After being appealed to the Supreme Court of Texas, this Hurricane Ike case was remanded to a Houston court of appeals for further consideration in light of USAA Texas Lloyds v. Menchaca (Tex. 2018).  In State Farm Lloyds v. Fuentes, 14-14-00824-CV, 2020 WL 897401 (Tex. App.—Houston [14th Dist.] Feb. 25, 2020, no pet. h.) (slip op.), much of the court’s opinion is devoted to a legal sufficiency challenge to the trial court’s decision to disregard the jury’s finding that the policyholder committed a prior material breach of the policy.  The court again concluded the district court had been correct to disregard that finding from the jury because it was not supported by sufficient evidence. 

The court also concluded the policyholders alleged and were awarded damages for an independent injury in the form of their mental anguish claim, under Menchaca’s “independent injury” rule:

“The Menchaca court stated that it had “yet to encounter” a successful independent-injury claim and it did not “have ... occasion to speculate what would constitute a recoverable independent injury”; however, it noted its previous decision in Twin City Fire Insurance “identif[ied] mental anguish as an example” of actual, separate damages that an insured could recover when caused by the insurer's tortious conduct. … In other words, Menchaca did not foreclose the possibility of recovery for mental-anguish damages as an independent injury. Nor does any provision within the Insurance Code preclude recovery for mental-anguish damages. At least one Texas appellate court has since indicated that mental-anguish damages could qualify as an independent injury in an Insurance Code claim under the right circumstances.” [internal citations omitted]

The court went on to conduct a legal sufficiency analysis of the mental anguish claim and concluded the policyholders could keep their mental anguish damage award and their Insurance Code enhanced damages.

Editor’s note: Because the jury found State Farm had breached the contract and had violated the Insurance Code, this opinion may not be as legally significant as it seems. It does not represent a scenario where the carrier was liable for mental anguish and statutory damages in the absence of a breach. Thus, while it appears to make sweeping statements about the recoverability of mental anguish damages as an independent injury, it may ultimately be limited to its facts.

The jury awarded the policyholders approximately $19,000 in actual damages, approximately $27,000 in mental anguish damages, and approximately $7,500 in enhanced statutory damages. The much larger portion of the award, which was not at issue in this appeal, was for attorney fees - nearly $325,000.

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