Texas Insurance Law Newsbrief - April 14, 2025
U.S. DISTRICT COURT DETERMINES ESTIMATE EXPLICITLY DISCLAIMING CAUSATION IS NO MORE THAN A CONCLUSORY AFFIDAVIT AND INSUFFICIENT EVIDENCE TO SURVIVE SUMMARY JUDGMENT
The United States District Court for the Southern District of Texas granted summary judgment to dismiss all claims against an all-risk insurer because the insured failed to provide anything more than conclusory affidavits supporting her claim that water damage to her home was caused by Winter Storm Uri.
In Grotts v. State Farm Lloyds, Civil Action No. 4:22-CV-02806, 2025 U.S. Dist. LEXIS 60060 (S.D. Texas [Houston Division] March 31, 2025), Pamela Grotts’s home suffered water damage that Grotts claimed was caused by Winter Storm Uri. Grotts filed a claim on her all-risk insurance policy issued by State Farm. Upon investigation, State Farm denied coverage, citing evidence of rodents gnawing through the plumbing lines and resultant water seepage because the policy specifically excluded damage from animals or water seepage. Grotts subsequently sued State Farm, alleging breach of contract, violations of the Texas Insurance Code, and other extracontractual claims.
During litigation, State Farm retained two consultants who conducted additional inspections. Both consultants reached the same conclusion: rodents chewed through Grotts’s pipes and caused long-term water damage. Grotts, on the other hand, retained Quantum Claim Consulting Services to estimate repair costs. Quantum’s estimate report explicitly disclaimed making any determination as to causation. Eventually, State Farm moved for summary judgment on all Grotts’s claims.
In granting summary judgment, the court first grounded its analysis in the Texas insurance coverage burden-shifting framework to establish that an all-risks insurer moving for summary judgment must either: (1) show that the insured has no evidence of a physical loss during the policy period or (2) conclusively establish that an exclusion applies. According to the court, State Farm conclusively established that an exclusion applied through weather data, uncontested expert testimony, photographic evidence, and water-usage data demonstrating that rodents and gradual water seepage—both excluded by the policy—caused Grotts’s damage. Under the burden shifting framework, an all-risks insured must then designate specific facts showing that there is a genuine issue on the exclusion or whether the exclusion applies. Grotts failed to do so, as a Quantum estimate which specifically avoided any determination of causation is nothing more than a conclusory affidavit. Since Grotts failed to provide any substantiated evidence to dispute the exclusion’s application, State Farm was entitled to summary judgment and the dismissal of all of Grotts’s claims.
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EXPERT TESTIMONY NOT REQUIRED TO PROVE AMOUNT OF DAMAGES, BUT A MERE QUOTE FOR REPAIRS GREATER THAN THE AMOUNT PAID BY AN INSURER IS NOT ENOUGH TO PROVE INSURANCE CODE VIOLATIONS
The United States District Court for the Northern District of Texas found that while expert testimony is not necessary to prove the extent or amount of damages arising from a plumbing leak in a residential home, more than conclusory allegations are needed to prove an insurer’s violation of the Texas Insurance Code and Deceptive Trade Practices Act (“DTPA”).
In Lotuleiei v. Spinnaker Ins. Co., Civil Action No. 3:23-CV-1980-L, 2025 U.S. Dist. LEXIS 60177 (N.D. Texas [Dallas Division] March 31, 2025), John Lotuleiei made a claim under his Homeowners’ Policy issued by Spinnaker Insurance Company for water damage stemming from a plumbing leak. Spinnaker assigned an adjuster to investigate the claim, and once the adjuster completed her investigation and closed the claim, Spinnaker paid Lotuleiei $15,268.56. Later, Lotuleiei filed a lawsuit against Spinnaker and the adjuster for (1) breach of contract, (2) unfair or deceptive acts or trade practices under the Texas Insurance Code, (3) breach of the duty of good faith and fair dealing, and (4) breach of the Prompt Payment of Claims Act.
Spinnaker moved for summary judgment on all Lotuleiei’s claims, asserting first that Lotuleiei failed to designate an expert witness on the issue of property damages. According to Spinnaker, expert testimony was necessary to establish the amount of the alleged damages, and without it, Lotuleiei could not meet his burden of proof. However, the court began its analysis by focusing on the fact that Spinnaker did not allege that there was no water damage; rather, Spinnaker merely alleged that the amount of the alleged damage was not certain. Since the parties did not dispute that the damage to Lotuleiei’s home was a result of a plumbing leak, which was covered by the policy, and since Spinnaker only disputed the amount of the damages, the court determined that expert testimony was not necessary to prove the extent of Lotuleiei’s claimed damages and denied Spinnaker’s summary judgment on the matter.
Second, Spinnaker argued that because Lotuleiei could not establish a breach of the insurance contract, his claims for alleged violations of the Texas Insurance Code and DTPA also fail. The court relied on Texas case law for the general contention that if an insured’s DTPA and Insurance Code claims are based on the same theory which underlies the bad faith claim, then those DTPA and Insurance Code claims must fail if the bad faith claim fails. The court then analyzed each of Lotuleiei’s DTPA and Insurance Code claims eventually finding that: (1) a factual dispute as to what a policy covers is not evidence of a misrepresentation of the policy; (2) denial of a claim by itself is not sufficient proof of advertising goods or services with the intent not to sell them as advertised; and (3) evidence that Spinnaker paid the amount for which it considered itself liable is not evidence that Spinnaker did not provide a prompt, fair, or equitable settlement. According to the court, Spinnaker acknowledged its liability to Lotuleiei by assessing the damage, adjusting the loss, and paying $15,268.56. Lotuleiei providing a quote from a contractor which was greater than the amount paid by Lotuleiei was not sufficient evidence to establish that Spinnaker failed to provide a prompt, fair, or equitable settlement. Thus, the court granted Spinnaker’s motion for summary judgment as to the DTPA and Insurance Code claims.
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