Herrera v. State Farm Lloyds
Filing
27
MEMORANDUM AND ORDER granting Herrera's 16 Opposed MOTION to Abate and 20 Motion to Compel Appraisal. The case is STAYED pending the completion of the appraisal process outlined in the insurance policy. The parties are ORDERED to advise the Court on the status of the appraisal process 60 days after the entry of this order. The parties are also ORDERED to advise the Court when the appraisal process is complete, at which time the Court will lift the stay. State Farm's 18 Opposed MOTION for Summary Judgment is GRANTED as to the extra-contractual claims discussed in Subsection B. Those claims are DISMISSED. (Signed by Judge George P. Kazen) Parties notified. (dmorales, 5)
United States District Court
Southern District of Texas
o
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
LAREDO DIVISION
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ROSALINDA HERRERA,
Plaintiff,
v.
STATE FARM LLOYDS,
Defendant.
March 18, 2016
David J. Bradley, Clerk
NO. 5:15-cv-148
MEMORANDUM AND ORDER
Pending before the Court are three motions: (1) Plaintiff
Rosalinda Herrera’s (“Herrera”) Motion to Abate (Dkt. 16), (2)
Defendant State Farm Lloyds’s (“State Farm”) Motion for Summary
Judgment (Dkt. 18), and (3) Herrera’s Motion to Compel Appraisal
(Dkt. 20).
Based on the following, the Court will grant Herrera’s
motions and grant State Farm’s summary judgment motion in part.
BACKGROUND
This case involves an insurance contract between Herrera and
State Farm, covering a rental home in southern Laredo, Texas, owned
and managed by Herrera.
Herrera claims the property suffered
“incredible” hail damage on March 30, 2013.
She alleges breach of
contract and other causes of action due to State Farm’s failure to
pay under the contract.
I.
Procedural History
Herrera filed this lawsuit in the 406th Judicial District of
Webb County, Texas, on June 1, 2015.
(Dkt. 1 at p. 15.)
State
Farm was served with process on July 13, 2015, and removed this
case
to
federal
court
on
jurisdiction on July 31, 2015.
the
basis
of
(Id. at p. 1.)
federal
On January 8, 2016,
Herrera invoked her contractual right to appraisal.
1.)
diversity
(Dkt. 16 at p.
The contract’s appraisal clause operates similarly to an
arbitration clause, allowing the parties to appoint third-party
neutrals to determine the amount of loss.
On
January
11,
2016,
Herrera
proceeding pending appraisal.
filed
(Id.)
a
(Dkt. 18-1 at p. 20.)
motion
to
abate
this
State Farm moved for summary
judgment two days later (Dkt. 18), and Herrera moved to compel
appraisal (Dkt. 20) six days after that.
On March 9, 2016, State
Farm moved to compel Herrera to respond to certain discovery
requests concerning the amount of damage and when the damage
occurred.
(Dkt. 26.)
Herrera’s only response to State Farm’s
summary judgment motion is her motion to compel appraisal.
She has
not responded to the merits of State Farm’s summary judgment
motion.
II.
Factual Background
State Farm supports its summary judgment motion with the
following evidence: the insurance contract (Dkt. 18-1), State
Farm’s internal records of the appraisal of Herrera’s property
(Dkt. 18-2), Herrera’s independent appraiser’s findings and other
correspondence between the parties including photos of Herrera’s
property (Dkt. 18-3, 18-4, 18-5), Herrera’s invocation of her
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contractual appraisal rights (18-7), and a signed statement by
State Farm team manager Jennifer Flores summarizing State Farm’s
business records (Dkt. 19).
Since Herrera failed to offer countervailing evidence, the
Court accepts the facts supported by this evidence as undisputed
for the purposes of this motion.
F.2d 172, 174 (5th Cir. 1988).
See Eversley v. MBank Dallas, 843
Herrera first notified State Farm
of the alleged hail damage on March 1, 2015, almost two years after
the alleged damage occurred on March 30, 2013.
23–24.)
(Dkt. 18-2 at p.
State Farm dispatched a claims representative to Herrera’s
property on March 10, 2015.
(Id. at p. 21.)
The representative,
along with Herrera’s contractor and son, inspected the exterior of
the property, finding signs of light hail damage on some sections
of the roof.
(Id. at p. 20–21.)
The representative did not
inspect the interior of the building because Herrera did not claim
any damage to the interior, but he offered to return if any
interior damage was later discovered.
(Id.)
The representative estimated the amount of loss at $499.58,
below
the
insurance
policy’s
deductible
amount.
(Id.)
He
discussed this with Herrera’s son two days after the inspection,
explaining the difference between the covered losses, wear-andtear, and deterioration.
(Id.)
State Farm mailed Herrera its
estimate and partial denial letter that same day.
(Id.)
Other
than a brief phone conversation on March 14, 2015, State Farm did
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not hear from Herrera again until May 27, 2015, when Herrera’s
attorney sent State Farm a letter demanding $29,962.12 under the
Texas Deceptive Trade Practices Act (“DTPA”).
(Id.)
State Farm
responded to this letter, reserving its rights and defenses while
offering to re-inspect the property with Herrera and her attorney.
(Dkt. 18-4 at p. 74.)
Neither Herrera nor her attorney replied
until the instant lawsuit was filed.
(Dkt. 19 at p. 2.)
ANALYSIS
Herrera brings claims against State Farm for negligence,
breach of contract, violations of the DTPA, violations of the Texas
Insurance Code, breach of the common-law duty of good faith and
fair dealing, breach of fiduciary duty, unfair insurance practices,
misrepresentation,
misrepresentation.
claims.
and
common-law
fraud
by
negligent
State Farm moves for summary judgment on all
At the same time, Herrera moves to compel appraisal,
urging the Court to wait until after the appraisal process to rule
on State Farm’s Motion for Summary Judgment.
The Court will grant
summary judgment as to some claims but not the breach-of-contract
claim.
I. Motion for Summary Judgment
A party moving for summary judgment must demonstrate that
there is no genuine issue of material fact and it is entitled to
judgment as a matter of law.
Fed. R. Civ. P. 56(c).
The movant
bears the initial burden of informing the court of the basis of the
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motion and identifying the evidence in support.
Catrett, 106 S.Ct. 2548, 2553 (1986).
Celotex Corp. v.
Once that burden is met, the
non-movant must present sufficient evidence that a reasonable jury
could find for the non-movant.
Fordoche, Inc. v. Texaco, Inc., 463
F.3d 388, 392 (5th Cir. 2006).
When deciding a motion for summary judgment, a court views the
facts in the light most favorable to the nonmovant.
Liberty Lobby, Inc., 106 S.Ct. 2505, 2513 (1986).
Anderson v.
Mere conclusory
allegations are not sufficient to defeat a motion for summary
judgment, Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1994), nor
are
unsubstantiated
assertions,
unsupported speculation.
improbable
inferences,
or
Forsyth v. Barr, 19 F.3d 1527, 1533 (5th
Cir. 1994).
A. Breach of Contract
State Farm claims it is not liable under the contract because
Herrera breached the prompt-notice provision, a condition precedent
to coverage.
(Dkt. 18 at p. 1.)
Herrera does not respond.
A movant seeking summary judgment on an affirmative defense
must establish all the elements of the defense.
Tyler v. Cedar
Hill Indep. Sch. Dist., 426 F. App’x 306, 308 (5th Cir. 2011).
Under Texas law, an insurer is excused from performing under an
insurance contract if the insured commits a material breach of a
prompt-notice provision.
PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d
630, 632 (Tex. 2008).
State Farm must show that (1) Herrera
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breached the contract’s prompt-notice provision, and (2) the breach
was material.
See Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d
750, 755 (Tex. 2013); see also Ridglea Estate Condominium Ass’n v.
Lexington Ins. Co., 415 F.3d 474, 480 (5th Cir. 2005).
The
provision in question reads:
YOUR DUTIES AFTER LOSS. After a loss to which this
insurance may apply, you shall see that the following
duties are performed:
a. give immediate notice to us or our agent . . . .
(Dkt. 18-1 at p. 19.)
When a contract fails to define “immediate notice,” Texas
courts require notice to be given within “a reasonable time.”
Ridglea, 415 F.3d at 479 (citing Stonewall Ins. Co. v. Modern
Exploration, Inc., 757 S.W.2d 432, 435 (Tex.App.–Dallas 1988, no
writ)).
Unreasonable delay is typically a fact question, but when
the relevant facts are not in dispute, a court may find a delay in
notification unreasonable as a matter of law.
Cont’l Sav. Ass’n v.
U.S. Fidelity and Guar. Co., 762 F.2d 1239, 1240 (5th Cir. 1985).
Other federal courts interpreting Texas law have found unreasonable
delays of 6 months, Flores v. Allstate, 278 F.Supp.2d 810, 815
(S.D. Tex. 2003), 6 years, Ridglea, 415 F.3d at 478, and 522 days,
Telez v. Encompass Ins. Co. of Am., No. 5:02-cv-214, 2004 WL 742912
(E.D. Tex. 2004).
Herrera waited approximately 700 days to inform State Farm of
the
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“incredible
damage”
to
her
property.
Herrera
offers
no
explanation
for
this
delay.
The
unreasonable as a matter of law.
Court
finds
this
delay
Therefore, Herrera has breached
the prompt-notice provision.
Next, the Court must decide whether this breach is material.
“[T]he materiality of an insured’s breach is determined by several
factors, including the extent to which the breach deprived the
insurer of the benefit that it reasonably could have anticipated
from the full performance by the insured.”
Greene v. Farmers Ins.
Exchange, 446 S.W.3d 761, 768 (Tex. 2014).
“If the insurer
receives its reasonably anticipated benefit despite the insured’s
breach, the breach is immaterial, the insurer is not prejudiced,
and the insurer is not excused from performance.”
(Id.)
The Fifth Circuit, interpreting Texas law, has held that the
reasonably anticipated benefit of a prompt-notice provision is the
ability
“to
occurrence,
investigate
while
the
the
incident
evidence
is
close
fresh,
in
[]
so
time
to
the
that
it
may
accurately determine its rights and liabilities under the policy
(and take appropriate remedial action).”
Alaniz v. Sirius Int’l
Ins. Corp., 626 F. App’x 73, 78 (5th Cir. 2015).
Further, “in
order for an insured’s breach to defeat coverage, the breach must
prejudice the insurer in some tangible way.”
Berkley Reg’l Ins.
Co. v. Phila. Indem. Ins. Co., 690 F.3d 342, 349 (5th Cir. 2012).
This tangible prejudice must rise above mere inability to use
normal procedures when evaluating the claim, and “courts are
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powerless to bridge the gap between the creation of an environment
in
which
showing.”
prejudice
could
occur
and
the
requisite
prejudice
Tumble Steel Erectors, Inc. v. Moss, 304 F. App’x 236,
244 (5th Cir. 2008).
Despite State Farm’s argument that “there is ample evidence of
prejudice to State Farm caused by Plaintiff’s delay in reporting
her claim” (Dkt. 18 at p. 7), State Farm provides no specific
evidence of prejudice.
Instead, State Farm asks the Court to
bridge the very gap the Fifth Circuit says it cannot cross, arguing
essentially that State Farm must necessarily have been prejudiced
by a two-year delay in reporting the damage.
Certainly, it is
curious that while Herrera claims “incredible damage due to storm
related conditions” (Dkt. 1 at p. 16) and “extreme external and
internal damage” (Id. at p. 20), she did not report the damages for
almost two years.
Nevertheless, there is at least some evidence
that State Farm was not prejudiced.
Its representative was able to
investigate the property, differentiate between hail damage and
wear-and-tear, and determine the amount of loss.
20–23; 18-5.)
a
matter
of
Under these circumstances, the Court cannot find as
law
that
provision was material.
Herrera’s
breach
of
the
prompt-notice
Accordingly, summary judgment will be
denied as to breach-of-contract claim.
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(Dkt. 18-2 at pp.
B. Extra-contractual Claims
State Farm also moves for summary judgment on Herrera’s extracontractual claims.
The Court finds that summary judgment is
appropriate as to all these claims.
1. Negligence
Herrera alleges that State Farm negligently breached a duty to
properly adjust the insurance losses associated with her property.
(Dkt. 1 at p. 19.)
When a duty arises solely under a contract, its
breach gives rise to a cause of action under contract, not under
tort.
Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494–95 (Tex.
1991).
the
Because State Farm’s alleged duty to appraise arises under
insurance
policy,
Herrera
cannot
bring
an
negligence claim alleging breach of this duty.
independent
Accordingly,
summary judgment is proper as to this claim.
2. Texas Deceptive Trade Practices Act (DTPA)
Herrera alleges a variety of violations of the DTPA.
at pp. 20–23.)
(Dkt. 1
The elements of a DTPA claim are “(1) the plaintiff
is a consumer, (2) the defendant engaged in false, misleading, or
deceptive acts, and (3) these acts constituted a producing cause of
the consumer’s damages.”
Doe v. Boys Clubs of Greater Dallas,
Inc., 907 S.W.2d 472, 478 (Tex. 1995).
The undisputed evidence
shows that State Farm sent a representative to Herrera’s property
ten days after she reported the alleged damage.
21.)
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(Dkt. 18-2 at p.
The representative inspected the property, determined the
amount of loss, and relayed that amount to Herrera’s son.
pp. 20–21.)
(Id. at
There is no evidence of any damage-producing “false,
misleading, or deceptive acts.”
Herrera does not even allege
specific wrongful acts, instead relying on conclusory, generalized
allegations.
(Dkt. 1 at pp. 20–23.)
These conclusory allegations
are not sufficient to survive summary judgment.
3. Texas Insurance Code
Herrera
next
alleges
unfair
settlement
practices,
misrepresentation of an insurance policy, and failure to promptly
pay in violation of Tex. Ins. Code §§541.061, 541.060, and 542.058.
(Dkt. 1 at p. 23.)
Mere denial of a claim does not violate the
insurance code if there is a reasonable basis for the denial.
Provident Am. Ins. Co. v. Castaneda, 988 S.W.2d 189, 198 (Tex.
1998).
The evidence shows that State Farm promptly investigated
the insurance
claim
and
denied
the
claim
because
State
Farm
calculated the amount of loss to be below the policy’s deductible.
(Dkt. 18-2 at pp. 18–24.)
unacceptable
to
Herrera,
Although this valuation of the claim was
it
is
not
inherently
unreasonable.
Therefore, State Farm had a reasonable basis for its denial of
Herrera’s claim.
There is no evidence of bad faith on the part of
State Farm, and Herrera’s broad, conclusory allegations are not
sufficient to survive summary judgment.
judgment
is
appropriate
Insurance Code.
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on
Herrera’s
Accordingly, summary
claims
under
the
Texas
4. Common-Law Claims
Herrera alleges breach of the common-law duty of good faith
and fair dealing, breach of fiduciary duty, unfair insurance
practices, misrepresentation, and fraud.
(Dkt. 1 at pp. 25–29.)
These claims simply restate Herrera’s statutory DTPA and Texas
Insurance Code claims, couching them as separate common-law causes
of action.
The
They fail for the same reasons those other claims fail.
evidence
indicates
that
State
Farm
timely
investigated
Herrera’s claim, explained its findings to Herrera’s son and
contractor, and attempted to resolve the claim.
18–24.)
(Dkt. 18-2 at pp.
When Herrera’s attorney notified State Farm of her intent
to sue, State Farm offered to re-inspect the property with Herrera
and her attorney present.
(Dkt. 18-4 at p. 74.)
evidence of bad faith or misrepresentation.
There is no
Herrera once again
relies only on broad, generalized, conclusory allegations that are
not sufficient to survive summary judgment.
Therefore, summary
judgment is appropriate as to these claims.
II.
Herrera’s Motions
Herrera
appraisal.
moves
to
abate
these
proceedings
and
to
compel
On January 8, 2016, Herrera invoked the appraisal
clause contained in the insurance contract at issue.
That clause
reads:
APPRAISAL. If you and we fail to agree on the amount of
loss, either one can demand that the amount of the loss
be set by appraisal. If either makes a written demand for
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appraisal, each shall select a competent, independent
appraiser and notify the other of the appraiser’s
identity within 20 days of receipt of the written demand.
The two appraisers shall then select a competent,
impartial umpire. If the two appraisers are unable to
agree upon an umpire within 15 days, you or we can ask a
judge of a court of record in the state where the
residence premises is located to select an umpire. The
appraisers shall then set the amount of the loss. If the
appraisers submit a written report of an agreement to us,
the amount agreed upon shall be the amount of the loss.
If the appraisers fail to agree within a reasonable time,
they shall submit their differences to the umpire.
Written agreement signed by any two of these three shall
set the amount of the loss. Each appraiser shall be paid
by the party selecting that appraiser. Other expenses of
the appraisal and the compensation of the umpire shall be
paid equally by you and us.
(Dkt. 18-1 at p. 20.)
The Texas Supreme Court strongly favors
enforcing such clauses, holding, “[u]nless the amount of loss will
never be needed . . . appraisals should generally go forward
without preemptive intervention by the courts.”
v. Johnson, 290 S.W.3d 886, 895 (Tex. 2009).
State Farm Lloyds
The Court will
therefore abate this case and order the parties to undergo the
procedure outlined in the appraisal clause.
CONCLUSION
Accordingly, Herrera’s Motion to Abate (Dkt. 16) and Motion to
Compel Appraisal (Dkt. 20) are GRANTED.
This case is STAYED
pending the completion of the appraisal process outlined in the
insurance policy.
The contractual 20-day period in which the
parties must identify their chosen appraiser begins to run from the
date this order is entered.
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Moreover, the parties are ORDERED to advise the Court on the
status of the appraisal process 60 days after the entry of this
order.
The parties are also ORDERED to advise the Court when the
appraisal process is complete, at which time the Court will lift
the stay.
State Farm’s Motion for Summary Judgment (Dkt. 18) is GRANTED
as to the extra-contractual claims discussed above in Subsection B.
Those claims are DISMISSED.
DONE at Laredo, Texas, this 18th day of March, 2016.
___________________________________
George P. Kazen
Senior United States District Judge
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