Usaa Texas Lloyds Company v. Gail Menchaca, 545 S.W.3d 479

Background

Gail Menchaca sued USAA Texas Lloyds for Hurricane Ike damages, alleging breach of the homeowners policy and violations of the Texas Insurance Code; the jury answered three pertinent questions: Q1 (breach of policy) = NO, Q2 (various statutory violations) = YES only for failure to conduct a reasonable investigation, and Q3 (damages measured as unpaid policy benefits) = $11,350.00.
Trial court concluded Q1 was defective and disregarded it, then entered judgment for Menchaca based on Q2 and Q3; USAA challenged that ruling.
Menchaca sought only policy benefits as damages for the statutory violation (she abandoned independent extra-contractual damages).
The central factual support for Q1=NO included evidence that Menchaca’s loss was less than her policy deductible, so the insurer had no contractual obligation to pay benefits.
The opinion addresses whether an insured may recover policy benefits as damages for an insurer’s statutory violation when a jury rejects contractual liability but finds a statutory violation and awards policy-benefit-style damages.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a statutory-violation finding permits recovery of unpaid policy benefits when the jury rejected breach of contract	Menchaca argued the statutory violation (failure to investigate) caused loss of policy benefits and the jury awarded benefits-style damages (Q3)	USAA argued plaintiff failed to prove entitlement to policy benefits (Q1=NO), so statutory violation alone cannot create a right to policy benefits	The dissent would hold Menchaca cannot recover policy benefits because she failed to prove contractual entitlement; statutory violation alone does not establish right to policy benefits (no-recovery rule)
Whether a jury answer awarding ‘‘policy-benefit’’ damages can be reconciled with a separate answer finding no breach	Menchaca treated Q3 as damages flowing from Q2; she urged the court to give effect to both answers	USAA argued Q3 is legally fallacious given Q1=NO (no unpaid benefits existed) and thus judgment cannot rest on Q3	The dissent concludes the answers are logically incompatible and that, because plaintiff failed her burden on contract liability, defendant is entitled to judgment; trial court erred in disregarding Q1
Whether the trial court’s failure to direct the jury to reconsider conflicting answers waives appellate review	Menchaca (and some justices) emphasized preservation rules and timing for objections; trial court rejected further jury deliberations	USAA maintained post-verdict motions preserved the conflict issue and Rule 295 does not bar appellate review when the court elects not to reform the verdict	The dissent reasons Rule 295 permits but does not mandate reformation and that appellate courts may review judgment entered on potentially conflicting answers when preservation is satisfied (e.g., post-verdict motions)
Burden of proof and remedy when plaintiff fails to obtain findings supporting recovery	Menchaca relied on jury damages answer to support recovery	USAA stressed plaintiff bore the burden to secure findings on every element and she failed to prove entitlement to benefits	The dissent would render judgment for USAA because plaintiff failed to obtain necessary findings and cannot recover absent contract entitlement or independent statutory damages

Key Cases Cited

Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex. 1989) (jury’s negative answer on an ultimate issue means plaintiff failed to carry burden of proof)
Provident Am. Ins. Co. v. Castañeda, 988 S.W.2d 189 (Tex. 1998) (statutory violation alone does not entitle insured to policy benefits; independent injury required)
Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663 (Tex. 1995) (some bad-faith acts may give rise to damages distinct from contractual breach)
City of Brownsville v. Alvarado, 897 S.W.2d 750 (Tex. 1995) (a jury’s “no” on liability can render related questions immaterial)
Little Rock Furniture Mfg. Co. v. Dunn, 222 S.W.2d 985 (Tex. 1949) (appellate consideration of potentially conflicting answers even when parties declined to object at trial)
Fleet v. Fleet, 711 S.W.2d 1 (Tex. 1986) (incomplete verdicts require timely objection to prompt redeliberation)
United Scaffolding, Inc. v. Levine, 537 S.W.3d 463 (Tex. 2017) (plaintiff bears burden to secure findings supporting recovery)
St. Louis Sw. Ry. Co. v. Duke, 424 S.W.2d 896 (Tex. 1967) (motion for new trial can preserve objection to judgment based on conflicting findings)
C. & R. Transp., Inc. v. Campbell, 406 S.W.2d 191 (Tex. 1966) (court considered conflicting findings when parties sought outright victory)
St. Paul Fire & Marine Ins. Co. v. Murphree, 357 S.W.2d 744 (Tex. 1962) (statement that entry of judgment on conflicting findings is not per se fundamental error; discussion of preservation mechanisms)