Knoderer v. State Farm Lloyds

• Citation: 515 S.W.3d 21
• Decision Date: 13 January 2017
• Docket Number: No. 06–16–00009–CV,06–16–00009–CV
• Parties: William R. and Susan M. KNODERER, Appellants v. STATE FARM LLOYDS, Penni Perkins, and Tom Roberts, Appellees
• Court: Texas Court of Appeals

515 S.W.3d 21

William R. and Susan M. KNODERER, Appellants

v.STATE FARM LLOYDS, Penni Perkins, and Tom Roberts, Appellees

No. 06–16–00009–CV

Court of Appeals of Texas, Texarkana.

Date Submitted: November 23, 2016

Date Decided: January 13, 2017

Rehearing Overruled March 7, 2017

Russell J. Bowman, Law Office of Russell J. Bowman, Irving, TX, for appellant.

Levon G. Hovnatanian, Martin, Disiere, Jefferson & Wisdom, LLP, Houston, TX, Joe E. Weis, Pemberton, Green, Newcomb & Weis, Greenville, TX, Melinda R. Burke, Martin, Disiere, Jefferson & Wisdom, LLP, Dallas, TX, for appellee.

Before Morriss, C.J., Moseley and Burgess, JJ.

OPINION

Opinion by Justice Moseley

On February 20, 2008, William R. and Susan N. Knoderer's home sustained extensive water damage resulting from the separation of a water pipe from its fitting. In the first appeal of this case, this Court reversed the trial court's death penalty sanctions assessed against the Knoderers and remanded the cause for further proceedings. Knoderer v. State Farm Lloyds (Knoderer I ), No. 06–13–00027–CV, 2014 WL 4699136 (Tex. App.–Texarkana Sept. 19, 2014, no pet.) (mem. op.). On remand, the trial court assessed lesser sanctions against William in the amount of $333,157.57, being the attorney fees, expert fees, and costs incurred by State Farm Lloyds related to William's sanctionable actions. Thereafter, a lengthy jury trial ensued on the Knoderers' misrepresentation claim against State Farm and Tom Roberts brought pursuant to the Insurance Code.¹ A Hunt County jury found that neither State Farm nor Roberts² made any misrepresentations relating to an insurance policy; that at least one of the Knoderers procured, caused, or contributed to the loss; that at least one of the Knoderers intentionally concealed or misrepresented a material fact relating to the insurance policy; and that at least one of the Knoderers committed fraud against State Farm. After a post-verdict hearing on State Farm's counterclaim under Section 541.153 of the Insurance Code,³ the trial court entered a take-nothing judgment against the Knoderers on their claims against State Farm, awarded State Farm an additional $353,036.75 in attorney fees under Section 541.153, reaffirmed its order awarding lesser sanctions, and awarded State Farm appellate attorney fees and costs of court.

In this appeal, the Knoderers assert that the trial court erred (1) in assessing monetary sanctions; (2) in awarding attorney fees under Section 541.153 ; (3) in allowing the jury to hear evidence relating to the Knoderer's spoliation of evidence and in submitting a spoliation instruction; (4) in submitting erroneous jury instructions and questions; and (5) in allowing State Farm's expert, Antoine Rios, to testify because his actions allegedly violated the Texas Private Security Act. We find (1) that the trial court did not abuse its discretion in assessing monetary sanctions, (2) that the trial court erred in admitting spoliation evidence and in submitting a spoliation instruction, but that the error was harmless, (3) that any error in the jury charge was harmless, and (4) that the trial court erred in awarding attorney fees under Section 541.153. We also find that the complaint regarding the admission of Rios' testimony was not preserved. Therefore, we will reverse the trial court's award of attorney fees under Section 541.153, but we will affirm the remainder of its judgment.

I. Background

In April 2007, a copper pipe under the foundation of the Knoderers' house began to leak. Tyson Hobbs of H & R Plumbing isolated the leak and rerouted the plumbing to avoid the leaking pipe. Hobbs used a flexible polyethylene piping called PEX to reroute the water from a plumbing manifold located behind a wall in the utility closet. He also used a metal fitting, called a SharkBite fitting, to connect the PEX pipe to the existing plumbing. The SharkBite fitting gets its name from a ring of metal teeth that bites into the PEX pipe when it is inserted into the fitting that is designed to prevent the pipe from pulling back out when pressure is applied to the line. In order to access the manifold, Tyson cut out a piece of the drywall, which was later replaced and repaired by Randy Wineinger. About ten months later, the PEX pipe separated from the fitting, resulting in the inundation of the first floor of the Knoderers' house with an inch or more of water. This lawsuit arose out of certain representations made by State Farm during its handling of the Knoderers' water damage claim and State Farm's subsequent denial of the claim based on its contentions that the Knoderers intentionally caused the loss and that the Knoderers intentionally concealed or misrepresented one or more material facts or circumstances relating to the loss.

As we noted in Knoderer I , this is not the first dispute between the Knoderers and State Farm. Id. at *1. In 2003, the Knoderers had had a prior water leak in the same house, which also flooded the first floor of the house. State Farm was also the Knoderers' insurer at that time and spent approximately $252,000 to restore the house. During the restoration, the Knoderers saw what they thought was mold behind the walls and wanted State Farm to remediate it. Apparently, the Knoderers did not have mold coverage at the time, and State Farm refused to resolve the issue to their satisfaction. Although William testified at the trial of this lawsuit that the issue could have been resolved for $40,000, after the claim was closed, the Knoderers demanded that State Farm pay them $3,000,000. The Knoderers filed suit against State Farm claiming the mold was caused by the failure of State Farm to properly dry the house (First Lawsuit). The trial of the First Lawsuit took place on January 8–10, 2008. At that trial, William testified that the house had significant mold and that the house was uninhabitable for their personal use. He also testified that it had given him a medical condition that impaired his cognitive memory. Nevertheless, the jury returned a verdict in favor of State Farm. William testified that he spent approximately $400,000 in attorney fees in the First Lawsuit.

Six days after the verdict in the First Lawsuit, on January 16, 2008, the Knoderers secured another policy from their State Farm agent which included $900,000 for coverage in the event that mold was discovered in their home. Then, by letter dated January 30, 2008, State Farm advised the Knoderers that it would not be able to provide them mold coverage and that the mold coverage endorsement would cease on March 6, 2008. On February 20, 2008, the Knoderers' house was inundated with water a second time when the PEX pipe separated from its fitting.

By the morning of February 21, the Knoderers had contacted Servpro to begin removing the water and drying their house, H & R Plumbing to fix the leak, and State Farm to notify it of the claim. Tyson Hobbs of H & R Plumbing testified that when he came to the Knoderers' house, he found the PEX pipe separated from the Sharkbite fitting. To repair it, he removed the old fitting, cut some slack out of the pipe, put a new fitting on, reconnected it, and turned the water on to make sure it no longer leaked. He also testified that the fitting he took out was not broken and looked like a regular SharkBite fitting.

State Farm initially assigned the claim to Doug Taylor, who met with the Knoderers and Ronny Hobbs of H & R Plumbing on February 21. Taylor requested that Ronny provide him with the fitting that was removed from the Knoderers' house, as well as the piece of PEX pipe that it had been attached to. Although there was conflicting testimony regarding whether the fitting and PEX pipe given to Taylor were the ones removed from the Knoderers' house, Taylor understood that they were. Taylor explained that he obtained the parts for subrogation purposes if it was determined that a part failed or that somebody else was at fault. On February 26, he sent the parts to Dr. Antoine Rios with The Madison Group.

Within two days of the loss, William began pointing out areas to Scott Mooney, the general manager of Servpro, where he was concerned there may be black mold. As a result, Taylor instructed Mooney to dry and remediate the house from a mold standpoint. On February 28, 2008, State Farm sent a reservation of rights letter advising the Knoderers that it was reserving its rights to deny coverage for any damage that was not caused by accident or that occurred outside the policy period, among other reasons.

On March 5, 2008, State Farm transferred the handling of the claim to Beckey Woodard with its Special Investigative Unit (SIU) due to possible fraud by the Knoderers. Woodard explained that the SIU is assigned claims when there are National Insurance Crime Bureau indicators. She said the indicator in this case was the new $900,000 mold endorsement that was in the process of being cancelled at the time of the loss. On March 12, Rios told State Farm that based on his initial findings, he could not pinpoint how the pipe had separated from the fitting, but that it was unlikely that it separated by water pressure alone; he asked to do more testing. On April 8, Roberts, a claim team manager for State Farm, authorized Rios to proceed with further testing to determine the cause of the failure of the PEX pipe and fitting connection.

Meanwhile, Servpro continued to dry the house, removing the floors and baseboards and cutting drywall in order to dry the slab. Woodard explained that State Farm could neither wait on the results of the subrogation investigation before drying the slab, nor deny the claim based on a suspicion of fraud. However, as State Farm authorized more drywall to be removed, as well as counters and cabinets, the Knoderers became concerned that State Farm might deny the claim after these were removed. During March, April, and May 2008, Roberts, Woodard, and the Knoderers had a number of communications regarding the removal of the floors,...