Texas Insurance Law Newsbrief - July 14, 2023

Texas Insurance Law Newsbrief

The United States District Court for the Western District of Texas (in San Antonio) retained jurisdiction over a lawsuit despite the plaintiffs claiming they were not seeking sufficient damages to warrant federal court jurisdiction.

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In a currently-ongoing case, Sliepcevic v. American Family Connect Property and Casualty Insurance Company, Inc., 2023 WL 4351504 (W.D. Tex.), Mark and Linda Sliepcevic experienced an accidental discharge of water that allegedly caused damages to their home.  They filed a claim with American Family Connect, which referred them to seek repairs from ServPro.  ServPro began working on the Sliepcevics’ home, then American Family Connect denied their coverage.  The Sliepcevics sued American Family Connect in state court in Kendall County, Texas, and American Family Connect removed the case to federal court on the basis of diversity jurisdiction.  The parties conceded that they were diverse; however, in an interesting turn of events, the Sliepcevics sought a remand, claiming that their lawsuit sought less than $75,000 and therefore did not meet diversity jurisdiction’s amount-in-controversy requirements. 

The Federal San Antonio Court disagreed, noting that (1) ServPro quoted the Sliepcevics’ repairs to cost over $50,000 in remediation and reconstruction, (2) the Sliepcevics filed a Deceptive Trade Practices Act cause of action that could entitle them to treble damages ($150,000 in this case), and perhaps most importantly (3) in a pre-suit demand letter, the Sliepcevics demanded $188,000 + attorney’s fees. The parties disputed whether the Court was permitted to consider the pre-suit demand or whether its consideration was barred by Rule 408 of the Federal Rules of Evidence. The Western District followed other Districts’ examples and stated that “settlement offers are compelling evidence of the minimum amount in controversy.”  (citing Ham v. Bd. of Pensions of Presbyterian Church (U.S.A.), No. Civ. 3:04-CV-2692-P, 2005 WL 6271207, at *3 (N.D. Tex. Mar. 8, 2005) (emphasis added by San Antonio Court).  Thus the Court denied the Sliepcevics’ motion to remand.

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The Texas Court of Appeals in Fort Worth joined the Dallas court of appeals and others across the state in holding that an insurer’s payment of an appraisal award and interest precludes an award of attorney’s fees under the Texas Prompt Payment of Claims Act (TPPCA).

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In Kester v. State Farm Lloyds, 2023 WL 4359790 (Tex. App—Fort Worth), Kester suffered damage to his home in Southlake, Texas in an October 2019 storm.  He submitted a claim to State Farm, which found covered damage to be $17,000 and then issued him a payment of $2,270 after subtracting his depreciation and deductible.  Kester demanded more and eventually an appraisal, resulting in an appraised cost of replacement of $48,000.  State Farm complied with the appraisal award by paying Kester $21,000.

Kester sued State Farm a few months later for violating the TPPCA, breach of contract, and Texas Insurance Code Violations.  A few months into the lawsuit, State Farm voluntarily paid him $2,965.15 to resolve any potential “questions or concerns” regarding interest accrued and $5,000 in attorney’s fees for its delayed payment (in reference to the TPPCA’s penalties).  Shortly thereafter, State Farm moved for summary judgment dismissal of the lawsuit claiming there were no further amounts Kester could recover.  Kester argued that State Farm’s “gratuitous payment” did not moot his right to attorney’s fees.  The trial court, and subsequently the Fort Worth court of appeals sided with State Farm, noting the Dallas court of appeals, and a growing number of federal and state courts hold that an appraisal award and interest payment did in fact preclude an attorney fee award under the TPPCA.  It accordingly affirmed the trial court’s dismissal of the lawsuit.

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