Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg
USAA TEXAS LLOYD'S COMPANY AND ALLCAT CLAIMS SERVICE, LP, Appellants,
JOHN R. GRIFFITH, Appellee.
appeal from the 206th District Court of Hidalgo County,
Chief Justice Contreras and Justices Benavides and Hinojosa.
M. Benavides, Justice.
John Griffith's house was damaged in a hail storm that
struck McAllen in the spring of 2012. Griffith filed suit
against appellant USAA Texas Lloyd's Company (USAA) and
others,  alleging various causes of action related
to their handling of his insurance claim. The jury found USAA
liable as alleged and awarded Griffith roughly $776, 000 in
actual damages, treble damages, exemplary damages, penalty
interest, attorney's fees, and expert witness fees. USAA
appeals contending there is legally insufficient evidence to
support the jury's findings of breach of contract,
knowing violations of the insurance code, fraud, expert
witness fees, and damages arising from these findings. In
addition, USAA argues that the jury charge was erroneous, and
the award of attorney's fees must be reversed. We affirm
in part and reverse and render in part.
held a USAA policy on his house in McAllen, which had a
sizeable roof composed of wood shakes, a type of wood-plank
shingling. The roof was newly built in the early 2000's.
Shortly before the storm, Griffith had maintenance performed
on the roof which included replacing some damaged shakes and
oiling the rest.
weeks before the storm, USAA sent an inspector to survey
Griffith's house for the purpose of underwriting a new
insurance policy. In his report, the inspector documented the
home's good condition, took photos showing there were no
holes in the roof visible from the attic, and increased the
home's appraisal value by over $100, 000.
April 2012, McAllen was struck by a hail storm. There was
evidence of sixty-mile-per-hour winds and 3.2-inch sized hail
at Griffith's house. Griffith reported home damage to
USAA within four days.
sent an inspector from Allcat Claims Service, LP, to assess
the damage, which the Allcat inspector agreed was caused by
the hail storm. The Allcat inspector's photos showed that
there were now holes in the roof where daylight could be seen
from the attic. The inspector found that other than hail
damage, the roof was well maintained and had minimal wear and
Allcat inspector used a "test square" method,
whereby he evaluated a test patch on each slope of the roof,
counted the number of damaged shakes in each patch, and used
those numbers to extrapolate the damage to the rest of the
roof. He found broken shakes on each slope, with a total of
eighty-seven shakes split by hail in the test patches. Based
on these tests, he determined that the right slope of the
house should be replaced entirely, and that the other three
slopes could be spot-repaired, with an estimated 1, 730
shakes to be individually replaced on the other three slopes.
He estimated the cost to repair Griffith's roof and other
areas of his property at $41, 077, which, after depreciation
and deductibles, would result in a $32, 190 payment to
relied on the Allcat estimate and issued Griffith a check for
$32, 190. Griffith saw that his neighbors' roofs were
being replaced, not spot repaired, and he wanted a full
replacement as well. He retained Rimkus, an inspection
company often used by insurers, to perform an estimate. The
Rimkus inspector determined that the roof should be replaced
because all slopes showed significant damage, with over fifty
percent of the shakes damaged on at least two slopes.
Additionally, the punctured felt underlayment needed to be
replaced or else the roof would leak. He estimated that USAA
owed Griffith $119, 850.45, including $73, 405 for
replacement of the roof. The remainder included damage to
windows and screens, a satellite dish, and pool decking.
submitted the Rimkus estimate to USAA and requested
additional payment. USAA in turn submitted Rimkus's
estimate to a third-party engineering firm called Project
Time and Cost (PTC). Seven months after the storm, PTC sent
an engineer to survey the roof. The PTC engineer determined
that most of the damage to the roof was caused by natural
wear and tear and "mechanical damage" such as foot
traffic. He concluded that fewer than twenty shakes were
damaged by hail, and that the largest hail at Griffith's
house was probably one inch in diameter at most. Citing
PTC's report, USAA sent Griffith a partial denial
indicating that it would not pay any more than its initial
offer of $32, 190 based on Allcat's estimate. Griffith
then sued USAA.
trial, the parties submitted additional expert testimony on
the roof, its condition, the source of the damage, and the
prospects of repairing it. USAA called Steve Patterson, an
engineer hired during the litigation, to testify. After
inspecting the roof, Patterson found it to be in good
condition with some damage attributable to hail. He
testified, however, that he believed there was a construction
defect which caused the holes in the attic: certain boards
were misaligned so that the underlying felt paper was
exposed, increasing the risk that hail would puncture the
felt. Patterson believed that it was feasible to repair 1,
700 shakes individually, and the underlying felt could be
patched as well using caulking compounds. Patterson agreed
that, contrary to PTC's report, the holes in the
underlayment could not have been caused by natural wear
occurring prior to the storm. Another of USAA's experts
Alan Berryhill, a roofing expert hired during the litigation,
testified that the roof was in good condition when he
surveyed it years after the storm. He agreed that there were
no signs that the roof was leaking and that the roof could be
repaired effectively for $32, 190.
submitted the expert testimony of engineer Greg Becker and
consultant Phil Spotts. Griffith's experts testified that
to restore the home to its pre-storm condition, it was
essential to replace the felt underlayment, or else the roof
would not effectively shed water. They explained that because
four years had passed since the storm the hail marks had
faded; it would be very difficult to tell which boards were
damaged without manually checking each one, and it would be
hard to replace individual shakes without damaging the rest.
Ultimately, Griffith's experts viewed the option of spot
repairs as ineffective and impractical, and they felt
USAA's proposal was "absurd." They agreed that
the attic holes were caused when hail "shot the
gap" between shakes that had shifted due to wind or
where the shakes were laid with slight gaps.
conclusion of the evidence, the court submitted the case on
three theories: breach of policy, bad faith violations of the
insurance code, and fraud. The jury found in favor of
Griffith on all theories. The jury found that USAA breached
the insurance policy, and that it should have paid $76, 500
more than the $32, 190 it had already paid. The jury further
found that USAA knowingly committed bad faith violations of
the insurance code and the jury awarded treble damages on
that basis. See Tex. Ins. Code Ann. §
jury also found that USAA committed fraud, for which it
additionally awarded $33, 000 to compensate for the premiums
that USAA had wrongfully collected. Finally, the jury found
that USAA acted with malice in committing fraud, and it
awarded exemplary damages. Griffith elected to recover
primarily under his insurance code theory that USAA had
refused to pay the claim without conducting a reasonable
investigation, for which USAA alone was liable. Griffith also
elected to recover any nonduplicative damages under his fraud
theory. The trial court rendered judgment awarding Griffith:
under his insurance code theory, $76, 500 for damages, $153,
000 in treble damages, penalty interest of $64, 285.29, and
$199, 000 in attorney's fees; and under his fraud theory,
$33, 000 in lost premiums and $200, 000 in exemplary damages.
The judgment also awarded Griffith $26, 423.04 to compensate
for his testifying experts under rule of civil procedure 167,
as well as pre- and post-judgment interest. Tex.R.Civ.P. 167.
Standard of Review Legal Sufficiency
sufficiency challenge will be sustained only if: (1) there is
a complete absence of evidence of a vital fact; (2) the court
is barred by rules of law or of evidence from giving weight
to the only evidence offered to prove a vital fact; (3) the
evidence offered to prove a vital fact is no more than a mere
scintilla; or (4) the evidence conclusively establishes the
opposite of a vital fact. City of Keller v. Wilson,
168 S.W.3d 810, 822 (Tex. 2005). In our review, we are
mindful that jurors are the sole judges of the credibility of
the witnesses and the weight to be given their testimony.
Id. at 819. We review the evidence presented at
trial in the light most favorable to the jury's verdict,
crediting favorable evidence if reasonable jurors could and
disregarding contrary evidence unless reasonable jurors could
not. Del Lago Partners, Inc. v. Smith, 307 S.W.3d
762, 770 (Tex. 2010).
determining a question of insurance coverage, we look first
to the language of the policy. Gilbert Tex. Constr., LP
v. Underwriters at Lloyd's London, 327 S.W.3d 118,
126 (Tex. 2010). We give the policy's terms their
ordinary and generally-accepted meaning unless the policy
shows the words were meant in a technical or different sense.
Id. Since insurance policies are contracts, we
construe them according to general rules of contract
construction to ascertain the parties' intent. USAA
Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 488 (Tex.
Breach of Insurance Policy
first issue, USAA contends that there is legally insufficient
evidence to demonstrate that USAA breached the insurance
policy. USAA argues that, as a matter of law, it complied
with the contract, and Griffith was not entitled to more
policy benefits than the $32, 190 that USAA paid. Citing
Menchaca, USAA argues that Griffith cannot recover
on his theory of bad faith violations of the insurance code.
545 S.W.3d at 490 ("The general rule is that an insured
cannot recover policy benefits for an insurer's statutory
violation if the insured does not have a right to those
benefits under the policy.").
establish a breach of contract, a plaintiff must prove (1)
the existence of a valid contract, (2) the plaintiff's
performance or tender of performance, (3) the defendant's
breach of contract, and (4) the plaintiff's damages as a
result of the breach. S&S Emergency Training Sols.,
Inc. v. Elliott, 564 S.W.3d 843, 847 (Tex. 2018);
Davis v. Nat'l Lloyds Ins. Co., 484 S.W.3d 459,
468 (Tex. App.-Houston [1st Dist.] 2015, pet. Denied) (citing
Certain Underwriters at Lloyd's v. KKM Inc., 215
S.W.3d 486, 489 (Tex. App.- Corpus Christi-Edinburg 2006,
pet. denied)). Thus, in the context of an insurance policy, a
plaintiff must prove the existence of a valid insurance
policy covering the denied claim and entitlement to money
damages on that claim. Davis, 484 S.W.3d at
admits that Griffith's roof was covered for hail damage
by a policy that was in force on the date of the hail storm.
The policy provided:
In return for payment of premium and subject to all terms of
this policy, we will provide the insurance described. . . .
We insure against "sudden and accidental," direct
physical loss to tangible property described in PROPERTY WE
COVER . . . . Windstorm or hail. We will pay our cost to
repair or our cost to replace the damaged property with
similar construction and for the same use on the premises
shown in the Declarations . . . .
policy excluded losses caused by microbial organisms, weather
conditions, wear and tear, loss caused by "birds,
rodents, insects," or defective construction, among
the doctrine of concurrent causes, when covered and
non-covered perils combine to create a loss, the insured is
entitled to recover that portion of the damage caused solely
by the covered peril. Travelers Indem. Co. v.
McKillip, 469 S.W.2d 160, 163 (Tex. 1971); Dall.
Nat'l Ins. Co. v. Calitex Corp., 458 S.W.3d 210, 222
(Tex. App.- Dallas 2015, no pet.); Comsys Info. Tech.
Servs., Inc. v. Twin City Fire Ins. Co., 130 S.W.3d 181,
198 (Tex. App.-Houston [14th Dist.] 2003, pet. denied);
Allison v. Fire Ins. Exch., 98 S.W.3d 227, 258 (Tex.
App.-Austin 2002, judgm't vacated w.r.m.). The doctrine
of concurrent causation is not an affirmative defense or an
avoidance issue. Calitex, 458 S.W.3d at 222. Because
an insured can recover only for covered events, the burden of
segregating the damage attributable solely to the covered
event is a coverage issue for which the insured carries the
burden of proof. Id.; see Cooper Indus., LLC v.
Am. Int'l. Specialty Lines Ins. Co., 273 Fed.Appx.
297, 308 (5th Cir. 2008). The insured is also required to
produce evidence which will afford a reasonable basis for
estimating the amount of damage or the proportionate part of
damage caused by a risk covered by the insurance policy.
Calitex, 458 S.W.3d at 222-23. Failure to segregate
covered and noncovered perils is fatal to recovery.
Id. at 223. "Although a plaintiff is not
required to establish the amount of his damages with
mathematical precision, there must be some reasonable basis
upon which the jury's finding rests." Tex.
Windstorm Ins. Ass'n v. Dickinson Indep. Sch. Dist.,
561 S.W.3d 263, 273 (Tex. App.-Houston [14th Dist.] 2018,
pet. filed); Wallis v. United Servs. Auto.
Ass'n, 2 S.W.3d 300, 304 (Tex. App.-San Antonio
1999, pet. denied).
disputes whether Griffith was entitled to the cost to replace
the roof, as the jury found or only to the cost of repair.
USAA was contractually obligated to either repair or replace
the hail-damaged roof, but under the language of the policy,
USAA had the sole discretion to either repair or replace the
roof. USAA paid Griffith $32, 190 to repair the roof, but
there was evidence before the jury that replacing the roof
would have cost USAA $73, 405 more than it already paid.
There was other evidence that repairing the roof would have
in fact cost far more, to the point that repairing the roof
was regarded by many witnesses as impractical and even
absurd. The jury evidently found this evidence credible and
awarded Griffith the cost to replace the roof as damages-the
least amount necessary to legitimately fulfill USAA's
obligation under the policy. This amount of damages was
supported by legally sufficient evidence. See City of
Keller, 168 S.W.3d at 820 (holding that the standard of
review requires that we resolve inconsistencies in the
evidence in favor of the jury's verdict).
next disputes coverage, arguing that the loss falls into one
of many exclusions from coverage. Griffith's policy
incorporated exclusions for "wear and tear, marring,
deterioration," "microbial organisms, including but
not limited to mold," and "mechanical breakdown,
latent defect, inherent vice, or any quality of the property
that causes it to damage or destroy itself." USAA now
argues that the roof's deterioration and design flaws
acted as concurrent causes of damage to the roof, and it was
Griffith's burden to segregate the damages attributable
to these concurrent causes. USAA contends that because
Griffith failed to supply a reasonable basis to apportion
damages to these concurrent causes, his award cannot stand.
argument is contradicted by the evidence at trial. There was
general consensus among the witnesses that the roof was well
maintained and in good condition before the storm. Griffith
explained that he had the roof regularly maintained,
including service to repair any broken boards just months
before the storm. There was also evidence USAA found the home
to be in good condition and increased its appraisal value
$100, 000 just six weeks before the storm while taking
photographs which documented the structural integrity of the
roof. Following the storm, photographic evidence documented
broken shakes, holes in the roof, and hail-pocked surfaces.
Many witnesses, including the Allcat inspector who was hired
by USAA, testified that any damage to the shakes was due
solely to hail. The jury was entitled to credit this
testimony and to reject evidence to the contrary.
importantly, there was no evidence that wear or fungus acted
as a concurrent cause of the damage to the roof. There was no
testimony that hail synergized with natural wear or fungus to
cause even greater damage than the hail might have otherwise
caused to a newer roof. There was no evidence that natural
wear and fungus required the roof to be replaced independent
of any hail damage. In fact, USAA conceded at closing,
"USAA didn't deny any of the damage that it found to
Mr. Griffith's roof, that [the Allcat adjuster] Mr. Ellis
found on Mr. Griffith's roof, didn't deny any of that
based on wear and tear and deterioration or construction
central theme in USAA's case was that one slope of the
roof needed replacement, but the rest of the roof could be
spot-repaired. Only one witness suggested that wear or a
design flaw was to blame for damage to the roof-the PTC
engineer-but a reasonable jury could have disregarded this
disputed testimony. See Del Lago Partners, 307
S.W.3d at 770.
in the light most favorable to the jury's verdict, this
evidence would enable a rational jury to conclude that hail
was the sole cause of Griffith's loss requiring
replacement. See id. We conclude that there is more
than a scintilla of probative evidence supporting the
jury's finding that USAA breached the policy by failing
to pay for the full extent of the hail damage. See
Davis, 484 S.W.3d at 472 (deferring to the jury's
resolution of conflicting testimony on the nature of a loss).
overrule USAA's first issue.