The Supreme Court of Texas recently ruled that Farmers Group Inc. did nothing wrong in replacing more comprehensive homeowners’ policies with narrower ones, reversing an intermediate appellate court's ruling in favor of the class action plaintiffs.  In Farmers Group, Inc. v. Geter, 2021 WL 1323407 (Tex., April 9, 2021), the court examined a trial court's judgment that Farmers breached an insurance contract when it decided not to renew certain homeowners policies.

Beginning in 2000, the Texas homeowners insurance market experienced a large increase in mold claims. Farmers and other insurers decided to stop offering HO-B policies and begin offering a “named peril” policy, known as the HO-A policy. The Texas Department of Insurance approved an enhanced HO-A policy, which Farmers intended to offer as a substitute for the HO-B policy. In 2002, Farmers sent a notice of non-renewal to its HO-B policyholders, including Geter. The notice stated that the policyholders' existing policies would not be renewed and that Farmers would no longer offer the HO-B policy.

Geter brought the suit in 2002 on behalf of the more than 400,000 HO-B policyholders in Texas. She claimed that Farmers did not have the right to non-renew HO-B policies. She sought and received class certification from the trial court. Geter argued that the mold claims that prompted Farmers to non-renew the HO-B policy were “claims for losses resulting from natural causes” which would have prohibited Farmers from refusing to renew the HO-B policy. The trial court granted summary judgment to Geter and the class holding that Farmers breached the insurance contract by not renewing the policies. The court held that each class member was entitled to renew his HO-B policy. The court later ordered Farmers to issue HO-B policies to class members wishing to renew them at a premium set by the trial court. The trial court rendered a final judgment in 2017.  On appeal, the court of appeals affirmed the trial court's judgment insofar as the trial court held that Farmers breached the insurance contract when it refused to renew the HO-B policies. However, the court of appeals reversed the portion of the trial court's judgment ordering Farmers to issue the policies at a determined premium. The court of appeals remanded the case for a decision on the proper remedy, if any, for the class's breach-of-contract claim.

Referencing testimony from the Commissioner of the Texas Department of Insurance, and an opinion from the Attorney General of Texas, the Texas Supreme Court found that because the individual plaintiff and class members were not entitled to a renewal of their HO-B policies, all the plaintiffs' claims fail, and summary judgment for Farmers was proper. The court concluded that Farmers was entitled to summary judgment on Geter's breach-of-contract claim for non-renewal of the HO-B policies. The court reversed the court of appeals' judgment and rendered judgment that the plaintiff and the class take nothing on this claim. The court also reversed the judgment on the fee request of class counsel and remanded the case to the trial court for requests for attorney fees and costs.

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