JNH Holding, Inc v. Nationwide Property & Casualty Insurance Company
MEMORANDUM OPINION AND ORDER re 18 MOTION for Summary Judgment and Judgment on the Pleadings filed by Nationwide Property & Casualty Insurance Company. It is ORDERED that Plaintiff take nothing by its extra-contractual claims of breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act and tie-in statutes, and unfair insurance practices, and that those claims should be DISMISSED with prejudice. Only Plaintiffs breach of contract and prompt payment claims, alleging that Defendant failed to pay Plaintiff the benefits under the Policy to properly repair the Property, should proceed to trial. Signed by Judge Amos L. Mazzant, III on 9/29/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
JNH HOLDING, INC
NATIONWIDE PROPERTY &
CASUALTY INSURANCE COMPANY
Civil Action No. 4:16-CV-00866
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant Nationwide Property & Casualty Insurance
Company’s Motion for Partial Judgment on the Pleadings and Motion for Partial Summary
Judgment (Dkt. #18). The Court will address Defendant’s Motion for Partial Summary Judgment
to resolve the issues raised.1
After reviewing the relevant pleadings, the Court finds that
Defendant’s Motion for Partial Summary Judgment should be granted.
The above-referenced case arises out of a dispute between a policyholder and its insurer
regarding the extent of damages and amount of loss suffered to Plaintiff’s property located at 4695
State Highway 121, Lewisville, Texas 75056 (the “Property”) (Dkt. #1 at p. 2). Defendant
Nationwide Property & Casualty Insurance Company issued a commercial property insurance
policy to Plaintiff JNH Holding, Inc., effective March 12, 2016, through March 12, 2017 (the
“Policy”) (Dkt. #18 at p. 4). On or about March 23, 2016, the Property suffered damage due to
Pursuant to Local Rule CV-7(a), each motion must be filed as a separate document, except for motions for
alternative relief. Additionally, the Amended Scheduling Order (Dkt. #13) sets forth a June 29, 2017 dispositive
motion deadline, which is the same day this motion was filed. Therefore, the Court will only address Defendant’s
Motion for Partial Summary Judgment.
storm-related conditions (Dkt. #1 at p. 2–3). On September 13, 2016, Plaintiff made a claim to
Defendant for damage resulting from the storm (Dkt. #18 at p. 4).
Defendant assigned the claim to its adjuster Melvin Spiller (“Spiller”), who inspected the
Property on September 15, 2016 (Dkt. #1 at p. 3). Spiller determined that Plaintiff’s roof had been
damaged but needed to retain third-party experts as part of his investigation (Dkt. #18 at p. 4).
Spiller sent Plaintiff a letter advising that more time was needed to investigate the loss
(Dkt. #18 at p. 4).
Spiller retained HVACi to inspect Plaintiff’s rooftop air conditioning units, and Haag
Engineering (“Haag”) to evaluate whether wind or hail damage was present on the roof and to
investigate the cause and origin of interior leaks (Dkt. #18 at p. 4). HVACi returned its report to
Spiller on September 23, 2016, stating that two of the Plaintiff’s seven rooftop units could be
repaired and that the other five would need new condenser coils (Dk. #18 at p. 4). According to
HVACi, one of the units was out of service (Dkt. #18 at p. 4). Based on HVACi’s report, Spiller
prepared an estimate for damages totaling $10,517.15, which included repairs to six of the seven
rooftop air conditioning units. Defendant issued payment according to the estimate the same day.
Haag engineer Tim Marshall (“Marshall”) submitted his report to Spiller on September 27,
2016, five days after HVACi’s report (Dkt. #18 at p. 5). Marshall concluded that there was no
wind or hail damage to the roof of the building and that the interior leaks were not related to windor hail-created openings (Dkt. #18 at p. 5). On September 30, 2016, Spiller sent Plaintiff a letter
partially denying Plaintiff’s claim, explaining the policy excluded cosmetic loss and did not name
wear and tear and improper installation as perils on the policy (Dkt. #18 at p. 5).
On November 11, 2016, Plaintiff brought suit contending that Defendant failed to
adequately compensate it for damages to the Property, and seeking to recover damages based on
the following claims: (1) breach of contract, (2) violations of the Texas Deceptive Trade Practices
Act (“DTPA”) and Tie-In Statutes, (3) violations of the Texas Insurance Code, (4) breach of the
common law duty of good faith and fair dealing, and (5) unfair insurance practices (see Dkt. #1).
On June 29, 2017, Defendant filed its motion for partial summary judgment (Dkt. #18).
On July 20, 2017, Plaintiff filed its response (Dkt. #31). On July 27, 2017, Defendant filed its
reply (Dkt. #34).
The purpose of summary judgment is to isolate and dispose of factually unsupported claims
or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary judgment is proper
if the pleadings, the discovery, and disclosure materials on file, and any affidavits “[show] that
there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a
matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is genuine “if the evidence
is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all reasonable doubts in favor
of the party opposing the motion for summary judgment. Casey Enters., Inc. v. Am. Hardware
Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations omitted). The substantive law identifies
which facts are material. Anderson, 477 U.S. at 248.
The party moving for summary judgment has the burden to show that there is no genuine
issue of material fact and that it is entitled to judgment as a matter of law. Id. at 247. If the movant
bears the burden of proof on a claim or defense on which it is moving for summary judgment, it
must come forward with evidence that establishes “beyond peradventure all of the essential
elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).
Where the nonmovant bears the burden of proof, the movant may discharge its burden by showing
that there is an absence of evidence to support the nonmovant’s case. Celotex, 477 U.S. at 325;
Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried
its burden, the nonmovant must “respond to the motion for summary judgment by setting forth
particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing
Anderson, 477 U.S. at 248-49). The nonmovant must adduce affirmative evidence. Anderson,
477 U.S. at 257. No “mere denial of material facts nor . . . unsworn allegations [nor] arguments
and assertions in briefs or legal memoranda” will suffice to carry this burden. Moayedi v. Compaq
Comput. Corp., 98 F. App’x 335, 338 (5th Cir. 2004). Rather, the Court requires “significant
probative evidence” from the nonmovant in order to dismiss a request for summary judgment
appropriately supported by the movant.
United States v. Lawrence, 276 F.3d 193, 197
(5th Cir. 2001). The Court must consider all of the evidence, but must refrain from making any
credibility determinations or weighing the evidence. See Turner v. Baylor Richardson Med. Ctr.,
476 F.3d 337, 343 (5th Cir. 2007).
Defendant moves for partial summary judgment on Plaintiff’s extra-contractual claims,
including Plaintiff’s claims for violations of the Texas Insurance Code, Plaintiff’s claims for
violations of the Deceptive Trade Practices Act (the “DTPA”), and Plaintiff’s claim for breach of
the common law duty of good faith and fair dealing (See Dkt. #18).
A. Breach of the Duty of Good Faith and Fair Dealing
Plaintiff alleges that Defendant breached the duty of good faith and fair dealing by failing
to adequately and reasonably investigate and evaluate Plaintiff’s claim. Texas law imposes on an
insurer “a common law duty to deal fairly and in good faith with its insured in the processing and
payment of claims.” Aleman v. Zenith Ins. Co., 343 S.W.3d 817, 822 (Tex. App.—El Paso 2011,
no pet.) (citing Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995)). If an insurer knew
or should have known that it was reasonably clear that a claim was covered, it will be liable if it
denies that claim. Id. Failure to reasonably investigate a claim can also constitute a breach of the
duty of good faith and fair dealing. Id. Whether “a reasonable insurer under similar circumstances
would have delayed or denied payment of the claim” is determined by an objective standard. Id.
For Plaintiff to prevail on its bad faith claim, there must be a genuine issue of material fact
that Defendant “commit[ted] some act, so extreme, that would cause injury independent of the
policy claim” or failed “to timely investigate [Plaintiff’s claim.]” Stoker, 903 S.W.2d at 341;
Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210, 214 (Tex. 1988); see also United Servs. Auto. Ass’n
v. Gordon, 103 S.W.3d 436, 442 (Tex. App.—San Antonio 2002, no pet.). Evidence that “merely
shows a bona fide dispute about the insurer’s liability on the contract does not rise to the level of
bad faith.” Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 17 (Tex. 1994).
There is no evidence of an act by Defendant that is so extreme that it caused injury to
Plaintiff independent of the Plaintiff’s claims under the policy (Dkt. #1 at ¶¶ 31–34;
Dkt. #31 at ¶¶ 24–27).2 To the contrary, the evidence shows that Defendant paid Plaintiff under
the policy, and that any further disagreement between the parties is a bona fide dispute as to the
proper amount of payment for damage suffered by Plaintiff (Dkt. #18 at ¶¶ 34–37). See MagDolphus, Inc. v. Ohio Cas. Ins. Co., 906 F. Supp. 2d 642, 649 (S.D. Tex. 2012) (finding no extreme
act where defendant had promptly paid plaintiffs even though plaintiffs alleged that defendant had
The only evidence in support of Plaintiff’s contention that Nationwide failed to consider or investigate certain facts
is the expert report of Stephen Strzelec (“Strzelec”) (Dkt. #31, Exhibit 1). Strzelec states in his report that Nationwide,
including Spiller, “did not objectively review the Haag report in conjuncture with all the other information available”
prior to denying the claim. Id. at 8. Strzelec provides a bullet list of items Nationwide needed to consider, but provides
no evidence or basis that they were not considered. Id. Additionally, Strzelec’s report does not have an alternative
causation theory, but only states that Nationwide’s investigators failed to follow certain standards. Strzelec’s own
unsubstantiated opinion about what adjusters should do when conducting a property inspection and reviewing reports
is not proper summary judgment evidence.
undervalued their loss); see also State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42, 44
(Tex. 1998). Nor does the evidence support a claim that Defendant failed to timely investigate
Plaintiff’s claim. Defendant began its investigation two days after Plaintiff notified Defendant of
its claim (Dkt. #18). Plaintiff fails to offer sufficient summary judgment evidence to raise a
material fact issue and the Court, therefore, grants Defendant’s summary judgment on Plaintiff’s
claim for bad faith.
B. Statutory Claims under the Texas Insurance Code and DTPA
In Texas, an individual who has been damaged by “unfair method[s] of competition or
unfair or deceptive act[s] or practice[s] in the business of insurance” may bring a cause of action
under the Texas Insurance Code against the person or persons engaging in such acts or practices.
Tex. Ins. Code § 541.151 (formerly codified as Tex. Ins. Code, art. 21.21); see Higginbotham v.
State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir. 1997); Crown Life Ins. Co. v. Casteel,
22 S.W.3d 378, 382-83 (Tex. 2000). “The prohibited conduct includes ‘failing to attempt in good
faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the
insurer’s liability has become reasonably clear.’” Performance Autoplex II Ltd. v. Mid-Continent
Cas. Co., 322 F.3d 847, 860-61 (5th Cir. 2003) (quoting Tex. Ins. Code § 541.151). A violation
of Chapter 541 of the Texas Insurance Code is also a violation of the DTPA. Tex. Bus. & Comm.
Code § 17.50(a); Kondos v. Allstate Tex. Lloyds, No. 1:03-CV-1440, 2005 WL 1004720, at 12
(E.D. Tex. Apr. 25, 2005); see Thrash v. State Farm Fire & Cas. Co., 992 F.2d 1354, 1357-58 &
n. 19 (5th Cir. 1993); Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129, 135 (Tex. 1988).
Texas law holds that extra-contractual tort claims pursuant to the Texas Insurance Code
and the DTPA require the same predicate for recovery as a bad faith claim under a good faith and
2014 WL 3974315, at *8 (E.D. Tex. Aug. 5, 2014); Douglas v. State Farm Lloyds,
37 F. Supp. 2d 532, 544 (S.D. Tex. 1999); Lawson v. Potomac Ins. Co. of Ill., No. 398-CV-0692H,
1998 WL 641809, at *4 (N.D. Tex. Sept. 14, 1998). “When an insured joins claims under the
Texas Insurance Code and the DTPA with a bad faith claim, all asserting wrongful denial of policy
benefits, if there is no merit to the bad faith claim, there can be no liability on either statutory
claim.” O’Quinn, 2014 WL 3974315, at *8; Higginbotham, 103 F.3d at 460; see Beaumont Rice
Mill, Inc. v. Mid-American Indem. Ins. Co., 948 F.2d 950, 952 (5th Cir. 1991); State Farm Fire &
Cas. Co. v. Woods, 925 F. Supp. 1174, 1180 (E.D. Tex. 1996).
In the present case, Plaintiff’s bases for asserting that Defendant violated Chapter 541 of
the Texas Insurance Code and the DTPA arise out of the same factual allegations, and are
essentially identical to Plaintiff’s bases for arguing that Defendant violated its common law duty
of good faith and fair dealing. In fact, Plaintiff’s response does little to distinguish any of its extracontractual claims (See Dkt. #31). Because the Texas Insurance Code and DTPA claims arise out
of the same factual allegations as the bad faith claims, the Court finds that these statutory claims
must also be dismissed. See O’Quinn, 2014 WL 3974315, at *8; Higginbotham, 103 F.3d at 460;
Kondos, 2005 WL 1004720, at *13.
In addition, Plaintiff fails to cite to any sufficient evidence that would create a genuine
issue of fact as to whether Defendant acted unreasonably in its handling of the claims. Specifically,
Plaintiff fails to cite any summary judgment evidence that would show that Defendant represented
that the Policy conferred or involved rights or obligations that it lacked, or that Defendant failed
to disclose information concerning any goods or service in support of her DTPA claims
(See Dkt. #1 at ¶¶ 35–36). Plaintiff further fails to offer any competent summary judgment
evidence in support of its DTPA claims that Defendant unreasonably delayed the investigation,
adjustment, and resolution of its claim, that Defendant failed to properly investigate Plaintiff’s
claim, or that Defendant hired and relied upon a biased adjuster to obtain a favorable report
(See Dkt. #1 at ¶¶ 35–36).
As to Plaintiff’s claims under Chapter 541 of the Texas Insurance Code, Plaintiff offers no
summary judgment evidence that would demonstrate a genuine issue of material fact as to its
allegations that Defendant engaged in false, misleading, or deceptive acts, that Defendant engaged
in unfair claims settlement practices, or that Defendant misrepresented to it pertinent facts or
provisions relating to the coverage at issue (See Dkt. #1 at ¶¶ 13–21). Nor does Plaintiff’s response
cite to any summary judgment evidence that would support its allegations that Defendant failed to
act in good faith in effectuating a prompt and fair settlement within a reasonable time, that
Defendant failed to affirm or deny coverage of Plaintiff’s claim within a reasonable time, that
Defendant refused to pay Plaintiff’s claims without conducting a reasonable investigation, or that
Defendant failed to provide Plaintiff with an explanation regarding any denial of the claim or offer
a compromise settlement (See Dkt. #1 at ¶¶ 22–28). Therefore, the Court finds that summary
judgment should be granted as to Plaintiff’s claims of violations of the Texas DTPA and tie-in
statutes, violations of Chapter 541 of the Texas Insurance Code, and unfair insurance practices.
C. Plaintiff’s Rule 56(d) Request
Plaintiff did not properly move for an extension of time to file a response to Defendant’s
Motion for Partial Summary Judgment under Rule 56(d); however, out of an abundance of caution,
the Court will consider it as an additional ground for relief. Plaintiff requests that the Court extend
the deadline for its response to Defendant’s summary judgment motion “until Plaintiff has had an
opportunity to complete discovery as set forth in the Court’s Scheduling Order” (Dkt. #31 at ¶ 17),
including taking the depositions of two individuals and a corporate representative
(Dkt. #31 at ¶¶ 13–17). “[Rule 56(d)] is an essential ingredient of the federal summary judgment
scheme and provides a mechanism for dealing with the problem of premature summary judgment
motions.” Parakkavetty v. Indus. Int’l, Inc., No. 3:02-CV-1461-D, 2004 WL 354317, at *1
(N.D. Tex. Feb. 12, 2004) (citation omitted). “Rule 56(d) functions as a safe harbor that has been
built into the rules so that summary judgment is not granted prematurely.” State Farm Fire and
(N.D. Tex. Aug. 15, 2011) (citing Union City Barge Line v. Union Carbide Corp., 823 F.2d 129,
136 (5th Cir. 1987)). “It is usually invoked when a party claims that it has had insufficient time
for discovery or that the relevant facts are in the exclusive control of the opposing party.” Id.
“Rule 56(d) offers relief where the nonmovant has not had a full opportunity to conduct—not to
complete—discovery. The two concepts are distinct.” Id. (citing McCarty v. United States,
929 F.2d 1085, 1088 (5th Cir. 1991)).
It is not sufficient for a summary judgment nonmovant to allege that discovery is
incomplete or that discovery will produce needed but unspecified facts. See Washington v. Allstate
Ins. Co., 901 F.2d 1281, 1284-85 (5th Cir. 1981). The party must demonstrate “how the additional
time will enable [it] to rebut the movant’s allegations of no genuine issue of fact.” Id. at 1286
(internal quotation marks omitted) (quoting Weir v. Anaconda Co., 773 F.2d 1073, 1083
(10th Cir. 1985)). A nonmovant is not entitled to a continuance if it “fail[s] to explain what
discovery [it] did have, why it was inadequate, and what [it] expected to learn from further
discovery” and gives only “vague assertions of the need for additional discovery.” Bauer v.
Albemarle Corp., 169 F.3d 962, 968 (5th Cir. 1999) (internal quotations and citations omitted).
Rule 56 does not require that any discovery take place before summary judgment can be granted.
Washington, 901 F.2d at 1285.
Pursuant to the Court’s Amended Scheduling Order, the deadline for all dispositive
motions was June 29, 2017, and the deadline for all discovery was September 7, 2017
(Dkt. #13 at p. 2). Defendant filed its motion for partial summary judgment on June 29, 2017
(Dkt. #18), and Plaintiff filed its response on July 20, 2017 (Dkt. #31). To date, Plaintiff has not
requested leave from the Court to supplement its response with additional evidence derived from
Furthermore, Plaintiff fails to explain what it expects to learn from further discovery.
Plaintiff gives only vague assertions of the need for additional discovery, and does not demonstrate
that it diligently pursued discovery. See Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 28 F.3d 1388, 1396 (5th Cir. 1994). Under Rule 56(d), the Court “need not
aid non-movants who have occasioned their own predicament through sloth.” Wichita Falls Office
Assocs. v. Banc One Corp., 978 F.2d 915, 919 (5th Cir. 1992). Therefore, the Court finds that
Plaintiff has not satisfied its burden to show it is entitled to a continuance under Rule 56(d).
It is therefore ORDERED that Defendant Nationwide Property & Casualty Insurance
Company’s Motion for Partial Summary Judgment (Dkt. #18) is hereby GRANTED.
It is further ORDERED that Plaintiff take nothing by its extra-contractual claims of breach
of the duty of good faith and fair dealing, violations of the Texas Insurance Code, violations of the
Texas Deceptive Trade Practices Act and tie-in statutes, and unfair insurance practices, and that
those claims should be DISMISSED with prejudice.
Only Plaintiff’s breach of contract and prompt payment claims, alleging that Defendant
failed to pay Plaintiff the benefits under the Policy to properly repair the Property, should proceed
SIGNED this 29th day of September, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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