and are instead related to other claimed improper practices related to the settlement process.
For the same reasons that the Court has granted Defendant's Motion with respect to Plaintiff's bad faith claims, Defendant's Motion is also GRANTED with respect to Plaintiff's claims under Texas Insurance Code §§ 541.060(a)(2)(A) and (a)(7), but DENIED with respect to Plaintiff's remaining statutory claims.
VI. Conclusion
For the foregoing reasons, Defendant's Motion for Summary Judgment is GRANTED with respect to Plaintiff's claims for violations of the duty of good faith and fair dealing and Texas Insurance Code §§ 541.060(a)(2)(A) and (a)(7), and these claims are DISMISSED WITH PREJUDICE . The Motion is DENIED with respect to Plaintiff's remaining claims under Texas Insurance Code § 541.060(a).