Texas Insurance Law Newsbrief - August 13, 2024

In Hurst v. Liberty Mut. Ins. Co., No. 1:22-cv-1093-DAE, 2024 U.S. Dist. LEXIS 141413 (W.D. Texas [Austin Division], August 7, 2024, mem. op.), the Hursts’ home sustained hail damage, and they presented a claim to their insurer, Liberty Mutual.  Liberty Mutual conducted an inspection of the property and determined the estimate for covered damages was below the deductible, and no payment was issued.  In response, the Hursts invoked the appraisal process. The Hursts and Liberty Mutual each selected an appraiser.  The appraisers failed to reach an agreement on the amount of the loss, so an umpire was appointed.  The umpire issued an appraisal award of $248,696.05.  Nonetheless, Liberty Mutual continued to deny the claim on the basis that the damage was not covered under the policy. Consequently, the Hursts filed suit asserting a claim of breach of contract, among other claims.

After the lawsuit was filed, Liberty Mutual tendered payment for the appraisal award plus all statutory interest, approximately 500 days after the umpire issued the final appraisal award (despite the insurance policy requiring that payment for covered losses be issued within five business days). The Hursts refused the tender of Liberty Mutual's payment and continued with their suit.  Liberty Mutual moved for summary judgment, arguing that its payment of the final award eliminated the Hursts' breach-of-contract claim.  In response, the Hursts argued that the payment of the appraisal award did not bar their breach-of-contract claim because they did not accept tender of the payment and Liberty Mutual did not timely pay the award.

The U.S. District Court granted summary judgment in favor of Liberty Mutual, concluding that the Hursts’ “argument [was] unavailing under the relevant precedent.”  “[The Hursts] rejecting [Liberty Mutual’s] tender does nothing to change that [Liberty Mutual] tendered payment pursuant to the conditions of the appraisal clause, which estops [the Hursts] from raising a breach of contract claim.” "Generally, tender of the full amount owed pursuant to the conditions of an appraisal clause is all that is required to estop the insured from raising a breach of contract claim."  Additionally, although Liberty Mutual’s “late payment of the appraisal award entitled [Liberty Mutual] to interest under the Texas Prompt Payment of Claims Act, the breach of contract claim is still estopped.” "An insured's payment of an appraisal award may defeat a contract claim, but it does not automatically prevent a prompt-payment claim.... an insurer may be liable under the Texas Prompt Payment of Claims Act even when it pays in full if that payment is not timely."  But because Liberty Mutual paid all statutory interest owed under Texas Prompt Payment of Claims Act, and the insured’s could not show any independent injury, the court denied all extra-contractual claims, claims for attorney fees and granted summary judgment in favor of Liberty Mutual.

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In Deatley v. AmGuard Ins. Co., No. 4:24-cv-1559, 2024 U.S. Dist. LEXIS 140056 (S.D. Texas [Houston Division], Aug. 7, 2024, mem. op.), Deatley discovered cracks in the foundation, brick veneer, and interior finishes of his home. He retained a leak detection technician, who identified a leak in a water line at the property. Deatley also retained a property damage inspector, who concluded that the cracks in the foundation were caused by water leaks. Deatley made a claim with his insurer, AmGuard, but AmGuard denied the claim based on the policy’s Earth Movement exclusion because AmGuard’s retained engineer concluded that the foundation movement and cracks were the result of long-term soil-related differential movement. The Earth Movement exclusion excluded coverage for foundation damage that is "caused directly or indirectly" by earth movement, "regardless of any other cause or event contributing concurrently or in any sequence to the loss." Dissatisfied with the coverage denial, Deatley filed suit asserting a claim of breach of contract.  In response, AmGuard filed a motion for summary judgment, which the court granted.    

In granting summary judgment in favor of AmGuard, the U.S. District Court concluded that “the anti-concurrent clause provides that if earth movement was a cause—even if it was not the sole or primary cause—there is no coverage, even if there were concurrent causes (like a plumbing leak) that would otherwise be covered under the Policy.” “Summary judgment is appropriate where it is undisputed that earth movement was a concurrent cause of the loss, regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”  The court reasoned that although Deatley’s property damage inspector concluded that the water leak caused the foundation damage, the inspector did not conclude that long-term soil damage was not a direct or indirect cause. “It [was] immaterial that a plumbing leak may have also contributed to the damage.”  

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