Henley v. Love Insurance Group LLC et al

Filing 54

MEMORANDUM OPINION AND ORDER: The court grants 12 Plaintiff's Motion for Summary Judgment with respect to the breach of contract claim; and denies it with respect to the amount of damages to which Henley is entitled. Plaintiff has indicated th at he will likely elect the breach of contract remedy and nonsuit the rest of his claims. Plaintiff is instructed to inform the court by 3/6/2017. If Plaintiff nonsuits his remaining claims, then the parties are directed to file a written submission and inform the court of the amount of time to try the issue of damages by 3/10/2017. The parties are also to provide the court by 3/10/2017, three separate weeks in three separate months in which they are available to try this action with respect to damages. (Ordered by Judge Sam A Lindsay on 2/24/2017) (axm)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
HUDSON HENLEY,
Plaintiff,
v.
LOVE INSURANCE GROUP, LLC, 1
Defendant.

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Civil Action No. 3:15-CV-3078-L

MEMORANDUM OPINION AND ORDER
Before the court is Plaintiff’s Motion for Summary Judgment 2 (Doc. 12), filed July 6, 2016.
After careful consideration of the motion and brief, response and brief, reply, appendices, record,
hearing transcript, and applicable law, the court denies in part and grants in part Plaintiff’s
Motion for Summary Judgment.
I.

Procedural and Factual Background
Plaintiff Hudson Henley (“Plaintiff” or “Henley”) filed this action against Defendants Love

Insurance Group, LLC, (“Defendant” or “Love Insurance”) and American Bankers Insurance
Company of Florida (“ABI”) on August 18, 2015, in the 14th Judicial District of Dallas County,
Texas. On September 22, 2015, ABI removed this action to federal court, contending that it arises
under the National Flood Insurance Act, 42 U.S.C. § 4001, et seq. Defendant consented to removal
of the action. On July 7, 2016, ABI was dismissed from this action. Plaintiff’s remaining claims
against Defendant include breach of contract, negligent misrepresentation, promissory estoppel,
1

In several of Defendant Love Insurance Group, LLC’s filings, the caption incorrectly includes Veracity, Inc., who
has never been a party to this action.
2

Hudson Henley designates his motion as one for summary judgment; however, the correct designation should be a
motion for partial summary judgment, as he does not move on all claims or issues.

Memorandum Opinion and Order - Page 1

and breach of fiduciary obligations. Plaintiff only moves for summary judgment on his breach of
contract claim. On February 1, 2017, the court held a hearing to clarify the parties’ respective
arguments related to Plaintiff’s Motion for Summary Judgment.
At the hearing, the parties agreed to the following facts. On November 17, 2014, Plaintiff
purchased the Sonoma Apartments in Dallas County, Texas. The apartment complex contained
several buildings with eight different addresses: 704, 706, 708, 710, 712, 714, 716, and 718 N.
Plymouth Road, Dallas, Texas 75211 (hereinafter “the Property”). 3 Plaintiff financed $975,000
of the $1.2 million purchase price through Happy State Bank, and, as a condition of the loan,
Happy State Bank required Plaintiff to obtain and carry $975,000 in flood insurance on the
Property. Henley hired Love Insurance’s agent John Sheetz to help him obtain flood insurance for
the Property.
Mr. Sheetz was to secure two separate Federal Emergency Management Agency
(“FEMA”) flood policies from ABI. The first policy was for the maximum permissible limit of
$500,000, and the second policy was for $475,000 to cover the excess of loss expenses. Plaintiff
paid the premiums to secure both policies. Mr. Sheetz then submitted one application to FEMA
for the $500,000 policy that listed the address for the Sonoma Apartments as “704-718 N.
Plymouth Road, Dallas, Texas 75211” to cover all of the physical structures that were
encompassed within those eight addresses.

3

In both parties’ summary judgment documents and at the hearing on the motion, each party states that the Sonoma
Apartments consist of seven different structures with eight separate addresses; however, there appears to be some
confusion as to how the buildings are counted. The parties agree that two of the separate buildings share an adjoining
firewall and there is a separate building for the HVAC. The parties are unsure about whether to count the adjoining
building as one or two buildings and whether to count the HVAC building. As the parties agree that all of the buildings
were to be covered by insurance, this disagreement is of no moment.
Memorandum Opinion and Order - Page 2

The parties entered into an implied contract when Plaintiff hired Defendant to secure
primary and excess loss insurance on all of the Sonoma Apartment buildings. The parties agree
that the terms of the implied contract were that Henley would pay the premiums to Defendant, and
in exchange he would receive $975,000 of insurance coverage. With respect to the excess loss
policy for $475,000, Love Insurance concedes that, despite Plaintiff paying the premium, it never
procured the $475,000 excess loss policy. On May 28, 2015, the Sonoma Apartments flooded,
and Plaintiff contends that he has had difficulty in collecting on the insurance policy. The parties
disagree as to whether Love Insurance breached its implied contract with Plaintiff; and, even if a
breach occurred, the parties disagree as to the amount of damages that Plaintiff has incurred.
On March 18, 2015, Defendant forwarded to Plaintiff an insurance policy that was
underwritten by ABI, and listed the Property to be insured as “704-718 N. Plymouth Road, Dallas,
Texas 75211.” According to Plaintiff, Defendant wrote the policy incorrectly by submitting one
FEMA application to ABI for the $500,000 policy to cover all of the buildings. Plaintiff contends
that submitting one policy for all of the buildings violated FEMA policy and did not secure the
insurance coverage to which the parties agreed. Plaintiff further contends that Defendant’s
employee, Mr. Sheetz, was unfamiliar with the FEMA guidelines that require only one building
per policy; ignored multiple warnings that he was writing the flood policies incorrectly; and
ultimately failed to secure the $975,000 worth of flood insurance that Plaintiff paid his premiums
to receive. Moreover, Plaintiff contends that Mr. Sheetz’s errors constituted a breach of the parties
implied contract, which caused him to be deprived of the full benefit of the $975,000 insurance
policy.

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Love Insurance contends that it did not breach the contract with respect to procuring the
$500,000 policy covering the Sonoma Apartments, as it listed an address for each building on its
application for flood insurance from ABI. Defendant contends that, based on the application it
submitted, ABI issued a valid insurance policy to Plaintiff for “704-718 N. Plymouth Road,” and
that policy was effective when the flooding occurred. Defendant contends that once it secured the
valid policy from ABI it performed its obligation under the implied contract. Further, Defendant
contends that ABI approached Plaintiff about correcting the alleged errors in the policy only after
the flood occurred, and this is an attempt by ABI to improperly limit payment to only one of the
multiple buildings listed on the policy.
Plaintiff has moved for partial summary judgment on his breach of contract claim. He
contends that he is entitled to summary judgment as a matter of law because Defendant breached
their implied contract when it did not secure $975,000 of insurance coverage for the Sonoma
Apartment buildings. Defendant counters that it did not breach the implied contract, as it secured
an insurance policy from ABI for $500,000 in primary coverage to cover each of the Sonoma
Apartment buildings. Further, Defendant contends that there is no summary judgment evidence
as to whether the $475,000 excess loss policy would have applied; therefore, Plaintiff cannot prove
it is entitled to summary judgment on his breach of contract claim.
II.

Summary Judgment Standard
Summary judgment shall be granted when the record shows that there is no genuine dispute

as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas
Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is “genuine”

Memorandum Opinion and Order - Page 4

if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary
judgment, the court is required to view all facts and inferences in the light most favorable to the
nonmoving party and resolve all disputed facts in favor of the nonmoving party. Boudreaux v.
Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005). Further, a court “may not make
credibility determinations or weigh the evidence” in ruling on a motion for summary judgment.
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 25455.
Once the moving party has made an initial showing that there is no evidence to support the
nonmoving party’s case, the party opposing the motion must come forward with competent
summary judgment evidence of the existence of a genuine dispute of material fact. Matsushita
Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). On the other hand, “if the movant
bears the burden of proof on an issue, either because he is the plaintiff or as a defendant he is
asserting an affirmative defense, he must establish beyond peradventure all of the essential
elements of the claim or defense to warrant judgment in his favor.” Fontenot v. Upjohn Co., 780
F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original). “[When] the record taken as a whole could
not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine [dispute] for
trial.’” Matsushita, 475 U.S. at 587. (citation omitted). Mere conclusory allegations are not
competent summary judgment evidence, and thus are insufficient to defeat a motion for summary
judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions,
improbable inferences, and unsupported speculation are not competent summary judgment
evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994).

Memorandum Opinion and Order - Page 5

The party opposing summary judgment is required to identify specific evidence in the
record and to articulate the precise manner in which that evidence supports his or her claim. Ragas,
136 F.3d at 458. Rule 56 does not impose a duty on the court to “sift through the record in search
of evidence” to support the nonmovant’s opposition to the motion for summary judgment. Id.; see
also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n.7 (5th Cir. 1992). “Only disputes
over facts that might affect the outcome of the suit under the governing laws will properly preclude
the entry of summary judgment.” Anderson, 477 U.S. at 248. Disputed fact issues that are
“irrelevant and unnecessary” will not be considered by a court in ruling on a summary judgment
motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence
of an element essential to its case and on which it will bear the burden of proof at trial, summary
judgment must be granted. Celotex, 477 U.S. at 322-23.
III.

Plaintiff’s Breach of Contract Claims Against Love Insurance
A.

Breach of Contract

Under Texas law, the elements for a breach of contract claim are: “(1) the existence of a
valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract
by the defendant; and (4) damages sustained by the plaintiff as a result of the breach.” Smith Int’l,
Inc. v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007) (citation omitted). “The elements of a
contract, express or implied, are identical.” Univ. Nat’l Bank v. Ernst & Whinney, 773 S.W.2d 707,
710 (Tex. App.San Antonio 1989, no writ)). “A breach of contract occurs when a party fails to
perform an act that it has expressly or impliedly promised to perform.” Case Corp. v. Hi–Class
Bus. Sys., 184 S.W.3d 760, 769-70 (Tex. App.Dallas 2005, pet. denied). When an agent fails to
procure insurance, the damages are measured by “the amount that would have been due under the

Memorandum Opinion and Order - Page 6

insurance policy [if] it had been obtained.” Smith-Reagan & Assocs., Inc. v. Fort Ringgold Ltd.,
No. 04-13-00608-CV, 2015 WL 1120398, at *1 (Tex. App.San Antonio, Mar. 11, 2015, pet.
denied) (citing Scott v. Conner, 403 S.W.2d 453, 457 (Tex. Civ. App.Beaumont 1966, no writ)).
This amount may be different than the cost of repairing the building; instead, it is the amount that
would have been due had the insurance agent procured the insurance. See Taylor v. Republic
Grocery, 483 S.W.2d 293, 296 (Tex. Civ. App.El Paso 1972, no writ).
The parties agree that they have a valid implied contract and that Plaintiff performed by
paying the premiums for both insurance policies. Whether Plaintiff is entitled to summary
judgment on his breach of contract claim turns on whether there is a genuine dispute of material
fact that Love Insurance breached the implied contract between the parties, and the amount of
damages, if any, Plaintiff sustained as result of the alleged breach. The real issue in this case is
whether Love Insurance obtained $975,000 of insurance coverage for Henley, although the parties
discuss each policy separately. The court discusses, although not necessary, each policy separately
because the parties briefed the issue in this manner.
B.

$475,000 Insurance Policy

Love Insurance concedes that even though Plaintiff paid his premium, it never procured
the excess loss policy for $475,000. Hr’g Tr. vol. 1, 4. Plaintiff argues that this is a material breach
of the implied contract, which required Defendant to procure $975,000 of insurance coverage.
Defendant counters that its mere failure “to procure an excess policy does not get one to the
liability aspect because of what the . . . legal liability is.” Hr’g Tr. vol. 1, 10. Defendant explains
that because liability is measured by what would have been due under the insurance policy if it
had been obtained, a fact question remains as to whether the excess loss policy would have be

Memorandum Opinion and Order - Page 7

applicable to the damages the flood caused. Id. Defendant indirectly contends that if the excess
loss policy would not have been applicable, then its failure to procure the excess coverage would
not constitute a breach of the implied contract.
With respect to Defendant’s argument that its failure to procure the $475,000 excess loss
policy is not determinative of whether they breached the implied contract, Defendant has merged
the breach analysis with the damages analysis. Defendant is incorrect in arguing that how liability
is measured raises a fact question as to breach, as its failure to perform by not procuring nearly
half of the agreed upon amount of insurance is a breach of the implied contract, which is
independent of the potential amount of damages. Accordingly, there is no genuine dispute of
material fact as to whether Love Insurance breached the parties’ implied contract, in which Love
Insurance agreed to obtain $975,000 in insurance coverage. The court, therefore, determines that
as a matter of law Love Insurance breached the parties’ implied contract.
Love Insurance argues that despite its failure to obtain the $475,000 excess policy, it did
secure $500,000 of insurance coverage for the Sonoma Apartment buildings.

Defendant’s

argument is a red herring that distracts from the real issue, which is that the parties implied contract
required Love Insurance to obtain $975,000 of insurance coverage, and it breached that implied
contract when it failed to perform as agreed. Nonetheless, the court will next consider Defendant’s
argument regarding the $500,000 primary insurance policy; however, this analysis necessarily
leads the court to the same result, that is, Defendant breached the implied contract.
C.

$500,000 Insurance Policy

Defendant argues that it obtained the insurance policy with respect to the $500,000 primary
insurance and that ABI would not pay the policy, and that, therefore, a fact question remains as to

Memorandum Opinion and Order - Page 8

whether it is liable for paying that portion of the implied contract. Hr’g Tr. vol. 1, 17. Plaintiff
counters that Defendant is attempting to improperly shift its liability to ABI, which was not a party
to the implied contract between him and Love Insurance.
The court agrees with Plaintiff. Both parties agree that there was a meeting of the minds
that Plaintiff would pay the premiums, which it did, in exchange for Defendant obtaining $975,000
worth of insurance. Hr’g Tr. vol. 1, 16-17. The policy that Defendant secured was defective. For
example, Defendant admits that the policy requires a specific amount of insurance to be designated
for each building; however, the application that Defendant submitted for the Sonoma Apartment
Buildings did not do this. Hr’g Tr. vol. 1, 18. Love Insurance contends that any defect in the way
it submitted the application to obtain the $500,000 primary insurance policy is a problem that ABI
should have addressed. Id. Further, Love Insurance contends that a defect in the application does
not “necessarily negate the fact that there is a contract [for flood insurance between Henley and
ABI].” Id. Love Insurance, therefore, contends that despite any defects in the application and
policy, a genuine dispute of material fact exists as to whether “one can only have one policy per
address or whether one can have two to ten buildings within a schedule[d] policy.” Hr’g Tr. vol.
1, 11.
Despite Defendant’s admission that the application submitted did not comply with the
requirements for a valid application, there is also ample evidence to support such finding in the
record. The record contains evidence that one building is covered per one policy unless the
applicant is submitting a scheduled building policy. For example, the last page of the application
for insurance that Defendant submitted states in uppercase letters “PLEASE NOTE: ONE
BUILDING PER POLICY – BLANKET COVERAGE NOT PERMITTED.” Def.’s App. 12, ECF

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22. Moreover, FEMA General Rules state that “scheduled building policies” may cover two to
ten buildings, and that type of policy “requires a specific amount of insurance to be designated for
each building.” Id. at 76. The flood policy application that Love Insurance submitted to ABI did
not contain a separate policy per each building; and it did not specify the amount of insurance to
be designated for each building in a scheduled building policy. As a result of these omissions,
Plaintiff did not receive the flood insurance coverage for which it contracted with Defendant. Any
dispute that Love Insurance may have with ABI is not before this court.
For these reasons, reasonable minds would not differ in determining that Defendant
breached its contract with Plaintiff, as it did not secure the $500,000 policy; therefore, there is no
genuine dispute of material fact as to whether Defendant breached its implied contract to secure a
total of $975,000 worth of insurance. Next the court turns to whether a genuine dispute of material
fact exists with respect to the amount of damages that Plaintiff should be awarded as a result of
Defendant’s breach.
D.

Damages

Defendant contends that the amount of damages hinges on a fact question regarding the
parameters of the insurance policies had they been acquired. Defendant further argues that
Plaintiff has not presented summary judgment evidence as to what the policies would have
covered. Specifically, Love Insurance contends that there are a number of matters unknown,
namely, “What are the terms of that policy? Under what circumstances would it kick in? What
would it actually cover? Are there exclusions to that policy because they have to be under FEMA?”
Hr’g Tr. vol. 1, 10.

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Plaintiff counters that he has presented evidence of the amount of damages, as he hired
James Amos, a public adjuster with National Adjustment Services, Inc., to do a full adjustment of
the flood damages. Mr. Amos calculated the total damages for all of the buildings is $847,520.10.
Plaintiff has already recovered $112,054.78 for one of the buildings; therefore, he contends that
he is entitled to a judgment of $735,465.32 for the flood damage. Plaintiff also contends that he
is entitled to economic damages to cover the cost of hiring National Adjustment Services, Inc.,
prejudgment interest, and attorney’s fees.
The court determines that there is a genuine dispute of material fact as to the amount of
damages, as there is no evidence on the record to suggest what the policies would have covered or
excluded had they been attained. “A starting point for this calculation would have been the terms
of a policy provision that provided such coverage during the relevant time period.” Smith-Reagan
& Assocs., Inc., 2015 WL 1120398, at *2 (citing Nat’l Fire Ins. Co. of Pittsburgh, Pa. v. Valero
Energy Corp., 777 S.W.2d 501, 509-10 (Tex. App.Corpus Christi 1989, writ denied); Gibbs v.
Allstate Ins. Co., 386 S.W.2d 606, 609 (Tex. Civ. App.Fort Worth 1965, writ ref'd n.r.e.)).
Neither party has embarked on this type of analysis. The record, therefore, contains no evidence
as to the amount that would have been due had Defendant performed. This amount may be
different from the amount of total damages that the flooding caused. Moreover, Plaintiff’s Rule
702 opinion witness, Mr. Amos, did not consider the underlying policies when he calculated
damages, because it was unclear what would have been covered had Defendant performed on the
contract (Pl.’s Sur. App. 4-7, ECF. 53). His calculation does not take into consideration what would
have been due, and a genuine dispute of material fact exists as to that issue; therefore, the court
will deny summary judgment with respect to damages.

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VI.

Conclusion
For the reasons stated herein, the court concludes that there is no genuine dispute of

material fact as to whether Love Insurance breached the implied contract between it and Plaintiff,
in which Love Insurance agreed to provide a total of $975,000 of insurance coverage for the
Sonoma Apartment buildings. Defendant, therefore, as a matter of law is liable for its breach of
the parties implied contract; however, the amount of damages, if any, that the breach caused is in
dispute. The court, therefore, grants Plaintiff’s Motion for Summary Judgment with respect to
the breach of contract claim; and denies it with respect to the amount of damages to which Henley
is entitled. Plaintiff has indicated that he will likely elect the breach of contract remedy and nonsuit
the rest of his claims. Plaintiff is instructed to inform the court by March 6, 2017. If Plaintiff
nonsuits his remaining claims, then the parties are directed to file a written submission and inform
the court of the amount of time to try the issue of damages by March 10, 2017. The parties are
also to provide the court by March 10, 2017, three separate weeks in three separate months in
which they are available to try this action with respect to damages.
It is so ordered this 24th day of February, 2017.

_________________________________
Sam A. Lindsay
United States District Judge

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