Court Opinion

ID: 4436999
Source: CourtListenerOpinion
Date Created: 2019-09-11 01:00:18.576755+00
Date Added: 2024-06-11T09:47:15.030225
License: Public Domain

Case: 18-11415      Document: 00515112176         Page: 1    Date Filed: 09/10/2019

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                      United States Court of Appeals
                                                                               Fifth Circuit

                                      No. 18-11415                           FILED
                                                                    September 10, 2019
                                                                        Lyle W. Cayce
UNIVERSITY BAPTIST CHURCH OF FORT WORTH,                                     Clerk

              Plaintiff - Appellant

v.

LEXINGTON INSURANCE COMPANY,

              Defendant - Appellee

                   Appeal from the United States District Court
                        for the Northern District of Texas
                              USDC No. 4:17-CV-962

Before STEWART, Chief Judge, and JONES, and OWEN, Circuit Judges.
PER CURIAM:*
       In this insurance dispute between University Baptist Church of Fort
Worth (“UBC”) and its insurance company, Lexington, 1 UBC appeals from the
district court’s adverse summary judgment and maintains that for summary
judgment purposes, it adequately supported a breach of contract claim,
violations of the Texas Insurance Code and the Deceptive Trade Practices Act

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
       1 The court also heard oral argument in the related case between UBC and York Risk
Services, the insurance adjustor. See University Baptist Church of Fort Worth v. York Risk
Servs., No. 18-10713 (N.D. Tex. filed Jun. 14, 2018).
    Case: 18-11415    Document: 00515112176    Page: 2   Date Filed: 09/10/2019

                                No. 18-11415
(“DTPA”), and a violation of the duty of good faith and fair dealing.       We
AFFIRM the judgment of the district court.
   1. Background
      Following storm damage to UBC’s tile roof, the church submitted an
insurance claim with Lexington. In addition to coverage for storm and other
damage, the insurance policy included a code and ordinance endorsement,
which covered up to $250,000 for any repairs deemed necessary to bring the
building into compliance with city building codes. The city of Fort Worth
required UBC to do code upgrade work, which was performed by the church’s
roofer, Jeff Eubank Roofing. Eubank initially submitted a fixed bid for about
$286,000, but the insurance adjuster had doubts about the accuracy of this bid.
After requesting more information, and realizing, as both parties admit, that
Eubank’s bid was seriously deficient because of the construction’s unique
features, the adjuster directed the roofer to perform the work on a time-and-
materials basis. The church maintains it could have held the contractor to his
original bid and had the work completed for $35,798 as its out-of-pocket costs
above the policy limit.
      Although Lexington eventually paid UBC the policy limits, a total
amount exceeding $852,000 for the repairs, the acceptance of the new bid
meant the church had to bear an additional $614,148.49 in out-of-pocket costs.
UBC does not argue that the initial bid was an accurate bid, or that the time
and materials charge was inflated, or that it would not have otherwise had this
work performed. Rather, UBC claims that because Eubank was willing to
honor its initial fixed bid, UBC could have had the work completed for $35,798
in out-of-pocket costs had Lexington approved UBC’s insurance claim at that
time. UBC contends that Lexington’s actions in delaying the approval and
payment of the insurance claim thus denied UBC of the benefit of its bargain
with Eubank in violation of (1) five sections of the Texas Insurance Code;
                                      2
    Case: 18-11415     Document: 00515112176      Page: 3   Date Filed: 09/10/2019

                                  No. 18-11415
(2) Lexington’s duty of good faith and fair dealing; and (3) the DTPA in virtue
of the Insurance Code violations. Finally, UBC asserts a breach of contract
claim arising from the use of a different type of tile for the roof repair.
      The district court granted Lexington’s motion for summary judgment,
and UBC timely appealed. This court reviews summary judgments de novo,
under the same standards applicable to the district court. See, e.g., Brumfield
v. Hollins, 551 F.3d 322, 326 (5th Cir. 2008).           Summary judgment is
appropriate if there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, (1986). The evidence must
be viewed “in the light most favorable to the non-moving party,” and “the
movant has the burden of showing this Court that summary judgment is
appropriate.” Hollins, 551 F.3d at 326 (citing Matsushita Elec. Indus. Co. v.
Zenith Radio, 475 U.S. 574, 587 (1986); Celotex Corp. v. Catrett, 477 U.S. 317,
323, (1986)).
   2. Insurance Code and DTPA Claims
      First, UBC claims that Lexington violated five sections of the Texas
Insurance Code: §§ 541.060(a)(1), (a)(2), (a)(3), (a)(7), and § 542.058.
      Section 541.060(a)(1) prohibits “misrepresenting to a claimant a
material fact or policy provision relating to coverage at issue.” Tex. Ins. Code
§ 541.060 (Lexis Advance 2016). As the court observed, UBC did not allege any
violation of this section in its complaint and raised it for the first time in its
response to Lexington’s motion for summary judgment. On the merits, the
district court rejected the claim as a matter of law because under Texas law
“post loss statements regarding coverage are not misrepresentations under the
Insurance Code.” See Aguilar v. State Farm Lloyds, 4:15-CV-565-A, 2015 WL
5714654, at *3 (N.D. Tex. Sept. 28, 20l5) (citing Texas Mut. Ins. Co. v. Ruttiger,
381 S.W.3d 430, 445–56 (Tex. 2012)).          While UBC argues that this is
                                         3
     Case: 18-11415       Document: 00515112176         Page: 4     Date Filed: 09/10/2019

                                       No. 18-11415
inconsistent with the “plain language” of the statute, UBC cites no cases to
support its reading.          And, fatally, UBC offered no evidence of any
misrepresentation by Lexington.
       UBC’s Section 541.060(a)(2) claim alleged that Lexington “fail[ed] to
attempt in good faith to effectuate a prompt, fair, and equitable settlement
of . . . a claim with respect to which the insurer’s liability has become
reasonably clear . . . .” Tex. Ins. Code § 541.060 (Lexis Advance 2016). But
there was no “settlement” because Lexington paid the policy proceeds in full
after the repairs were completed, pursuant to the terms of the policy. 2
       The district court also properly granted summary judgment for
Lexington on § 541.060(a)(3), a provision that prohibits “failing to promptly
provide to a policyholder a reasonable explanation of the basis in the policy, in
relation to the facts or applicable law, for the insurer’s denial of a claim or offer
of a compromise settlement of a claim.”              Tex. Ins. Code § 541.060 (Lexis
Advance 2016). UBC provided no evidence that Lexington ever denied any
claim. It is undisputed that Lexington paid $852,149.52 to UBC, including the
full $250,000 limit of the code and ordinance endorsement. UBC argues that
because Lexington did not pay the policy limits quicker, i.e., in time to accept
Eubank’s lower bid, UBC was denied the benefit of its bargain with Eubank.
But as was just noted, Lexington owed no payment to UBC until after the
repairs had been made.          No further explanation was required, much less
settlement by Lexington, for its compliance with the policy’s explicit terms.

       2  The Policy terms make clear that payment was due only after the repair or
replacement: “[w]e will not pay for the Increased Cost of Construction: (i) Until the property
is actually repaired or replaced, at the same or another premises; and (ii) Unless the repairs
or replacement are made as soon as reasonably possible after the loss or damage, not to
exceed two years. We may extend this period in writing during the two years.” UBC does
not argue that this provision of the policy otherwise violates Section 541.060(a)(3).
                                              4
    Case: 18-11415    Document: 00515112176     Page: 5    Date Filed: 09/10/2019

                                 No. 18-11415
      UBC’s Section 541.060(a)(7) claim, grounded in Lexington’s alleged
“refus[al] to pay a claim without conducting a reasonable investigation with
respect to the claim.,” Tex. Ins. Code § 541.060 (Lexis Advance 2016), likewise
lacks merit because Lexington never refused to pay any claim under the policy.
UBC faults Lexington for failing to obtain competing bids, reasoning that such
conduct is tantamount to pursuing an insufficient investigation, but the church
offers no cases or other law suggesting that this can support liability under the
Code. If anything, it was the adjuster’s further investigation into Eubank’s bid
that prompted the switch to a time-and-materials approach.
      Finally, because Lexington paid the claim in full according to the policy’s
terms, the district court properly granted summary judgment for Lexington
under Section 542.058, which prohibits delay in the payment of an insurance
claim: “Except as otherwise provided, if an insurer, after receiving all items,
statements,   and    forms   reasonably    requested      and   required   under
Section 542.055, delays payment of the claim for a period exceeding the period
specified by other applicable statutes or, if other statutes do not specify a
period, for more than 60 days, the insurer shall pay damages and other items
as provided by Section 542.060.” Tex. Ins. Code § 542.058 (Lexis Advance
2016). UBC again points to no case or other law suggesting that these policy
terms violated the Insurance Code.
      The DTPA claims, being wholly dependent on the possibility of
Lexington’s having violated the Texas Insurance Code, must fail along with
the demise of the Insurance Code claims.
   3. Duty of Good Faith and Fair Dealing Claim
      Second, UBC claims that Lexington violated its duty of good faith and
fair dealing by denying UBC’s claim when Lexington’s liability had become
reasonably clear. See State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42,
44 (Tex. 1998). To prevail on this claim, UBC must show that Lexington had
                                       5
    Case: 18-11415     Document: 00515112176    Page: 6   Date Filed: 09/10/2019

                                 No. 18-11415
no reasonable basis for the denial or delay in payment of a claim and that
Lexington knew or should have known of that fact. See Hudspeth v. Enter. Life
Ins. Co., 358 S.W.3d 373, 389 (Tex.App.–Houston [1st Dist.] 2011, no pet.). But
under Texas law “there is no duty beyond the contract itself.” Higginbotham
v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460 (5th Cir. 1997). Lexington
complied with the policy by paying the policy limits when the repairs were
completed. UBC has provided no evidence that Lexington denied any claim.
UBC seems to suggest that Lexington could not have switched to a time-and-
materials cost basis in good faith without explaining the risk of exceeding
policy limits. But an insured party is deemed to know the contents of its
insurance policy, including policy limits. See Morris County Nat’l Bank v. John
Deere Ins. Co., 254 F.3d 538, 541 (5th Cir. 2001).
   4. Breach of Contract Claim
      Finally, UBC claims that Lexington breached the parties’ contract by
providing an inferior replacement tile roof. This claim relates to only one
portion of the tile replacement following the storm damage. UBC asserts that
because Lexington replaced the Ludowicki tile that was on the building with
allegedly inferior Verea tile, Lexington did not provide a “like kind and quality
repair” to the roof under the terms of the policy. UBC claims that the district
court improperly dismissed its expert and relied on Lexington’s expert, when
there was a fact question for a jury.
      We disagree with UBC’s proffered interpretation of the insurance policy.
Lexington agreed to pay for losses according to the following terms:
                  a.     In the event of loss or damage covered by
            this Coverage
                  Form, at our option, [Insurer] will either:
                  (1) Pay the value of lost or damaged property;

                                        6
    Case: 18-11415     Document: 00515112176     Page: 7   Date Filed: 09/10/2019

                                  No. 18-11415
                  (2) Pay the cost of repairing or replacing the lost
            or damaged property, subject to b. below,
                  (3) Take all or any part of the property at an
            agreed or appraised value; or
                  (4) Repair, rebuild or replace the property with
            other property of like kind and quality, subject to b.
            below.
            [Insurer] will determine the value of lost or damaged
      property, or the cost of its repair or replacement, in accordance
      with the applicable terms of the Valuation Condition in this
      Coverage Form or any applicable provision which amends or
      supersedes the Valuation Condition.
Lexington thus had the option to choose among these options for satisfying its
obligations, and it opted to completely replace the roof with Verea tile.
      The parties dispute whether Verea tile was of “like kind and quality”
under the policy, and both parties offered expert testimony on this issue.
UBC’s expert, Allen Seymour, testified that he had to use Verea tile, which was
inferior to Ludowicki tile, because Forman, the adjuster, would not approve
the Ludowicki tile. Lexington’s expert, Brett Lochridge, testified that UBC
received better than a like, kind and quality repair because Lexington replaced
the roof with new clay tile, rather than merely repairing the damaged portion
of the roof with new clay tiles or salvaged clay tiles. UBC did not offer evidence
to contradict Lochridge’s account of the repair process, which demonstrated
Lexington’s having used the replacement rather than repair option for the roof.
The district court accordingly reasoned that Lochridge’s testimony showed that
UBC could not prove damages as a matter of law.
      UBC argues that the question how to weigh this competing evidence was
for a jury to determine, but the church does not respond to the rationale that
                                        7
    Case: 18-11415    Document: 00515112176     Page: 8   Date Filed: 09/10/2019

                                 No. 18-11415
UBC received a full replacement roof, rather than merely a repair of a subset
of the tile, and that this option was available to the insurer. Additionally, UBC
has offered no evidence of damages, which is an essential element of their
claim. Intercontinental Grp. P'ship v. KB Home Lone Star L.P., 295 S.W.3d
650, 655 & n.26 (Tex. 2009). Summary judgment for Lexington on the breach
of contract claim was thus proper.
                                 Conclusion
      For the foregoing reasons, the district court’s order granting summary
judgment for Lexington is AFFIRMED.

                                       8