INSURED FAILS TO COMPLY WITH DUTIES AFTER LOSS - TRIAL COURT JUDGMENT AFFIRMED
Last Tuesday, the Houston Court of Appeals affirmed a take nothing jury verdict in favor of Safeco Insurance Company in a bad faith lawsuit arising from a water damage loss to the insured residence. In Khan v. Safeco Surplus Lines, 2014 WL 3907976 (Tex.App. - Houston [14th Dist.], August 12, 2014), the insured returned from a multi-week family vacation and found water throughout the house, reportedly due to an air conditioning pan leak in the attic. Safeco insured the property (under a policy placed by the mortgage company) and investigated the loss. They found numerous sources of water intrusion and mold damage in the house. And, despite Khan's resistance and repeated failure to cooperate in the investigation, Safeco paid the mortgage company based on an $80,000 estimate for damage to the dwelling and paid Khan the $26,000 policy limit for personal property. Khan disagreed with the damage estimate and refused to make the needed repairs throughout the pendency of this claim and the litigation which began in May 2001. It took 10 years to get the case to trial after Kahn fired and hired lawyers over and over again. Safeco moved for summary judgment multiple times based on the mold exclusion in the policy and the Texas Supreme Court’s mold decision in Fiess vs. State Farm, but the trial court judge denied the motions each time and forced Safeco to take it trial. After a two week jury trial in Ft. Bend County (southwest of Houston), Safeco won on every issue. Based on the jury findings, a take nothing judgment was entered in Safeco's favor and this appeal followed.
After finding that Khan had standing as an intended third-party beneficiary under the mortgage company's force-placed policy with Safeco, the Houston Court of Appeals gave careful consideration to Khan's arguments on appeal and challenges to the sufficiency of the evidence in support of the jury's findings. In particular, one of the jury instructions instructed that "Safeco did not fail to comply with the terms of the policy if the Khans did not 'protect the dwelling or property from further damage' or 'make reasonable and necessary repairs to protect the dwelling or property.'" The court observed that Khan testified inconsistently about what he did with the money paid, that he had repair estimates and contractors that would have done the work for amounts paid, that the house sat vacant and unrepaired for years during the pendency of the lawsuit, and that the "jury was free to compare the state the Property in 2002 to the state the Property was in 2011 [time of trial] and note any deterioration in its condition." Concluding that "the record is rife with evidence that the Khans satisfied neither of these duties," the Court overruled each of Khan's issues on appeal and affirmed the trial court's judgment in favor of Safeco.
Editor's Note: Martin, Disiere, Jefferson & Wisdom had the privilege of defending Safeco in both the trial of this case and on appeal. Chris Martin and Chris Avery handled the matter for the last two years before trial and they won the jury trial. On appeal, the head of our appellate section Levon Hovnatanian handled the case. We want to thank Safeco and Liberty Mutual for having the courage to try this case and this defend this appeal. We also want to thank them for the opportunity to defend their interests in this case and for the chance to get this significant victory.