Wilson v. Allstate Insurance Company
MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE for 31 Report and Recommendations, 21 Motion to Dismiss/Lack of Jurisdiction, filed by Allstate Insurance Company. Defendant Allstate Insurance Companys Rule 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction and Rule (12(b)(6) Motion to Dismiss (Dkt. #21) is DENIED. Signed by Judge Amos L. Mazzant, III on 4/10/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
ALLSTATE INSURANCE COMPANY
Civil Action No. 4:16-CV-970
(Judge Mazzant/Judge Nowak)
MEMORANDUM ADOPTING REPORT AND
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Came on for consideration the report of the United States Magistrate Judge in this action,
this matter having been heretofore referred to the Magistrate Judge pursuant to 28 U.S.C. § 636.
On March 5, 2017, the report of the Magistrate Judge (Dkt. #31) was entered containing proposed
findings of fact and recommendations that Defendant Allstate Insurance Company’s
(“Defendant”) Rule 12(b)(1) Motion to Dismiss for Lack of Jurisdiction and Rule 12(b)(6) Motion
to Dismiss (“Motion to Dismiss”) (Dkt. #21) be denied.
Having received the report and
recommendation of the Magistrate Judge (Dkt. #31), having considered Defendant’s timely filed
objections (Dkt. #32), and having conducted a de novo review, the Court is of the opinion that the
findings and conclusions of the Magistrate Judge are correct and adopts the Magistrate Judge’s
report (Dkt. #31) as the findings and conclusions of the Court.
On November 15, 2016, Plaintiff Tommy Wilson (“Plaintiff”) filed the present suit,
asserting claims against Defendant for breach of contract and violations of the Texas Insurance
Code (Dkt. #1). Plaintiff is the owner of a Texas Homeowner’s Insurance Policy (the “Policy”)
issued by Allstate Vehicle and Property Insurance Company, for the period beginning
December 7, 2015 to December 7, 2016 (Dkt. #1, Exhibit E). In March 2016, Plaintiff’s home,
located at 6815 McWhirter Rd., Allen, Texas 75002 (the “Property”), was damaged by a wind and
hail storm; Plaintiff submitted a claim for the resulting damage after the storm (Dkt. #11 at 3).
Plaintiff asserts that Defendant grossly underestimated the damage to the Property. On February 6,
2017, Defendant filed its Motion to Dismiss (Dkt. #21), arguing that Plaintiff’s suit was not yet
ripe because of Plaintiff’s failure to comply with the Policy’s express requirement to submit a
sworn proof of loss (“POL”) 91 days before filing suit against Defendant, and also alleging that
Plaintiff had failed to state a claim. The relevant portion of the Policy, setting forth the POL
Action Against Us
No one may bring an action against us in any way related to the existence
or amount of coverage, or the amount of loss for which coverage is sought
. . . unless:
there has been full compliance with all policy terms; and
the action is commenced within two years and one day from the date
the cause of action first accrues; and
in the event that you and we fail to agree on the amount of loss
claimed by you, unless you have previously provided to us a signed
sworn proof of loss, it is a condition under this Action Against Us
provision that no later than 91 days prior to commencing any action
against us that we receive from you a signed sworn proof of loss. . .
(Dkt. #21, Exhibit A). The Parties agree that Plaintiff did not submit a POL prior to initiating
litigation against Defendant Allstate. On February 16, 2017, Plaintiff timely filed a Response to
Defendant’s Motion to Dismiss (Dkt. #24). On February 23, 2017, Defendant filed a Reply
(Dkt. #25). The Magistrate Judge entered a report and recommendation on March 5, 2017,
recommending Defendant’s Motion to Dismiss be denied (Dkt. # 31). Subsequently, Defendant
timely filed objections on March 20, 2017 (Dkt. # 32).
A party who files timely written objections to a magistrate judge’s report and
recommendation is entitled to a de novo review of those findings or recommendations to which
the party specifically objects. 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b)(2)-(3). At the outset,
the Court notes neither party objects to the Magistrate Judge’s findings regarding Defendant’s
request to dismiss Plaintiff’s claims under Rule 12(b)(6) for failure to state a claim, namely that
Plaintiff has stated plausible claims for purposes of defeating a Rule 12(b)(6) motion (Dkt. #31 at
7). As such, and after de novo review of the record, the Court holds this finding is correct.
The Court now turns to Defendant’s objections, which focus on its request to dismiss for
lack of subject matter jurisdiction. Defendant objects to the Magistrate Judge’s finding that,
notwithstanding Plaintiff’s failure to submit a POL prior to filing suit, Plaintiff’s suit is ripe for
adjudication. Defendant specifically argues that the Magistrate Judge erred in (i) finding the POL
requirement was not triggered, (ii) finding the “Action Against Us” provision does not bar
Plaintiff’s suit, and/or (iii) finding that Plaintiff has substantially complied with the POL condition.
Magistrate Judge’s Findings Regarding POL
Defendant first asserts that the Magistrate Judge “seems to rely on the dispute over just the
structures on Plaintiff’s property being used in whole or in part for business purposes in concluding
that coverage, rather than the amount of loss, is the basis for the parties’ dispute . . .” (Dkt. #32 at
4). Defendant contends that because a significant dispute exists regarding the amounts necessary
to compensate Plaintiff for the covered damages to the Property, the POL requirement must be
applied. The Court agrees that the proof of loss provision is only triggered by a dispute as to the
amount of loss. Here, the Magistrate Judge did not make an express finding regarding the type of
dispute at issue, be it a coverage dispute or dispute regarding the amount of loss. Rather, the
Magistrate Judge assumed that the POL provision did apply to this dispute and proceeded to
analyze the prejudice, if any, imposed on Defendant by Plaintiff’s failure to comply with the
clause. The Court, therefore, overrules this objection.
Defendant also vehemently objects to the Magistrate Judge’s findings that the POL
provision does not bar Plaintiff’s suit and/or that Plaintiff’s civil complaint constitutes “substantial
compliance” with the POL condition. Both of these arguments are leveled at the reasoning adopted
by the Magistrate Judge from Polen v. Allstate Vehicle & Property Insurance Co., No. 4:16-CV843, 2017 WL 661836 (E.D. Tex. Feb. 17, 2017) and as such the Court considers Defendant’s final
two objections together. Defendant specifically contends that the cases cited in support of the
holding in Polen apply to liability —not property insurance— policies and, further, that the
provisions at issue relate to notice, not proof of loss. To that end, Defendant further argues that
the POL is an express contractual condition precedent to suit for which Plaintiff bargained, and
that the Court has oversimplified the consequences of Plaintiff’s non-compliance.
Defendant’s attempt to distinguish Polen is unavailing. Defendant concedes that the
primary purpose of requiring a sworn proof of loss is to permit Defendant “to investigate the
circumstances and sworn facts of Plaintiff’s disagreement, to prevent fraud, and to have the ability
to resolve their dispute through further negotiation or appraisal” before the filing of suit (Dkt. #21
at 6). Thus the proof of loss provision, akin to a notice provision, is aimed, in large part, at aiding
the insurer in administration of its coverage of claims. See e.g., Stonewall Ins. Co. v. Modern
Expl., Inc., 757 S.W.2d 432, 435 (Tex. App. —Dallas 1988, no writ) (finding the primary purpose
of a prompt notice and proof of loss provision in a policy is to allow the insurer to investigate the
incident close in time to the occurrence, while the evidence is fresh, so that it may accurately
determine its rights and liabilities under the policy); Hanover Ins. Co. of N.Y. v. Hagler, 532 S.W.
2d 136, 137-38 (Tex. Civ. App. —Dallas 1975, writ ref’d n.r.e.) (“The purpose of requiring written
notice and proof of loss within ninety-one days is to enable the insurer to properly investigate the
circumstances of the loss while the occurrence is fresh in the minds of witnesses, to prevent fraud,
and to enable it to form an intelligent estimate of its rights and liabilities so that it may adequately
prepare to defend any claim that may arise”); FDIC v. Booth, 82 F.3d 670, 678 (5th Cir. 1996) (“In
occurrence based policies, the notice requirement is generally included to aid the insurer in
administration of its coverage of claims. . .”) (emphasis omitted). While proof of loss and/or
notice requirements afford valuable rights to the insurer, such provisions have not been established
as an essential part of the bargained for exchange in an occurrence based policy such as the one at
issue (Dkt. #21, Exhibit A at 33 (“The policy applies only to losses or occurrences that take place
during the policy period.”)). See e.g., PAJ, Inc. v. Hanover, Ins., 243 S.W.3d 630, 635 (Tex. 2008)
(holding that “the timely notice provision was not an essential part of the bargained-for exchange
under PAJ’s occurrence-based policy”). Indeed, the Fifth Circuit has held that in the case of an
occurrence policy, any notice requirement is subsidiary to the event that triggers coverage. Id.
(quoting Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653, 658 (5th Cir.
Moreover, even were that not the case, the holding in PAJ does not rest on the distinction
between conditions precedent and covenants. It is clear that, while clauses in an insurance policy
were historically treated as conditions precedent, such is no longer the case. See Am. Teachers
Life Ins. v. Brugette, 728 S.W.2d 763, 764 (Tex. 1987). Under current Texas law, regardless of
whether a policy provision is characterized as a covenant, condition precedent (as Defendant
argues), or exclusion, the insurer must still demonstrate prejudice caused by the plaintiff’s noncompliance. See e.g., PAJ., 243 S.W.3d at 634-35. Consequently, while Defendant asks the Court
to deem the POL provision a bargained-for condition precedent, such a designation would not
conclude the analysis. The Court must go further to determine whether prejudice would result.
See Saint Paul Guardian Ins. Co. v. Centrum G.S. Ltd., 383 F.Supp.2d 891, 901 (N.D. Tex. 2003)
(“[T]he Fifth Circuit has recognized a modern trend in the case law away from the traditional
contractual approach towards a view that considers prejudice to an insurer a relevant factor in
determining whether to enforce a condition precedent to insurance coverage.”). 1
Defendant claims that it has been prejudiced because it was forced to prematurely litigate
this case without the benefit of each piece of information required to be submitted in the POL. “A
showing of prejudice generally requires a showing that one of the recognized purposes has been
impaired.” Polen, 2017 WL 661836 (citing Blanton v. Vesta Lloyds Ins., 185 S.W.3d 607, 615
(Tex. App.— Dallas 2006, no pet.)). With respect to the prejudice requirement, the Texas Supreme
Court has further explained:
In determining the materiality of a breach, courts will consider, among other things,
the extent to which the nonbreaching [sic] party will be deprived of the benefit that
it could have reasonably anticipated from full performance. The less the nonbreaching party is deprived of the expected benefit, the less material the breach.
Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d 691, 693 (Tex. 1994) (citations and footnotes
omitted). Applying this materiality principle to the facts of this case, a finding of prejudice simply
cannot be supported. Plaintiff timely submitted a claim to Defendant. After receipt of the claim,
Defendant had an opportunity to inspect the damage to the Property and to engage in attempts to
settle the claim. Here too, the Parties engaged in correspondence for several months regarding the
disputes between them both as to coverage and loss amounts, providing Defendant additional
opportunity to investigate and make inquiries. Plaintiff’s civil complaint provides the bulk of the
The Court does not find Morales v. Allstate Fire & Casulty Insurance Co., upon which Defendant relies to support
its argument that the POL provision is a condition precedent, persuasive. No. 5:16-CV-1067 (W.D. Tex. Feb.
information required by the terms of the POL provision, and the Court does not find that the
unsworn nature of the complaint deprives Defendant of the value of the information provided or
precludes substantial compliance.
Accordingly, the Court overrules Defendant’s remaining
Having considered each of Defendant’s timely filed objections (Dkt. #32), and having
conducted a de novo review, the Court is of the opinion that the findings and conclusions of the
Magistrate Judge are correct and adopts the Magistrate Judge’s report (Dkt. #31) as the findings
and conclusions of the Court.
Accordingly, it is ORDERED that Defendant Allstate Insurance Company’s Rule 12(b)(1)
Motion to Dismiss for Lack of Subject Matter Jurisdiction and Rule (12(b)(6) Motion to Dismiss
(Dkt. #21) is DENIED.
IT IS SO ORDERED.
SIGNED this 10th day of April, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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