Tri Invs., Inc. v. United Fire & Cas. Co.

• Decision Date: 31 March 2020
• Docket Number: CIVIL ACTION NO. 5:18-CV-116
• Citation: 553 F.Supp.3d 400
• Parties: TRI INVESTMENTS, INC., Plaintiff, v. UNITED FIRE & CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

553 F.Supp.3d 400

TRI INVESTMENTS, INC., Plaintiff,

v.UNITED FIRE & CASUALTY COMPANY, Defendant.

CIVIL ACTION NO. 5:18-CV-116

United States District Court, S.D. Texas, Laredo Division.

Signed March 31, 2020

Jeffrey L. Raizner, Amy Bailey Hargis, Andrew P. Slania, Benjamin C. Wickert, Raizner Slania LLP, Houston, TX, for Plaintiff.

David P. Andis, Gauntt Koen Binney & Kidd LLP, Spring, TX, Robert F. Scheihing, Brock Guerra Strandmo Dimaline Jones P.C., San Antonio, TX, Marcel C. Notzon, III, The Notzon Law Firm, Laredo, TX, for Defendant.

MEMORANDUM & ORDER

Diana Saldaña, United States District Judge

This lawsuit involves a first-party insurance claim brought by Plaintiff Tri-Investments, Inc. against its insurer, Defendant United Fire & Casualty Company. (Dkt. 1.) Plaintiff alleges that Defendant wrongfully refused to compensate it for property damage caused by a 2017 wind and hailstorm in violation of (1) the Texas Insurance Code, (2) the Texas Deceptive Trade Practices Act (DTPA), (3) Parties’ policy agreement ("Policy" or "Agreement") and (4) the duty of good faith and fair dealing. (Dkt. 1 at 13–17.) In response, Defendant argues that it did not breach the Agreement because (1) the storm damage to Plaintiff's property is "cosmetic" in nature and thus subject to the Agreement's "Cosmetic Damage Exclusion"; (2) much of the structural (i.e. non-cosmetic) damage to Plaintiff's property resulted from "other excluded causes" besides the 2017 hailstorm; and (3) Plaintiff's failure to "allocate" between covered and excluded sources of damage is fatal to its entire claim. (Dkt. 4 at 6–10; Dkt. 45 at 1–2.) Defendant further argues that Plaintiff's statutory and bad-faith dealing claims fail because Defendant did not breach the Agreement or act unreasonably. (Dkt. 45 at 1.)

Now pending are Plaintiff's "Partial Motion for Summary Judgment on Defendant's Affirmative Defense of Cosmetic Damage Exclusion" (Dkt. 33) and Defendant's motion for summary judgment on all of Plaintiff's claims (Dkt. 45). Plaintiff's motion seeks a ruling that the evidence before the Court cannot, as a matter of law, support Defendant's application of the Cosmetic Damage Exclusion. (Dkt. 33.) Defendant seeks the inverse outcome, i.e. a ruling that the Agreement's Cosmetic Damage Exclusion operates to bar Plaintiff's claim for breach of contract. (Dkt. 45 at 1–2.) Defendant also seeks summary judgment on Plaintiff's bad-faith and statutory claims. (Id. ) Both motions have been fully briefed, and Parties’ have had ample opportunity to provide summary judgment evidence. (See Dkts. 33, 42, 45, 48, 52, 63, 74.)

Having considered the filings and the applicable law, the Court finds that (1) both Plaintiff's breach of contract claim and Defendant's affirmative defense present triable issues of fact, and (2) Defendant is entitled to summary judgment on Plaintiff's bad faith dealing, Texas Insurance Code and DTPA claims.

Background

A. The Policy

Plaintiff owns and operates two commercial freight terminals located at 442 Logistic Drive, Laredo, TX 78045 and 301 Flecha Lane, Laredo, TX 78045 (collectively "Properties"). (Dkt. 1.) To protect these Properties, Plaintiff purchased Commercial Property Insurance Policy Number 85318342 from Defendant United Fire. (Dkt. 1, Ex. 1.) The Policy provides coverage for various types of property damage, including damage resulting from wind and hail. (Id. ) The Policy was in force from April 15, 2017 until April 15, 2018 (Policy Period). (Id. )

The Policy contains a variety of limitations and exclusions, including an exclusion for cosmetic hail damage (Cosmetic Damage Exclusion). The language of the Cosmetic Damage Exclusion is as follows:

We [United Fire] 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.

(Dkt. 1, Ex. 1 at 41 (emphasis in original).)¹ The Policy also contains exclusions for damage resulting from (1) wear and tear; (2) rust/corrosion; (3) "settling, cracking, shrinking or expansion [of construction materials]"; (4) faulty or inadequate design; and (5) defects related to construction, renovation or maintenance. (Dkt. 1, Ex. 1 at 29–38; see Dkt. 4 at 6–9.)

B. Plaintiff's Insurance Claim

On May 21, 2017, a wind and hailstorm struck Webb County, Texas, damaging Plaintiff's Properties.² (Dkt. 1 at 5.) On May 30, 2019, Plaintiff filed two insurance claims with Defendant, which acknowledged Plaintiff's claims one day later. (Dkt. 33, Ex. 1.) Combined, the two claims seek $950,420.73 in compensation.³ (Dkt. 1, Ex. 2 at 4.) Upon receipt of Plaintiff's claims, Defendant dispatched David Scott Walton (Walton) to evaluate the damage to the Properties. (Dkt. 45, Exs. 3–4.) In addition to Walton, Defendant retained the engineering firm, BSC Forensics, and the EPI Materials Testing Group to prepare reports on Plaintiff's claims. (Dkt. 45 at 3–4; Dkt. 45, Exs. 4–5, 7) Based on these reports and information provided by Walton, Defendant concluded that Plaintiff was entitled to approximately $32,000 in compensation, but that the remainder of Plaintiff's claims were barred by various exclusions, including the Cosmetic Damage Exclusion and the Doctrine of Concurrent Causation. (Id. at 3; Dkt. 45, Exs. 3–4.) Plaintiff brought this lawsuit to recover the difference. (Dkt. 1.)

Legal Standards

A. Summary Judgment

Federal Rule of Civil Procedure 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is proper if 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 fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law." Sossamon v. Lone Star State of Tex. , 560 F.3d 316, 326 (5th Cir. 2009) (quoting Hamilton v. Segue Software Inc. , 232 F.3d 473, 477 (5th Cir. 2000) ). "An issue as to a material fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ " Seacor Holdings, Inc. v. Commonwealth Ins. Co. , 635 F.3d 675, 680 (5th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).

The movant may satisfy the initial burden of showing that there is no genuine fact issue by merely pointing out the absence of evidence supporting the nonmovant's case. Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548. The burden then shifts to the nonmovant to show the existence of a genuine fact issue for trial. Lincoln Gen. Ins. Co. v. Reyna , 401 F.3d 347, 349 (5th Cir. 2005) (citing Celotex , 477 U.S. at 321–25, 106 S.Ct. 2548 ). To bear this burden, the nonmovant must go beyond the pleadings and identify specific evidence in the record supporting its position. Littlefield v. Forney Indep. Sch. Dist. , 268 F.3d 275, 282 (5th Cir. 2001) ; Forsyth v. Barr , 19 F.3d 1527, 1533 (5th Cir. 1994). "The [nonmovant] cannot preclude summary judgment by raising ‘some metaphysical doubt as to the material facts, conclusory allegations, unsubstantiated assertions, or by only a scintilla of evidence.’ " Avina v. JP Morgan Chase Bank, N.A. , 413 F. App'x 764, 767 (5th Cir. 2011) (quoting Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) ).

In determining whether there is a genuine fact issue, the court must view the evidence in the light most favorable to the nonmovant, making all inferences in their favor. HEI Res. E. OMG, Joint Venture v. Evans , 413 F. App'x 712, 715 (5th Cir. 2011) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). Before finding that there are no genuine fact issues, the court must be satisfied that no reasonable trier of fact could find for the nonmovant, or, in other words, that the evidence favoring the nonmovant is insufficient to enable a reasonable jury to return a verdict in their favor. Norwegian Bulk Transp. A/S v. Int'l Marine Terminals P'ship , 520 F.3d 409, 411-12 (5th Cir. 2008). When making this determination, the court must avoid making credibility determinations. Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (discussing identical standards in judgment as a matter of law).

B. Coverage Disputes and the Doctrine of Concurrent Causation

"Texas courts"—and federal courts sitting in diversity in Texas—"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. 2005). To determine the scope of insurance coverage, "the court examines the policy as a whole in order to ascertain the true intent of the parties." Hahn v. United Fire & Cas. Co. , 2017 WL 1289024, *7 (W.D. Tex. Apr. 6, 2017) (citing Utica Nat. Ins. Co. of Tex. v. Am. Indem. Co. , 141 S.W.3d 198, 202 (Tex. 2004) ). As a general matter, the party asserting that...