UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS

JOHN GUILES and JENNIFER GUILES,

Plaintiffs,

versus

GEOVERA ADVANTAGE INSURANCE 

SERVICES, INC.,

Defendant.

§

§

§

§

§

§

§

§

§

§

CIVIL ACTION NO. 1:23-CV-289

MEMORANDUM ORDER OVERRULING 

PLAINTIFFS’ OBJECTIONS AND ADOPTING THE REPORT 

AND RECOMMENDAITON OF THE UNITED STATES MAGISTRATE JUDGE

Pursuant to 28 U.S.C. § 636 and the Local Rules of Court for the Assignment of Duties 

to United States Magistrate Judges, the district court referred this proceeding to Magistrate Judge 

Christine L. Stetson to conduct all pretrial proceedings, to enter findings of fact and recommend 

disposition on case-dispositive matters, and to determine non-dispositive matters. See 28 U.S.C. 

§ 636(b)(1); E.D. TEX. LOC. R. CV-72. 

This case is a dispute between an insured and an insurer following a freeze event in 

February 2021. On April 25, 2024, Judge Stetson issued a Report and Recommendation (#19)

with the following conclusions and recommendations: (1) Plaintiffs did not assert any viable 

claims under the common law or Texas Insurance Code Chapter 541, (2) Defendant’s Motion 

for Summary (#15) should be GRANTED in full, and (3) all claims should be DISMISSED.

I. Plaintiffs’ Objections are Overruled

On May 8, 2024, Plaintiffs timely filed objections (#20) to the Report and 

Recommendation. A party who timely files specific, written objections to a magistrate judge’s 

Case 1:23-cv-00289-MAC-CLS Document 21 Filed 05/16/24 Page 1 of 5 PageID #: 715
2

report and recommendation is entitled to a de novo determination of findings or recommendations 

to which the party specifically objects. 28 U.S.C. § 636(b)(1)(C); FED. R. CIV. P. 72(b)(2)-(3). 

To be specific, an objection must identify the specific finding or recommendation to which 

objection is made, state the basis for the objection, and specify the place in the magistrate judge’s 

report and recommendation where the disputed determination is found. An objection that merely 

incorporates by reference or refers to the briefing before the magistrate judge is not specific.

Frivolous, conclusive or general objections need not be considered by the district court.” Nettles 

v. Wainwright, 677 F.2d 404, 410 n.8 (5th Cir. 1982) (en banc), overruled on other grounds by 

Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1412 (5th Cir. 1996) (en banc).

A. Plaintiffs’ Objections

For context, Judge Stetson correctly noted that establishing damages under Chapter 541 

of the Texas Insurance Code and for a breach of the duty of good faith and fair dealing requires

an insured to have (1) a right to receive benefits under the policy at issue, or (2) an injury 

independent of a right to benefits (#19 at 6). See In re State Farm Mut. Auto. Ins. Co., 629 

S.W.3d 866, 872-73 (Tex. 2021) (citing USAA Tex, Lloyds Co. v. Menchaca, 545 S.W.3d 479, 

500 (Tex. 2018) (holding “there is no alternative to these two pathways” to recover damages). 

Judge Stetson found that Defendant’s payment of the appraisal award and statutory interest 

satisfied Plaintiffs’ rights under the policy and that Plaintiffs asserted no independent injury. 

Accordingly, she recommended Defendant’s Motion for Summary Judgement (#15) be granted.

Plaintiffs object to Judge Stetson’s Report and Recommendation in two ways. First, they 

contend that a party is not required to prove an injury independent of policy benefits to recover 

damages for the alleged common law and statutory torts (#20 at 1-3). Second, Plaintiffs argue 

that Defendant’s payment of an appraisal award does not bar Plaintiffs from recovering damages 

Case 1:23-cv-00289-MAC-CLS Document 21 Filed 05/16/24 Page 2 of 5 PageID #: 716
3

in tort under the “entitled-to-benefits” rule (#20 at 3-4). The court will address each objection 

in turn.

1. Plaintiffs’ First Objection

Plaintiffs claim the independent injury rule “does not bar the insured from recovering 

policy benefits as actual damages or trebling those actual damages under Chapter 541 if the 

insured establishes that the claim is covered under the policy” (#20 at 3). Nowhere does Judge 

Stetson suggest a court could not award policy benefits as damages and treble those damages in 

absence of an independent injury. Instead, she properly found that where no policy benefits 

were at issue, an insured would need to show an independent injury to recover under Chapter 

541 or for a common law claim.

Plaintiffs cite, for the first time, Lyda Swinerton Builders, Incorporated v. Oklahoma

Surety Company in their first objection, but this case bolsters Judge Stetson’s Report and 

Recommendation. Lyda explicitly notes that “an insurer's statutory violation does not permit 

the insured to recover any damages beyond policy benefits unless the violation causes an injury 

that is independent from the loss of the benefits.” Lyda Swinerton Builders, Inc. v. Oklahoma 

Sur. Co., 903 F.3d 435, 452 (5th Cir. 2018) (quoting Menchaca, 545 S.W.3d at 452) (emphasis 

added). Certain statutory and common law damages, such as treble damages, are not considered 

to be “beyond” policy benefits. Id. at 453. In other words, where a party seeks benefits owed 

under a policy, they may seek relevant “benefits” such as treble damages. An insured may not, 

however, seek treble damages when no policy benefits are owed.

Plaintiffs’ first objection is, therefore, overruled. In the absence of an independent 

injury, Plaintiffs are required to show they are currently owed benefits under their insurance 

policy with Defendant. Whether they did so is implicated in the second objection.

Case 1:23-cv-00289-MAC-CLS Document 21 Filed 05/16/24 Page 3 of 5 PageID #: 717
4

2. Plaintiffs’ Second Objection

Plaintiffs concede that the payment of the appraisal award and interest fulfills Defendant’s 

contractual obligations (#20 at 4). They argue, instead, that the payment does not foreclose 

further proceedings based in common law and tort claims under the “entitled-to-benefits” rule 

(Id.). Under Plaintiffs’ theory, one’s entitlement to benefits under an insurance policy opens the 

door to statutory and common law damages, even if all benefits were fully paid. This view of 

the law cuts against precedent.

The “entitled-to-benefits” rule has two parts: (1) “an insured cannot recover policy 

benefits as damages for an insurer’s extra-contractual violation if the policy does not provide the 

insured a right to those benefits,” and (2) “an insured who establishes a right to benefits under 

the policy can recover those benefits as actual damages resulting from a statutory violation.” 

Menchaca, 545 S.W.3d at 497. Put simply, the “entitled-to-benefits” rule represents the idea 

that an insured who is owed policy benefits can seek what they are owed under the policy and 

other actual damages, such as treble damages, under that policy resulting from a statutory 

violation.

Courts in the Fifth Circuit, however, have found that the “entitled-to-benefits rule” 

cannot apply when an insurer timely paid an appraisal award that fulfilled all that was owed 

under the policy. Bonner v. Allstate Vehicle & Prop. Ins. Co., No. 3:23-CV-158, 2024 WL 

718202, at *3 (S.D. Tex. Jan. 3, 2024) (“Bonner cannot satisfy the entitlement-to-benefits rule 

because Allstate's alleged conduct did not cause Bonner to lose any benefit under the policy. 

Bonner received all benefits he was entitled to receive under the policy when Allstate paid the 

appraisal award.”); Royal Hosp. Corp. v. Underwriters at Lloyd's London, No. 3:18-CV-102, 

2022 WL 17828980, at *7 (S.D. Tex. Nov. 14, 2022) (finding that “[t]he appraisal award 

Case 1:23-cv-00289-MAC-CLS Document 21 Filed 05/16/24 Page 4 of 5 PageID #: 718
5

constitutes the entirety of benefits Royal is entitled to under the Policy,” and that the plaintiff, 

accordingly, “did not sustain actual damages under the Policy”). Here, Plaintiffs never claim 

they are entitled to other benefits under their policy with Defendant or that they did not receive 

their policy benefits.

This area of Texas law appears to be developing rapidly, but the court sees no reason to 

depart from the cases cited above. As the Texas Supreme Court noted in Ortiz, the payment of 

an appraisal award “contractually resolves” the issue of the “amount of the covered loss” of an 

insurance policy. Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 132 (Tex. 2019). If an insurer 

could be in a breach of contract despite timely paying an appraisal award, “insureds would be 

incentivized to sue for breach every time an appraisal yields a higher amount than the insurer's 

estimate (regardless of whether the insurer pays the award).” Id. at 133. Plaintiffs’ second 

objection is overruled.

II. Conclusion and Order

The court has conducted a de novo review of Plaintiffs’ objections in relation to the 

pleadings and the applicable law. See FED. R. CIV. P. 72(b). After careful consideration, 

Plaintiffs’ objections (#20) are OVERRULED. The Report and Recommendation of the United 

States Magistrate Judge (#19) is ADOPTED. Defendant’s Motion for Summary Judgment (#15) 

is GRANTED in full, and all of Plaintiffs’ claims are DISMISSED with prejudice. The court 

will enter a separate final judgment.

________________________________________

MARCIA A. CRONE

UNITED STATES DISTRICT JUDGE SIGNED at Beaumont, Texas, this 16th day of May, 2024.

Case 1:23-cv-00289-MAC-CLS Document 21 Filed 05/16/24 Page 5 of 5 PageID #: 719