McClelland et al v. Chubb Lloyd's Insurance Company of Texas et al

Filing 44

MEMORANDUM OPINION AND ORDER, The Court finds that no reasonable jury could find that Chubb Lloyd's violated Insurance Code Chapter 541. Thus, no reasonable jury could find that Chubb Lloyd's violated the DTPA. Accordingly, the DTPA claims will be dismissed. a reasonable jury could not find that Chubb Lloyd's breached its contract with the McClellands based on the evidence presented here. Therefore, for the reasons stated above, the Court will grant defendant Chubb Lloyd's motion for summary judgment as to the contractual claims and the extra-contractual claims. A separate order shall issue granting summary judgment. Signed by Judge Royce C. Lamberth. (wg)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
JAN 3
)

C

)
)

KIRK MCCLELLAND and
TAMRE MCCLELLAND,

WE
BY

0 201?

ç6s DSTRCTCERK
N

DISTRICT OF TEXAS

CPUry

)

Plaintiffs,

)
)

v.

)

Case No: 5:16-cv-00108

)

CHUBB LLOYD'S INSURANCE
COMPANY OF TEXAS, and
ROBERT LYNN PRITCHARD,

)
)

)
)

Defendants.

)

MEMORANDUM OPINION
I.

INTRODUCTION

This case is a dispute over insurance policy coverage and the conduct of the defendant insurer,

Chubb Lloyd's Insurance Company of Texas (Chubb Lloyd's), in its payments to the plaintiff
insureds, Kirk and Tamre McClelland for a covered loss. The McClellands asserted various causes

of action against Chubb Lloyd's and claims adjuster Robert Pritchard: breach of contract,
violations of Sections 541 and 542 of the Texas Insurance Code, violations of the Texas Deceptive

Trade Practices Act (DTPA), unfair insurance practices, and breach of the duty of good faith and
fair dealing. On November 1, 2016, Chubb Lloyd's moved for summary judgment as to those
claims. The Court now considers defendant's Motion [ECF No. 37], plaintiffs' Response [ECF
No. 38], and defendant's Reply [ECF No. 39].

On September 8, 2014, the McClellands' garage apartment at 502 Arcadia Place, San Antonio

Texas was destroyed in a fire. The McClellands were policyholders of a Chubb Lloyd's "Texas
1

Standard Homeowners Policy" covering that unit. Mot. Ex.

1

[ECF No. 37-1] PP. App. 1, 11.

Under the Standard Policy, the limit of liability for covered losses to dwellings or other structures
was "replacement cost settlement" subject to certain limitations and deductions for deprecation.

However, in addition to the Texas Standard Homeowners Policy, the McClellands also purchased
a "Texas Platinum Homeowner's Endorsement." Id. at p. App. 32. The Platinum Endorsement

amended the Standard Policy, augmenting the coverage limits and providing additional protections
against covered losses. Id. One such addition extended the limit on liability for covered losses to
"reconstruction cost even if this amount exceeds the limit of liability for your dwelling or other
structures as shown on the declarations page." Mot Ex. 1, PP. 46. The Platinum Endorsement also
defined "reconstruction cost":

"Reconstruction cost" means the amount required at the time of loss to repair,
replace, or rebuild, whichever is less, at the same location, your dwelling or other
structure, using like design, and the quality of materials and workmanship which
existed at the time of the loss.

"Reconstruction cost" does not include any amount required for:
a.

the excavation, replacement or stabilization of land under or around your
dwelling or any other structure;

b. conforming to any law or ordinance that regulates the repair, replacement,

rebuilding or demolition of your dwelling or any other structure; or
c. removing the debris

of a covered loss or the property that caused a covered loss.

Mot. Ex. 1, Pp. App. 47.

On September 8, 2014, the same day as the fire, the McClellands filed a claim for damage to
the property. Mot. 2. According to Kirk McClelland, Truax Construction submitted an estimate

for the cost of repair at $211,450.00, excluding the cost of the slab, demolition, and haul-off.
Affidavit of Kirk McClelland [ECF No. 3 8-1] 2. Viewed in the light most favorable to plaintiffs,

2

Chubb Lloyd's rejected that estimate in favor of their own estimate. Id. According to the evidence

presented, Chubb Lloyd's paid out $213,527.37 on the claim:

Rebuild estimate
Slab removal
Survey
Survey
Slab replacement
Emergency board up expenses
Garage and Apartment Contents

$106,156.84
$5,500.00
$1,500.00
$363.38
$33,633.88
$1,341.33
$65,031.94

Mot. Ex. 1, p. App. 57. While the survey and board up expenses were paid to a third party

contractor, all other payments were directed to the McClellands. Id "McClelland directly received
$145,290.72, towards the rebuild of the structure." Pls.' Resp. [ECF No. 38] 3.

In contrast, the McClellands have spent $349,402.55 to rebuild the structure. Affidavit of Kirk
McClelland 2. During the rebuild, the McClellands increased the size of the dwelling from 1,204
square feet to 1,584 square feet, an increase of more than 30%. Affidavit of Kirk McClelland 2.

However, the McClellands claim that the increase in square footage "is not the basis for the large
difference in cost of repair that [they] have incurred." Id; see

also Pis.

Resp. 5 ("[T]his increase in

size does not account for the large difference in actual cost to repair and Defendant's estimated

cost.")
The McClellands filed suit, claiming "Defendant Chubb [Lloyd's] failed to perform its
contractual duty to adequately compensate Plaintiffs under the terms of the Policy." Am. Compl.
[ECF No. 6] 3. According to the McClellands, Chubb Lloyd's failed to pay the full proceeds under

the Policy in breach of the insurance contract. Id. Further, plaintiffs alleged Chubb Lloyd's violated

various portions of the Texas Insurance Code:
(1) by making misrepresentations that covered damages to the property were not

covered in violation of TEX.

INS.

CODE

§

541.051, 541.060, and 541.061;

(2) by failing to settle claims in a fair matter in violation of TEX. INS. CODE
§

541 .060(2);

(3) by failing to promptly provide a reasonable explanation

for denial of the claim in violation of TEX. INS. CODE

§

of the basis of the policy

54 1.060(3);

(4) by failing to affirm or deny coverage within a reasonable time in violation TEX. INS.
CODE §

541.060(4);

(5) by refusing to fully compensate plaintiffs under the terms of the policy in violation

of TEX. INS. CODE § 541.060(7);
(6) by failing to acknowledge plaintiffs' claim, begin investigation or request all

information reasonably necessary to investigate plaintiffs' claim within fifteen days
in violation of TEx. INS. CODE

§

542.05 5

(7) by failing to accept or deny the claim within fifteen days in violation of TEX. INS.
CODE

§542.056;

(8) by delaying full payment in violation of TEX. INS. CODE § 542.055; and
(9) by refusing to pay with no good faith basis to deny full payment in violation of the

common law duty of good faith and fair dealing.
Id. at 3-11. The McClellands also alleged the above violations of the Insurance Code as actionable

under the DTPA. Id. at 7.
Chubb Lloyd's removed the action on January 29, 2016. Notice of Removal, ECF No.

1.

On

September 30, 2016, this Court dismissed claims against defendant Pritchard, a claims adjuster for

Chubb Lloyd's, on the basis that he was improperly joined. ECF No. 34. On November 1, 2016,
Chubb Lloyd's moved for summary judgment as to the breach of contract claim, arguing that

plaintiffs "have no evidence Chubb [Lloyd's] failed to pay what was required by the policy." Mot.

4

1.

Specifically, Chubb Lloyd's points to an absence of evidence as to two essential elements of a

breach of contract action: breach and damages. Further, Chubb Lloyd's argues that "[b]ecause

Plaintiffs' contractual claim fails, all of Plaintiffs' extra-contractual claims predicated on the claim
handling also fail." Id. at 2. Chubb Lloyd's also points to an absence of evidence as to two essential

elementscausation and damagesof the extra-contractual claims (violation of the Insurance
Code, DTPA, and common law breach of good faith and fair dealing claims). See Id at 5

("Plaintiffs have no evidence a breach of any duty by Chubb [Lloyd's] caused Plaintiffs to suffer
any damage beyond contractual damages."). Thus, according to Chubb Lloyd's, even if evidence

exists as to contractual damages, that evidence does not raise an issue of material fact as to the
extra-contractual claims
The McClellands respond that it has evidence that additional monies are owed under the policy

which has not been paid. To support this claim, the McClellands point to witnesses that may testify
as to the repair of the property, as well as an Affidavit from Kirk McClelland and billing invoices

from Truax Construction, the McClellands' contractor. Pls.' Resp. 5; see also Ex. A.

III.

LEGAL STANDARD

Under the rules of civil procedure, a court "shall grant summaiy 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
matter of law." Fed. R. Civ. P. 56(a). A party's summary judgment burden depends on whether
they have the burden of proof at trial on the particular claims or defense to which the motion is
addressed. A party who does not have the burden of proof at trial can meet its summary judgment

obligation by pointing the court to the absence of evidence to support a claim or defense. See
Celotex Corp.

v.

Catrett, 477 U.S. 317, 325 (1986). Once it does so, the nonmovant must go

beyond the pleadings and designate specific facts showing a genuine issue of material fact. Id. at
324; Fed. R. Civ. P. 56(c)(l)(B).

A fact is material if it could affect the outcome of a case. Anderson v. Liberty Lobby, Inc., 477

U.s. 242, 247 (1986). A dispute is genuine if the evidence is such that a reasonable jury could
return a verdict in favor of the party with the burden of proof.

Id at 248. Summary judgment is

mandatory if the party with the burden of proof fails to produce evidence as to any essential
element. See Little v. LiquidAir Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam).

Parties may assert such facts by presenting evidence in the record "including depositions,

documents, electronically stored information, affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions, interrogatory answers, or other
materials." Fed. R. Civ. P. 56(c)( 1 )(A). In determining whether a genuine dispute of material fact
exists, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be

drawn in his favor." Anderson, 477 U.S. at 255. However, the mere existence of a scintilla of
evidence is insufficient to raise a genuine issue of material fact. Id. at 251.
IV.

ANALYSIS

As plaintiffs, the McClellands have the burden at trial of proving their claims for breach of

contract and the extra-contractual claims for violations of the duty of good faith and fair dealing,
the Insurance Code, and the DTPA. Therefore, Chubb Lloyd's can meet its summary judgment

burden by pointing to the absence of evidence to support those claims. Celotex, 477 U.S. at 325.
Here, Chubb Lloyd's has asserted an absence of evidence as to both the contractual or extracontractual claims. The Court will consider them separately.

A. The Summary Judgment Evidence

The McClellands point to the insurance policy submitted with defendant's motion. Mot. Ex.

1

[ECF No. 37-1]. They also point to testimony by Kirk McClelland. In an affidavit attached to the

Response, McClelland asserts that defendants incorrectly estimated the rebuild at $106,156.84.
Affidavit of Kirk McClelland 1. The McClellands have also attached Truax Construction's original
estimate for the cost of repair at $211,450.00.

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Pls.' Resp. Ex. 2, ECF No. 3 8-2. According to Mr. McClelland, that estimate was rejected, and the
McClellands received only payment of $106,156.84, and payments for the removal and

replacement of the property's slab:

Defendant's representatives created an estimate which estimated that our property
could be completely rebuilt for $106,156.84. Defendant Chubb paid this estimated
amount even though my wife and I informed Defendant that items in the estimate
were incorrect. Our contractor Truax Construction submitted an estimate to
Defendant Chubb, estimating the cost of repair, excluding the cost of the slab,
demolition, and haul-off to be $211,450.00. Our contractors estimate was rejected
and we have received no additional payments towards the reconstruction of our

property with the exception of a payment for the removal and replacement of the
property's slab.
Affidavit of Kirk McClelland 1-2. McClelland claims to have spent $349,402.55 to rebuild the
structure, though they admit increasing the size from 1,204 square feet to 1,584. Id The invoices
detailing the McClellands expenses are also attached. The Court will consider whether this
evidence raises a genuine issue of material fact as to either the contractual or extra-contractual
claims.
Plaintiffs claim to have identified "multiple witnesses whom have information as to the cost,

method, and scope of repair required at the property," that the "amount of repair incurred may be

testified to by Kirk or Tamre McClelland," and the "necessity, cost, and method of repair can be
testified to by Plaintiffs' contractor Jeff Truax." Pls.' Resp. 5. However, Rule 56 requires
assertions of material facts to be supported by evidence in the record, such as sworn testimony or
other admissible evidence. See Fed. R. Civ. P. 56(c)(1)(B) & (c)(2). Witness lists are not evidence,

and this Court cannot consider whether or how these potential witnesses might testify here.

Accordingly, this Court only considers the summary judgment in the record here: the policy, the
Affidavit of Kirk McClelland, and Truax Construction's invoices. According to plaintiffs, that
evidence "constitutes clear evidence that Plaintiffs have incurred costs which have not been
properly compensated by defendant Chubb." PIs.' Resp. 5. The Court assesses those claims below.
B. Breach of Contract Claims
To prevail on a breach of contract claim in Texas, plaintiffs must prove (1) a valid and

enforceable contract exists, (2) the plaintiff performed or tendered performance, (3) the defendant

materially breached the contract, and (4) the plaintiff sustained damages due to the breach. Valero
Mktg.

& Supply Co.

v.

Kalama Int'l, L.L.C.,

51 S.W.3d 345, 351 (Tex.

App.Houston [ist Dist.]

200 1). Chubb Lloyd's moves for summary judgment dismissing the McClellands' claims for
8

breach of contract, arguing that the plaintiffs have asserted no evidence that Chubb Lloyd's failed
to pay what was required by the policy. Mot.
material fact as to elements

3

and

4.

See

Mot.

1.
3

In other words, that plaintiffs cannot raise a

("Plaintiffs cannot meet their burden to submit

evidence raising a genuine issue of material fact that Chubb materially breached the Policy or that

Plaintiffs suffered damages because of such breach.").
A breach occurs when a party fails to perform a duty required by the contract. Hoover
Gregory, 835

S.W.2d

668, 677

(Tex.

App.Dallas

v.

1992). The McClellands argue that Chubb

Lloyd's was required to pay additional money under the insurance policy, and that Chubb Lloyd's
failure to pay constitutes both breach and damages in the amount of roughly

$243,245.71,

difference in what Chubb Lloyd's paid to the McClellands

($106,156.84)

McClellands paid to Truax Construction ($349,402.55).

the

4-5, 9.

Pis.

Resp.

and what the

But the scant evidence here would not enable a reasonably jury to find a material breach of the
policy or resulting damages. The parties do not dispute whether or not the building was covered,
and Chubb Lloyd's did not deny the McClellands' claim for a covered loss. Indeed, the evidence

provided by

Qth

parties shows that the McClellands' home was covered by a Chubb Lloyd's

policy, that the home burned down, and that that Chubb Lloyd's paid

$106,156.84

to the

McClellands to satisfy policy obligations. The only dispute is over the amount owed under the
policy. That is, the McClellands argue that they were owed more than

$106,156.84.

The policy covered loss valued at the cost of reconstruction, or "the amount required at the
time of loss to repair, replace, or rebuild, whichever is less, at the same location, [the} dwelling or
any other structure, using like design, and the quality of materials and workmanship which existed

at the time of loss." Mot. Ex. 1, pp. App.

47.

Therefore, assuming a rebuild was required, Chubb

Lloyd's owed a duty to pay only the amount required to rebuild a dwelling of like design and

quality. Plaintiffs argue the amount required to rebuild a dwelling of like design and quality is
more than $106,156.84 and point to their own expenses and a Truax Construction estimate as

proof. But the expenses paid cannot be the proper amount for a dwelling of like design or quality;

plaintiffs admit that the dwelling is not of like design or quality. See Affidavit of Kirk McClelland
2 (admitting that the rebuild increased the size

of the dwelling by 380 square feet). The expenses

required to rebuild a dwelling 30% larger than the one that was destroyed is not evidence that the
$106,156.84 was insufficient. A reasonable jury could not look at those expenses and find that

Chubb Lloyd's breached the policy by only paying $106,156.84.
Similarly, the Truax Construction estimate consists of a single page with a "standard

replacement cost/construction cost" break down. But there is no evidence that the standard rates
used by Truax Construction, such as the $250/sf rate for conditioned space, was the amount
required to rebuild a dwelling of like design or quality as the one destroyed here. Similarly, the
estimate contains no reference to the design, materials, or the quality of workmanship of either the
original dwelling or the dwelling to be rebuilt. Further, plaintiffs have not submitted any testimony
from Truax that he considered the design and quality of the dwelling at the time of loss, or that the
estimate was intended to replace the dwelling as it existed at the time of loss. Simply put, there is
no evidence that the Truax estimate is the amount required to rebuild a dwelling of like design or

quality as it existed at the time of loss. A reasonable jury could not look at the Truax estimate and

find that Chubb Lloyd's breached the policy by not paying $211,450.00.
The only remaining evidence that plaintiffs could point to for evidence of breach is the

Affidavit of Kirk McClelland, which states:
[T]he small increase in square footage is not the basis for the large difference in
cost of repair that we have incurred. Defendant Chubb failed to pay the correct
value of many aspects of our home, including windows, doors, appliances, building

10

materials and fixtures. To date, my wife and I have not received any additional
payment for those items.
Affidavit of Kirk McClelland 2. But "[a]ffidavits setting forth 'ultimate or conclusory facts and

conclusions of law' are insufficient to either support or defeat a motion for summary judgment."
Galindo

v.

Precision American Corp., 754 F.2d 1212, 1216 (5th Cir. 1985). McClelland's

conclusory statement that Chubb Lloyd's "failed to pay the correct value" is tantamount to an

affidavit saying "defendant breached." Similarly, the conclusory statement that the increase in size
"is not the basis for the large difference in cost of repair" is conclusory and without evidentiary
support. McClelland's affidavit is insufficient to defeat a motion for summary judgment. No

reasonable jury could look to this affidavit and find that Chubb Lloyd's breached the policy by
paying $106,156.84.
In sum, the McClellands have submitted no evidence under which a reasonable jury could find

that Chubb Lloyd's breached the policy. Accordingly, this Court finds there is no genuine issue of
material fact as to breach, an essential element of breach of contract.1 Therefore, this Court will

grant summary judgment and dismiss the claims for breach of contract against Chubb Lloyd's.
C. Extra-contractual Claims

Chubb Lloyd's also claims that, because the contractual claim fails, "all of Plaintiffs extracontractual claims predicated on the claim handling also fail." Mot. 2. The Court assesses each

extra-contractual claim separately below.
a. Breach of Good Faith and Fair Dealing Claims

Chubb Lloyd's also moved for summary judgment dismissing the McClellands' claims for

violations of the common law duty of good faith and fair dealing. In Texas, insurers have a duty

Because there is no evidence to raise a genuine issue of material fact as to breach, this Court finds it unnecessary to
reach Chubb Lloyd's arguments asserting an absence of evidence to support damages regarding the contractual and
extra-contractual claims.
11

to deal fairly and in good faith with an insured in processing and paying claims. Arnold

v.

Nat'l

County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987). An insurer breaches this duty by

denying or delaying payments

if the insurer knew or should have known it was reasonably clear

the claim was covered. JM Walker LLC

v.

Acadia Ins. Co., 356 Fed. Appx. 744, 747 (5th Cir.

2009). An insured must show that the insurer had no reasonable basis to deny or delay a claim. Id.

Evidence of a bona fide coverage dispute does not rise to the level of bad faith. Id. In other words,

insurers have a right to deny questionable claims without being subject to bad faith liability if the
denial later is determined to be wrongful. So long as an insurer has a reasonable basis to deny or
delay payment of a claim, the insurer is not liable for breach of the duty of good faith and fair

dealing. Lyons v. Millers Cas. Ins. Co. of Tex., 866 S.W.2d 597, 600 (Tex. 1993).
Chubb Lloyd's argues that "Plaintiffs cannot maintain a bad faith cause of action because there
is no evidence Chubb's liability for the claim exceeds what it paid, i.e. Plaintiffs cannot show the

claim decision was unreasonable." Mot. 5. In essence, Chubb Lloyd's argues that, if the

McClellands' have no evidence that Chubb Lloyd's even breached the contract by declining the
Truax estimate, they cannot present evidence that Chubb Lloyd's lacked a reasonable basis in
declining the Truax estimate. This Court agrees. No reasonable jury could look to the evidence

presented here and determine that Chubb Lloyd's lacked a reasonable basis to decline the Truax
estimate. Accordingly, the court will grant summary judgment and dismiss the bad faith claims.

b. Insurance Code Violations
Chubb Lloyd's also moves for summary judgment dismissing the McClellands' claims for

violations of the Texas Insurance Code. The McClellands' claims are broadly plead, and include
violations of both Chapter 541 and Chapter 542 of the Insurance Code. The Court will consider

those claims separately.

12

Chapter 541

i.

Chubb Lloyd's similarly moved for summary judgment dismissing the McClellands' claims
for violations of Texas Insurance Code § § 541.051, 541.060, and 541.061, arguing that there is an

absence of evidence that Chubb Lloyd's caused plaintiffs to suffer damages. Mot. 5. Under
§

541.151, a person who sustains actual damages may bring a private right of action against another

person for engaging in unfair methods of competition, or unfair or deceptive practices in the
business of insurance.

TEx. INS.

CODE

§

541.151. It is an unfair or deceptive act to misrepresent

the terms or benefits promised under a policy.

TEX. INS.

CODE §541.051(1). It is also an unfair or

deceptive act to misrepresent to a claimant a material fact or policy provision,

§

541.060(1); to fail

to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim "to which

the insurer's liability has become reasonably clear,"

§

541.060(2); to promptly provide a

reasonable explanation of the basis for the denial of a claim, § 541.060(3); to fail to affirm or deny
coverage in a reasonable time,

reasonable investigation,
To recover under

§

§

§

541.060(4); or to refusing to pay a claim without conducting a

541.060(7).

541.151, plaintiffs must prove that the unfair or deceptive conduct caused

actual damages. See TEX.

INS.

CODE

an action against another person

§

541.151 ("A person who sustains actual damages may bring

for those damages caused by the other person

.

. .

."). The

McClellands correctly assert that the wrongful refusal to pay an insured's claim "causes damages
as a matter of law in at least the amount of the policy benefits wrongly withheld." Vail

v.

Texas

Farm Bureau Mut. Ins. Co., 754 S.W.2d 129, 136 (Tex. 1988). But, as noted above, there is no
evidence in the record that would allow a reasonable jury to find that Chubb Lloyd's wrongfully

withheld policy benefits here. Thus, there is no evidence that would allow a reasonable jury to find
that Chubb Lloyd's caused actual damages to the McClellands.

13

Further, "Texas courts have clearly ruled that these extra-contractual tort claims require the
same predicate for recovery as bad faith causes of action in Texas." Higginbotham

v.

State Farm

Mut. Auto Ins. Co., 103 F.3d 456,460 (5th Cir. 1997) (citing Emmert v. Progressive County Mutual

Insurance Co., 882 S.W.2d 32, 36 (Tex.

App.Tyler

1994, writ denied)). In other words, if the

bad-faith claim fails, the extra-contractual claims fail. Insurers are not faced with tort suits under
Chapter 541 for challenging a claim of coverage if there was a reasonable basis for denial of that
coverage. Id. 2 As noted above, no reasonable jury could look to the evidence presented here and

determine that Chubb Lloyd's lacked a reasonable basis to decline the Truax estimate. Thus, the
evidence presented here fails to raise a genuine issue of material fact as to the Chapter 541 claims.

Accordingly, those claims will be dismissed.
ii. Chapter 542

Chubb Lloyd's argues that it is entitled to summary judgment as to the Chapter 542 Prompt

Payment Act claims "[b]ecause Plaintiffs have no evidence of the covered loss." Mot. 4. This is a

confusing argument. Chubb Lloyd's own evidence establishes that there was a covered loss under
the policy and that Chubb Lloyd's paid $213,527.37 pursuant to the policy for structure loss, slab

removal, dwelling rebuild, board up expenses, and the destroyed contents of the apartment. See
Mot. 4; see also Mot. Ex.,

1

pp. App. 57-58. Conceivably, this could be construed as an argument

that plaintiffs have no evidence to support their measure of the covered loss: either the $211,450.00
Truax estimate or the $349,402.55 actually spent. The Court addresses both possible arguments.
The Texas Insurance Code imposes an obligation to acknowledge receipt of the claim,

commence an investigation of the claim, and request all items the insurer reasonably believes at
the time will be required. TEX. INS. CODE

§

542.055. Similarly, the Code imposes an obligation to

2

Importantly, a wrOngful rejection can trigger prompt payment liability under Chapter 542 of the Texas Insurance
Code. Higginbotham, 103 F.3d at 461 (construing Tex. Ins. Code Art. 3.62, which was recodified as Chapter 542).

14

notify a claimant in writing of the acceptance or rejection of a claim no later than 15 days after the
insurer receives those items.

TEX. INS.

CODE

§

542.056. Insurers must notify the insured of any

reason for delay, or of any reason for a rejection of the claim. Id. Insurers in violation of these
provisions are liable, in addition to the amount of the claim, 18% annual interest on the claim plus
reasonable attorney's fees. Tex. Ins. Co.

§

542.060. To recover under the Prompt Payment Act, a

party must establish three elements: (1) a claim under an insurance policy, (2) the insurer's liability
for the claim, and (3) the insurer's failure to follow one or more sections of the statute with respect
to the claim. Weiser-Brown Operating Co.

v. St.

(5th Cir. 2015) (quoting GuideOne Lloyds Ins. Co.
822, 830-31 (Tex.

Paul Surplus Lines Ins. Co., 801 F.3d 512, 518
v.

First Baptist Church ofBedford, 268 S.W.3d

App.Fort Worth 2008, no pet.)).

Chubb Lloyd's correctly suggests that "insurance agencies are required to pay

. . .

[Prompt

Payment Act] damages only after having first been found liable for the claim." Tremago, L.P.

v.

Euler-Hermes American Credit Indem. Co., 602 Fed. Appx. 981 (Tex. 2015) (quoting Amine

v.

Liberty Lloyds of Tex. Ins. Co., No. 01-06-00396CV, 2007 WL 2264477, at *5 (Tex.

App.

Houston [1st Dist.] 2007, no pet.). However, evidence from both parties shows there was a claim
under the policy and that Chubb Lloyd's was liable forand paidthat claim. Chubb Lloyd's has
not disputed its liability for the McClellands' claims under the policy. Rather, it has disputed the
amount required to satisfy that liability. Similarly, the McClellands base their Chapter 542 claims
on the assertion that the $213,527.23 that Chubb Lloyd's paid out under the policy was insufficient,

but not that Chubb Lloyd's denied coverage altogether. See Pls.' Resp. 6 ("[A]dditional money is
owed under the policy, money which has not bee [sic] paid by Defendant.")
Further, the McClellands have provided no evidence that Chubb Lloyd's failed to investigate

or provide any written notice required by Chapter 542, or that Chubb Lloyd's delayed payment of

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their claim. In contrast, Chubb Lloyd's presents evidence that shows a September 30, 2014
payment of $106,156.84 based on Chubb Lloyd's rebuild estimate. Mot. Ex. 1, p. App. 57. That
payment was only 22 days after the McClellands submitted their claim. Additional payments for
slab removal/replacement and replacement of the apartment contents were made in November 6,
2014, February 3, 2015, February 18, 2015, March 9, 2015, and August 12, 2015. There is no
evidence as to how or why these payments were untimely or might otherwise violate Chapter 542,

other than the McClelland' s allegation that they were not enough. Accordingly, the Court construes

plaintiffs' Chapter 542 claims as alleging prompt payment violations based on Chubb Lloyd's
refusal to pay the Truax estimate or the actual expenses.
As noted above, there is no evidence presented here that would allow a reasonable jury to find

that Chubb Lloyd's was liable for the additional benefits sought here. Therefore, to the extent that
the McClellands assert Chapter 542 violations based on additional payments to which they claim
to be entitledpayments for which this Court finds no evidence to

supportthose claims are

dismissed. No reasonable jury could find that Chubb Lloyd's violated the Insurance Code in failing

to pay claims with no evidentiary support. Accordingly, plaintiffs' motion for summary judgment
as to the Chapter 542 claims is granted.
c. DTPA Claims

Violations of the Insurance Code are also actionable under the DTPA's tie-in statute
provisions.

See TEx. Bus.

&

COMM. CODE

§

17.50 ("A consumer may maintain an action where

any of the following constitute a producing cause of economic damages or damages for mental

anguish.. . the use or employment by any person of an act or practice in violation of Chapter 541,
Insurance Code."). For the reasons articulated above, this Court finds that no reasonable jury could

find that Chubb Lloyd's violated Insurance Code Chapter 541. Thus, no reasonable jury could find

that Chubb Lloyd's violated the DTPA. Accordingly, the DTPA claims vili be dismissed.

CONCLUSION

V.

In sum, a reasonable jury could not find that Chubb Lloyd's breached its contract with the

McClellands based on the evidence presented here. Similarly, a reasonably jury could not find that

Chubb Lloyd's breached the common law duty of good faith and fair dealing or violated either
Texas Insurance Code Chapter 541 or Texas Insurance Code Chapter 542. Therefore, for the
reasons stated above, the Court will grant defendant Chubb Lloyd's motion for summary judgment
as to the contractual claims and the extra-contractual claims.

A separate order shall issue granting summary judgment.

Date:

c

(f
I

oyce C. Lamberth
United States District Judge

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