John Davis D/B/A J.D. House of Style v. National Lloyds Insurance Company
484 S.W.3d 459
Tex. App.2015Background
- John Davis owned a commercial/residential building insured by National Lloyds; policy valued building and contents and contained a valuation provision stating losses are paid at actual cash value unless Replacement Cost optional coverage is shown on the Declarations Page.
- The Declarations Page had an Optional Coverages schedule but contained no entries selecting Replacement Cost coverage.
- After Hurricane Ike (2008) Davis claimed roof and interior water damage; National Lloyds’ adjuster inspected, found mostly wear and tear and only minor storm damage below the $3,700 deductible, and denied payment.
- Davis sued (2010), alleging breach of contract, violations of the Texas Insurance Code, and breach of duty of good faith and fair dealing; a jury found liability for National Lloyds and awarded $0 (actual cash value), $100,000 (replacement cost), exemplary damages, and fees.
- National Lloyds moved to disregard the replacement-cost finding and for JNOV based on the jury’s $0 actual cash-value finding; the trial court granted JNOV and rendered a take-nothing judgment. Davis appealed.
Issues
| Issue | Plaintiff's Argument (Davis) | Defendant's Argument (National Lloyds) | Held |
|---|---|---|---|
| Proper measure of recovery under policy (ACV vs. Replacement Cost) | The policy wording and the “(X)” on Declarations create a reasonable basis to find Replacement Cost coverage; at minimum ambiguous so construed for Davis | Policy plainly sets ACV as valuation and Replacement Cost applies only if Optional Coverage is shown in the schedule; no entries were made | Court held policy unambiguous: only ACV coverage applied because Replacement Cost required an entry on the Declarations schedule and none existed |
| Whether trial court properly disregarded jury’s replacement-cost damage finding | Jury verdict awarded replacement-cost damages; trial court could not disregard a valid jury finding | Interpretation of coverage is a question of law for the court; absent optional-selection language, jury’s replacement-cost award conflicts with policy terms and may be disregarded | Court upheld disregarding replacement-cost finding as legally unsupported because policy limited recovery to ACV |
| Sufficiency of evidence supporting $0 ACV award | Davis argued experts showed repair cost > deductible and thus ACV > $3,700 | National Lloyds presented multiple experts showing preexisting deterioration, ponding, prior damage, and that ACV damage attributable to Ike did not exceed deductible | Court held evidence supporting $0 ACV finding was legally sufficient; insured failed to segregate covered-from noncovered damage and produced no depreciated-value proof |
| Viability of extra-contractual (Insurance Code and bad-faith) claims when no coverage payment owed | Davis argued liability and statutory/bad-faith findings supported damages and could not be negated by legal valuation ruling | If no contractual payment was owed as a matter of law, extra-contractual claims based on wrongful denial cannot stand; coverage defeat defeats bad-faith and Insurance Code claims | Court held extra-contractual claims fail where insurer owed no payment under policy; jury’s liability findings could not overcome legal conclusion that ACV = $0, so take-nothing judgment affirmed |
Key Cases Cited
- State Farm Lloyds v. Page, 315 S.W.3d 525 (Tex. 2010) (policy construction principles; interpret entire policy and resolve ambiguities)
- Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154 (Tex. 2003) (unambiguous contract construction is a question of law)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency review; view evidence in light most favorable to verdict)
- Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897 (Tex. 2004) (standards for sustaining legal-sufficiency challenge)
- Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757 (Tex. 2003) (presumption that jury follows court instructions)
- Trinity Indus., Inc. v.53 S.W.3d 297 (Tex. 2001) (test for affirming jury verdict when any probative evidence supports it)
- Travelers Indem. Co. v. McKillip, 469 S.W.2d 160 (Tex. 1971) (insured must segregate damage caused by covered peril from other causes)
- Transp. Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994) (relation between contract coverage resolution and extra-contractual claims)