REINSPECTION AND SUPPLEMENTAL PAYMENT ON HAIL DAMAGE CLAIM FAILS TO SUPPORT UNFAIR CLAIM HANDLING ALLEGATIONS – PARTIAL SUMMARY JUDGMENT GRANTED

Last week, the U.S. District Court in El Paso considered an insurer’s motion for partial summary judgment arising from two reported hail damage claims and found that the insurer’s actions in reassessing its damage findings and issuing a supplemental payment would not support claims alleging unfair claims handling.  In Kazanjian v. State Farm Lloyds, 2023 WL 2034441 (W.D. Tex. February 15, 2023), in the summer of 2021, the insured’s home was in the path of two hailstorms that were four days apart. After the first storm, State Farm issued payment for the damage observed. After the second storm, State Farm inspected the property and found hail damage to three roof turbines and three window screens, but no covered damage to the modified bitumen or clay tile portions of the roof. The insureds hired an attorney who sent a demand letter seeking $57,980.78 to replace the modified bitumen and clay tile portions of the roof. State Farm reinspected the property and found that the wind turbines could not be replaced without disturbing a portion of the modified bitumen portion of the roof. So, State Farm revised its estimate finding $9,858.43 in damages and after applying the deductible and recoverable depreciation, issued a supplemental payment for $4,731.16. State Farm also made an additional payment of $150.36 it determined was owed under Texas’ Prompt Payment of Claims Act. The insured’s attorney filed suit alleging a variety of common law and statutory bad faith claims. State Farm removed the case to federal court and filed a partial motion for summary judgment on all but the breach of contract and Prompt Payment claims.

In response to State Farm’s motion, the insured voluntarily dismissed all extra-contractual claims except for the Unfair Settlement Claims and requests for exemplary and punitive damages. The court carefully reviewed Texas law and noted that the common law bad faith claims and Unfair Claim Practices claims applied the same legal standard - “an insured must show that the insurer failed to settle the claim even though it new and should have known that it was reasonably clear the claim was covered.” And, that evidence of nothing more than a “bona fide dispute about the insurer’s liability on the contract does not rise to the level of bad faith.” Addressing the insured’s argument related to the reinspection and supplemental payment, the court observed that “the fact of the reassessment alone, does not warrant a reasonable inference of bad faith.” Here, there is a disagreement among experts which “may sustain a breach of contract claim, but it does not suffice to establish bad faith.” And because there was no evidence of bad faith, the court granted State Farm’s motion for partial summary judgment. Further, noting that the only remaining claims were for breach of contract and 542.058 Prompt Payment Claims which don’t permit recovery of exemplary or treble damages, State Farm’s request for judgment as a matter of law on those claims was granted as well.