State Farm Lloyds v. Ginger Hanson , 2016 Tex. App. LEXIS 6937 ( 2016 )

Affirmed and Opinion filed June 30, 2016.
In the
Fourteenth Court of Appeals
NO. 14-15-00093-CV
STATE FARM LLOYDS, Appellant
V.
GINGER HANSON, Appellee
On Appeal from the 281st District Court
Harris County, Texas
Trial Court Cause No. 2012-68087
OPINION
State Farm Lloyds appeals from a judgment in favor of insured Ginger
Hanson following a jury trial. The jury found that State Farm breached its policy
when it refused to cover physical loss to Hanson’s roof caused by a wind event in
June 2012. In addition to awarding Hanson damages for the cost to repair or
replace her physical loss, the jury awarded attorney’s fees. State Farm: (1)
challenges the legal sufficiency of the evidence supporting the jury’s finding that
State Farm failed to comply with the policy, (2) contends that the evidence
conclusively established an exclusion to coverage, and (3) argues that Hanson
failed to produce evidence showing she was entitled to replacement cost benefits.
With regard to attorney’s fees, State Farm argues that: (a) the evidence is legally
insufficient to support the award; (b) under rule 167, State Farm is entitled to an
offset for litigation costs accruing after Hanson rejected its settlement offer and
Hanson is precluded from receiving post-rejection attorney’s fees; (c) Hanson
failed to properly segregate; and (d) the award is excessive. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Ginger Hanson closed on the house at issue in July 2011. At the time, the
roof was approximately 15 years old with 30-year shingles fastened to the decking
with staples. The house underwent a purchase inspection, which did not reveal any
concerns with the roof. The seller’s disclosure did not indicate any roof damage.
Hanson sought coverage for the house from her longtime State Farm agent.
Her agent prepared an underwriting report for Hanson’s policy. There was no
indication that the roof had “possible hail damage,” “curled shingles,”
“loose/missing shingles,” “wear in valleys,” “missing/replaced ridge row,”
“patched area[s],” or “stain/rotting under eaves.” There were no “interior leaks.”
The report did not identify any possible concerns. According to Shannon Kimmel,
one of Hanson’s experts with experience working as a claims adjuster for State
Farm and currently working as a public adjuster,1 the underwriting report indicated
there were “no issues with that roof less than a year before this reported storm.”
Another of Hanson’s experts with experience working for State Farm as a claims
adjuster, Kerry Freeman, stated that the report reflected a “clean bill of health” for
1
A public adjuster is an adjuster who is licensed to represent the public against an
insurance company when there is a problem with the claim.
2
Hanson’s roof.
Under “Section I – Coverages,” Hanson’s homeowner’s policy with State
Farm provides:
COVERAGE A – DWELLING
1. Dwelling. We cover the dwelling used principally as a private
residence on the residence premises shown in the Declarations.
Dwelling includes:
a. structures attached to the dwelling;
b. materials and supplies located on or adjacent to the residence
premises for use in the construction, alteration or repair of the
dwelling or other structures on the residence premises;
c. foundation, floor slab and footings supporting the dwelling;
and
d. wall-to-wall carpeting attached to the dwelling.
Under “Section I – Losses Insured,” the policy provides:
COVERAGE A – DWELLING
We insure for accidental direct physical loss to the property described
in Coverage A, except as provided in SECTION I - LOSSES NOT
INSURED.
Under “Section I – Losses Not Insured,” the policy provides:
1. We do not insure for any loss to the property described in Coverage
A which consists of, or is directly and immediately caused by, one or
more of the perils listed in items a. through n. below, regardless of
whether the loss occurs suddenly or gradually, involves isolated or
widespread damage, arises from natural or external forces, or occurs
as a result of any combination of these: . . .
g. wear, tear, marring, scratching, deterioration, inherent vice,
latent defect or mechanical breakdown . . . .
3. We do not insure under any coverage for any loss consisting of one
or more of the items below. Further, we do not insure for loss
described in paragraphs 1. and 2. immediately above regardless of
3
whether one or more of the following: (a) directly or indirectly cause,
contribute to or aggravate the loss; or (b) occur before, at the same
time, or after the loss or any other cause of the loss: . . .
b. defect, weakness, inadequacy, fault or unsoundness in: . . .
(2) design, specifications, workmanship, construction,
grading, compaction . . . .
Hanson was not at home during the June 1, 2012 storm. On the day after the
storm, Roy Campbell, who sells roofs for Telge Roofing, tarped roofs and made
adjuster appointments for houses in Hanson’s neighborhood. Kimmel discussed
the June 1, 2012 storm with Hanson’s neighbors and the greenskeeper for the golf
course around the corner from Hanson’s house. After the storm, the golf course
had to shut down due to “a tremendous amount” of fallen trees blocking golf cart
paths. Several of Hanson’s neighbors received new roofs after the June 1, 2012
storm.
In early October 2012, Campbell inspected Hanson’s roof. Campbell found
“pulled through fasteners” and “lots of wind lift”: “Basically, [Hanson] has staples
on her roof and where the wind had lifted it up, it made a clean pull through of the
shingle. The shingle was actually still in place but it’s basically flapping in the
wind.” Campbell found areas of Hanson’s roof where the edges of the top layer of
shingles were not sealed to the underlying layers and could be lifted by hand.
Campbell suggested that Hanson file an insurance claim.
Hanson and Campbell called in a claim to State Farm for wind damage to
Hanson’s roof.2 State Farm assigned claims representative Jon Flores. Campbell
accompanied Flores onto the roof for the inspection. Campbell showed Flores
areas of pulled-through shingles and creased shingles. Flores only walked the
2
Hanson’s claim initially also included hail damage.
4
ridge3 of the roof and did not go down any of the slopes. According to Campbell,
Flores indicated there was not “enough damage” and that despite any “lift” there
were “no missing shingles.” Flores concluded that Hanson’s roof had not
sustained an accidental direct physical loss.
Flores’s inspection did not satisfy Hanson. Campbell referred Hanson to
Kimmel. Hanson requested another inspection from State Farm. State Farm next
assigned claims representative Andrew Traise. Campbell accompanied Traise onto
the roof for the inspection. Kimmel also was present. Campbell described Traise’s
inspection as uncharacteristically quick. Traise “traversed” about ten percent of
the roof and made no effort to ask any of Hanson’s neighbors about, or to observe,
their properties. Campbell showed Traise areas of lifted shingles “pretty much all
over the roof”—pulled-through fasteners and unsealed shingles. According to
Campbell, Traise wanted to find “some more missing shingles, you know,
damaged shingles.” Traise informed Hanson that he found no accidental direct
physical loss. State Farm denied Hanson’s claim for wind damage.
In November 2012, Hanson filed suit against State Farm and Traise.
Against State Farm, Hanson alleged breach of contract and violation of the Prompt
Payment of Claims Statute, see Tex. Ins. Code Ann. §§ 542.051–.061 (West 2009).
Against both State Farm and Traise, Hanson alleged “bad faith/DTPA” in the form
of violations of chapter 541 of the Insurance Code, see id. §§ 541.051, 541.060,
541.061 (West 2009).4 State Farm and Traise served Hanson with a settlement
offer in November 2013. State Farm and Traise offered Hanson $30,000, with an
3
The ridge is the top of the roof, where the slopes intersect.
4
In May 2014, the trial court granted partial summary judgment in favor of State Farm
on the “section 542 claims and common law duty of good faith and fair dealing.” The trial court
also granted partial summary judgment in favor of Traise on “any common law duty of good
faith causes of action.”
5
expiration date of December 4, 2013. Hanson did not accept the offer.
At trial, Kimmel testified about his inspection of Hanson’s roof. He
described accidental direct physical loss as “any damage to the shingle. It could be
creasing. It could be torn. In this instance, in her roof, it’s pulled through that
fastener so it’s actually torn right there at the fastener. So it is damage, it’s got
actual direct physical loss.” Kimmel located pulled-through shingle damage,
where a shingle is “pulled through that fastener so it’s actually torn right there at
the fastener,” exposing the plywood decking underneath. According to Kimmel,
pulled-through shingles indicate “wind damage” and comprise “accidental direct
physical loss” covered under Hanson’s policy. Kimmel also located “wind-
creased” shingle damage, where the shingle “was actually bent over” because “the
wind has been flapping that thing up and creased it.” Wind-creased shingles also
are “accidental direct physical loss” covered by Hanson’s policy. Kimmel further
found shingle damage caused either by flying debris or “tree damage where the
tree’s blown into the roof during the storm and messed up the edging.” He
indicated that such damage was covered by Hanson’s policy. According to
Kimmel, Hanson’s roof “absolutely” sustained covered wind damage on “all
sides.” He opined Hanson’s roof required replacement—there were “way too
many shingles that are damaged on the roof, and the cost of repairing that would
outweigh the cost of replacing that.”
Freeman also inspected Hanson’s roof and agreed with Kimmel’s
assessment of wind damage. Freeman described pulled-through shingle damage—
“[w]hat that is, where that fastener originally was put into that top one, it has been
pulled up and torn from wind.” Freeman acknowledged that he saw a “handful” of
overdriven staples, as there are on any given roof, but that he saw pulled-through
shingle tears throughout Hanson’s roof. He stated that if the staples had been
6
overdriven, then there would not be tearing; instead, “it would go straight through
like a bullet hole.” Freeman opined that the roof was unrepairable because the
repairs would risk causing more damage to the shingles. Freeman further testified
regarding his Xactimate5 estimate totaling approximately $39,687 as the reasonable
and necessary cost to replace Hanson’s roof.
State Farm’s expert Mark West, a general contractor, inspected Hanson’s
roof with Eric Green, a civil engineer also serving as State Farm’s expert. West
did not walk the back slope of Hanson’s roof. West acknowledged that
“potentially the ridge was displaced by wind.” There were approximately five to
ten “displaced shingle tabs” and shingle tabs with a tear, crease, or “stripe,” which
could have been damaged by a wind event or from impact with tree limbs. West
agreed that a windstorm could cause shingles to unseal or pull through their
fasteners. He opined that the damaged shingle tabs could be repaired for under
$500. West, who has experience with Xactimate, went through Kimmel’s estimate
and noted several areas of unnecessary and duplicative charges. West estimated
that the cost to replace Hanson’s roof was approximately $15,000 to $16,000.
According to Green, wind measurements from the closest airport to
Hanson’s house (approximately eight miles away) indicated gusts up to 49 mph on
June 1, 2012. This wind speed can blow over small trees and cause tree branches
to fall. Green testified that wind can cause physical damage to roofs such as
shingles ripping off, tearing, and creasing. He physically examined a “sampling”
of about five to eight percent of the surface of Hanson’s roof. Green
acknowledged finding some shingles on the ridge and on the eaves that had
sustained wind damage or “wind-blown debris damage.” Also, “wind forces”
5
Xactimate is software widely used in the insurance industry to estimate a cost basis for
property replacement, including roofs.
7
possibly contributed to some staple failures. Green agreed that Kimmel’s photos
revealed “conditions consistent with wind damage.” When asked whether there
was wind damage to Hanson’s roof, Green answered “yes.” Green indicated that
the damaged shingles could be replaced without replacing the entire roof and could
be repaired for less than the policy’s $4000 deductible. Green opined that the
unsealed condition of Hanson’s roof was not caused by a wind event, but rather by
thermal expansion and contraction. Although Green stated Hanson’s roof was in
“excellent” condition and was “aging extremely well,” he also opined it was a “bad
roof” that had been defectively installed because 80 to 85 percent of the staples had
been overdriven. Green also stated it was “true” that Hanson’s roof needed to be
replaced.
One of Hanson’s trial counsel, Richard Daly, testified regarding attorney’s
fees. He described the case as “difficult,” involving as many as fifteen raised
defenses, at least five depositions, discovery disputes, legal challenges, and
multiple experts on each side. Daly described his firm’s method of keeping time
records in a certain computer program. The trial court admitted a summary
containing billing entries in Hanson’s case from October 22, 2012 through May 15,
2014. The summary contains line items with information about the date, the
billing professional, description of tasks performed, the hours and rate, and the
amount. The summary totaled just over $157,000. Daly described the work spent
on Hanson’s contract and bad faith claims as inextricably intertwined and
estimated that five percent of the time was spent solely on bad faith issues. Daly
testified that attorney’s fees of $149,224.11 were fair, reasonable, and necessary.
State Farm’s expert on attorney’s fees, Charles Levy, opined that Hanson’s
case was “a plain run-of-the-mill lawsuit” and could have been tried for fewer
hours at lower rates for approximately $30,000 to $40,000.
8
Question 1 of the jury charge asked whether State Farm failed to comply
with the terms of the insurance policy issued to Hanson. The jury was instructed
that: the insurance policy covers physical loss to Hanson’s property caused by a
June 1, 2012 wind event; the policy does not cover wear and tear, marring,
scratching, deterioration, inherent vice, latent defect, or mechanical breakdown;
and the policy does not cover defect, weakness, inadequacy, fault or unsoundness
in design, specifications, workmanship, construction, grading, compaction,
materials used in construction or repair, or maintenance. The jury answered “yes”
to question 1.
Question 2 asked the jury what sum of money would fairly and reasonably
compensate Hanson for her damages resulting from State Farm’s failure to comply
with the policy. The jury awarded $12,878 as “the cost to repair or replace any
physical loss to Ginger Hanson’s property as a result of a wind event on June 1,
2012, less the deductible of $4,000.”
Question 3 asked the jury what is a reasonable fee for the necessary services
of Hanson’s attorneys in the current lawsuit. For representation prior to and
through trial, the jury awarded $70,000. The jury awarded $45,000 for
representation in an appeal in the court of appeals, and a total of $35,000 for
representation in the Supreme Court of Texas. For representation before the
settlement offer’s deadline, the jury awarded $15,000.
The trial court rendered final judgment in favor of Hanson and against State
Farm consistent with the jury’s verdict, and rendered that Hanson recover nothing
from Traise. State Farm timely appealed.
9
II. ANALYSIS
A. State Farm’s first issue
In what we construe as its first issue, State Farm presents three distinct
subparts. First, State Farm contends there is no proof that Hanson’s roof sustained
a covered physical loss on June 1, 2012. Second, State Farm asserts any physical
loss was not covered because it conclusively established that an exclusion applied.
Third, State Farm argues that Hanson cannot recover replacement costs as damages
because she did not prove she was entitled to them.
1. Standard of review
The test for legal sufficiency is whether the evidence at trial “would enable
reasonable and fair-minded people to reach the verdict under review.” City of
Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In making this determination,
we must view the evidence in the light most favorable to the verdict, crediting any
favorable evidence if a reasonable factfinder could and disregarding any contrary
evidence unless a reasonable factfinder could not. Id. at 827. We assume jurors
made all inferences in favor of their verdict if reasonable minds could, and
disregarded all other inferences. Id. at 821. We cannot substitute our judgment for
that of the jury, so long as the evidence falls within the zone of reasonable
disagreement. Id. at 822. The factfinder is the only judge of witness credibility
and the weight to give to testimony. Id. at 819.
We will sustain a legal sufficiency challenge only when: (1) the record
discloses the complete absence of a vital fact, (2) the court is barred by rules of law
or evidence from giving weight to the only evidence offered to prove a vital fact,
(3) the only evidence offered to prove a vital fact is no more than a mere scintilla,
or (4) the evidence conclusively establishes the opposite of a vital fact. Id. at 810.
10
More than a scintilla of evidence exists if the evidence “rises to a level that would
enable reasonable and fair-minded people to differ in their conclusions.” Service
Corp. Int’l v. Guerra, 348 S.W.3d 221, 228 (Tex. 2011). Evidence is conclusive
only if reasonable people could not differ in their conclusions. City of Keller, 168
S.W.3d at 816. To successfully challenge the legal sufficiency of an adverse
finding on an issue on which it has the burden of proof, a party must conclusively
establish all vital facts in support of that issue. Dow Chem. Co. v. Francis, 46
S.W.3d 237, 241 (Tex. 2001) (per curiam).
2. Legally sufficient evidence supports the jury’s answer to question 1.
State Farm first argues Hanson did not prove that her shingles were in a
“satisfactory state,” or sealed, before the June 1, 2012 storm.6 State Farm points to
Hanson’s testimony that she did not ask her inspector to check for unsealed
shingles when she purchased the house, and did not know whether they were
sealed in 2011 or whether any other weather event had affected the sealing.
The evidence presented, however, reasonably supports the jury’s finding that
Hanson’s shingles were sealed prior to June 1, 2012. The inspection of Hanson’s
house prior to closing found only cosmetic issues, no substantive damage, “nothing
really wrong with the roof that required repair.” The seller’s disclosure did not
indicate any roof damage. State Farm generated an underwriting report in June
2011 to determine whether to issue a policy on Hanson’s house. The report
indicated that there were no concerns regarding the roof—no hail damage, no
6
State Farm cites Lennar Corp. v. Great American Insurance Co., 200 S.W.3d 651, 678–
79 (Tex. App.—Houston [14th Dist.] 2006, pet. denied), abrogated by Gilbert Texas
Construction, L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010). However,
unlike here, the circumstances in Lennar revealed that the exterior insulation and finish system at
issue had not been physically injured or changed to constitute property damage, but rather was
“already in an unsatisfactory state when applied to the homes because it is inherently defective.”
Id. at 679.
11
curled shingles, no loose or missing shingles, no valley wear, no missing or
replaced ridge row, no patched areas, no stain or rotting under the eaves, and no
interior leaks. Kimmel’s and Freeman’s testimony supports that State Farm found
no issues in 2011 precluding roof coverage. State Farm’s corporate representative,
Randy Teufel, the team manager who supervised both Flores and Traise, testified
the report showed that Hanson’s roof was in “good condition.” Traise also
testified that the report indicated “no problems noted with the roof.”
State Farm also argues there is no evidence that a wind event caused the
unsealed condition of Hanson’s roof. State Farm contends that Campbell and
Kimmel did not testify regarding what caused the sealant to fail, only that the wind
lifted the shingles so that they pulled and tore through the staples. However, State
Farm’s expert Green, when asked “what are the scientifically recognized causes of
unsealed shingles,” testified that shingles “can become loose because of wind” and
agreed “wind can cause sealant failure.” West agreed that a windstorm could
cause shingles to “flap in the wind.” In any event, the evidence was not limited to
unsealed shingles, or even pulled-through shingles. Even assuming without
deciding solely for purposes of our analysis that purely unsealed shingles are not
evidence of accidental direct physical loss due to wind, there is no dispute that
“torn, ripped, folded, creased,” “missing,” or “displaced” shingles can constitute
evidence of accidental direct physical loss due to wind. Campbell indicated that
Traise wanted to find “more missing shingles”; in other words, Traise located some
missing shingles. Kimmel located “wind-creased” shingle damage and areas of
“messed-up” edging caused by flying debris or by a tree “blown into the roof
during the storm.” Freeman saw the same damage as Kimmel. West observed
“displaced” shingle tabs. He agreed that photos taken by Kimmel showed shingle
tabs with tears and creases. Green located a missing ridge shingle and “wind-
12
blown debris damage” on eave shingles. Green also agreed that Kimmel’s photos
showed creased shingles. This evidence is legally sufficient to support the jury’s
finding of physical loss.
Next, State Farm asserts Hanson produced no evidence that a wind event
caused pulled-through damage to the shingles. State Farm argues that Campbell’s
and Kimmel’s expert testimony was not probative because it is conclusory or
speculative.7 State Farm essentially contends that Campbell’s and Kimmel’s
opinions amount to no evidence because they did not adequately explain or link
their opinions to the facts.8 State Farm also complains that Campbell and Kimmel
did not rule out alternate causes of the purported pulled-through shingle damage.9
State Farm contends that the pulled-through shingle damage was instead caused by
a construction defect: overdriven staples. Again, setting aside the pulled-through
shingles,10 State Farm’s position completely fails to recognize that the jury was
presented with evidence of other types of shingle damage—such as creases,
“stripes,” edging tears, and displacement—which Teufel acknowledged “would be
considered a covered loss, that would be accidental direct physical loss and we
would have considered repairing or replacing the roof.”
Finally, State Farm argues that there was no evidence Hanson’s roof
7
Hanson correctly notes that she did not designate Campbell as an expert and that the
trial court sustained State Farm’s objection to any expert opinion testimony by Campbell.
8
See City of San Antonio v. Pollock, 284 S.W.3d 809, 818 (Tex. 2009); Coastal Transp.
Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004).
9
See Wal-Mart Stores, Inc. v. Merrell, 313 S.W.3d 837, 840 (Tex. 2010) (per curiam).
10
Even if pulled-through shingles were the sole type of damage at issue, there was
evidence that wind can unseal shingles, can lift unsealed shingles, and can pull shingles through
their fasteners. There was also evidence that the wind event on June 1, 2012 was strong enough
to topple trees and cause tree branches to fall. Moreover, there was evidence from Freeman
explaining that overdriven staples “go straight through [the shingle] almost like a bullet hole”
compared to when wind pulls the shingle through the staple resulting in tearing.
13
sustained physical loss on June 1, 2012. We disagree. We already have
determined there was evidence to support that the shingles were in a satisfactory
state prior to the June 1, 2012 storm. We already have determined that there was
evidence to support that Hanson’s shingles were damaged by wind. Moreover,
there was evidence that a wind event occurred on June 1, 2012. Campbell testified
regarding his response to the June 1, 2012 wind event; he was tarping houses and
was making claims and adjuster appointments in Hanson’s neighborhood the next
day. Kimmel confirmed the date of the storm with Hanson’s neighbors, several of
whom sustained roof damage, and with the neighborhood golf course’s
greenskeeper. The wind was powerful enough to knock over a “tremendous”
number of trees. According to Kimmel, State Farm uses precisely this type of
evidence to determine the date of loss when adjusting claims. State Farm’s
operation guidelines list observation of neighboring properties as a factor in
determining a loss. Further, wind speeds of almost 50 mph recorded at Hooks
Airport—the closest “official wind gauge”—on June 1, 2012 were capable of
blowing over small trees and causing branches to fall. State Farm points to no
evidence, much less evidence the jury could not reasonably disregard, that supports
some other specific wind event instead caused Hanson’s physical loss.11 The jury
reasonably could have found that Hanson’s shingles suffered accidental direct
physical loss during the June 1, 2012 wind event.
We overrule this subissue.
3. State Farm failed to conclusively establish any policy exclusion.
Having determined Hanson met her initial burden to establish coverage
11
The only other specific storm discussed was Hurricane Ike, which occurred in
September 2008, several years before State Farm issued its underwriting report on Hanson’s
house.
14
under the terms of her policy, we next consider whether State Farm conclusively
established that Hanson’s loss falls within an exclusion to avoid liability. See
Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124
(Tex. 2010); Francis, 46 S.W.3d at 241. State Farm contends the evidence
conclusively established that the unsealed shingles were caused by “wear and tear,
deterioration, latent defect, or inadequate, faulty, or unsound workmanship or
materials used in construction.” State Farm’s position again focuses on shingles
whose only sustained damage was their unsealed nature or pulled-through tearing
and fails to account for evidence of other types of (undisputed) wind damage to
Hanson’s shingles for which State Farm authorizes repair or replacement.
In any event, State Farm did not conclusively establish that any exclusion
applies to avoid liability. State Farm’s underwriting report did not indicate any
concerns that would preclude or lessen coverage of Hanson’s roof. Moreover,
State Farm’s claim file noted that Hanson’s shingles were in good general
condition and there was no “excessive wear and tear to the ridge shingles or to the
south slope of s[h]ingles”; Traise found no “excessive wear and tear on the
shingles”; West stated that Hanson’s shingles were in “real good condition”; and
Green testified Hanson’s shingles were “excellent” and “aging extremely well.”
State Farm points to Green’s testimony that thermal debonding caused Hanson’s
shingles to unseal, at least at the corners. But inspection photos reflected that the
“lifted” shingles were unsealed throughout, not just at their corners. Further,
Freeman testified that sealant actually becomes “better bonded” over time.
Therefore, State Farm did not conclusively prove that wear and tear or
deterioration caused the unsealed or pulled-through shingles, much less the other
types of shingle damage.
Nor did State Farm conclusively prove that stapling defects caused the
15
unsealed or pulled-through shingles, or any other types of shingle damage.
According to Teufel and Green, the overdriven staples were a latent and a
construction defect. But Freeman testified that Hanson’s roof only had a “handful”
of overdriven staples common to “any roof.” Freeman explained that a pulled-
through shingle was not “overdriven” based on the space underneath the staple and
where the staple did not “go down into the decking.” Green acknowledged
“[c]ertainly some of these staples were installed properly.” And although Green
opined that Hanson’s entire roof needed to be replaced due to defective stapling,
West did not believe that all her shingles needed to be replaced.
We overrule this second subissue.
4. Hanson did not have to prove any actual repair or replacement.
State Farm argues even if Hanson provided evidence that her roof sustained
a covered loss, she failed to prove that she satisfied the policy’s condition
precedent to trigger any obligation for State Farm to make replacement cost
payments. State Farm points to language within the loss settlement endorsement of
Hanson’s policy stating that State Farm would only pay the actual cash value at the
time of the loss of the damaged part of the property, up to policy limits and not to
exceed the cost to repair or replace the damaged part, “until actual repair or
replacement is completed.”12
12
Under an endorsement for loss settlement, the policy provides:
A1 – Replacement Cost Loss Settlement – Similar Construction is replaced with
the following:
a. We will pay the cost to repair or replace with similar construction and
for the same use on the premises shown in the Declarations, the damaged
part of the property covered under SECTION I – COVERAGES,
COVERAGE A – DWELLING, except for wood fences, subject to the
following:
(1) until actual repair or replacement is completed, we will pay
16
A condition precedent may be either a condition to the formation of a
contract or a condition to an obligation to perform an existing agreement. Sharifi
v. Steen Auto., LLC, 370 S.W.3d 126, 143 (Tex. App.—Dallas 2012, no pet.)
(citing Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.
1976)). In other words, conditions precedent may relate to either the formation of
contracts or to the liability under them. Id. at 143–44. We recognize particular
burdens of pleading and proof with regard to conditions precedent:
When a plaintiff avers generally that all conditions precedent have
been performed, he is required to prove the performance of only those
conditions precedent specifically denied by the defendant. The effect
of this rule is to shift the burden of pleading to the defendant, but not
the burden of proof, when the plaintiff has made a general allegation
that all conditions precedent have been performed.
Lidawi v. Progressive Cty. Mut. Ins. Co., 112 S.W.3d 725, 729 n.1 (Tex. App.—
Houston [14th Dist.] 2003, no pet) (citing Trevino v. Allstate Ins. Co., 651 S.W.2d
8, 11 (Tex. App.—Dallas 1983, writ ref’d n.r.e.)) (emphasis omitted). Rule 54 of
the Texas Rules of Civil Procedure provides:
only the actual cash value at the time of the loss of the damaged
part of the property, up to the applicable limit of liability shown in
the Declarations, not to exceed the cost to repair or replace the
damaged part of the property;
(2) when the repair or replacement is actually completed, we will
pay the covered additional amount you actually and necessarily
spend to repair or replace the damaged part of the property, or an
amount up to the applicable limit of liability shown in the
Declarations, whichever is less;
(3) to receive any additional payments on a replacement cost basis,
you must complete the actual repair or replacement of the damaged
part of the property within two years after the date of loss, and
notify us within 30 days after the work has been completed; and
(4) we will not pay for increased costs resulting from enforcement
of any ordinance or law regulating the construction, repair or
demolition of a building or other structure, except as provided
under Option OL – Building Ordinance or Law Coverage.
17
In pleading the performance or occurrence of conditions precedent, it
shall be sufficient to aver generally that all conditions precedent have
been performed or have occurred. When such performances or
occurrences have been so plead, the party so pleading same shall be
required to prove only such of them as are specifically denied by the
opposite party.
Tex. R. Civ. P. 54.
In her petition, Hanson averred that “[a]ll conditions precedent to Plaintiff’s
right to recover have been fully performed, or have been waived by Defendants.”
By operation of rule 54, Hanson was required to prove only the conditions
precedent that State Farm specifically denied. See id. In its answer, with regard to
conditions precedent, State Farm alleged “[s]pecifically, Plaintiff has failed to
prove that the alleged loss was a covered loss, and/or has failed to segregate the
portion of the alleged loss which is covered from the portion of the alleged loss
which is not covered.” State Farm also alleged that “Plaintiff has not provided
timely or adequate notice of their [sic] intent to sue.” State Farm, however, did not
specifically deny that Hanson was not entitled to repair or replacement costs
because she had not completed actual repair or replacement.13 Therefore,
assuming without deciding actual repair or replacement was a condition precedent
to Hanson’s recovery of repair or replacement benefits pursuant to her policy,14
because State Farm did not specifically deny this condition precedent, Hanson was
not required to prove at trial that she had completed any actual repair or
13
Traise’s allegations were identical to State Farm’s.
14
State Farm relies on Fitzhugh 25 Partners, L.P. v. KILN Syndicate KLN 501, 261
S.W.3d 861, 864 (Tex. App.—Dallas 2008, pet. denied), where the Dallas court of appeals
determined that the insurance policy provision at issue—“Replacement cost valuation does not
apply until the damaged or destroyed property is repaired or replaced.”—constituted a condition
precedent to the insured’s recovery under the policy. Hanson maintains Fitzhugh 25 Partners is
distinguishable because there the insurer did not wholesale deny coverage, but rather disputed its
liability for any additional replacement costs after acknowledging coverage for the insured’s
claim and tendering actual cash value of the damaged property.
18
replacement. See id.; Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 178
S.W.3d 198, 203, 205 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (“Inasmuch
as the Bencon Parties only pleaded failure to comply with certain alleged
conditions in the Prime Contract in the event that the entire Prime Contract applies
to Boyer, and because the entire Prime Contract does not apply to Boyer, the
Bencon Parties have not specifically denied the alleged conditions precedent in
question, and Boyer did not have to prove compliance therewith.”).15
We overrule this third subissue. Having overruled all three of its subparts,
we overrule State Farm’s first issue.
B. State Farm’s attorney’s fee issues
Because we have concluded that the evidence is legally sufficient to support
the jury’s liability finding,16 we necessarily reject State Farm’s argument that the
jury’s attorney’s fee award should be reversed because Hanson did not prevail on
her contract claim. Next, we turn to State Farm’s specific challenges to the
attorney’s fee award.
1. Standard of review
The prevailing party in a breach of contract suit is entitled to attorney’s fees.
Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (West 2013); Haden v. David J.
Sacks, P.C., 332 S.W.3d 503, 510 (Tex. App.—Houston [1st Dist.] 2009, pet.
denied). An award of attorney’s fees must be supported by evidence that the fees
15
See also Sharifi, 370 S.W.3d at 147 (where defendant did not specifically deny
conditions precedent, plaintiff did not have burden to prove they were satisfied on summary
judgment); cf. U.S. Tire-Tech, Inc. v. Boeran, B.V., 110 S.W.3d 194, 200 (Tex. App.—Houston
[1st Dist.] 2003, pet. denied) (where defendant specifically denied condition precedent of notice,
plaintiff required to prove notice at trial).
16
Aside from its argument relating to condition precedent, which we have overruled,
State Farm does not challenge the jury’s award of damages for the cost to repair or replace
Hanson’s roof.
19
are reasonable and necessary. See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d
1, 10 (Tex. 1991). The reasonableness of attorney’s fees is generally a fact issue.
See Garcia v. Gomez, 319 S.W.3d 638, 642 (Tex. 2010). We review attorney’s fee
awards for an abuse of discretion. Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d
143, 163 (Tex. 2004).
2. Legal sufficiency
Here, Hanson’s trial counsel applied to recover their attorney’s fees under
the lodestar method. The lodestar method is a way to calculate total attorney’s fees
where the number of hours worked is multiplied by the prevailing hourly rate. See
Long v. Griffin, 442 S.W.3d 253, 255 (Tex. 2014) (per curiam).
In El Apple I, Ltd. v. Olivas, the Supreme Court of Texas explained that
generalities about tasks performed and hours spent provide insufficient information
for the fact finder to meaningfully review whether the tasks and hours were
reasonable and necessary under the lodestar method. 370 S.W.3d 757, 763 (Tex.
2012). Sufficient evidence includes, at a minimum, evidence “of the services
performed, who performed them and at what hourly rate, when they were
performed, and how much time the work required.” Id. at 764. Because the
testimony in El Apple only included the total number of hours worked and
generalities about discovery and the length of trial, the Court remanded for a
redetermination of attorney’s fees. Id. at 765. In so holding, the Court stated:
In this case, neither attorney indicated how the 890 hours they spent in
the aggregate were devoted to any particular task or category of tasks.
Neither attorney presented time records or other documentary
evidence. Nor did they testify based on their recollection of such
records. The attorneys instead based their time estimates on
generalities such as the amount of discovery in the case, the number
of pleadings filed, the number of witnesses questioned, and the length
of the trial. While all this is relevant, it provides none of the
20
specificity needed for the trial court to make a meaningful lodestar
determination. The court could not discern from the evidence how
many hours each of the tasks required and whether that time was
reasonable. Without at least some indication of the time spent on
various parts of the case, a court has little basis upon which to conduct
a meaningful review of the fee award.
Id. at 763.
El Apple involved a claim under the Texas Commission on Human Rights
Act, which mandates use of the lodestar method. 370 S.W.3d at 758–59. In Long
v. Griffin, a case involving claims for breach of contract and declaratory judgment,
the Court revisited the specificity requirements of evidence to support attorney’s
fees under the lodestar method. The Court characterized the attorney affidavit at
issue as “only offer[ing] generalities”:
It indicates that one attorney spent 300 hours on the case, another
expended 344.50 hours, and the attorneys’ respective hourly rates.
The affidavit posits that the case involved extensive discovery, several
pretrial hearings, multiple summary judgment motions, and a four and
one-half day trial, and that litigating the matter required understanding
a related suit that settled after ten years of litigation. But no evidence
accompanied the affidavit to inform the trial court the time spent on
specific tasks. See El Apple, 370 S.W.3d at 763. The affidavit does
claim that 30% of the aggregate time was expended on the assignment
claim (part of which the Griffins prevailed on) and that the assignment
issue was inextricably intertwined with matters that consumed 95% of
the two attorneys’ time on the matter. But without any evidence of
the time spent on specific tasks, the trial court had insufficient
information to meaningfully review the fee request. [City of Laredo
v.] Montano, 414 S.W.3d [731,] 736–37 [(Tex. 2013)]; El Apple, 370
S.W.3d at 764.
Long, 442 S.W.3d at 255.17
17
See also Montano, 414 S.W.3d 731, 736–37 (reversing and remanding for
redetermination of attorney’s fees in eminent-domain case where attorney testified to time
expended and hourly rate but failed to provide evidence of time devoted to specific tasks;
21
Recently, in a case brought by the Texas Attorney General involving claims
of violations of the Texas Food, Drug, and Cosmetic Act, see Tex. Health & Safety
Code Ann. §§ 431.001–.415 (West 2010 & Supp. 2015), our sister court
considered whether evidence on attorney’s fees was too general under El Apple
and Long to support the judgment’s award of attorney’s fees. Med. Disc.
Pharmacy, L.P. v. State, No. 01-13-00963-CV, 2015 WL 4100483, at *17 (Tex.
App.—Houston [1st Dist.] July 7, 2015, pet. filed) (mem. op.); see also John
Moore Servs., Inc. v. Better Bus. Bureau of Metro. Houston Inc., No. 01-14-00906-
CV, 2016 WL 3162206, at *6–7 (Tex. App.—Houston [1st Dist.] June 2, 2016, no.
pet. h.) (mem. op.). There, the State presented expert testimony regarding its
attorney’s fees—the reasonableness and necessity of the work done on the case, the
hours spent, the experience and qualifications of the timekeepers for the State, and
their prevailing hourly rates. Med. Disc. Pharmacy, 2015 WL 4100483, at *17.
The State also submitted a computer-generated summary of the time records of the
State’s timekeepers. Id. The summary identified the case, each timekeeper, a
description of activities, and the hours devoted. Id. The activities were divided
into categories such as “attend/appear at hearing,” “drafting/revising pleadings,”
and “reviewing/researching law.” Id. However, the appellants argued that “the
department offered only information about general categories of work[,]” and
“identified no specific tasks and apportioned the time its lawyers purportedly spent
only among general categories.” Id. at *16. They also complained that the
summary did not say which hearings were attended, which pleadings were revised,
and what law was researched. Id. at *17.
Our sister court rejected such arguments, concluding the State’s evidence of
“Gonzalez offered nothing to document his time in the case other than the ‘thousands and
thousands and thousands of pages’ generated during his representation of the Montanos and his
belief that he had reasonably spent 1,356 hours preparing and trying the case.”)
22
attorney’s fees was “much more detailed than that provided in El Apple [or] Long”
and was sufficient for the trial court to conduct a meaningful review of the number
of hours the State spent on the case and to properly apply the lodestar method.
Med. Disc. Pharmacy, 2015 WL 4100483, at *17. In doing so, the First Court of
Appeals particularly noted how “nothing in El Apple [or] Long . . . requires such
detail” and found that the State’s evidence was complied with El Apple “by
indicating how long each person spent working on particular categories of tasks.”
Med. Disc. Pharmacy, 2015 WL 4100483, at *17.
Here, State Farm raises a similar complaint based on El Apple and Long.
However, having reviewed Hanson’s evidence, we conclude that her evidence is
sufficiently detailed. Hanson presented expert testimony from Daly regarding his
attorney’s fees, the reasonableness and necessity of the work done on the case, his
experience and qualifications and those of his two associates and the additional
lawyer, John Black, brought in to help try the case, and the prevailing rates of each.
Daly described keeping time in a particular computer program:
[C]ontemporaneously whenever I do my work, I write down
what the time is, who—what you were doing in your law firm and
then you would write down what the task was. And then you’ve got a
computer program that puts an hourly rate to it, whatever hourly rate
you assigned and tells you who did that.
So, basically, you know, on a daily or bi-weekly or, you know,
every third day you will write down your time and, you know, the
computer program keeps track of it. And, you know, in this case, for
example, it started in October of 2012, and then the time I’ve written
actually goes through tomorrow because we’re assuming we’re still
going to be here tomorrow.
Hanson also submitted a ten-page computer-generated summary, which contained
details regarding the nature of the work performed, who performed the services
and his rate, approximately when the services were performed, and the number of
23
hours worked. See El Apple, 370 S.W.3d at 763.
State Farm challenges a particular entry that provided the total daily time
spent but where the description of the work included more than one specific task.18
Essentially, State Farm argues that El Apple requires assigning a particular number
of minutes to each individual task. We cannot agree that such level of detail is
required to be able to meaningfully review a fee award. See John Moore Servs.,
2016 WL 3162206, at *6–7 (concluding that “block-billing technique” was
“distinguishable from El Apple, in which there was far less evidence of attorney's
fees, and it was presented in a far more summary fashion” and “distinguishable
from the aggregate and conclusory time estimates provided in Montano” because
entries “describe the work that was done, specify the date the work was done,
provide the total amount of time spent accomplishing the tasks, and identify the
person who did the work.”). Hanson’s attorneys’ time entries could be
meaningfully reviewed because they included details about the nature of the work,
who did it at what rate, what day the work was performed, and the time worked.
See El Apple, 370 S.W.3d at 762. Moreover, the entries were detailed enough to
provide “some indication of the time spent on various parts of the case”; the daily
entry challenged by State Farm described tasks and time spent relating to
formation of the attorney-client relationship and pre-suit investigation of the
defendant. See id.
State Farm also takes issue with generalities in the summary, such as the
description “Prepared for trial” provided for each attorney who billed hours on a
particular trial day because “[t]hat is merely a general category for work that can
18
This October 23, 2012 entry indicated that Daly worked 3.40 hours at a rate of
$450.00/hour doing the following tasks: “Draft Fee Agreement. Correspond with client re same.
Investigate hail claims against this particular Insurance company. Multiple conferences with
consulting experts. Research regarding removal to federal court and Defendant’s propensity to
attempt.”
24
be comp[o]sed of many specific tasks.” Although State Farm acknowledges that
“Prepare for trial” describes a particular category of tasks, it insists El Apple
requires further details. We disagree. See Med. Disc. Pharmacy, 2015 WL
4100483, at *17 (concluding that El Apple does not require more level of detail for
particular category of tasks than, e.g., “attend/appear at hearing”). Even if El
Apple required more, Daly expounded on what trial preparation entailed:
It’s the most grueling thing that you can do as a lawyer. Last
night for the first time I got in bed at 11:30. Okay. That was good.
The prior six nights, 2:30 in the morning is when I went to bed. The
problem is you’ve got to go to trial, then you’ve got to go prepare for
an entire new day. You want to be—make sure you’re prepared so
they don’t waste your time because I don’t want to come in here and
bumble around and stumble around. You’ve got to get your exhibits
ready. You’ve got to get—you know, your associates to make sure
that everything is all set up.
Moreover, State Farm has not pointed us to, and we have not located, any daily
time entries that failed to describe particular tasks or, at the least, categories of
tasks, such as “prepare for trial.”
We overrule State Farm’s legal sufficiency challenge to the award of
attorney’s fees.
3. Rule 167 settlement offer
There is no dispute that State Farm made a rule 167 settlement offer and that
Hanson did not accept the offer by the stated December 4, 2013 deadline, which
constituted a rejection. See Tex. Rs. Civ. P. 167.2(b),19 167.3(c). State Farm
19
Rule 167.2(b) provides:
(b) Requirements of an offer. A settlement offer must:
(1) be in writing;
(2) state that it is made under Rule 167 and Chapter 42 of the Texas Civil
Practice and Remedies Code;
25
contends that pursuant to rule 167.4 it is entitled to litigation costs accruing after
Hanson rejected its settlement offer.
Rule 167.4(a) provides that if a settlement offer made under the rule “is
rejected, and the judgment to be awarded on the monetary claims covered by the
offer is significantly less favorable to the offeree than was the offer, the court must
award the offeror litigation costs against the offeree from the time the offer was
rejected to the time of judgment.” Id. 167.4(a). Rule 167.4(b) states that “[a]
judgment award on monetary claims is significantly less favorable than an offer to
settle those claims if: (1) the offeree is a claimant and the judgment would be less
than 80 percent of the offer; or (2) the offeree is a defendant and the judgment
would be more than 120 percent of the offer.” Id. 167.4(b). Litigation costs
awarded to a defendant under rule 167 “must be made a setoff to the claimant’s
judgment against the defendant.” Id. 167.4(g).
Here, the judgment would need to be at least $24,000 to meet the 80 percent
threshold set by the rule and entitle State Farm to an award of litigation costs.
State Farm argues that the judgment was only 43 percent because it offered Hanson
$30,000 and the jury only awarded her $12,878 for the cost to repair or replace her
physical loss under the policy. However, State Farm’s position fails to account for
the attorney’s fee award. Although State Farm argues that “monetary claims” do
(3) identify the party or parties making the offer and the party or parties to
whom the offer is made;
(4) state the terms by which all monetary claims—including any attorney
fees, interest, and costs that would be recoverable up to the time of the
offer—between the offeror or offerors on the one hand and the offeree or
offerees on the other may be settled;
(5) state a deadline—no sooner than 14 days after the offer is served—by
which the offer must be accepted;
(6) be served on all parties to whom the offer is made.
Tex. R. Civ. P. 167.2(b).
26
not include attorney’s fees for breach of contract, its settlement offer covered all
Hanson’s “claims for monetary damages, [her] attorney’s fees, exemplary
damages, interest and costs.” See Tex. P. Civ. P. 167.2(b)(4) (settlement offer
must state “terms by which all monetary claims—including any attorney fees,
interest and costs that would be recoverable up to the time of the offer . . . may be
settled”). Texas courts have not determined whether total attorney’s fees or fees as
of date of settlement rejection should be used in a rule 167.4 calculation. See
Compass Bank v. Nacim, 459 S.W.3d 95, 110–11 (Tex. App.—El Paso 2015, no
pet.). We need not reach that question because, in this case, even using the lesser
amount of only accrued fees, State Farm’s argument fails.20 Here, the jury
expressly found that a reasonable fee for the necessary services of Hanson’s
attorneys for representation before December 5, 2013, the date of the settlement
rejection, was $15,000. Adding damages of $12,878 to fees of $15,000 equals
$27,878. $27,878 divided by the settlement offer amount of $30,000 equals
approximately 93 percent. Therefore, the trial court was not required to award
State Farm litigation costs and was not required to apply any setoff.
Because we conclude that State Farm was not entitled to litigation costs
against Hanson, we do not reach State Farm’s argument under rule 167.4(f) that
Hanson is precluded from any award of attorney’s fees accruing after December 4,
2013. We overrule State Farm’s challenge to Hanson’s award of attorney’s fees
based on its rule 167 offer.
4. Segregation
Because attorney’s fees are only recoverable pursuant to a contract or
statute, “fee claimants have always been required to segregate fees between claims
20
Including the total amount of attorney’s fees, the judgment far exceeds the settlement
offer.
27
for which they are recoverable and claims for which they are not.” Tony Gullo
Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006). Texas courts
recognize a narrow exception “when discrete legal services advance both a
recoverable and unrecoverable claim” and thus “are so intertwined that they need
not be segregated.” Id. at 313–14; see In re Lesikar, 285 S.W.3d 577, 585 (Tex.
App.—Houston [14th Dist.] 2009, no pet.) (“If a legal service necessary to the
litigation of a claim for which attorneys’ fees are available also advanced a claim
for which attorneys’ fees are not recoverable, then the exception to the general fee-
segregation rule applies, and the amount of time or money that was reasonable to
expend in performing the service need not be segregated among the claims it
advanced.”). However, if any attorney’s fees relate solely to a claim for which
attorney’s fees are unrecoverable, a claimant must segregate recoverable from
unrecoverable fees. Chapa, 212 S.W.3d at 313. But, even when fee segregation is
required, attorneys are not required to keep separate records documenting the exact
amount of time prosecuting one claim versus another. See id. at 314. Rather,
segregation is sufficiently established if an attorney testifies that a given
percentage of the time worked would have been necessary even if the claim for
which attorney’s fees are unrecoverable had not been asserted. See id.; Alief Indep.
Sch. Dist. v. Perry, 440 S.W.3d 228, 246 (Tex. App.—Houston [14th Dist.] 2013,
pet. denied) (citing Chapa, 212 S.W.3d at 314, and Citizens Nat’l Bank of Tex. v.
NXS Constr., Inc., 387 S.W.3d 74, 87 (Tex. App.—Houston [14th Dist.] 2012, no
pet.)).
Here, Daly stated:
Chapa is a case that basically says when you have different
causes of action—like here we’ve got a breach of contract cause of
action and we’ve got a bad faith cause of action. And it says you need
to apportion your time to each in case you’re not successful on one of
them.
28
But what basically happens is in this case we’re trying to get a
new roof. So 95 percent of the time that we spend on this case is
towards that. And that—so in other words, the breach of—the work
you do for breach of c[ontract] and bad faith is inextricably
intertwined. That’s the terminology they use.
I would estimate that 5 percent of the time that we’ve spent was
spent solely on bad faith issues.
In addition, Daly testified:
Q. (By Mr. Black) So I take the number that you’ve got at the bottom
there and it’s $157,078.01. Now, the answer that you gave me about
inextricably intertwining and causes of action that are so intertwined,
sounded like a lawyer answer. And so I just—I want you to help me
understand a little bit better what it means when you talk about
separating out time and why you’re doing that.
A. Sure. Let’s say for example we want to go take the deposition of
their expert. Now, we’re going to have to drive to the deposition, ask
the questions, prepare for the deposition, read the deposition,
regardless of whether or not it’s a breach of contract claim or a bad
faith claim.
Q. And stop right there. And why does it matter that you’re talking a
breach of contract claim versus a bad faith claim, what's the
difference?
A. I’m not sure I understand what you mean.
Q. I mean, do you get attorney’s fees for both?
A. Oh, yeah, you do, you get attorney’s fees for both anyway.
Q. All right. Keep going. I’m sorry I interrupted you.
A. But, if for example, you don’t prevail on one of the claims or you
decide, you know, we’re not going to ask for any money for one of the
claims, then it would be improper for a jury to say, well, you know,
either you didn’t ask for bad faith or you didn’t prevail on the bad
faith despite the fact you prevailed on the breach of contract, so we
need to knock 5 percent off because you spent 5 percent of your time
solely on bad faith.
Q. So if you knocked 5 percent off this bill, and I’m just going to—
29
MR. BLACK: The Court can take judicial notice of this or people can
trust that I did the math correctly if you get cross-examined on it.
Q. (By Mr. Black) But 5 percent of that amount is $78[]53.90, which
yields $149,224.11.
Is this figure under the subtotal line the figure that would
represent 5 percent discounted off of your bill?
A. It is.
Q. All right. And do you think that that figure is a fair and reasonable
sum to request of a jury or anyone in a case like this?
A. I think it’s fair, reasonable and necessary. Yes.
There is no dispute that Hanson cannot recover attorney’s fees for any claim
aside from her contract claim against State Farm. As a result, Hanson generally
was required to segregate fees. Hanson, however, provided evidence that 95
percent of the attorney’s fees was for work related directly to prosecuting her
contract claim or for work that was so intertwined with that claim and that five
percent of the attorney’s fees was for work attributable solely to bad faith claims.
State Farm asserts that Hanson’s attempt to segregate using a percentage
estimate was unsupported and therefore insufficient, relying primarily on Farmers
Group Insurance, Inc. v. Poteet, 434 S.W.3d 316 (Tex. App.—Fort Worth 2014,
pet. denied). In Poteet, the court of appeals remanded for a redetermination of fees
in part because the insured “failed to segregate her attorney’s fees related to the
alleged breach of the appraisal provision from those fees incurred in pursuit of the
claims upon which she did not prevail in the prior appeal from the summary
judgment and the claims upon which we have held that damages are not
recoverable on this appeal.” Id. at 333. The circumstances in Poteet are
distinguishable. Procedurally, there was a previous appeal where the appellate
court affirmed a summary judgment on a multitude of claims in favor of the insurer
and remanded for proceedings on the sole remaining claim of breach of the
30
policy’s appraisal provision. Id. at 318. Moreover, in the second appeal, the
Poteet court held that the trial court erred in failing to disregard the jury’s findings
regarding two of the three awards of damages resulting from the insurer’s failure to
comply with the appraisal provision. Id. at 331–32. The insured’s attorney’s
percentage estimate based on “the entire litigation” failed to account for these
circumstances. See id. at 332. As a result, the Poteet court concluded that the
insured’s provided estimate was insufficient under Chapa:
Poteet’s attorney made his “rough estimate” by lumping together
hundreds of hours spent working to recover damages that Farmers had
no duty to pay. Most significantly, there is no estimate of the
reasonable and necessary fees incurred in pursuing the sole claim that
survived the first appeal of this lawsuit.
Poteet, 434 S.W.3d at 333.
In contrast, Hanson’s case involved one continuous proceeding in the trial
court, not proceedings both pre- and post-dating a remand after appeal. In
addition, we already concluded that legally sufficient evidence supports the jury’s
breach finding (and State Farm otherwise does not challenge the jury’s actual
damages award). Further, Hanson presented evidence in the form of an estimate of
the reasonable and necessary fees incurred in, or at the least intertwined with, the
pursuit of her contract claim.
Nevertheless, State Farm argues the only way to properly segregate is to
examine each billing entry and deduct amounts that are not recoverable. See
Citizens Nat’l Bank, 387 S.W.3d at 87–88 (attributing 66 percent of fees to
Uniform Fraudulent Transfer Act case).21 While we have held such a process
sufficient, we do not necessarily require it under “the relaxed standard enunciated
21
The attorney in Citizens National Bank explained that he performed this review “in
[his] mind” and “in [his] head.” 387 S.W.3d at 88.
31
in Chapa”22:
Attorneys are not required to keep separate records documenting the
exact amount of time working on one recoverable claim versus an
unrecoverable claim. . . . Rather, segregation is sufficiently
established if, for example, an attorney testifies that a given
percentage of the drafting time would have been necessary even if the
claim for which attorney’s fees are unrecoverable had not been
asserted.
Perry, 440 S.W.3d at 246 (citing Chapa, 212 S.W.3d at 314, and Citizens Nat’l
Bank, 387 S.W.3d at 87). In Alief Independent School District v. Perry, we
considered whether the plaintiff’s evidence from his attorney attributing
approximately “80% of his attorney’s fees to each claim to each [defendant] for
which fees were recoverable” was sufficient under the Chapa standard. Id. at 247.
This evidence consisted of redacted invoices, as well as affidavit testimony from
his attorney. Id. at 246. The attorney testified that all the discovery “would have
been equally applicable” to the nonsuited claims. Id. He opined that less than ten
percent of the time spent related solely to nonsuited claims. Id. He further
estimated an additional five percent reduction for each claim for which a defendant
was not liable or which was an alternative claim to account for legal research and
analysis attributable only to these claims. Id. at 247. We held such evidence
supported a conclusion that the plaintiff properly segregated his claims. Perry, 440
S.W.3d at 247; see also Sentinel Integrity Sols., Inc. v. Mistras Group, Inc., 414
S.W.3d 911, 929–30 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)
(concluding evidence that attorney’s fees sought were for work directly related to
defense of claim or for work intertwined with such defense and that at least 90
percent of work presented in admitted bills was necessary to defend claim was
sufficiently segregated per Chapa).
22
Citizens Nat’l Bank, 387 S.W.3d at 88.
32
Here, Daly provided his opinion that the work on Hanson’s case involved
inextricably intertwined claims. As reflected by Daly’s expert deposition example,
discovery for her contract claim equally applied to her bad faith claims.
Approximately 95 percent of the time, Hanson’s attorneys’ work went toward or
was intertwined with getting Hanson a new roof pursuant to the contract. Daly
estimated that five percent of the attorneys’ time shown in the summary was spent
solely on bad faith issues. Further, the summary is consistent with Daly’s estimate.
While not required by Chapa, see Perry, 440 S.W.3d at 246, the summary included
daily entries describing discrete legal tasks expressly relating to Hanson’s bad
faith, extra-contractual, or Insurance Code claims.23 Excising the entire amount of
those daily entries reduces the total balance by just over five percent. Moreover,
Daly explained that the amount included in the summary did not include every fee
incurred in the course of trial, particularly for the trial days themselves:
I mean, it is—we’ve put countless hours just in the past, you
know, weeks preparing for this case. And so you’re looking at 15, 16
hours a day. You’ll see that on the bills here we put ten. It’s not even
close. I mean, we’ve got—we’re here [from] 8:30 until 5:00 and then
I go back straight back to the office.
See Sentinel Integrity Sols., 414 S.W.3d at 929–30 (considering as part of
segregation analysis testimony that bills did not include every fee incurred).
We therefore conclude that Hanson’s evidence supporting her attorney’s fees
was sufficiently segregated under Chapa.
5. Excessiveness
Finally, State Farm contends that because the attorney’s fee award of
23
For the most part, we agree with State Farm’s statement that “[t]he fee statement
contains entries for non-recoverable fees for claims on which Hanson did not prevail.” However,
we do not agree that tasks involving research of State Farm’s policies with regard to denial of
claims or “wind lift” would necessarily only advance Hanson’s non-contract claims.
33
$70,000 is unreasonably disproportionate to her damages award of $12,878 the
trial court abused its discretion when it denied State Farm’s motion for remittitur.
This court may only remit the jury’s award when we determine, after
evaluation of the evidence, that the award is so against the great weight and
preponderance of the evidence as to be manifestly unjust. Pope v. Moore, 711
S.W.2d 622, 624 (Tex. 1986) (per curiam) (factual sufficiency is proper remittitur
standard). Here, the parties presented competing expert evidence regarding the
reasonableness of the attorney’s fees award. Daly opined that Hanson’s case was
difficult and complicated with regard to defenses, discovery, and legal challenges.
Daly testified that just under $150,000 in attorney’s fees was reasonable and
necessary. Levy opined that Hanson’s case was straightforward and reasonably
could have been tried by a second-year associate for $30,000 to $40,000.
However, even such an amount would be approximately three times more than
what the jury ultimately awarded Hanson as actual damages. See Bencon Mgmt.,
178 S.W.3d at 209–10 (fee award of over $282,000 compared to actual damages of
$81,336.83 was not factually insufficient); see also Metroplex Mailing Services,
LLC v. RR Donnelley & Sons Co., 410 S.W.3d 889, 900 (Tex. App.—Dallas 2013,
no pet.) (“[T]here is no rule that fees cannot be more than the actual damages
awarded.”). The jury charge included an instruction providing eight factors to
consider in determining a reasonable fee, tracking Arthur Andersen & Co. v. Perry
Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997), which included “the amount
involved and the results obtained.” Ultimately, the jury determined that a
reasonable fee for the necessary services of Hanson’s attorneys for trial
representation was less than half of what she sought.
Based on our review of all the evidence, we cannot conclude that the jury’s
award is so against the great weight and preponderance of the evidence to require
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remittitur. See Pope, 711 S.W.2d at 624. Therefore, the trial court did not abuse
its discretion.
We overrule all of State Farm’s challenges to Hanson’s attorney’s fee award.
III. CONCLUSION
Having overruled all of State Farm’s issues, we affirm the trial court’s
judgment.
/s/ Marc W. Brown
Justice
Panel consists of Justices Jamison, Donovan, and Brown.
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