A Federal District Court Judge in the Western District of Texas – Austin Division recently granted Nationwide’s Motion for Partial Summary Judgment in Walker v. Nationwide Property and Casualty Insurance Co., 2014 WL 171246 (W.D. Tex.). This decision provides additional authority that 1) post-loss misrepresentations are not actionable absent evidence they were the producing cause of damages, and 2) an expert opinion is necessary to testify whether an insurer’s investigation was reasonable.

In addition, the Court held a HO-542-A policy does not provide coverage for plumbing leak damage without a dwelling foundation endorsement, the endorsement’s coverage sub-limit is enforceable, and there is no coverage for any cracking of walls, floors, and ceilings even if the damage ensues from foundation movement caused by a plumbing leak. 

The insured owned a residence in Austin which was insured by Nationwide and made a claim that alleged his extensive foundation movement was the result of multiple plumbing leaks that had been discovered in his drain line.  Nationwide investigated and retained an engineer who concluded the foundation movement was the result of other causes, not plumbing leaks.  The insured did not dispute that the Dwelling Foundation Endorsement limited his coverage to 15% of his Dwelling coverage and was limited solely to the foundation damage, but he argued the HO-542-A policy itself provided coverage for any cracking of walls, floors, and ceilings where the damage ensued from foundation movement caused by a plumbing leak.  The insured also alleged the Nationwide adjuster misrepresented the coverage to him during the investigation.  Moreover, in response to Nationwide’s Motion for Summary Judgment, the insured presented his own affidavit that alleged several reasons why Nationwide did not conduct a reasonable investigation of this claim.

In its opinion, the Court dismissed the insured’s policy interpretation arguments and ruled the policy itself, without the endorsement, excludes coverage for plumbing leak damage.  In addition, the Court ruled the Dwelling Foundation Endorsement only applies to damage to the foundation itself, and only in an amount equal to 15% of the Coverage A (Dwelling) limit of liability. 

The Court then turned to the extra-contractual claims and dismissed all of them.  Importantly, the Court ruled that alleged post-loss misrepresentations made by an insurance carrier or its adjusters are not actionable under the Texas Insurance Code or the DTPA absent evidence that the alleged misrepresentations were the producing cause of damages.  And, finally, when addressing the insured’s affidavit that provided his opinion why Nationwide failed to conduct a reasonable investigation, the Court ruled an insured’s opinion on whether an insurance carrier violated the Texas Insurance Code by failing to pay a claim without conducting a reasonable investigation is irrelevant and thus inadmissible when the insured is not an expert on insurance investigations.

Editor’s Note: MDJW had the privilege of representing Nationwide in this case before the trial court.  Nationwide’s counsel, Chris Martin, Patrick Kemp and Joe Matetich, wish to thank the carrier for the opportunity to protect its interests in this important case.

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