Fiberco, Inc. v. Acadia Insurance Company

Filing 74

MEMORANDUM OPINION AND ORDER denying 39 Partial Motion for Summary Judgment; denying in part 56 Motion for Summary Judgment. The Court DISMISSES Union Standard as a party to this action (Ordered by Judge Brantley Starr on 11/15/2023) (axm)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FIBERCO, INC.,

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Plaintiff,
v.
ACADIA INSURANCE COMPANY
and UNION STANDARD LLOYDS
d/b/a UNION STANDARD
INSURANCE GROUP,
Defendants.

Civil Action No. 3:22-CV-0525-X

MEMORANDUM OPINION AND ORDER
Before the Court are Plaintiff FiberCo, Inc.’s partial motion for summary
judgment, (Doc. 39), and Defendants Acadia Insurance Company and Union
Standard Lloyds’s motion for summary judgment, (Doc. 56). Having reviewed the
motions, the applicable caselaw, and the underlying facts, the Court concludes that
there are genuine disputes of material fact related to the breach of contract claim and
the statutory claims. Therefore, the Court DENIES FiberCo’s partial motion for
summary judgment. (Doc. 39). The Court also DENIES IN PART Acadia and Union
Standard’s motion for summary judgment as to all of FiberCo’s claims against Acadia.
(Doc. 56). However, the Court concludes that FiberCo has failed to prove that it has
contractual standing to sue Union Standard in this matter, and therefore, the Court
GRANTS IN PART the motion for summary judgment as to all claims brought
against Union Standard. (Doc. 56). And the Court DISMISSES Union Standard as
a party to this action.
1

I. Background
This is an insurance coverage dispute. FiberCo’s building was insured under
a policy issued by Acadia effective from April 10, 2020 to April 10, 2021 (the “Policy”). 1
The Policy is subject to an endorsement for limitations on roof surfacing which
contains the following cosmetic damage exclusion (the “Cosmetic Damage
Exclusion”):
We will not pay for cosmetic damage to roof surfacing caused by wind
and/or hail. For the purpose of this endorsement, cosmetic damage
means that the wind and/or hail caused marring, pitting or other
superficial damage that altered the appearance of the roof surfacing, but
such damage does not prevent the roof from continuing to function as a
barrier to entrance of the elements to the same extent as it did before
the cosmetic damage occurred. 2
In April 2020, the building suffered damage from a hailstorm while the Policy was in
effect. 3 FiberCo filed a claim with Acadia for the hail damage. 4 Acadia hired an
engineer to assess the damage. 5 He found at least seven places on the roof of the
building with openings at seams of overlapping metal panels, reducing the water
shedding capability of the roof in those areas, and additional hail dents that did not
yet cause open seams. 6 FiberCo’s public adjuster sent Acadia a $406,678.05 estimate
for the cost to replace the hail damage to the building and a sworn proof of loss. 7

1

Doc. 40-1 at 70.

2

Id. at 153.

3

Id. at 3–4.

4

Doc. 58-3.

5

Docs. 58-10, 58-18.

6

Doc. 58-18.

7

Docs. 58-3, 58-13.

2

Acadia denied FiberCo’s claim and explained that although the seven open seams
were a covered loss, the dents to the roof were excluded by the Policy’s Cosmetic
Damage Exclusion, and therefore the amount of the covered loss fell below the Policy’s
deductible amount. 8 In contrast, however, FiberCo’s expert concluded that the hail
dents which have not opened seams will cause accelerated corrosion and reduce the
useful life of the roof. 9 FiberCo therefore disputes Acadia’s conclusion that the hail
dents are only cosmetic. 10
FiberCo filed suit in state court alleging claims for breach of contract and
violations of the Texas Insurance Code against Acadia and Union Standard because
FiberCo alleged that Union Standard underwrote the Policy. 11 Acadia and Union
Standard removed the action to this Court. 12 FiberCo filed a motion for partial
summary judgment, 13 and Acadia and Union Standard filed a motion for summary
judgment. 14
II. Legal Standard
Courts may grant summary judgment if the movant shows that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a

8

Doc. 58-16.

9

Doc. 61-1 at 313–319, 326, 350–353, 402–404 & 440–441.

10

Doc. 63 at 26–27.

11

Doc. 1-3.

12

Doc. 1.

13

Doc. 39.

14

Doc. 56.

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matter of law.” 15 A material fact is one “that might affect the outcome of the suit
under the governing law.” 16 And “[a] dispute is genuine if the evidence is such that
a reasonable jury could return a verdict for the nonmoving party.” 17 The party
moving for summary judgment bears the initial burden of identifying the evidence
“which it believes demonstrate[s] the absence of a genuine [dispute] of material
fact.” 18
III. Analysis
Because there are a genuine disputes of material fact regarding whether the
hail dents which have not opened seams will still affect the roof’s ability to act as a
barrier to entrance of the elements and the proper assessment of damages, summary
judgment is improper for the breach of contract claim. Likewise, there are multiple
disputes of material fact underlying the Texas Insurance Code claims, thereby
precluding summary judgment as to those claims as well.
A. Breach of Contract
Both sides moved for summary judgment on the breach of contract claim. 19 To
prove a breach of contract claim, the plaintiff must show: (1) existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach of
contract by the defendant; and (4) damages. 20

Because insurance policies are

15

FED. R. CIV. P. 56(a).

16

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

17

Westfall v. Luna, 903 F.3d 534, 546 (5th Cir. 2018) (cleaned up).

18

Celotex Corp. v. Catrett, 477 U.S. 318, 323 (1986); see also FED. R. CIV. P. 56(c)(1).

19

Docs. 39, 56.

20

Smith Intern., Inc. v. Egle Group, LLC, 490 F.3d 380, 387 (5th Cir. 2007).

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contracts, an insurer may be liable for breach of contract if it fails to provide coverage
based on an inapplicable exclusion. In an insurance coverage dispute, Texas law
places the initial burden on the insured to show that there is coverage under the
applicable policy. 21 The burden then shifts to the insurer to prove that the alleged
damage falls into an exclusion under the policy. 22 If the insurer does prove the
applicability of an exclusion, the burden shifts back to the insured to show that an
exception to the exclusion applies. 23
Here, the parties agree that the Policy was in effect at the time of the hailstorm
and could provide coverage absent an exclusion. 24

The parties disagree on the

applicability of the Cosmetic Damage Exclusion to the Policy. 25 FiberCo argues that
summary judgment is improper here because even the damage that Acadia considers
“cosmetic” damage is covered by the Policy because it will still affect the roof’s ability
to act as a barrier to entrance of the elements. 26 Acadia contends that the hail dents
involved here are cosmetic, not functional, and that cosmetic damage is excluded
under the Policy. 27
1. Cosmetic Damage Exclusion
Here, it is undisputed that there is some damage that is covered under the

21

Guaranty Nat. Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir. 1998).

22

Id.

23

Id.

24

See Doc. 41 at 12; see also Doc. 57 at 8–12.

25

See Doc. 41 at 15–23; see also Doc. 57 at 13–18.

26

Doc. 63 at 26–27.

27

See Doc. 57 at 13–18.

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Policy. 28 Both parties agree the roof’s damage affects its ability to keep out the
elements to a lesser degree than it did prior to the hail damage because of the seven
open seams. 29 But there is a fact dispute concerning whether the hail dents in the
roof which have not opened seams will still effect the roof’s ability to act as a barrier
to entrance of the elements. The Cosmetic Damage Exclusion reads:
We will not pay for cosmetic damage to roof surfacing caused by wind
and/or hail. For the purpose of this endorsement, cosmetic damage
means that the wind and/or hail caused marring, pitting or other
superficial damage that altered the appearance of the roof surfacing, but
such damage does not prevent the roof from continuing to function as a
barrier to entrance of the elements to the same extent as it did before
the cosmetic damage occurred. 30
Acadia presents evidence that the denial of FiberCo’s insurance claim was
proper because the value of only the non-cosmetic damage did not exceed FiberCo’s
deductible. 31 FiberCo disputes this, pointing to evidence that indicates the damage
that Acadia deems “cosmetic” will actually prevent the roof from acting as a barrier
to entry of the elements. 32 Because there is a genuine dispute of material fact
regarding the proper extent of damage covered by the Policy, the Court DENIES
FiberCo’s motion for summary judgment and DENIES IN PART Acadia’s motion for

28

Doc. 41 at 15–23; Doc. 57 at 11–12.

29

Doc. 41 at 21; Doc. 49 at 12.

30

Doc. 40-1 at 153.

31

Doc. 57 at 13–18; Doc. 58-16.

32 Doc. 63 at 26–27 (citing Doc. 61-1 at 313–319, 326, 350–353, 402–404 & 440–441). Acadia
contends that this evidence, the testimony of FiberCo’s expert, David Day, is improper summary
judgment evidence. Acadia has a motion to strike David Day also pending before the Court. Doc. 53.
For the reasons explained in its Order on the motion to strike, Day’s testimony is proper summary
judgment evidence and can be considered for purposes of the motions for summary judgment addressed
by this Order.

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summary judgment.
2. Replacement Cost Coverage
Additionally, both parties move for summary judgment on the issue of whether
FiberCo is entitled to replacement cost coverage. 33

FiberCo contends that it is

entitled to replacement cost coverage because it notified Acadia of its intent to replace
the damaged property within the 180 days required by the Policy, and Acadia
breached the Policy by improperly denying coverage based on the cosmetic damage
exclusion. 34 Acadia contends that the Policy requires the insured to actually repair
or replace the damaged property, which must be done as soon as reasonably possible,
and FiberCo did not do so. 35 Both parties point to summary judgment evidence
regarding the proper extent of damages here. 36 Thus, there is a genuine dispute of
material fact on the issue of damages so the Court cannot resolve the question at
summary judgment. The Court DENIES FiberCo’s motion for summary judgment
and DENIES IN PART Acadia’s motion for summary judgment.

33

Doc. 41 at 26–29; Doc. 57 at 24–25.

34

Doc. 41 at 26–29.

35

Doc. 57 at 24–25.

36 See Doc. 41 at 26–29 (citing Doc. 40-1 at 427, 454–61, 537–38, and 544); see also Doc. 57 at
24–25 (citing Docs. 58-1, 58-24, 58-28, 58-29).

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3. Union Standard
Union Standard moves for summary judgment on the breach of contract
claim 37 because it is not a party to the Policy. 38 FiberCo contends otherwise, pointing
to a letter from Union Standard that thanks FiberCo for selecting Union Standard as
its insurance provider. 39

Whether a party has standing to pursue a claim is a

question of law. 40 “Generally, a property-insurance policy is a personal contract
between the insured and the insurer.” 41 To establish standing to sue for a breach of
contract, the plaintiff must either be in privity of contract with the defendant or be a
third-party beneficiary entitled to enforce the contract.” 42 “[P]rivity is a legal
conclusion, not a judgmental process.” 43
Here, FiberCo’s complaint alleges that Union Standard underwrote the Policy,
but a sworn declaration avers that Union Standard did not issue or underwrite the
Policy. 44

The declaration explains that Union Standard sometimes provides

personnel to underwrite policies or adjust claims for insurance groups, like Acadia,

Union Standard also moves for summary judgment on the Texas Insurance Code claims.
Doc. 57 at 28, 30. Because FiberCo has not shown that Union Standard is its insurer, or is liable for
any of the claimed conduct, the insurance code claims must also be dismissed against Union Standard.
37

38

Doc. 57 at 23.

39

Doc. 63 at 34 (citing Doc. 61-1 at 22).

40

Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998), cert. denied, 526 U.S. 1144

(1999).

Ostrovitz & Gwinn, LLC v. First Specialty Ins. Co., 393 S.W.3d 379, 388 (Tex. App.—Dallas
2012, no pet.).
41

42

Allan v. Nersesova, 307 S.W.3d 564, 571 (Tex. App.—Dallas 2010, no pet.).

43

Benson & Ford, Inc. v. Wanda Petroleum Co., 833 F.2d 1172, 1174 (5th Cir. 1987).

44

Doc. 58-2.

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but it did not do so in this instance. 45 Moreover, the Policy clearly lists “Acadia
Insurance Company” as the insurer. 46 FiberCo fails to adequately prove that it has
a contractual relationship with Union Standard—FiberCo presents no evidence
proving that the two are in contractual privity or that Union is a third-party
beneficiary. FiberCo relies upon a letter from Union Standard, but the letter alone
does not establish a legal basis upon which FiberCo has standing to sue Union
Standard. Because Union Standard did not underwrite or issue the Policy, and
FiberCo has not proven that it has contractual standing to sue Union Standard, the
Court concludes that summary judgment is proper as to FiberCo’s claims brought
against Union Standard.

Therefore, the Court GRANTS IN PART, Union

Standard’s motion for summary judgment as to all the claims brought against Union
Standard.
B. Statutory Claims
Acadia moves for summary judgment on all of FiberCo’s claims under the
Texas Insurance Code. 47 FiberCo moves for summary judgment on the issue of
attorney’s fees and interest under the Texas Insurance Code. 48 Because there are
multiple disputes of material fact, summary judgment is improper as to the Texas
Insurance Code claims and is also improper on the issue of attorney’s fees and
interest.

45

Id.

46

Doc. 40-1 at 154.

47

Doc. 57 at 25–30.

48

Doc. 41 at 23–26.

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Turning first to Acadia’s motion for summary judgment, the Court concludes
that there are genuine disputes of material fact that preclude summary judgment on
FiberCo’s Texas Insurance Code claims. FiberCo brought claims under Sections
541.060, 541.061, 542.055, 542.056, and 542.058 of the Texas Insurance Code. 49
Sections 542.055, 542.056, and 542.058 concern the insurer’s proper procedure for
claim-handling after receiving a claim while Sections 541.060 and 541.061 concern
unfair practices in claim-handling. In short, FiberCo alleges that Acadia failed to
timely and reasonably investigate its claim and engaged in unfair practices during
the claim-handling process.
Acadia moves for summary judgment because FiberCo has no evidence that
Acadia acted unreasonably, made misrepresentations, or failed to timely accept or
reject FiberCo’s claim. 50 FiberCo pointed to summary judgment evidence in support
of its allegations that Acadia made misstatements and the parties dispute what the
deadline was for determining whether Acadia timely resolved FiberCo’s claim. 51 Both
parties point to evidence that favors their interpretation of the deadline. 52 For these
reasons, there are multiple disputes of material fact here: (1) whether Acadia made
material misstatements of coverage in violation of Section 541.061; (2) whether
Acadia timely rendered a decision or notified FiberCo of its need for additional time
under Sections 542.055, 542.056, and 542.058; and (3) whether Acadia acted

31.

49

Doc. 1-3 at 10–16.

50

Doc. 57 at 25–30.

51

Doc. 41-1 at 1–5; Doc. 61-1.

52

Doc. 41-1 at 1–5; Doc. 61-1; Doc. 58-3; Doc. 58-4; Doc. 58-6; Doc. 58-24; Doc. 58-27; Doc. 58-

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reasonably in handling FiberCo’s claim under Section 541.060. 53
Because there are multiple, genuine disputes of material fact, summary
judgment is improper as to FiberCo’s claims under Sections 541.060, 541.061,
542.055, 542.056, and 542.058 of the Texas Insurance Code. Likewise, whether
Acadia acted knowingly and intentionally is another fact dispute rendering any
inquiry into the availability of punitive and treble damages improper for summary
judgment. 54 Therefore, the Court DENIES IN PART Acadia’s motion for summary
judgment.
Second, FiberCo moved for summary judgment on the issue of attorney’s fees
and interest. 55 Because there are fact disputes surrounding the underlying claims
that cannot be determined on summary judgment, it is premature to seek summary
judgment on the issue of attorney’s fees and interest. Therefore, the Court DENIES
FiberCo’s motion for partial summary judgment.
IV. Conclusion
The Court DENIES FiberCo’s partial motion for summary judgment. (Doc.
39). The Court also DENIES IN PART Acadia and Union Standard’s motion for
summary judgment as to all of FiberCo’s claims against Acadia. (Doc. 56). However,
the Court concludes that FiberCo has failed to prove that it has contractual standing
to sue Union Standard in this matter, and therefore, the Court GRANTS IN PART
the motion for summary judgment as to all claims brought against Union Standard.

53

See Doc. 41 at 23–26; see also Doc. 57 at 25–30.

54

Doc. 57 at 29.

55

Doc. 41 at 23–26.

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(Doc. 56). And the Court DISMISSES Union Standard as a party to this action.
IT IS SO ORDERED this 15th day of November, 2023.

___________________________________
BRANTLEY STARR
UNITED STATES DISTRICT JUDGE

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