In Cantu v. State Farm Lloyds, Civ. Action No. 7:13-cv-00105 (So. Dist. Tex - McAllen Div. August 7, 2015), a homeowner filed suit on his first party property insurance claim for hail damage to his residence in the Valley.  The trial court denied the carrier’s motion for summary judgment on claims of breach of contract and granted in part and denied in part its motion for summary judgment on claims for extra-contractual damages.  State Farm had determined the covered damages fell below the policy deductible.  The insured invoked the appraisal clause, but filed suit in state court before the appraisal process was completed alleging claims of breach of contract, violations of the Texas Insurance Code and DTPA, and breach of the common-law duty of good faith and fair dealing.  The case was removed to federal court and Plaintiff’s motion to remand was denied.  The Plaintiff attempted to invoke the appraisal clause again in federal court, but the Court ruled that right was waived when he abandoned the previous appraisal.

State Farm moved for summary judgment on the breach of contract claim contending it arose solely on Plaintiff adjuster’s contention that the entire roof needed to be replaced because the damaged tiles allegedly could not be replaced with similar tiles.  State Farm contended there was no breach because the Insured admitted only 8 to 14 tiles were damaged and the policy only required the insurer to replace damaged parts of the roof with similar materials and construction. The Court focused on Plaintiff’s adjuster's contention that “all slopes of the roof require complete replacement” and denied the motion for summary judgment on the basis of a question of fact as to whether 8 to 14 tiles needed replacing or the entire roof.

The Court granted summary judgment on Plaintiff’s DTPA, Texas Insurance Code and common law duty of good faith and fair dealing claims that fall under the analysis of a “bad faith” claim.  The Court recognized that “a claim crosses the boundary from breach of contract to bad faith when the former ‘is accompanied by an independent tort.’” An insurer does not act in bad faith, as a matter of law, where a reasonable investigation merely shows “a bona fide dispute about the insurer’s liability on the contract.”  The Court noted that the insured testified he had no complaints about the handling of his claim other than disagreements on the amount.  Plaintiff’s public adjuster claimed State Farm’s adjuster failed to reasonably investigate the claim as evidenced by the “incomplete and inadequate assessment of the damage.”  The Court quickly saw through this advocacy and stated, “a discrepancy between the estimates and disagreement as to the amount of damage is not tantamount to bad faith.”

The Court denied a summary judgment “at this time” as to Plaintiff’s remaining prompt payment of claim contention because of a fact question created by the denial of the summary judgment motion on the breach of contract claim.  The Court concluded: “An insurer is required to pay statutory damages ‘only after having first been found liable for the claim.’  Thus, if State Farm is ultimately adjudged liable under the policy, it may still be liable under Section 542.058 despite its potential good faith in denying payment.”  Thus, the Court held it was premature to rule on the prompt payment of claim contentions.

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