539 F.Supp.3d 669
S.D. Tex.2021Background
- Plaintiff Texas Friends Chabad-Lubavitch insured three buildings (Main Education Building and Annexes) in Houston under a commercial property policy effective June 14, 2017–June 14, 2018.
- Hurricane Harvey (Aug. 25–29, 2017) produced ~30–40 inches of rain; Plaintiff alleges interior water damage from roof/window leaks during the storm.
- Parties dispute cause of intrusion: Plaintiff says rainwater weight/seepage during the storm caused or worsened roof/window separations; Nova contends separations/openings preexisted Harvey from wear, maintenance, or defective construction.
- Nova denied coverage by letter (Jan. 8, 2018), citing exclusions for wear/tear, continuous seepage, flood/earth movement, and damage below deductible; Plaintiff sued for breach of contract, TPPCA violations, unfair settlement practices, and bad faith.
- Cross-motions for summary judgment: court denied Plaintiff’s partial MSJ and granted/denied Nova’s MSJ in part, finding several coverage fact issues genuine and granting summary judgment on certain statutory and bad-faith claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether roof "collapse" exception (weight of rain) creates coverage for separations | Rainwater weight during Harvey caused or worsened separations → exception to collapse exclusion applies | Separations preexisted Harvey (maintenance/defect), so collapse exclusion bars coverage | Genuine dispute of material fact; both MSJs denied on this issue |
| Whether "continuous or repeated seepage" exclusion (14-day rule) bars coverage for storm leakage | Seepage/leakage during Harvey (<14 days) is not "continuous" and thus is a Covered Cause of Loss that can satisfy Limitation 1(c)(1) | Even if seepage occurred during storm, interior damage resulted from preexisting openings or non-covered causes | Genuine dispute of material fact; Plaintiff’s MSJ denied |
| TPPCA §542.055 (timely acknowledgment/initial investigation) | Nova failed statutory duties | Nova timely acknowledged and began investigation within the extended period | Nova entitled to summary judgment on §542.055 claim |
| TPPCA §542.056(a) (notify acceptance/rejection within 15 business days after receiving all required items) | Denial came late after investigation finished Nov. 21, 2017 | (Implicit) Nova needed additional items or acted reasonably | Court: denial letter (Jan. 8, 2018) was sent after the statutory deadline; Nova’s MSJ denied on §542.056(a) |
| TPPCA §542.058 (penalty for delayed payment >60 days after receipt of all items) | If coverage owing, Nova delayed payment → penalties/interest/fees | No coverage owed, so no withheld amounts | Genuine coverage dispute precludes summary judgment for Nova on §542.058; MSJ denied |
| Common-law bad faith (no reasonable basis to deny/delay) | Nova’s denial/delay was unreasonable given coverage | Nova had reasonable basis (expert reports supporting preexisting separations) | Nova entitled to summary judgment on bad-faith claim |
| Unfair settlement practices (§541.060 claims) — misrepresentation, failure to explain, unreasonable investigation, compelling suit | Nova misrepresented coverage and performed outcome-driven investigation | Nova provided explanation, reasonably investigated, and had a basis for denial | Court: summary judgment for Nova on most §541.060 claims (misrepresentation, explanation, investigation, §542.003(5)); denial as to §541.060(a)(4) (failure to affirm/deny timely) survives due to §542.056 delay |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (genuine-dispute/summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden-shifting)
- Little v. Liquid Air Corp., 37 F.3d 1069 (5th Cir. 1994) (movant’s summary-judgment obligations)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment credibility/inference limits)
- Reeves v. Sanderson Plumbing Prods., 530 U.S. 133 (courts cannot weigh evidence or make credibility determinations on summary judgment)
- Evanston Ins. Co. v. Legacy of Life, Inc., 370 S.W.3d 377 (Tex. 2012) (policy definitions control)
- Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997) (respecting policy definitions)
- Moriel v. Royal Indem. Co., 879 S.W.2d 10 (Tex. 1994) (elements of bad-faith claim)
- State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex. 1997) (reliance on expert reports and bad-faith defenses)
- Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) (TPPCA damages standard)
- Hinojos v. State Farm Lloyds, 619 S.W.3d 651 (Tex. 2021) (insurer still liable for interest on unpaid amounts after statutory deadline)