Losciale v. State Farm Lloyds
MEMORANDUM AND ORDER entered. It is ORDERED that Plaintiffs Motion for Summary Judgment [Doc. # 15] is DENIED, Defendants Motion for Summary Judgment [Doc. # 11] is GRANTED, and this case is DISMISSED WITH PREJUDICE. The Court will issue a separate final judgment. (Signed by Judge Nancy F Atlas) Parties notified. (wbostic, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
STATE FARM LLOYDS,
July 14, 2017
David J. Bradley, Clerk
CIVIL ACTION NO. 4-17-0016
MEMORANDUM AND ORDER
This insurance case is before the Court on the Motion for Summary Judgment
(“Motion”) [Doc. # 9] filed by Defendant State Farm Lloyds (“State Farm”), to which
Plaintiff Lee Losciale filed a Response and Cross-Motion for Summary Judgment
[Doc. # 15], State Farm filed a Combined Response to Plaintiff’s Cross-Motion and
Reply in support of its own Motion [Doc. # 16], and Plaintiff filed a Reply [Doc.
# 17]. Having reviewed the full record and the applicable legal authorities, the Court
grants Defendant’s Motion and denies Plaintiff’s Cross-Motion.
The material facts in this case are undisputed. Plaintiff’s property (the
“Property”) was insured under a State Farm Homeowners Policy (the “Policy”) for
approximately $221,500.00. Plaintiff filed an insurance claim on April 6, 2016,
reporting that the covered Property was damaged during a storm on April 19, 2015.
State Farm conducted an initial inspection of the Property on April 15, 2016 and, at
Plaintiff’s request, conducted a second inspection on May 17, 2016, and a third
inspection on November 2, 2016. Based on the inspector’s report that the storm
damage to the Property was below the Policy’s deductible amount, State Farm denied
Plaintiff’s claim on November 7, 2016.
On November 29, 2016, Plaintiff sued State Farm in Texas state court. Plaintiff
asserted claims for breach of contract1 and violations of the Texas Insurance Code.
Defendant filed a timely Notice of Removal on January 5, 2017.
At the joint request of the parties, the case was abated pending completion of
the appraisal process. On April 10, 2017, the appraisers issued an award establishing
the amount of Plaintiff’s loss on an actual cash value basis at $22,239.43. The
appraisal award established the amount of loss of $25,129.92 on a replacement cost
basis. To date, Plaintiff has not submitted any repairs/replacement documentation.
On April 17, 2017, State Farm notified Plaintiff that it would pay the appraisal
award loss amount based on the actual cash value award. Simultaneously, State Farm
tendered to Plaintiff through her counsel the appraisal award (less depreciation and
deductible) of $17,809.43.
Plaintiff has withdrawn his breach of contract claim. See Response [Doc. # 15], p. 2
STANDARD FOR SUMMARY JUDGMENT
Rule 56 of the Federal Rules of Civil Procedure provides for the entry of
summary judgment against a party who fails to make a sufficient showing of the
existence of an element essential to the party’s case, and on which that party will bear
the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Little v. Liquid
Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); see also Curtis v. Anthony,
710 F.3d 587, 594 (5th Cir. 2013). Summary judgment “should be rendered if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” FED. R. CIV. P. 56(a); see Celotex, 477 U.S. at 322-23;
Curtis, 710 F.3d at 594.
State Farm seeks summary judgment in this case based on its full and timely
payment of the appraisal award. Plaintiff does not dispute that State Farm paid the
appraisal award fully, and there is no dispute that State Farm timely paid the award
within five business days after giving Plaintiff notice that it would pay the appraisal
award. See TEX. INS. CODE § 542.027; Policy, ¶ 8, Exh. to Motion [Doc. # 9-1], ECF
Under long-standing Texas law, “if the appraisal award has been reached in
accordance with the terms of the insurance policy and the insurer has timely tendered
the full amount awarded by the appraisers, that conduct is legally sufficient to entitle
the insurer to summary judgment on the breach-of-contract claim against it.” See
United Neurology, P.A. v. Hartford Lloyd’s Ins. Co., 101 F. Supp. 3d 584, 619 (S.D.
Tex.), aff’d, 624 F. App’x 225 (5th Cir. 2015), and cases cited therein. Similarly,
because timely and full payment of an appraisal award precludes a breach of contract
claim, extra-contractual claims for fraud, bad faith, and violations of the DTPA and
the Texas Insurance Code also fail. See id. at 620; McEntyre v. State Farm Lloyds,
Inc., 2016 WL 6071598, *6 (E.D. Tex. Oct. 17, 2016).
Plaintiff argues that a recent decision from the Texas Supreme Court
“overruled” the vast legal authority regarding the effect of full and timely payment of
an appraisal award. In USAA Tex. Lloyds Co. v. Menchaca, a case not involving
payment of an appraisal award, the Texas Supreme Court attempted to clarify prior
rulings regarding the relationship between breach of contract claims under an
insurance policy and extra-contractual claims such as those arising under the Texas
Insurance Code. See Menchaca, __ S.W.3d __, 2017 WL 1311752, *1 (Tex. Apr. 7,
2017). In Menchaca, the jury found that the insurance company complied with the terms
of the policy, but found also that the insurer engaged in unfair business practices. The Texas
Supreme Court clarified:
that  an insured cannot recover policy benefits as damages for an insurer’s
statutory violation if the policy does not provide the insured a right to receive
those benefits.  An insured who establishes a right to receive benefits under
the policy can recover those benefits as actual damages under the Insurance
Code if the insurer’s statutory violation causes the loss of the benefits.  And
an insured can recover benefits as actual damages under the Insurance Code
even if the insured has no contractual right to those benefits if the insurer’s
conduct caused the insured to lose that right.  If an insurer’s statutory
violation causes an injury independent of the insured’s right to recover policy
benefits, the insured may recover damages for that injury even if the insured
is not entitled to receive benefits under the policy. But if the policy does
entitle the insured to benefits, the insurer’s statutory violation does not permit
the insured to recover any actual damages beyond those policy benefits unless
the violation causes an injury that is independent from the loss of the benefits.
 Finally, an insured cannot recover any damages based on an insurer’s
statutory violation if the insured had no right to receive benefits under the
policy and sustained no injury independent of a right to benefits.
Menchaca, 2017 WL 1311752, at *12. Plaintiff does not identify on which of these “rules”
he relies as support for his Insurance Code claims against State Farm. The Court finds that
none apply in this case given State Farm’s full and timely payment of the appraisal award.
The payment of the appraisal award satisfies Plaintiff’s right to receive benefits under the
Policy and, therefore, there is no “loss of benefits.” Plaintiff has not identified nor presented
evidence of an independent loss that does not flow or stem from the original denial of policy
benefits. As a result, Menchaca does not allow Plaintiff to pursue his Texas Insurance Code
claims following full and timely payment of the appraisal award.
Additionally, Menchaca does not purport to alter the long-standing case law
regarding the effect of full and timely payment of an appraisal award. PostMenchaca, only one Texas Court of Appeals has considered the issue, and it held that
prior case law applied in the appraisal context, explaining again that full and timely
payment of an appraisal award generally precludes both breach of contract and extracontractual claims.
See, e.g., Nat’l Security Fire & Cas. Co. v. Hurst, 2017
WL 2258243 (Tex. App. – Houston [14th Dist.] May 23, 2017).
The Hurst court explained that where, as here, the appraisal award has not been
set aside, “full and timely payment of an appraisal award under the policy precludes
an award of penalties under the Insurance Code’s prompt payment provisions as a
matter of law.” Id. at *5. The full and timely payment likewise precludes extracontractual claims under the DTPA, the Texas Insurance Code, and for a breach of the
duty of good faith and fair dealing. See id. at *5-*6. “In order to recover any
damages beyond policy benefits, the statutory violation or bad faith must cause an
injury that is independent from the loss of benefits.” Id. at *6 (citing Menchaca, 2017
WL 1311752 at *11-*12). In order to allow an extra-contractual claim to proceed, the
“independent injury” must be one that does not “‘flow’ or ‘stem’ from the denial of
policy benefits.” Id. As recognized by the courts in both Menchaca and Hurst, “a
successful independent-injury claim would be rare, and we in fact have yet to
encounter one.” Id. (citing Menchaca, 2017 WL 1311752 at *12). In this case,
Plaintiff has neither alleged nor presented evidence of any independent injury that
does not “flow” or “stem” from the initial denial of policy benefits. As a result, the
full and timely payment of the appraisal award precludes Plaintiff’s extra-contractual
claims in this case.
Plaintiff argues, correctly, that the Texas Supreme Court in Menchaca clarified
that its decision in Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 129
(Tex. 1988), remains intact. In Vail, the issue was whether policy benefits improperly
withheld were actual damages in relation to a claim of unfair claims settlement
practices. See Menchaca, 2017 WL 1311752 at *8 (citing Vail, 754 S.W.2d at 136).
The Texas Supreme Court in Vail held that the policy benefits were actual damages
under the Texas Insurance Code. See id. In Plaintiff’s case, however, there are no
“improperly withheld policy benefits” because the policy benefits were paid in full by
Defendant’s payment of the appraisal award. As a result, Plaintiff’s reliance on the
Vail decision is misplaced.
CONCLUSION AND ORDER
On April 17, 2017, State Farm made full and timely payment of the appraisal
award. As a result, based on clearly-established Texas law which has not been
changed by the Texas Supreme Court’s Menchaca decision, Plaintiff’s breach of
contract and extra-contractual claims are precluded as a matter of law. It is, therefore,
ORDERED that Plaintiff’s Motion for Summary Judgment [Doc. # 15] is
DENIED, Defendant’s Motion for Summary Judgment [Doc. # 11] is GRANTED,
and this case is DISMISSED WITH PREJUDICE. The Court will issue a separate
SIGNED at Houston, Texas, this 14th day of July, 2017.
NAN Y F. ATLAS
STATES DISTRICT JUDGE
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