Texas Insurance Law Newsbrief - September 12, 2024
COURT REJECTS DEFAULT SUMMARY JUDGMENT BECAUSE PLAINTIFF FAILED TO FILE A RESPONSE BUT FINDS UM/UIM “OWNED BY” EXCLUSION PRECLUDES COVERAGE AS A MATTER OF LAW
The United States District Court for the Northern District of Texas, Dallas Division, recently granted Safeco Insurance Company of America’s motion for summary judgment and dismissed the insured’s breach of contract claims.
In Matei v. Safeco Ins. Co. of Am., No. 3:23-cv-2091-BN, 2024 U.S. Dist. LEXIS 157574 (N.D. Tex. 2024), Matei purchased both an automobile policy and an umbrella policy from Safeco. Matei was involved in a motor vehicle accident during the policy period and allegedly suffered injuries. Matei made a claim against the other driver’s insurance and was paid under that policy. Matei also made claims with Safeco for PIP and a UM/UIM claim, both of which Safeco denied. Matei filed suit in state court for breach of contract, violations of the Texas Insurance Code, and breach of duty of good faith and fair dealing against Safeco and The Phoenix Integra Insurance Services. The insurers successfully severed the breach of contract claim against Safeco and the other extra-contractual claims against Safeco and Phoenix, which allowed Safeco to remove the breach of contract cause of action to federal court on diversity jurisdiction grounds.
Safeco moved for summary judgment on the breach of contract claim in federal court. Plaintiff did not file a response. When a nonmoving party does not file any response to a motion for summary judgment, the “failure to respond does not permit the court to enter a ‘default’ summary judgment” See Boyd v. Fam. Dollar Stores of Texas, LLC, No. 3-22-cv-1368-D, 2023 U.S. Dist. LEXIS 107849 (N.D. Tex. 2023). As the First Circuit put it, a “motion for summary judgment cannot be granted simply because there is no opposition, even if failure to oppose violated a local rule.” See John v. La. (Bd. Of Trustees) for State Colleges & Universities, 757 F.2d 698, 709 (5th Cir. 1985). But a Court “may grant an unopposed summary judgment motion if the undisputed facts show that the movant is entitled to judgment as a matter of law.” Bryan v. Cano, No. 22-50035, 2022 U.S. App. LEXIS 30953 (5th Cir. 2022). “[A]lthough the court is not permitted to enter a ‘default’ summary judgment, the court is allowed to accept the evidence adduced by plaintiffs as undisputed and may grant summary judgment if the motion and supporting materials show plaintiffs are entitled to it.” Williams v. Sake Hibachi Sushi & Bar, Inc., No. 3:18-cv-517-D, 2020 U.S. Dist. LEXIS 106701 (N.D. Tex. 2020). That is exactly what occurred here.
The sole dispute on Safeco’s motion is whether Safeco breached the auto insurance and umbrella policy by improperly denying coverage for Matei’s claim for UM/UIM coverage. But under Texas law, there is no breach of contract claim until coverage under the policy is established.
The relevant portion of the auto policy exclusion stated:
“We do not provide Uninsured/Underinsured Motorist Coverage for bodily injury sustained: 1. By an insured while occupying, or when struck by, any motor vehicle owned by that insured which is not insured for this coverage under this policy.”
In Texas, “owned-but-unscheduled-vehicle exclusions are generally valid and enforceable.” See Am. Econ. Ins. Co. v. Tomlinson, 12 F.3d 505, 510 (5th Cir. 1994). Here, Safeco established that Matei owned and was driving a 2017 Acura NXS at the time of his accident, which was not covered under Matei’s auto policy with Safeco. Instead, the evidence showed that the vehicle was covered by another insurance company, American Modern Home Insurance. The court determined that Matei is not entitled to UM/UIM coverage by the policy and cannot bring a claim for breach of contract against Safeco.
The court went on to consider the umbrella policy, which stated:
“This policy does not apply to any: 7. amounts payable under any b. uninsured motorists or underinsured motorists coverage or any similar coverage, unless this policy is endorsed to provide such coverage as shown in the Declarations.”
Summary judgment evidence confirmed there was no such declaration providing for amounts payable under any UM/UIM coverage. The Court concluded that Matei is not entitled to payment for UM/UIM coverage under the policy and does not have a breach of contract claim against Safeco. As such, the Court granted Safeco’s motion for summary judgment and dismissed Matei’s breach of contract claim with prejudice.
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ATTACHING WRONG COSMETIC LOSS EXCLUSION ENDORSEMENT TO POLICY RESULTS IN THE DENIAL OF SUMMARY JUDGMENT
The United States District Court for the Western District of Texas, San Antonio Division, denied State Farm Lloyds’ motion for summary judgment because State Farm Lloyd’s attempted to prove up a policy endorsement excluding coverage for cosmetic loss to metal roof caused by hail, which was not signed by the policyholder and, in fact, was part of a different policy issued to a different insured.
In Rodriguez v. State Farm Lloyds, No. SA-21CV-508-OLG, 2024 U.S. Dist. LEXIS 160007 (W.D. Tex. 2024), State Farm Lloyds issued a homeowners policy to Plaintiff Geronimo Rodriguez. During the policy period, a hail and windstorm occurred on or about April 13, 2019, and Rodriguez reported the loss on April 20, 2019. An inspection revealed some minimal loss caused by hail was covered, but the amount of loss was determined to be less than the deductible. State Farm Lloyds determined that any hail damage to the roof was excluded from coverage per an endorsement FE 8706.1, Exclusion of Cosmetic Loss to Metal Roof Coverings Caused by Hail. It was also determined that some damage was due to prior faulty workmanship or wear and tear, also excluded from coverage. The insured hired his own inspector and sued alleging breach of contract, breach of duty of good faith and fair dealing, and violations under the DTPA and Texas Insurance Code, among others.
State Farm Lloyds moved for summary judgment on breach of contract claim arguing that the central issue of this claim is whether a cosmetic loss exclusion applies precluding coverage to Plaintiff’s metal roof. Careful review of the evidence presented revealed that the endorsement page that State Farm Lloyds presented was not a part of the insured’s 2019 policy. Instead, the endorsement page appeared to be part of a 2012 policy issued to a different insured under a different policy number.
As such, the court denied summary judgment on this claim. State Farm Lloyds also moved for summary judgment on the extra-contractual claims that remained after Plaintiff withdrew the DTPA and Texas Insurance Code claims. The remaining extra-contractual claims were breach of the duty of good faith and fair dealing, violation of the prompt payment provisions of Chapter 542 of the Texas Insurance Code, and violations of Chapter 541 of the Texas Insurance Code for failure to adequately and reasonably investigate the claim and effectuate prompt, fair and equitable settlement of the claim. The court ruled that “to the extent that some of the claimed loss may have been caused by faulty workmanship or deterioration, a bona fide coverage dispute exists.” Further, State Farm Lloyds’s explanation to Rodriguez for the denial was based on the cosmetic loss exclusion, which was not valid, and the court denied summary judgment on the extra-contractual claims. The court noted, however, that should a cosmetic loss exclusion endorsement signed by Geronimo Rodriguez for the correct policy number exist and is in State Farm Lloyds’ possession, Defendant may seek leave to file an amended motion for summary judgment and correct the record.
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