Hinson v. State Farm Lloyds

Filing 78

MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE for 32 Motion for Summary Judgment, filed by State Farm Lloyds, 73 Report and Recommendations. It is therefore ORDERED that Defendant's Motion for Summary Judgment, (Dkt. 32 ), is GRANTED. It is further ORDERED that Plaintiff's claim for breach of the duty of good faith and fair dealing, as well as all of Plaintiff's claims for violations of the Texas Insurance Code, with the exception o f Plaintiff's claim under Section 542.058 of the Code, are DISMISSED with prejudice. Plaintiff's claims for breach of contract and violation of Section 542.058 of the Texas Insurance Code remain.. Signed by District Judge Sean D. Jordan on 4/26/2021. (baf, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
DEANNE M. HINSON

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v.
STATE FARM LLOYDS

CIVIL NO. 4:20-CV-093-SDJ

MEMORANDUM ADOPTING THE REPORT AND
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Came on for consideration the Amended Report and Recommendation of the
United States Magistrate Judge (“Report”), this matter having been referred to the
Magistrate Judge pursuant to 28 U.S.C. § 636. On March 10, 2021, the Amended
Report of the Magistrate Judge, (Dkt. #73), was entered containing proposed findings
of fact and recommendations that Defendant State Farm Lloyds’s Motion for
Summary Judgment, (Dkt. #32), be granted. 1 Having assessed the Amended Report
and considered Plaintiff’s Objection, (Dkt. #74), and Defendant’s Response,
(Dkt. #75), the Court determines that the Magistrate Judge’s Report and
Recommendation should be adopted.
BACKGROUND
The underlying facts of this case are set forth in detail in the Report. As such,
the Court describes only those facts pertinent to the Plaintiff’s Objection.
I. Texas Insurance Code
Under Texas law, although an insurance policy is recognized as a contract that
“establish[es] the respective rights and obligations to which an insurer and its

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Defendant will sometimes be referenced herein as “State Farm.”

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insured have mutually agreed,” an insurance policy is also deemed to be “a unique
type of contract” because insurers generally “‘ha[ve] exclusive control over the
evaluation, processing[,] and denial of claims,’ and [insurers] can easily use that
control to take advantage of [their] insured[s].” USAA Texas Lloyds Co. v. Menchaca,
545 S.W.3d 479, 488 (Tex. 2018) (quoting Arnold v. Nat’l Cnty. Mut. Fire Ins. Co.,
725 S.W.2d 165, 167 (Tex. 1987)). Based on this “inherent ‘unequal bargaining
power,’” the Texas Supreme Court has held that the “‘special relationship’ between
an insurer and insured justifies the imposition of a common-law duty on insurers to
‘deal fairly and in good faith with their insureds.’” Id. (quoting Arnold, 725 S.W.2d
at 167).
The Texas Insurance Code provides further protections for insureds,
supplementing the parties’ contractual rights and obligations by imposing procedural
requirements that govern the manner in which insurers review and resolve an
insured’s claim for policy benefits. See, e.g., TEX. INS. CODE § 541.060(a) (prohibiting
insurers from engaging in a variety of “unfair settlement practices”). The Code grants
insureds a private action against insurers that engage in certain discriminatory,
unfair, deceptive, or bad-faith practices, and it permits insureds to recover “actual
damages . . . caused by” those practices, court costs, and attorney’s fees, plus treble
damages if the insurer “knowingly” commits the prohibited act. Id. §§ 541.151, .152;
Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 441 (Tex. 2012).
Chapter 541 of the Code defines trade practices that are unfair methods of
competition or unfair or deceptive acts or practices and prohibits such practices. TEX.

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INS. CODE § 541.001. Plaintiff Deanne Hinson has alleged, among other claims, that
Defendant State Farm Lloyds violated several subsections of Chapter 541, including
Section 541.060(a)(1), 541.060(a)(2)(A), 541.060(a)(3), and 541.060(a)(7). State Farm
has moved for summary judgment as to all of these claims, as well as Hinson’s claim
for breach of the duty of good faith and fair dealing. In her Report, the Magistrate
Judge recommends that the Court grant summary judgment in favor of State Farm,
dismissing each of Hinson’s Chapter 541 claims and her claim for breach of the duty
of good faith and fair dealing.
Hinson has objected to the Report as to only one claim, specifically her
allegation that State Farm violated Section 541.060(a)(7) of the Texas Insurance
Code, which provides that it is an unfair method of competition or an unfair or
deceptive act or practice in the business of insurance to refuse to pay a claim without
conducting a reasonable investigation with respect to the claim.
II. Hinson’s Insurance Policy
Hinson owns a house located at 3521 Burnet Dr., Plano, Texas (the “Property”).
The Property is insured by a Texas Homeowner’s Insurance Policy purchased from
State Farm (the “Policy”). The Policy provides for a one-percent deductible of the
value of the covered property for losses caused by hail damages and states that no
coverage is provided for losses caused by wear, tear, marring, scratching,
deterioration, inherent vice, latent defect, or mechanical breakdown.
In 2012, Hinson’s Property was impacted by a hailstorm that caused damage
to the exterior of the home, which was covered in part by the Policy. Later, on

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March 10, 2019, Hinson made another insurance claim, asserting that her home had
been subject to another wind/hail event on June 6, 2018. Hinson submitted Claim No.
43-7982-Q98 under the Policy. State Farm contacted Hinson and scheduled to have
an adjuster visit the home for an inspection on March 19, 2019. Ultimately, State
Farm conducted three inspections of the Property, one of which was performed by an
independent engineer.
Each inspection concluded with a finding that the damage to Hinson’s roof (and
the shingles thereon) was not caused by hail but rather resulted from a
manufacturing defect in the hail-impact-resistant shingles that were installed in
2013 after the earlier 2012 storm and insurance claim. State Farm estimated that to
repair or replace the property damaged by hail—including attic vent covers, turbine
roof vents, a flue cap, and chimney flashing—would cost $2,785.76, which fell below
Hinson’s $3,404.00 deductible. Hinson contends, contrary to the inspection findings,
that the damage to her roof was caused by hail (a covered loss), not a manufacturing
defect.
III.

The Litigation between Hinson and State Farm
Hinson filed the instant suit against State Farm in the 471st Judicial District

Court of Collin County, Texas. The case was subsequently removed to this Court.
Hinson has asserted claims against State Farm for: (1) breach of contract;
(2) noncompliance with the Texas Insurance Code; and (3) breach of the common-law
duty of good faith and fair dealing. State Farm has moved for summary judgment on

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each of the extra-contractual causes of action asserted by Hinson, with the sole
exception of Hinson’s claim under Section 542.058 of the Texas Insurance Code.
OBJECTION
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). Relevant to consideration of Plaintiff’s Objection herein, the Magistrate
Judge recommended that summary judgment be granted on Plaintiff’s claim under
§ 541.060(a)(7) of the Texas Insurance Code. (Dkt. #73 at 17).
Hinson raises a single objection to the Magistrate Judge’s Amended Report,
arguing that “a fact issue exists as to if the inspections were reasonable.” (Dkt. #74
at 2). Hinson contends that the individual who inspected the property, Taylor Asfar,
was not qualified, as he is a field adjuster with little training regarding
manufacturing defects. (Dkt. #74 at 3). In response, State Farm maintains that
Hinson, even now, fails to raise a fact issue. Specifically, State Farms notes that the
record demonstrates that its adjuster, Asfar, has over fifteen years of “practical
experience in identifying manufacturing and latent defects in roof shingles[,]” and,
further, that multiple inspections constitute a reasonable inspection. (Dkt. #75
at 2–3).
The Court concludes that the Magistrate Judge properly determined that the
summary judgment was warranted on Hinson’s claim for failure to conduct a
reasonable investigation. Hinson does not contest that State Farm had three separate

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inspections of the Property conducted, (Dkt. #74 at 2), and it is well established that
conducting multiple inspections of an insured’s property demonstrates that the
insurer’s investigation was not performed unreasonably or in bad faith. See WeiserBrown Operating Co. v. St. Paul Surplus Lines Ins. Co., 801 F.3d 512, 527 (5th Cir.
2015) (finding that retaining an expert to conduct a second inspection “demonstrates
an effort on [the insurer’s] part to obtain an expert opinion on a complicated coverage
issue”); Greenville Townhome Owners Ass’n, Inc. v. Phila. Indem. Ins. Co.,
473 F.Supp.3d 692, 698–700 (N.D. Tex. 2020) (finding summary judgment proper for
defendant on plaintiff’s claim for violations of § 541.060(a)(7) where two inspections
were completed of the property prior to adjusting the plaintiff’s claim for wind
damage). Indeed, “[an insurance company’s] decision to consult with additional
experts before making a final coverage decision speaks to the thoroughness of its
investigation.” J.P. Columbus Warehousing, Inc. v. United Fire & Cas. Co., No. 5:18CV-100, 2021 WL 799321, at *9 (S.D. Tex. Jan. 13, 2021). Here, State Farm had three
separate inspections of the Property completed, one of which was performed by Frank
Griffin—a senior project engineer (about whom Hinson does not complain in her
Objection)—and each of which reached the same conclusion. (Dkt. #32-4).
For these reasons, the Magistrate Judge correctly concluded that summary
judgment is appropriate as to Hinson’s claim that State Farm violated
Section 541.060(a)(7)

of

the

Texas

Insurance

OVERRULED.

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Code.

Hinson’s

objection

is

CONCLUSION
Having considered Plaintiff Deanne Hinson’s Objection, (Dkt. #74), and
Defendant State Farm Lloyds’s Response, (Dkt. #75), the Court adopts the
Magistrate Judge’s Amended Report and Recommendation, (Dkt. #73), as the
findings and conclusions of the Court.

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It is therefore ORDERED that Defendant’s Motion for Summary Judgment,
(Dkt. #32), is GRANTED. It is further ORDERED that Plaintiff’s claim for breach
of the duty of good faith and fair dealing, as well as all of Plaintiff’s claims for
violations of the Texas Insurance Code, with the exception of Plaintiff’s claim under
Section 542.058 of the Code, are DISMISSED with prejudice. Plaintiff’s claims for
breach of contract and violation of Section 542.058 of the Texas Insurance Code
remain.

So ORDERED and SIGNED this 26th day of April, 2021.

____________________________________
SEAN D. JORDAN
UNITED STATES DISTRICT JUDGE

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