Hahn v. Bowling et al

Filing 68

ORDER GRANTING IN PART AND DENYING IN PART 50 Motion for Summary Judgment; GRANTING 52 Motion to exclude Testimony of Plaintiffs Expert Matt B. Phelps. Signed by Judge Robert Pitman. (jch)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
WACO DIVISION
STEPHEN HAHN
Plaintiff,
v.
UNITED FIRE AND CASUALTY
COMPANY,
Defendant.

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6:15-CV-00218 RP

ORDER
Before the Court are Defendant United Fire and Casualty Company’s Motion for Summary
Judgment, (Dkt. 50), Motion to Exclude the Expert Testimony of Matt B. Phelps, (Dkt. 52), and
Objections to Evidence Attached to Plaintiff’s Response to Defendant’s Motion for Summary
Judgment, (Dkt. 55). After reviewing these filings, the responsive pleadings thereto, the record in
this case, and the relevant case law, the Court issues the following order.
I. BACKGROUND
Plaintiff Stephen Hahn filed this action against Defendants Bettina Bowling and United Fire
and Casualty Company (“United Fire”) in the 146th District Court in Bell County on March 27,
2015. (Pl.’s Orig. Pet., Dkt. 1-4, at 1). Plaintiff brought claims for breach of contract, breach of duty
of good faith and fair dealing, and statutory violations of the Texas Unfair Compensation and Unfair
Practices Act, the Texas Prompt Payment of Claims Act, the Texas Deceptive Trade Practices Act
(“DTPA”), and the Texas Insurance Code. (Pl.’s Orig. Pet, Dkt. 1-4, at 5–11). Generally, Plaintiff
alleged in the petition that he had entered a contract with United Fire to provide him an insurance
policy for commercial property located on Stan Schluter Loop, in Killeen, Texas, (“the Property”),
and that United Fire and Defendant Bowling, an insurance adjuster for United Fire, wrongfully

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denied coverage after a storm caused damage to the roof of the Property. (Pl.’s Orig. Pet, Dkt. 1-4,
at 2–5).
Defendant United Fire removed the action to federal court on July 1, 2015, contending that
Bowling, who, like Plaintiff, is a citizen of Texas, was fraudulently joined in the action in order to
defeat diversity jurisdiction. (Def.’s Not. of Removal, Dkt. 1, ¶¶ 4–6). No motion to remand was
filed, and the parties later agreed to dismiss Defendant Bowling. (Agreed Mot. Dismiss, Dkt. 39).
On January 23, 2017, Defendant United Fire filed a motion for summary judgment on all of
Plaintiff’s claims. (Def.’s Mot. Summ. J., Dkt. 50). United Fire makes five arguments in support of
its motion for summary judgment. First, it argues that it is entitled to summary judgment on
Plaintiff’s breach of contract claims because Plaintiff will be unable to meet his burden to allocate
between covered and non-covered damage to his property, and because Plaintiff’s claim falls within
the cosmetic damage exclusion in his insurance policy. Next, United Fire argues that it is entitled to
summary judgment on Plaintiff’s bad faith and statutory claims because Plaintiff cannot prevail on
his breach of contract claims, because there was a reasonable basis for United Fire’s denial of
Plaintiff’s claim; and because there is no evidence that United Fire knowingly violated the Texas
Insurance Code.
Plaintiff filed a response to United Fire’s motion for summary judgment on February 6,
2017, arguing that the damage to his roof does not fall under the cosmetic damage exclusion to his
insurance policy, or that at least, he has provided sufficient evidence that the damage was not
cosmetic to create a genuine issue of material fact. (Pl.’s Resp., Dkt. 54, at 6–7). Further, Plaintiff
acknowledges that extra-contractual damages are barred if the insurance policy does not provide
coverage of the claim, but asserts that United Fire has not denied that hail damage is covered.
Plaintiff also argues that, based on the testimony of one of United Fire’s adjusters, jurors could
conclude United Fire “knowingly” violated the Texas Insurance Code.

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Soon after it moved for summary judgment, United Fire filed a Motion to Exclude the
Testimony of Plaintiff’s Expert Matt B. Phelps. (Def.’s Mot. to Exclude, Dkt. 52). United Fire
argues that the definition of “damage” on which Phelps relies will confuse the jury and be unduly
prejudicial. It also asserts that Phelps’s opinions should be excluded because they are based on data
and a methodology with a high potential rate of error, that have not been peer reviewed or tested,
and that are not generally accepted in the relevant scientific community.
United Fire invoked these same arguments in an objection to Plaintiff’s submission of Phels’
expert report as evidence in response to United Fire’s motion for summary judgment. (Def.’s Obj.,
Dkt. 55, 1–2). It also argued that the estimate of alleged damage provided by Jerry Bird should be
deemed inadmissible as unsworn hearsay evidence. It moved for both Phelps’s report and the
estimates from Bird to be stricken from the summary judgment record. Plaintiff responded to
United Fire’s motion to exclude Phelps’s testimony, arguing that Phelps’s report is admissible, but
did not file a response to United Fire’s objections.
The Court will first address Defendant United Fire’s objections to Plaintiff’s summary
judgment evidence and its related motion to exclude Plaintiff’s expert testimony. The Court will then
address Defendant’s motion for summary judgment.
II. EVIDENTIARY OBJECTIONS & MOTION TO EXCLUDE
Defendant United Fire submits objections to expert testimony of Matt B. Phelps and Jerry
Bird filed by Plaintiff Hahn in response to United Fire’s motion for summary judgment, and has
filed a motion to exclude the testimony of Phelps at trial.
A. Objections to Phelps’s Report & Motion to Exclude Phelps’s Testimony
Defendant makes three objections to the Phelps Report attached to Plaintiff’s summary
judgment response: (1) that it is inadmissible pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc.,
509 U.S. 579 (1993); (2) that it is inadmissible “as hearsay as it is an unsworn, unverified expert

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report that is not supported by affidavits;” (3) that the conclusions and opinions about whether data
and weather events contained in the report should be excluded because Phelps is not a
meteorologist and “he relies on unsourced, ambiguous weather data” to form conclusions about
weather damage at the Property. (Def.’s Obj., Dkt. 55, at 2). Defendant has also filed a separate
motion to exclude Phelps’s testimony under Daubert, primarily arguing that Phelps’s conclusions are
based on a definition of “damage” that conflicts with the term as it is used in the insurance policy,
and additionally contesting the methodology he uses. (Def.’s Mot. Exclude, Dkt. 52, at 1). Plaintiff
suggests that the definition of “damage” Phelps relies on is substantially similar to the one at issue in
the policy, and argues that Phelps’s methods are generally accepted in the scientific community. (Pl.’s
Resp. to Mot. Exclude, Dkt. 57, at 5). The Court will first address Defendant’s objection and motion
under Daubert, then, if it deems Phelps’s testimony admissible, turn to Defendant’s other objections.
Federal Rule of Evidence 702 has been amended to incorporate the principles first
articulated by the Supreme Court in Daubert, as well as those enunciated in the many later cases
applying Daubert, including Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999). See Fed. R. Evid.
702 Advisory Committee Notes. Rule 702 now provides:
A witness who is qualified as an expert by knowledge, skill, experience, training, or
education may testify in the form of an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized knowledge will help the
trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the
case.
Fed. R. Evid. 702. “Daubert standards apply not merely at trial, but also on summary judgment.” Gen.
Star Indem. Co. v. Sherry Brooke Revocable Trust, No. CIV.A. SA-99-CA-1105, 2001 WL 34063890, at *9
(W.D. Tex. Mar. 16, 2001); see also Kumho Tire Co., 526 U.S. at146 (affirming district court decision
granting motion for summary judgment in light of its decision to exclude expert testimony pursuant
to Daubert).
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Federal Rule of Evidence 703 also provides guidance for the admissibility of expert
testimony. Specifically, it provides:
An expert may base an opinion on facts or data in the case that the expert has been
made aware of or personally observed. If experts in the particular field would
reasonably rely on those kinds of facts or data in forming an opinion on the subject,
they need not be admissible for the opinion to be admitted. But if the facts or data
would otherwise be inadmissible, the proponent of the opinion may disclose them to
the jury only if their probative value in helping the jury evaluate the opinion
substantially outweighs their prejudicial effect.
Fed. R. Evid. 703.
Following Daubert and its progeny, trial courts are to act as “gatekeepers,” overseeing the
admission of scientific and nonscientific expert testimony. See Kumho Tire Co., 526 U.S. at 147. Trial
courts must make “a preliminary assessment of whether the reasoning or methodology underlying
the testimony is scientifically valid and of whether that reasoning or methodology properly can be
applied to the facts in issue.” Daubert, 509 U.S. at 592–93. In carrying out this task, district courts
have broad latitude in weighing the reliability of expert testimony for admissibility. See Kumho Tire
Co., 526 U.S. at 152 (recognizing trial court must have considerable leeway in determining
admissibility of expert testimony). The district court’s responsibility “is to make certain that an
expert, whether basing testimony upon professional studies or personal experience, employs in the
courtroom the same level of intellectual rigor that characterizes the practice of an expert in the
relevant field.” Id. The party seeking to have the district court admit expert testimony must
demonstrate that the expert’s findings and conclusions are based on the scientific method and are
reliable. See Moore v. Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998).
Plaintiff designated Phelps to testify “regarding the inspection, analysis, reports,
investigation, and evaluation [of] Plaintiff’s property damage, the cause and origin of the roof
damage, [and] the scope of repairs required.” (Pl.’s First Am. Rule 26(e) Designation, Dkt. 46, at 1).

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Defendant first argues that Phelps’s testimony should be excluded because he uses a definition of
“damage” that conflicts with the term used in the policy.
The parties agree that a “Cosmetic Damage Exclusion” applies to Plaintiff’s insurance policy
with Defendant. It provides:
5. Cosmetic or Appearance Loss or Damage
We will not pay for loss or damage caused by the peril of hail that alters the physical
appearance of any part of any roof covering made of metal but does not result in
damage that allows the penetration of water through the roof covering or does not
result in the failure of the roof covering to perform its intended function to
keep out elements over an extended period of time. This exclusion applies to roof
coverings including the roofing material exposed to weather, its underlayments
applied for moisture protection and all flashings required in application of the roof
covering.
Hail damage to roof coverings that results in damage that will allow the penetration
of water through the roof covering or that results in the failure of the roof
covering to perform its intended function to keep out elements over an extended
period of time is not subject to this exclusion.
(Def.’s Mot. Summ J., Dkt 51, App. 49; Pl.’s Resp. Mot. Summ. J., Dkt. 54-1, App. 23). In other
words, damage that affects the appearance, but not proper function, of the roof is expressly
excluded under Plaintiff’s policy. (See id.).
Phelps’s report directly addresses the definition of “damage” he uses to form his opinions.
He explains:
To determine what is damaged we must first define what damage means.
Oxford defines damage as: physical harm caused to something in such a way
as to impair its value, usefulness, or normal function, and unwelcome or
detrimental effects. The United States District Court of South Dakota . . .
found that damage is “physical harm caused to something in such a way as to
impair its value, usefulness, or normal function, commonly associated as
causing unwelcome or detrimental effects.” . . . . The damages described and
data analysis contained within this report are based upon this definition of
damage.
(Pl.’s Resp. Mot. Summ. J., Dkt. 54-3, App. 109). Because Phelps’s definition includes damage that
impairs the “value” or otherwise causes “unwelcome or detrimental effects,” it could encompass

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cosmetic damage. (See id.). Phelps goes on to conclude in his report that “[t]he metal roof and vent
caps on the subject property have been damaged and must be replaced.” (Id. at App. 131). He
further reasons that “[b]ased upon a reasonable degree of certainty, it is more likely than not that the
observed damage is a result of the subject storm event.” (Id. at App. 131). In light of Phelps’s
definition of damage, however, it would be impossible for the Court or a jury to determine whether
the damage he is discussing in his analysis or conclusion is damage that is covered by the policy
applicable in this case. In other words, under Rule 702(d), Phelps’s report indicates that he has not
reliably applied the principles and methods he employs to the facts of this case, which include the
relevant policy.
Plaintiff points to Phelps’s deposition testimony to argue that Phelps’s analysis is based on
the appropriate definition of damage. At his deposition, Phelps states that he did not make a
determination as to whether or not the value of the roof was impaired, but only its functionality or
“performance,” (Phelps Dep. 171:16–24, Dkt. 57-1, at App. 11). The Court finds this testimony
questionable and unreliable. First, Phelps contradicts this testimony both in his report and earlier
within the same deposition. In his report he states that “[t]he damages described and data analysis
contained within this report are based upon” the definition of “damage” included in his report,
which includes impairment to the “value” of the roof. (Pl.’s Resp. Mot. Summ. J., Dkt. 54-3, App.
109). In his deposition, Phelps initially agreed that his conclusions were based upon the roof’s
“value, usefulness, or normal function,” and, when pressed to differentiate between those various
types of damages, explained that he could “not really address that other than what it says in the
definition” he used in his report. (Phelps Dep. 171:16–24, Dkt. 57-1, at App. 11). Phelps’s later
suggestion that his assessment of the damage was based on the functionality of the roof came only
after some suggestive questioning by Plaintiff’s counsel.

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Second, in his report, Phelps provides no basis for the Court to evaluate the methodology or
reasoning behind his later assertion that the roof was functionally damaged by the storm at issue.
Phelps’s analysis employs mathematical calculations to determine the amount of energy, in joules,
that would have been exerted by a 1.75 inch in diameter hailstone hitting the roof of the Property
while the wind was blowing at 67 miles per hour. 1 His calculations take into account various forces
and factors to make this determination, including the approximate size of the hail, its density, 2 its
terminal velocity due to gravity, the effect of the wind on the hail’s downward force, and the pitch of
the roof. (Def.’s Mot. Exclude, Dkt. 52, at App. 21–24). Phelps also analyzed the roof of the
Property. This analysis included Phelps’s counts of the number of screws on various parts of the
roof, the number of hail impact points on the roof, and Phelps’s measurement of the approximate
size of those impact points. (Id. at App. 26). But these two parts of Phelps’s data—the calculations
regarding the amount of energy with which the hail may have hit the roof, and the number and size
of impact points on the roof—say little or nothing about whether the roof of the Property was
functionally damaged by the hail. Phelps has not, for example, accounted for the roofing material in
his calculations, nor has he indicated that he observed impact points at which water could penetrate
the roof. Certainly, the roofing material itself plays a significant role in whether a certain amount of
force (from falling hail) causes damage. 3 For example, bullet-proof glass might exhibit no damage
whatsoever when subject to the forces at issue in Phelps’s calculations, while drywall might be
completely and functionally ruined when subjected to the same forces. As Defendant points out,
Hailstones of 1.75 inches in diameter were the maximum observed in the general area; 67 mile per hour wind was the
maximum wind speed. (Pl.’s Resp. Mot. Exclude, Dkt. 57-1, at App. 27). Defendant notes that there is little evidence
that any hail 1.75 inches in diameter fell at the Property. (Def.’s Mot. Exclude, Dkt. 52, at 7).
2 Defendant disputes the accuracy of Phelps’s use of the density of water as a substitute for the density of ice (or more
specifically, hail). (Def.’s Mot. Exclude, Dkt. 52, at 7). The Court concludes that it need not address that issue at this
time.
3 Defendant argues more specifically that physical testing on actual roofing materials is necessary to draw conclusions
about the damage hail caused to the roof. (See Def.’s Mot. Exclude, Dkt. 52, at 9). While the Court agrees that physical
testing would address the deficiency in Phelps’s analysis, it is not convinced that, with the proper data, an appropriate
analysis could not be made solely using mathematical calculations. Regardless, Phelps has not attempted such
calculations here.
1

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“whether a hailstone supposedly released 4 or 40 joules of energy is meaningless without knowing
how much energy the roofs were designed to withstand.” (Def.’s Reply to Mot. Exclude, Dkt. 59, at
4 n.12). Further, one can easily imagine visual or cosmetic “damage” that is not functional
“damage”—most minor hail damage to the hoods of cars would fall into this category. Phelps’s data,
analysis, and calculations simply do not speak to whether or not the damage to the Property is
cosmetic or functional damage, thus the Court cannot accept the testimony from his deposition
suggesting otherwise, nor can it conclude that he has reliably applied his principles and methods to
the facts of this case. The Court will thus sustain Defendant’s objection to Plaintiff’s use of Phelps’s
report in opposition to its motion for summary judgment and grant Defendant’s motion to exclude
the expert testimony of Matt B. Phelps.
B. Objections to Bird Evidence
Defendant also objects to the estimate of Jerry Bird, of BMJ Estimators, Inc. (“Bird
Estimate”), attached to Plaintiff’s response to Defendant’s motion for summary judgment. (Pl.’s
Resp. Mot. Summ. J., Dkt. 54-6, App. 222–252). The Bird Estimate contains invoice-like estimates
of the replacement cost of the Property’s roof, along with supporting photographs. (Id.). First,
Defendant notes that Bird was “designated . . . as a testifying expert” by Plaintiff, but argues that the
Bird Estimate is an “unsworn, unverified expert report[]” and inadmissible as summary judgment
evidence. (Def.’s Obj., Dkt. 55, at 2). Pursuant to Federal Rule of Civil Procedure 26(a)(2)(B), for a
witness “retained or specially employed to provide expert testimony,” a party must provide a report
“prepared and signed by the witness.” Fed. R. Civ. P. 26(a)(2)(B). 4 This report must also contain:

A witness who is “not required to provide a written report,” which are generally non-retained experts, need only
submit a disclosure which states “(i) the subject matter on which the witness is expected to present evidence . . . ; and (ii)
a summary of the facts and opinions to which the witness is expected to testify.” Fed. R. Civ. P. 26(a)(2)(C). Plaintiff has
not shown or suggested that Bird is a witness not required to provide a written report. Beane v. Utility Trail Mfg. Co., No.
2:10-CV-781, 2013 WL 1344762 at *3 (W.D. La. Feb. 25, 2013) (“[T]he distinction between a 26(a)(2)(B) and a
26(a)(2)(C) expert is that 26(a)(2)(C) experts’ conclusions and opinions arise from firsthand knowledge of activities they
were personally involved in before the commencement of the lawsuit. . . .”)
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(i) a complete statement of all opinions the witness will express and the basis and
reasons for them;
(ii) the facts or data considered by the witness in forming them;
(iii) any exhibits that will be used to summarize or support them;
(iv) the witness’s qualifications, including a list of all publications authored in the
previous 10 years;
(v) a list of all other cases in which, during the previous 4 years, the witness testified
as an expert at trial or by deposition; and
(vi) a statement of the compensation to be paid for the study and testimony in the
case.
Id. If a party fails to provide a report pursuant to Rule 26, the court must strike evidence provided
by that witness unless the failure is substantially justified or harmless. See Fed. R. Civ. P. 37(c)(1) (“If
a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is
not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a
trial, unless the failure was substantially justified or is harmless.”). Interestingly, however, Defendant
did not argue that Plaintiff failed to produce an expert report for Bird pursuant to Rule 26, only that
what is attached to Plaintiff’s summary judgment response was an unsigned and unsworn report. As
Defendant has not argued that Bird’s report was not produced, presumably Plaintiff did produce a
report, he simply did not attach it to his response. (See Pl.’s First Am. Rule 26(e) Designation, Dkt.
46, at 2 (“Please find the reports prepared by Jerry Bird, email correspondence with invoices,
curriculum vitae of Jerry Bird and other documents related to Jerry Bird’s role in this case as
required by Federal Rule 26 attached hereto as Exhibit B.”). Because there is no suggestion that
Plaintiff failed to comply with Rule 26 with respect to Bird, the Court will not exclude the Bird
Estimate as summary judgment evidence on that basis.
Further, the rule governing motions for summary judgment, Federal Rule of Civil Procedure
56, does not require that summary judgment evidence be signed or sworn. Instead, it envisions that
various sorts of materials and documents may be submitted as summary judgment evidence. Fed. R.
Civ. P. 56(c)(1)(A) (“A party asserting that a fact cannot be or is genuinely disputed must support
the assertion by . . . citing to particular parts of materials in the record, including depositions,
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documents, electronically stored information, affidavits or declarations, stipulations . . . , admissions,
interrogatory answers, or other materials.”). While parties “may object that the material cited to
support or dispute a fact cannot be presented in a form that would be admissible in evidence,” see
Fed. R. Civ. P. 56(c)(2), Defendant has not done so here, and it appears that the Bird Estimate could
be presented in a form that would be admissible, particularly if Bird were called as a witness.
Therefore, the Court overrules Defendant’s objection that the Bird Estimate should be struck
because it is unsworn and unsigned.
Second, Defendant explains that “Plaintiff has designated Bird as a testifying expert only as
to the ‘reasonable and necessary costs of repair to Plaintiff’s property,’” and objects to the Bird
Estimate to the extent it is used to show causation. (Def.’s Obj., Dkt. 55, at 2). Plaintiff only cites to
the Bird Estimate once in his response, however, and does so to assert that the only damages he
seeks are for the replacement of his roof. (Pl.’s Resp., Dkt. 54, at 6). Thus, the Court overrules
Defendant’s second objection to the estimate as the evidence is not used to show causation.
III. MOTION FOR SUMMARY JUDGMENT
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure
only “if the movant shows there is no genuine dispute as to any material fact and that the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is “genuine” only if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). “A fact issue is ‘material’ if its resolution could affect the
outcome of the action.” Poole v. City of Shreveport, 691 F.3d 624, 627 (5th Cir. 2012).
The party moving for summary judgment bears the initial burden of “informing the district
court of the basis for its motion, and identifying those portions of [the record] which it believes
demonstrates the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). “[T]he moving party may [also] meet its burden by simply pointing to an absence of

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evidence to support the nonmoving party’s case.” Boudreaux v. Swift Transp. Co., 402 F.3d 536, 544
(5th Cir. 2005). Where the movant bears the burden of proof on an affirmative defense such as
release or limitations, the movant “must establish beyond peradventure all of the essential elements
of the defense to warrant judgment in his favor.” Addicks Servs., Inc. v. GGP-Bridgeland, LP, 596 F.3d
286, 293 (5th Cir. 2010). The burden then shifts to the nonmoving party to establish the existence of
a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585–87
(1986); Wise v. E.I. Dupont de Nemours & Co., 58 F.3d 193, 195 (5th Cir. 1995). “After the nonmovant has been given the opportunity to raise a genuine factual issue, if no reasonable juror could
find for the non-movant, summary judgment will be granted.” Miss. River Basin Alliance v. Westphal,
230 F.3d 170, 174 (5th Cir. 2000).
The parties may satisfy their respective burdens by tendering depositions, affidavits, and
other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). The Court will
view this evidence in the light most favorable to the non-movant, Rosado v. Deters, 5 F.3d 119, 122
(5th Cir. 1993), and should “not make credibility determinations or weigh the evidence.” Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).
III. DISCUSSION
As the Court previously explained, Defendant moves for summary judgment Plaintiff’s
breach of contract claim, bad faith, and statutory claims. Because Defendant argues, in part, that
Plaintiff’s bad faith and statutory claims are precluded because he cannot prevail on his breach of
contract claim, the Court will first address Defendant’s motion with respect to that claim.
A. Breach of Contract
“In Texas, ‘[t]he essential elements of a breach of contract action are: (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.’” Smith Int'l,

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Inc. v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007) (quoting Valero Mktg. & Supply Co. v. Kalama
Int'l, LLC, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no pet.).
Further, “Texas courts interpret insurance policies according to the rules of contract
construction.” de Laurentis v. United Services Auto. Ass’n, 162 S.W.3d 714, 721 (Tex.App.—Houston
[14th Dist.] 2005, pet. denied); Am. States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir.1998). Thus,
like with any other contract, the primary concern of the court in construing the insurance policy is to
determine the parties’ intentions as expressed in the contract. See Gonzalez v. Denning, 394 F.3d 388,
392 (5th Cir. 2004); see also Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 311–12 (Tex.
2005). In determining the scope of coverage, the court examines the policy as a whole to ascertain
the true intent of the parties. Utica Nat. Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex.
2004).
Defendant argues that it is entitled to summary judgment on Plaintiff’s breach of contract
claims because Plaintiff will be unable to meet his burden to allocate between covered and noncovered damage to his property; and because Plaintiff’s claim falls within the cosmetic damage
exclusion in his insurance policy.
1. Allocation Between Covered and Non-Covered Perils
Defendant first argues that Plaintiff fails to provide evidence sufficient to distinguish
between covered and non-covered perils—in particular, damages caused by “defective maintenance
or construction,” which, it asserts, are damages not covered by the policy. (Def.’s Mot. Summ J.,
Dkt. 50, at 9). Notably, Defendant fails to point to language in the policy that provides for such an
exclusion. After the Court’s review of the policy, however, it has identified two provisions that may
be applicable. The first, Subsection 2, of “Exclusions” in the “Causes of Loss – Special Form”
attached to the policy, provides:
We will not pay for loss or damage caused by or resulting from any of the
following. . . . (1) Wear and tear; (2) Rust or other corrosion, decay, deterioration,
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hidden or latent defect or any quality in property that causes it to damage or destroy
itself.
(Def.’s Mot. Summ J., Dkt. 52-1, at App. 37). Next, in Subsection 3 of that same part of the policy
the contract provides:
We will not pay for loss or damage caused by or resulting from any of the
following: . . . Faulty, inadequate or defective: . . . Design, specifications,
workmanship, repair, construction, renovation, remodeling, grading, compaction; . . .
Materials used in repair, construction, renovation or remodeling; or . . . Maintenance.
(Def.’s Mot. Summ J., Dkt. 52-1, at App. 38–39). Subsection 3, however, further explains that “if an
excluded cause of loss [under this subsection] results in a Covered Cause of Loss, we will pay for the
loss or damage caused by that Covered Cause of Loss.” (Id.). Neither party has addressed either of
these provisions in their summary judgment briefing.
Defendant argues that, under the doctrine of concurrent causes, Plaintiff has the burden to
show that the loss he claims is covered, and, in turn, must be able to provide sufficient evidence to
allocate between loss created by covered causes and loss created by non-covered causes. In Texas,
the doctrine of concurrent causes provides that where covered and non-covered perils combine to
create a loss, the insured is entitled to recover only that portion of the damage caused solely by the
covered peril. E.g., Travelers Indemnity Co. v. McKillip, 469 S.W.2d 160, 162 (Tex.1971). The insured is
therefore required “to provide evidence upon which a jury or court can allocate damages between
those that resulted from covered perils and those that did not.” Nat’l Union Fire Ins. of Pittsburgh, Pa.
v. Puget Plastics Corp., 735 F. Supp. 2d 650, 669 (S.D. Tex. 2010) (citing Wallis v. United Servs. Auto.
Ass’n, 2 S.W.3d 300, 303 (Tex. App.—San Antonio, 1999, pet. denied)). Failure to do so it fatal to an
insured’s claim. Id.
In light of evidence Defendant has attached that the loss at issue was created, at least in part,
by other causes of loss (including foot crimps that dented the roof to allow water ingress, improper
flashing near the front of the roof, and improper flashing where air conditioner conduits penetrated

14

the roof) (Def.’s Mot. Summ. J., Dkt 51-1, at App. 89), Defendant argues that Plaintiff cannot meet
his burden to allocate the loss.
The Court rejects Defendant’s argument for two reasons. First, Plaintiff submits evidence in
support of his assertion that all claimed loss was covered. For example, Plaintiff’s property manager
testified that prior to the storm, all past roof leaks had been sufficiently repaired, but that after the
storm, the property began experiencing significant leaks in areas that had never leaked before—
suggesting the leaks were caused by the storm alone. (See Pl.’s Resp. Mot. Summ. J., Dkt. 54-7, at
App. 270–275) (deposition of C.J. Rogers)). Plaintiff also submits as evidence a letter from the first
insurance adjuster who visited the Property, who said it was “in good, well maintained condition.”
(See Pl.’s Resp. Mot. Summ. J., Dkt. 54-1, at App. 2). While Defendant has evidence to the contrary,
it would be difficult to conclude from the competing evidence that Plaintiff cannot allocate his loss
between covered or non-covered causes at trial—or, in other words, that there is no genuine dispute
of material fact that Plaintiff cannot allocate his loss. Allocation of loss need not be made with
mathematical precision—there simply must be some reasonable basis on which a jury can evaluate
what percentage of loss was created by the covered cause of loss. Wallis, 2 S.W.3d at 304. Thus even
assuming that all loss caused by faulty repairs is non-covered—and the Court turns to that
assumption in a moment—the Court is unconvinced, based on the competing evidence, that
Plaintiff will not be able to allocate between covered and non-covered loss, and denies Defendant’s
motion for summary judgment on that basis. 5

Defendant identifies three cases in which an insured lost his claim entirely due to failure to allocate. Two of these cases
were decided after a trial, and after all the evidence had been heard. See id. (“The jury heard no testimony regarding how
much of the [insureds’] damage was caused by the plumbing leaks. It learned only that plumbing leaks were found.
Because there is no evidence upon which the jury could determine that thirty-five percent of the damage was caused by
plumbing leaks, the trial court properly granted a take-nothing judgment in favor of [the insurer].”); Puget Plastics Corp.,
735 F. Supp. 2d at 677. The Court acknowledges that the third, Hamilton Properties v. Am. Ins. Co., No. 3:12-CV-5046-B,
2014 WL 3055801 (N.D. Tex. July 7, 2014), has many similarities to the present case, but ultimately concludes that it is
distinguishable. In Hamilton Properties, there was a significant question as to whether a prior storm or lack of maintenance
had caused the leaks, both of which the plaintiff’s witnesses acknowledged could have caused the leaks, both of which
were not covered under the policy. Id. at *4–7. Here, while Defendant asserts that faulty repairs and design defects are
5

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Second, however, the Court must address Defendant’s assertion that the alternative causes
of loss it identifies, such as improper flashing, are non-covered causes of loss. Most of these causes
of loss appear to fall within the second exclusion identified by the Court—for faulty, inadequate, or
defective, design, repairs or maintenance. (Def.’s Mot. Summ J., Dkt. 52-1, at App. 38–39). While
the policy makes clear that loss or damage caused by faulty repairs alone, are not covered, it is less
clear whether loss or damage caused by a hailstorm due to prior faulty repairs is covered. Again, the
policy explains that “[i]f an excluded cause of loss [under this subsection] results in a Covered Cause
of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.” (Def.’s Mot.
Summ J., Dkt. 52-1, at App. 38–39). The parties agree that hail damage 6 is a “Covered Cause of
Loss.” (See Def.’s Mot. Summ. J., Dkt. 50, at 10; Pl.’s Resp. Mot. Summ. J., Dkt 54, at 5–6). Thus a
question remains as to whether an excluded cause of loss (faulty repairs, for example) “result[ed] in a
Covered Cause of Loss” (hail damage), and is therefore covered under the policy. Plaintiff notes that
Texas law requires the court to adopt the construction of an exclusionary clause urged by an insured
so long as that construction is not unreasonable. (See Pl.’s Resp. Mot. Summ. J., Dkt 54, at 4
(quoting Glover v. Nat’l Ins. Underwriters, 545 S.W.2d 755, 761 (Tex. 1997)). Here, however, neither
party advanced a construction of this particular clause, nor did they even identify it. Because the
parties have not addresses this exclusion, and because the Court rejects Defendant’s argument that
Plaintiff cannot allocate covered and non-covered causes of loss under any interpretation of the
clause, it will not decide the issue at this time.

similarly not covered under the policy, they have simply failed to connect that assertion to the policy at issue, as the
Court addresses below.
6 Subject to the Cosmetic Damage Exclusion, as addressed supra and infra.

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2. Cosmetic Damage Exclusion
Defendant’s second argument in support of its motion for summary judgment on Plaintiff’s
breach of contract claim is that the Cosmetic Damage Exclusion applies to Plaintiff’s claims. As the
Court previously noted, the exclusion provides:
We will not pay for loss or damage caused by the peril of hail that alters the physical
appearance of any part of any roof covering made of metal but does not result in
damage that allows the penetration of water through the roof covering or does not
result in the failure of the roof covering to perform its intended function to
keep out elements over an extended period of time. This exclusion applies to roof
coverings including the roofing material exposed to weather, its underlayments
applied for moisture protection and all flashings required in application of the roof
covering.
Hail damage to roof coverings that results in damage that will allow the penetration
of water through the roof covering or that results in the failure of the roof
covering to perform its intended function to keep out elements over an extended
period of time is not subject to this exclusion.
(Def.’s Mot. Summ J., Dkt. 51, App. 49; Pl.’s Resp. Mot. Summ. J., Dkt. 54-1, App. 23). In support
of its argument that the loss at issue is subject to the Cosmetic Damage Exclusion, Defendant
submits the testimony of two experts. The first, Timothy Marshall, is an engineer whose career
includes an emphasis on forensic hail analysis. (Def.’s Mot. Summ J., Dkt 51-1, App. 88). He
inspected the Property multiple times and concluded that, while there were hail-caused dents on the
Property, these dents “did not damage the roof coating” nor did they “reduce the watertight
integrity of the [roof] panels.” (Def.’s Mot. Summ J., Dkt. 51-1, App. 88). He further concluded that
“[t]here was no wind damage[] to the roofs.” (Id.). The second, Edward Cox, holds a BS in
Metallurgical Engineering and a Masters and Ph.D. in Theoretical and Applied Mechanics. (Def.’s
Mot. Summ. J., Dkt. 51-3, App. 214). Cox tested a section of the roof panel from the Property “to
determine whether hail contact had affected the functionality of the steel substrate and Galvalume
coating.” (Def.’s Mot. Summ. J., Dkt. 51-3, App. 152). He concluded that “[n]o loss of integrity,

17

functionality or corrosion resistance was found in either of the two largest hail indents” he
examined. (Def.’s Mot. Summ. J., Dkt. 51-3, App. 154).
In light of the Court’s exclusion of Plaintiff’s expert testimony from Matt Phelps, Plaintiff’s
evidence is circumstantial—in other words he has no testimony from an expert who can opine that
hail or wind caused functional damage (or damage not excluded by the Cosmetic Loss Exclusion) to
the roof of the Property. Yet that circumstantial evidence suggests that the damage caused by the
hail storm was not merely cosmetic. Plaintiff submits the testimony of the property manager, who
explains that prior to the storm at issue, the Property had “had perimeter leaks,” but that after the
hailstorm, he “observed interior leaks” for the first time. (Pl.’s Resp. Mot. Summ J., Dkt. 54-7, at
App. 269). He further explains that he “had pretty much addressed almost everything on the
perimeter of these buildings that would have had to do with flashing,” before the storm, and drew a
diagram at his deposition of places where he observed new leaks following the storm. (Pl.’s Resp.
Mot. Summ J., Dkt. 54-3, at App. 102–103). He also notes that he had a close relationship with the
tenants at the property, so he learned about leaks soon after they occurred, suggesting that he would
know when they first occurred. (Pl.’s Resp. Mot. Summ J., Dkt. 54-7, at App. 271)
Defendant claims that the “only credible sources of causation evidence” are from their
experts, (Def.’s Mot. Summ J., Dkt 50, at 11), that “there is no evidence or testimony [that] a single
hail[stone] created penetration in any of the roofs, which would be required in order to cause leaks
immediately after the storm” and that “there is no evidence that the leak was caused by hail.” (Def.’s
Reply Mot. Summ J., Dkt. 56, at 6–7). The Court rejects these arguments. At summary judgment,
“[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in
his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). “Credibility determinations, the
weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions,
not those of a judge, whether he is ruling on a motion for summary judgment or for a directed

18

verdict.” Id. While the Defendant would like to completely discount Plaintiff’s evidence,
circumstantial evidence is still evidence—the timing of the new leaks creates an inference that the
storm may have caused or contributed to those new leaks. Plaintiff need not point to a particular
hole in the roof to make his case. The Court therefore finds that there is a genuine issue of material
fact as to whether Plaintiff has a claim for covered damages, and denies Defendant’s motion for
summary judgment on Plaintiff’s breach of contract claim.
B. Statutory & Bad Faith Claims
Next, United Fire argues that it is entitled to summary judgment on Plaintiff’s bad faith and
statutory claims because: (1) Plaintiff cannot prevail on his breach of contract claims; (2) there was a
reasonable basis for Defendant’s denial of Plaintiff’s claim; and (3) there is no evidence that
Defendant knowingly violated the Texas Insurance code.
Because the Court has not granted Defendant summary judgment on Plaintiff’s breach of
contract claim, it will not address Defendant’s argument that Plaintiff’s statutory and bad faith
claims fail on the basis that summary judgment on the breach of contract should be granted. 7 The
Court concludes, however, that Defendant’s second argument—that there was a reasonable basis for
United Fire’s denial of Plaintiff’s claim—warrants summary judgment on Plaintiff’s remaining
claims.
In Texas, “[a] breach of the duty of good faith and fair dealing is established when: (1) there
is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and
In reply to Plaintiff’s opposition to its motion, Defendant argues that even where an insured might prevail on its
breach of contract claim, it may not succeed on extra-contractual claims unless there is an independent injury arising
from those claims. Indeed, the Fifth Circuit, applying Texas law, has repeatedly indicated that “[t]here can be no
recovery for extra-contractual damages for mishandling claims unless the complained of actions or omissions caused
injury independent of those that would have resulted from a wrongful denial of policy benefits.” Parkans Int’l LLC v.
Zurich Ins. Co., 299 F.3d 514, 519 (5th Cir. 2002); see also Great Am. Ins. Co. v. AFS/IBEX Fin. Servs., Inc., 612 F.3d 800,
808 (5th Cir. 2010). But some Texas Courts of Appeals have reached the opposite conclusion—holding that so long as a
claim is for a covered cause of loss under the policy, extra-contractual claims survive regardless of whether there is
evidence of an independent injury. See, e.g., USAA Texas Lloyd’s Co. v. Menchaca, No. 13-13-00046-CV, 2014 WL 3804602,
at *7 (Tex. App.—Corpus Christi-Edinburg, July 31, 2014). Because the Court finds that summary judgment is
warranted on other grounds, it will not take a position on this issue.
7

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(2) the carrier knew or should have known that there was not a reasonable basis for denying the
claim or delaying payment of the claim.” Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995)
(citing Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex. 1988)).
Here, Defendant has presented ample evidence that there was a reasonable basis for denying
Plaintiff’s claim. First, it sent an insurance adjuster, Ms. Bowling, to the Property on April 9, 2014.
(Def.’s Mot. Summ. J., Dkt. 51-1, at App. 68). She explained that:
There was no visible hail damage seen at the time of the inspection to the roof, metal
fencing, windows, awning, or stucco finish on the front of the building. There was
also no evidence of hail impacts to the outside air conditioner condenser units and
exterior doors.
(Id.). After Defendant learned that Plaintiff had retained a public adjuster to represent him related to
the alleged property damage, Defendant retained a licensed professional engineer, Mr. Marshall, to
re-inspect those buildings. (Def.’s Mot. Summ. J., Dkt. 51-1, at App. 80). Marshall inspected the
Property with Plaintiff’s public adjuster and roofing contractor, and found that while “[w]idely
scattered hail dents were found in the roof panels[, t]he dents were difficult to detect even when
looking obliquely at the reflection of the sun on the panels.” (Id. at App. 87). In order to see and
measure the dents, they rubbed chalk on the surface of the metal roof. (Id.).
Marshall further explained that the public adjuster and roofing contractor “believed that hail
had damaged the coating which will shorten the life of the roof.” (Id. at App. 85). They suggested
that the roofing manufacturer had informed them of this, and although Marshall asked for a letter
from the manufacturer stating that, there is no evidence in the record that one was ever provided.
(Id.). Instead, Defendant employed its own expert to test the roof to see if hail-caused dents would
damage the coating of the roof, and he concluded that they would not. (See Def.’s Mot. Summ. J.,
Dkt. 51-3, at App.152–154). Defendant has presented ample evidence that it reviewed and
considered Plaintiff’s claim, including by employing two experts to look at the alleged damage to

20

Plaintiff’s roof who concluded that the roof was not damaged by hail. This evidence indicates that
Defendant had a reasonable basis for denying Plaintiff’s claim.
Although Plaintiff responds that “[a]n insurer cannot insulate itself from bad faith liability by
investigating a claim in a manner calculated to construct a pre-textual basis for denial,” (Pl.’s Resp.
Mot. Summ. J., Dkt. 54, at 8 (quoting State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42, 44 (Tex.
1998)), he has no evidence that Defendant’s basis for denial was pre-textual. Plaintiff asserts that
Marshall’s report failed to include certain critical information, such as the timing and age of certain
leaks, and “only included dates of leaks which fit into Defendant’s narrative that all the leaks predate the storm.” (Id. at 9). That Marshall manipulated the data, however, is mere speculation.
Plaintiff provides no evidence that Marshall was provided those other dates or that he manipulated
the data to support a particular conclusion.
Further, Plaintiff has not demonstrated that Defendant’s liability for the claim has become
reasonably clear. As another court in this district explained, “[a]n insured . . . cannot establish a claim
for bad faith without offering evidence that the insurer’s liability on the claim had become
reasonably clear, or that there was no reasonable basis for denying the claim.” Tesoro Ref. & Mktg.
Co. LLC v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 96 F. Supp. 3d 638, 652 (W.D. Tex. 2015)(citing
Provident Am. Ins. Co. v. Castaneda, 988 S.W.2d 189, 198 (Tex. 1998)), aff’d on other grounds, 833 F.3d
470 (5th Cir. 2016). Here, Plaintiff offers only circumstantial evidence that it is entitled to relief on
its claim. While this evidence is sufficient to create a bona fide dispute regarding whether Plaintiff’s
claim should be covered, it is not reasonably clear evidence that Defendant has liability.
Based on the forgoing, the Court concludes that there is no genuine issue of material fact as
to whether Defendant had a reasonable basis for denying Plaintiff’s claim, and will therefore grant
Defendant summary judgment on Plaintiff’s claim for breach of the duty of good faith and fair
dealing.

21

Turning to Plaintiff’s claims under the Texas Insurance Code and the DTPA, the Court
similarly finds that summary judgment is warranted. As the Fifth Circuit explained, “Texas courts
have clearly ruled that these extra-contractual tort claims” for violations of the DTPA and the Texas
Insurance Code “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). “Plainly put, an
insurer will not be faced with a tort suit for challenging a claim of coverage if there was any
reasonable basis for denial of that coverage.” Id. As the Court has already concluded that there is no
genuine dispute of material fact as to whether there was a reasonable basis for the denial of
Plaintiff’s insurance claims, it similarly concludes that summary judgment is warranted on Plaintiff’s
statutory claims under the DTPA and Texas Insurance Code. 8

The Court notes that while Plaintiff submitted deposition testimony from Defendant’s corporate representative in
support of his statutory claim against Defendant for a knowing violation of the Texas Insurance Code, the evidence fails
to support their claim. In his deposition, the representative explains that he has never been personally involved in a claim
on a metal roof that was compensated when a cosmetic damage exclusion was in place. (Pl.’s Resp. Mot. Summ J., Dkt.
54-7, at App. 305). On that basis Plaintiff asserts that Defendant uses “the cosmetic exclusion endorsement as an
absolute shield from liability.” (Pl.’s Resp. Mot. Summ J., Dkt. 54, at 11). But the representative’s involvement in some
claim denials based on a particular exclusion does not mean or suggest that those denials were not warranted. It would
be unreasonable to infer from the representative’s testimony that Defendant knowingly denied valid claims.

8

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IV. CONCLUSION
Based on the foregoing, the Court DENIES Defendant’s Motion for Summary Judgment
on Plaintiff’s claim for breach of contract and GRANTS Defendant’s Motion for Summary
Judgment on Plaintiff’s claim for breach of the duty of good faith and fair dealing and each of his
statutory claims (Dkt. 50).
In addition, the Court GRANTS Defendant’s Motion to Exclude Testimony of Plaintiff’s
Expert Matt B. Phelps (Dkt. 52).
SIGNED on April 6, 2017.

ROBERT PITMAN
UNITED STATES DISTRICT JUDGE

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