United Servs. Auto. Ass'n v. Hayes

• Decision Date: 30 August 2016
• Docket Number: NO. 01-14-00133-CV,01-14-00133-CV
• Parties: UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant/Cross-Appellee v. Joseph HAYES, Jr. and Joanne Hayes, Appellees/Cross-Appellants
• Court: Texas Court of Appeals

507 S.W.3d 263

UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant/Cross-Appellee

v.Joseph HAYES, Jr. and Joanne Hayes, Appellees/Cross-Appellants

NO. 01-14-00133-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued August 30, 2016

Levon G. Hovnatanian, Christopher W. Martin, Kevin G. Cain, Martin, Disiere, Jefferson & Wisdom, L.L.P., Houston, TX, for Appellant/Cross-Appellee.

Rene M. Sigman, The Mostyn Law Firm, Jennifer Bruch Hogan, Richard P. Hogan, Jr., Hogan & Hogan, Houston, TX, Randal Cashiola, Cashiola & Bean, Beaumont, TX, for Appellees/Cross-Appellants.

Panel consists of Justices Jennings, Higley, and Huddle.

OPINION

Terry Jennings, Justice

Appellant/Cross-Appellee, United Services Automobile Association ("USAA"), challenges the trial court's judgment, entered after a jury trial, in favor of Appellees/Cross-Appellants, Joseph Hayes, Jr. and Joanne Hayes (collectively, "the Hayeses"), in their suit against USAA for breach of contract and violations of the Texas Insurance Code.¹ In three issues, USAA contends that there is no evidence to support the jury's finding that it failed to comply with its insurance policy in regard to the Hayeses' claim for damage caused by Hurricane Ike to the roof of their house; the trial court erred in awarding the Hayeses "a specific amount of costs"; and the trial court erred in awarding the Hayeses "$56,421.65 in court costs."

In their cross-appeal,² the Hayeses contend that the trial court erred in concluding that USAA conclusively established that they had made an excessive demand upon it and disregarding the jury's corresponding award of $237,500 for their attorney's fees for representation in the trial court; disregarding the jury's finding that USAA had knowingly engaged in an unfair or deceptive act or practice that caused them $30,000 in additional damages; disregarding the jury's finding that $5,000 would fairly and reasonably compensate them for damage to the interior of their home and garage; and not awarding them penalty interest pursuant to the Texas Insurance Code.³

We affirm in part and reverse and remand in part.

Background

In their Second Amended Petition, the Hayeses alleged that in September 2008, Hurricane Ike caused damage to their house in Clearlake and Mr. Hayes reported their claim of exterior damage to USAA in late September.

The evidence presented at trial reveals that while waiting for a USAA adjuster to inspect the damage to their house, the Hayeses, on November 5, 2008, had their roof inspected by Brinkman Roofing ("Brinkman"). Captain Kenyon of Brinkman reported that wind had caused damage to their roof, it needed to be replaced, and it would cost $11,593 to replace the roof.

However, when Cynthia Melena, USAA's adjuster, viewed the Hayeses' house later in November, she opined that it had sustained damages totaling $9,319. And she concluded that the roof had not in fact been damaged by wind because she found no torn, creased, or missing shingles. Melena did note at the time that the roof did have shingles that were "unsealed."

USAA subsequently sent to the Hayeses a "Claim Payment" letter in which it stated that the actual cash value settlement due to the Hayeses was $7,209.38. After Mr. Hayes complained to USAA that its settlement value was too low, USAA sent a second adjuster, Stephen Taylor, to re-inspect the house on December 3, 2008. Taylor opined that the Hayeses' house had sustained $9,892 in damages, but he also concluded that the roof had not been damaged by wind. After Mr. Hayes again complained to USAA, it sent a third adjuster, Jack Berke, to inspect the roof. Berke opined that wind turbines on the roof, and the roofing surrounding the turbines, needed to be replaced. Although he saw six to seven damaged shingles, he concluded that the entire roof did not need to be replaced. And Berke estimated that the house had sustained damages totaling $12,006.

In May 2009, USAA sent Peter Weakly, the fourth and final adjuster, to inspect the damage to the Hayeses' house. He noted that "40-60%" of the shingles on the roof were "lifted" and "not sealed," most of the lifted shingles were located on the front slope and the center of the front slope of the roof, and one shingle might have been nicked by flying debris. Weakly did not see any evidence of "creased" shingles, which would have been indicative of wind damage. And he opined that wind did not cause the lifted shingles to become unsealed; rather, this was caused by "poor manufacturing, defective shingles, at the time." Weakly did see a torn shingle, but concluded that it was torn by a Brinkman roofer. He also saw damage to vent pipes on the roof, but he concluded that the damage had been caused by squirrels, not Hurricane Ike. When Weakly entered the house, he found water damage in the master bedroom, dressing

area, and master bathroom. However, he opined that this interior water damage was caused by the exterior damage to the vent pipes on the roof. In all, Weakly estimated that the Hayeses' house had sustained $28,473.09 in damages, including the costs to reseal the shingles on the roof.

At trial, Mr. Hayes testified that although USAA had paid him $24,025 on his claim, he paid $8,450 out of his own pocket for repairs. And, even with the money that he received from USAA, he was not able to make all of the needed repairs to the house. Moreover, after Weakley had inspected the house, Mr. Hayes contacted USAA to ask if it was going to replace the roof, USAA responded, "[T]hat's it."

After hearing the evidence, the jury returned its verdict, finding that USAA had failed to comply with the insurance policy regarding the Hayeses' claim "for roof, garage door, and other exterior damage" to their house. It further found that USAA had "knowingly" engaged in "unfair or deceptive act[s] or practice[s]" that caused the Hayeses damage, specifically by failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of their claim after USAA's liability had become reasonably clear; failing to promptly provide the Hayeses with a reasonable explanation of the basis in the policy for USAA's denial of their claim or an offer of a compromise settlement of their claim; and refusing to pay the Hayeses' claim without conducting a reasonable investigation. And the jury found that USAA had failed to notify the Hayeses "in writing" of its "acceptance or rejection of their claims by June 10, 2009" and "comply with its duty of good faith and fair dealing" to the Hayeses.

The jury awarded the Hayeses $20,000 for "[d]amage to the roof, garage door, and other exterior damage" to their house, $5,000 for "[d]amage to the interior of the home and garage," and $2,000 for damages proximately caused by USAA's "failure to comply with its duty of good faith and fair dealing." In addition to their actual damages, it awarded the Hayeses $30,000 because USAA had committed its conduct knowingly. And the jury awarded the Hayeses $237,500 in attorney's fees for representation in the trial court and $50,000 for representation in the court of appeals.

In its Motion for Judgment Notwithstanding the Verdict ("JNOV"), USAA asserted that the Hayeses had presented no evidence to establish that they had suffered a direct physical loss; USAA committed violations of the Texas Insurance Code; they suffered damages in regard to their claims for breach of contract and violations of the Texas Insurance Code; they suffered $20,000 in damage to the roof, garage door, and other exterior damage; they suffered $5,000 in damage to the interior of their home and garage; USAA "knowingly" engaged in "unfair or deceptive act[s] or practice[s]" that caused damage to the Hayeses; and USAA failed to comply with its duty of good faith and fair dealing that proximately caused damages of $2,000 to the Hayeses. USAA further asserted that the Hayeses' evidence on attorney's fees is "improper as a matter of law"; their attorney's fees are limited due to the fact that they made an excessive demand upon USAA; and, alternatively, their recovery of attorney's fees is limited under the Texas Insurance Code.⁴ In their response, the Hayeses asserted that they did not make an excessive demand upon USAA and legally sufficient evidence supports the jury's findings and awards.

In its judgment, the trial court disregarded the jury's award of $5,000 for damage to the interior of the Hayeses' home and garage; the jury's finding that USAA "knowingly" engaged in "unfair or deceptive act[s] or practice[s]" and corresponding award of $30,000; the jury's award of $2,000 for USAA's failure to comply with its duty of good faith and fair dealing; and the jury's award to the Hayeses for attorney's fees for representation in the trial court. And the trial court reduced the award of attorney's fees for trial representation to "$0, reflecting the [c]ourt's finding of excessive demand" by the Hayeses. In accord with the remainder of the jury's verdict, the trial court rendered judgment in favor of the Hayeses and against USAA based upon the jury's findings that USAA had failed to comply with the insurance policy and violated the Texas Insurance Code. And it awarded the Hayeses $20,000 in actual damages, plus pre- and post-judgment interest, and $56,421.65 in "taxable court costs." The Hayeses then filed a Motion to Modify, Correct or Reform the Judgment and a Motion for New Trial on Attorney's Fees, both of which were overruled by operation of law.⁵

Breach of Contract

In its first issue, USAA argues that the trial court erred in denying its motion for JNOV and "rendering judgment on the [Hayeses'] breach of contract claim because there [is] no evidence of a direct physical loss with respect to unsealed shingles." USAA asserts that "[a] shingle in an ‘unsealed’ condition is not a ‘direct physical loss' under the Hayes[es's] homeowner's policy, absent evidence the shingle was sealed prior to the storm"; the Hayeses' expert evidence "regarding the cause of the unsealed...