Texas Insurance Law Newsbrief

FOURTEENTH COURT OF APPEALS DETERMINES ISSUE OF FIRST IMPRESSION: THE MEANING OF ‘SELF-INSURER’ UNDER INSURANCE CODE § 462.207

The Fourteenth Court of Appeals recently granted a permissive appeal to address an issue of first impression: The meaning of “self-insurer” under Insurance Code § 462.207. Argueta v. Harris Cnty., No. 14-24-00259-CV, 2025 LEXIS 8369 (Tex. App.––Houston [14th Dist.] Oct. 30, 2025, no pet. h.).

This case involves a motor vehicle collision between an individual and a Harris County vehicle, after which Harris County filed a lawsuit against the individual who was insured by ACCC Insurance Company. The insurer subsequently became insolvent and was an “impaired insurer” under the Guaranty Act. The insured filed a summary judgment motion arguing that Harris County was a “self-insurer” under the Guaranty Act and was barred from pursuing its claim, which the trial court denied, but then granted the insured’s request to file a petition for permissive appeal.

The Fourteenth Court of Appeals applied statutory construction to the Guaranty Act’s language, and found that “…it is clear that “any other claim” applies to Harris County’s claim as a self-insurer here because Harris County seeks to recover the damages it has to pay…from the party that caused them…[the] impaired insurer’s insured.” The Court held that “self-insurer” in Insurance Code § 462.207 has the same meaning as a “self-insurer” as in Transportation Code § 601.124 and that this applied to Harris County’s claims. However, the Court affirmed the trial court’s order denying the insured’s summary judgment because the insured’s evidence did not conclusively establish there was no genuine issue of material fact.

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NO DUTY TO DEFEND OR INDEMNIFY WHEN INSURED PLEADS GUILTY TO CRIMINAL CONDUCT IF THAT CONDUCT WAS THE ONLY REASON FOR THE CIVIL LAWSUIT AND EXPRESSLY DISCUSSED IN THE PETITION

The Sixth Court of Appeals recently held that an insurer owed no duty to defend or indemnify its insured after the insured pled guilty to criminal charges resulting from the incident that was the subject of the lawsuit.

Tex. Mun. League Intergovernmental Risk Pool v. Fierro, No. 06-25-00015-CV, 2025 LEXIS 470378 (Tex. App.––Texarkana Oct. 28, 2026, no pet. h.). This case involves a police officer (the “insured”) who was arrested for an off-duty altercation that resulted in someone’s death. The decedent’s estate and surviving family filed a federal action against the insured, the City, and the City’s police chief. Approximately six months after the lawsuit was filed, the police officer pled guilty to the charged offenses. The trial court granted summary judgment in favor of the decedent’s estate and family, which the insurer appealed. “…If not for [the insured’s] criminal actions, to which he pled guilty, there would be no underlying suit [and] the amended petition highlighted [the insured’s] plea to the underlying criminal charges, thus bringing the criminal allegations within their pleadings and squarely within the criminal conduct exclusion.” The Court held that the criminal acts exclusion to coverage applies, and the insurer owed no duty to defend or indemnify its insured.

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INSURANCE TOWER CAN BE DESIGNATED AS CONFIDENTIAL FOR DISCOVERY PURPOSES IN LITIGATION WITH A PROPERLY WORDED PROTECTIVE ORDER

The Northern District recently held that Amazon’s insurance tower could be marked as CONFIDENTIAL in discovery pursuant to the protective order because it is commercial information not publicly known and of commercial advantage to its possessor.

Leyman v. Amazon Logistics, Inc., No. 2:24-cv-129-BR, 2025 LEXIS 436117 (N.D. Tex. October 31, 2025). This case involved a motor vehicle accident where Plaintiffs allege Defendants were driving an Amazon-owned tractor trailer that collided with Plaintiffs’ vehicle. The sole issue in dispute was whether Amazon should be compelled to produce its insurance policies without confidentiality protection. The Court granted an agreed motion for protective order which allowed documents to be marked as confidential that were “…commercial information that is not publicly known and is of technical or commercial advantage to its possessor.” The Court determined that Amazon’s insurance tower fell into this category and it was proper to designate the policies as confidential.

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WESTERN DISTRICT GRANTS SUMMARY JUDGMENT IN FAVOR OF INSURER: NO RECOVERY FOR INSURED’S BAD FAITH CLAIM AS A MATTER OF LAW

The Western District recently found in favor of an insurer on common law bad faith claims but allowed the insured’s breach of contract and insurance code claims to continue in litigation.

. Boerne UMC v. Church Mut. Ins. Co., No. SA-24-CV-00610-JKP, 2025 LEXIS 210767 (W.D. Tex. October 27, 2025). The insured had multiple buildings under an insurance policy which provided coverage from January 1, 2021, to January 1, 2022, and the insured suffered a hailstorm during the policy period in May 2021. The insured had someone investigate the buildings in August 2022, over a year later, and the insurer sent a third-party vendor to inspect the damage in November 2022. The inspector found signs of storm damage but did not determine when the observed damage occurred. The insurer hired an engineer to inspect who determined the actual cash value of the damages, which was below the insured’s deductible, so no benefits were issued.

In response toa bad faith lawsuit against the insurer that followed, the insurer filed a motion for summary judgment on all asserted causes of action. The Court found that “… [The insured] presents no evidence to dispute the facts that establish the [insurer’s] reasonable efforts to determine the extent and cost of the roof damage…[the insurer] had a reasonable basis for denying coverage and payment…” Accordingly, the Court granted summary judgment on the common law breach of duty of good faith and fair dealing claim, and denied summary judgment on the breach of contract claim and other statutory claims under the Texas Insurance Code.

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NEITHER BANKRUPTCY, ASSIGNMENT, NOR INFORMAL SETTLEMENTS EXCUSE AN INSURER’S DUTIES

The Fifth Circuit Court of Appeals recently juggled complex intersections of coverage, assignment, and bankruptcy and ultimately concluded that Underwriters was unable to win dismissal of its bankrupt insured’s assigned claims.

In BPX Prod. Co. v. Certain Underwriters at Lloyd’s London Subscribing to CGL, 2025 U.S. App. LEXIS 27273 (5th Cir., October 20, 2025), BPX Production Company hired BJ Services to cement the production casing on an oil well in Reeves County, Texas. Unfortunately, BJ Services used the wrong cement component and plugged the well, requiring BPX Production to dig a new well. The master services agreement between them required them to resolve disputes arising from the agreement by (1) giving written notice of the dispute to the other party and (2) requesting a settlement meeting, then (3) if the dispute could not be resolved at the settlement meeting, they could proceed with forum selection and arbitration.

BPX Production sent BJ Services a dispute letter, which BJ timely sent to its insurer, Underwriters. However, Underwriters denied coverage, citing a policy exclusion for certain types of property damage arising out of BJ Services’ operations, and BJ Services’ failure to comply with a supplemental endorsement that required BJ Services to obtain certain protection.

Despite Underwriters’ denial of coverage, the parties initiated settlement discussions, then to further complicate matters, BJ Services filed for bankruptcy. The bankruptcy pended for a year and a half, then the bankruptcy judge approved a settlement between BPX Production and BJ Services that included an assignment of BJ Services for Underwriters’ denial/refusal of coverage. BPX Productions then sued Underwriters in state court in Harris County, Texas, Underwriters removed the case to federal court, where Underwriters successfully had the case dismissed for failure to state a claim. BPX then appealed to the Fifth Circuit Court of Appeals, which partially reversed the dismissal.

Underwriters argued that it was properly granted a dismissal from the district court because that it had the right and duty to defend BJ Services from any suit (A civil proceedings… or any other alternative dispute resolution proceeding…), and the settlement discussions involved in this case were not a “suit.” The Fifth Circuit disagreed. Although the Tenth Circuit Court of Appeals held that Nevada’s statutorily required settlement process did not constitute a “suit,” like the Florida Supreme Court, “we interpret this policy language as broadening the definition of ‘suit’ to encompass any other ‘alternative dispute resolution proceeding,’ regardless of whether it is a ‘civil proceeding.’”

The Fifth Circuit also rejected Underwriters’ argument that it had no duty to defend because BJ Services failed to comply with the insurance policy’s consent provisions. The Fifth Circuit held that Underwriters waived the consent-to-suit requirement by failing to assert it in its denial letter.

The Fifth Circuit additionally agreed with BPX Production that it should be permitted to pursue both the liability claims against BJ Services and the insurance claims against Underwriters, invoking the duty to indemnify, despite the presence of a bankruptcy order. Although the bankruptcy order and settlement between the parties precluded BPX from suing BJ Services, that merely shifted the costs of litigation away from the bankruptcy estate and did not excuse Underwriters’ contractual obligations under the insurance contract. Lastly, however, the Court held that there could be no Stower’s liability due to BJ Services’ bankruptcy precluding personal liability against it, and no bad faith claims against Underwriters, as they are not assignable. Accordingly, the Court remanded the case to the Southern District of Texas for further proceedings.

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RESOLUTION ATTEMPTS ARE NOT DECISION REVERSALS

The Texas Court of Appeals in San Antonio recently dismissed an insured apartment’s lawsuit against its insurer as time barred by the statute of limitations, despite the apartment’s assertions that the insurance company continued to review its case and therefore tolled the statute of limitations.

In NFI Apt. Mgmt., LLC v. Third Coast Ins. Co., 2025 U.S. Dist. LEXIS 208967 (Tex. App.—San Antonio October 23, 2025) NFI Apartments were in a hailstorm in April 2020. In June of 2020 NFI filed a claim with Third Coast, which investigated and found that the damage was very minor and less than NFI’s deductible. Third Cost wrote NFI a letter disclosing its findings and denying payment on July 21, 2020. Over the next two years, Third Coast conducted an additional investigation, sent another letter saying the loss was less than the deductible, NFI hired an engineer, and NFI presented additional claims allegedly due to the hailstorm. In April 2022, Third Coast wrote NFI, saying that it had closed its file and had retained counsel to attempt to resolve this dispute without resorting to litigation. Plaintiff filed suit on July 23, 2024.

Third Coast filed a motion for summary judgment, claiming that the two-year statute of limitations began upon its July 2020 decision letter, and NFI missed it by two years. NFI argued that the statute was tolled because of the continued correspondences between them, that did not give it notice of facts that would alert it to seek a judicial remedy. The Court disagreed, noting that the July 2020 denial was clear, and there were no subsequent actions by Third Coast that could have been interpreted as a reversal of the July 2020 letter. NFI’s claims were accordingly dismissed.

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SUMMARY JUDGMENT GRANTED IN FAVOR OF AMERICAN ALTERNATIVE INSURANCE CORPORATION BASED ON STATUTE OF LIMITATIONS BECAUSE POLICY CONTRACTUALLY LIMITED THE PERIOD TO TWO YEARS AND ONE DAY

In Christian Care Ctr. v. American Alternative Ins. Corp., No. 4:25-CV-00321-O, 2025 U.S. Dist. LEXIS 197082* (October 6, 2025), the United States District Court for the Northern District of Texas, Fort Worth Division granted American Alternative Insurance Corporation’s Motion for Summary Judgment on the finding that Christian Care’s causes of action were time-barred.

Christian Care submitted an insurance claim to Alternative American on February 2, 2022, claiming property damage resulting from a storm that occurred on April 27, 2020. After investigation, the American Alternative determined that the damage was attributed to prior claims and denied the claim on July 28, 2022. Christian Care filed suit on February 18, 2025, more than two years and six months later asserting causes of action for breach of contract, violation of Chapter 542 of the Texas Insurance Code, and violation of Chapter 541 of the Texas Insurance Code. Alternative American moved for summary judgment on statute of limitations because the insurance policy contained a two-year-and-one-day limitations period. Christian Care attempted to argue that a four-year statute of limitations should apply.

The court determined that the contractual limitations period was valid under Texas law because it provided at least two years from when the cause of action accrued (i.e. the date of claim denial).

The court further rejected Christian Care's argument that the policy required invocation or waiver of appraisal before filing suit, finding that the policy’s language about appraisal was permissive, not mandatory. See Baisden v. I’m Ready Productions, Inc., 693 F.3d 491, 502 (5^th Cir. 2012). The insurance policy stated that either party “may make written demand for an appraisal of the loss,” thus the appraisal provision was not a mandatory precondition to filing suit. The court also noted that Christian Care's own conduct contradicted its argument, because Christian Care filed suit before invoking appraisal. The court declined to “strain the construction” of the appraisal provision to require express invocation or waiver of a conditional right prior to filing suit.

Ultimately, where an insurance policy contained a two-year-and-one-day limitations period from the date of claim denial, and the insured filed suit more than two years and six months after denial, the insured’s claims were time-barred. Christian Care needed to bring the Chapter 541 claim by July 28, 2024. Christian Care needed to bring the Chapter 542 and breach of contract claims by July 29, 2024.

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CONFLICTING EXPERT TESTIMONY ENOUGH TO PRECLUDE SUMMARY JUDGMENT

In Vera v. Homesite Ins. Co., No. 2:24-CV-00047-AM-MHW, 2025 U.S. Dist. LEXIS 198349* (October 7, 2025), the United States District Court for the Western District of Texas, Del Rio Division Magistrate Judge recommended that the District Court deny Defendant’s Motion for Summary Judgment in its entirety.

Vera filed an insurance claim for hailstorm damage to her home. Another event, a plumbing leak, also caused damage to the Vera’s property, and the damage that resulted from this leak was the subject of a separate lawsuit with these Parties. Vera initially provided undifferentiated damage estimates that did not separate hailstorm damage from plumbing leak damage. Vera later submitted a supplemental affidavit differentiating the damages, but Homesite argued it was untimely. Regarding the supplemental damage computations, the court applied a four-factor test and determined that while the Vera lacked justification for late disclosure, the Homesite would not be prejudiced by its admission because Homesite had access to the undifferentiated estimate for over a year without objection. As such, no prejudice needed curing, and the evidence was critically important to Vera’s ability to prove her damages.

Additionally, Homesite and Vera presented conflicting expert testimony about whether the hailstorm occurred during the policy period and caused covered damage. The court held that where Vera and Homesite present conflicting expert testimony regarding whether hailstorm damage occurred during the policy period and constituted “direct physical loss” under the policy, genuine issues of material fact existed that precluded summary judgment.

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BAD FAITH CLAIMS AGAINST TRISURA FAIL WHEN HOMEOWNER RECEIVED APPRAISAL AWARD AND COULD SHOW NO INDEPDENDENT INJURY

In Frederich v. Trisura Specialty Ins. Co., No. 24-40748, 2025 U.S. App. LEXIS 26063* (October 7, 2025), the United States Court of Appeals for the Fifth Circuit affirmed the district court’s grant of summary judgment in favor of Trisura Specialty Insurance Company.

Frederich filed an insurance claim with Trisura for wind and hail damage in September 2021. Trisura investigated and determined only some losses were covered. Frederich invoked the policy’s appraisal provision. In December 2022, the appraisal panel valued covered losses at $27,670.04. Trisura paid the appraisal award minus the deductible and prior payment. Trisura later paid $2,996.27 in accrued interest.

The district court granted summary judgment on all claims because Frederich received all benefits to which he was entitled through the appraisal process and he failed to establish any independent injury beyond the policy benefits.

On appeal, Frederich argued that Chapter 541 allows him to recover tort damages that are independent from contractual damages for breach of contact. In essence, Frederich’s breach of contract claims were eliminated by the appraisal payment, but he argued he could still bring a tort claim from improper withholding of his claim payment. The court disagreed.

In its analysis, the court cited to Mirelez v. State Farm Lloyds, 127 F.4th 949 (5th Cir. 2025) - holding that an insured cannot maintain bad-faith claims after receiving an appraisal award and interest without showing an independent injury under Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019) - establishing that if the only actual damages sought are policy benefits already paid pursuant to an appraisal, an insured cannot recover for bad faith under Chapter 541.

Because Frederich received his full appraisal award of $27,670.04 plus $2,996.27 in statutory interest and failed to establish an independent injury, he could not maintain his Chapter 541 bad-faith claims against Trisura. Although Frederich presented a statutory construction argument not explicitly addressed in Mirelez, the Fifth Circuit found that it was still bound by Mirelez’s holding.

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DON’T EXPECT TO FILE A STATE COURT STYLE NO EVIDENCE MOTION FOR SUMMARY JUDGMENT IN FEDERAL COURT AND WIN

In Tillema v. Meridian Sec. Ins. Co., No. SA-24-CV-00661-JKP, 2025 U.S. Dist. LEXIS 198111* (October 7, 2025), the United States District Court for the Western District of Texas, San Antonio Division granted in part and denied in part Meridian’s Motion for Summary Judgment.

The Tillemas held a homeowner's insurance policy with Meridian. They filed a claim for wind and hail damage allegedly occurring on April 26, 2022. Meridian denied coverage on May 18, 2022, determining the damage predated the storm and weather reports showed no hail event at the property on the claimed date. On May 18, 2022, Meridian sent a denial of coverage letter. The Tillemas hired an independent contractor to inspect the property, who recommended replacement of the entire roof along with a weather report confirming no hail at or within one mile of the home on the date of the alleged storm. The Tillemas filed suit on June 13, 2024, asserting four causes of action for breach of contract, violations of Texas Insurance Code § 541, violation of the Prompt Payment Act in Texas Insurance Code § 542, and common law breach of duty of good faith and fair dealing. Meridian moved for summary judgment on all claims.

Meridian argued only that the Tillemas had no evidence to prove essential elements of their breach of contract, Texas Insurance Code §541, and bad faith claims. While that would be sufficient in Texas state court, Federal courts do not recognize the no-evidence motion for summary judgment. Wilson v. Tessmer Law Firm, PLLC, 483 F.Supp.3d 416, 423-24 (W.D. Tex. 2020). Without pointing to specific evidence establishing absence of genuine factual disputes, Meridian failed to satisfy its summary judgment burden. Not only must a party moving for summary judgment identify the basis of the summary judgment motion, but a party must also point to specific evidence which establishes the absence of genuine factual disputes on essential elements (i.e. point to relevant excerpts from pleadings, discovery, admissions, or affidavits). Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992) and Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

Meridian only secured summary judgment on Plaintiff’s Prompt Payment Act cause of action. The court held that where Meridian presented undisputed evidence it acknowledged the Tillemas’ claim on the same day it was submitted, began investigation promptly, inspected the property, and sent a denial letter within the statutory timeframe, and the Tillemas presented no contradicting evidence, Meridian was entitled to summary judgment on the Prompt Payment Act claim.

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DETERMINATION OF DUTY TO INDEMNIFY NOT RIPE WHILE UNDERLYING SUIT IS STILL PENDING

In Century Sur. Co. v. RTI Servs., L.L.C., No. 25-50242, 2025 U.S. App. LEXIS 26228* (October 8, 2025), the United States Court of Appeals for the Fifth Circuit recommended granting RTI’s motion to dismiss under both Rule 12(b)(1) for lack of subject matter jurisdiction due to lack of ripeness, and Rule 12(b)(6) for failure to state a claim.

This was appeal from the District Court for the Western District of Texas.

An underlying car accident lawsuit was pending in Texas state court against RTI Services and Aurelia Silva. RTI held a $1 million primary insurance policy and a $5 million excess policy with Century Surety at the time of the accident. The excess policy required notice to Century within 14 days of notifying the primary insurer. RTI notified the primary insurer the day after the accident but did not notify Century until almost a year later. Century filed a declaratory judgment action seeking a ruling that it has no duty to indemnify RTI due to the late notice.

RTI and Silva sought dismissal of Century’s complaint pursuant to Rules 12(b)(1) and 12(b)(6) arguing that the lawsuit was nonjusticiable or premature since no duty to defend exists while the underlying lawsuit is pending. The court agreed. The issue of an insurer’s duty to indemnify is not ripe for adjudication while an underlying lawsuit is still pending, unless the narrow Griffin exception applies, because the facts proven at trial may be different from the pleadings.

The Griffin exception is: “if the insurer has no duty to defend, and the same reasons that negate a duty to defend also foreclosure any possible duty to indemnify, then the indemnity question may be decided early.” Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997). The Griffin exception allowing early adjudication of the duty to indemnify does not apply when the insurer is only seeking a declaration regarding the duty to indemnify, but not the duty to defend.

The court concluded that any duty to indemnify would be speculate and hypothetical and because the duty to defend differs from the duty affecting indemnity, the indemnity issue was nonjusticiable. The district court’s judgment was affirmed.

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INFORMATION SOUGHT BY ZURICH FROM A MEDIATOR IS CONFIDENTIAL, PRIVILEGED, AND PROTECTED FROM DISCLOSURE AND OFFENSIVE USE DOCTRINE DID NOT APPLY

In Zurich Am. Ins. Co. v. Nautilus Ins. Co., No. 3:25-CV-296-N, 2025 U.S. Dist. LEXIS 200222* (October 9, 2025), the United States District Court for the Northern District of Texas, Dallas Division granted Nautilus’s motion to quash the deposition subpoena served on a mediator and for protective order.

The Court also awarded reasonable attorney’s fees and expenses to both Nautilus and the mediator for costs incurred in preparing the motion.

Zurich filed a declaratory judgment action regarding Nautilus’s duty to defend and indemnify certain insureds. The parties participated in mediation of an underlying state court lawsuit and reached a settlement agreement. Nautilus and Zurich disputed whether the declaratory judgment action was included in the settlement. Zurich subpoenaed the mediator seeking testimony and documents (such as notes) from the mediation. The mediator’s Rules, incorporated into the mediation agreement, prohibited disclosure of mediation communications. Nautilus argued that the court should quash the subpoena because it violates the mediation agreement. The court agreed with Nautilus.

The Court reasoned that both the Texas ADR Act and the parties’ mediation agreement protected the mediator’s communications and documents from disclosure. Zurich attempted to convince the court to apply the “offensive use doctrine,” wherein a party cannot “invoke the jurisdiction of the courts in search of affirmative relief, and yet, on the basis of privilege, deny a party the benefit of evidence that would materially weaken or defeat the claims against her.” Alford v. Bryant, 137 S.w.3d 916, 921 (Tex.App.—Dallas 2004). The Court rejected Zurich’s argument that the offensive use doctrine applied, finding that Nautilus’s counterclaim was defensive rather than seeking affirmative relief. The Court also determined that the mediator’s Rules, which both parties agreed to, provided for attorneys’ fees when a party violates the confidentiality provisions.

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FIRE LOSS TO PROPERTY AFTER A FORECLOSURE SALE DOES NOT ENTITLE MORTGAGEE WHO PURCHASED THE PROPERTY AT FORECLOSURE TO POLICY BENEFITS

In Lakeview Loan Serv. v. Am. Risk Ins. Co., No 3:24-CV-1638-N, 2025 U.S. Dist. LEXIS 200127*, (October 9, 2025), the United States District Court for the Northern District of Texas, Dallas Division granted American Risk Insurance Company’s motion for summary judgment and denied Lakeview’s motion for partial summary judgment, dismissing both the breach of contract claim and the extracontractual Texas Insurance Code claims.

ARI issued a homeowner’s insurance policy to Elsie Castillo with Lakeview listed as additional loss payee and mortgagee. After Castillo defaulted on the mortgage, Lakeview foreclosed on the property and purchased it at auction for $220,000 on September 20, 2022. When Castillo did not vacate the property, an eviction ensued. The property burned down on November 28, 2022, during a scheduled eviction. Lakeview filed a claim with ARI for the fire loss, which ARI denied on July 24, 2023.

Lakeview filed suit to recover policy benefits but ARI moved for summary judgment on the basis that Lakeview was not entitled to policy proceeds. Lakeview also moved for partial summary judgment on the basis that it was entitled to proceeds as a result of Castillo’s assignment of the policy to Lakeview.

First, the court determined that the policy unambiguously designated Lakeview as an additional loss payee and not an insured party entitled to coverage. Next, the court determined that Lakeview was not entitled to recover contractual or extracontractual damages under the policy.

Lakeview purchased Castillo’s property at foreclosure for $220,000, which exceeded the unpaid principal balance of $201,014.50, on September 20, 2022. The court determined that Lakeview was not entitled to policy proceeds because: (1) as mortgagee rather than insured, Lakeview’s rights were contingent on conditions it failed to meet; (2) Lakeview did not notify ARI of the ownership change after foreclosure as required by the mortgage clause; (3) Castillo’s debt was fully satisfied by the foreclosure sale proceeds, leaving no remaining indebtedness to be covered; and (4) Castillo had no insurable interest at the time of the fire loss, having been divested of equitable title at foreclosure.

The court granted ARI’s motion for summary judgment but denied Lakeview’s motion for partial summary judgment.

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SUMMARY JUDGMENT GRANTED IN FAVOR OF STATE FARM LLOYDS BECAUSE THERE WAS NO EVIDENCE OF UNREASONABLE INSPECTION

In Terrazas v. State Farm Lloyds, No. P:24-CV-00039-DC, 2025 U.S. Dist. LEXIS 201925 (October 10, 2025), the United States District Court the Western District of Texas, Pecos Division granted State Farm’s Motion for Partial Summary Judgment and dismissed Terrazas’s claims under Sections 541.060(a)(7) and 541.152(b) of the Texas Insurance Code with prejudice.

Terrazas held a homeowner's policy with State Farm. Terrazas filed a claim for hail damage after a storm on October 14, 2022. State Farm’s Claims Specialist inspected interior damage but couldn’t access the roof herself. Instead, State Farm hired SeekNow to inspect the roof, which found minor hail damage. Defendant offered $3,280.54 for structural damage and $4,723.71 for personal property. Terrazas demanded $236,911.73, claiming the entire roof needed replacement because the roofing material is no longer produced. State Farm then retained another expert who re-inspected the home and reviewed the reports made by prior inspectors. State Farm’s experts determined damage was primarily due to construction and architecture issues and lack of maintenance.

Terrazas filed suit alleging breach of contract and breach of the Texas Insurance Code alleging the inspection was unreasonable. State Farm moved for partial summary judgment.

Terrazas asserted that the first inspector did not manage to get on the roof herself and that SeekNow was not a permissible substitute for State Farm. The court was not persuaded and held that it is sufficient to create a genuine dispute of the State Farm acting unreasonably in its investigation or that State Farm knew it was acting unreasonably. The court determined that State Farm's multiple inspections, including hiring third-party experts, constituted a reasonable investigation. The court concluded that a bona fide dispute existed regarding the cause and extent of damage, which as a matter of law precludes liability for Texas Insurance Code violations.

Terrazas also admitted that she could not identify anything that State Farm “failed to do” and her complaint was that the amount offered by State Farm was too low. However, the court stated that there was no evidence that liability under the policy had become “reasonably clear,” nor was there any evidence that State Farm was actually aware that its conduct was unreasonable. When a homeowner merely contests the amount offered by an insurer based on competing estimates without providing evidence that the insurer’s investigation was unreasonable, there is no genuine dispute of material fact to preclude summary judgment on Texas Insurance Code claims.

In sum, where an insurer conducts multiple inspections of property damage (including hiring third-party experts), offers payment based on those inspections, and there exists a bona fide dispute over the cause and scope of damages, the insurer has not violated Sections 541.060(a)(7) and 541.152(b) of the Texas Insurance Code as a matter of law.

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DISPUTE OVER COMPLIANCE WITH A CONDITION PRECEDENT IS A QUESTION OF COVERAGE

A Texas Court of Appeals recently found that whether an insured complied with a condition precedent involving amounts “actually and necessarily spent” is a coverage question.

Allen v. Tex. Windstorm Ins. Ass'n, No. 13-23-00065-CV, 2025 Tex. App. LEXIS 7625 (Tex. App.—Corpus Christi Oct. 2, 2025, no pet. h.), involves a coverage dispute between the Texas Windstorm Insurance Association (TWIA) and Lisa Allen, the executor for her mother, who was the insured under a windstorm policy issued by TWIA. The policy provided dwelling and personal property coverage to the insured, and the insured purchased additional coverage through a personal property replacement cost endorsement.

The insured filed a claim for damage due to Hurricane Harvey. TWIA accepted the claim “in full” and paid certain amounts under the policy. However, a dispute arose when TWIA found that Allen failed to provide sufficient documentation showing that the estate had “actually and necessarily spent” any amount to replace the damaged personal property, as required by the endorsement. Allen eventually filed suit claiming that TWIA breached the policy by failing to pay the estate in accordance with the endorsement. TWIA moved for summary judgment, arguing that, because this was a dispute about the amount of loss, rather than coverage, Allen’s exclusive remedy was to demand appraisal. The trial court granted the motion, and Allen challenged the decision in this appeal.

The court of appeals here found that the case here involved a coverage dispute concerning questions of liability, rather than a question of damages. The endorsement at issue contained language which made actual repair or replacement of the damaged property a condition precedent to recovery of replacement cost damages. Citing to the endorsement, TWIA notified Allen that, because the documentation submitted did not indicate that the estate had spent any amount for replacement of personal property, TWIA was unable to make any payment under the replacement cost provisions of the policy. The court found that TWIA’s notice amounted to a determination that the estate had failed to comply with a condition precedent, thus precluding coverage under the endorsement. Accordingly, this was a dispute over coverage, not the amount owed. The court noted that resolving the issue at hand went beyond mere valuation questions, and would require an appraiser to construe the policy, which is something generally reserved to the judiciary. Thus, the court of appeals reversed the trial court’s granting of TWIA’s motion and found that the estate was entitled to seek judicial relief and remanded the case for further proceedings.

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WESTERN DISTRICT OF TEXAS FINDS THAT POLICY DOES NOT COVER REPLACEMENT OF ENTIRE PIPE WITH UPGRADED MATERIAL

The Western District of Texas recently ruled in favor of an insurer, granting summary judgment as to certain claims made by the insured as beyond the scope of coverage.

In Rio Perla Props., L.P. v. Affiliated FM Ins. Co., No. SA-24-CA-00689-XR, 2025 U.S. Dist. LEXIS 196387 (W.D. Tex. 2025), the insurer issued a policy covering “all risks of physical loss or damage,” subject to several exclusions and limitations, including an exclusion for wear and tear, deterioration, or latent defects. The policy included a Demolition and Increased Cost of Construction provision that extended coverage to additional costs incurred based on an obligation to comply with a law or ordinance, if such law or ordinance was enforced as a direct result of the loss. The insured filed a claim after a water leak at the subject property, a micro-brewery and restaurant, caused flooding and damage to floorboards. An investigation later showed that the leak was caused by breaks in the drain line. Later on, four disputes arose between the parties: (1) the scope of damage covered; (2) whether the policy covered upgraded material; (3) whether the policy covered incidental costs; and (4) whether the insured was entitled to damages pursuant to its extracontractual claims.

First, the court found that the policy did not require the insurer to replace the entire drain line. The insured sought to cover the replacement of the entire drain line, with upgraded piping materials. However, the insurer found that the policy covered replacement of only the 20 feet of the drain line that was directly damaged by the water leak, with the same material or with a material of like quality. The court held that the insured did not show that the leak caused damage to the entire drain line. The only evidence presented was experts’ testimony that the additional piping would probably fail in the future. However, the court found that the policy did not obligate the insurer to fix underlying issues that may produce a covered event. Further, the insured failed to produce evidence that the Demolition and Increased Cost of Construction provision provided coverage. Although the insured’s expert opined that the replacement of the entire pipe was necessary to conform to the relevant building code, the court found it unreasonable to conclude that the building code required replacement of the drain pipe. Thus, the court granted summary judgment in favor of the insurer for this claim.

The court also found that the policy did not require the insurer to pay for upgraded material because the insured failed to point to evidence that the suggested material was of the “like, size, kind and quality” as the original piping material. The court granted summary judgment as to the insured’s breach of contract claim with respect to costs incurred in using the upgraded material in place of the original.

Lastly, the court found that the insurer did not provide enough evidence to dispel a fact question on whether the insurer breached the policy by withholding coverage for the insured’s additional incidental costs claims. Because this claim survived summary judgment, the court also found that the insured’s extracontractual claims also survived.

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SOUTHERN DISTRICT OF TEXAS COURT PRESENTED WITH THREE IDENTICAL CASES REGARDING WAIVER OF APPRAISAL

The Southern District of Texas was recently presented with three cases with three nearly identical motions for partial summary judgment, filed by insureds, on an insurer’s waiver of policy appraisal clause.

The three cases, cited below, all delt with wind claims made under Allstate policies which covered the insureds’ homes. In each of these cases, the insured’s counsel filed nearly identical motions, arguing that Allstate waived its contractual right to invoke appraisal to resolve a dispute on the amount of loss. Puente v. Allstate Vehicle, Civil Action No. 7:24-CV-00291, 2025 U.S. Dist. LEXIS 192809 (S.D. Tex. 2025); Trevino v. Allstate Vehicle, Civil Action No. 7:24-CV-00297, 2025 U.S. Dist. LEXIS 192795 (S.D. Tex. 2025); Ramos v. Allstate Vehicle, Civil Action No. 7:24-CV-00343, 2025 U.S. Dist. LEXIS 192811 (S.D. Tex. 2025).

The Southern District of Texas found that in each case, Allstate did not waive its contractual right to invoke appraisal. The party challenging appraisal based on waiver bears the burden of establishing (1) an unreasonable delay between the point of impasse in negotiations and the appraisal demand; and (2) prejudice resulting from the delay. First, the court found that the issue was not ripe because Allstate had not invoked appraisal in any of the cases. Because no demands had been made, the court declined to resolve the waiver defense prematurely. However, even assuming the issue were ripe, the court found that the insureds failed to show prejudice. In each case, the insureds argued that they had been prejudiced by Allstate’s delay in invoking appraisal because they incurred litigation expenses. However, the insureds were able to invoke appraisal themselves. By bypassing the appraisal process, the insureds assumed the costs of litigation.

The insureds also put forth an argument that they had been prejudiced by the threat of an appraisal demand, because Allstate could theoretically invoke appraisal “on the courthouse steps at trial.” However, the court found this argument unpersuasive. The court found that this alleged prejudice was not only speculative, but also unsupported. Thus, the insureds in each of these cases were not entitled to summary judgment on the waiver issue. Each of the insureds’ motions were denied.

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TIMING IS EVERYTHING – INSURED’S CLAIMS BARRED BY LIMITATIONS

A Texas court of appeals recently affirmed a trial court’s ruling, finding that an insured’s claims were time-barred and also dismissed a fraud claim against the insurer.

Lopez v. State Nat'l Ins. Co., No. 13-24-00041-CV, 2025 Tex. App. LEXIS 7492 (Tex. App.—Corpus Christi Sep. 25, 2025, no pet. h.), involves a claim made under a homeowners insurance policy, issued by State National Insurance Company, and managed by Wellinton Risk Insurance Agency, Inc. The insureds submitted a claim for water damage, and the insurance agency informed the insureds that an inspection could be requested and that they would have to submit a sworn proof of loss before their claim could be accepted. The property was inspected and State National denied the claim, after the inspection revealed that the damage did not result from a “sudden and unexpected discharge of water” as required by the policy. The insureds then spent over $20,000 to make repairs. Months later, the insureds submitted a sworn proof of loss and filed suit against State National, alleging breach of contract and fraud.

First, State National moved for summary judgment, which was granted by the trial court, arguing that the statute of limitations had run. The court of appeals here found that the trial court did not err in granting such. The statute of limitations for a breach of contract claim is generally four years from the day the cause of action accrues. However, parties may agree to contract for a shorter period. The Texas Insurance Code, however, limits how much the time period can be shortened, and provides that a contractual limitations period may not end before two years from the date the insurer accepts or rejects the claim. Here, the policy provided for a two-year limitations period, and the insured filed suit almost five months after it expired. Although the insureds tried to argue that they did not knowingly or voluntarily accept the provision, never agreed to shorten the statute of limitations, and argued that the policy was ambiguous, the court found these claims unpersuasive. The court found that language of the policy was clear, and that ambiguity does not exist simply because the parties interpret the policy differently. The court affirmed the trial court’s decision and concluded that the insureds failed to raise a fact issue as to any element of the defense or show any exception.

The court of appeals also found that the insureds’ fraud claim was properly dismissed. The insureds argued that they relied on a representation by an inspector who allegedly told them that the claim was covered, and relied on this representation to make the over $20,000 in repairs to the home. However, the court found that State National conclusively established that the insureds could not have justifiably relied on this alleged misrepresentation, when State National and the insurance agency diligently informed the insureds that the claim was denied, provided reasons why, and gave instructions on how to proceed if they disagreed with State National’s assessment.

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DISMISSAL OF CLAIM PROPER WHEN INSURED FAILED TO PROVIDE EVIDENCE OF MISREPRESENTATION

The U.S. District Court for the Western District of Texas recently granted an insurer’s motion for summary judgment, dismissing one of the insured’s claim under the Texas Insurance Code.

In Edmondson v. State Farm Lloyds, No. 5:23-CV-1504-JKP, 2025 U.S. Dist. LEXIS 189925 (W.D. Tex. 2025), the insured filed a claim for hail and wind damage. State Farm had a vendor conduct an initial inspection and found that the costs of repair fell below the deductible. The insured’s contractor reported additional damage twice, with supporting photographs, but State Farm determined that the photos did not show accidental direct physical loss, that reinspection was not necessary, and that the repair costs were still under the deductible. The insured retained a public adjuster, and State Farm approved a reinspection. State Farm also had two individuals review the claim, and they determined that the submitted photos did not show damage consistent with hail and maintained State Farm’s initial decision. The insured filed suit and State Farm moved to dismiss claims made under the Texas Insurance Code.

Under statutory and common law, an insurer will only be liable if it “knew or should have known that it was reasonably clear that the claim was covered” and is not liable for bad faith if it has a reasonable basis to deny or delay payment of a claim. However, an insurer cannot insulate itself from bad faith liability by investigating a claim in a manner calculated to construct a pretextual basis for denial. In Texas, what constitutes as a reasonable investigation varies depending on the circumstances. Here, although the court found that the insured presented enough evidence to raise a factual dispute as to the reasonableness of the investigation, the court also found that the insured did not present evidence supporting his claims of misrepresentation. Although not all sections of the Texas Insurance Code contain a misrepresentation component, § 541.060(a)(7) does. The court dismissed the insured’s claims under this section only.

Editor’s note: Although insureds typically make claims under the “laundry list” of violations of the Texas Insurance Code, this case highlights the importance of establishing, and having insurers point to the lack of evidence for, each of the components under each section.

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Texas Insurance Law Newsbrief - November 11, 2025

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