Texas Insurance Law Newsbrief - April 3, 2025
CIRCUMSTANTIAL EVIDENCE AND EXPERT TESTIMONY THAT LOSS CAME SOLELY FROM HURRICANE HARVEY DEFEATS INSURER’S MOTION FOR SUMMARY JUDGMENT UNDER CONCURRENT-CAUSATION FRAMEWORK
In Majestic Oil, Inc. v. Underwriters at Lloyd’s, No. 4:19-CV-03149 2025 U.S. Dist. LEXIS 57053* (March 27, 2025), the U.S. District Court for the Southern District of Texas, Houston Division denied Lloyd’s summary judgment because Majestic presented evidence that Hurricane Harvey caused all of the losses.
This case involves a commercial property used as a warehouse and distribution center. Majestic bought the property in 2014 and hired a contractor to renovate the interior. During that work, roof leaks were discovered. Majestic chose to make limited repairs rather than replace the entire roof. Several employees confirmed the roof no longer leaked after the repairs. In 2016, Majestic purchased property insurance from Lloyd’s. Before issuing the policy, Lloyd’s sent an inspection to look at the building and that inspector found no roof leakage and no other problems with the roof at that time. In August 2017, Hurricane Harvey struck. Following Harvey, employees inspected the building and found water damage and leaks. Majestic reported the loss. Lloyd’s adjuster and, a structural engineer concluded that some or all of the damage was “pre-existing” and denied the claim. Majestic also hired an engineer, Gregory Becker. Becker concluded that the losses were caused solely by Hurricane Harvey and recommended total replacement of the roof.
The Court began their analysis by explaining the concurrent-causation doctrine. In Texas, “[w]hen covered and excluded perils combine to cause an injury, the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage.” Overstreet v. Allstate Vehicle & Prop. Ins., 34 F.4th 496, 498 (5th Cir. 2022). The Court pointed out the very real issue that “[t]here are substantial gaps in the concurrent causation doctrine.” Id. at 497. At this point, it’s not clear when the doctrine applies and what is plaintiff’s burden of proof. Acknowledging that these are unanswered questions, the Fifth Circuit held in Advanced Indicator that an insured may survive summary judgment by “putting forth evidence demonstrating that [its] loss came solely from a covered cause.” Advanced Indicator & Mfg., Inc. v. Acadia Ins. Co., 50 F.4th 469, 477 (5th Cir. 2022) (per curiam).
In this case, Majestic presented substantial evidence that Harvey was the sole cause of the losses. The Court noted that: 1) multiple witnesses testified that there were no leaks prior to Harvey; 2) the owner stated there were no leaks between the 2016 repairs and Harvey; 3) Lloyd’s pre-policy inspection in 2016 found no roof leaks; 4) immediately after the storm, employees found water damage and leaking; 5) Majestic’s Operations Manager attested that he inspected the property four days after Harvey and found leaks from the ceiling and that this only appeared after Harvey; and importantly 6) Majestic’s expert Becker concluded that the sole cause of Majestic’s losses was Hurricane Harvey and ruled out pre-existing conditions. Because of the conflicting evidence, viewed in light most favorable to the insured, there was a genuine fact issue for the jury to resolve. Accordingly, the Court denied Lloyd’s summary judgment.
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QUANTUM ESTIMATE WAS NOT COMPETENT SUMMARY JUDGMENT EVIDENCE TO DEFEAT SUMMARY JUDGMENT IN FAVOR OF INSURER
In Mitchell v. Praetorian Ins. Co., No. 24-20205 2025 U.S. App. LEXIS 6803* (March 24, 2025), the U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s summary judgment in favor of Praetorian Insurance Company.
In September 2020, Mitchell filed a claim with Praetorian claiming damage to her roof, ceilings, walls and floors. Praetorian found the loss was covered but fell below Mitchell’s deductible. A second inspection resulted in payment on the claim. Mitchell sought additional coverage for mold remediation. Mitchell claimed the losses were caused by wind, while Praetorian claimed the losses, in part, were caused by improper tarping and bathtub water spillover, which were excluded. Appraisal was invoked by the insured in October 2021, and Mitchell proceeded to file suit in state court. Praetorian then removed the case to federal court on diversity jurisdiction grounds. Praetorian moved for summary judgment on Mitchell’s breach of contract claim and § 541.060(a)(3) of the Texas Insurance Code arguing that the concurrent causation doctrine barred the claims. Mitchell relied on a report containing repair cost estimates titled “Quantum Estimate.” The district court found this report incompetent summary judgment evidence because the author’s identity was not identified on the report and further, even if the report was considered, it did not raise a factual dispute material to deciding the motion as it did not opine on the cause of the loss.
The court explained the concurrent-causation doctrine as follows:
Texas concurrent causation doctrine applies when covered and excluded events combine to cause an insured’s loss. Under that doctrine, if covered and uncovered events are inseparable, then causation is concurrent, the insurance policy’s exclusion applies and the insurer owes no coverage for the loss.” Dillon Gage Inc. of Dallas v. Certain Underwriters at Lloyds Subscribing to Pol’y No. EE1701590, 636, S.W.3d 640, 645 (Tex. 2021). The burden is on the insured to segregate the damage attributable to the covered event and failure to carry this burden is fatal to recovery. Advanced Indicator & Mfg., Inc. v. Acadia Ins. Co., 50 F.4th 469, 477 (5th Cir. 2022) (per curiam).
Mitchell argued that the Quantum Estimate did segregate the damage. And Praetorian argued that the estimate did not segregate but only provided estimated costs of repairs without opining on the causes of any claimed loss. The court agreed and that the estimate did not segregate which losses were caused by covered and excluded perils, the court found Praetorian’s argument persuasive and affirmed summary judgment.
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NO BAD FAITH DAMAGES RECOVERABLE IF INSURED ALREADY RECOVERED THEIR POLICY BENEFITS IN FULL THROUGH PAYMENT OF APPRAISAL AWARD
In Guiles v. Geovera Advantage Ins. Servs., No 24-40411 2025 U.S. App. LEXIS 6806* (March 24, 2025), the United States Court of Appeals for the Fifth Circuit affirmed summary judgment in favor of the insurer on the common law and statutory bad faith claims.
Plaintiffs-Appellants John and Jennifer Guiles submitted an insurance claim on February 17, 2021, to their insurer GeoVera Advantage Insurance Services, Inc. alleging their home was damaged during a freeze known as Winter Storm Uri. Plaintiffs invoked appraisal in September 2021. In August 2022, the appraisal panel found that the total cost to repair the home was $48,744.43 and GeoVera paid that amount, less deductible. Plaintiffs then filed suit alleging violations of the Chapter 541 of the Texas Insurance Code and Chapter 542 of the Texas Insurance Code, as well as breach of common law duty of good faith and fair dealing. After the filing of the suit, GeoVera paid an additional amount for interest and filed a motion for summary judgment arguing that Plaintiffs’ causes of action were extinguished by the payment of the appraisal award plus interest.
Guiles argued they can recover actual and treble damages for an improperly withheld payment, even when the insurer has already paid the appraisal award plus interest. The Court disagreed. Unless the insured suffered an independent injury, payment by the insurer of an appraisal award forecloses an insurer’s liability for breach of contract and bad faith. Biasatti v. GuideOne Nat’l Ins. Co., 601 S.W.3d 792, 794 (Tex. 2020). Because Plaintiffs did not assert an independent injury beyond the benefits that GeoVera already paid, they could not maintain their common law or statutory bad faith claims against GeoVera and affirmed the district court’s judgment.
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MOTION FOR SUMMARY JUDGMENT AFFIRMED FOR CHURCH MUTUAL INSURANCE COMPANY BECAUSE INSURED ALREADY RECOVERED THEIR POLICY BENEFITS IN FULL THROUGH PAYMENT OF APPRAISAL AWARD
In First Baptist Church Daisetta Tex. v. Church Mut. Ins. Co., No. 24-40594 2025 U.S. App. LEXIS 6809* (March 24, 2025), the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment in favor of Church Mutual Insurance Company.
First Baptist submitted a claim to CM Insurance for wind and hail damage to its property. After an initial and second inspection, CM determined that covered damages were below the deductible, and nothing was owed on the claim. First Baptist invoked appraisal. First Baptist’s appraiser and the umpire signed an appraisal award in the amount of $87,015.86, and after applying depreciation, an actual cash value of $72,031.77. CM paid the actual cash value less the deductible four days later. Unsatisfied, First Baptist demanded additional money as late-payment interest under the Texas Prompt Payment of Claims Act, and CM paid that amount also.
First Baptist filed suit in state court and CM removed it to federal court. First Baptist alleged causes of action for common law bad faith, and violations of Chapter 541 and 542 of the Texas Insurance Code.
The Court held that the district court properly granted CM’s summary judgment because if the only actual damages that a plaintiff seeks are policy benefits that have already been paid pursuant to appraisal provision, that party cannot recover for bad faither under either Chapter 541 or in common law tort. Mirelez v. State Farm Lloyds, 127 F.4th 949, 951 (5th Cir. 2025). The Court also rejected First Baptist’s argument that it need not prove an independent injury. The opposite is the case. First Baptist needed to provide evidence of an independent injury to survive summary judgment and because it did not, the Fifth Circuit affirmed summary judgment in favor of Church Mutual.
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