FEDERAL DISTRICT COURT UPHOLDS PRIOR ORDER DISMISSING INSURED’S HURRICANE HARVEY-RELATED PROMPT PAYMENT CLAIM

Recently, a federal District Court in Houston denied an insured’s motion for reconsideration in which the insured sought to have the court change its prior decision granting the insurer’s motion for summary judgment as to the insured’s prompt payment claim under Ch. 542 of the Texas Insurance Code. Caramba, Inc. v. Nationwide Mut. Fire Ins. Co., No. H-19-1973, 2021 WL 259388 (S.D. Tex. Jan. 26, 2021) involved claims made by insured Caramba, Inc., d/b/a Pueblo Viejo alleging its commercial property suffered wind and water damage due to Hurricane Harvey.

After Caramba made its claims, which included breach of contract and claims arising under Ch. 542 of the Texas Insurance Code, amongst others, the insurer assigned an adjuster to investigate and inspect the claim. The adjuster engaged an expert to inspect the property, and the expert reported that the property did not suffer wind damage from Hurricane Harvey. Consequently, the insurer denied the claim.

In turn, Caramba retained counsel, submitted additional information to the insurer, and filed suit against the insurer in state court alleging breach of contract and extra-contractual claims, which the insurer timely removed to federal court. Once removal was complete, the insurer moved for summary judgment on all Caramba’s claims. The court granted summary judgment on all the extra-contractual claims but denied it as to the Caramba’s breach of contract claim. Caramba responded by seeking to have the court reconsider its ruling as to its prompt payment claim under Ch. 542 of the Texas Insurance Code.

The court noted that Caramba entirely failed to address the insurer’s argument that Caramba could not show that it wrongfully denied the claim or otherwise delayed payment, let alone meet its burden to provide evidence sufficient to raise a genuine issue of material fact on each element of its Ch. 542 claim, including evidence that the insurer received “all items, statements, and forms reasonably requested and required” under the Texas Insurance Code. As a result, the court denied Caramba’s motion for reconsideration and thereby upheld its previous decision to dismiss Caramba’s prompt payment claim.