Appeal from the United States District Court for the Eastern District of Texas. D.C. DOCKET NUMBER 6:91-CV-14. JUDGE William M. Steger
Before Politz, Chief Judge, Wisdom and Wiener, Circuit Judges.
Challenging the sufficiency of the evidence to support a verdict for extracontractual damages, State Farm Fire & Casualty Company partially appeals the judgment on verdict in favor of Bobby Thrash, Sr., as modified by the trial court. On the issues appealed we reverse and render judgment in favor of State Farm.
This dispute arises from a claim Thrash presented to his insurer, State Farm, shortly after fire destroyed his home near Reklaw, Cherokee County, Texas. State Farm conducted an investigation into the circumstances surrounding the destruction of the Thrash home immediately after the claim was filed.
State Farm's investigator and the local state fire marshal agreed, after inspecting the scene and interviewing witnesses, including Thrash, that someone intentionally set the fire by "pouring flammable liquids in several rooms of the house" and that Thrash most likely was that person. The evidence indicated that Thrash: (1) purchased the policy from State Farm five weeks before the fire and after his efforts to sell the house proved futile; (2) moved out of the house and into a mobile home, carrying his valuables with him, two weeks before the fire; (3) returned to the house hours before the fire, locking it behind him, and is the last person known to be on the premises before the fire; (4) faced threats from the Internal Revenue Service to foreclose on his house if he did not either pay off its $9,000 levy or sell the house within 120 days (he also owed $7,000 in local taxes); (5) was unemployed and had received no income for months, and could no longer rely on his ex-wife, and sole source of income, to meet his obligations.*fn1
Relying on the Conclusions of its independent expert, the state fire marshal, and the evidence produced in their reports, State Farm denied the claim and instituted a declaratory judgment action in federal court to determine its liability. Thrash counterclaimed for payment under the policy, as well as compensation for mental anguish and exemplary damages, under the Texas common law, Texas Insurance Code, and Texas Deceptive Trade Practices -- Consumer Protection Act. The case proceeded to trial before a jury.
At the close of the evidence, State Farm moved for a directed verdict, contending that, as a matter of law, Thrash was not entitled to damages beyond recovery under the policy. The court granted the motion, finding insufficient evidence to support Thrash's claims of either gross negligence or that State Farm had committed a knowing*fn2 violation of the DTPA, either of which would have allowed the discretionary imposition of exemplary damages.*fn3
The jury returned a verdict awarding Thrash approximately $158,000 under the policy, $110,000 for breach of the duty of good faith and fair dealing, $200,000 for deceptive practices, $2,000 in mandatory treble damages under the DTPA, and $38,000 in attorney's fees and prejudgment interest. State Farm again sought to limit the recovery to contractual damages in a motion for judgment notwithstanding the verdict.*fn4 The court denied the motion but required Thrash to elect between the $110,000 and $200,000 awards as they represented compensation for the same mental anguish damages; State Farm timely appealed challenging only the award of extracontractual damages.
At the outset we stress the limited nature of the appeal: the sufficiency of evidence to support the award of extracontractual damages. We are not here presented with a challenge to the jury's determination that Thrash did not burn down his house. Rather, we are to consider only whether there is sufficient evidence to support the award of damages under the Texas common law, as it is bound up in the Texas Insurance Code and the DTPA.
In a diversity case state law provides the elements of the plaintiff's case.*fn5 Federal law, however, provides the scale by which we measure the sufficiency of the evidence to support the jury's findings.*fn6 Here we consider the law of Texas, specifically the common-law duty of good faith and fair dealing imposed on an insurer, and the related duties under the DTPA and Insurance Code.
Our standard of review is narrow. We review the district court's decision to deny a motion for judgment as a matter of law, as did the district court,*fn7 according deference to the verdict. Nonetheless, we recognize that a jury occasionally may become confused; or, on rare occasions, may breach its obligation to apply the law fairly ...