Texas Insurance Law Newsbrief - September 23, 2025
NO, REALLY! NO INDEPENDENT INJURY & NO TORT RECOVERY AFTER APPRAISAL AWARD PAID
The Fifth Circuit Court of Appeals reaffirmed that insureds (under Texas law) may not recover tort claims once the insured has been made whole under the policy following appraisal absent a showing of an “independent injury.”
In Wilhite v. Ark Royal Ins. Co., 2025 U.S. App. LEXIS 23150 (5th Cir. September 8, 2025), Gregory Wilhite submitted a homeowner’s insurance claim to Ark Royal due to a burst water pipe. Ark Royal conducted two inspections and made payments to Wilhite based on its inspections’ findings. Wilhite thought his payments were too low, and he invoked his policy’s right to appraisal. The appraisal resulted in a higher damages award, which Ark Royal paid the balance in full along with statutory interest. Nevertheless, Wilhite then sued Ark Royal in state court with causes of action for (1) breach of contract, (2) violations of the Prompt Payment of Claims Act, (3) breach of the duty of good faith and fair dealing, and (4) violations of Chapter 541 of the Texas Insurance Code—unfair methods of competition and unfair or deceptive acts or practices.
Ark Royal removed the case to federal court and moved for summary judgment, arguing that Wilhite’s claims were barred due to having received the full appraised recovery. Wilhite agreed that his contract-based claims (breach of contract claim and Prompt Payment of Claims Act) were barred but argued that his tort-based claims were not. The Federal District Court granted Ark Royal’s motion for summary judgment, and Wilhite appealed to the Fifth Circuit.
Citing its months-old precedent, Mirelez v. State Farm, (127 F.4th 949 (5th Cir. 2025)), and applicable Texas law (Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 135 (Tex. 2019)) the Fifth Circuit affirmed the District Court and agreed with Ark Royal: ‘“if the only actual damages that a plaintiff seeks are policy benefits that have already been paid pursuant to an appraisal provision in that policy, an insured cannot recover for bad faith under either Chapter 541 of the Texas Insurance Code or in common law tort.’” (internal quotations omitted). Accordingly, summary judgment in favor of Ark Royal was affirmed.
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SUMMARY JUDGMENT PROPER WHEN INSURED CAN’T ESTABLISH NEWLY DISCOVERED PROPERTY DAMAGE WAS RELATED TO STORM
A Federal District Court Judge for the Western District granted summary judgment in favor of the insurer on a homeowner policy claim for storm damage.
Chilobe v. State Farm Lloyds, No. 1:23-CV-1229-DAE, 2025 Lexis 487622 (W.D. Tex. 2025). The insured suffered damage to its roof from a storm, which the insurer had inspected, determined the cost of repair was lower than the deductible, and denied the claim. The insured later produced a cost estimate which included previously undiscovered water damage but did not establish the additional damages were caused by the storm. After the insured filed suit, the insurer moved for summary judgment on the basis that the insured could not meet its burden to prove the storm in question caused the additional damages, the bad faith claim was at most a bona fide coverage dispute, and the prompt payment claim failed because the lack of payment was due to the claim falling below the deductible amount. The District Court Judge agreed with State Farm, granted its motion for summary judgment, and dismissed the case with prejudice.
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ADDING TORTFEASOR TO UIM CASE LATE DOESN’T DEFEAT DIVERSITY JURISDICTION IN FEDERAL COURT
A Federal District Court Judge from the Southern District denied a motion to remand a case back to state court holding that a UIM insured in a motor vehicle accident did not establish the elements necessary to prove the tortfeasor was properly joined sufficient to defeat diversity jurisdiction.
Murray v. Combined Transp. Inc., No. H-25-2290, 2025 Lexis 332431 (S.D. Tex. 2025). After an injured insured filed a UIM case in state court, the UIM carrier removed it to federal court. The insured’s lawyer then joined the tortfeasor (who was allegedly uninsured) by bringing a declaratory judgment action to determine that driver’s liability and damages and the joinder of the tortfeasor would defeat diversity jurisdiction (because the insured and the tortfeasor were both Teas residents). The Court determined that the insured did have the legal ability to join the tortfeasor but ultimately determined that the insured did not allege all four elements needed to require a remand because he failed to establish the ripeness of the UIM claim. The Court explained: “An action for declaratory relief against an insurer to resolve coverage disputes may be ripe if the complaint Includes allegations that: (1) the insured is entitled to underinsured motorist benefits; (2) an underinsured motorist is liable for the insured’s injuries; (3) the insured claimed policy benefits; and (4) the insurer refused to pay.” The District Court Judge then denied the UIM plaintiff’s motion to remand.
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FEDERAL MAGISTRATE JUDGE ALLOWS INSURED TO REPLEAD BAD FAITH CLAIMS AND ALLOWS DISCOVERY TO PROCEED IN DENYING MOTION TO DISMISS
A Federal Magistrate Judge in the Western District recently allowed an insured to amend his complaint and denied an insurer’s motion to dismiss claims brought for violation of the Texas Insurance Code and breach of contract due to the insurer’s allegedly improper underpayment of first-party property damage claims.
Price v. State Farm Lloyds, No. 1:25-CV-1049-ADA, 2025 Lexis 326085 (W.D. Tex. 2025) involved storm damage to the insured’s home, and the insured claimed the adjuster conducted an inadequate investigation and inspection, causing unreasonable delays, underpayment of the claim, and the insured couldn’t complete necessary repairs. The insurer removed the case from state court to federal court and then filed a motion to dismiss for failure to state a claim for relief. The Judge determined that while the insured failed to sufficiently plead the claim under Tex. Ins. Code § 541.050(a)(1), the insured should be allowed to amend her complaint and proceed on the other claims. The Court found that the insured “has sufficiently stated her non-fraud-based claims for relief” to give the insurer fair notice of the claim and grounds upon which it rests and that the allegations of bad faith are “better resolved after the benefit of discovery.” The Federal Magistrate Judge recommended granting the insured’s motion for leave to file an amended complaint and allowing the case to proceed.
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INSURED FAILED TO PROVE STORM WAS SOLE CAUSE OF ROOF DAMAGE AND BAD FAITH SUIT DISMISSED
A Federal District Court Judge from the Northern District adopted the Magistrate Judge’s recommendations in dismissing the contractual and bad faith claims against an insurer.
In AZ Wealth Big Springs, LLC v. Third Coast Ins. Co., No. 1:23 CV-223-H, 2025 Lexis 455956 (N.D. Tex. 2025), the insurer assigned a property damage inspection to a TPA who then assigned it to an Independent Field Adjuster. After inspections by the Field Adjuster and an engineer, the TPA told the insured that further investigation was needed, and the carrier ultimately made more than $575,000 in payments to replace the roof. The insured still sued, alleging violations of the Texas Insurance Code and the duty of good faith and fair dealing, and both parties filed motions for summary judgment over whether the storm damage was the sole cause of the damage to the roof. The Court determined that the insured failed to provide sufficient evidence that the storm at issue was the sole cause of the alleged roof damage, overruled the insured’s objections to the Magistrate Judge’s findings, granted the insurer’s motion for summary judgment in full, and dismissed the suit.
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