PUBLIC ADJUSTER DEALT A $475,000 LOSS FROM HIS OWN CONTRACT

Last Thursday, the Texas Second District Court of Appeals in Fort Worth upheld a trial court’s construction of a contract, and in doing so allowed an insured to keep $475,000 in interpleaded settlement funds. In CCPA Enterprises, Inc. v. Bedford Hospitality Investments, LLC, No. 02-17-00382-CV, 2019 WL 5608230 (Tex. App.—Fort Worth Oct. 31, 2019, no pet. h.), a public hailstorm insurance adjuster sought interpleaded funds as a matter of law, from his client’s settlement with its real property insurer.

In April of 2007, a hailstorm damaged Bedford Hospitality’s hotel property in Bedford, Texas. The damage resulted in catastrophic roof damage, additionally, several rooms flooded. At the time of the storm the structure was covered under an insurance policy with Colony Insurance (“Colony”). Bedford Hospitality contracted with CCPA Enterprises, Inc. (“CCPA”) to adjust the loss for damages caused by the hail in exchange for 10% of specific damages recovered by Bedford Hospitality after trial or settlement with Colony. After over four years of litigation, without reciting any liability or damages, Colony agreed to settle with Bedford Hospitality for $4,275.000 and to interplead an additional $475,000 into the court’s registry for a potential claim by CCPA. Notably, the settlement agreement did not allocate specific amounts to any damage categories.

After removing several claims, Bedford Hospitality and CCPA had dueling breach-of-contract claims for the $475,000 in interpleaded funds. The trial judge reviewed the contract and determined that because the specific damage types listed in the contract between Bedford Hospitality and CCPA had not been laid out in Bedford’s settlement agreement with Colony, Bedford had not breached the adjusting contract with CCPA. And based in part on Colony’s settlement language disclaiming admissions to “any fact or contention of law,” the trial court ruled none of the payment represented “structural loss, personal-property loss, business interruption, loss of use, or extra expense” damages as listed in the contract by CCPA. Thus, the trial court awarded the $475,000 worth of interpleaded funds to Bedford Hospitality. CCPA appealed the Court’s ruling.

The Second District Court of Appeals agreed with the lower court, holding that Bedford Hospitality was not required to “slice and dice any settlement it might enter into with Colony” in order to pay CCPA for the damages specifically listed in the contract. Notably, CCPA drafted and had counsel review the adjusting contract before executing it. For all these reasons, the appellate court refused to rewrite the contract, and upheld the trial court’s ruling awarding the interpleaded funds to Bedford Hospitality.