Shin v. Lloyds
| Decision Date | 03 July 2019 |
| Docket Number | CIVIL ACTION NO. 4:18-CV-1784 |
| Parties | HYEWON SHIN, Plaintiff, v. ALLSTATE TEXAS LLOYDS, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Before the Court is Defendant's Motion for Summary Judgment on Plaintiff's claims of: (1) breach of contract, (2) violation of the prompt payment of claims statute, and (3) bad faith/violation of the Deceptive Trade Practices Act ("DTPA"). (Doc. No. 27.) Defendant has paid the arbitration panel award in this case, and Plaintiff agrees that the breach of contract claim no longer exists. (Doc. No. 29 at 2.)
The dispute now is whether the extracontractual claims can be brought after full and timely payment of an appraisal award. The parties each argue for a different interpretation of USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479, 499-500 (Tex. 2018).
This case arises out of an insurance dispute relating to damages to Plaintiff's home sustained during Hurricane Harvey. (Doc. No. 1.) On September 3, 2017, Defendant conducted an initial inspection of the damage to Plaintiff's home and came to an estimate of $3,590.92 in damage. (Doc. No. 27 at 9.) Later, Plaintiff reported additional damages, and a subsequent inspection led to a revised damage estimate of $4,616.63. (Doc. No. 27 at 9.)
On February 21, 2018, Plaintiff filed this lawsuit, alleging (1) breach of contract, (2) violation of the prompt payment of claims statute, and (3) bad faith/violation of the DTPA. (Doc. No. 1.) On March 11, 2019, Plaintiff invoked the appraisal provision of the policy, and the case was abated. (Doc. No. 27 at 9.) The appraisers reached an award of $25,944.94 on March 27, 2019. (Doc. No. 27 at 9.) Defendant paid the award, less deductible and prior payment amount, on March 29, 2019, and notified Plaintiff of the payment. (Doc. No. 27 at 10.) Defendant notified the Court that the appraisal process had concluded, lifting the abatement, and filed this Motion for Summary Judgment. (Doc. No. 26.)
On a motion for summary judgment, the movant can only succeed if there is "no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "A fact is material only when it might affect the outcome of the suit under the governing law, and a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party." Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006).
"If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial." Engstrom v. First Nat'l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995). In deciding a motion for summary judgment, a court must view the evidence in the light most favorable to the non-moving party. Id.
Plaintiff admits that the breach of contract claim cannot be maintained now that the appraisal award has been paid in full. (Doc. No. 29 at 2.) There is overwhelming support for this conclusion in the case law. See e.g., Nat'l Sec. Fire & Cas. Co. v. Hurst, 523 S.W.3d 840, 847 (Tex. Ct. App. 2017), reh'g denied (July 25, 2017) ("Generally, tender of the full amount owedpursuant to the conditions of an appraisal clause is all that is required to estop the insured from raising a breach of contract claim." (citing Blum's Furniture Co. v. Certain Underwriters at Lloyds London, 459 F. App'x 366, 368 (5th Cir. 2012); Brownlow v. United Servs. Auto. Ass'n, 2005 WL 608252, at *2 (Tex. Ct. App. 2005); Toonen v. United Servs. Auto. Ass'n, 935 S.W.2d 937, 940 (Tex. Ct. App. 1996)); Losciale v. State Farm Lloyds, 2017 WL 3008642, at *2-*3 (S.D. Tex. July 14, 2017) ().
The Court finds that Defendant is entitled to summary judgment on Plaintiff's breach of contract claim.
The case law is also clear that "full and timely payment of an appraisal award under the policy precludes an award of penalties under the Insurance Code's prompt payment provisions as a matter of law." Nat'l Sec. Fire & Cas. Co. v. Hurst, 523 S.W.3d 840, 847 (Tex. App. 2017), reh'g denied (July 25, 2017) (citing In re Slavonic Mut. Fire Ins. Ass'n, 308 S.W.3d 556, 563 (Tex. Ct. App. 2010), overruled on other grounds by In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 405-07 (Tex. 2011)). See also Mainali Corp. v. Covington Specialty Ins. Co., 872 F.3d 255, 258-59 (5th Cir. 2017), as revised (Sept. 27, 2017) ( ); Zhu v. First Cmty. Ins. Co., 543 S.W.3d 428, 436-37 (Tex. App. 2018) (); Cano v. State Farm Lloyds, 276 F. Supp. 3d 620, 628-29 (N.D. Tex. 2017)("Plaintiffs' TPPCA claim fails as a matter of law because "[a] plaintiff may not seek Chapter 542 damages for any delay in payment between an initial payment and the insurer's timely payment of an appraisal award." (citing Quibodeaux v. Nautilus Ins. Co., 655 F. App'x 984, 988 (5th Cir. 2016); In re Slavonic Mut. Fire Ins. Ass'n, 308 S.W.3d 556, 563 (Tex. Ct. App. 2010)).
Here, the appraisers reached an award of $25,944.94 on March 27, 2019. (Doc. No. 27 at 9.) Defendant paid the award, less Plaintiff's deductible and prior payment amounts, on March 29, 2019, and notified Plaintiff of the payment. (Doc. No. 27 at 10.) There was a lapse of only two days between the award and Defendant's payment.
Plaintiff's homeowner's insurance policy states that Defendant's deadline to pay claims is five days from the date Defendant notifies Plaintiff that it will pay the claims. (Doc. No. 27-1 at 39.) There is no calculation by which Defendant's payment could be untimely under this provision. Thus, Defendant is entitled to summary judgment on Plaintiff's prompt payment claim.
Plaintiff's final claim is brought under the DTPA. Plaintiff's complaint alleges that Defendant "conducted substandard investigations and inspections of the properties, prepared reports that failed to include all of the damages that were noted during the inspection, and undervalued the damages observed during the inspections," and that "Defendant's unreasonable investigation led to the underpayment of Plaintiffs' respective claims." (Doc. No 1-7 at 4.) Plaintiff also claims that Defendant misrepresented the terms of the homeowner's insurance policy, resulting in an undervaluation of Plaintiff's claim. (Doc. No. 1-7 at 6.) All Plaintiff's allegations stem from Defendant's undervaluation of Plaintiff's claim.
Before payment of the appraisal award, Plaintiff sought recovery of the policy benefits through the DTPA claim, plus exemplary and/or treble damages upon a showing that Defendantviolated the DTPA "knowingly." (Doc. No. 1-7 at 6.) Plaintiff's response to the motion for summary judgment indicates that Plaintiff still seeks "policy benefits (off-set by the appraisal payment); exemplary damages up to treble damages for a 'knowing' violation; and reasonable and necessary attorneys' fees." (Doc. No. 29 at 4.)
However, the case law indicates that Plaintiff has already received all due policy benefits through the appraisal process. See Section III. Texas insurance law has two sets of rules for causes of action. Suits brought for breach of contract are distinct from "extracontractual" actions brought based on an insurance provider's common-law and statutory duties, like those established by the DPTA. See USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018).
Plaintiff's DPTA claim is "extracontractual." Defendant argues that, in order for Plaintiff to recover under the DTPA without showing that outstanding policy benefits are due, Plaintiff must satisfy the "independent-injury rule." In response, Plaintiff argues that a recent Texas Supreme Court decision clarified a series of confusing cases, establishing that plaintiffs need not be entitled to additional policy benefits or have pled an independent injury to maintain a claim under the DTPA. See USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018). Plaintiff believes Menchaca states that plaintiffs need only show that they were entitled to benefits under the insurance policy in order to pursue a claim under the DTPA.
The "entitled-to-benefits" rule holds that "an insured who establishes a right to receive benefits under an insurance policy can recover those benefits under an insurance policy as 'actual damages' under the statute if the insurer's statutory violation causes the loss of the benefits." USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 495 (Tex. 2018). This rule was recognized by the Texas Supreme Court in Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 129 (Tex.1988). Some courts, including the Fifth Circuit, assumed Vail had been overruled by subsequent decisions, replaced by a new rule that "an insured can never recover policy benefits as actual damages for statutory or common-law bad-faith violations." Menchaca, 545 S.W.3d at 495; see also Parkans Int'l, LLC v. Zurich Ins. Co., 299 F.3d 514, 519 (5th Cir. 2002). Menchaca clarified and reaffirmed the entitled-to-benefits rule as described in Vail. Menchaca, 545 S.W.3d at 497.
Under Texas law, extracontractual claims for damages outside of policy benefits must satisfy the "independent-injury rule" to...
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