568 S.W.3d 156
Tex. App.2017Background
- Ortiz submitted a wind/hail claim to State Farm; initial inspections found damage below his deductible and no payment was made.
- Ortiz sued State Farm in April 2015 asserting contractual and extra-contractual (bad faith/Insurance Code) claims.
- State Farm invoked the policy appraisal clause; the lawsuit was abated while appraisal proceeded.
- An appraisal award issued for $9,447.52; State Farm paid Ortiz the ACV less deductible and recoverable depreciation and agreed to pay recoverable depreciation after repairs.
- State Farm moved for summary judgment arguing payment of the appraisal award estopped Ortiz from pursuing breach of contract and extra-contractual claims; the trial court granted summary judgment.
- Ortiz appealed, arguing this court should reconsider Garcia v. State Farm Lloyds in light of the Texas Supreme Court’s decision in Menchaca.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does payment of an appraisal award bar a breach of contract claim? | Ortiz: payment shouldn’t automatically preclude claims; Garcia should be revisited post-Menchaca. | State Farm: payment satisfies insured’s contractual rights and estops breach claim absent a ground to set aside appraisal. | Payment of appraisal award satisfied policy benefits; summary judgment on breach proper absent a basis to set aside appraisal. |
| Can statutory Insurance Code/DTPA claims survive where appraisal award was paid? | Ortiz: Menchaca allows statutory bad-faith claims without a breach of contract. | State Farm: Menchaca does not change that payment eliminating loss of benefits forecloses statutory damages unless independent injury exists. | Menchaca’s rules do not prevent summary judgment here; no loss of benefits and no independent injury shown. |
| What is required to defeat summary judgment on common-law bad faith after appraisal payment? | Ortiz: asserted insurer conduct supported bad faith claims. | State Farm: payment and lack of independent injury or extreme misconduct foreclose bad faith. | Insured must show insurer failed timely investigation or committed an act so extreme causing independent injury; Ortiz produced no such evidence. |
| Does Menchaca require revisiting Garcia’s appraisal-payment analysis? | Ortiz: Menchaca alters the relationship between contract and extra-contractual claims. | State Farm: Menchaca’s rules are consistent with appraisal-payment effect; Menchaca did not involve appraisal payments. | Court declines to revisit Garcia; Menchaca does not undermine appraisal-payment reasoning. |
Key Cases Cited
- Garcia v. State Farm Lloyds, 514 S.W.3d 257 (Tex. App.—San Antonio 2016) (holding insurer’s payment of appraisal award bars breach claims absent a ground to set aside the award and limiting bad-faith recovery absent independent injury)
- Katy Venture, Ltd. v. Cremona Bistro Corp., 469 S.W.3d 160 (Tex. 2015) (standard of review for summary judgment is de novo)
- USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018) (articulating five rules governing the relationship between contractual and extra-contractual insurance claims)