Ganim v. Zurich American Insurance Company
Filing
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MEMORANDUM AND OPINION entered: The motion to abate is denied. (Docket Entry No. 20). The motion to dismiss is granted in part. (Docket Entry No. 22). All claims except Ganims breach-of-contract and § 541.060(a)(3) claims are dismissed, with prejudice, because amendment would be futile. (Signed by Judge Lee H Rosenthal) Parties notified.(LisaEddins, 4)
United States District Court
Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
KHALIL GANIM,
Plaintiff,
v.
ZURICH AMERICAN INSURANCE
COMPANY,
Defendant.
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February 05, 2024
Nathan Ochsner, Clerk
CIVIL ACTION NO. H-23-1897
MEMORANDUM AND OPINION
The plaintiff, Khalil Ganim, alleges that his property insurer, Zurich American Insurance
Company, underpaid his claim for property damages from Winter Storm Uri. (Docket Entry No.
21 at ¶¶ 8–9). Ganim moves to abate the case pending the appraisal provided for in the parties’
contract. (Docket Entry No. 20). Zurich opposes the motion to abate on the ground that Ganim
has waived his right to invoke appraisal. (Docket Entry No. 23). Zurich also moves to dismiss
the extra-contractual claims in Ganim’s second amended complaint. (Docket Entry No. 22).
Based on the record, the pleadings, the briefs, and the applicable law, the motion to abate
is denied. The motion to dismiss is granted in part. The reasons are set out below.
I.
The Legal Standards
A.
Waiver of Appraisal Rights
Texas insurance policies frequently include provisions requiring or allowing appraisal to
resolve disputes about loss amounts. See State Farm Lloyds v. Johnson, 290 S.W.3d 886, 888–89
(Tex. 2009). “An appraisal clause ‘binds the parties to have the extent or amount of the loss
determined in a particular way.’” Id. at 895 (quoting In re Allstate Cty. Mut. Ins. Co., 85 S.W.3d
193, 195 (Tex. 2002)); see also Lundstrom v. United Servs. Auto. Ass’n–CIC, 192 S.W.3d 78, 87
(Tex. App.—Houston [14th Dist.] 2006, pet. denied) (“The effect of an appraisal provision is to
estop one party from contesting the issue of damages in a suit on the insurance contract, leaving
only the question of liability for the court.”). An appraiser must “decide the ‘amount of loss,’ not
[] construe the policy or decide whether the insurer should pay.” Johnson, 290 S.W.3d at 890.
“[U]nless the ‘amount of loss’ will never be needed . . . appraisals should generally go forward
without preemptive intervention by the courts.” Id. at 895.
The contractual right to appraisal may be waived. The Texas Supreme Court has explained
that:
[To] constitute waiver [of the right to appraisal] the acts relied on must be . . .
reasonably calculated to induce the assured to believe that . . . compliance by him
with the terms and requirements of the policy is not desired, or would be of no
effect if performed. The acts relied on must amount to a denial of liability, or a
refusal to pay the loss.
In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 407 (Tex. 2011) (quoting Scottish
Union & Nat. Ins. Co. v. Clancy, 8 S.W. 630, 632 (Tex. 1888)). “Waiver requires intent, either
the intentional relinquishment of a known right or intentional conduct inconsistent with claiming
that right.’” Id. (quoting In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex. 2006)).
“[W]hile an unreasonable delay is a factor in finding waiver, reasonableness must be
measured from the point of impasse.” Id. at 408. An impasse is “a mutual understanding that
neither [party] will negotiate further.” Id. at 410. Determining whether the parties are at an
impasse “requires an examination of the circumstances and the parties’ conduct, not merely a
measure of the amount of time involved in seeking appraisal.” Id. at 408. “An impasse is not the
same as a disagreement about the amount of loss. Ongoing negotiations . . . do not trigger a party’s
obligation to demand appraisal. Nor does an insurer’s offer of money to cover damages necessarily
indicate a refusal to negotiate further . . . .” Id.
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“[M]ere delay is not enough to find waiver; a party must show that it has been
prejudiced.” Id. at 411. “[P]rejudice to a party may arise in any number of ways that demonstrate
harm to a party’s legal rights or financial position.” Id.; see also Perry Homes v. Cull, 258 S.W.3d
580, 597 (Tex. 2008) (prejudice for the purpose of finding a waiver of arbitration is “the inherent
unfairness in terms of delay, expense, or damage to a party’s legal position” (quoted in Universal
Underwriters, 345 S.W.3d at 411)); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 46 n.5 (1st Cir.
2005) (“[A] party should not be allowed purposefully and unjustifiably to manipulate the exercise
of its arbitral rights simply to gain an unfair tactical advantage over the opposing party.”
(quoted in Universal Underwriters, 345 S.W.3d at 411)); Menorah Ins. Co., Ltd. v. INX
Reinsurance Corp., 72 F.3d 218, 222 (1st Cir. 1995) (finding prejudice when a party “incurred
expenses as a direct result of [an opponent’s] dilatory behavior” (quoted in Universal
Underwriters, 345 S.W.3d at 411)).
Waiver “is an affirmative defense and the party asserting it bears the burden of proof.” In
re State Farm Lloyds, Inc., 170 S.W.3d 629, 634 (Tex. App.—El Paso 2005, orig. proceeding).
Waiver may be a fact question, but it “becomes [a question] of law” when the facts are undisputed
or “clearly established.” Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996).
“The trial court may determine whether an appraisal has been waived as a matter of law at the
preliminary stages of litigation.” Laas v. State Farm Mut. Auto. Ins. Co., No. 14-98-00488-CV,
2000 WL 1125287, at *7 (Tex. App.—Houston [14th Dist.] Aug. 10, 2000, no pet.) (unpublished).
B.
Rule 12(b)(6) and Rule 9(b)
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be
granted.” FED. R. CIV. P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a),
which requires “a short and plain statement of the claim showing that the pleader is entitled to
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relief.” FED. R. CIV. P. 8(a)(2). “[A] complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Rule 8 “does not require
‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation.” Id. at 678 (quoting Twombly, 550 U.S. at 555). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S.
at 556). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more
than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S.
at 556).
“A complaint ‘does not need detailed factual allegations,’ but the facts alleged ‘must be
enough to raise a right to relief above the speculative level.’” Cicalese v. Univ. Tex. Med. Branch,
924 F.3d 762, 765 (5th Cir. 2019) (quoting Twombly, 550 U.S. at 555). “Conversely, when the
allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic
deficiency should be exposed at the point of minimum expenditure of time and money by the
parties and the court.” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (alterations omitted)
(quoting Twombly, 550 U.S. at 558).
A court reviewing a motion to dismiss under Rule 12(b)(6) may consider “(1) the facts set
forth in the complaint, (2) documents attached to the complaint, and (3) matters of which judicial
notice may be taken under Federal Rule of Evidence 201.” Inclusive Cmtys. Project, Inc. v.
Lincoln Prop. Co., 920 F.3d 890, 900 (5th Cir. 2019).
Rule 9(b) provides that, “[i]n alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions
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of a person’s mind may be alleged generally.” FED. R. CIV. P. 9(b). “At a minimum, Rule 9(b)
requires allegations of the particulars of time, place, and contents of the false representations, as
well as the identity of the person making the misrepresentation and what he obtained thereby. Put
simply, Rule 9(b) requires ‘the who, what, when, where, and how’ to be laid out.” Benchmark
Elec., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003) (citation and quoting reference
omitted).
II.
The Motion to Abate
Zurich argues that Ganim’s delays have waived his right to invoke appraisal. The court
agrees. Ganim received the final payments on his claim in April 2021. (Docket Entry No. 23-1 at
3–4). Ganim filed this lawsuit two years later. Ganim does not explain why he did not invoke
appraisal during those two years. Nor does he explain why he waited six more months after filing
suit to invoke appraisal. The delay does not appear to be explained by negotiations between the
parties. Ganim did not notify Zurich of his complaint until Zurich was served with this lawsuit.
(Id. at 4). Ganim’s delay is inconsistent with an intention to exercise his appraisal rights. Gulf
Ins. Co. v. Carroll, 330 S.W.2d 227, 232 (Tex.Civ.App.—Waco 1959, no writ) (upholding a jury’s
finding that a delay of four months and one day was unreasonable); Sanchez v. Prop. & Cas., Ins.
Co. of Hartford, No. CIV. A. H-09-1736, 2010 WL 413687, at *8 (S.D. Tex. Jan. 27, 2010)
(holding that a delay of more than ten months was an “intentional relinquishment” of insurer’s
right to appraisal).
Ganim’s delay was prejudicial to Zurich because during that time, Zurich has responded to
Ganim’s complaint, participated in discovery, and filed three motions to dismiss, all steps and
expenses that could have been avoided had Ganim invoked appraisal before filing suit. Ganim
has waived its right to appraisal. The motion to abate is denied.
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III.
The Motion to Dismiss
The court previously dismissed Ganim’s extra-contractual claims for failure to satisfy the
heightened pleading standard of Federal Rule of Civil Procedure 9(b):
Zurich alleges three categories of misrepresentations in support of his claims for
breach of the duty of good faith and fair dealing, Texas Deceptive Trade Practices
Act, Chapter 541 of the Texas Insurance Code, and common-law fraud. First, he
alleges that Zurich misrepresented the amount of loss that his property sustained
from the freeze. Second, he alleges that Zurich misrepresented that the policy
covered freeze damage. Third, he alleges that Zurich misrepresented that it would
conduct a reasonable investigation of any loss.
The context—the who, what, when, where and how—of these alleged
misrepresentations is unclear from Ganim’s complaint. The allegations do not
satisfy Rule 9(b). If Ganim chooses to replead these allegations, he must specify
whether the alleged misrepresentations were made before Zurich issued the policy,
such as in promotional materials or in communications with Zurich representatives;
in the policy language; or after Zurich issued the policy, but outside the four corners
of the policy, such as in communications with Zurich during the claims process. To
the extent Ganim alleges that Zurich failed to disclose any material facts, he must
allege what material facts Zurich failed to disclose. To the extent Ganim alleges
false advertising under Chapter 541, he must allege what the advertisements were
and what was false about them.
(Docket Entry No. 18) (citations omitted).
Ganim’s second amended complaint does not correct the deficiencies identified in his first.
A.
Breach of the Duty of Good Faith and Fair Dealing
Ganim alleges that Zurich breached the duty of good faith and fair dealing by failing to
reasonably investigate his property damage. (Docket Entry No. 21 at ¶ 37). Gamin alleges that
“the defendant insurer created a false exclusion basis to fully deny the plaintiff’s freeze damage
claim, obstructing any reasonable investigation of the claim. The refusal to pay any of this covered
claim displays the defendant insurer’s lack of diligence.” (Id.). He also alleges that Zurich’s
“failure to adequately and fairly examine and assess the plaintiff’s claim, while knowing or should
have known [sic] through reasonable diligence that its liability was reasonably evident, signifies a
violation of the duty of good faith and fair dealing.” (Id. at ¶ 38).
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These allegations are conclusory and do not state a claim upon which relief can be granted.
Ganim does not allege specific ways in which Zurich’s investigation was unreasonable. Ganim’s
claim for breach of the duty of good faith and fair dealing is dismissed, with prejudice because
further amendment would be futile.
B.
Texas Deceptive Trade Practices Act
Ganim alleges that Zurich violated the Texas Deceptive Trade Practices Act through its
“tie in” provision, TEX. BUS. & COM. CODE § 17.50(a)(4), by violating the Texas Insurance Code.
(Docket Entry No. 21 at ¶ 40). Ganim alleges that Zurich violated the DTPA by:
a.
Claiming the policy had benefits and qualities it does not have;
b.
Stating the policy confers rights and solutions it does not have;
c.
Omitting known information about the policy at purchase intending to
induce the plaintiff into a deal they would not have entered if disclosed; and
d.
Pursuing an unfair course of conduct.
(Id. at ¶ 41). According to Ganim, Zurich “continually informed the plaintiff they would cover
freeze damages.” (Id. at ¶ 42). Gamin’s second amended complaint, like his last complaint, fails
to allege “the who, what, when, and where” behind this fraud allegation. Benchmark, 343 F.3d at
724. Ganim’s DTPA claims are dismissed with prejudice, because his continued failure to cure
the pleading deficiencies indicates that further amendment would be futile.
C.
The Texas Prompt Payment of Claims Act
Ganim alleges that Zurich violated the Texas Prompt Payment of Claims Act, TEX. BUS. &
COM. CODE § 542.051 et seq., in the following ways:
44.
Within 15 days of the claim notice, the defendant insurer did not:
a.
Acknowledge receipt, violating TEX. INS. CODE § 542.055(a)(1).
See Dunn v. Southern Farm Bur. Cas. Ins. Co., 991 S.W.2d 467,
472 (Tex. App.—Tyler 1999, pet. denied);
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b.
Record the acknowledgement date, means and content, violating
TEX. INS. CODE § 542.055(c);
c.
Initiate a reasonable investigation, instead performing an
unreasonable, outcome-driven probe lacking deference to the
plaintiff’s evidence, violating TEX. INS. CODE § 542.055(a)(2); and
d.
Seek needed information from the plaintiff, relying solely on
predetermined biased conclusions, violating TEX. INS. CODE §
542.055(a)(3).
45.
Additionally, upon receiving all reasonably required information, the
defendant insurer did not:
a.
Accept or reject by the 15th business day, violating TEX. INS. CODE
§ 542.056(d);
b.
Provide reasonable justification for underpayment, violating TEX.
INS. CODE § 542.056(c);
c.
Request more time and explain why, violating TEX. INS. CODE §
542.056(d);
d.
Pay within 5 days of the plaintiff meeting conditions, instead
underpaying contrary to the plaintiff’s estimator, violating TEX. INS.
CODE § 542.057(b); and
e.
Pay within 60 days despite the plaintiff’s full cooperation, violating
TEX. INS. CODE § 542.058(a).
(Docket Entry No. 21 at ¶¶ 44–45).
Ganim’s allegations that Zurich violated § 542.055 are conclusory. Ganim does not allege
the date that he filed his claim with Zurich, or the date that Zurich acknowledged receipt or initiated
its investigation. Instead, he alleges merely that he “promptly contacted the Insurance Company .
. . to initiate a claim and resolve the incurred damage. Subsequently, [Zurich] furnished the
Plaintiff with a claim number, 159005315.” (Id. at ¶ 9).
Ganim’s allegations that Zurich violated §§ 542.056, 542.057, and 542.058 are also
conclusory.
Ganim does not allege the date that Zurich received all reasonably required
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information, the date that Zurich notified him of the acceptance or rejection of his claim, or the
date that Zurich paid the claim.
D.
Chapter 541 of the Texas Insurance Code
Ganim alleges that Zurich violated Chapter 541 of the Texas Insurance Code, TEX. BUS. &
COM. CODE § 541.001 et seq., in the following ways:
49.
Regarding the plaintiff’s claim, the defendant insurer engaged in these
improper settlement tactics (TEX. INS. CODE § 541.060):
a.
Failing to attempt a prompt, fair, and equitable settlement once
liability was reasonably evident;
b.
Failing to timely provide a reasonable basis in the policy, facts, or
law for denying and underpaying the claim; and
c.
Failing within reasonable time to deny claim coverage.
50. Defendant Insurer engaged in the following settlement practices on Plaintiff’s
claim (TEX. INS. CODE § 541.061):
a.
made an untrue material fact statement on coverages and loss
amount;
b.
making a statement in such manner as to mislead a reasonably
prudent person to a false conclusion of a material fact such as
occurred here.
(Docket Entry No. 21 at ¶¶ 49–50).
Ganim fails to state a claim under § 541.060(a)(2)(A) because he does not allege facts
specifying how the payments Zurich made were not “prompt, fair, and equitable.” Instead, he
alleges, in conclusory fashion, that “despite being fully aware of [Zurich’s] liability to the plaintiff
under the policy, [Zurich] neglected to make a genuine effort to fairly settle the plaintiff’s claim.”
(Id. at ¶ 14). To withstand a motion to dismiss, Ganim must allege facts allowing the reasonable
inference that Zurich knew or should have known that it owed Ganim more than the amount it paid
him. Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 56 (Tex. 1997). Ganim does not allege facts
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about the extent of the damage, the estimated cost of replacement or repair, or why the money
Zurich paid was insufficient.
Ganim states a claim under § 541.060(a)(3), which makes it an “unfair settlement
practice[]” to “fail[] to promptly provide to a policyholder a reasonable explanation of the basis in
the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim or offer of a
compromise settlement of a claim.” Ganim alleges that Zurich made an incomplete payment
without “any accompanying justification for the partial payment” and without “communicat[ing]
any plans for future settlements or payments that would encompass the full extent of the losses
covered under the policies.” (Docket Entry No. 21 at ¶ 15).
Ganim fails to state a claim under § 541.060(a)(4), which makes it an unfair settlement
practice to fail within a reasonable time to “affirm or deny coverage of a claim to a policyholder.”
Again, Ganim does not allege when he filed the claim or when Zurich affirmed or denied coverage.
He alleges merely that he “did not receive a timely written response from the defendant indicating
acceptance or rejection of the entire claims.” (Docket Entry No. 21 at ¶ 16). These allegations are
conclusory and insufficient.
Ganim fails to satisfy the heightened pleading standard applicable to his § 541.061 claims.
Again, Ganim does not allege the “the who, what, when, where, and how” behind the alleged fraud.
Benchmark, 343 F.3d at 724.
Ganim’s counsel explains that his “good conscience” and
“commitment to fundamental ethical principles of honesty and veracity” prevent him from
“construct[ing] false allegations.” (Docket Entry No. 24 at ¶¶ 12, 14). That is all well and good,
but claims that cannot be adequately pleaded without fabrication should not be pleaded at all. See
FED. R. CIV. P. 11.
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IV.
Conclusion
The motion to abate is denied. (Docket Entry No. 20). The motion to dismiss is granted
in part. (Docket Entry No. 22). All claims except Ganim’s breach-of-contract and § 541.060(a)(3)
claims are dismissed, with prejudice, because amendment would be futile.
SIGNED on February 5, 2024, at Houston, Texas.
________________________________
Lee H. Rosenthal
United States District Judge
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