612 F.Supp.3d 667
W.D. Tex.2020Background
- Lakeside FBBC owned a large apartment complex in San Antonio; Everest Indemnity insured the property under consecutive policies covering Nov 2015–Nov 2016 (hail) and Nov 2016–Nov 2017 (tornado).
- April 2016 hail loss: plaintiff gave notice; Everest’s adjuster (Engle Martin / McCoy) inspected, requested contractor estimates and a sworn proof of loss; Everest made two pre-appraisal payments ($250,000 and $1,672,031.67) after receiving signed proofs of loss.
- February 2017 tornado loss: notice provided; adjuster requested separating tornado damage from prior hail damage; Everest made a small advance payment ($8,029.86); later appraisal awarded ACV/RCV of similar amounts.
- The court compelled appraisal; property-appraisal awards: hail ACV $4,150,745.57 (RCV higher); tornado ACV/RCV $255,861.82; Everest paid ACV amounts (less prior advances). Business-interruption awards were later paid in full.
- Plaintiff had not completed repairs (a policy condition to obtain replacement-cost payments). Plaintiff sued for breach of contract, common-law and statutory bad faith, and TPPCA (prompt-payment) violations. The court granted summary judgment for defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer breached contract by not paying replacement-cost after appraisal for hail loss | Lakeside: Everest failed to pay full appraisal (RCV) and thus breached | Everest: appraisal award and timely payment of ACV satisfied contract where plaintiff had not repaired property; RCV payable only after repairs | Court: Payment of appraised ACV satisfied appraisal award; breach claim dismissed because plaintiff had not made repairs required to trigger RCV |
| Whether insurer violated TPPCA deadlines for hail and tornado claims | Lakeside: Everest failed to accept/reject/pay within statutory periods, entitling plaintiff to 18% interest | Everest: it timely requested information, made reasonable pre-appraisal payments, and deadlines were not triggered because plaintiff (or its contractor) delayed providing required items and proofs of loss | Court: Defendants complied with TPPCA steps; pre-appraisal payments were reasonable; deadlines weren’t triggered for tornado; TPPCA claim dismissed |
| Whether extracontractual bad-faith (Chapter 541 and DTPA) claims survive after payment of appraisal award | Lakeside: seeks statutory and common-law bad faith damages tied to delayed/underpayment | Everest: payment of appraisal award bars extracontractual claims to extent they seek the withheld policy benefits | Court: Extracontractual claims dismissed to the extent they seek policy benefits because appraisal payment cured those damages |
| Whether adjuster/engineering defendants (Engle Martin, McCoy) are liable under TPPCA | Lakeside: seeks penalties against adjusters too | Defendants: TPPCA applies only to insurers, not to adjusters; adjusters were improperly joined | Court: Adjusters cannot be held liable under Chapter 542; they were improperly joined |
Key Cases Cited
- Mainali Corp. v. Covington Specialty Ins. Co., 872 F.3d 255 (5th Cir. 2017) (payment of ACV can satisfy appraisal award where insured has not repaired property; reasonableness of pre-appraisal payment relevant to TPPCA)
- Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019) (appraisal process does not automatically insulate or expose insurer to TPPCA liability; analysis focuses on whether insurer complied with TPPCA and whether insurer accepted liability)
- Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) (invoking appraisal to resolve a dispute does not per se bar or create TPPCA damages; insurer liable under §542.060 only if it accepted liability or was adjudicated liable and violated a TPPCA deadline)
- Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) (elements and purpose of TPPCA; statute construed to promote prompt payment)
- Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co., 801 F.3d 512 (5th Cir. 2015) (summary of TPPCA deadlines and insurer obligations to request items and investigate)
- Cox Operating LLC v. St. Paul Surplus Lines Ins. Co., 795 F.3d 496 (5th Cir. 2015) (section 542.060 enforcement mechanism and accrual of statutory interest upon deadline violation)
- Breshears v. State Farm Lloyds, 155 S.W.3d 340 (Tex.App.—Corpus Christi 2004) (pre-appraisal payments can satisfy TPPCA where insurer complied with statutory procedures and payments were reasonable)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (contract terms are given their plain, ordinary meaning when unambiguous)
- Nat'l Sec. Fire & Cas. Co. v. Hurst, 523 S.W.3d 840 (Tex.App.—Houston [14th Dist.] 2017) (timely payment of binding appraisal award estops insured from breach-of-contract claim)