Armstrong et al v. State Farm Lloyds
MEMORANDUM OPINION AND ORDER re: 12 Motion for Summary Judgment. State Farm's Motion for Summary Judgment is GRANTED IN PART on all of Plaintiffs' claims other than the Texas Prompt Payment of Claims Act claim. As to that claim, the case is STAYED pending resolution of Rodriguez v. Safeco Ins. Co., supra. The Scheduling Order is VACATED. (Ordered by Senior Judge Barbara M. G. Lynn on 11/13/2023) (axm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
KATHY AND MARIAN ARMSTRONG,
STATE FARM LLOYDS,
Civil Action No. 3:22-cv-01974-M
MEMORANDUM OPINION AND ORDER
Before the Court is State Farm Lloyds’ Motion for Summary Judgment. ECF No. 12.
The Motion is GRANTED IN PART. The balance of the case is STAYED pending resolution
of Rodriguez v. Safeco Ins. Co. of Indiana, 73 F.4th 352 (5th Cir. 2023) (certified question
accepted on July 21, 2023, in Case No. 23-0534 (Tex. 2023)). The Scheduling Order is
VACATED. ECF No. 7.
The following facts are undisputed and supported by the summary judgment evidence, to
which neither party has objected. ECF Nos. 14, 16.
On April 29, 2020, wind and hail damaged Kathy and Marian Armstrong’s property. On
June 8, 2020, the Armstrongs submitted a claim for damages. One week later, after inspecting
the property, State Farm provided to the Armstrongs a repair estimate that did not exceed the
policy deductible, so State Farm concluded it owed nothing to the Armstrongs. A second
inspection followed, with the same result. A third inspection, this time with a public adjuster,
also resulted in the estimate falling below the deductible.
On January 4, 2021, the Armstrongs’ counsel sent a notice to State Farm, alleging unfair
and deceptive practices and violations of the Texas Insurance Code, and seeking $100,827.51.
Two weeks later, State Farm responded, maintaining its prior position, but exercising its
statutory right to request an additional inspection of the property. After that inspection, State
Farm provided to the Armstrongs’ counsel a revised estimate, but it still fell below the
On March 8, 2021, the Armstrongs’ counsel sent State Farm a demand under the policy
for an appraisal. The policy allows each party to “select a competent, disinterested appraiser,”
after which the appraisers will “attempt to set the amount of the loss,” and then report to the
parties. ECF No. 14 at 177–78. On July 17, 2021, the appraisers determined the loss to be
$18,872 on a replacement cost basis. Five days later, State Farm notified the Armstrongs’
counsel it would pay the appraisal award less certain minor amounts of $217.48 plus
depreciation ($8,150.90), and the deductible ($2,690), for a net of $7,813.62. State Farm issued
payment of the net amount that day. Later that year, the depreciation issue was resolved in the
Armstrongs’ favor and State Farm paid an additional $8,150.90 to the Armstrongs.
On August 3, 2022, the Armstrongs sued State Farm in state court, asserting claims for
breach of contract, violations of the Texas Deceptive Trade Practices Act and Texas Insurance
Code, breach of the duty of good faith and fair dealing, and fraud. On September 6, 2022, State
Farm removed the case. ECF No. 1. On May 16, 2023, State Farm sent to the Armstrongs an
interest payment of $1,141.17 and paid the additional amount of $217.48. On July 6, 2023, State
Farm moved for summary judgment.
A court must grant summary judgment when the evidence, viewed in the light most
favorable to the nonmovant, shows that there is “no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); Boudreaux v. Swift
Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005). A fact is considered material if it “might affect
the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). A genuine dispute exists if evidence shows that “a reasonable jury could return
a verdict for the nonmoving party.” Id. The movant has the initial burden to provide the basis
for the summary judgment motion by citing to the record. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). If the movant satisfies this initial burden, the nonmovant must “go beyond the
pleadings” to “designate specific facts showing that there is a genuine issue.” Id. at 324 (internal
quotations omitted). If the nonmovant fails to do so, the movant is entitled to summary
judgment. Id. at 331.
A. Breach of Contract
Under Texas law, a claim for breach of contract requires: (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. Certain
Underwriters at Lloyd’s of London v. Lowen Valley View, L.L.C., 892 F.3d 167, 170 (5th Cir.
2018). The Armstrongs argue State Farm breached the insurance policy by withholding statutory
interest for 663 days and never paying their attorneys’ fees. The policy does not provide for
interest or attorneys’ fees, so those items cannot support a breach of contract claim.
The Armstrongs cite as support for their position Randel v. Travelers Lloyds of Texas Ins.
Co., 9 F.4th 264, 267–68 (5th Cir. 2021), but that case undermines their argument. In Randel,
the Fifth Circuit held that “the insurer’s payment of the award bars the insured’s breach of
contract claim premised on a failure to pay the amount of the covered loss.” Id. at 267 (quoting
Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 129 (Tex. 2019); see also Blum’s Furniture Co. v.
Certain Underwriters at Lloyds London, 459 F. App’x 366, 368 (5th Cir. 2012). Neither party
disputes that the Armstrongs accepted payment of the appraisal award. This bars their breach of
B. Extracontractual Claims
Under the Texas Insurance Code, an insured may bring an action against an insurer that
commits “an unfair or deceptive act or practice in the business of insurance” that causes damages
to another. Tex. Ins. Code § 541.151: Jeffrey Roeder, v. Allstate Vehicle and Prop. Ins. Co.,
2023 WL 5985240, at *4 (S.D. Tex. Sept. 14, 2023) (Rosenthal, J.). The Texas Supreme Court
recently held that “the insurer’s payment of the [appraisal] award bars the insured’s . . . common
law and statutory bad faith claims to the extent the only actual damages sought are lost policy
benefits.” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 129 (Tex. 2019). An insured may
recover damages caused by a statutory violation “only if the damages are truly independent of
the insured’s right to receive policy benefits,” and not “predicated on [the loss] being covered
under the insurance policy.” Meisenheimer v. Safeco Ins. Co. of Indiana, 2018 WL 3869573, at
*3 (N.D. Tex. Aug. 15, 2018) (Lynn, J.) (citing USAA Texas Lloyds Co. v. Menchaca, 545
S.W.3d 479, 499–500 (Tex. 2018) (further quotation omitted)). The Armstrongs’ alleged
injuries all flow from the denial of the claim for policy benefits. As a matter of law, their
claimed injuries are not independent of their claims under the policy, so that summary judgment
on such extra-contractual claims must be granted.
The Armstrongs’ defense of their Deceptive Trade Practices Act claim relies entirely on
their arguments supporting their Texas Insurance Code claim, which fails for the same reasons
that the DTPA claim fails. The Armstrongs did not respond to State Farm’s arguments for
summary judgment on their claims for breach of the duty of good faith and fair dealing and
fraud. Timely and full payment of an appraisal award precludes these claims. See Braden v.
Allstate Vehicle & Prop. Ins. Co., No. 4:18-CV-00592-O, 2019 WL 201942, at *5–6 (N.D. Tex.
Jan. 15, 2019); Losciale v. State Farm Lloyds, No. CV 4-17-0016, 2017 WL 3008642, at *2
(S.D. Tex. July 14, 2017); McEntyre v. State Farm Lloyds, Inc., No. 4:15-CV-00213, 2016 WL
6071598, at *6 (E.D. Tex. Oct. 17, 2016) (“Because Plaintiffs’ breach of contract claim fails,
their extra-contractual claims for fraud, bad faith violations under the DTPA and the Texas
Insurance Code also fail.”); United Neurology, P.A. v. Hartford Lloyd’s Ins. Co., 101 F. Supp. 3d
584, 620 (S.D. Tex. 2015), aff’d, 624 F. App’x 225 (5th Cir. 2015)
C. Texas Prompt Payment of Claims Act
State Farm moves for summary judgment on the Armstrongs’ claim for alleged violations
of the Texas Prompt Payment of Claims Act. The Fifth Circuit recently certified the following
question to the Texas Supreme Court: “In an action under Chapter 542A of the Texas Prompt
Payment of Claims Act, does an insurer’s payment of the full appraisal award plus any possible
statutory interest preclude recovery of attorney’s fees?” Rodriguez v. Safeco Ins. Co. of Indiana,
73 F.4th 352, 356 (5th Cir. 2023). The court, in certifying the question, noted that federal courts
are split on this issue, citing to several cases relied upon by State Farm and the Armstrongs.
Therefore, this Court will await the Circuit’s resolution of the certified question.
State Farm’s Motion for Summary Judgment is GRANTED IN PART on all of
Plaintiffs’ claims other than the Texas Prompt Payment of Claims Act claim. As to that claim,
the case is STAYED pending resolution of Rodriguez v. Safeco Ins. Co., supra. The Scheduling
Order is VACATED.
November 13, 2023.
BARBARA M. G. LYNN
SENIOR UNITED STATES DISTRICT JUDGE
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