Usaa Texas Lloyds Company v. Gail Menchaca, 14-0721

Hurricane Ike damaged Gail Menchaca's home; USAA Texas Lloyds insured and assigned adjusters who found minimal damage.
USAA initially declined benefits due to deductible; a second adjuster largely confirmed, still paying nothing.
Menchaca sued for breach of contract and Unfair Settlement Practices under the Texas Insurance Code, seeking policy benefits and fees.
Jury answered Question 1: No, USAA did not breach the policy terms; Question 2: Yes, USAA violated the Insurance Code by failing to reasonably investigate; Question 3: Damages $11,350.
Trial court disregarded Question 1; court of appeals affirmed; Supreme Court granted review to resolve the conflict in Texas precedent.
Texas Supreme Court reverses and remands for a new trial in light of clarified five-rule framework relating contract and statutory claims.

Issue	Plaintiff's Argument	Defendant's Argument	Held
May insured recover policy benefits as damages for statutory violations without a breach finding?	Menchaca argues coverage findings aren't required; statutory violation yields benefits.	USAA argues no recovery without breach or independent injury.	Insured may recover benefits if entitlement exists and violation causes loss of those benefits.
How do contract and extra-contractual claims relate for damages when coverage is disputed?	Vail permits recovery of benefits for statutory violations even without breach.	Stoker/Castañeda limit recovery when no contractual right to benefits exists.	Clarified five rules governing relationship between contract claims and Insurance Code violations.
Was the trial court’s disregard of Question 1 reversible error?	Question 1 was material; its answer should govern breach; disallowing it misapplies law.	Question 1 was defective; other findings support remedy regardless of it.	Trial court erred in disregarding Question 1; remand for new trial in interest of justice.
What is the proper remedy given the jury’s mixed findings and the clarified rules?	Remand allows proper application of the clarified rules.	Remand unnecessary if the law could be applied to render judgment.	Remand for new trial in the interest of justice to resolve confusion in precedent.

Stoker v. Republic Insurance Co., 903 S.W.2d 338 (Tex. 1995) (general rule: no bad-faith claim where denial was not covered)
Castañeda v. Texas Farm Bureau Mut. Ins. Co., 988 S.W.2d 189 (Tex. 1998) (failure to establish contractual coverage; no statutory damages without breach)
Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 136 (Tex. 1988) (insurer's unfair denial may allow recovery of policy benefits as damages)
Twin City Fire Insurance Co. v. Davis, 904 S.W.2d 663 (Tex. 1995) (distinguishes independent damages from those flowing from denial)
JAW the Pointe, L.L.C. v. Lexington Insurance Co., 460 S.W.3d 597 (Tex. 2015) (insurer's independent-injury theory and coverage considerations)
State Farm Lloyds v. Page, 315 S.W.3d 525 (Tex. 2010) (coverage dispute affects availability of extra-contractual claims)