Summary
refusing to consider claim not alleged as theory of recovery in complaint
Summary of this case from Tri Core Incorporated v. Northland Insurance CompanyOpinion
No. 3-98-CV-2490-BD
February 14, 2000
MEMORANDUM OPINION AND ORDER
Defendant State Farm Lloyds has filed a motion for summary judgment or, in the alternative, motion for partial summary judgment. For the reasons stated herein, the motion is granted in its entirety.
I.
Plaintiffs George and Karia Bunting were insured under a standard Texas Homeowner's Policy issued by Defendant State Farm Lloyds. The policy insures against physical loss to residential dwellings caused by a variety of occurrences, including "Windstorm, Hurricane and Hail." (Def. App. at 10, Section I — Perils Insured Against). Defendant agreed to promptly investigate any claims and pay for repairs to the damaged structure. ( Id. at 13-14, Section I — Conditions ¶ 3). The policy also contains a provision for the appraisal of property damage:
If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent, independent appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers will choose an umpire . . . The two appraisers will then set the amount of loss, stating separately the actual cash value and loss to each item . . . If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by any of these three and filed with us will set the amount of the loss. Such award shall be binding on you and us.
( Id. at 14, Section I — Conditions ¶ 7).
On March 24, 1996, plaintiffs suffered hail damage to the roof of their home. (Plf. Response, Exh. A ¶ 7). They filed a claim with defendant on April 30, 1996. (Def. App. at 27, ¶ 5). The claim was assigned to Tod Falcomata, who inspected the roof on May 21, 1996. ( Id. at 28, ¶ 7). Falcomata estimated the cost of repairs at $4,004.69 and sent plaintiffs a check in that amount, less their $250 deductible. ( Id.; Plf. Response, Exh. A ¶ 11). Plaintiffs were dissatisfied with this settlement and demanded a reinspection with their roofer present. ( Id. at 31, ¶ 5). Defendant sent another adjuster to inspect the roof on June 12, 1996. However, no additional damage was found. ( Id. at 32, ¶¶ 6 7).
On July 26, 1996, plaintiffs formally requested an appraisal under the provisions of their homeowner's policy. ( Id. at 43). Defendant designated J.O. Lochridge of Unified Building Services as its appraiser. ( Id. at 46). Lochridge, in turn, assigned the case to Allen Neff. ( Id. at 71, ¶ 5). Plaintiffs selected Eric Foerster of Elite Roofing as their independent appraiser. (Plf. Response, Exh. A ¶ 22). However, Foerster subsequently left the company and Scott Hamilton took over as his replacement. (Def. App. at 93). Al Wininger was chosen as the umpire. ( Id. at 61, ¶ 14). Neff, Hamilton, and Wininger inspected plaintiffs' roof on January 16, 1997. ( Id. ¶ 10). They concluded that there was no hail damage and only $950 in wind damage. ( Id. at 68). This was $3,054.69 less than the settlement paid by defendant. Plaintiffs disagreed with defendant's interpretation of the appraisal award, maintaining that the panel had found an additional $950 in roof damage. ( Id. at 35, ¶ 6).
Unable to resolve this dispute, plaintiffs filed suit in state court for: (1) breach of contract; (2) breach of the duty of good faith and fair dealing; and (3) violations of the Texas Deceptive Trade Practices Act and Texas Insurance Code. Defendant timely removed the case to federal court and filed a motion for summary judgment. The legal issues have been briefed by the parties and this matter is ripe for determination.
Federal jurisdiction is proper because the parties are citizens of different states and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332.
II.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 113 S.Ct. 136 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991).
A movant who does not have the burden of proof at trial must point to the absence of a genuine fact issue. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir. 1995); Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The burden then shifts to the nonmovant to show that summary judgment is not proper. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The non-movant may satisfy this burden by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993); Reid v. State Farm Mutual Automobile Insurance Co., 784 F.2d 577, 578 (5th Cir. 1986). However, conclusory statements and testimony based on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 945 F.2d at 1131.
III.
As a preliminary matter, defendant objects to the Affidavit of George Bunting because it is not based on personal knowledge, contains hearsay and contradictory statements, and "is so vague and ambiguous as to be completely meaningless." (Def. Mot. to Strike at 1). The Court has determined that only two of the challenged statements in this affidavit are necessary to the disposition of the pending motion. First, Bunting alleges that he "received an estimate of $9,980.00 from Elite Roofing as the cost to make necessary repairs to the roof of my residence." (Plf. Response, Exh. A ¶ 14). He also recounts the details of a conversation with Eric Foerster upon learning that defendant designated Allen Neff as its appraiser. According to Bunting, "Mr. Foerster informed me that Allen L. Neff had a reputation in the roofing industry of being rude and unfair to homeowners and biased in favor of the insurance company when appraising roof damage for the insurance industry." (Id., Exh. A at ¶ 27). Defendant contends that both these statements constitute inadmissible hearsay.
The Court agrees. The estimate prepared by Elite Roofing and the remarks made by Eric Foerster are clearly "offered in evidence to prove the truth of the matter asserted." See FED. R. EVID. 801(c). Accordingly, the hearsay objection is sustained and this evidence will not be considered for any purpose.
Plaintiffs contend that the estimate from Elite Roofing is "not necessarily offered for the truth of the matter, but for the fact that the Plaintiffs received an estimate that was in excess of the appraisal figure determined by State Farm." (Plf. Resp. to Mot. to Strike at 5). The fact that plaintiffs may have received such an estimate is irrelevant to any issue in this case.
IV.
The linchpin of plaintiffs' case is their breach of contract claim. Plaintiffs contend that defendant breached the appraisal provision of the homeowner's policy by: (1) failing to select an independent appraiser as required by the contract; (2) conducting the appraisal with substitute appraisers who were not designated by either party; (3) altering the Memorandum of Appraisal after it was signed by plaintiffs; and (4) appraising the damage to their roof at an amount substantially lower than defendant's original settlement offer, the estimate of another roofing company, and the actual cost of replacement. Plaintiffs further allege that defendant breached the insurance policy by not paying for water damage to the interior of their home.A.
Under Texas law, an appraisal award made pursuant to the terms of an insurance contract is binding and enforceable. Wells v. American States Preferred Insurance Co. 919 S.W.2d 679, 683 (Tex.App.-Dallas 1996, writ denied); Barnes v. Western Alliance Insurance Co., 844 S.W.2d 264, 267 (Tex.App.-Fort Worth 1992, writ dism'd by agr.). Such an award may be set aside only if: (1) it was made without authority; (2) it was the result of fraud, accident, or mistake; or (3) it was not in substantial compliance with the terms of the contract. Wells, 919 S.W.2d at 683; Providence Lloyds Insurance Co. v. Crystal City Independent School District, 877 S.W.2d 872, 875-76 (Tex.App.-San Antonio 1994, no writ). Every reasonable presumption must be indulged in favor of the award. Providence Lloyds, 877 S.W.2d at 875; Barnes, 844 S.W.2d at 267. The party contesting the award bears the burden of proving that it should be set aside. Barnes, 844 S.W.2d at 267.
B.
None of the arguments advanced by plaintiffs justify setting aside the appraisal award. First, plaintiffs claim that the award was not in substantial compliance with the terms of the contract because Alien Neff was not an "independents appraiser. The only evidence offered in support of this contention is Eric Foerster's hearsay statement that Neff "had a reputation in the roofing industry of being rude and unfair to homeowners and biased in favor of the insurance company . . ." (Plf. Motion, Exh. A ¶ 27). The Court has previously ruled that this evidence is inadmissible. See Part III, supra. Even if this statement is considered, it does not disqualify Neff. Most courts hold that an appraiser is "independent" unless he has a direct, pecuniary interest in the outcome of the appraisal. Land v. State Farm Mutual Insurance Co., 600 A.2d 605, 607 (Pa.Super. 1991); Central Life Insurance Co. v. Aetna Casualty Surety Co., 466 N.W.2d 257, 261 (Iowa 1991); Northern Assurance Co., Ltd., of London v. Melinsky, 213 N.W. 70, 71 (Mich. 1927). But see Holt v. State Farm Lloyds, 1999 WL 261923 at *4 (N.D. Tex. April 21, 1999) (Buchmeyer, C.J.) (summary judgment not proper where evidence showed that appraiser derived more than one-quarter of his income from work done for insurance company). Plaintiffs offer no such evidence here.
Next, plaintiffs contend that none of the appraisers who participated in the process were properly designated by the parties. Plaintiffs point out that defendant originally selected J.O. Lochridge as their appraiser, while they chose Eric Foerster. However, the appraisal was actually conducted by Allen Neff and Scott Hamilton. Plaintiffs allege that they never agreed to substitute appraisers, nor did they authorize the alteration of the Memorandum of Appraisal to reflect this change. Despite these irregularities, the Court is unable to conclude that the appraisal award was the result of fraud, accident, or mistake. The evidence shows that both these substitutions were made by the appraisal companies, not defendant. (Def. App. at 71, ¶ 5; id. at 93). Moreover, Hamilton contacted plaintiffs after Foerster left Elite Roofing to let them know of his involvement in the case. ( Id. at 93-94). Plaintiffs did not object to the substitution at that time and allowed the appraisal to go forward. Under these circumstances, Hamilton had implied or apparent authority to act of behalf of plaintiffs. See Toonen v. United States Automobile Ass'n, 935 S.W.2d 937, 941 (Tex.App.-San Antonio 1996, no writ).
Plaintiffs also contend that Scott Hamilton did not participate in the appraisal process because he never signed the award. Instead, they suggest that the award was signed by an "unknown third-party." (Plf. Response at 13). In support of this rather novel argument, George Bunting purports to analyze the signature at the bottom of the award and concludes that it "is not the signature of Scott Hamilton." ( Id., Exh. A ¶ 36). The Court initially observes that Bunting lacks the qualifications to render such an opinion. See FED. R. EVID. 901(b)(2) (non-expert opinion as to the genuineness of handwriting must be based on familiarity not acquired for purposes of litigation). Moreover, both Allen Neff and Al Wininger testified that Hamilton attended the appraisal. (Def. App. at 61, ¶ 13; id. at 81, ¶ 8).
Plaintiffs also claim that the $950 appraisal award is tainted because it is substantially lower than the amount originally offered by defendant, the estimate of another roofing company, and the actual cost of replacement. All this may be true. However, the mere fact that plaintiffs received higher bids from other appraisers does not invalidate the appraisal process.
Finally, plaintiffs allege that defendant breached the insurance contract by failing to pay for water damage caused by widespread leaking after the hailstorm. This claim was raised for the first time in plaintiffs' response to defendant's motion for summary judgment. It was never alleged as a theory of recovery in their complaint. Moreover, there is absolutely no evidence that plaintiffs ever sought insurance benefits for water damage to the interior of their home. The failure to pay a claim that was never made cannot constitute a breach of contract.
Defendant's motion for summary judgment is granted as to this claim.
V.
Plaintiffs also sue for breach of the duty of good faith and fair dealing, violations of the Texas Deceptive Trade Practices Act, and violations of the Texas Insurance Code. Having found that defendant did not breach the insurance policy, these extra-contractual claims fall like a house of cards.
Plaintiffs allege that defendant violated the following provisions of the Texas Deceptive Trade Practices Act:
(1) Representing that the insurance policy has characteristics, uses, or benefits which it does not have;
(2) Representing that the policy is of a particular standard, quality, or grade when it was of another;
(3) Representing that the policy confers or involves rights, remedies, or obligations which it does not have or involve; and
(4) Failing to disclose information concerning the policy which was known at the time of the transaction with the intent to induce plaintiffs to enter into the transaction.
(Plf. Am. Complaint ¶ 72). See TEX. Bus. COMM. CODE ANN. § 17.46(b)(5), (7), (12) (23) (Vernon Supp. 1999). A violation of the Texas Deceptive Trade Practices Act is also a violation of the Texas Insurance Code. See TEX. INS. CODE ANN. art. 21.21, § 16(a) (Vernon Supp. 1999). In addition, plaintiffs seek damages under Article 21.55 of the Texas Insurance Code for failure to promptly pay their property damage claim. This statute requires an insurer to accept or reject a claim within 60 days or pay "18 percent of the amount of such claim as damages, together with reasonable attorney's fees." Id. § 21.55, § 6.
As a general rule, an insured cannot prove a bad faith claim absent a breach of contract. See Republic Insurance Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995); Toonen, 935 S.W.2d at 941. The only recognized exception to this rule is if the insurer "commit[s] some act, so extreme, that would cause injury independent of the policy claim," or fails "to timely investigate the insured's claim." Stoker, 903 S.W.2d at 341; Toonen, 935 S.W.2d at 941. Plaintiffs have failed to adduce any evidence of such conduct. Nor have they shown that defendant made any misrepresentations outside the terms of the policy or engaged in unconscionable conduct. See Crawford v. Ace Sign. Inc., 917 S.W.2d 12, 13-14 (Tex. 1996) (failure to fulfill promise to perform contractual duty not actionable under DTPA). To the contrary, the summary judgment evidence shows that defendant paid this claim less than 30 days after it was filed. (Def. App. at 28, ¶ 7). Although plaintiffs were unhappy with the outcome of the appraisal process, they have failed to prove a DTPA or Insurance Code violation.
Defendants motion for summary judgment is granted as to these claims.
CONCLUSION
There are no genuine issues of material fact and defendant is entitled to judgment as a matter of law. Accordingly, defendant's motion for summary judgment is granted in its entirety.
SO ORDERED.