UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

JAMES MORRISON and DALLAS ) 

MORRISON, individually and on behalf of ) 

others similarly situated, ) 

) 

Plaintiffs, ) Case No. 4:23-cv-324 

) JURY DEMAND 

v. ) 

) 

SPINNAKER INSURANCE COMPANY, ) 

) 

Defendant. ) 

CLASS ACTION COMPLAINT

COMES NOW Plaintiffs James Morrison and Dallas Morrison (collectively “Plaintiffs”), 

individually and on behalf of others similarly situated, for their Class Action Complaint against 

Defendant Spinnaker Insurance Company (“Defendant” or “Spinnaker”), states and alleges the 

following: 

OVERVIEW OF CLAIMS

1. This is a class action case arising out of a dispute between policyholders and their 

property insurer, Spinnaker. The seminal legal dispute before the Court is whether future labor, 

yet to be incurred, may be “depreciated” by Spinnaker when Spinnaker calculates its actual cash 

value (“ACV”) payment obligations for structural property losses. 

2. This lawsuit does not contest that labor used to make a building product (such as a 

shingle or electrical outlet) become “embedded” within the building product or home and can be 

depreciated as part of an ACV calculation.

3. Future labor is at issue because, pursuant to Spinnaker’s property insurance policy 

forms at issue, ACV payments are to be made prospectively, that is, prior to the policyholder 

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undertaking repairs to a damaged structure. In contrast to ACV coverage, replacement cost value 

coverage payments (“RCV”) are made retrospectively, after repairs have been completed.

4. Most property insurers in Texas do not withhold future labor under the auspice of 

“depreciation” when making ACV payments for structural loss claims. However, some property 

insurers in Texas do withhold future labor as depreciation when making ACV payments for 

structural loss claims but only pursuant to the terms of their insurance policies, which expressly 

permit future labor to be withheld—i.e., a form that expressly uses the terms “labor” and 

“depreciate” or “depreciation” and addressing the issue within the text of the policy or 

endorsement. Others, such as Spinnaker, withhold future labor as depreciation even under policies 

that do not contain such provisions. Spinnaker’s policies at issue did not include any provision or 

language that allow it to withhold labor as depreciation when making ACV payments for structural 

loss claims.

5. The issue presented is a question of law (whether labor may be depreciated in the 

absence of a labor depreciation permissive form) and was recently addressed by the Fifth Circuit 

Court of Appeals in Mitchell v. State Farm Fire & Cas. Co., 954 F.3d 700 (5th Cir. 2020) 

(interpreting Mississippi law); as well as by U.S. District Court for the Western District of Texas 

in Sims v. Allstate Fire & Cas. Co. et al., No. SA-22-CV-00580-JKP, 2023 WL 175006, at *4 

(W.D. Tex. Jan. 11, 2023) (applying Texas law) and Cortinas et al. v. Liberty Mutual Personal 

Ins. Co., et al., No. SA:22-CV-00544-OLG, Dkt. 37 (W.D. Tex. March 14, 2023) (applying Texas 

law).

6. In Mitchell, the Firth Circuit held that both the insurer and insured’s interpretations 

of the otherwise undefined phrase “actual cash value” were reasonable, thus the policy was 

ambiguous and must be construed in favor of the insured. Id. at 703, 707. 

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7. The Fifth Circuit’s holding in Mitchell is dispositive because Texas law and 

Mississippi law are the same as it relates to all of the contractual interpretation issues before the 

Court. Sims, 2023 WL 175006, at *4 (“The Fifth Circuit’s holding in Mitchell is dispositive 

because Texas law and Mississippi law are the same with regard to contractual interpretation and 

are substantially similar with regard to the definition and interpretation of ‘actual cash value.’”). 

The chart below compares the consistency between the two States: 

Issue Mitchell v. State Farm

(Mississippi)

Case Before the Court

(Texas)

Determination 

of whether an 

insurance 

policy term is 

ambiguous 

Under Mississippi law, if the 

ordinary meaning of a subject term is 

susceptible to more than one 

reasonable interpretation, the term 

shall be considered ambiguous and 

construed in favor of the insured. 

Mitchell v. State Farm Fire & Cas. 

Co., 954 F.3d 700, 705-06 (5th Cir. 

2020).

“As shown in Mitchell, under 

Mississippi law as in Texas, if the 

ordinary meaning of a subject term is 

susceptible to more than one 

reasonable interpretation, the term 

shall be considered ambiguous and 

construed in favor of the insured.” 

Sims v. Allstate Fire & Cas. Co. et al., 

No. SA-22-CV-00580-JKP, 2023 WL 

175006, at *4 (W.D. Tex. Jan. 11, 

2023).

Interpretation 

of ambiguous 

provisions 

within 

insurance 

policies

Under Mississippi law, “ambiguity 

and doubt in an insurance policy must 

be resolved in favor of the insured.” 

Mitchell, 954 F.3d at 705 (citing 

Bellefonte Ins. Co. v. Griffin, 358 So. 

2d 387, 390 (Miss. 1978)). 

Under Texas law, when an insurance 

policy is ambiguous, courts “must 

resolve the uncertainty by adopting 

the construction that most favors the 

insured.” RSUI Indem. Co. v. Lynd 

Co., 466 S.W.3d 113, 118 (Tex. 2015) 

(citations omitted).

When a policy 

provision is 

ambiguous 

“[W]e need only determine whether 

[the insured’s] interpretation is a 

reasonable one—not necessarily the 

most reasonable. Mitchell, 954 F.3d 

at 706 (citing State Farm Mut. Auto. 

Ins. Co. v. Scitzs, 394 So. 2d 1371, 

1372 (Miss. 1981)). 

If both the insured and insurer 

“present reasonable interpretations of 

the policy’s language, we must 

conclude that the policy is 

ambiguous.” Uncertainty must be 

resolved in favor of the insured "even 

if the construction urged by the insurer 

appears to be more reasonable or a

more accurate reflection of the 

parties’ intent.” RSUI Indem. Co. v. 

Lynd Co., 466 S.W.3d 113, 118 (Tex. 

2015) (citations omitted).

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8. This lawsuit seeks to remedy the improper withholdings of future labor from 

Plaintiff’s and putative class members’ ACV payments.

PARTIES, RESIDENCY, JURISDICTION AND VENUE

9. Plaintiffs James Morrison and Dallas Morrison are citizens and residents of Fort 

Worth, Texas. At all times relevant hereto, Plaintiffs owned the dwelling and other structures 

located at 746 Swindle Road, Howe, Texas 75459 (the “Insured Property”).

10. Defendant Spinnaker Insurance Company is organized under the laws of the State 

of Illinois with its principal place of business in Bedminster, New Jersey. Spinnaker is authorized 

to sell property insurance policies in the State of Texas, including within this judicial district.

11. Spinnaker engaged in the contractual breaches described herein in a uniform matter 

and pursuant to a uniform policy.

12. Pursuant to Federal Rule of Civil Procedure 23, Plaintiffs bring contractual and 

declaratory relief claims on behalf of themselves and a putative class of Spinnaker’s property 

insurance policyholders who are similarly situated. 

13. The events giving rise to the individual claims asserted by Plaintiffs that are the 

subject of this action occurred in the Eastern District of Texas. Spinnaker has insurance agents in 

the Eastern District of Texas for the conduct of its usual and customary business, including the 

sale and servicing of property insurance policies and the handling and payment of claims 

associated with those policies of insurance.

14. Subject matter jurisdiction is proper in this Court pursuant to the Class Action 

Fairness Act, 28 U.S.C. § 1332(d)(2) (“CAFA”). There are more than 100 members in the proposed 

class and the amount in controversy exceeds $5,000,000, exclusive of interest and costs.

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15. This Court has personal jurisdiction over Spinnaker because it has availed itself of 

the privilege of conducting business and issuing insurance contracts covering structures in the 

State of Texas.

FACTS

A. Introduction and Scope of Lawsuit

16. Spinnaker sells property insurance coverage for, inter alia, homes and buildings in 

Texas.

17. This lawsuit only concerns property coverage for buildings and structures, and not 

personal contents, such as furniture and clothes.

18. Further, this lawsuit only concerns claims wherein Spinnaker itself accepted 

coverage and then Spinnaker chose to calculate its ACV payment obligations exclusively pursuant 

to the replacement cost less depreciation (“RCLD”) methodology.

B. Plaintiffs’ Insurance Policy and Loss

19. Plaintiffs contracted with Spinnaker for an insurance policy providing coverage for 

certain losses to the Insured Property. The policy number was HTX-0210823-02 (the “Policy”).

20. Plaintiffs paid Spinnaker premiums in exchange for insurance coverage. The 

required premiums were paid at all times relevant to this Complaint.

21. On or about April 28, 2021, the Insured Property suffered damage covered by the 

Policy. The damage to the Insured Property required replacement and/or repair.

22. Plaintiffs timely submitted a claim to Spinnaker requesting payment for the covered 

loss.

23. Spinnaker determined the loss to the Insured Property was covered by the terms of 

the Policy.

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24. Spinnaker calculates its actual cash value payment obligations to its policyholders 

for structural damage loss by first estimating the cost to repair or replace the damage with new 

materials (replacement cost value, or RCV), and then Spinnaker subtracts the estimated 

depreciation.

25. The Policy, and the other property forms at issue in this pleading, do not permit the 

withholding of labor as depreciation as described below. In contrast with Plaintiffs’ Policy, certain 

policies of insurance expressly allow for the depreciation of “labor” as described herein. The type 

of form or endorsement will be referred to herein as a “labor depreciation permissive form.” 

26. Plaintiffs’ Policy does not contain a labor depreciation permissive form.

C. Spinnaker’s Calculation of Plaintiffs’ ACV Payment

27. In adjusting Plaintiffs’ claim, Spinnaker affirmatively and unilaterally chose to use 

a RCLD methodology to calculate Plaintiffs’ losses and to make Plaintiffs’ ACV payment. 

Spinnaker did not use any other methodology to calculate Plaintiffs’ ACV payment. The Policy, 

itself, adopts the RCLD method for determining ACV.

28. Spinnaker did not calculate any portion of Plaintiffs’ losses by reference to or 

analysis of any alleged increase or decrease in the market value of their home, or the market value 

of any portion of their property. 

29. Spinnaker did not conduct an appraisal of Plaintiffs’ loss.

30. Spinnaker did not conduct an appraisal of Plaintiffs’ property.

31. Spinnaker has waived, and is estopped from asserting, any right to contend that 

ACV should have been calculated under any methodology other than the RCLD methodology.

32. Soon after Plaintiffs’ loss, Spinnaker sent an adjuster to inspect the damage and 

estimate ACV. 

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33. Spinnaker used commercially available computer software to estimate Plaintiffs’

RCV, depreciation, and ACV calculations. The software used to calculate the payment to Plaintiffs

is called Xactimate®.

34. As set forth in the written Xactimate® estimate provided to Plaintiffs, Spinnaker

determined that Plaintiffs had suffered covered losses to their property. The Xactimate® estimate

generated by Spinnaker included the estimated cost of materials and future labor required to 

complete the repairs (the RCV). 

35. In calculating its ACV payment obligations to Plaintiffs, Spinnaker utilized 

Xactimate® to determine the depreciation to subtract from the RCV. 

36. Plaintiffs were underpaid on their ACV claim and deprived of the use of their 

money from the time they should have received full ACV payments until the date they actually

recovered the wrongfully withheld amounts, as more fully described below.

D. Spinnaker’s Practice Of Withholding Future Labor As Depreciation

37. For Plaintiffs and putative class members, Spinnaker used Xactimate® software to 

calculate ACV payments. Xactimate® is used by both insurers and contractors to calculate the cost 

of rebuilding or repairing damaged property and is also used to calculate depreciation to determine 

ACV payments under the RCLD methodology. 

38. The only methodology used by Xactimate® to calculate ACV payments for 

structural damage is the RCLD methodology. Xactimate® does not use any other methodology to 

calculate ACV, such as, e.g., the calculation of ACV through a fair market value as determined by 

a real estate appraisal.

39. Because Xactimate® does not use any methodology to calculate ACV other than 

“replacement cost less depreciation,” a property insurer only makes an ACV payment through 

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Xactimate® after the property insurer itself has affirmatively determined and agreed to use the 

RCLD methodology.

40. Spinnaker unfairly manipulates Xactimate® to withhold future labor from ACV 

payments.

41. Xactimate® generates its estimate prices from its ongoing fair market pricing 

research. Its price lists are both temporal (e.g., monthly) and geographic (e.g., city or region).

42. When adjusting property insurance claims with Xactimate®, the adjuster inputs, 

among other information, the dimensions of the damaged property, the damaged portion of the 

damaged property, and other objective information such as the age of the roofing, siding, or other 

damaged building materials.

43. The Xactimate® software then breaks down each individual necessary step in the 

repair process into an individual “line item.” Each line item has a specific dollar value. The line 

items are totaled to obtain the RCV values, and then depreciation is applied.

44. Xactimate® can be manipulated to withhold labor from ACV payments by simply 

checking or unchecking certain boxes concerning depreciation. For example, the below screenshot 

from the Xactimate® program allows the software user to select or de-select “Depreciate NonMaterial,” “Depreciate Removal” or “Depreciate Overhead and Profit,” all of which are labor 

items, and all of which will result in the withholding of labor from an ACV payment.

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45. When Spinnaker calculated Plaintiffs’ ACV benefits owed, Spinnaker withheld 

costs for both the materials and future labor required to repair Plaintiffs’ property as depreciation, 

even though labor does not depreciate in value over time. Spinnaker withheld labor costs as 

depreciation throughout its ACV calculations as depreciation.

46. In this pleading, whenever reference is made to withholding “labor” as 

depreciation, “labor” means intangible non-materials, specifically including both the labor costs 

and the laborers’ equipment costs and contractors/laborers’ overhead and profit necessary to 

restore property to its condition status quo ante, as well as removal costs to remove damaged 

property, under commercial claims estimating software. 

47. Spinnaker’s withholding of future labor costs as depreciation resulted in Plaintiffs

receiving payment in an amount less than what they were entitled to receive under their Policy. 

Spinnaker breached its obligations under Plaintiffs’ Policy by improperly withholding the future 

cost of labor as depreciation. 

48. Without expert assistance, Plaintiffs themselves cannot determine the precise 

amount of labor that has been withheld based only upon the written estimate provided. To 

determine the precise amount of labor withheld, it is necessary to have access to the commercial 

property estimating program at issue (Xactimate®), as well as the electronic file associated with 

the respective estimate.

49. While a property insurer may lawfully depreciate material costs when calculating 

the amount of an ACV payment owed to an insured, it may not lawfully withhold labor as 

depreciation under the policy forms at issue when the carrier chooses to use a RCLD methodology.

50. Spinnaker’s failure to pay the full cost of the labor necessary to return Plaintiffs’

structures to the status quo ante left Plaintiffs under-indemnified and underpaid for their losses. 

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51. Future labor which has not yet been incurred, by its nature, does not depreciate, and 

an insurer therefore may not withhold future labor as depreciation. 

52. Spinnaker materially breached its duty to indemnify Plaintiffs by withholding 

future labor costs from ACV payments as depreciation, thereby paying Plaintiffs less than they 

were entitled to receive, including but not limited to depriving Plaintiffs of the time use of money 

resulting from the periods of labor withholding in the form of prejudgment interest.

AMOUNT IN CONTROVERSY

53. Upon information and belief, the amount in controversy with respect to the 

proposed class exceeds $5,000,000, exclusive of interest and costs.

CLASS ACTION ALLEGATIONS

54. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs bring this 

lawsuit as a class action on behalf of themselves and on behalf of others similarly situated. This 

action satisfies the requirements of numerosity, commonality, typicality, and adequacy of 

representation. Only to the extent it is a requirement under applicable law, the proposed class 

herein is ascertainable.

55. The proposed class that Plaintiffs seek to represent is tentatively defined as follows:

All Spinnaker Insurance Company policyholders (or its lawful assignees) who 

made: 

(1) a structural damage claim for property located in Texas; and 

(2) for which Spinnaker accepted coverage and then chose to calculate actual cash 

value exclusively pursuant to the replacement cost less depreciation methodology 

and not any other methodology, such as fair market value; and 

(3) which resulted in an actual cash value payment during the class period from 

which “non-material depreciation” was withheld from the policyholder; or which 

would have resulted in an actual cash value payment but for the withholding of nonmaterial depreciation causing the loss to drop below the applicable deductible.

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In this definition, “non-material depreciation” means application of either the 

“depreciate removal,” “depreciate non-material” and/or “depreciate O&P” option 

settings within Xactimate® software or similar depreciation option settings in 

competing commercial software programs.

The class period for the proposed class is the maximum time period as allowed by 

applicable law.

The class excludes any claims for which the applicable limits of insurance was 

exhausted by the initial actual cash value payment. The class also excludes any 

claims arising under labor depreciation permissive policy forms, i.e., those forms 

and endorsements expressly permitting the “depreciation” of “labor” within the text 

of the policy form. 

56. Plaintiffs reserve the right to amend the definition of the proposed class through 

discovery. The following persons are expressly excluded from the class: (1) Spinnaker and its 

subsidiaries and affiliates; (2) all persons who make a timely election to be excluded from the 

proposed Class; and (3) the Court to which this case is assigned and its staff.

57. Plaintiffs and members of the putative class as defined all have Article III standing 

as all such persons and entities, at least initially, received lower claim payments than permitted 

under the policy. Certain amounts initially withheld as labor may be later repaid to some 

policyholders with replacement cost provisions in their policies, if any. However, policyholders 

who have been subsequently repaid for initially withheld labor still have incurred damages, at the 

least, in the form of the lost “time value” of money during the period of withholding, i.e., statutory 

or common law prejudgment interest on the amounts improperly withheld, for the time period of 

withholding.

58. The members of the proposed class are so numerous that joinder of all members is 

impracticable. Plaintiffs reasonably believe hundreds or thousands of people geographically 

dispersed across Texas have been damaged by Spinnaker’s actions. The names and addresses of 

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the members of the proposed class are readily identifiable through records maintained by

Spinnaker or from information readily available to Spinnaker.

59. The relatively small amounts of damage suffered by most members of the proposed 

class make filing separate lawsuits by individual members economically impracticable.

60. Spinnaker has acted on grounds generally applicable to the proposed class in that 

Spinnaker has routinely withheld labor costs as described herein in its adjustment of property 

damage claims under its policies of insurance. It is reasonable to expect Spinnaker will continue 

to withhold labor to reduce the amount they pay to its insureds under these policies absent this 

lawsuit. 

61. Common questions of law and fact exist as to all members of the proposed class 

and predominate over any questions affecting only individual members. The questions of law and 

fact common to the proposed class include, but are not limited to:

a. Whether the applicable policy language allows the withholding of future 

labor costs in the calculation of ACV payments under the RCLD methodology;

b. Whether applicable policy language is ambiguous concerning the 

withholding of future labor costs in calculating ACV payments, and if so, how the 

insurance policies should be interpreted;

c. Whether the withholding of future labor costs in the calculation of ACV 

payments breaches the applicable insurance policies;

d. Whether Spinnaker has a custom and practice of withholding future labor 

costs in the calculation of ACV payments; 

e. Whether Spinnaker and members of the proposed class have been damaged 

as a result of the withholding of future labor costs in the calculation of ACV payments; and

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f. Whether Spinnaker and members of the proposed class are entitled to a 

declaration, as well as potential supplemental relief, under the Declaratory Judgment Act.

62. Plaintiffs’ claims are typical of the claims of the proposed class members, as she is

similarly affected by the customs and practices alleged herein. Further, Plaintiffs’ claims are

typical of the claims of the proposed class members because the claims arose from the same 

practices and course of conduct that give rise to the claims of the members of the proposed class 

and are based on the same factual and legal theories. Plaintiffs are not different in any material 

respect from any other member of the proposed class. 

63. Plaintiffs and their counsel will fairly and adequately protect the interests of the 

members of the proposed class. Plaintiffs’ interests do not conflict with the interests of the 

proposed class they seek to represent. Plaintiffs have retained lawyers who are competent and 

experienced in class action and insurance litigation. Plaintiffs and Plaintiffs’ counsel have the 

necessary financial resources to adequately and vigorously litigate this class action, and Plaintiffs

and counsel are aware of their fiduciary responsibilities to the members of the proposed class and 

will diligently discharge those duties by vigorously seeking the maximum possible recovery for 

the proposed class while recognizing the risks associated with litigation. Plaintiffs reserve the right 

to have unnamed class members join them in seeking to be a class representative.

64. A class action is superior to all other available methods for the fair and efficient 

adjudication of this controversy. Joining all proposed members of the proposed class in one action 

is impracticable and prosecuting individual actions is not feasible. The size of the individual claims 

is likely not large enough to justify filing a separate action for each claim. For many, if not most, 

members of the proposed class, a class action is the only procedural mechanism that will afford 

them an opportunity for legal redress and justice. Even if members of the proposed class had the 

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resources to pursue individual litigation, that method would be unduly burdensome to the courts 

in which such cases would proceed. Individual litigation exacerbates the delay and increases the 

expense for all parties, as well as the court system. Individual litigation could result in inconsistent 

adjudications of common issues of law and fact.

65. In contrast, a class action will minimize case management difficulties and provide 

multiple benefits to the litigating parties, including efficiency, economy of scale, unitary 

adjudication with consistent results and equal protection of the rights of Plaintiff and members of 

the proposed class. These benefits would result from the comprehensive and efficient supervision 

of the litigation by a single court.

66. Questions of law or fact common to Plaintiffs and members of the proposed class, 

including those identified above, predominate over questions affecting only individual members 

(if any), and a class action is superior to other available methods for the fair and efficient 

adjudication of the controversy. Class action treatment will allow a large number of similarly 

situated consumers to prosecute their common claims in a single forum, simultaneously, 

efficiently, and without the necessary duplication of effort and expense that numerous individuals 

would require. Further, the monetary amount due to many individual members of the proposed 

class is likely to be relatively small, and the burden and expense of individual litigation would 

make it difficult or impossible for individual members of the proposed class to seek and obtain 

relief. On the other hand, a class action will serve important public interests by permitting 

consumers harmed by the unlawful practices to effectively pursue recovery of the sums owed to 

them, and by deterring further unlawful conduct. The public interest in protecting the rights of 

consumers favors disposition of the controversy in the class action form.

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67. Class certification is further warranted because Spinnaker has acted or refused to 

act on grounds that apply generally to the class, so final injunctive relief or corresponding 

declaratory relief is appropriate with respect to the class as a whole.

68. Plaintiffs may seek, in the alternative, certification of issues classes. Rule 23(c)(4) 

provides that an action may be brought or maintained as a class action with respect to particular 

issues when doing so would materially advance the litigation as a whole.

69. Prior to instituting this action, Spinnaker was provided notice, on behalf of 

Plaintiffs and the putative class, of the intent to pursue the claims herein against Spinnaker. Notice 

was so given by letters dated August 10, 2022 and February 6, 2023. 

INDIVIDUAL ALLEGATIONS 

(INDEPENDENT OF NON-MATERIAL DEPRECIATION)

70. Plaintiffs requested that Spinnaker cover the cost of repairs to the Insured Property, 

pursuant to the Policy.

71. Spinnaker inspected the property and did not issue a full and prompt payment to 

Plaintiffs for the damages. Spinnaker, on multiple occasions, failed to properly inspect the Insured 

Property and failed to properly scope the loss by intentionally ignoring areas of damage and turning 

a blind eye to the true extent of the loss.

72. Spinnaker set about to deny and/or underpay on properly covered damages. As a 

result of Spinnaker’s unreasonable investigation of the claim, including not providing full coverage 

for the damages sustained by Plaintiffs, as well as under-scoping the damages during its 

investigation and thus denying adequate and sufficient payment to Plaintiffs to repair the Insured 

Property, Plaintiffs’ claim was improperly adjusted. The mishandling of Plaintiffs’ claim has also 

caused a delay in Plaintiffs’ ability to fully repair the Insured Property, which has resulted in 

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additional damages. To this date, Plaintiffs have yet to receive the full payment to which they are 

entitled under the Policy.

73. As detailed in the paragraphs below, Spinnaker wrongfully denied or underpaid 

Plaintiffs’ claim for repairs of the Insured Property, even though the Policy provided coverage for 

losses such as those suffered by Plaintiffs. Furthermore, Spinnaker underpaid some of Plaintiffs’ 

claims by not providing full coverage for the damages sustained by Plaintiffs, as well as underscoping the damages during its investigation. 

74. Plaintiffs purchased the above referenced insurance policy(s) through Spinnaker. 

Plaintiffs relied on the experience, representations, and expertise of Spinnaker’s company to 

provide policies which covered damage from covered losses, including the losses sustained as a 

result of the above referenced date of loss. 

75. Plaintiffs’ Policy includes an applicable deductible of $3,950.00 for covered 

damages.

76. The Insured Property suffered substantial damages from a hail/windstorm. 

77. Plaintiffs relied on Spinnaker to promptly and properly estimate the damages of 

any claims filed in accordance with the protections that Texas law provides for all policyholders. 

78. Due to Spinnaker’s unfair claims handling, Plaintiffs were compelled to hire a 

Public Adjuster, Marcus Cox with Hawk Public Adjusting. Mr. Cox conducted an inspection on 

or about June 4, 2021 and found substantial damage to Plaintiff’s property resulting from the 

subject loss. The Public Adjuster prepared an estimate in the amount of $280,311.12 which is the 

actual damage to the Insured Property and the reasonable and necessary amount to indemnify 

Plaintiffs. The Public Adjuster provided sufficient proof of loss to place Spinnaker on notice of

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the reasonable and necessary amount to indemnify Plaintiffs and the full scope of the covered 

damage and cost of repairs.

79. On or about June 2, 2021, Spinnaker caused an estimate to be prepared by its claims 

representative, Mr. Martin Jelinek, and presented it to Plaintiff and/or Plaintiff’s Public Adjuster. 

The estimate completely underestimated the scope and cost of necessary repairs and the reasonable 

and necessary amount to indemnify Plaintiffs. 

80. By letter dated June 16, 2021, Spinnaker, through its adjuster, Ronald Tatum, 

acknowledged coverage for Plaintiffs’ loss and Spinnaker issued payment in the amount of 

$549.38, which was wholly insufficient to indemnify Plaintiffs. Such payments are evidence of 

Spinnaker’s unreasonable investigation and its knowing misrepresentations regarding the true 

value of the covered loss and the applicable coverage. 

81. Purporting to have concluded its investigation, Spinnaker stated “[w]ith the 

completion of our investigation comes the conclusion of handling your claim.” The statement is 

evidence of Spinnaker’s unreasonable investigation, and its intention to misrepresent the scope of 

the covered damage and the cost of covered repairs, as well as Spinnaker’s unfair minimizing 

payment of Plaintiffs’ claim, in a clear and intentional effort to delay payment of the true cost of 

covered repairs. 

82. On or about December 9, 2021, Spinnaker caused another estimate to be prepared 

by its claims representative, Mr. Danny Adams, and presented it to Plaintiffs and/or their public 

adjuster. This estimate still severely underestimated the scope and cost of necessary repairs and 

the reasonable and necessary amount to indemnify Plaintiffs. The estimate is also evidence of 

Spinnaker’s unreasonable investigation, the insufficiency of Spinnaker’s prior estimate, 

Spinnaker’s improper adjustment and unjustified delay in settling Plaintiffs’ claim. 

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83. By letter date December 22, 2021, Spinnaker through its adjuster, Alexis Wilkins, 

reported that Spinnaker “received and reviewed your public adjuster’s request for additional funds 

to repair your dwelling” and that a check would be mailed to Plaintiffs. Spinnaker’s insufficient 

payment is evidence of its unreasonable investigation, knowing misrepresentation of the scope of 

the covered damage and the cost of covered repairs overtly and by omission, as well as unfair 

minimizing payment of Plaintiffs’ claim, in a clear and intentional effort to delay payment of the 

true cost of covered repairs. 

84. Ms. Wilkins further reported that Spinnaker “obtained the services of an 

independent appraisal company, Pilot, to inspect this loss and provide a report of their findings for 

our use in resolving your claim.” Despite that Spinnaker was placed on notice of the reasonable 

and necessary amount to indemnify Plaintiffs for their covered claim, Spinnaker stated: 

[W]e are unable to provide coverage for the damages noted above because 

these types of damage are either not consistent with hail, or do not correlate 

to the reported date of loss. Furthermore, policy exclusions for damage caused 

by or resulting from surface water, repeat/long-term seepage of water, surface 

water, rust, wear, tear, deterioration, and improper construction or installation 

of building materials are specifically excluded from coverage by the 

provisions of the policy.

Such statement is a misrepresentation of the cause and scope of covered damage. It is also a 

misrepresentation of the policy and the scope of coverage applicable to the damage. 

85. By letter dated March 28, 2022, Spinnaker, through its adjuster, Alexis Wilkins, 

improperly denied coverage for the loss. By the letter, Spinnaker knowingly misrepresented the 

cause of the loss, the scope of the loss, the scope of the coverage, and the coverage applicable to 

the loss.

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86. To date, Spinnaker continues to delay payment of full indemnity for the damage to 

the Insured Property. As such, Plaintiffs have not been paid in full for the damage to the Insured

Property. 

87. Spinnaker failed to perform its contractual duties to adequately compensate 

Plaintiffs under the terms of the Policy. Specifically, it refused to pay the full proceeds of the 

Policy, although due demand was made for proceeds to be paid in an amount sufficient to cover 

the damaged property, and all conditions precedent to recovery upon the Policy had been carried 

out and accomplished by the Plaintiffs. Spinnaker’s conduct constitutes a breach of the insurance 

contract between Spinnaker and Plaintiffs.

88. Spinnaker misrepresented to Plaintiffs that certain damage to the Insured Property 

was not covered under the Policy, even though the damage was caused by a covered occurrence. 

Spinnaker’s conduct constitutes a violation of the Texas Insurance Code, Unfair Settlement 

Practices. TEX. INS. CODE §541.060(a)(1).

89. Spinnaker failed to make an attempt to settle Plaintiffs’ claim in a fair manner, 

although it was aware of its liability to Plaintiffs under the Policy. Spinnaker’s conduct constitutes 

a violation of the Texas Insurance Code, Unfair Settlement Practices. TEX. INS. CODE

§541.060(a)(2)(A). 

90. Spinnaker failed to explain to Plaintiffs the reasons for its offer of an inadequate 

settlement. Specifically, Spinnaker failed to offer Plaintiffs adequate compensation, without any 

or adequate explanation why full payment was not being made. Furthermore, Spinnaker did not 

communicate that any future settlements or payments would be forthcoming to pay for the entire 

losses covered under the Policy, nor did it provide any or adequate explanation for the failure to 

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adequately settle Plaintiffs’ claim. Spinnaker’s conduct is a violation of the Texas Insurance Code, 

Unfair Settlement Practices. TEX. INS. CODE §541.060(a)(3).

91. Spinnaker failed to affirm or deny coverage of Plaintiffs’ claim within a reasonable 

time. Specifically, Plaintiffs did not receive timely indication of acceptance or rejection, regarding 

the full and entire claim, in writing from Spinnaker. Spinnaker’s conduct constitutes a violation 

of the Texas Insurance Code, Unfair Settlement Practices. TEX. INS. CODE §541.060(a)(4).

92. Spinnaker refused to fully compensate Plaintiffs, under the terms of the Policy, 

even though Spinnaker failed to conduct a reasonable investigation. Specifically, Spinnaker

performed an outcome-oriented investigation of Plaintiffs’ claim, which resulted in a biased, 

unfair, and inequitable evaluation of Plaintiffs’ losses on the Property. Spinnaker’s conduct 

constitutes a violation of the Texas Insurance Code, Unfair Settlement Practices. TEX. INS. CODE

§541.060(a)(7).

93. Spinnaker failed to meet its obligations under the Texas Insurance Code regarding 

timely acknowledging Plaintiffs’ claim, beginning an investigation of Plaintiffs’ claim, and 

requesting all information reasonably necessary to investigate Plaintiffs’ claim, within the 

statutorily mandated time of receiving notice of Plaintiffs’ claim. Spinnaker’s conduct constitutes 

a violation of the Texas Insurance Code, Prompt Payment of Claims. TEX. INS. CODE §542.055. 

94. Spinnaker failed to accept or deny Plaintiffs’ full and entire claim within the 

statutorily mandated time of receiving all necessary information. Spinnaker’s conduct constitutes 

a violation of the Texas Insurance Code, Prompt Payment of Claims. TEX. INS. CODE §542.056. 

95. Spinnaker failed to meet its obligations under the Texas Insurance Code regarding 

payment of claim without delay. Specifically, it has delayed full payment of Plaintiffs’ claim 

longer than allowed and, to date, Plaintiffs have not received full payment for the claim. 

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Spinnaker’s conduct constitutes a violation of the Texas Insurance Code, Prompt Payment of 

Claims. TEX. INS. CODE §542.058. 

96. From and after the time Plaintiffs’ claim was presented to Spinnaker, the liability 

of Spinnaker to pay the full claim in accordance with the terms of the Policy was reasonably clear. 

However, Spinnaker has refused to pay Plaintiffs in full, despite there being no basis whatsoever 

on which a reasonable insurance company would have relied to deny the full payment. Spinnaker’s

conduct constitutes a breach of the common law duty of good faith and fair dealing.

97. Spinnaker knowingly or recklessly made false representations, as described above, 

as to material facts and/or knowingly concealed all or part of material information from Plaintiffs.

98. As a result of Spinnaker’s wrongful acts and omissions, Plaintiffs were forced to 

retain the professional services of the attorney and law firm for representation with respect to these 

causes of action.

COUNT I

BREACH OF CONTRACT (Class Action)

99. Plaintiffs restate and incorporate by reference all preceding allegations.

100. Spinnaker entered into policies of insurance with Plaintiffs and members of the 

proposed class. These insurance policies govern the relationship between Spinnaker and Plaintiffs, 

and members of the proposed class, as well as the manner in which claims for covered losses are 

handled.

101. These policies of insurance are binding contracts under Texas law, supported by 

valid consideration in the form of premium payments in exchange for insurance coverage.

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102. Spinnaker drafted the insurance policies at issue, which are essentially identical in 

all respects material to this litigation concerning the withholding of labor as depreciation from 

ACV payments for structural loss when Spinnaker calculates ACV under a RCLD methodology.

103. In order to receive or be eligible to receive ACV claim payments in the first 

instance, Plaintiffs and the putative class members complied with all material provisions and 

performed all their respective duties with regard to their insurance policy.

104. Spinnaker breached its contractual duties to pay Plaintiffs and members of the 

proposed class the ACV of their claims by unlawfully withholding labor costs as described herein.

105. Spinnaker’s actions in breaching its contractual obligations, as described herein, 

are the direct and proximate cause of damages to Plaintiffs and members of the proposed class.

106. In light of the foregoing, Plaintiffs and members of the proposed class are entitled 

to recover damages sufficient to make them whole for all amounts unlawfully withheld from their 

ACV payments, including prejudgment interest for all periods of withholding as may be allowed 

by law.

COUNT II

BREACH OF CONTRACT (Individual Claim)

107. Plaintiffs restate and incorporate by reference all preceding allegations.

108. The Policy issued by Spinnaker is a binding contract supported by valid 

consideration.

109. Unrelated to the discrete breach alleged in Count I, Spinnaker is in total, material 

breach of each of the Policy issued to Plaintiffs and is liable to Plaintiffs for the maximum allowed 

by the Policy for the direct physical loss and damage caused by the covered loss at issue, along 

with other loss, damage, and expense covered by the terms and conditions of the policies, less the 

deductible and payments previously made. Specifically, Spinnaker breached its contract by its

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failure and refusal to fully and promptly pay the amounts owed to Plaintiffs as required by the 

terms of the Policy at issue. To date, Spinnaker has failed to make full payment to Plaintiffs.

110. As a result of Spinnaker’s breach of contract, Plaintiffs has sustained compensable 

losses, including loss and damage covered by the terms of Plaintiffs’ Policy as well as 

consequential damages arising from the ongoing delay in payment. As a result of Spinnaker’s 

breach of contract, Plaintiffs were prevented from timely completing the necessary repairs.

111. Spinnaker is liable to Plaintiffs for Plaintiffs’ losses for its breaches unrelated to 

the breach alleged in Count I.

COUNT III

NONCOMPLIANCE WITH TEXAS INSURANCE CODE:

UNFAIR SETTLEMENT PRACTICES (Individual Claim)

112. Plaintiffs restate and incorporate by reference all preceding allegations.

113. Unrelated to the discrete breach alleged in Count I, Spinnaker’s conduct constitutes 

multiple violations of the Texas Insurance Code, Unfair Settlement Practices. TEX. INS. CODE 

§541.060(a). All violations under this article are made actionable by TEX. INS. CODE §541.151.

114. Spinnaker’s unfair settlement practice, as described above, of misrepresenting to 

Plaintiffs material facts relating to the coverage at issue, constitutes an unfair method of 

competition and an unfair and deceptive act or practice in the business of insurance. TEX. INS.

CODE §541.060(a)(1).

115. Spinnaker’s unfair settlement practices, as described above, of failing to attempt in 

good faith to effectuate a prompt, fair, and equitable settlement of the claim, even though 

Spinnaker’s liability under the Policy was reasonably clear, constitutes an unfair method of 

competition and an unfair and deceptive act or practice in the business of insurance. TEX. INS.

CODE §541.060(a)(2)(A). 

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116. Spinnaker’s unfair settlement practices, as described above, of failing to promptly 

provide the Plaintiffs with a reasonable explanation of the basis in the Policy, in relation to the 

facts or applicable law, for its offer of a compromise settlement of the claim, constitutes an unfair 

method of competition and an unfair and deceptive act or practice in the business of insurance. 

TEX. INS. CODE §541.060(a)(3).

117. Spinnaker’s unfair settlement practices, as described above, of failing within a 

reasonable time to affirm or deny coverage of the claim to Plaintiffs, or to submit a reservation of 

rights to Plaintiffs, constitutes an unfair method of competition and an unfair and deceptive act or 

practice in the business of insurance. TEX. INS. CODE §541.060(a)(4). 

118. Spinnaker’s unfair settlement practices, as described above, of refusing to pay 

Plaintiffs’ claim without conducting a reasonable investigation, constitutes an unfair method of 

competition and an unfair and deceptive act or practice in the business of insurance. TEX. INS.

CODE §541.060(a)(7). 

119. Each of the foregoing unfair settlement practices were completed knowingly by 

Spinnaker and were a producing cause of Plaintiffs’ injuries and damages.

COUNT IV

NONCOMPLIANCE WITH TEXAS INSURANCE CODE:

THE PROMPT PAYMENT OF CLAIMS (Individual Claim)

120. Plaintiffs restate and incorporate by reference all preceding allegations.

121. Unrelated to the discrete breach alleged in Count I, the claim is a claim under an 

insurance policy with Spinnaker of which Plaintiff gave proper notice. Spinnaker is liable for the 

claim. Spinnaker’s conduct constitutes multiple violations of the Texas Insurance Code, Prompt 

Payment of Claims. All violations made under this article are made actionable by TEX. INS. CODE 

§542.060.

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122. Spinnaker’s failure to acknowledge receipt of Plaintiffs’ claim, commence 

investigation of the claim, and/or request from Plaintiffs all items, statements, and forms that it 

reasonably believed would be required within the applicable time constraints, as described above, 

constitutes a non-prompt payment of claims and a violation of TEX. INS. CODE §542.055.

123. Spinnaker’s failure to notify Plaintiffs in writing of its acceptance or rejection of 

the claim within the applicable time constraints, constitutes a non-prompt payment of the claim. 

TEX. INS. CODE §542.056. 

124. Spinnaker’s delay of the payment of Plaintiffs’ claim following its receipt of all 

items, statements, and forms reasonably requested and required, longer than the amount of time 

provided for, as described above, constitutes a non-prompt payment of the claim. TEX. INS. CODE

§542.058.

125. Each of the foregoing unfair settlement practices were completed knowingly by 

Spinnaker and were a producing cause of Plaintiffs’ injuries and damages.

COUNT V

BREACH OF GOOD FAITH AND FAIR DEALING (Individual Claim)

126. Plaintiffs restate and incorporate by reference all preceding allegations.

127. Unrelated to the discrete breach alleged in Count I, Spinnaker breached the 

common law duty of good faith and fair dealing owed to Plaintiffs by denying or delaying payment 

on the claim when Spinnaker knew or should have known that liability was reasonably clear. 

128. Spinnaker failed, as described above, to adequately and reasonably investigate and 

evaluate Plaintiffs’ claim, although, at that time, Spinnaker knew or should have known by the 

exercise of reasonable diligence that its liability was reasonably clear and constitutes a breach of 

the duty of good faith and fair dealing.

129. Spinnaker’s conduct proximately caused Plaintiffs’ injuries and damages.

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COUNT VI

DECLARATORY JUDGMENT AND RELIEF (Class Action)

130. Plaintiffs restate and incorporate by reference all preceding allegations.

131. This Court is empowered by the Declaratory Judgment Act as codified at 28 U.S.C. 

§ 2201 and Fed. R. Civ. P. 57 to declare the rights and legal relations of parties regardless of 

whether further relief is or could be claimed.

132. A party may seek to have insurance contracts, before or after a breach, construed 

to obtain a declaration of rights, status, and other legal relations thereunder adjudicated.

133. Plaintiffs and members of the proposed class have all complied with all relevant 

conditions precedent in their contracts.

134. Plaintiffs seek, individually and on behalf of the proposed class, a declaration that 

the applicable insurance contracts prohibit the withholding of future labor costs as described herein 

when adjusting losses under the methodology employed herein.

135. Plaintiffs further seek, individually and on behalf of the proposed class, any and all 

other relief available under the law arising out of a favorable declaration.

136. Plaintiffs and members of the proposed class have and will continue to suffer 

injuries. 

JURY DEMAND

Plaintiffs hereby demands a trial by jury.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, individually and on behalf of all others similarly situated, 

respectfully request that this Court:

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1. Enter an order certifying this action as a class action, appointing James Morrison 

and Dallas Morrison as the representatives of the class, and appointing Plaintiffs’ attorneys as 

counsel for the class;

2. Enter a declaratory judgment, declaring that Spinnaker’s withholding of future

labor costs as depreciation is contrary to and breaches the insurance policies issued to Plaintiffs

and members of the putative class;

3. Enter a declaration, and any preliminary and permanent injunction and equitable 

relief against Spinnaker and its officers, agents, successors, employees, representatives, and any 

and all persons acting in concert with them, from engaging in each of the policies, practices, 

customs, and usages complained of herein, as may be allowed by law;

4. Enter an order that Spinnaker specifically perform and carry out policies, practices, 

and programs that remediate and eradicate the effects of its past and present practices complained 

of herein;

5. Award compensatory damages for all sums withheld as non-material depreciation 

as defined above, plus prejudgment interest on all such sums, to Plaintiffs and members of the 

proposed class;

6. Award compensatory damages, statutory benefits, treble damages, attorney’s fees, 

exemplary and punitive damage to Plaintiffs, individually, for all amounts to which they are

entitled, unrelated to the discrete breach alleged in Count I;

7. Award attorneys’ fees, costs, expenses, and disbursements incurred herein by 

Plaintiffs and members of the proposed class as may be allowed by law; 

8. Pre- and Post-Judgment interest; and

9. Grant such further and additional relief as the Court deems necessary and proper.

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Respectfully submitted, 

 

 /s Shaun W. Hodge________________ 

Shaun W. Hodge 

Texas Bar No. 24052995 

shodge@hodgefirm.com 

The Hodge Law Firm, PLLC 

The Historic Runge House 

1301 Market Street 

Galveston, Texas 77550 

Telephone: (409) 762-5000 

Facsimile: (409) 763-2300 

 

Attorney for Plaintiffs and 

Proposed Class Representatives 

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