United National Insurance Company v. AMJ Investments, LLC
447 S.W.3d 1
| Tex. App. | 2014Background
- AMJ Investments owned a seven‑story office building insured by United National; Hurricane Ike damaged the building in 2008 and AMJ submitted a claim. United paid roughly $2.41 million but AMJ claimed United underpaid.
- Dispute centered on scope and cause of damage (wind/rain through roofs and windows vs. preexisting maintenance issues) and on competing Xactimate estimates prepared by (1) United’s adjuster Sheffield, (2) United’s consultant Johnson, and (3) AMJ’s expert Boutin.
- AMJ (through public adjuster Krone) and United reportedly agreed to use Johnson’s Xactimate estimate for repair costs, but United paid the amount in Sheffield’s estimate (which was lower and included large amounts for mitigation work), prompting AMJ’s suit for breach of contract and statutory bad faith.
- A jury found United underpaid by $300,000, found statutory Insurance Code violations and that United acted knowingly, awarded $1,000,000 in exemplary damages (later capped to $600,000), attorney’s fees, and prompt‑payment enhanced interest; the trial court entered judgment accordingly.
- On appeal United challenged sufficiency of evidence for compensatory damages, statutory liability, knowing conduct, prompt‑payment penalties timing, and sufficiency of attorney’s‑fee proof.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence that insurer failed to attempt good‑faith settlement when liability reasonably clear | AMJ: United agreed to pay Johnson’s estimate (scope and costs) so liability was reasonably clear; paying Sheffield’s estimate violated that agreement | United: Reasonable dispute existed; United relied on independent experts and thus liability was not reasonably clear | Held: Evidence (agreement to use Johnson’s estimate and payment per Sheffield) legally and factually sufficient to support bad‑faith finding; verdict affirmed |
| Sufficiency of evidence for compensatory damages ($300,000) | AMJ: Parties agreed to use Johnson’s Xactimate estimate for policy benefits; jury asked for policy benefits, not "reasonable and necessary" costs, so Xactimate evidence sufficed | United: Xactimate estimates alone (and Boutin’s testimony) don’t prove reasonable/necessary costs (McGinty) | Held: Because charge asked for policy benefits and evidence showed agreement to use Johnson’s Xactimate estimate, evidence was legally and factually sufficient; award affirmed |
| Whether absence of an independent injury bars statutory Insurance Code recovery | AMJ: When insurer unfairly withholds policy benefits, policy benefits wrongfully withheld constitute damages as a matter of law | United: Recovery under Insurance Code requires independent injury beyond contract breach | Held: Vail/Waite Hill principle applies — insured may recover withheld policy benefits under Insurance Code even without separate injury; statutory recovery allowed |
| Sufficiency of evidence that insurer "knowingly" violated the Insurance Code | AMJ: Communications, contradictory estimates, and United’s representations support inference United acted with actual awareness | United: Reliance on experts and investigation shows no knowing misconduct | Held: Evidence of representations, agreement to Johnson’s estimate, sending Sheffield’s estimate as "final", and other objective manifestations supported a reasonable inference of knowing conduct; finding sustained |
| Prompt‑payment enhanced interest start date | AMJ: Interest should run from March 16, 2009 (date of major payment) | United: Enhanced interest begins 75 days after insurer received all reasonably requested items; last required material was received Nov. 23, 2009 | Held: Jury did not make prompt‑payment findings; record showed last required material received by Nov. 23, 2009; enhanced interest properly runs from 75 days after that date — court reduced award accordingly |
| Sufficiency of attorney’s‑fee proof for fees through trial | AMJ: Presented lodestar hours and hourly rates (though firm keeps no billing records) | United: Hour entries were not specific enough under El Apple / lodestar to permit meaningful review | Held: AMJ chose lodestar proof but failed to provide sufficiently specific time entries for many tasks; trial fees award reversed and remanded for redetermination |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standard for reviewing legal and factual sufficiency of evidence)
- McGinty v. Hennen, 372 S.W.3d 625 (Tex. 2012) (Xactimate/EXactimate estimates alone insufficient to prove reasonable and necessary remedial costs)
- Vail v. Tex. Farm Bur. Mut. Ins. Co., 754 S.W.2d 129 (Tex. 1988) (unfair refusal to pay causes damages as a matter of law equal to withheld policy benefits)
- State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex. 1997) (insurer’s reliance on biased or pretextual expert reports may support bad‑faith finding)
- El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) (lodestar method requires specific, task‑linked hours and rates for fee awards)