Thomas v. State Farm Lloyds

Citation218 F.Supp.3d 506
Decision Date02 November 2016
Docket NumberCIVIL ACTION NO. 3:15–CV–1937–B
Parties John F. THOMAS and Barbara J. Thomas, Plaintiffs, v. STATE FARM LLOYDS and Maegan Stronger, Defendants.
CourtU.S. District Court — Northern District of Texas

Andrew Paul Taylor, J. Steve Mostyn, Rene Michelle Sigman, Sean Christopher Timmons, J. Ryan Fowler, Mostyn Law Firm, Houston, TX, Brian P. Lauten, Deans & Lyons LLP, Dallas, TX, for Plaintiffs.

W. Neil Rambin, L. Kimberly Steele, Scott Philip Brinkerhoff, Sedgwick LLP, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

JANE J. BOYLE, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants State Farm Lloyds (SFL) and Maegan Stronger's Motion for Summary Judgment (Doc. 33). This is an insurance coverage dispute over whether a Water Damage endorsement (WDE) in Plaintiffs John F. Thomas and Barbara J. Thomas's homeowner's policy with SFL extends to foundation damage caused by a leak in the home's plumbing system. Plaintiffs argue that the WDE extends their coverage to include foundation damage caused by leaky pipes or, at the very least, renders the policy ambiguous to the point that it must be construed in their favor. For their part, Defendants dispute both that the policy's terms are ambiguous and that the WDE covers the foundation damage. For the reasons set forth below, the Court agrees with Defendants, and finds that the policy is unambiguous and that "the WDE excludes coverage for loss which consists of, or is caused by, foundation movement, even when the movement is related to plumbing leaks." Salazar v. State Farm Lloyds , No. H–13–1904, 2014 WL 2862760, at *1 (S.D. Tex. June 24, 2014).

Accordingly, the Court GRANTS Defendants' Motion for Summary Judgment in its entirety.

I.BACKGROUND

Plaintiffs own a home in Dallas, Texas. Doc. 1–3, Ex. C, Pls.' Orig. Pet. ¶ 10. They insured it with a Texas Dwelling Insurance Policy issued by SFL. Id. ¶ 9–10. In late 2011, Plaintiffs began to notice cracks in some of the home's walls. Doc. 40, Pls.' App. 44, Ex. B, Dep. of Barbara Thomas 28:7–20. They noticed more cracks and sloping floors in September 2013 and, as a result, hired an engineering firm to determine the damage's source. Id. at 12–13, Ex. A, Dep. of John Thomas 45:15–20, 50:4–51:1; 45, Ex. B, Dep. of Barbara Thomas 29:6–30:7.

The engineer, Edward Scoular, concluded that foundation movement was to blame. Id. at 13–14, Ex. A, Dep. of John Thomas 51:2–56:23; Doc. 35, Defs.' App. 79–81, Ex. E, Visual Foundation Eval. Add. #2. And that foundation movement was due to soil erosion, which Scoular and Plaintiffs' plumber later determined was caused by five leaks in the home's plumbing system.1 Doc. 40, Pls.' App. 20, Ex. A, Dep. of John Thomas 79:17–80:13. Despite those leaks, however, Plaintiffs admit there was no noticeable water damage—stains, seepage, or the like—beyond that caused by the foundation's shifting. Id. at 20–21, Ex. A, Dep. of John Thomas 79:12–16, 81:13–23, 83:17–84:8.

At any rate, the damage was enough to warrant repairs to the plumbing system and foundation, as well as to other areas of the property that were necessarily damaged by the repairs themselves. Id. at 19–27, Ex. A, Dep. of John Thomas 76:25–79:11, 86:5–93:14, 98:15–105:14. The cost for those repairs totaled approximately $55,534. Id. at 24–25, Ex. A, Dep. of John Thomas 95:14–97:13. Plaintiffs paid for the repairs out of pocket and then submitted a claim for the damages to SFL. Id. at 25, Ex. A, Dep. of John Thomas 97:14–97:22; 50–53, Ex. C, Claim History File.

Defendant Maegan Stronger, an adjuster at SFL, called John Thomas to discuss the claim. Id. at 50–53, Ex. C. Claim History File. Thomas described the cracks and foundation damage caused by the plumbing leaks and their subsequent repair. Id. Stronger told Thomas that SFL would deny Plaintiffs' claim because the damage to their home was not the type of visible water damage that the Policy covered. Id.

SFL denied Plaintiffs' claim and Stronger sent Plaintiffs a letter reiterating her earlier conclusion. Id. at 61–63, Ex. C, Claim History File. The Policy, she explained, did not cover foundation settling or cracking or earth movement, so Plaintiffs' losses were not insured. Id. But Stronger's letter did not mention that the Policy had a WDE. Doc. 35, Defs.' App. 9–10, Ex. A, Policy No. 43–QQ–0431–8; see id. And Plaintiffs believed that, because the foundation settling and cracking were caused by plumbing leaks (i.e. , water damage), they should have been covered by the WDE. Doc. 40, Pls.' App. 30, Ex. A, Dep. of John Thomas 119:8–120:3.

On that basis, Plaintiffs filed suit in Texas state court asserting claims against SFL for fraud, conspiracy to commit fraud, breach of contract, violations of chapters 541 and 542 of the Texas Insurance Code, and breach of the duty of good faith and fair dealing. See Doc. 1–3, Ex. C, Pls.' Orig. Pet. ¶¶ 42–62. As to Stronger, Plaintiffs alleged violations of chapter 541 of the Texas Insurance Code, fraud, and conspiracy to commit fraud. Id. ¶¶ 33–45. Defendants removed the case to federal court on diversity grounds.2 Doc. 1, Notice of Removal. Then they moved for summary judgment on all of Plaintiffs' claims. Doc. 33, Defs.' Mot. for Summ. J. Plaintiffs responded. Doc. 38, Pls.' Resp. Opp'n Defs.' Mot. for Summ. J. Defendants replied in turn. Doc. 42, Defs.' Reply Opp'n Pls.' Resp [hereinafter Defs.' Reply]. The Motion is therefore ready for review.

II.LEGAL STANDARD

Summary judgment is appropriate "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 dispute "is ‘genuine’ if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party." Burrell v. Dr. Pepper/Seven Up Bottling Grp. , 482 F.3d 408, 411 (5th Cir. 2007). And a fact "is ‘material’ if its resolution could affect the outcome of the action." Id.

The summary judgment movant bears the burden of proving that no genuine issue of material fact exists. Latimer v. Smithkline & French Labs. , 919 F.2d 301, 303 (5th Cir. 1990). Usually, this requires the movant to identify "those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation marks omitted). But if the non-movant ultimately bears the burden of proof at trial, the movant may satisfy its burden just by pointing to the absence of evidence supporting the non-movant's case. Id. at 322–23, 106 S.Ct. 2548.

If the movant meets that burden, then it falls to the non-movant to "show with significant probative evidence that there exists a genuine issue of material fact." Hamilton v. Segue Software Inc. , 232 F.3d 473, 477 (5th Cir. 2000) (internal quotation marks omitted) (citing Conkling v. Turner , 18 F.3d 1285, 1295 (5th Cir. 1994) ). And significant probative evidence is just that: significant. See Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (per curiam). "[M]etaphysical doubt as to material facts," "conclusory allegations," "unsubstantiated assertions," or a mere "scintilla of evidence" will not do. Id. (internal citations and quotation marks omitted). Rather, "the non-movant must go beyond the pleadings and present specific facts indicating a genuine issue for trial." Bluebonnet Hotel Ventures, L.L.C. v. Wells Fargo Bank, N.A. , 754 F.3d 272, 276 (5th Cir. 2014) (citing Celotex , 477 U.S. at 324, 106 S.Ct. 2548 ).

To be sure, the court views evidence in the light most favorable to the non-movant when determining whether a genuine issue exists. Munoz v. Orr , 200 F.3d 291, 302 (5th Cir. 2000). Yet it need not "sift through the record in search of evidence to support a party's opposition to summary judgment." Ragas v. Tenn. Gas Pipeline Co. , 136 F.3d 455, 458 (5th Cir. 1998) (quoting Skotak v. Tenneco Resins, Inc. , 953 F.2d 909, 915–16 & n.7 (5th Cir. 1992) ). Simply put, the non-movant must "identify specific evidence in the record" and "articulate the precise manner in which that evidence supports [its] claim." Id. If it cannot, then the court must grant summary judgment. Little , 37 F.3d at 1076.

III.ANALYSIS

There are, as mentioned above, a number of causes of action at play here. But as laid out below, they boil down to whether SFL breach the terms of the Policy when it denied Plaintiffs' claim for foundation damage, which, in turn, requires the Court to determine whether the WDE covered damage to Plaintiffs' home's foundation caused by their leaky plumbing system.

A. The Contractual Claim: Did the Policy Cover the Damages to Plaintiffs' Home?
1. Insurance policy interpretation under Texas Law

"Insurance policies are contracts." Harken Expl. Co. v. Sphere Drake Ins. PLC , 261 F.3d 466, 471 n.3 (5th Cir. 2001). And "[i]n diversity cases such as this one, [courts] apply state law rules of construction. Therefore, Texas's rules of contract interpretation control." Id. (internal citations omitted).

Under Texas law, insurance policies are subject to the same rules of interpretation and construction applicable to contracts generally.

Progressive Cty. Mut. Ins. Co. v. Sink , 107 S.W.3d 547, 551 (Tex. 2003). That means the Court's "primary concern in construing a written contract ‘is to ascertain the true intent of the parties as expressed in the instrument.’ " Fed. Ins. Co. v. Northfield Ins. Co. , 837 F.3d 548, 552 (5th Cir. 2016) (quoting Nat'l Union Fire Ins. Co. v. CBI Indus., Inc. , 907 S.W.2d 517, 520 (Tex. 1995) ).

To that end, the Court "evaluates the contract based on its plain meaning, determining what the words of the contract say the parties agreed to do." Tetra Tech., Inc. v. Cont'l Ins. Co. , 814 F.3d 733, 746 (5th Cir. 2016) (internal quotation marks and citations omitted). The Court " ‘must examine the...

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