Candelaria Garcia v. State Farm Lloyds and Sylvia Garza

ACCEPTED
04-16-00209-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
8/12/2016 2:17:55 PM
KEITH HOTTLE
CLERK
CASE NO. 04-16-00209-CV
FILED IN
4th COURT OF APPEALS
SAN ANTONIO, TEXAS
IN THE 08/12/2016 2:17:55 PM
KEITH E. HOTTLE
Clerk
COURT OF APPEALS
FOR THE FOURTH DISTRICT
SAN ANTONIO, TEXAS
CANDELARIA GARCIA—Appellant
v.
STATE FARM LLOYDS and SYLVIA GARZA—Appellees
APPELLEES' BRIEF
Dan K. Worthington SBN 00785282 Linda J. Burgess SBN 03381300
dkw@atlashall.com lburgess@winstead.com
Sofia A. Ramon SBN 00784811 Elliot Clark SBN 24012428
sramon@atlashall.com eclark@winstead.com
Elizabeth Cantu SBN 24013455 WINSTEAD PC
ecantu@atlashall.com 401 Congress Ave., Suite 2100
ATLAS, HALL & RODRIGUEZ, LLP Austin, Texas 78701
P. O. Drawer 3725 (512) 370-2800 telephone
818 Pecan (78501) (512) 370-2850 telecopier
McAllen, Texas 78502
(956) 682-5501 telephone
(956) 686-6109 telecopier
ATTORNEYS FOR APPELLEES
ORAL ARGUMENT REQUESTED
CASE NO. 04-16-00209-CV
IN THE
COURT OF APPEALS
FOR THE FOURTH DISTRICT
SAN ANTONIO, TEXAS
CANDELARIA GARCIA—Appellant
v.
STATE FARM LLOYDS and SYLVIA GARZA—Appellees
APPELLEES' BRIEF
TO THE HONORABLE COURT OF APPEALS:
Appellees, State Farm Lloyds ("State Farm") and Sylvia Garza, ask the
Court to affirm the trial court's judgment that Appellant Candelaria Garcia
("Garcia") take nothing.
-i-
TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................................... ii
TABLE OF AUTHORITIES ................................................................................... iii
INTRODUCTION ................................................................................................... xi
STATEMENT OF THE CASE ............................................................................... xii
RESPONSE ISSUES PRESENTED ..................................................................... xiii
STATEMENT OF FACTS ........................................................................................1
SUMMARY OF THE ARGUMENT ........................................................................4
ARGUMENT .............................................................................................................7
I. The summary judgment grounds are broad enough to contemplate
Garcia's later-pled defense to set aside the appraisal award, and State
Farm was not required to pre-emptively negate Garcia's defense. .......7
II. No material fact issues existed. ...........................................................11
III. Garcia cannot avoid summary judgment by choosing not to cash her
appraisal award check. ........................................................................16
IV. Under Texas law, the fact that an appraisal award is greater than an
earlier estimate is no evidence of a breach of contract. ......................21
V. Payment of the appraisal award disposes of Garcia's prompt payment
claims as a matter of law. ....................................................................22
A. The overwhelming majority of courts have found that TPPCA
claims do not survive payment of an appraisal award ..............23
B. Graber relies on distinguishable authority that did not involve
appraisal ....................................................................................25
C. The facts here are distinguishable from Graber .......................27
D. Garcia has not raised a fact issue ..............................................28
VI. Without a valid breach of contract claim, all of Garcia's extra-
contractual claims fail. ........................................................................28
CONCLUSION AND PRAYER .............................................................................34
CERTIFICATE OF COMPLIANCE .......................................................................36
- ii -
TABLE OF AUTHORITIES
CASES PAGE(S)
AKB Hendrick, LLP v. Musgrave Enters.,
380 S.W.3d 221 (Tex. App.—Dallas 2012, no pet.) ............................................ 9
Amine v. Liberty Lloyds of Tex. Ins.,
No. 01-06-00396-CV, 2007 Tex. App. LEXIS 6280 (Tex. App.—
Houston [1st Dist.] 2007, no pet.).......................................................................25
Anderson v. American Risk Ins. Co.,
No. 01-15-00257-CV, 2016 Tex. App. LEXIS 6538 (Tex. App.—
Houston [1st Dist.] June 21, 2016, no pet. h.) .............................................passim
Barry v. Allstate Tex. Lloyds,
No. 4:14-cv-00870, 2015 U.S. Dist. LEXIS 40953 (S.D. Tex. Mar. 31,
2015) .........................................................................................................5, 24, 32
Bernstein v. Safeco Ins. Co. of Ill.,
No. 05-13-01533-CV, 2015 Tex. App. LEXIS 6699 (Tex. App.—Dallas,
June 30, 2015, no pet.) ........................................................................................25
Bluebonnet Petroleum, Inc. v. Kolkhorst Petroleum Co.,
No. 14-07-00380-CV, 2008 Tex. App. LEXIS 7724 (Tex. App.—
Houston [14th Dist.] Oct. 9, 2008, pet. denied)..................................................15
Blum's Furniture Co. v. Certain Underwriters at Lloyds London,
No. H-09-3479, 2011 U.S. Dist. LEXIS 20604 (S.D. Tex. March 2, 2011)
affirmed by 459 Fed. Appx. 366 (5th Cir. 2012) ................................................23
Blum's Furniture Co. v. Certain Underwriters at Lloyds London,
459 Fed. Appx. 366 (5th Cir. 2012).............................................................passim
Breshears v. State Farm Lloyds,
155 S.W.3d 340 (Tex. App.—Corpus Christi 2004, pet. denied) ...............passim
Burks v. Metro Lloyds Ins. Co. of Tex.,
No. H-14-591, 2015 U.S. Dist. LEXIS 88729
(S.D. Tex. July 8, 2015) ......................................................................5, 24, 29, 32
Cameron Int'l Corp. v. Liberty Ins. Underwriters, Inc. (In re Deepwater
Horizon), 807 F.3d 689 (5th Cir. 2015) ........................................................30, 31
- iii -
Cantu v. S. Ins. Co.,
No. 03-14-00533-CV, 2015 Tex. App. LEXIS 8847 (Tex. App.—Austin
Aug. 25, 2015, no pet.) .......................................................................................11
Caso v. Allstate Tex. Lloyds,
No. 7:12-CV-478, 2014 U.S. Dist. LEXIS 15279 (S.D. Tex. Feb. 7,
2014) ............................................................................................................passim
Cater v. United Servs. Auto. Ass'n,
27 S.W.3d 81 (Tex. App.—San Antonio 2000, pet. denied) ..............................26
Cavazos v. State Farm Lloyds,
No. 7:13-CV-00252 (S.D. Tex. Oct. 27, 2015) ......................................24, 31, 32
Cavazos v. State Farm Lloyds,
No. 7:14-CV-395, 2015 U.S. Dist. LEXIS 163287 (S.D. Tex. Dec. 4,
2015) ...................................................................................................................31
Church on the Rock North v. Church Mut. Ins. Co.,
No. 3:10-CV-0975-L, 2013 U.S. Dist. LEXIS 17849 (N.D. Tex. Feb. 11,
2013) .............................................................................................................18, 19
Cissne v. Robertson,
82 S.W.2d 912, 918 (Tex. App.—Dallas 1989, writ denied) ............................... 8
Continental Ins. Co. v. Guerson,
93 S.W.2d 591 (Tex. Civ. App.—San Antonio 1936, writ dism'd) ...................12
Cook Composites v. Westlake Styrene Corp.,
15 S.W.3d 124 (Tex. App.—Houston [14th Dist.] 2000, pet. dism'd) ............... 10
Corpus v. State Farm Lloyds,
No. 7:14-CV-00383 (S.D. Tx. Oct. 27, 2015) ....................................................24
Devonshire Real Estate & Asset Management, L.P. v. American Insurance
Co., No. 3:12-CV-2199-B,
2014 U.S. Dist. LEXIS 135939 (N.D. Tex. Sep. 26, 2014) ...................18, 19, 20
Dizdar v. State Farm Lloyds,
No. 7:14-CV-402, 2016 U.S. Dist. LEXIS 13355 (S.D. Tex. Feb. 4,
2016) ...................................................................................................................32
- iv -
Dizdar v. State Farm Lloyds,
No. 7:14-CV-514, 2016 U.S. Dist. LEXIS 49839 (S.D. Tex. Apr. 13,
2016) ...................................................................................................................32
Dizdar v. State Farm Lloyds,
No. 7:14-CV-664, 2016 U.S. Dist. LEXIS 20871 (S.D. Tex. Feb. 22,
2016) ...................................................................................................................32
Douglas v. State Farm Lloyds,
37 F. Supp. 2d 532 (S.D. Tex. 1999) ....................................................................32
Farah v. Magrige & Kormanik,
927 S.W.2d 663 (Tex. App.—Houston [1st Dist.] 1996, no writ) ...................8, 9
Fitzhugh 25 Partners, L.P. v. KILN Syndicate,
501, 261 S.W.3d 861 (Tex. App.—Dallas 2008, pet. denied)............................20
Franco v. Slavonic Mut. Fire Ins.,
154 S.W.3d 777 (Tex. App.—Houston [14th Dist.] 2004, no pet.) ... xi, 5, 11, 19
Gabriel v. Allstate Texas Lloyds,
No. 7:13-CV-181, 2013 U.S. Dist. LEXIS 186032 (S.D. Tex. Nov. 1,
2013) ............................................................................................................passim
Gardner v. State Farm Lloyds,
76 S.W.3d 140 (Tex. App.—Houston [1st Dist.] 2002, no pet.) .......................... 5
Graber v. State Farm Lloyds,
No. 3:13-CV-2671-B, 2015 U.S. Dist. LEXIS 77361 (N.D. Tex. June 15,
2015) reconsideration denied (August 6, 2015)...............................23, 24, 25, 27
Gronik v. Chubb Indem. Ins. Co.,
10-CV-954, 11-CV-697, 2015 U.S. Dist. LEXIS 157266
(E.D. Wis. Nov. 20, 2015) ..................................................................................13
Guerra v. State Farm Lloyds,
No. 7:14-CV-00381 (S.D. Tex. Oct. 27, 2015) ..................................................24
Gulf Ins. Co. of Dallas v. Pappas,
73 S.W.2d 145 (Tex. Civ. App.—San Antonio 1934, writ ref'd) .......................12
-v-
Hernandez v. Allstate Texas Lloyds,
No. 7:12-CV-480, 2014 U.S. Dist. LEXIS 15276 (S.D. Tex. Feb. 7,
2014) .............................................................................................................19, 24
Higginbotham v. State Farm Mutual Automobile Ins. Co.,
103 F.3d 456 (5th Cir. 1997) ............................................................25, 26, 27, 32
Home Ins. Co. v. Walter,
230 S.W. 723 (Tex. Civ. App.—Dallas 1921, no writ) ......................................12
Hudgens v. Allstate Texas Lloyd's, No. H-11-2716,
2012 U.S. Dist. LEXIS 97446 (S.D. Tex. July 13, 2012) ......................11, 12, 13
In re Allstate County Mut. Ins. Co.,
85 S.W.3d 193 (Tex. 2002).................................................................................10
In re Slavonic Mut. Fire Ins. Ass'n,
308 S.W.3d 556 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ...... 23, 24, 25
Judwin Prop., Inc. v. Griggs & Harrison,
911 S.W.2d 498 (Tex. App.—Houston [1st Dist.] 1995, no writ) ....................... 8
Key Life Ins. Co. of S.C. v. Davis,
509 S.W.2d 403 (Tex. Civ. App.—Beaumont 1974, no writ)............................26
Lampasas v. Spring Center, Inc.,
988 S.W.2d 428 (Tex. App.—Houston [14th Dist.] 1999, no pet.) .................8, 9
Liberty National Fire Insurance. Co. v. Akin,
927 S.W.2d 627 (Tex. 1996) ........................................................................28, 29
Lumbermens Mut. Cas. Co. v. Klotz,
251 F.2d 499 (5th Cir. 1958) ..............................................................................26
Lundstrom v. USAA,
192 S.W.3d 78 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) .....5, 11, 14
Mackie v. McKenzie,
900 S.W.2d 445 (Tex. App.—Texarkana 1995, writ denied) .............................. 8
Mag-Dolphus, Inc. v. Ohio Cas. Ins. Co.,
906 F. Supp. 2d 642 (S.D. Tex. 2012) ......................................................6, 24, 32
- vi -
McIntyre v. Wilson,
50 S.W.3d 674 (Tex. App.—Dallas 2001, pet. denied)........................................ 7
Medistar Twelve Oaks Partners, Ltd. v. Am. Econ. Ins. Co.,
No. H-09-3828, 2011 US. Dist. LEXIS 82846 (S.D. Tex. July 27, 2011) ......... 24
Michels v. Safeco Ins. Co. of Ind.,
544 Fed. Appx. 535 (5th Cir. 2013)................................................................5, 16
Michels v. Safeco Ins. Co. of Indiana,
No. A-12-CA-511-SS (W.D. Tex. March 13, 2013) affirmed by 544 Fed.
Appx. 535, 542-543 (5th Cir. 2013) ...................................................................24
MLCSV10 v. Stateside Enters.,
866 F. Supp. 2d 691 (S.D. Tex. 2012) ....................................................11, 13, 16
Moore v. Allstate Texas Lloyds,
No. 7:12-CV-479, 2014 U.S. Dist. LEXIS 15277 (S.D. Tex. Feb. 7,
2014) .............................................................................................................19, 24
O'Quinn v. Gen. Star Indem. Co.,
No. 1:13-CV-471, 2014 U.S. Dist. LEXIS 107484 (E.D. Tex. Aug. 5,
2014) ...................................................................................................................33
Providence Lloyds Ins. Co. v. Crystal City Indep. Sch. Dist.,
877 S.W.2d 872 (Tex. App—San Antonio 1994, no writ) ................. xi, 4, 14, 34
Providence Wash. Ins. Co. v. Farmers Elevator Co.,
141 S.W.2d 1024 (Tex. Civ. App.—Amarillo 1940, no writ)............................12
Provident Am. Ins. Co. v. Castaneda,
988 S.W.2d 189 (Tex. 1998) ..............................................................................30
Quibodeaux v. Nautilus Ins. Co.,
No. 1:10-CV-739, 2015 U.S. Dist. LEXIS 39324 (E.D. Tex. Mar. 10,
2015) aff'd by 2016 U.S. App. LEXIS 12643 (5th Cir. Jul. 7, 2016)................. 24
Republic Ins. Co. v. Stoker,
903 S.W.2d 338 (Tex. 1995) ............................................................28, 29, 31, 32
Richardson East Baptist Church v. Philadelphia Indemnity Ins. Co.,
No. 05-14-01491-CV, 2016 Tex. App. LEXIS 3267 (Tex. App.—Dallas
March 30, 2016) ....................................................................................................5
- vii -
Rios v. State Farm Lloyds,
No. 7:13-CV-00187 (S.D. Tex. Aug. 17, 2015) .................................................24
Russell v. Scottsdale Ins. Co.,
No. 4:10-CV-3057, 2014 U.S. Dist. LEXIS 143882 (S.D. Tex. Sept. 30,
2014) ...............................................................................................................5, 32
Saenz v. J.D. Rodriguez Produce & Trucking Co.,
No. 04-99-00867-CV, 2000 Tex. App. LEXIS 8596 (Tex. App.—San
Antonio Dec. 29, 2000, pet. denied) ...................................................................15
Scalise v. Allstate Texas Lloyds,
No. 7:13-CV-178, 2013 U.S. Dist. LEXIS 179692 (S.D. Tex. Dec. 20,
2013) ............................................................................................................passim
Smith v. Heard,
980 S.W.2d 693 (Tex. App.—San Antonio 1998, pet. denied)......................8, 10
Solis v. State Farm Lloyds,
No. 7:13-cv-00149 (S.D. Tex. Oct. 27, 2015) ....................................................24
Spicewood Summit Office Condominiums Ass'n, Inc. v. Amer. First Lloyd's
Ins. Co.,
287 S.W.3d 461 (Tex. App.—Austin 2009, pet. denied) ...................................32
Stewart v. Geovera Specialty Ins. Co.,
No. H-14-3162 (S.D. Tex. October 21, 2015) ....................................................24
Strasser v. Sulzer Medica U.S.A., Inc.,
No. 01-01-00610-CV, 2002 Tex. App. LEXIS 5463 (Tex. App.—
Houston [1st Dist.] July 25, 2002, pet. denied) ..............................................8, 10
Studer v. State Farm Lloyds,
No. 4:13-CV-413, 2016 U.S. Dist. LEXIS 99883 (E.D. Tex. July 29,
2016) ...................................................................................................................24
Tabor v. State Farm Lloyds,
No. 7:14-cv-389 (S.D. Tex. April 9, 2015) ..................................................23, 24
Tex. Mut. Ins. Co. v. Sara Care Child Care Ctr., Inc.,
324 S.W.3d 305 (Tex. App.—El Paso 2010, pet. denied) ..................................32
- viii -
Texas Dep't. of Pub. Safety v. Mendoza,
952 S.W.2d 560 (Tex. App.—San Antonio 1997, no writ) ................................12
TMM Invs., Ltd. v. Ohio Cas. Ins. Co.,
730 F.3d 466 (5th Cir. 2013) ..............................................................................16
Toonen v. United Servs. Auto Ass'n,
935 S.W.2d 937 (Tex. App.—San Antonio 1996, no writ) .......................xi, 4, 18
Tremago, L.P. v. Euler-Hermes Am. Credit Indem. Co.,
602 Fed. Appx. 981 (5th Cir. 2015)....................................................... 25, 26, 27
USAA Texas Lloyds Co. v. Menchaca,
No. 13-13-00046-CV, 2014 Tex. App. LEXIS 8250 (Tex. App.—Corpus
Christi July 31, 2014, pet. filed) (mem. op.) ......................................................30
United National Insurance Co. v. AMJ Investments, LLC
447 S.W.3d 1 (Tex. App.—Houston [14th Dist.] 2014, pet dism'd) .................. 29
United Neurology, P.A. v. Hartford Lloyd's Ins. Co.,
101 F. Supp. 3d 584 (S.D. Tex. 2015), affirmed by 624 Fed. Appx. 225
(5th Cir. 2015).........................................................................................17, 19, 24
Vail v. Texas Farm Bureau Mutual Ins. Co.,
754 S.W.2d 129 (Tex. 1988) ..............................................................................33
Villanueva v. State Farm Lloyds,
No. 7:13-CV-00601 (S.D. Tex. Oct. 27, 2015) ..................................................24
Waite Hill Services, Inc. v. World Class Metal Works, Inc.,
959 S.w.2d 182 (Tex. 1998) ...............................................................................33
Walters v. Metro Lloyds Ins. Co.,
4:16-CV-307, 2016 U.S. Dist. LEXIS 91244 (E.D. Tex. July 14, 2016)........... 33
Waterhill Cos. v. Great Am. Assur. Co.,
No. H-05-4080, 2006 U.S. Dist. LEXIS 15302 (S.D. Tex. March 16,
2006) ...............................................................................................................5, 24
Wells v. American States Preferred Ins. Co.,
919 S.W.2d 679 (Tex. App.—Dallas 1996, writ denied) ...................................14
- ix -
STATUTES
Chapter 541 of the Texas Insurance Code ...........................................................x, 32
Chapter 542 of the Texas Insurance Code .......................................... xii, x, 7, 22, 28
OTHER AUTHORITIES
Brad E. Brewer & James W. Holbrook, II, Graber v. State Farm Is a Texas
Prompt Payment Outlier, Law 360, August 10, 2015,
http://www.law360.com/articles/686001/graber-v-state-farm-is-a-texas-
prompt-payment-outlier (last visited July 28, 2016) .........................................25
-x-
INTRODUCTION
This is a hail case that was resolved by the contractual appraisal process.
Broadly speaking, the appraisal provision allows either party to invoke a process in
which the amount of the loss is determined by agreement of appraisers selected by
the insured and insurer and, if necessary, an umpire jointly chosen and mutually
agreed to by the appraisers or appointed by the court. Garcia made a claim for
damage to her house under her State Farm Homeowners Policy. State Farm found
damage that was below the Policy deductible. Garcia disagreed and filed a lawsuit.
State Farm invoked the appraisal provision in the Policy. Garcia appointed an
appraiser, as did State Farm, and the parties proceeded to appraisal without
objection. The appraisers agreed on the amount of loss without the need for an
umpire. State Farm paid the appraisal award within three (3) business days of
receipt. State Farm then moved for summary judgment on the broadly stated
ground that "payment of the appraisal award resolves and disposes of all claims in
this lawsuit." Before the summary judgment hearing, and following a hearing on
Garcia's Motion for Continuance of the summary judgment, Garcia amended her
petition to request, for the first time, that the appraisal award be set aside, and then
argued to postpone the trial court's ruling on the dispositive appraisal issues based
on her new defense. The court heard arguments and, after reviewing the briefing,
granted the summary judgment.
- xi -
STATEMENT OF THE CASE
Nature of the Case: In connection with an insurance claim for damage to
her dwelling, Plaintiff Candelaria Garcia asserted
causes of action against Defendants State Farm and
Sylvia Garza for breach of contract, bad faith,
violations of Chapters 541 and 542 of the Texas
Insurance Code, and violations of the DTPA. Garcia
later requested the appraisal award signed by her
designated appraiser be set aside.
Trial Court: County Court at Law of Starr County, Texas, the
Honorable Romero Molina
Course of Proceedings: The case was stayed by agreement while the parties
engaged in the contractual appraisal process. An
appraisal award was signed, and State Farm paid the
award. State Farm moved for summary judgment
dismissing all of Garcia's claims based on its payment
of the appraisal award.
Trial Court Disposition: Summary Judgment was granted dismissing all of
Garcia's claims.
- xii -
RESPONSE ISSUES PRESENTED
The trial court, following established Texas precedent,1 correctly granted
summary judgment because payment of the appraisal award disposed of all of
Garcia's claims.
Issue 1: Under Texas law, if summary judgment grounds are broad enough
to contemplate later-pled causes of action, a court can render summary judgment
on all causes of action without requiring an amended or supplemental motion for
summary judgment. And a movant for summary judgment is not required to pre-
emptively negate a non-movant's defenses to the movant's grounds. Here, the
grounds for the summary judgment expressly stated: "Payment of the appraisal
award resolves and disposes of all claims in this lawsuit," 2 and concluded that "a
binding appraisal award was issued" and paid by State Farm leaving "no remaining
issues."3 Garcia defended by seeking to set aside and disregard the award. The
trial court did not err by granting summary judgment dismissing all claims because
the grounds for summary judgment—which centered around the appraisal award—
were broad enough to contemplate Garcia's later-pled and unsupported defense that
the appraisal award is invalid.
Issue 2: A party seeking to set aside an appraisal award has the burden to
overcome the presumption in favor of enforcing awards. There was no evidence
that the appraisers acted without authority or signed the award based on fraud,
mistake, or accident. Garcia's arguments and suspicions about a possible mistake
are not evidence and did not create a genuine fact issue to avoid summary
judgment.
1
Toonen v. United Servs. Auto Ass'n, 935 S.W.2d 937, 940 (Tex. App.—San Antonio
1996, no writ) (holding insurer was entitled to summary judgment on breach of
contract claim because it tendered appraisal award pursuant to the contract);
Providence Lloyds Ins. Co. v. Crystal City Indep. Sch. Dist., 877 S.W.2d 872, 875
(Tex. App—San Antonio 1994, no writ) (holding trial court erred by allowing a trial
of a breach of contract claim after insurer promptly paid an appraisal award and
rendering judgment that insured take nothing); Breshears v. State Farm Lloyds, 155
S.W.3d 340, 344 (Tex. App.—Corpus Christi 2004, pet. denied) (insurer complied
with every requirement of contract where it participated in appraisal process and paid
amount set by appraisers and umpire); Franco v. Slavonic Mut. Fire Ins., 154 S.W.3d
777, 787 (Tex. App.—Houston [14th Dist.] 2004, no pet.) (holding summary
judgment dismissing contract claim was proper when insurer paid appraisal award).
2
CR 68 (emphasis added).
3
CR 76.
- xiii -
Issues 3: Payment of an appraisal award disposes of a contract claim as a
matter of law. Courts have rejected the argument that an insured can avoid
summary judgment dismissal by refusing to accept payment of an award. Garcia's
refusal to cash her check is not grounds for reversal.
Issue 4: Payment of an appraisal award disposes of a contract claim as a
matter of law. Courts have rejected the argument that the difference between the
amount of an appraisal award and the amount of a carrier's estimate is evidence of
a breach of contract. Garcia fails to raise a genuine fact issue by relying on the
difference between the award and State Farm's estimate.
Issue 5: Payment of an appraisal award precludes recovery of penalties
under Chapter 542 of the Texas Insurance Code as a matter of law. Garcia does
not raise a fact issue to avoid summary judgment.
Issue 6: The Texas Supreme Court has held that without a breach of
contract, there is no bad faith, unless the insured proves the insurer committed an
act so extreme it caused injury independent of the policy claim or the insurer failed
to timely investigate the insured's claim. Statutory bad faith and DTPA claims
require the same predicate for recovery and will fail if a common law bad faith
claim fails. The undisputed evidence conclusively demonstrates there was no
extreme act by State Farm or adjuster Garza that caused independent injury and the
claim was timely investigated. The trial court did not err by dismissing all of
Garcia's extra-contractual claims against State Farm and adjuster Garza.
- xiv -
STATEMENT OF FACTS
Garcia's dwelling in Rio Grande City, Starr County, Texas was insured for
approximately $88,000.00 (Coverage A dwelling limits) at the time of the loss
under a State Farm Texas Homeowners Policy. 4 On or about January 22, 2015,
Garcia reported an insurance claim for her house due to damage from a storm on or
about May 28, 2014.5 Sylvia Garza, on behalf of State Farm, contacted Garcia on
January 22, 2015 to get additional information regarding the loss and schedule an
inspection of the dwelling, which took place on February 28, 2015. 6 After
inspecting the property, State Farm prepared an estimate of damage finding
$902.37 in storm-related damage, which was below the Policy's deductible.7
Garcia filed suit against State Farm and adjuster Garza 8 on or about April 8,
2015, without making a pre-suit demand.9 On July 21, 2015, State Farm
demanded appraisal under the Policy, appointing Lee Moynahan as appraiser. 10
4
CR 79-137 (Homeowners Policy, with Business Records Affidavit).
5
CR 139 (Burrell Affidavit at ¶ 5).
6
CR 139 (Burrell Affidavit at ¶ 6).
7
CR 139 (Burrell Affidavit at ¶ 6).
8
Garcia's claims against Garza are derivative of, and based on, the same alleged facts
asserted against State Farm.
9
CR 10-38 (Plaintiff's Original Petition).
10
CR 139 (Burrell Affidavit at ¶ 7); CR 168-69 (Appraisal Demand Letter).
-1-
On July 27, 2015, Garcia responded to State Farm's appraisal demand and
appointed James Wesselski as appraiser.11
An appraisal award was issued setting the amount of loss at $7,835.70, on a
replacement cost basis, and $6,142.92, on an actual cash value basis. 12 Appraiser
Moynahan and appraiser Wesselski both signed the award.13 No umpire was
needed because the appraisers agreed on the amount of the loss. State Farm
received the appraisal award on September 23, 2015. 14 Three (3) business days
later, on September 28, 2015, State Farm timely tendered payment of the award
(minus depreciation and deductible) in the amount of $4,382.92. 15
State Farm moved for summary judgment on December 14, 2015, asserting
broadly that payment of the appraisal award resolved all of Garcia's causes of
action. 16 A hearing was set on the summary judgment for January 28, 2016. 17 On
January 21, 2016, the deadline for Garcia to respond to the summary judgment,
Garcia moved to continue the summary judgment hearing, arguing that she needed
11
CR 140 (Burrell Affidavit at ¶ 7); CR 173 (Appraisal Response Letter).
12
CR 140 (Burrell Affidavit at ¶ 8); CR 174-182 (Appraisal Award).
13
CR 140 (Burrell Affidavit at ¶ 8); CR 174 (Appraisal Award).
14
CR 140 (Burrell Affidavit at ¶ 8).
15
CR 140 (Burrell Affidavit at ¶ 9); CR 183-84 (Letter Issuing Appraisal Payment).
16
CR 68-202.
17
CR 203.
-2-
time to conduct discovery. 18 The continuance motion said nothing about setting
aside the appraisal award. State Farm responded to Garcia's motion for
continuance, noting that Garcia failed to identify facts or discovery needed that
could raise a material fact issue related to the summary judgment. 19 The trial court
heard arguments on Garcia's Motion for Continuance on January 28, 2016. 20 The
court took the matter under advisement and denied the Motion for Continuance on
February 9, 2016. 21 Garcia does not appeal the denial of the Motion for
Continuance.
After the continuance was denied, the summary judgment was reset for
hearing on March 3, 2016.22 On February 25, 2016, seven days before the
summary judgment hearing, Garcia filed her First Amended Petition 23 and her
Response to Defendants' Motion for Summary Judgment. 24 The First Amended
Petition still listed the same theories of liability in Section VII—"Cause of Action
for Breach of Contract," 25 "Cause of Action for Violation of Section 542,"26
18
CR 205-217.
19
CR 218-226.
20
1 RR 4-20.
21
CR 226.
22
CR 232.
23
CR 234-248.
24
CR 249-744.
25
CR 239.
26
CR 240.
-3-
"DTPA Cause of Action," 27 "Cause of Action for Unfair Insurance Practices,"28
and "Cause of Action for Breach of Duty of Good Faith and Fair Dealing."29
Separately, and not identified as a cause of action, the First Amended Petition
added a new section, "VIII. Request to Set Aside and Disregard Appraisal
Award." 30
The trial court heard the motion for summary judgment on March 3, 2016.31
The court granted the motion on March 10, 2016, and entered a final judgment that
Garcia take nothing on all of her claims. 32 Garcia appealed.
SUMMARY OF THE ARGUMENT
This Court has recognized that payment of an appraisal award disposes of an
insured's claims, and summary judgment dismissing those claims is appropriate.33
27
CR 240.
28
CR 242.
29
CR 243.
30
CR 244.
31
2 RR 4-18.
32
CR 751.
33
Toonen v. United Servs. Auto Ass'n, 935 S.W.2d 937, 940 (Tex. App.—San Antonio
1996, no writ) (holding insurer was entitled to summary judgment on breach of
contract claim because it tendered appraisal award pursuant to the contract);
Providence Lloyds Ins. Co. v. Crystal City Indep. Sch. Dist., 877 S.W.2d 872, 875
(Tex. App—San Antonio 1994, no writ) (holding trial court erred by allowing a trial
of a breach of contract claim after insurer promptly paid an appraisal award and
rendering judgment that insured take nothing).
-4-
Many other Texas courts 34 and Federal courts in Texas 35 have held the same.
Garcia first tries to avoid this settled law by arguing a technical, procedural issue—
34
Anderson v. American Risk Ins. Co., No. 01-15-00257-CV, 2016 Tex. App. LEXIS
6538, at *11 (Tex. App.—Houston [1st Dist.] June 21, 2016, no pet. h.) (affirming
summary judgment dismissing all claims based on payment of appraisal award);
Breshears, 155 S.W.3d at 344 (affirming summary judgment dismissing contractual
and extra-contractual claims after payment of appraisal award); Franco, 154 S.W.3d
at 787 (holding summary judgment dismissing contract claim was proper when
insurer paid appraisal award); Gardner v. State Farm Lloyds, 76 S.W.3d 140, 143-44
(Tex. App.—Houston [1st Dist.] 2002, no pet.) (holding trial court properly rendered
summary judgment for insurer based on appraisal award that required no payment to
be made); Lundstrom v. USAA, 192 S.W.3d 78, 87, 95 (Tex. App.—Houston [14th
Dist.] 2006, pet. denied) (affirming summary judgment dismissing breach of contract
claim based on appraisal award); Richardson East Baptist Church v. Philadelphia
Indemnity Ins. Co., No. 05-14-01491-CV, 2016 Tex. App. LEXIS 3267, at *7-12
(Tex. App.—Dallas March 30, 2016) (affirming summary judgment dismissing
breach of contract claim based on appraisal award).
35
Blum's Furniture Co. v. Certain Underwriters at Lloyds London, 459 Fed. Appx.
366, 369 (5th Cir. 2012) (affirming summary judgment dismissing breach of contract
claim following payment of appraisal award and noting "it seems clear that Lloyds
did not breach its contract with Blum's"); Michels v. Safeco Ins. Co. of Ind., 544 Fed.
Appx. 535, 542 (5th Cir. 2013) (affirming district court's granting of summary
judgment after payment of appraisal award); Burks v. Metro Lloyds Ins. Co. of Tex.,
No. H-14-591, 2015 U.S. Dist. LEXIS 88729, at *9-11 (S.D. Tex. July 8, 2015)
(granting summary judgment after payment of appraisal award); Scalise v. Allstate
Texas Lloyds, No. 7:13-CV-178, 2013 U.S. Dist. LEXIS 179692, at *13-16 (S.D.
Tex. Dec. 20, 2013) (granting summary judgment dismissing breach of contract
claim based on payment of appraisal award); Russell v. Scottsdale Ins. Co., No. 4:10-
CV-3057, 2014 U.S. Dist. LEXIS 143882, *17 (S.D. Tex. Sept. 30, 2014) (granting
summary judgment because insured is estopped from asserting breach of contract
when insurer pays appraisal award); Barry v. Allstate Tex. Lloyds, No. 4:14-cv-
00870, 2015 U.S. Dist. LEXIS 40953, at *8-11 (S.D. Tex. Mar. 31, 2015) (granting
summary judgment after payment of appraisal award); Caso v. Allstate Tex. Lloyds,
No. 7:12-CV-478, 2014 U.S. Dist. LEXIS 15279, at *14-24 (S.D. Tex. Feb. 7, 2014)
(granting summary judgment because insurer's payment of appraisal award estopped
insured's breach of contract claim); Waterhill Cos. v. Great Am. Assur. Co., No. H-
05-4080, 2006 U.S. Dist. LEXIS 15302, at *8 (S.D. Tex. March 16, 2006) (granting
summary judgment after insurer paid appraisal award); Gabriel v. Allstate Texas
Lloyds, No. 7:13-CV-181, 2013 U.S. Dist. LEXIS 186032, at *12 (S.D. Tex. Nov. 1,
-5-
that Garcia amended her petition seven days before the hearing, requiring an
amended or supplemental summary judgment to be filed and the hearing reset. But
Garcia did not assert a new cause of action, and Texas courts recognize an
exception to this general rule when the grounds stated in the original summary
judgment are broad enough to include the newly pled claim. Here, that is the case.
Payment of the valid appraisal award was the basis of the summary judgment
motion. Also, Garcia's request to set aside was raised as a defense to State Farm's
estoppel defense based on the appraisal award. Thus, State Farm, as the movant
for summary judgment, was not required to pre-emptively negate Garcia's defense
to summary judgment.
Garcia also argues the substantive issues. Garcia speculates that the award
was made without authority or was the result of fraud, accident, or mistake,
rendering it invalid. But there is no evidence that the appraisers acted without
authority or were tainted by fraud, accident, or mistake. Garcia did not offer an
affidavit from her own appraiser—who signed the award—saying he had made a
mistake or acted improperly. Garcia's position is based on arguments, not
evidence. Garcia makes other arguments—that she can refuse to accept State
Farm's payment of the award to avoid summary judgment, that the difference
2013) (granting summary judgment after payment of appraisal award); Mag-Dolphus,
Inc. v. Ohio Cas. Ins. Co., 906 F. Supp. 2d 642, 652 (S.D. Tex. 2012) (granting
summary judgment after payment of appraisal award).
-6-
between State Farm's original estimate and the later appraisal award is evidence of
a breach of contract, that she should be allowed to recover Chapter 542 penalties
on top of the award amount, and that her extra-contractual claims survive even if
she has no breach of contract claims. But all of these arguments have been made
before by many other parties, and they have been rejected before by many other
courts. 36
ARGUMENT
I. The summary judgment grounds are broad enough to contemplate
Garcia's later-pled defense to set aside the appraisal award, and State
Farm was not required to pre-emptively negate Garcia's defense.
Garcia's primary argument seeks to avoid the substantive issues in this
appeal based on a technical issue. But Garcia fails to address or even acknowledge
that Texas courts recognize an exception to the general rule upon which Garcia
relies:
Although summary judgment generally may not be granted on a claim
not addressed in the summary judgment proceeding, it may be granted
on later pleaded causes of action if the grounds asserted in the motion
show that the plaintiff could not recover from the defendant on the
later pleaded cause of action. 37
***
This Court has recognized an exception to the rule that a movant must
amend or supplement its summary judgment motion expressly to
address claims pled after the original motion's filing. If the summary
36
See Argument Sections III, IV, V, and VI, supra.
37
McIntyre v. Wilson, 50 S.W.3d 674, 684-85 (Tex. App.—Dallas 2001, pet. denied).
-7-
judgment grounds are broad enough to contemplate all causes of
action later pled, then summary judgment may properly be rendered
on the later claims even without an amended or supplemental
motion.38
This Court adopted the exception in Smith v. Heard:
Courts have granted summary judgments on causes of action not
specifically addressed in a movant's motion if the movant has
conclusively disproven an ultimate fact which is central to all causes
of action alleged, or the unaddressed causes of action are derivative of
the addressed cause of action. 39
The genesis of the general rule upon which Garcia relies is based on the
language in Rule 166a(c) that requires a party to state the specific grounds upon
which they are entitled to judgment. 40 Generally, if a plaintiff adds new causes of
action after a summary judgment is filed, the movant could not have known to
include grounds on the new cause of action. But if the summary judgment is
sufficiently broad, "it may be deemed to cover additional causes of action under
appropriate fact situations." 41 Thus, in Farah v. Mafrige & Kormanik, the court
38
Strasser v. Sulzer Medica U.S.A., Inc., No. 01-01-00610-CV, 2002 Tex. App. LEXIS
5463, at *6 (Tex. App.—Houston [1st Dist.] July 25, 2002, pet. denied).
39
See Smith v. Heard, 980 S.W.2d 693, 697 (Tex. App.—San Antonio 1998, pet.
denied) (citing TIMOTHY PATTON, SUMMARY JUDGMENTS IN TEXAS--
PRACTICE, PROCEDURE AND REVIEW § 3.06[3] (2d ed. 1996); Judwin Prop.,
Inc. v. Griggs & Harrison, 911 S.W.2d 498, 502-503 (Tex. App.—Houston [1st
Dist.] 1995, no writ); Mackie v. McKenzie, 900 S.W.2d 445, 451 (Tex. App.—
Texarkana 1995, writ denied); Cissne v. Robertson, 782 S.W.2d 912, 918 (Tex.
App.—Dallas 1989, writ denied)).
40
Lampasas v. Spring Center, Inc., 988 S.W.2d 428, 435-36 (Tex. App.—Houston
[14th Dist.] 1999, no pet.).
41
Lampasas, 988 S.W.2d at 436.
-8-
held that a summary judgment motion seeking to dismiss fraud claims was broad
enough to include a later-added claim for negligent misrepresentation. 42 But the
court also found that a newly pleaded cause of action for promissory estoppel was
not within the summary judgment grounds. 43 In AKB Hendrick, LLP v. Musgrave
Enters., the court affirmed summary judgment dismissing a later pleaded negligent
misrepresentation claim because the grounds asserted against the plaintiff's fraud
claim showed the plaintiff could not recover on the negligent misrepresentation
claim. 44
Here, the validity of the appraisal award is central to State Farm's and
adjuster Garza's motion for summary judgment. The entire basis of the motion was
State Farm's payment of a valid appraisal award. It stretches credulity for Garcia
to now argue that these grounds "were not addressed in the motion for summary
judgment." 45 And this is contrary to Garcia's previous acknowledgment that the
validity of the appraisal award was already squarely before the trial court as part of
State Farm's summary judgment. 46 State Farm offered the signed appraisal award
42
927 S.W.2d 663, 671-672 (Tex. App.—Houston [1st Dist.] 1996, no writ).
43
Id.
44
380 S.W.3d 221, 237-38 (Tex. App.—Dallas 2012, no pet.).
45
Appellant's Brief at p. 8.
46
2 RR 14 ("If the appraisal--if there's a question about the validity of the Appraisal
Award, then that raises questions about whether they can even prove the first element
of their estoppel defense, whether there's a valid and binding Appraisal Award.").
-9-
in evidence,47 and alleged that it was a binding award.48 Under Texas law, the
award is presumed valid. 49 State Farm met its burden.
It is questionable whether Garcia's later-amended petition even qualifies
under the general rule requiring a summary judgment to be amended. Garcia did
not add a cause of action, but rather a "Request to Set Aside and Disregard
Appraisal Award" separate from her "Causes of Action," and it was plead as a
defense to State Farm's estoppel defense and summary judgment. 50 In Smith, this
Court implicitly recognized that the general rule may not apply when a plaintiff
pleads an affirmative defense as opposed to a cause of action.51 And courts
recognize that a summary judgment movant is not required to address the non-
movant's defenses, because it is incumbent upon the non-movant to raise a genuine
material fact issue on the elements of the non-movant's defense.52 Once State
Farm proved its defense to Garcia's claims based on its payment of the binding
47
CR 174.
48
CR 76 ("Appraisal has concluded and a binding appraisal award was issued setting
the amount of loss.").
49
In re Allstate County Mut. Ins. Co., 85 S.W.3d 193, 195 (Tex. 2002).
50
See, e.g., Strasser, 2002 Tex. App. LEXIS 5463, at *17 (recognizing that fraudulent
concealment is a defense to a defendant's limitations defense).
51
Smith, 980 S.W.2d at 697 (noting that failure of consideration in amended pleading
was a defense not a cause of action, but applying general rule to other newly added
cause of action under Texas Debt Collection Practices Act).
52
Cook Composites v. Westlake Styrene Corp., 15 S.W.3d 124, 139 (Tex. App.—
Houston [14th Dist.] 2000, pet. dism'd).
- 10 -
appraisal award, it was Garcia's burden to plead and raise a fact issue on her
defense that the award is invalid.
The validity of the appraisal award raised by Garcia in her First Amended
Petition was already central to State Farm's summary judgment motion. Thus, the
trial court did not err by ruling on the substantive merit of the parties' claims and
defenses.
II. No material fact issues existed.
Texas law presumes the appraisal award is valid, and it was Garcia's burden
to prove a valid ground for setting aside the award.53 When a party does not
produce evidence showing grounds to set aside the appraisal award, the award is
presumed valid and should be enforced as a matter of law. 54 Garcia argues that the
award should be set aside because the award was made without authority or was
53
Franco, 154 S.W.3d at 786; Lundstrom, 192 S.W.3d at 87.
54
See Hudgens v. Allstate Texas Lloyd's, No. H-11-2716, 2012 U.S. Dist. LEXIS
97446, at *27 (S.D. Tex. July 13, 2012) (granting insurer's post-appraisal motion for
summary judgment after finding that "Plaintiff has failed to produce any evidence
showing the grounds required to set aside the appraisal award"); Cantu v. S. Ins. Co.,
No. 03-14-00533-CV, 2015 Tex. App. LEXIS 8847, at *20 (Tex. App.—Austin Aug.
25, 2015, no pet.) ("Cantu produced no evidence that the appraisers and umpires did
not comply with the requisite procedure and did not meet that burden [to set the
award aside]"); MLCSV10 v. Stateside Enters., 866 F. Supp. 2d 691, 708 (S.D. Tex.
2012) (granting summary judgment for insurer, finding that insured had presented no
evidence that award was invalid); Breshears, 155 S.W.3d at 344 ("Thus, because
there is no evidence showing grounds to set aside the appraisal award, the trial court
did not err in granting summary judgment on this issue").
- 11 -
the result of fraud, accident, or mistake. But Garcia only offers arguments, not
evidence.55 She did not meet her burden to raise a genuine issue of material fact.
To set aside an award on the ground of fraud, accident, or mistake, Garcia
must prove that the award was not the intended result of the appraisers who signed
the award or the appraisers were incompetent, interested, or partial. 56 There is no
evidence that the award does not reflect the intent of appraiser Wesselski or
appraiser Moynahan.57 Garcia speculates that because the appraisal award's scope
differs in some ways from the State Farm estimate, the award does not reflect the
intent of the appraisers. But allegations and speculation are not evidence. For
example, in Hudgens, the court held that the plaintiff's allegations of misconduct in
55
Texas Dep't. of Pub. Safety v. Mendoza, 952 S.W.2d 560, 564 (Tex. App.—San
Antonio 1997, no writ) ("argument of counsel is not evidence.").
56
See Providence Wash. Ins. Co. v. Farmers Elevator Co., 141 S.W.2d 1024, 1026-27
(Tex. Civ. App.—Amarillo 1940, no writ) (trial court judgment setting aside an
award by two appraisers and an umpire reversed and rendered in part because there
was no mistake—award was intended result); Continental Ins. Co. v. Guerson, 93
S.W.2d 591, 594 (Tex. Civ. App.—San Antonio 1936, writ dism'd) (court cannot
concern itself where the award embodies the appraisers real judgment); Gulf Ins. Co.
of Dallas v. Pappas, 73 S.W.2d 145, 146-47 (Tex. Civ. App.—San Antonio 1934,
writ ref'd) (court will not substitute its own award for that of the appraisers unless the
mistake is one by which the award fails to operate in a way the appraisers intended);
Home Ins. Co. v. Walter, 230 S.W. 723, 724 (Tex. Civ. App.—Dallas 1921, no writ)
(an award which is the result of fraud, mistake or accident means one which was
made by appraisers who were incompetent, interested or partial).
57
Garcia makes no argument that either appraiser committed fraud, was incompetent,
interested, or partial.
- 12 -
the appraisal were not competent evidence, and that the plaintiff therefore failed as
a matter of law to satisfy its burden of proof to set aside the award. 58
To set aside an award for lack of authority, Garcia had the burden to prove
that the appraisers made improper legal determinations of what is or is not a
covered loss.59 Garcia offers no legal support for the proposition that appraisers
are bound by prior estimates or must use them as a starting point when determining
the extent or amount of loss. A federal court in Wisconsin has expressly rejected
this argument: "Once the appraisal was confirmed, any previous estimates from
[the insurer's restoration company] or anyone else became meaningless, and the
only damages estimate that mattered was the appraisal award." 60 Under the Policy,
the appraisers are not bound by pre-appraisal estimates, but rather have a duty to
make an independent determination of the amount of loss:
4. Appraisal. …If either makes a written demand for
appraisal, each shall select a competent, disinterested
appraiser…. The appraisers shall then set the amount of
the loss. If the appraisers submit a written report of
58
Hudgens, 2012 U.S. Dist. LEXIS 97446, at *26-27; see also Scalise, 2014 U.S. Dist.
LEXIS 49419, at *7 (where an award was valid on its face, court "could not have
discerned from the appraiser estimates and award made part of the summary
judgment record whether either individual impermissibly refused to inspect or
consider the damages…").
59
MLCSV10, 866 F. Supp. 2d at 705-06.
60
Gronik v. Chubb Indem. Ins. Co., 10-CV-954, 11-CV-697, 2015 U.S. Dist. LEXIS
157266, at *8 (E.D. Wis. Nov. 20, 2015).
- 13 -
an agreement to us, the amount agreed upon shall be
the amount of loss…. 61
The Policy requires the appraisers to make a disinterested evaluation of the
loss and clearly states that the appraisers' agreement—not prior estimates—"shall
be the amount of loss." In other words, the appraisal award controls over the prior
estimates. 62 Garcia's reliance on Wells v. American States Preferred Ins. Co. 63 and
Lundstrom v. United Services Auto Association—CIC64 is misplaced.65 In Wells,
the appraisal panel expressly made coverage decisions as part of the award. 66 That
did not happen here. In Lundstrom, the court affirmed the summary judgment on
the ground that appraisal resolved the contract claim and rejected the plaintiff's
broad interpretation of Wells, noting no coverage issues were before the appraisal
panel.67 Garcia's opinion that the award should have included additional items is
61
CR 106 (emphasis added).
62
Similarly, when appraisers disagree, an umpire is not constrained to choose between
them, but must exercise her independent judgment. See, e.g., Providence Lloyds Ins.
Co., 877 S.W.2d at 877-878 ("we find that in acting independently as to the disputed
values, the umpire did not exceed the authority conferred upon him. On the contrary,
it was the duty of the umpire under the terms of the contract of insurance to ascertain
and determine, in the exercise of his own judgment and as the result of his own
investigation, the cost values of the disputed items, independent of the findings of the
appraisers, or either of them.").
63
919 S.W.2d 679, (Tex. App.—Dallas 1996, writ denied).
64
192 S.W.3d 78 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).
65
Appellant's Brief at pp. 16-17.
66
Wells, 919 S.W.2d at 685 (umpire and appraiser exceeded authority by determining
foundation movement was not caused by a plumbing leak).
67
Lundstrom, 192 S.W.3d at 87-89.
- 14 -
not evidence that the award was made without authority and does not reflect that
the award was the result of fraud, accident, or mistake.
Garcia argues the appraisers either made coverage decisions without
authority or made a mistake because they did not award her $397.72 for three items
that were in State Farm's original estimate. Garcia had seventy-three days from the
day that State Farm moved for summary judgment until her evidentiary deadline
seven days before the March 3, 2016 summary judgment hearing to support her
speculation with evidence—such as an affidavit from appraiser Wesselski (whom
she appointed) that he was mistaken or that he made coverage decisions. But
Garcia offered no such evidence. Instead, Garcia relies only on her arguments and
speculation about what the appraisers might have done or intended by comparing
what is in the award and what is in State Farm's original estimate. But summary
judgment cannot be avoided by a non-movant when the "application of . . .
evidence relies upon speculation rather than reasonable inference." 68 That the
appraisal award did not include a $43 turtle vent or $354 for ceiling paint in two
68
Bluebonnet Petroleum, Inc. v. Kolkhorst Petroleum Co., No. 14-07-00380-CV, 2008
Tex. App. LEXIS 7724, at *26-27 (Tex. App.—Houston [14th Dist.] Oct. 9, 2008,
pet. denied) (affirming summary judgment dismissing conspiracy claim because no
evidence of content of phone calls was offered and the proffered application of
evidence—i.e., that the existence of the phone calls was circumstantial evidence that
the parties conspired—relied upon speculation rather than reasonable inference); see
also Saenz v. J.D. Rodriguez Produce & Trucking Co., No. 04-99-00867-CV, 2000
Tex. App. LEXIS 8596, at *20 (Tex. App.—San Antonio Dec. 29, 2000, pet. denied)
(argument that summary judgment evidence raised a reasonable inference was merely
suspicion and speculation).
- 15 -
rooms is no evidence that the appraisers acted without authority or signed an award
as a result of fraud, accident or mistake. Garcia only speculates that is the case. 69
But her speculation does not raise a genuine fact issue.
III. Garcia cannot avoid summary judgment by choosing not to cash her
appraisal award check.
State Farm tendered payment under the appraisal award within three
business days of receiving the award.70 Garcia's counsel purported to reject the
payment, arguing that State Farm needed to confess "to their liability" before
Garcia would accept the check and that Garcia should have received the amount of
the appraisal award originally without having to go to appraisal.71 Garcia now
argues that her refusal to accept payment prevents summary judgment from being
entered against her. Numerous courts have found that a party cannot avoid
69
Even if the Court were to indulge Garcia's speculation (which State Farm asserts is
without merit), the $397 amount is a minor discrepancy that does not justify setting
aside the award. Michels, 544 Fed. Appx. at 541 ("minor discrepancies in the
appraisal process or award do not invalidate the award"); TMM Invs., Ltd. v. Ohio
Cas. Ins. Co., 730 F.3d 466, 472 (5th Cir. 2013) ("minor mistakes that do not taint
the entire award should not frustrate the parties' intent to be bound by the appraisal
provision of their contract."). And if Garcia's speculation about the $397 could
justify setting aside the award (which State Farm asserts is without merit), only that
portion of the award would be set aside. See MLCSV10, 866 F. Supp. 2d at 707-708
(noting that only part of the appraisal award might be set aside and "there is,
however, no basis for setting aside the entire award or any other part of it."). Thus,
the remainder of the award would remain intact, all of Garcia's ensuing causes of
action related to those parts of the award would still be disposed of by summary
judgment, and at most Garcia would go to trial seeking to prove the $397 amount not
in the award was omitted without authority or by fraud, accident, or mistake.
70
CR 183.
71
CR 729.
- 16 -
summary judgment by refusing to accept payment of an appraisal award. In
United Neurology, P.A. v. Hartford Lloyd's Ins. Co., the federal court pointed out
that several courts have rejected Garcia's argument:
United Neurology now argues that the third element required to estop
its breach of contract claim was not met because it did not accept the
payment of the appraisal award tendered to it by Hartford. A number
of courts have addressed the issue of the insured's rejection of a timely
and full payment of the appraisal award amount by the insurer under
Texas law and determined that if the appraisal award has been reached
in accordance with the terms of the insurance policy and the insurer
has timely tendered the full amount awarded by the appraisers, that
conduct is legally sufficient to entitle the insurer to summary
judgment on the breach-of-contract claim against it. This Court, too,
finds that United Neurology and Hartford are in substantial
compliance with the appraisal award clause in the Policy, that the
award is binding and enforceable, and that despite United Neurology's
refusal to accept the payment tendered, it has failed to show that
Hartford breached the contract.72
In Devonshire Real Estate & Asset Management, L.P. v. American
Insurance Co., the court rejected the argument advanced by Garcia that she can
block a summary judgment by not accepting payment:
Finally, the Court refuses to accept Devonshire's argument that
American cannot raise an estoppel defense because Devonshire never
accepted payment of the appraisal award issued by American. . . . The
Court therefore concludes that so long as there is a binding and
enforceable appraisal award and the insurer timely and full[ly] pays
72
United Neurology, P.A. v. Hartford Lloyd's Ins. Co., 101 F. Supp. 3d 584, 619-20
(S.D. Tex. 2015).
- 17 -
the resulting award, estoppel should apply regardless of whether the
insured actually accepts payment. 73
Similarly, in Caso v. Allstate Texas Lloyds, the court granted summary
judgment notwithstanding the insured's rejection of payment:
Plaintiffs do not dispute the first and second elements, but attack the
third, i.e. acceptance of the award, by asserting that Plaintiffs' non-
acceptance of Allstate's tender of the appraisal award prevents
estoppel. In support, Plaintiffs cite language from a district court
decision, Church of the Rock North v. Church Mut. Ins. Co., providing
that estoppel via appraisal only results where the plaintiff accepts
payment of the appraisal amount from the insurer. However, the
Church of the Rock requirement of acceptance for estoppel
effectiveness was due to distinguishable facts of that case . . . the
award remains both binding and enforceable until it is set aside,
notwithstanding Plaintiffs' rejection of Allstate's tender, an
apparently-baseless rejection for which Plaintiffs have not offered an
explanation. 74
Like the insured in Caso, Garcia relies on Church on the Rock North v.
Church Mut. Ins. Co.75 to support her position. The Court in Caso explained that
Church on the Rock was distinguishable due to peculiar language in that appraisal
clause and unique factual disputes about the enforceability of the award, which was
not signed.76 Notably, the court in Caso relied on this Court's opinion in Toonen to
reject the argument that an insured has to accept the check:
73
Devonshire Real Estate & Asset Mgmt., L.P. v. Am. Ins. Co., No. 3:12-CV-2199-B,
2014 U.S. Dist. LEXIS 135939, at *51, *53 (N.D. Tex. Sep. 26, 2014).
74
No. 7:12-CV-478, 2014 U.S. Dist. LEXIS 15279, at *18-20 (S.D. Tex. Feb. 7, 2014).
75
No. 3:10-CV-0975-L, 2013 U.S. Dist. LEXIS 17849 (N.D. Tex. Feb. 11, 2013).
76
Caso, 2014 U.S. Dist. LEXIS 15279, at *18.
- 18 -
Regarding a factually-similar situation in Toonen v. United Servs.
Auto. Ass'n, a Texas court of appeals rejected a similar argument,
writing:
In this case, USAA's motion and supporting proof are legally
sufficient to establish (1) Toonen's claim had been appraised
pursuant to the Policy, and (2) USAA had tendered the amount
awarded by the appraisers. Accordingly, USAA was entitled to
summary judgment in its favor on Toonen's breach of contract
claim unless Toonen raised an issue of fact as to a ground for
setting aside the appraisal award.77
The court in Devonshire also explained that the reasoning in Church on the
Rock was based on an over-reading of Franco, which "did not expressly state, as
Church on the North Rock and Blum's Furniture appear to suggest, that the
insured's acceptance of payment was a necessary condition for estoppel to apply." 78
Several other cases have likewise rejected an insured's attempt to avoid summary
judgment by not accepting payment and citing Church on the Rock. 79
Garcia also argues that she rejected the appraisal payment because it was for
the Actual Cash Value of the award, instead of the full Replacement Cost Value.80
Actually, Garcia never raised this issue at the trial court. She tries to add the new
argument on appeal—saying "it can be reasonably inferred" from her letter that she
77
Caso, 2014 U.S. Dist. LEXIS 15279, at *20-21.
78
Devonshire Real Estate, 2014 U.S. Dist. LEXIS 135939, at *52.
79
See Moore v. Allstate Texas Lloyds, No. 7:12-CV-479, 2014 U.S. Dist. LEXIS
15277, at *18 (S.D. Tex. Feb. 7, 2014); Hernandez v. Allstate Texas Lloyds, No.
7:12-CV-480, 2014 U.S. Dist. LEXIS 15276, at *18 (S.D. Tex. Feb. 7, 2014); United
Neurology, 101 F. Supp. 3d at 620, n.37.
80
Appellant's Brief at p. 23.
- 19 -
speculated State Farm might not later pay replacement cost benefits if she
completed repairs, and therefore, she rejected the payment. This argument (even if
it had been properly raised by Garcia) has also been rejected. In Devonshire, the
court held that "the plain terms of the policy only required American to pay the
actual cash value of the appraisal award, because Devonshire had not completed
repairs."81 Garcia offers no argument or evidence that she completed repairs.
Accordingly, she is not entitled to replacement cost benefits under the policy. 82
Garcia argues (again) that State Farm cannot defeat her claims by estoppel
because it cannot show the existence of a valid appraisal award. 83 Garcia
incorporates the earlier sections of her brief, arguing State Farm did not amend its
motion after Garcia amended her petition and that fact issues exist on her grounds
to set aside the award. 84 State Farm, in turn, incorporates its prior arguments on
these points. The broadly stated summary judgment grounds covered the
enforceability of the award, and State Farm did not have to pre-emptively negate
Garcia's defense. 85 And Garcia offers no evidence to raise a fact issue, only
81
2014 U.S. Dist. LEXIS 135939, at *49.
82
Fitzhugh 25 Partners, L.P. v. KILN Syndicate, 501, 261 S.W.3d 861, 863 (Tex.
App.—Dallas 2008, pet. denied) ("Courts across the country have universally held
that [a replacement cost provision] requires repair or replacement of the destroyed
property before the insured is entitled to recover replacement cost damages.")
83
Appellant's Brief at p. 22.
84
Id.
85
See Argument Section I, supra.
- 20 -
arguments.86 State Farm satisfied its burden by offering the signed appraisal
award, which is presumed valid. It is Garcia's burden of proof to set aside the
award. She cannot shift the burden to State Farm to pre-emptively disprove her
defense.
IV. Under Texas law, the fact that an appraisal award is greater than an
earlier estimate is no evidence of a breach of contract.
Under Texas law, the fact that an insurer paid less under its original estimate
than it later paid under a signed appraisal award cannot be used to argue the insurer
breached the contract. 87 Garcia tries to make exactly this argument. 88 Garcia
points to the differences between her public adjuster's estimate, State Farm's
estimate, and the appraisal award. 89 Garcia also complains that State Farm did not
include overhead and profit in its estimate, but the appraisers did. 90 But attacking
86
See Argument Section II, supra.
87
Gabriel, 2013 U.S. Dist. LEXIS 186032, at *11; Breshears, 155 S.W.3d at 343 ("The
Breshears may not use the fact that the appraisal award was different than the amount
originally paid as evidence of breach of contract, especially when the contract they
claim is being breached provides for resolution of disputes through appraisal.").
88
Appellant's Brief at pp. 24-27.
89
Id. at p. 25.
90
Id. at pp. 25-26. As discussed in footnote 91 below, an incongruity between an
estimate and an appraisal award is not germane to the issues presented in this appeal.
Nevertheless, it is important to note that Garcia misrepresents the TDI Bulletins cited
in her brief. Appellant's Appendix I. The bulletins do not stand for the proposition
that overhead and profit be included in every loss estimate. They only express TDI’s
opinion that depreciation and overhead and profit cannot both be deducted from
replacement cost value when calculating actual cash value.
- 21 -
the original estimate as being insufficient does not raise a fact issue when the
appraisal award later sets the amount of loss and is paid. 91
The Houston Court of Appeals in Anderson recently rejected the argument
that the award can prove the insurer breached the contract: "The fact that ARIC did
not pay the amount of the award earlier, alone, does not raise a fact issue on
Anderson's claim for breach of contract." 92 Garcia failed to prove any fact issues
prevented summary judgment dismissing her contract claim.
V. Payment of the appraisal award disposes of Garcia's prompt payment
claims as a matter of law.
Garcia argues that a cause of action under the Texas Prompt Payment of
Claims Act, Chapter 542 Tex. Ins. Code ("TPPCA"), can be maintained after an
insurer timely pays an appraisal award. Courts have already decided that issue,
recognizing that "Texas courts have constantly held that 'full and timely payment
of an appraisal award under the policy precludes an award of penalties under the
91
Gabriel, 2013 U.S. Dist. LEXIS 186032, at *11 ("For her part, Gabriel argues that
Breshears is 'easily distinguished' from this case since the Breshears plaintiffs
asserted claims 'because the amount of the appraisal award was different from the
amount initially offered by the insurance company.' Gabriel goes on, however, to
describe the same basis for her own claims, albeit with different wording: Allstate
breached the contract when it 'failed to correctly determine the amount of the loss
that led to the coverage dispute.'").
92
2016 Tex. App. LEXIS 6538, at *11.
- 22 -
Insurance Code's prompt payment provisions as a matter of law.'" 93 Garcia relies
on a recent interlocutory Order from a Northern District of Texas case that was
voluntarily dismissed by the plaintiff, Graber v. State Farm Lloyds, 94 that is at
odds with Fifth Circuit precedent, Southern, Eastern and Western District
precedent, and precedent from Texas courts of appeals.
A. The overwhelming majority of courts have found that TPPCA
claims do not survive payment of an appraisal award.
The Fifth Circuit, in Blum's Furniture Co. v. Certain Underwriters at Lloyds
London, upheld the summary judgment dismissal of the plaintiff insured's
contractual and extra-contractual claims, affirming the district court's summary
judgment. 95 The district court held that "under Texas law, 'full and timely payment
of an appraisal award under the policy precludes an award of penalties under the
Insurance Code's prompt payment provisions as a matter of law.' Because Lloyds
made full and timely payment of the appraisal award in this case, Plaintiffs' Prompt
Payment claim fails as a matter of law." 96
93
Tabor v. State Farm Lloyds, No. 7:14-cv-389, at pp. 15-16 (S.D. Tex. April 9, 2015)
(quoting In re Slavonic Mut. Fire Ins. Ass'n, 308 S.W.3d 556, 563 (Tex. App.—
Houston [14th Dist.] 2010, no pet.)).
94
Graber v. State Farm Lloyds, No. 3:13-CV-2671-B, 2015 U.S. Dist. LEXIS 77361
(N.D. Tex. June 15, 2015) reconsideration denied (August 6, 2015) (dismissed
voluntarily by plaintiff).
95
459 Fed. Appx. at 368.
96
Blum's Furniture Co. v. Certain Underwriters at Lloyds London, No. H-09-3479,
2011 U.S. Dist. LEXIS 20604, at *11 (S.D. Tex. March 2, 2011) affirmed by 459
- 23 -
District courts for the Southern District of Texas routinely grant summary
judgment dismissing TPPCA claims (and all other claims) after the carrier pays the
appraisal award. 97 And so do district courts in the Eastern District,98 and the
Western District.99
Graber finds no support among Texas state courts either. Courts that have
addressed these claims have also held that payment of an appraisal award means
Fed. Appx. 366 (5th Cir. 2012) (emphasis added) (quoting In re Slavonic, 308
S.W.3d at 563-64).
97
Gabriel, 2013 U.S. Dist. LEXIS 186032, at *12, *20-21 (S.D. Tex. Nov. 1, 2013);
Tabor, No. 7:14-cv-389, at pp. 15-16; Moore, 2014 U.S. Dist. LEXIS 15277, at *14-
30; Hernandez, 2014 U.S. Dist. LEXIS 15276, at *14-30; Caso, 2014 U.S. Dist.
LEXIS 15279, at *14-24; Cavazos v. State Farm Lloyds, No. 7:13-CV-00252, Minute
Entry of 10/27/15 (S.D. Tex. Oct. 27, 2015); Corpus v. State Farm Lloyds, No. 7:14-
CV-00383, Minute Entry of 10/27/15, (S.D. Tex. Oct. 27, 2015); Guerra v. State
Farm Lloyds, No. 7:14-CV-00381, Minute Entry of 10/27/15, (S.D. Tex. Oct. 27,
2015); Solis v. State Farm Lloyds, No. 7:13-cv-00149, Minute Entry of 10/27/15
(S.D. Tex. Oct. 27, 2015); Villanueva v. State Farm Lloyds, No. 7:13-CV-00601,
Minute Entry of 10/27/15, (S.D. Tex. Oct. 27, 2015); Rios v. State Farm Lloyds, No.
7:13-CV-00187, Minute Entry of 8/17/15 (S.D. Tex. August 17, 2015); Scalise, 2013
U.S. Dist. LEXIS 179692, at *11 (S.D. Tex. Dec. 20, 2013); Stewart v. Geovera
Specialty Ins. Co., No. H-14-3162 at p. 8 (S.D. Tex. October 21, 2015); Burks, 2015
U.S. Dist. LEXIS 88729, at *5, *12-16; Barry, 2015 U.S. Dist. LEXIS 40953, at *15;
United Neurology, P.A. v. Hartford Lloyd's Ins. Co., 101 F. Supp. 3d 584 (S.D. Tex.
2015) affirmed by 624 Fed. Appx. 225 (5th Cir. 2015); Mag-Dolphus, 906 F. Supp.
2d at 652; Medistar Twelve Oaks Partners, Ltd. v. Am. Econ. Ins. Co., No. H-09-
3828, 2011 US. Dist. LEXIS 82846, at *31, *23-24 n.8 (S.D. Tex. July 27, 2011);
Waterhill, 2006 U.S. Dist. LEXIS 15302, at *10.
98
Studer v. State Farm Lloyds, No. 4:13-CV-413, 2016 U.S. Dist. LEXIS 99883 (E.D.
Tex. July 29, 2016); Quibodeaux v. Nautilus Ins. Co., No. 1:10-CV-739, 2015 U.S.
Dist. LEXIS 39324, at *25-26 (E.D. Tex. Mar. 10, 2015) affirmed by 2016 U.S. App.
LEXIS 12643 (5th Cir. Jul. 7, 2016).
99
Michels v. Safeco Ins. Co. of Indiana, No. A-12-CA-511-SS, Slip Op. at p. 9 (W.D.
Tex. March 13, 2013) affirmed by 544 Fed. Appx. 535, 542-543 (5th Cir. 2013).
- 24 -
that TPPCA claims must be dismissed—as a matter of law. 100 As one legal article
characterized it, Graber is an "outlier." 101 Graber was voluntarily dismissed by the
Plaintiff before an appeal of the District Court's interlocutory order.
B. Graber relies on distinguishable authority that did not involve
appraisal.
Graber relied on Higginbotham v. State Farm Mutual Automobile Ins. Co.102
to disregard a long line of cases finding that timely payment of an appraisal award
precludes a prompt payment claim. But Higginbotham is distinguishable because
it was not an appraisal case and the insurer in that case was found liable for breach
of contract by a jury after it denied a claim. 103 The distinction is crucial. Not only
was there no finding of State Farm's liability in Graber—there was actually a
finding that State Farm was not liable to the Plaintiff for breach of contract when
the Court granted State Farm's motion for summary judgment on the plaintiff's
breach of contract claim. The Fifth Circuit recently explained in Tremago that
100
Anderson, 2016 Tex. App. LEXIS 6538, at *13; Bernstein v. Safeco Ins. Co. of Ill.,
No. 05-13-01533-CV, 2015 Tex. App. LEXIS 6699, at *3 (Tex. App.—Dallas, June
30, 2015, no pet.); In re Slavonic Mut. Fire Ins. Ass'n, 308 S.W.3d 556, 563-64 (Tex.
App.—Houston [14th Dist.] 2010, no pet.); Amine v. Liberty Lloyds of Tex. Ins., No.
01-06-00396-CV, 2007 Tex. App. LEXIS 6280, at *13-15 (Tex. App.—Houston [1st
Dist.] 2007, no pet.); Breshears, 155 S.W.3d at 343.
101
Brad E. Brewer & James W. Holbrook, II, Graber v. State Farm Is a Texas Prompt
Payment Outlier, Law 360, August 10, 2015,
http://www.law360.com/articles/686001/graber-v-state-farm-is-a-texas-prompt-
payment-outlier (last visited July 28, 2016).
102
103 F.3d 456 (5th Cir. 1997).
103
Id. at 461.
- 25 -
when there is no prospect for a finding of liability for breach of contract,
Higginbotham is inapposite:
Here, there has been no such liability determination. Similarly, this
court has made clear that an insurer was liable under the Prompt
Payment Act "when it was found liable for breach of contract."
Higginbotham v. State Farm Mutual Automobile Ins. Co., 103 F.3d
456, 461 (5th Cir. 1997). Since Euler has never been found liable for
breach of contract, nor will it ever face such a liability determination
because the breach of contract claim was settled, these cases are
inapposite. Summary judgment on Continental's Prompt Payment Act
claim was appropriate. 104
Tremago is consistent with Higginbotham in that a good faith defense will
not avoid statutory penalties "as long as the insurer is finally judged liable."105
Tremago is also consistent with earlier Fifth Circuit law recognizing (under a
predecessor statute) that "the penalty is due if the Insurer is ultimately held liable
on the policy." 106 Because there was no final judgment of liability under the
insurance contract against State Farm, and never could be since the contract claim
104
Tremago, L.P. v. Euler-Hermes Am. Credit Indem. Co., 602 Fed. Appx. 981, 983-84
(5th Cir. 2015) (emphasis added).
105
Higginbotham, 103 F.3d at 461 (citing Key Life Ins. Co. of S.C. v. Davis, 509 S.W.2d
403, 405 (Tex. Civ. App.—Beaumont 1974, no writ)) (emphasis added); see also
Cater v. United Servs. Auto. Ass'n, 27 S.W.3d 81, 84 (Tex. App.—San Antonio 2000,
pet. denied) ("The Fifth Circuit [in Higginbotham] recognized that courts that
interpreted article 3.62 [the predecessor of art. 21.55] consistently found that an
insurance company's good faith defense did not relieve the insured from liability for
damages for late payment, as long as the insurer is finally found liable for the
claim.") (emphasis added).
106
Lumbermens Mut. Cas. Co. v. Klotz, 251 F.2d 499, 509 (5th Cir. 1958) (emphasis
added).
- 26 -
was dismissed by summary judgment, the Court in Graber should have dismissed
the plaintiffs' TPPCA claim.
C. The facts here are distinguishable from Graber.
The Graber court explained it was not holding "that payment of an appraisal
award automatically establishes an insurer's liability for [a TPPCA] claim." 107 The
court's ruling hinged (incorrectly) on language in State Farm's letter issuing
payment of the appraisal award that said "the cost to repair or replace those items
of damage that State Farm has determined are covered by the Homeowners
policy." 108 Contrary to Higginbotham and Tremago, the district court incorrectly
concluded this language was evidence of State Farm's "liability" for purposes of
the TPPCA. Thus, the key fact in Graber that lead to the Court's erroneous
decision is not present in this case. State Farm's letter issuing payment of the
appraisal award does not contain any language "accepting coverage" based on the
award.109 State Farm paid the appraisal award to resolve the claim—which is the
purpose of appraisal.110
107
Graber, 2015 U.S. Dist. LEXIS 77361, at *25, n.3.
108
Id.
109
CR 183 (Letter Tendering Payment of Appraisal Award).
110
Scalise, 2013 U.S. Dist. LEXIS 179692, at *11.
- 27 -
D. Garcia has not raised a fact issue.
Garcia argues that the evidence demonstrates State Farm is liable under the
TPPCA. 111 That is not the case. State Farm timely investigated Garcia's claim.
The claim was reported January 22, 2015, and State Farm contacted Garcia on the
same day. 112 The parties scheduled an inspection of Garcia's dwelling on February
26, 2015.113 State Farm sent Garcia its estimate on March 2, 2015, within two
business days of inspecting Garcia's property. 114 There was no violation of any of
the provisions of Chapter 542.
VI. Without a valid breach of contract claim, all of Garcia's extra-
contractual claims fail.
The general rule in Texas is that an insured cannot prove a bad faith claim
absent a breach of contract.115 In Liberty National Fire Insurance. Co. v. Akin,116
the Texas Supreme Court cited with approval its earlier decision in Republic
Insurance Co. v. Stoker and held that an insured cannot prevail on a bad faith claim
without first showing a breach of contract.117 In Stoker, the Supreme Court noted
the only recognized exceptions to this rule are if the insurer "commit[s] some act,
111
Appellant's Brief at p. 29.
112
CR 139.
113
CR 139; 142-43.
114
CR 141.
115
Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995).
116
927 S.W.2d 627 (Tex. 1996).
117
Id. at 629.
- 28 -
so extreme, that would cause injury independent of the policy claim" or fails "to
timely investigate the insured's claim." 118 The Fifth Circuit—in Blum's—adopted
Akin and Stoker in an appraisal case. 119
Garcia argues that the Stoker independent injury exception does not apply in
this case because the claim was covered. 120 This argument has been expressly
rejected in an appraisal case:
Plaintiffs argue that the Akin rule generally prohibiting bad faith
claims without a breach of contract should be limited to cases where
in fact there is no insurance coverage. Such a distinction has not been
found in the Texas cases and appears entirely unwarranted, especially
in light of the Fifth Circuit's persuasive opinion applying the Akin rule
in Blum's Furniture. The court there held that the insured raised no
genuine issue of material fact on its bad faith claims when the insurer,
as here, did not deny coverage and paid the appraisal amount, which
the insured accepted. 121
Garcia relies on United National Insurance Co. v. AMJ Investments, LLC to
argue that the Stoker independent injury exception does not apply to her.122 But
AMJ was not an appraisal case. In that case, the insured succeeded on its breach of
contract claim at trial. Here, Garcia's contract claim is barred by State Farm's
timely payment of the appraisal award. AMJ is inapposite. It does not hold that
118
Stoker, 903 S.W.2d at 341.
119
Blum's, 459 Fed. Appx. at 368.
120
Appellant's Brief at p. 31.
121
Burks, 2015 U.S. Dist. LEXIS 88729, at *12 (citations omitted).
122
447 S.W.3d 1, 11–12 (Tex. App.—Houston [14th Dist.] 2014, pet dism'd).
- 29 -
when a breach of contract claim fails, the insured may recover for bad faith without
proving independent injury.
Garcia also cites USAA Texas Lloyds Co. v. Menchaca, but that case did not
involve the payment of an appraisal award. 123 And it squarely conflicts with the
Texas Supreme Court's holding in Provident Am. Ins. Co. v. Castaneda that a
failure to properly investigate cannot support an award of policy benefits. 124 The
persuasive value of Menchaca is also highly questionable because it is currently
pending before the Texas Supreme Court, where briefing on the merits has been
requested.
Garcia points out that an independent injury exception case had been
certified to the Texas Supreme Court. 125 But the Deepwater Horizon case has been
dismissed by agreement.126 Even if settlement had not rendered Garcia's reliance
on the case moot, that case is distinguishable because it is not an appraisal case and
the court found the insurance company breached the contract by denying policy
benefits.
123
No. 13-13-00046-CV, 2014 Tex. App. LEXIS 8250 (Tex. App.—Corpus Christi July
31, 2014, pet. filed) (mem. op.).
124
988 S.W.2d 189, 198 (Tex. 1998).
125
Appellant's Brief at p. 52.
126
Cameron Int'l Corp. v. Liberty Ins. Underwriters, Inc. (In re Deepwater Horizon),
807 F.3d 689 (5th Cir. 2015) (dismissed by agreement).
- 30 -
Garcia mischaracterizes an interlocutory order in Cavazos v. State Farm
Lloyds 127 as rejecting the independent-injury rule. 128 Judge Alvarez did not decide
the issue in Cavazos; she only noted that the Deepwater Horizon case had been
certified.129 But she also noted that the breach of contract claim survived, which
impacted the decision. 130 In fact, Judge Alvarez has followed Blum's and the
application of the Stoker independent injury exception in other appraisal cases,
dismissing extra-contractual claims by summary judgment:
In light of the Court's determination regarding the breach of contract
claim, Plaintiffs' common law or statutory bad faith claims survive the
summary analysis only if Plaintiffs raise a genuine issue of material
fact as to either of two exceptions recognized in Republic Ins. Co. v.
Stoker: (1) the insurer's failure to timely investigate the insured's
claim; or (2) the insurer's commission of "some act, so extreme, that
would cause injury independent of the policy claim." The end result,
recognized by the Fifth Circuit in Blum's Furniture Co., Inc. v.
Certain Underwriters at Lloyds London, is that a plaintiff "cannot
maintain an action for bad faith where the breach of contract claim
fails, and neither exception applies." 131
And even after Cavazos, Judge Alvarez continues to dismiss extra-
contractual claims based on Blum's and Stoker, and rejects parties' attempts to rely
127
No. 7:14-CV-395, 2015 U.S. Dist. LEXIS 163287 (S.D. Tex. Dec. 4, 2015).
128
Appellant's Brief at p. 32.
129
Cavazos, 2015 U.S. Dist. LEXIS 163287, at *15.
130
Id. at *14-15.
131
Caso, 2014 U.S. Dist. LEXIS 15279, at *25-26; see also Gabriel, 2013 U.S. Dist.
LEXIS 186032, at *15-22.
- 31 -
on Cavazos, as Garcia does. 132 Other courts in the Southern District have also
rejected Garcia's argument that she does not have to show independent injury. 133
The Houston Court of Appeals in Anderson also applied Stoker in a recent
appraisal case.134
Garcia's statutory claims against State Farm and adjuster Garza under
Chapter 541 of the Texas Insurance Code and under the DTPA fail for the same
reasons. Numerous courts have recognized that these statutory claims are
reviewed under the same standard as a common law bad faith claim, and require
the same predicate for recovery. 135 "When an insured joins claims under the Texas
Insurance Code and the DTPA with a bad faith claim, all asserting a wrongful
denial of policy benefits, if there is no merit to the bad faith claim, there can be no
132
Dizdar v. State Farm Lloyds, No. 7:14-CV-402, 2016 U.S. Dist. LEXIS 13355, at
*17 n.71 (S.D. Tex. Feb. 4, 2016); Dizdar v. State Farm Lloyds, No. 7:14-CV-664,
2016 U.S. Dist. LEXIS 20871, at *18-19 n.75 (S.D. Tex. Feb. 22, 2016); Dizdar v.
State Farm Lloyds, No. 7:14-CV-514, 2016 U.S. Dist. LEXIS 49839, at *16-17 n.67
(S.D. Tex. Apr. 13, 2016).
133
Burks, 2015 U.S. Dist. LEXIS 88729, at *11-15; Scalise, 2013 U.S. Dist. LEXIS
179692, at *20-23; Russell, 2014 U.S. Dist. LEXIS 143882, at *18-22; Mag-
Dolphus, Inc., 906 F. Supp. 2d at 649-50; Barry, 2015 U.S. Dist. LEXIS 40953, at
*11-14.
134
Anderson, 2016 Tex. App. LEXIS 6538, at *15.
135
See Anderson, 2016 Tex. App. LEXIS 6538, at *18; Tex. Mut. Ins. Co. v. Sara Care
Child Care Ctr., Inc., 324 S.W.3d 305, 317 (Tex. App.—El Paso 2010, pet. denied);
Spicewood Summit Office Condominiums Ass'n, Inc. v. Amer. First Lloyd's Ins. Co.,
287 S.W.3d 461, 468 (Tex. App.—Austin 2009, pet. denied); Douglas v. State Farm
Lloyds, 37 F. Supp. 2d 532, 544 (S.D. Tex. 1999); Higginbotham v. State Farm Mut.
Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir. 1997) (holding Texas courts have ruled
DTPA and Insurance Code claims require same predicate for recovery as bad faith
causes of action).
- 32 -
liability on either statutory claim." 136 Here, there is no merit to Garcia's bad faith
claim.
Garcia conflates the independent injury issue in her discussion of the claims
against adjuster Garza, arguing that because adjuster Garza had no contract with
Garcia, those claims survive. They do not. They were, as State Farm alleged,
derivative of, and based on the same facts asserted against State Farm. 137 Garcia
alleged no specific conduct by adjuster Garza that caused an independent injury. 138
Allegations, like Garcia's, that an adjuster assigned to a claim did not thoroughly
investigate the claim and conducted an outcome-oriented investigation do not
establish a valid cause of action against the adjuster individually. 139 Absent an
independent injury, Garcia has no bad faith or statutory claims against State Farm
or adjuster Garza. 140
136
Anderson, 2016 Tex. App. LEXIS 6538, at *18 (quoting O'Quinn v. Gen. Star Indem.
Co., No. 1:13-CV-471, 2014 U.S. Dist. LEXIS 107484 (E.D. Tex. Aug. 5, 2014)).
137
CR 70; see also CR 234-39 (First Amended Petition).
138
CR 234-39 (First Amended Petition).
139
Walters v. Metro Lloyds Ins. Co., 4:16-CV-307, 2016 U.S. Dist. LEXIS 91244, at *7
(E.D. Tex. July 14, 2016).
140
Confusingly, Garcia cites Waite Hill Services, Inc. v. World Class Metal Works, Inc.,
959 S.w.2d 182 (Tex. 1998) and Vail v. Texas Farm Bureau Mutual Ins. Co., 754
S.W.2d 129 (Tex. 1988), in support of her argument that she can recover policy
benefits from adjuster Garza individually. Appellant's Brief at p. 34. But both of
those cases involved claims only against an insurance company; neither case
involved an individual adjuster defendant. The cases do not support Garcia's
argument.
- 33 -
There is no independent injury, and Garcia does not argue that there is.
"Here, [Garcia] has made only those fairly routine allegations of a substandard
(albeit timely) investigation and initial undervaluation of [her] covered claim, the
entirety of which was timely paid upon issuance of the appraisal award."141
Garcia's extra-contractual claims are foreclosed by the timely payment of the
appraisal award.
CONCLUSION AND PRAYER
Texas law is settled that payment of an appraisal award resolves an insured's
claims. Here, as in many other cases in state and federal courts in Texas, the trial
court properly disposed of the resolved claims by summary judgment. As this
Court recognized in Providence Lloyds Ins. Co. v. Crystal City I.S.D., it would
have been error to allow the claims to proceed to trial after the appraisal award was
paid.142 Garcia cannot circumvent settled Texas law by her technical, procedural
arguments to delay summary judgment. The denial of her continuance request was
not appealed. And Texas law did not require State Farm to reset the summary
judgment hearing in order to modify or supplement its motion after Garcia
amended her petition to add the new defense that the award should be set aside.
The summary judgment grounds before the Court were already broad enough to
141
Scalise, 2013 U.S. Dist. LEXIS 179692, at *22-23.
142
Providence Lloyds Ins. Co., 877 S.W.2d at 875.
- 34 -
include, and in fact were based upon, the validity of the paid appraisal award.
There was no error. The trial court's judgment should be affirmed.
State Farm and adjuster Garza pray that the Court affirm the trial court's
take-nothing judgment against Garcia and that State Farm and adjuster Garza be
awarded all other relief to which they are entitled.
Respectfully submitted,
WINSTEAD PC
401 Congress Avenue, Suite 2100
Austin, Texas 78701
512-370-2854 telephone
512-370-2850 telecopier
By: /s/ Elliot Clark
Linda J. Burgess SBN 03381300
Elliot Clark SBN 24012428
Dan K. Worthington SBN 00785282
Sofia A. Ramon SBN 00784811
Elizabeth Cantu SBN 24013455
ATLAS, HALL & RODRIGUEZ, LLP
P. O. Drawer 3725
818 Pecan (78501)
McAllen, Texas 78502
(956) 682-5501 telephone
(956) 686-6109 telecopier
ATTORNEYS FOR APPELLEES
- 35 -
CERTIFICATE OF COMPLIANCE
I certify that the word count for this filing, excluding portions of the brief
that need not be counted under Rule 9.4(i)(1) and including the Introduction at is
9,757 according to the Microsoft Word 2010 word count feature, within the 15,000
word limit set for merits briefing by Rule 9.4(i)(2)(B).
/s/ Elliot Clark
Elliot Clark
CERTIFICATE OF SERVICE
I hereby certify that on the 12th day of August, 2016, I electronically filed
the foregoing with the Clerk of the Court and same was sent to the following
counsel of record.
Bernie Kray
bkray@anglawfirm.com
Troy A. Glander
M. Alex Nava
ALLAN, NAVA, GLANDER & HOLLAND, PLLC
serveone@anglawfirm.com
825 W. Bitters Road, Suite 102
San Antonio, Texas 78216
(210) 305-4220 – Phone
(210) 305-4219 – Fax
/s/ Elliot Clark
Elliot Clark
- 36 -
4827-2867-6404v.3 25249-698