Charles R. Allen and Julie L. Allen v. State Farm Lloyds
05-16-00108-CV
| Tex. App. | Aug 1, 2017Background
- Charles and Julie Allen owned a 2005 pier-and-beam home; in late 2009 two underground plumbing leaks (about two months apart) released ~244,000 gallons of water onto the lot. The Allens later observed foundation settlement and interior/exterior cracking concentrated at the southwest corner.
- The Allens had homeowners endorsements: a Dwelling Foundation Endorsement (covers foundation movement caused by covered perils) and a Water Damage Endorsement (covers "deterioration, wet rot or dry rot" caused by continuous or repeated seepage/leakage from plumbing).
- State Farm’s engineer (Richards) inspected ~2 months after repairs and concluded rain, not the leaks, caused crawl-space flooding and foundation movement; he noted yard grading and soil characteristics in support. State Farm denied the claim.
- The Allens presented three experts (Foose, Witherspoon, Mansour) who opined the leaks could have delivered water into the crawl space (via the loosely compacted plumbing trench and hydrostatic pressure) and that moisture-related deterioration occurred; homeowners and adjuster testimony also conflicted on causation and the adequacy of the insurer’s investigation.
- After trial the court granted State Farm multiple directed verdicts and entered a take-nothing judgment. On appeal the Fifth Court of Appeals affirmed only the dismissal of the §541.060(a)(3) (failure to provide reasonable explanation) claim, reversed other rulings (including directed verdicts on coverage and certain statutory claims), modified a pretrial summary judgment about a 15% cap, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Coverage under Dwelling Foundation Endorsement (causation) | Leak water entered crawl space (via trench/hydrostatic pressure) and caused foundation movement; experts provided non-conclusory reasons. | State Farm argued expert opinions were conclusory/speculative and rain (non-covered peril) caused the loss. | Reversed directed verdict — evidence raised fact issue on causation; experts had sufficient bases. |
| Coverage under Water Damage Endorsement ("deterioration", "continuous/repeated") | Two separate leaks constitute "repeated" seepage and experts showed humidity/rot/deterioration caused by standing water. | State Farm argued not continuous/repeated or long-term deterioration; damages were from foundation movement not water deterioration. | Reversed directed verdict — jury question exists; reasonable interpretation supports coverage for deterioration from repeated leaks. |
| Pretrial 15% liability cap interpretation | Allens: 15% cap applies only to Dwelling Foundation Endorsement, not total recovery under all endorsements. | State Farm: summary judgment limited Allens’ total recovery to 15% of dwelling coverage. | Modified: cap applies to Dwelling Foundation Endorsement only; summary judgment otherwise improperly limited total recovery. |
| Extra-contractual claims under Tex. Ins. Code (reasonable investigation; prompt/fair settlement; reasonable explanation; knowing violation) | Allens: State Farm failed reasonable investigation and settlement duties; denial lacked reasonable basis and was based on inadequate investigation; knowing violation triable. | State Farm: argued liability never reasonably clear; no independent injury for statutory claims; summary judgment that violations not knowing. | Court: reversed directed verdict on unreasonable investigation and prompt/fair settlement subclaim (fact issues exist); affirmed dismissal of §541.060(a)(3) (reasonable explanation) because Allens failed to show causation/damages from that failure; reversed summary judgment on "knowing" state of mind (fact issue). |
Key Cases Cited
- King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (benchmarks for when fact issues preclude directed verdict)
- JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) (insurer bears burden to prove anti-concurrent-causation exclusion applies)
- Dallas County v. Crestview Corners Car Wash, 370 S.W.3d 25 (Tex. 2012) (conclusory expert opinions are legally insufficient)
- Rogers v. Zanetti, 518 S.W.3d 394 (Tex. 2017) (expert opinion must answer "why" to be non-conclusory)
- Elizondo v. Krist, 415 S.W.3d 259 (Tex. 2013) (standards for admissible expert bases)
- Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) (expert testimony foundations)
- Crisp v. Security National Ins. Co., 369 S.W.2d 326 (Tex. 1963) (distinguishing contractual measure of damages from limitation on insurer liability)
- Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008) (construction of policy limitations against insurer)
- Nautilus Ins. Co. v. Steinberg, 316 S.W.3d 752 (Tex. App.—Dallas 2010, pet. denied) (policy term interpretation and fact-vs-law application)
- The Universe Life Ins. Co. v. Giles, 950 S.W.2d 48 (Tex. 1997) (bad-faith/insurance-code issues are fact questions when evidence conflicts)