U.S. Fire Ins. Co. v. Lynd Co.

• Citation: 399 S.W.3d 206
• Decision Date: 15 August 2012
• Docket Number: No. 04–11–00347–CV.,04–11–00347–CV.
• Court: Texas Court of Appeals
• Parties: UNITED STATES FIRE INSURANCE COMPANY, Appellant/Cross–Appellee v. The LYND COMPANY, Appellee/Cross–Appellant v. RSUI Indemnity Company, Cross–Appellee.

399 S.W.3d 206

UNITED STATES FIRE INSURANCE COMPANY, Appellant/Cross–Appellee
v.
The LYND COMPANY, Appellee/Cross–Appellant
v.
RSUI Indemnity Company, Cross–Appellee.

No. 04–11–00347–CV.

Court of Appeals of Texas,
San Antonio.

Aug. 15, 2012.

[399 S.W.3d 209]

From the 407th Judicial District Court, Bexar County, Texas, Trial Court No. 2007–CI–14556; Janet P. Littlejohn, Judge Presiding. ¹
Brian Scott Martin, Jamie Rohde Carsey, James L. Hordern, Jr., Kevin F. Risley, Thompson, Coe, Cousins & Irons, L.L.P., Houston, TX, for Appellant/Cross–Appellee.

Robert W. Loree, Todd Lipscomb, Loree, Hernandez & Lipscomb, P.L.L.C., San Antonio, TX, Jay W. Brown, Stephen R. Wedemeyer, Winstead PC, Houston, TX, for Appellee/Cross–Appellant.

Sitting: CATHERINE STONE, Chief Justice, PHYLIS J. SPEEDLIN, Justice, REBECCA SIMMONS, Justice.

OPINION OPINION ON APPELLEE'S MOTION FOR REHEARING
Opinion by: PHYLIS J. SPEEDLIN, Justice.

The motion for rehearing filed by appellee The Lynd Company is granted. This court's opinion and judgment dated April 25, 2012 are withdrawn, and this opinion and judgment are substituted.

This appeal involves issues arising out of a summary judgment proceeding and a bench trial on damages, statutory interest, and attorney's fees. The key issue on the summary judgment is whether a material fact issue exists as to whether property damage to two apartment complexes in Austin, Texas was caused by one hail storm or two separate hail storms in the spring of 2006. The Lynd Company (“Lynd”) sued its primary insurer, U.S. Fire Insurance Co. (“U.S.Fire”), and its excess insurer, RSUI Indemnity Co. (“RSUI”), seeking to obtain insurance proceeds to cover the property damages. Lynd obtained a partial summary judgment on its breach of contract claims against U.S. Fire, and was awarded damages, plus statutory interest under Chapter 542 of the Insurance Code and attorney's fees against U.S. Fire after a bench trial. RSUI obtained a favorable summary judgment that Lynd take nothing on its breach of contract claims against RSUI. U.S. Fire now appeals, challenging the summary judgment as well as the award of statutory interest for violations of Chapter 542 of the Insurance Code.

We conclude the summary judgment evidence raises a material fact issue that precludes Lynd's summary judgment against U.S. Fire on its breach of contract claims; because RSUI's summary judgment is based on the same summary judgment evidence, and is thus dependent on and interwoven with Lynd's summary judgment, we thus reverse the portion of the trial court's final judgment granting summary judgment in favor of Lynd and RSUI and remand for further proceedings. We affirm the portion of the trial court's judgment awarding Lynd statutory interest under Chapter 542 on the $5 million insurance proceeds paid by U.S. Fire in 2007.

Factual and Procedural Background

Lynd is the property manager for multiple apartment complexes in San Antonio,

[399 S.W.3d 210]

Austin and Dallas, Texas. U.S. Fire ² is the primary insurance carrier for the Lynd properties; its policy was in effect from March 31, 2006 to March 31, 2007, and carried a limit of $5 million per occurrence. Lynd obtained excess insurance coverage for the same period from RSUI, which would be liable for any covered damages in excess of U.S. Fire's $5 million policy limit per occurrence.

In the spring of 2006, a series of wind and hail storms hit the Dallas, Austin, and San Antonio areas. On May 4, 2006, Lynd notified its primary insurer U.S. Fire in writing of its claim for property damage that occurred on May 4, 2006, but stated “not all properties have been accessed—there is possibly additional properties with damage;” Lynd supplemented its notice of claim on May 23, 2006, adding additional properties including the Mandalay and Oak Hollow apartments in Austin that are the subject of this case. U.S. Fire hired an independent adjuster, William Franz of GAB Robins, who commenced an investigation of the property damages at all the Lynd apartment complexes. Franz hired EGP & Associates, an engineering firm, to assist with the inspections, evaluations, and repair estimates.

The excess insurer, RSUI, also hired an independent adjustment firm, Engle Martin & Associates, to assist with its evaluation. David Tusa of Engle Martin prepared a spreadsheet showing the Lynd properties that had sustained hail damage and the potential hail impact of each of the five spring 2006 storms. The spreadsheet showed that Mandalay and Oak Hollow had both been hit by the CAT 71 hail storm between May 1–6, 2006, but had also been hit by the CAT 68 hail storm between April 20–21, 2006. Franz received the Tusa spreadsheet in February 2007, and forwarded it to U.S. Fire with a copy to Michael Lynd, Sr., principal of the insured; in his email, Franz indicated the position taken in the spreadsheet was not his position. Based on his investigation, Franz was of the opinion that the damage to the Mandalay and Oak Hollow apartments was likely caused by the storm that occurred on or about May 4, 2006.

Based on RSUI's position that Mandalay and Oak Hollow had been damaged by more than one hail storm, U.S. Fire interviewed Lynd employees at the properties about how many storms had damaged the apartments. A U.S. Fire investigator, Robert Scott, prepared a March 2, 2007 report which contained several statements by Lynd employees that the May 2006 storm was the storm that caused the hail damage at Oak Hollow and Mandalay.

On May 14, 2007, Michael Lynd, Sr., on behalf of The Lynd Company, signed sworn Proofs of Loss for the Mandalay and Oak Hollow apartments which stated that a hail loss occurred in “May 2006” which was “caused by HAIL CAT 71.” U.S. Fire had already paid Lynd $3 million on February 28, 2007, and paid the remaining $2 million toward its $5 million single occurrence limit on June 20, 2007. During that period, Lynd had hired Geofill Material Technologies to repair the damage to the properties. After payment of the $5 million policy limit by U.S. Fire, Lynd still owed Geofill for repairs it had performed on the Oak Hollow and Mandalay properties.

When Lynd sought to recover under RSUI's excess insurance policy, RSUI refused coverage, claiming there was a question as to whether the damage at the Oak Hollow and Mandalay apartments was caused by a single occurrence, i.e., the May 2006 hail storm for which U.S. Fire

[399 S.W.3d 211]

had paid its policy limits, or also by a second occurrence, i.e., the April 2006 hail storm. RSUI obtained an expert report dated November 5, 2007 from UBS, an engineering firm, which analyzed hail storm tracking data and other scientific weather data and concluded that both Mandalay and Oak Hollow were “likely impacted by a damaging hail event on April 20, 2006;” the report further concluded, however, that Oak Hollow may have also been damaged by a hail event on May 6, 2006. Based on the UBS report, RSUI took the position that 100% of the damage to Mandalay, and 50% of the damage to Oak Hollow, was caused by CAT 68 in April 2006; it ultimately paid Lynd for its share of 50% of the damage at Oak Hollow. When Lynd sought coverage from U.S. Fire for a second storm occurrence in April 2006, U.S. Fire asserted that a single storm, CAT 71 in May 2006, had caused all of the damage to Mandalay and Oak Hollow, and took the position that it had already paid its $5 million policy limit for a single occurrence and owed nothing more.

Lynd sued both insurance carriers on September 24, 2007, alleging breach of contract, violations of Chapter 542 of the Texas Insurance Code, and breach of the duty of good faith and fair dealing. The trial court severed the extra-contractual claims against U.S. Fire and RSUI into a separate cause number. It retained Lynd's breach of contract claims and Chapter 542 claims against U.S. Fire and RSUI in the instant case.

Lynd moved for a traditional partial summary judgment against U.S. Fire on its breach of contract claims related to Mandalay and Oak Hollow. Lynd attached the following evidence to its summary judgment motion:

1. Michael Lynd, Sr. Affidavit—President of The Lynd Company, who states in relevant part that U.S. Fire prepared the Proofs of Loss and requested Lynd to sign them in order to receive payment of the $5 million; copies of the insurance policies and Proofs of Loss are attached to the affidavit.

2. Jack Karam Affidavit (Geofill)—Karam, with thirty years' experience in the construction industry, opines that based on the attached Exhibit B–1 (Franz email with spreadsheet attached) and Exhibit B–2 (UBS engineering report), he agrees with the conclusion reached by UBS.

Exhibit B–1: William Franz Email with Spreadsheet—The spreadsheet shows that Mandalay and Oak Hollow were hit by both CAT 68 and CAT 71. Karam's affidavit characterizes the spreadsheet as “created by Bill Franz,” and as representing Franz's conclusion that Mandalay and Oak Hollow were damaged by both CAT 68 and 71; Michael Lynd was copied on the email.

Exhibit B–2: Unified Building Sciences (UBS) Expert Report—UBS, an engineering firm, was hired by Engle Martin who RSUI retained to investigate the cause of the Mandalay and Oak Hollow damage. UBS collected and reviewed scientific weather data for the months of April and May 2006, inspected the properties and interviewed Mandalay and Oak Hollow employees as well as managers of other properties in the proximity. UBS concludes that, “Oak Hollow Apartments was likely impacted by a damaging hail event on April 20, 2006; however, we cannot rule out the possibility of additional damages having occurred to the property by a hail event reported on May 6, 2006. Mandalay Apartments was likely impacted by a damaging hail event on April 20, 2006. This location was not likely to have been impacted by a hail event on May 6, 2006.”

[399 S.W.3d 212]

3. Todd Lipscomb Affidavit (Lynd Attorney)—Attached as Exhibits C–1 and C–2, respectively, are a letter on behalf of RSUI accepting...