NO. 04-13-00608-CV

IN THE TEXAS COURT OF APPEALS FOR THE FOURTH DISTRICT 

SAN ANTONIO, TEXAS 

* * * * * 

SMITH-REAGAN & ASSOCIATES, INC., D/B/A 

SMITH-REAGAN INSURANCE AGENCY, 

 

APPELLANT, 

V.

FORT RINGGOLD LIMITED, PETE DIAZ III, 

AARON DIAZ and MONICA AGUILLON, 

APPELLEES. 

* * * * * 

On Appeal from the 381st Judicial District Court 

Starr County, Texas 

District Court Cause No. DC-02-343

* * * * * 

APPELLEES’ EN BANC MOTION FOR REHEARING

* * * * * 

Respectfully submitted, 

Brendan K. McBride

State Bar No. 24008900

Brendan.McBride@att.net

MCBRIDE LAW FIRM, of Counsel 

 to GRAVELY & PEARSON, LLP

425 Soledad, Suite 620

San Antonio, Texas 78205

(210) 227-1200 Telephone

(210) 881-6752 Facsimile 

Matthew R. Pearson

State Bar No. 0078817

mpearson@gplawfirm.com

GRAVELY & PEARSON, LLP

425 Soledad, Suite 600

San Antonio, Texas 78205

(210) 472-1111 Telephone

(210) 472-1110 Facsimile

ACCEPTED

04-13-00608-CV

FOURTH COURT OF APPEALS

SAN ANTONIO, TEXAS

4/9/2015 3:16:37 PM

KEITH HOTTLE

CLERK

 FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 4/9/2015 3:16:37 PM KEITH E. HOTTLE Clerk
2

TABLE OF CONTENTS

Page

TABLE OF CONTENTS............................................................................................................. 2

TABLE OF AUTHORITIES ........................................................................................................ 3

INTRODUCTION & SUMMARY ................................................................................................ 1

ARGUMENT & AUTHORITIES................................................................................................. 4

A. The Court Must Review The Entire Record and All of the Evidence To Resolve 

a Challenge to the Legal Sufficiency of the Evidence.............................................. 6

B. There Was Evidence Of How Business Interruption Would Have Been 

Determined. .................................................................................................................. 6

C. Smith-Reagan’s Own Brief Contradicts The Court’s Conclusion.......................... 9

CONCLUSION & PRAYER...................................................................................................... 12

CERTIFICATE OF SERVICE..................................................................................................... 13

CERTIFICATE OF COMPLIANCE............................................................................................. 13
3

TABLE OF AUTHORITIES

Page

Cases

City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005)............................................................. 6

Dow Chem. Co. v. Francis, 46 S.W.3d 237 (Tex. 2001).......................................................... 6

Henson v. Reddin, 358 S.W.3d 428 (Tex.App. – Fort Worth 2012, no pet.)...................... 6

Hidden Forest Homeowners Ass'n v. Hern, No. 04-10-00551-CV, 2011 Tex. App. LEXIS 

9566, 2011 WL 6089881 (Tex. App. -- San Antonio 2011, no pet.)(to be published)6

Kroger v. Texas Ltd. Parnership v. Suberu, 216 S.W.3d 788 (Tex. 2006)................................ 6

Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706 (Tex. 1997)......................................... 6

Smith-Reagan & Assocs. v. Fort Ringgold Ltd., No. 04-13-00608-CV, 2015 Tex. App. 

LEXIS 2291, 4 (Tex. App. -- San Antonio Mar. 11, 2015, no pet. h.)(mem. op.)...... 2
1

INTRODUCTION & SUMMARY

The Panel’s opinion in this case overlooks certain key record evidence related 

to the proof of damages that is inconsistent with the Panel’s conclusions about the 

record, and necessarily requires a different legal result than reached by the Panel. 

Given that the Panel’s opinion and judgment is based on a sufficiency of the evidence 

challenge, the Court must review all of the evidence on the record to determine 

whether there is at least a scintilla of evidence to support the jury’s verdict. 

Considering all of the evidence on the record – as the Court must – the Panel’s

conclusion that the evidence does not support the amount of business income loss 

sustained by the Hotel is erroneous and should be corrected on rehearing en banc. 

This is a dispute over the failure by an insurance agent to obtain all of the 

coverage requested for the Fort Ringgold Motor Inn in Rio Grande City, Texas (“the 

Hotel”). Appellees, Fort Ringgold Limited, Pete Diaz III, Aaron Diaz and Monica 

Guillon (collectively “Fort Ringgold”) were unable to obtain insurance benefits for 

“business interruption” losses when a massive rain storm caused massive damage 

disabling many of the rooms and causing a significant loss of income for the Hotel. 

Fort Ringgold brought this claim against its insurance agent, Smith-Reagan &

Associates, Inc. d/b/a Smith-Reagan Insurance Agency (“Smith-Reagan”) to recover 

damages for Smith-Reagan’s failure to include business interruption coverage on the 

property insurance policy for the Hotel. 
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In its opinion and judgment reversing rendering a take nothing judgment, the 

Panel concluded that there was no evidence presented on the record to show the 

amount of damages sustained by the Hotel as a result of Smith-Reagan’s failure to 

obtain requested business interruption coverage. The Panel’s opinion begins with the 

statement that there was no evidence of how business interruption damages would 

have been calculated had the coverage been obtained. Smith-Reagan & Assocs. v. Fort 

Ringgold Ltd., No. 04-13-00608-CV, 2015 Tex. App. LEXIS 2291, 4 (Tex. App. – San

Antonio Mar. 11, 2015, no pet. h.)(mem. op.). However, since no coverage was 

actually obtained, there is no way to prove what it would have been. At most, there 

would be evidence of what it probably would have been. And there was such evidence. 

David Surles, Smith-Reagan’s insurance expert, explained to the jury how business 

interruption coverage usually works and how the loss would be calculated – it would 

be based off net profit. Indeed, as explained below, Smith-Reagan’s own brief to the 

Court conceded that there was evidence from Surles about how the loss would have 

been calculated.

The Court then focused mainly on Pete Diaz’s testimony about the loss of 

gross revenues from the loss of use of many of the Hotel’s rooms and concluded that 

business interruption insurance would not have provided coverage for loss of total 

gross revenue. On that basis, the Court reversed and rendered a take nothing 

judgment against Fort Ringgold. It is true that business interruption coverage

probably would not have paid the total gross revenue for all of the damaged rooms. 
3

However, there was other critical evidence that does show the amount of coverage the 

Hotel probably would have been paid for business interruption losses had SmithReagan not failed to obtain the coverage. Specifically, Surles explained to the jury that 

the gross sales figure would have to be adjusted for the historical occupancy rate to 

arrive at how much gross revenue was lost, and then adjusted for expenses.

Thus, the jury heard that there were three items of information that were 

generally necessary to determine how much would have been paid had a standard 

business interruption policy been obtained for the Hotel: (1) the amount of gross 

revenue lost for all the unusable rooms; (2) the likely occupancy rate to determine 

how many of those damaged rooms were likely to have been rented had they not been 

damaged; and, (3) evidence of the difference in expenses due to the shutdown of 

some of the rooms. There was evidence of all three of these items. 

1. Pete Diaz testified about what would the gross rental income from all 

of the damaged rooms would have been had they all been rented 

($1.176 million). 

2. Surles testified that he had reviewed historical occupancy data for the 

Hotel and told the jury the percentage applicable to adjust the gross 

revenue to reflect the likely occupancy rate (57%).

3. Diaz testified that the Hotel had to keep its staff, pay insurance, 

mortgage and other recurring expenses and had no substantial change

in operating expenses because of the damaged rooms.

Thus, there was evidence from which the jury could determine the Hotel had 

lost as much as $670,320 (57% of $1.176 million, with no reduction for expenses). 

The jury awarded $325,000 for losses that “would not have occurred had [Smith-
4

Reagan] procured insurance for Fort Ringgold that included coverage for business 

interruption.” (CR5:181) 

There was more than a scintilla of evidence to support the jury’s determination 

of damages. If the Panel does not grant rehearing, the Court should grant rehearing 

en banc and consider these additional facts that support the jury’s award of damages. 

ARGUMENT & AUTHORITIES

The Panel’s opinion and judgment are based solely on the ground that there 

was legally insufficient evidence of the amount of damages awarded to Fort Ringgold

by the jury. The Panel’s opinion does not address the evidence showing there was an 

agreement by Smith-Reagan to procure a policy with business interruption coverage 

for the Hotel. As discussed in Appellees’ original briefing, there was sufficient 

evidence that there was such an agreement, including statements by the agent 

involved for Smith-Reagan, its Vice-President, that he had offered business 

interruption coverage but Diaz had declined it, and Pete Diaz’s testimony that he did 

not decline any of the coverage offered by Smith-Reagan except an “umbrella” policy. 

There was also evidence that Smith-Reagan had forms it would use to document 

when a client was declining offered coverage, and that business interruption coverage 

for a hotel would have been important and even “critical” for a hotel and there would 

have been an “in depth” discussion if the Hotel had declined the coverage as SmithReagan’s Vice-President claimed. (Appellees’ Brief at 1-5, 11-17) There was no 
5

dispute that Smith-Reagan did not, in fact, obtain business interruption coverage for 

the Hotel.

The Panel’s opinion also does not address the sufficiency of the evidence that 

the Hotel suffered massive storm damage that left 2/3 of the rooms unusable. (See 

Appellees’ Brief at 5-7) Indeed, the property insurer for the Hotel, which provided 

coverage for property damage but not losses of business income (because SmithReagan had not obtained business income coverage), instructed the Hotel to shut 

down the badly damaged rooms. (RR5:108-111) Thus, there was no dispute that the 

Hotel lost the ability to use 2/3 of its rooms to generate income.

The sole basis for the Panel’s judgment reversing and rendering a take nothing 

judgment against Fort Ringgold is its conclusion that the record did not establish how

much Fort Ringgold would have been paid in insurance benefits for loss of business 

income had Smith-Reagan obtain the requested business interruption insurance 

coverage. Given the record and the standard of review applicable to a post-verdict 

evidentiary sufficiency challenge, the Court should grant rehearing en banc and 

reconsider all of the evidence on the record. Considering all of the record, there is 

more than a scintilla of evidence to support the jury’s award of $325,000 in actual 

damages.
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A. The Court Must Review The Entire Record and All of the 

Evidence To Resolve a Challenge to the Legal Sufficiency of 

the Evidence.

The basis for the Panel’s opinion is a legal sufficiency challenge to the evidence 

of Fort Ringgold’s damages as awarded by the jury. A court must examine the “entire 

record” to determine if there is some evidence to support the finding. Hidden Forest 

Homeowners Ass'n v. Hern, No. 04-10-00551-CV, 2011 Tex. App. LEXIS 9566, 19, 2011 

WL 6089881 (Tex. App. -- San Antonio 2011, no pet.)(mem. op.)(citing Dow Chem. Co. 

v. Francis, 46 S.W.3d 237, 242 (Tex. 2001)).

The Court must credit favorable evidence if reasonable jurors could, and 

disregard contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 

168 S.W.3d 802, 822, 827 (Tex. 2005); Henson v. Reddin, 358 S.W.3d 428, 434 

(Tex.App. – Fort Worth 2012, no pet.). A legal sufficiently challenge fails when the 

offered evidence exceeds a “scintilla.” Kroger v. Texas Ltd. Parnership v. Suberu, 216 

S.W.3d 788, 793 (Tex. 2006), citing City of Keller, 168 S.W.3d at 810. More than a 

scintilla of evidence exists when the evidence supporting the finding, as a whole, 

would enable reasonable and fair-minded people to differ in their conclusions. Merrell 

Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). 

B. There Was Evidence Of How Business Interruption Would 

Have Been Determined.

The Panel’s analysis starts with the proposition that Fort Ringgold failed to 

produce a copy of a policy showing how business income losses would have been 
7

calculated had Smith-Reagan not failed to obtain it. There is no way to say for certain 

what the coverage would have been or how it would have been calculated because it 

would be a function of the endorsement that was not obtained. While there could 

have been copies of exemplar endorsements from other policies introduced to show 

the jury how the endorsement might have worked, that would not be the only way to 

provide a scintilla of evidence from which a jury could determine how business 

interruption losses would be determined. 

Here, there was testimony from David Surles that business interruption 

coverage is intended to provide benefits to replace lost “net profit plus the expenses 

that continued during the suspension of operations. So, profit plus continuing 

expenses during the period of suspension of operations is what business interruption 

insurance policy [sic] pays for.” (RR7:217) Thus, there was more than a scintilla of 

evidence of what benefits would be provided by a policy with a business interruption 

coverage endorsement even without an exemplar endorsement from some other 

policy. Indeed, an exemplar from another policy would not be as probative as the 

evidence here, since there really is no telling whether a particular form of 

endorsement would have been sold with this policy had it been requested. Here, 

however, there was evidence of the sort of losses for which these policies are intended 

to compensate the insured, and as detailed below, an explanation based on an expert 

witness’s knowledge how the loss would have been calculated. 
8

There was also evidence as to how the amount of lost net profits should be 

calculated for purposes of determining business interruption losses. When Surles 

critiqued Pete Diaz’s claim that the Hotel’s lost business interruption coverage was 

equal to the total amount of the lost income for all of the rooms – the $1.176 million 

figure the Panel discussed in its opinion – Surles explained that this number would 

have to be adjusted to reflect the historical occupancy rate for the Hotel, since 100% 

of the rooms would not be rented every night. (RR7:215-16) This adjustment was 

based on what Surles knows “about business interruption insurance and how it would 

have paid . . .” (Id.)

The jury did not need to guess what this historical occupancy rate was, either. 

Surles reviewed the documents and testified that Hotel records showed the occupancy 

rate was around 57% prior to the storm damage. (RR7:216, 218-19) 

The jury likewise heard that “net profit” is simply gross income less expenses. 

(RR5:139-140). Once the gross income was calculated and adjusted to the occupancy 

rate, the only thing that remained was to determine what effect the loss had on the 

Hotel’s expenses to arrive at the lost net profit from those rooms being unusable. 

There was also evidence of the effect of the damage on the Hotel’s expenses. Pete 

Diaz explained to the jury that substantially all of the Hotel’s expenses remained the 

same because Fort Ringgold was still trying to keep the Hotel operating while 2/3 of 

the rooms were unusable. Diaz testified that the expenses would be the same for the 

whole period – they were recurring monthly expenses that do not go up or down 
9

from month-to-month based on the amount of occupancy. (RR5:138-140, 194)(Q: 

“So even though the revenues decreased, the expenses still stayed the same?” A: 

“That is correct.”) 

Of course, gross income equals profit plus expenses - or put another way, net 

profit is gross income less expenses. (Id.) If the expenses remained the same with 

2/3 of the rooms shut down (and the expenses did remain the same, according to the 

evidence), then the lost revenue from those rooms was the same thing as lost net 

profit once those numbers are adjusted to the occupancy rate the jury heard about 

from Surles. The jury had all it needed to calculate how much the business 

interruption loss would have been based on what Surles explained about business 

interruption insurance and how it would have paid, and applying that to the gross 

sales number and evidence about expenses they heard from Pete Diaz. 

C. Smith-Reagan’s Own Brief Contradicts the Panel’s Conclusion That 

There Was No Evidence of How Business Interruption Loss Would 

Have Been Calculated.

Critically, in their brief to the Court, these two issues – occupancy rate and 

change in expenses – were the two arguments Smith-Reagan actually raised about the 

sufficiency of the evidence to support the jury’s determination of damages. 

(Appellant’s Brief at 33-34) This is the likely reason for the Panel reaching a 

conclusion about the evidence for damages that is not consistent with the record –

Smith-Reagan did not argue the sufficiency of the evidence as it relates to damages in 

the way that the Panel decided that legal issue. Had Smith-Reagan tried to argue that 
10

there was no evidence of how business interruption would have been calculated, 

Appellants would have much more explicitly called the Court’s attention to the fact 

that there most certainly was evidence of how the coverage for business interruption 

likely would have been calculated. But Smith-Reagan did not make that argument –

because the record cannot support it.

Rather, Smith-Reagan actually agreed that the record included evidence of the 

method of calculating lost business interruption benefits – and characterized it in the 

same manner as discussed above. On page 33 of its brief, Smith-Reagan stated: 

The evidence presented by Defendant’s expert witness, David Surles, 

was that payment for business interruption loses is determined by 

calculating profit plus continuing expense during the period of 

suspension of operations. [citation omitted] Instead of presenting 

evidence as to the motel’s profit, Plaintiffs presented evidence as to the 

motel’s gross sales.

Smith-Reagan then went on to explain the two specific pieces of evidence that it 

claimed were necessary to do the business interruption loss calculation. First, that 

Pete Diaz’s gross sales number of $1.176 million did not include “evidence of the 

amount of expenses that would have continued during the period the motel’s business 

was interrupted.” And second, “[h]e did not know the occupancy rate.” (Appellant’s 

Brief at 34)

Contrary to what the Panel explained in its opinion, there definitely was 

evidence of how business interruption losses would likely have been calculated – i.e. 

gross sales adjusted for occupancy rate less any change in operating expenses. Smith-
11

Reagan conceded as much in its brief – stating that Surles explained the calculation 

and challenging only whether there was evidence of the occupancy rate and expenses. 

(Appellant’s Brief at 33-34) 

Thus, the issue is really whether there was evidence of the effect on the 

damaged rooms on the ongoing operating expenses and evidence of the occupancy 

rate for the Hotel – the two issues raised in Smith-Reagan’s brief. As explained in 

more detail above, there was evidence before the jury on both issues. Pete Diaz 

specifically testified that the Hotel’s operating expense was the same even with the 

damaged rooms not generating revenue for the Hotel. And Surles testified that the 

occupancy rate would have been 57%. The Court must consider the entire record in 

ruling on a legal sufficiency challenge. There is no reason why a plaintiff cannot rely 

on the testimony of the opposing party’s witnesses to support their case. 

Here, taking the entire record, including Pete Diaz’s testimony about gross sales 

and expenses, and Surles’s testimony about how business interruption loss is 

calculated and the occupancy rate, the jury had evidence of all the elements necessary 

to determine what the business interruption loss would likely have been had SmithReagan not failed to obtain the coverage as agreed. The evidence supports

substantially more than the $325,000 awarded by the jury for actual damages. 

There was more than a scintilla of evidence of how much Fort Ringgold likely 

lost in insurance benefits as a result of Smith-Reagan’s failure to procure the business 

interruption insurance. If the Panel does not grant rehearing, then the Court should 
12

grant rehearing en banc, and on a review of the entire record, substitute an opinion 

vacating the Panel’s judgment and affirming the judgment for Fort Ringgold.

CONCLUSION & PRAYER

The Court’s opinion is based on conclusions about the evidence that are at 

odds with the record. Given the narrow standard of review that prohibits the Court 

from substituting its view of the evidence for that of a jury, and that limits reversal 

only to those instances where there is less than a scintilla of evidence, the Court was 

mistaken in concluding there was legally insufficient evidence to support the amount 

of actual damages found by the jury. 

To the contrary, both parties agree that Surles did testify about how business 

interruption loss likely would have been calculated. Smith-Reagan’s actual complaint 

was that Fort Ringgold did not produce evidence of what the ongoing expenses were 

or the occupancy rate. However, applying the standard of review applicable to legal 

sufficiency challenges and reviewing the entire record, as the Court must, there was at 

least a scintilla of evidence on both of these matters. 

The Court should grant rehearing and vacate its opinion and judgment in this 

matter. The judgment should be affirmed in its entirety.

Respectfully submitted,

________________________________

Brendan K. McBride

State Bar No. 24008900
13

Brendan.mcbride@att.net

THE MCBRIDE LAW FIRM

 Of Counsel to 

GRAVELY & PEARSON, L.L.P.

425 Soledad, Suite 620

San Antonio, Texas 78205

(210) 227-1200 Telephone

(210) 881-6752 Facsimile

And

Matthew R. Pearson

State Bar No. 00788173

mpearson@gplawfirm.com

GRAVELY & PEARSON, L.L.P.

425 Soledad, Suite 600

San Antonio, Texas 78205

Telephone: (210) 472-1111

Facsimile: (210) 472-1110

COUNSEL FOR APPELLEES

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document has been 

forwarded on this 9

th day of April 2015 to Appellant’s lead appellate counsel via email 

and via electronic service through Texas.gov.

____________________________________

Brendan K. McBride

CERTIFICATE OF COMPLIANCE

I hereby certify that this brief is in compliance with the rules governing the length 

of briefs prepared by electronic means. The brief was prepared using Microsoft Word 

2010. Garamond 14 pt. font was used for the body, and Garamond 12 pt. font was used 
14

for footnotes. According to the software used to prepare this brief, the total word 

count, including footnotes, but not including those sections excluded by rule, is 3,013

____________________________________

Brendan K. McBride