Texas Insurance Law Newsbrief - June 17, 2026
POLICY REQUIRES STATUS AS A PARTY IN INTEREST OR THIRD-PARTY BENEFICIARY FOR RECOVERY IF NOT A PARTY TO THE CONTRACT
The Fifth Circuit recently upheld summary judgment where a company that purchased subsidiaries of the insured tried to recover on the insured’s policies without having contractual privity and without being a party in interest or a third-party beneficiary.
Championx Corp. v. AIG Ins. Co. of Canada, No. 25-20030, 2026 LEXIS 240978 (5th Cir. 2026). The insured held commercial general liability policies from 2017–2020, then sold its subsidiaries to a new company in 2019-2020. The new company was sued in 2020 over a 2018 pipeline assessment and filed the notice of loss which was denied. “Related financial losses do not suffice to create standing for declaratory relief; instead, we look to whether a party has any rights and legal relations under the contract.” The Court held that the new company was not a third-party beneficiary under the policies and did not have standing to pursue the declaratory relief as an interested party, but the Court allowed the new company to amend the pleadings to include the proper parties.
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FAILED TO MAKE REPAIRS FROM PRIOR ROOF DAMAGE CLAIM – SUMMARY JUDGMENT GRANTED AND INSURED AFFIRMED
A Houston Court of Appeals recently ruled in favor of State Farm, finding that the trial court did not err in granting summary judgment and denying an insured’s motion for reconsideration.
In Khalili v. State Farm Lloyds, No. 14-25-00611-CV, 2026 LX 242846 (Tex. App.—Houston [14th Dist.] Apr. 30, 2026, no pet. h.), the insured filed suit against State Farm alleging breach of contract, and violations of the Texas Insurance Code and Deceptive Trade Practices Act.
The lawsuit arose from a roof damage claim made by the insured in 2021 under his homeowners’ policy. Prior to this claim, the insured made a claim in 2008 for roof damage, for which State Farm issued payment to replace the entire roof. It was later revealed that the insured never replaced the roof with the funds received from the 2008 claim. The insured’s 2021 claim was denied because the total damage did not exceed the deductible and because State Farm had already paid for the roof replacement, which was never completed. In 2022, the insured requested a re-inspection, which verified the same damage as before, and invoked appraisal. The appraisers for State Farm and the insured were unable to reach an agreement, and the insured did not agree to designating a third-party umpire.
In 2023, the insured filed suit. However, the case was abated as the appraisal process was never completed. After an umpire issued an appraisal award of around $13,000, State Farm declined to pay because the roof damage was due to the insured’s failure to replace the roof. Right before trial, the court held a hearing on State Farm’s motion for summary judgment and denied all of the insured’s claims, finding that the insured did not meet his burden. The insured filed a motion to reconsider, which was denied, and this appeal ensued.
The insured first argued that he was entitled to a jury trial and that he was denied the opportunity to present the facts and asserted that he had a constitutional right to a jury trial. However, if there are no issues of fact, the only questions that remain are legal questions, which are resolved by the trial court. The court of appeals overruled the insured’s issue as to the jury trial.
The insured also argued that the trial court erred in granting summary judgment. This issue was also overruled and the court of appeals found that the trial court did not err. First, the court found that the insured failed to raise evidence to indicate that State Farm breached the insurance contract. Rather, State Farm presented evidence showing that (a) the roof damage in 2021 was nearly identical to the damage from 2008; (b) the policy did not cover damage caused by negligence, failure to act, or inadequate repairs; and (c) that State Farm paid the insured to replace his entire roof in 2008 and the insured failed to do so. Accordingly, the court concluded that there was no issue of fact regarding the insured’s breach of contract claim. Second, because an insured must establish an insurer’s liability under the policy as a prerequisite to recovery on insurance code claims, and the insured failed to do so, the insured’s extra-contractual claims could not prevail. The insured also failed to identify any acts or omissions by State Farm to support his claim for DTPA violations. Because there were no issues of fact to any of the insured’s common-law or extra-contractual claims, the court found that the trial court did not err in granting summary judgment on all claims and affirmed the trial court’s ruling.
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DISMISSAL OF AN INSURED’S CLAIMS HINGES ON PROPER EVIDENCE IN AN INSURER’S MOTION TO DISMISS
A court of appeals recently highlighted the importance of evidence in dispositive motions.
In Holloman Holdings Corp. v. Starr Indem. & Liab. Co., No. 01-24-00704-CV, 2026 LX 209005 (Tex. App.—Houston [1st Dist.] Apr. 28, 2026, no pet. h.), a Houston Court of Appeals reversed a trial court’s dismissal of an insured’s claims against an insurer. The lawsuit arose from a claim made under occurrence-based builder’s risk policies issued by Starr. Starr was provided notice of the loss in October of 2021, for a project completed by the insured in October of 2019. The insured received notice of issues with the project in December of 2019 and completed repairs in May of 2021. Starr appointed an adjuster, who took approximately eighteen months to investigate the claim. Starr offered $3 million to settle the claim, but the insured rejected the offer and later filed suit, alleging breaches of contract and violations of the Texas Prompt Payment of Claims Act. Starr filed a motion to dismiss, which was granted, pursuant to Texas Rule of Civil Procedure 91a, arguing that the insured’s late notice caused prejudice due to Starr’s inability to investigate the losses.
The court of appeals here found that the trial court erred by granting Starr’s motion because the evidence attached to their motion, consisting of the policies and letters, could not be considered. Rather, the court is limited in a Rule 91a proceeding to considering the allegations in the claimant’s pleadings and any proper Rule 59 exhibits made part of the claimant’s pleadings. Because the evidence provided by Starr was not made part of the insured’s petition, the court could not consider such evidence beyond the insured’s allegations. Liberally construing the insured’s allegations, the court concluded that the insured had not pled facts proving that Starr was prejudiced by an inability to investigate the circumstances of the alleged loss, and thus Starr did not establish that the insured’s allegations defeated the insured’s entitlement to relief sought. The court of appeals thus reversed the trial court's order dismissing the insured’s claims and remanded for further proceedings.
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