Texas Insurance Law Newsbrief - March 15, 2024
INSURER ENTITLED TO SUMMARY JUDGMENT AND NO REQUIREMENT TO PAY ATTORNEYS’ FEES AFTER PAYING FULL APPRAISAL VALUE PLUS INTEREST
The U.S. District Court in Austin granted summary judgment in favor of an insurer after it paid the insured’s appraisal value plus all possible interest under the Texas Prompt Payment of Claims Act.
Loh v. Allstate Indem. Co., 2024 LEXIS 41383 (W.D. Tex. March 7, 2024) involved a claim for water damage to rental property, where the insured disagreed with the insurer’s $10,700 property damage estimate and retained a public adjuster who asserted the amount of loss was $102,012. The insured presented a settlement demand under 542A then invoked appraisal which resulted in a $103,791.98 appraisal award. Two days before the insurer claims to have received notice of the award, the insured filed suit asserting claims of breach of contract, statutory bad faith under Chapter 541 of the Texas Insurance Code, violations of the Texas Prompt Payment of Claims Act 542A (“TPPCA”) and sought recovery of attorneys’ fees. The insurer paid the insured’s appraisal value, less the deductible and credit for payments already made, and paid the total interest owed under the TPPCA. The insured argued he was entitled to the interest rate that would be calculated at final judgment, and the case should survive summary judgment only to provide the insured a chance at a higher interest payment.
“…[The insured] implies that Section 304.003 of the Finance Code imposes upon this Court a duty to proceed to trial on the chance that an insurer may owe interest beyond what is already paid, even though there are no unpaid policy benefits, merely because the interest rate may fluctuate in the meantime. The Court agrees with [the insurer] and finds no support in the statute or elsewhere, that the Legislature intended the waste of judicial resources [the insured] advocates for.”
The Court held the insurer was entitled to summary judgment on all claims brought by the insured because the insurer had paid the full appraisal amount plus interest, and the Court held (1) there was no recovery for breach of contract because the insured did not dispute the payment of the appraisal award; (2) the insurer’s appraisal award payment precluded recovery under the insured’s claim of bad faith; (3) the Court would not keep a case open with no unpaid policy benefits on the chance an insured could recover more interest; and (4) attorneys’ fees are unavailable when an insurer pays an appraisal award in full because there will never be a monetary judgment on the insured’s claim. Accordingly, summary judgment was granted in favor of Allstate.
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INSURER DECLARED A PREVAILING PARTY, ENTITLED TO COURT COSTS IN COVID-19 COVERAGE LAWSUIT
The U.S. District Court in Sherman declared an insurer was the ‘prevailing party’ in its lawsuit and awarded court costs to the insurer in a case involving an insurance claim of business interruption related to COVID-19.
In Cinemark Holdings, Inc. v. Factory Mut. Ins. Co., 2024 LEXIS 39152 (E.D. Tex. March 6, 2024), the insured notified its insurer in April 2020 of a loss related to COVID-19 and sought payment under two insurance policies with coverage additions and exclusions for “communicable disease response” and “interruption by communicable disease” (the “Extensions”). The insurer requested additional information from its insured before suit was filed, to establish the effect that COVID-19 had on the business and received the requested information during the course of the lawsuit. As such, the insurer paid policy limits, and the lower court granted summary judgment in favor of the insurer. The insurer then sought court costs as the ‘prevailing party’ because the lower court declared the insured’s claims failed as a matter of law.
“[The insured’s] claims for coverage under the Extensions were resolved when [the insurer] paid [the insured] ‘the full limits of liability available’ under those policies. So at the time of summary judgment, the only claims left in the case were those for policies that required ‘physical loss or damage.’”
The Court held the insurance payments were not settlement funds or a result of litigation and that the insurer was the ‘prevailing party’ due to the summary judgment finding in its favor. As such, the insurer was entitled to court costs and the Court awarded nearly $160,000 to the insurer.
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DISCOVERY IS LIMITED, BUT ONLY TO AN EXTENT
The U.S. District Court in Dallas granted an insurer’s motion for protective order against overly broad and unrelated discovery requests.
In Carpenter v. Twin City Fire Ins. Co., 2024 LEXIS 38051 (N.D. Tex. March 4, 2024), an employee sued his employer for breach of contract in a separate lawsuit. The employee sent a Stowers demand and offered to settle with his employer and its insurer within the limits of the employer’s insurance policy. The insurer declined the settlement offer, and the employee prevailed against the employer at trial for an award that exceeded the policy limits. The employee then filed a separate lawsuit against the insurer and, after receiving discovery requests, the insurer sought a protective order from the Court regarding certain requests. The Court granted the motion, in part, for the discovery requests seeking information about unrelated third parties and denied the motion as to the other requests.
“The Court agrees with the Texas Supreme Court, which found that ‘without more, the information sought [pertaining to third parties] does not appear reasonably calculated to lead to the discovery of evidence that has a tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable.’"
The Court held (1) the insurer was entitled to a protective order regarding the information related to third parties, (2) the insurer did not need a protective order for requests seeking privileged information such as attorney-client communication or materials used in the underlying mediation, and (3) the insurer was required to produce all documents related to the coverage analysis of this specific policy and information regarding the reserves related to the Stowers demand and policy limits.
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