Dennis Webb v. State Farm Lloyds
17-0400
Tex.Dec 19, 2017Background
- Dennis Webb sued State Farm Lloyds for breach of contract and violations of the Texas Insurance Code, alleging a plumbing leak caused foundation movement and cracked kitchen tiles and that State Farm underpaid his homeowner’s claim.
- Jury returned verdict for Webb on both contract and extra-contractual (Insurance Code/bad faith) claims; trial court entered judgment for Webb.
- Ninth Court of Appeals (Beaumont) affirmed the breach-of-contract judgment, reversed and rendered on the Insurance Code/bad-faith claims in favor of State Farm, and remanded the attorney-fees issue.
- Central factual dispute: whether the plumbing leak caused foundation heave that would make tile damage a covered loss; State Farm relied on engineer Brandon English, who found no foundation movement tied to the leak.
- Plaintiff’s expert (hired during litigation) concluded differently but relied on a later survey; three elevation surveys (pre- and post-leak) showed no appreciable foundation movement.
- The court of appeals held the record showed a bona fide dispute and no evidence that State Farm lacked a reasonable basis for denying/payment decisions; thus no support for bad-faith liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for Insurance Code/bad‑faith verdict | Webb: jury heard evidence showing outcome‑oriented investigation and biased engineering reliance supporting knowing or unreasonable denial. | State Farm: English’s investigation was objective, relied on multiple elevation surveys, and a bona fide dispute existed; no evidence State Farm had no reasonable basis. | Court of appeals: Affirmed there is no evidence of bad faith; record shows bona fide dispute and reasonable basis to deny. |
| Relevance of Nicolau (alleged insurer pattern/bias) | Webb: Nicolau is factually similar; insurer’s use of certain engineers shows systemic bias and supports bad faith. | State Farm: Nicolau had different, additional evidence (e.g., firm’s general unfavorable view and supervisory awareness) not present here; English did not hold a disqualifying general view. | Court: Nicolau inapplicable; record lacks the systemic/bad‑faith indicators present in Nicolau. |
| Proper legal standard and appellate review (City of Keller, Viles, Moriel) | Webb: appellate court misapplied legal‑sufficiency review, ignored evidence favorable to Webb, and misread Viles/Menchaca. | State Farm: Court of appeals applied City of Keller standard—credit favorable evidence that reasonable jurors could and disregard contrary evidence they could not; reviewed facts available at time of denial per Viles; Menchaca supports limiting extra‑contractual recovery to independent injury. | Court: Applied correct legal standards; reviewed all evidence, found only bona fide dispute and no independent injury, so reversal on extra‑contractual claims warranted. |
| Use of post‑denial information and independent damages (Menchaca principle) | Webb: insurer’s duty continues and post‑denial information can show bad faith; contends Menchaca discussion is irrelevant or misapplied. | State Farm: Insurer judged by facts available at time of denial; Webb sought only policy benefits and produced no evidence of independent extra‑contractual injury. | Court: Menchaca cited correctly—no evidence of injury independent from loss of policy benefits, so extra‑contractual damages are not supported. |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal‑sufficiency review must credit favorable evidence reasonable jurors could and disregard contrary evidence reasonable jurors could not)
- Viles v. Security National Insurance Co., 788 S.W.2d 566 (Tex. 1990) (reasonableness of denial judged by facts known to insurer at time of denial)
- Transportation Insurance Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994) (bad‑faith requires insurer to have had no reasonable basis for denial and knowledge of that lack)
- Lyons v. Millers Casualty Insurance Co. of Texas, 866 S.W.2d 597 (Tex. 1993) (mere expert disagreement does not establish bad faith)
- State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex. 1997) (insurer’s selection of experts can support bad faith only with additional evidence of outcome‑oriented conduct or systemic bias)