Zhu v. First Cmty. Ins. Co.

• Court: Texas Court of Appeals
• Writing for the Court: Kem Thompson Frost, Chief Justice
• Citation: Zhu v. First Cmty. Ins. Co., 543 S.W.3d 428 (Tex. App. 2018)
• Decision Date: 13 February 2018
• Docket Number: NO. 14-16-00226-CV,14-16-00226-CV
• Petition History: pet. dism'd by agr.
• Parties: Haiquan ZHU, Appellant v. FIRST COMMUNITY INSURANCE COMPANY, Appellee

543 S.W.3d 428

Haiquan ZHU, Appellant

v.FIRST COMMUNITY INSURANCE COMPANY, Appellee

NO. 14-16-00226-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed February 13, 2018

Richard D. Daly, Melissa Waden Wray, Houston, TX, for Appellant.

Robert Tate Gorman, Dallas, TX, Wade Caven Crosnoe, Austin, TX, Andrew L. Johnson, Houston, TX, for Appellee.

Panel consists of Chief Justice Frost and Justices Donovan and Wise.

OPINION

Kem Thompson Frost, Chief Justice

In this first-party insurance case, an insured under a homeowners policy appeals a summary judgment dismissing his breach-of-contract and extra-contractual claims against his insurer. Concluding that the insured has not shown that the trial court erred in granting summary judgment, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant Haiquan Zhu, the plaintiff in the trial court, owns a house in Sugar Land, Texas. Appellee First Community Insurance Company, the defendant in the trial court, issued Zhu a homeowner’s insurance policy. A storm in July 2014 damaged the house and allegedly damaged other property, prompting Zhu to file a claim on the policy.

First Community retained an adjuster, Command Claims, to investigate the loss. Command Claims conducted an inspection and estimated the actual cash value of damages to be $2,726.14. After applying the policy’s deductible, First Community issued payment to Zhu of $226.14.

Policyholder’s Suit Against Insurer

A few months later, Zhu filed suit against First Community asserting claims for breach of contract, violation of the Prompt Payment of Claims Act, violations of Insurance Code chapter 541, and violations of the Deceptive Trade Practices Act ("DTPA").

Appraisal Process

Under the policy, if Zhu and First Community fail to agree on the amount of the loss, either may demand appraisal of the amount of the loss. In November 2014, First Community invoked the appraisal provision and demanded appraisal of the amount of the loss. In March 2015, the two appraisers and the umpire (collectively the "Appraisal Panel") issued an appraisal award in which they agreed that the amount of the loss was $17,384.30 in replacement cost, depreciation of $3,500, and an actual cash value of $13,884.30. The Appraisal Panel stated in the award that "[t]his award pertains only to items where there was a disagreement as to the "amount of the loss" (i.e., items where the parties agreed on the scope of damages, but not on the price to repair them)" (hereinafter the "Included Items"). The Appraisal Panel also said that the award "was not intended to, and did not, cover items for which there was a disagreement as to whether there was damage at all" (the "Excluded Items").¹ The Appraisal Panel did not provide any details or itemization in the appraisal award, nor did the Appraisal Panel specify any of the Included Items or Excluded Items. First Community issued a check to Zhu and his counsel for $11,158.16, an amount equal to the actual cash value in the appraisal award, less the $2,500 deductible and First Community’s prior payment of $226.14.

Summary Judgment

First Community moved for summary judgment on the following grounds:

(1) First Community’s full and timely payment of the claim based on the appraisal award entitles First Community to judgment as a matter of law on Zhu’s breach-of-contract claim and claim under the Prompt Payment of Claims Act ("Prompt Payment Act").

(2) Zhu’s claims under the DTPA and his claims under Insurance Code chapter 541 fail as a matter of law because (a) First Community fully and timely paid the claim based on the appraisal award, (b) a bona fide dispute about the amount of covered damages exists, and (c) Zhu must show that he suffered damages above and beyond failure to receive policy proceeds but Zhu seeks damages based only on his alleged failure to receive the correct amount under the policy.

(3) Zhu’s claims based on alleged Insurance Code violations involving alleged misrepresentations fail as a matter of law because (a) Zhu has not shown that any alleged misrepresentation was the producing cause of damages separate from the alleged breach-of-contract damages, (b) these claims attempt to recast Zhu’s breach-of-contract claims as tort claims, and (c) there is no evidence First Community made a false representation that Zhu relied on to his detriment.

(4) Zhu’s claims based on First Community’s alleged failure to conduct a reasonable investigation, failure to make a timely coverage decision, and failure to promptly provide an explanation for the offer of settlement are barred because the damages sought are merely contractual damages based on the alleged breach of contract.

(5) Zhu cannot recover attorney’s fees because all of his claims fail as a matter of law.

Zhu responded in opposition. The trial court granted First Community’s summary-judgment motion, implicitly granting summary judgment on all of the above-stated grounds. Zhu now challenges the summary judgment in this appeal.

II. ISSUES AND ANALYSIS

On appeal Zhu asserts the following issues:

(1) Whether First Community’s payment of the claim based on the appraisal award estops Zhu from pursuing his breach-of-contract claim as to those items specifically excluded from the award;

(2) Regardless of the outcome as to the breach-of-contract claim, whether the trial court erred in granting summary judgment as to Zhu’s claims under Insurance Code chapter 541 and the DTPA;

(3) Whether First Community is entitled to summary judgment on Zhu’s claims under the Prompt Payment Act.

Standard of Review

In a traditional motion for summary judgment, if the movant’s motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich , 28 S.W.3d 22, 23 (Tex. 2000). In reviewing a no-evidence summary judgment, we ascertain whether the nonmovant pointed out summary-judgment evidence raising a genuine issue of fact as to the essential elements attacked in the no-evidence motion. Johnson v. Brewer & Pritchard, P.C. , 73 S.W.3d 193, 206–08 (Tex. 2002). In our de novo review of a trial court’s summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez , 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes , 236 S.W.3d 754, 755 (Tex. 2007). When, as in this case, the order granting summary judgment does not specify the grounds upon which the trial court relied, we must affirm the summary judgment if any of the independent summary-judgment grounds is meritorious.

FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).

Law Regarding Appraisal Awards

Appraisal clauses appear in almost every homeowners, property, or automobile insurance policy in Texas. See State Farm Lloyds v. Johnson , 290 S.W.3d 886, 889 (Tex. 2009). The clause in Zhu’s homeowners policy with First Community, like most appraisal clauses, provides that the insurer and insured agree to an extra-judicial remedy—appraisal—for any disagreement regarding the amount of loss owed the insured. See Nat'l Sec. Fire & Cas. Co. v. Hurst , 523 S.W.3d 840, 844 (Tex. App.—Houston [14th Dist.] 2017, pet. filed). From a policy point of view, appraisal clauses allow the insured and insurer to resolve disputes about damages with greater efficiency by eliminating the cost and delay of traditional litigation. See id.

Texas courts hold that appraisal awards made under the provisions of an insurance contract are binding and enforceable, and indulge every reasonable presumption to sustain an appraisal award. See Franco v. Slavonic Mut. Fire Ins. Ass'n , 154 S.W.3d 777, 786 (Tex. App.—Houston [14th] 2004, no pet.). Appraisal clauses estop a party from contesting the issue of damages in a lawsuit based on an insurance contract. See Hurst , 523 S.W.3d at 844. If a party seeks to avoid enforcement of an appraisal award, the party must carry the burden of proving one of the three grounds for setting aside an appraisal award:

1. the award was made without authority;

2. the award was made as a result of fraud, accident, or mistake; or

3. the award failed to comply with the requirements of the insurance policy.

See id. ; Franco , 154 S.W.3d at 786. A party seeking to set aside an appraisal award may amend the party’s pleadings to assert that the trial court should set aside the award, move the trial court to set aside the award, or respond in opposition to a summary-judgment motion by asserting a ground for setting aside the award and raising a fact issue as to the ground. See Studer v. State Farm Lloyds , No. 4:13-CV-413, 2016 WL 4063782, at *3–5 (E.D. Tex. July 29, 2016) (ruling on plaintiff’s motion to set aside the appraisal award); Franco , 154 S.W.3d at 785–86 & n.7 (noting that a party may seek to have the trial court set aside the appraisal award in the party’s pleading, but that a party also may raise a ground for setting aside the appraisal award for the first time in response to an opposing party’s summary-judgment motion). On appeal from a summary judgment in which the trial court enforced the appraisal award, an appellate court may not reverse the summary judgment on a ground for setting aside the appraisal award unless (1) the nonmovant raised that ground in response to the motion and (2) the summary-judgment evidence raises a fact issue as to that ground. See City of Houston v. Clear Creek Basin Auth. , 589 S.W.2d 671, 678 (Tex. 1979) (stating that "[w]ith the exception of an attack on the legal sufficiency of the grounds expressly raised by the movant...