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Texas Windstorm Insurance Association v. Dickinson Independent School District

Court of Appeals of Texas, Fourteenth District

May 31, 2018

TEXAS WINDSTORM INSURANCE ASSOCIATION, Appellant
v.
DICKINSON INDEPENDENT SCHOOL DISTRICT, Appellee Item # Description 1 Bay Colony Elementary RCV Depreciation ACV

          On Appeal from the 405th District Court Galveston County, Texas Trial Court Cause No. 12-CV-2012

          Panel consists of Chief Justice Frost and Justices Boyce and Jewell (Frost, C.J., dissenting).

          MAJORITY OPINION

          Kevin Jewell Justice.

         Today we consider whether Dickinson Independent School District ("DISD") is entitled to judgment for breach of contract damages against Texas Windstorm Insurance Association ("TWIA") based on an appraisal award.

         DISD sued TWIA in connection with TWIA's handling of DISD's Hurricane Ike claims. DISD alleged breach of contract and related claims. During the proceedings, TWIA invoked the insurance policy's appraisal provisions, and the resulting appraisal award totaled $10.8 million in damages. DISD amended its petition to abandon all claims except breach of contract and, based on the appraisal award, filed traditional motions for partial summary judgment on the elements of causation and damages. TWIA opposed the motions because, among other things, DISD had not conclusively proven that the alleged damages reflected in the appraisal award, or any portion of them, were caused by covered perils. The trial court granted both motions in DISD's favor. The case proceeded to trial and the sole question put to the jury was whether TWIA breached the policy by failing to pay the appraisal award, which the jury answered affirmatively. The trial court signed a final judgment against TWIA for $9, 602, 542.82.

         TWIA challenges the trial court's judgment in the following issues:

• In its first issue, TWIA challenges the orders granting partial summary judgment on causation and damages because DISD did not conclusively prove (or TWIA raised genuine issues of material fact) that DISD's alleged damages were caused by a named peril or covered by the TWIA policy. Further, TWIA asserts that DISD did not meet its burden to prove coverage at trial through expert testimony. As a remedy, TWIA requests rendition of judgment as a matter of law or remand for new trial.
• In its second issue, TWIA contends that the trial court reversibly erred in excluding TWIA's trial evidence supporting its affirmative defenses.
• In issue three, TWIA urges that the trial court erred in submitting DISD's jury question and in refusing to submit TWIA's proposed question and instructions.
• Finally, in its fourth issue, TWIA contends that legally insufficient evidence supports the jury's finding that TWIA breached the policy by not paying the appraisal award or that TWIA's failure to pay the award proximately caused the damages reflected in the judgment.

         For the reasons explained below, we sustain TWIA's first issue in part and hold that the trial court erred in granting DISD's motions for partial summary judgment on causation and damages because DISD's evidence, including the appraisal award, did not conclusively prove whether and how much alleged loss was caused by a covered peril and otherwise subject to coverage under the policy terms and conditions. Having sustained this portion of TWIA's first issue, we further conclude that remand for further proceedings, as opposed to rendition of judgment, is the appropriate remedy under the present circumstances. Given our resolution of TWIA's first issue, reaching TWIA's remaining issues is not necessary to final disposition of this appeal. See Tex. R. App. P. 47.1. Accordingly, we reverse the trial court's judgment and remand for further proceedings consistent with this opinion.

         Background

         TWIA issued a windstorm and hail commercial policy of insurance to DISD, the named insured. The relevant policy period was from September 1, 2008 to September 1, 2009. As to each covered property, the policy provided for two potential forms of coverage depending on whether a limit of liability for a particular form of coverage was shown in the declarations. The two forms of coverage were identified in the policy as "COVERAGE A (Building)" or "COVERAGE B (Business Personal Property)." The policy provided in relevant part[1] as follows:

AGREEMENT
We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy.
COVERED CAUSES OF LOSS
We insure for direct physical loss to the covered property caused by windstorm or hail unless the loss is excluded in the Exclusions.
EXCLUSIONS

         The following exclusions apply to loss to covered property:

1. Flood.
We will not pay under any and all circumstances for loss or damage caused by or resulting from flood, surface water, waves, storm surge, tides, tidal water, tidal waves, tsunami, seiche, overflow of streams or other bodies of water, or spray from any of these, all whether driven by wind or not.
6. Rain.
We will not pay for loss or damage caused by or resulting from rain, whether driven by wind or not unless wind or hail first makes an opening in the walls or roof of the described building. Then we will only pay for loss in the interior of the building, or the insured property within, caused immediately by rain entering through such openings.
CONDITIONS
4. Duties After Loss.
a. Your Duties After Loss. In case of a loss to covered property caused by windstorm or hail you must:
(1) Give us prompt written notice. Include a description of the property involved;
(2) Protect the property from further damage;
(3) Make reasonable, necessary, and temporary repairs to protect the property;
(4) Keep an accurate record of repair expenses;
(5) Furnish a complete inventory of damaged personal property showing the quantity, description, and amount of loss. Attach all bills, receipts and related documents which you have that justify the figures in the inventory. . . .
10. Appraisal. If you and we fail to agree on the actual cash value, amount of loss, or cost of repair or replacement, either can make a written demand for appraisal. Each will then select a competent and independent appraiser and notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers will choose a competent and independent umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a district court of a judicial district where the loss occurred. The two appraisers will then determine the amount of loss, stating separately the actual cash value and loss to each item.
If the appraisers fail to agree, they will submit their differences to the umpire. An itemized decision agreed to by any two of these three and filed with us will determine the amount of the loss.
Each party will pay its own appraiser and bear the other expenses of the appraisal and umpire equally.

         Hurricane Ike struck Galveston County, Texas on September 13, 2008, during the effective dates of the TWIA policy. Three days later, DISD notified TWIA of windstorm damage to several of its buildings. TWIA acknowledged DISD's claim and hired an adjuster to manage the claim. TWIA's adjuster and DISD personnel inspected DISD's campuses and documented the damage found. TWIA's adjuster verified damages exceeding policy deductibles on numerous insured structures and sent the documentation to DISD personnel for review. In December 2009, TWIA paid DISD $220, 232.85 for these damages. DISD subsequently signed a proof of loss, reflecting the cash value of the claim, as well as depreciation that TWIA would pay upon completion of repairs. TWIA paid DISD recoverable depreciation of $8, 667.80 in March 2010.

         In September 2011, DISD contacted TWIA concerning a roof on one of DISD's buildings. DISD had replaced the roof and sought reimbursement of $1, 550, 645.75 as additional damages caused by Hurricane Ike. TWIA paid $999, 577.19 for this supplemental claim in October 2011 (DISD's "Roof Claim"), though apparently no documentation was provided establishing a wind-created opening on the roof. This amount did not include general contractor overhead and profit amounts. In March 2012, DISD provided a new sworn proof of loss.

         The following September, DISD filed the instant lawsuit against TWIA. DISD claimed that TWIA breached its contract, violated the Texas Insurance Code, breached its duties of good faith and fair dealing, and committed fraud. Prior to filing suit, DISD did not notify TWIA of any additional losses it contended were covered under the policy. TWIA asserted a general denial and several affirmative defenses.

         DISD demanded that TWIA pay $311, 623.04 for overhead and profit related to DISD's Roof Claim, $292, 942.12 in statutory interest, and $225, 000 for attorney's and expert fees, for a total of $829, 566.16.[2] In response, TWIA invoked the policy's appraisal clause.

         DISD designated Mark Domangue as its appraiser, and TWIA selected Jonathan Held. The trial court appointed former judge Donnie Ray Burgess as umpire over TWIA's objection. Initial appraisal inspections occurred between October 1 and October 9, 2013. By that time, DISD already had repaired, replaced, or sold some of the damaged property for which it claimed further compensation was due under the policy. Domangue provided Held his initial damages estimates in early June 2014. Held reciprocated two months later and also sent Domangue a comparison detailing the differences in their initial estimates. Held and Domangue met to review estimates. They agreed to some items and changes, but were unable to agree on an overall damages estimate. They were to exchange revised estimates for final review before meeting with Burgess. Domangue did not provide Held with his revised appraisal, but instead informed Held that the revisions were not "significant" and would not change his overall summary.

         Burgess inspected DISD's buildings in March 2015. Neither Held nor Domangue were present when Burgess inspected the buildings. Burgess, Held, and Domangue met in early April 2015 to review the appraisers' estimates. At this meeting, Held discovered that Domangue's revised estimates increased DISD's claim by $6 million.

         Ultimately, Burgess and Domangue signed an appraisal award that totaled $10, 815, 967.43 (the "Appraisal Award"). Held did not sign the Appraisal Award.

         After the Appraisal Award was issued, DISD filed several motions for partial summary judgment, including a no-evidence motion regarding TWIA's affirmative defenses to the Award, a traditional motion on causation or alternatively to exclude evidence of causation, a traditional motion on the amount of DISD's damages, and a traditional motion on DISD's breach of contract claim. The trial court denied DISD's motions on TWIA's affirmative defenses and DISD's contract claim. The relevant motions for purposes of this appeal are DISD's motions on causation and property damages. In both motions, DISD argued that the Appraisal Award conclusively established certain elements of DISD's breach of contract claim, namely the amount of damages caused by wind from Hurricane Ike.

         TWIA filed responses to both motions, arguing that the Appraisal Award did not conclusively establish, or address, whether the damages identified therein were caused by a covered peril. TWIA also provided, inter alia, evidence that DISD's alleged damages were caused by events other than covered perils. The trial court granted DISD's motions on causation and property damages less than a week before trial began.

         At a pretrial hearing, DISD argued that the court's summary judgment orders on causation and damages foreclosed all of TWIA's affirmative defenses, as well as any argument or evidence by TWIA at trial that any portion of the damages listed in the Appraisal Award were not covered by the policy. TWIA responded that, regardless of the partial summary judgment orders, it was entitled to introduce evidence supporting its affirmative defenses and that DISD still had "to prove coverage." The trial court ruled that the summary judgment order on damages "forecloses all affirmative defenses regarding the amount of damages." Similarly, the trial court ruled that "the issue of causation is foreclosed given that there is an appraisal and the previous decisions made regarding this case."[3]

         Trial commenced after the pretrial hearing. Because DISD had nonsuited its extra-contractual claims pretrial, the only remaining disputed issue for the jury to determine was whether TWIA breached its insurance contract. After a five-day trial, the jury was asked to decide a single issue: "Did Texas Windstorm Insurance Association fail to comply with the agreement entitled Texas Windstorm Insurance Association Policy Windstorm and Hail?"[4] The jury answered, "Yes." Based on the jury's verdict, DISD moved to enter judgment; TWIA opposed entry on various grounds. The trial court signed a final judgment in which it ordered that DISD recover from TWIA a total of $9, 602, 542.82, comprised of the following amounts: $8, 193, 168.85 for the Appraisal Award less prior payments, deductibles, and sales tax; $159, 373.97 in interest on the award; and $1, 250, 000.00 in attorney's fees.

         TWIA timely moved for judgment notwithstanding the verdict or for a new trial. In its motions, TWIA asserted, in pertinent part, that no legally sufficient evidence supported causation or coverage. Additionally, TWIA argued that, because DISD had "de-designated" its only causation expert before the trial court ruled on DISD's summary judgment motion, DISD had not proved, and could not prove, that the Appraisal Award reflected only damages covered by the insurance policy. TWIA also challenged the trial court's striking of its affirmative defenses. TWIA's post-trial motions were overruled by operation of law, and this appeal timely followed.

         Analysis

         In its first issue, TWIA claims that the trial court erred in granting partial summary judgment on causation and damages. As part of this issue, TWIA argues that DISD did not conclusively establish how much of DISD's alleged damages, if any, were caused by wind and covered by the policy because the Appraisal Award by itself fails to prove these contested issues.

         A. Standard of Review

         We review a trial court's grant of summary judgment de novo. Exxon Corp. v. Emerald Oil & Gas Co., 331 S.W.3d 419, 422 (Tex. 2010). A trial court properly grants summary judgment if the movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Gastar Exploration Ltd. v. U.S. Specialty Ins. Co., 412 S.W.3d 577, 582 (Tex. App.-Houston [14th Dist.] 2013, pet. denied). We indulge every reasonable inference and resolve all doubts in the non-movant's favor. Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 736 (Tex. 1990).

         A movant seeking a traditional summary judgment must establish its right to that relief by conclusively proving all elements of the movant's claim as a matter of law. See Tex. R. Civ. P. 166a(c); Havlen v. McDougall, 22 S.W.3d 343, 345 (Tex. 2000). Here, DISD moved for partial summary judgment, so it was required to conclusively prove only those elements raised in its motion. See Tex. R. Civ. P. 166a(a) (explaining that claimant may move for summary judgment "upon all or any part thereof" of its claim). If the movant's motion and summary judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the non-movant to raise a genuine, material fact issue sufficient to defeat summary judgment. Dolcefino v. Randolph, 19 S.W.3d 906, 916 (Tex. App.-Houston [14th Dist.] 2000, pet. denied). On the other hand, if the movant fails to meet its initial summary judgment burden, the summary judgment cannot stand regardless whether the non-movant responds. See Grynberg v. Grey Wolf Drilling Co., 296 S.W.3d 132, 137 & n.13 (Tex. App.-Houston [14th Dist.] 2009, no pet.) (summary judgment must stand on its own merits; non-movant has no burden to respond unless movant conclusively establishes entitlement to summary judgment); see also City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979) ("Summary judgments must stand on their own merits, and the non-movant's failure to answer or respond cannot supply by default the summary judgment proof necessary to establish the movant's right."); Williams Consol. I, Ltd./BSI Holdings, Inc. v. TIG Ins. Co., 230 S.W.3d 895, 900 (Tex. App.-Houston [14th Dist.] 2007, no pet.) (movant bears burden to conclusively prove all elements of its claim or defense).

         B. Scope of Review

         Before addressing whether DISD met its summary judgment burden, we consider the scope of evidence properly included within the summary judgment record on appeal. DISD relied on identical evidence to support both of its motions for partial summary judgment: (a) a copy of the TWIA policy, (b) the Appraisal Award, (c) TWIA's live answer, and (d) TWIA's letter invoking the appraisal process. After TWIA responded to DISD's motions, DISD filed various replies and supplements, which attached additional evidence. All of DISD's evidence other than the evidence attached to its initial motions was filed within twenty-one days of the summary judgment hearing, which generally is not timely absent leave of court. See Tex. R. Civ. P. 166a(c). TWIA contends that DISD did not secure leave to file any evidence late and that the only exhibits properly before the trial court at the time it granted partial summary judgment were those attached to DISD's initial motions, including the Appraisal Award.

         Rule 166a requires a party seeking summary judgment to file and serve the motion and any supporting affidavits or evidence at least twenty-one days before the hearing on the motion. Tex.R.Civ.P. 166a(c). If a party intends to use discovery products that have not been filed with the trial court clerk, that party must file an appendix containing the evidence or a "notice containing specific references to the discovery, " along with a statement of intent to use the specified discovery, within the applicable time frames. Tex.R.Civ.P. 166a(d).

         Summary judgment evidence, either supporting or opposing the motion, may be filed late only with leave of court. Alphaville Ventures, Inc. v. First Bank, 429 S.W.3d 150, 154 (Tex. App.-Houston [14th Dist.] 2014, no pet.) (citing Tex.R.Civ.P. 166a(c); Benchmark Bank v. Crowder, 919 S.W.2d 657, 663 (Tex. 1996)); see also Lopez v. Exxon Mobil Dev. Co., No. 14-16-00826-CV, 2017 WL 4018359, at *5 (Tex. App.-Houston [14th Dist.] Sept. 12, 2017, pet. denied) (mem. op.). Leave to file summary judgment evidence late may be shown by a separate order, a recital in the summary judgment order, or an oral ruling contained in the reporter's record of the summary judgment hearing. Alphaville Ventures, 429 S.W.3d at 154 (citing Pipkin v. Kroger Tex., L.P., 383 S.W.3d 655, 663 (Tex. App.-Houston ...


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