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Phillips v. American Bankers Insurance Company of Florida

Court of Appeals of Texas, First District

July 16, 2019


          On Appeal from County Court Waller County, Texas Trial Court Case No. C17-129

          Panel consists of Chief Justice Radack and Justices Higley and Hightower.



         After his home was damaged during Hurricane Harvey, Thomas Phillips sued American Bankers Insurance Company of Florida ("ABIC") for breaching the homeowner's policy it had issued to him. ABIC moved to dismiss the suit based on Rule of Civil Procedure 91a and Insurance Code Chapter 542A.[1] The trial court granted the motion and signed a judgment dismissing the suit without prejudice to refiling it. Less than 30 days later, ABIC filed a motion to modify the judgment. The trial court denied the motion but signed an order awarding, among other relief, sanctions to ABIC to be paid, jointly and severally, by Phillips and his attorney.

         On appeal, Phillips raises three issues. In his first issue, Phillips claims that the trial court lacked plenary power to award the post-judgment sanctions. In his second and third issues, Phillips contends that the trial court abused its discretion in sanctioning him.

         We disagree that the trial court lacked plenary power to sign the post-judgment order, but we agree with Phillips that the trial court abused its discretion in sanctioning him. Accordingly, we reverse the trial court's award of sanctions against Phillips and render judgment that ABIC take nothing from him. We otherwise affirm the judgment.


         Phillips filed a claim with ABIC under his homeowner's policy to recover insurance money for damage to his home caused by Hurricane Harvey. Phillips retained counsel who sued ABIC on Phillips's behalf. The suit alleged that the two sides could not agree regarding the amount of loss to the home. Phillips's amended petition claimed that ABIC breached the insurance policy by refusing to engage in the appraisal process as the policy required. Phillips asked the trial court to order ABIC to participate in the appraisal process.

         ABIC answered and moved to dismiss the suit. ABIC asserted that the suit should be dismissed because the breach of contract claim was not ripe. ABIC pointed out that, under the terms of the insurance policy, an appraisal was not required until Phillips made a written demand for an appraisal, and he had not made such a demand.

         Citing Supreme Court of Texas case authority, ABIC explained that an appraisal is intended to take place before a suit is filed as a condition precedent to suit. See State Farm Lloyds v. Johnson, 290 S.W.3d 886, 894 (Tex. 2009). ABIC relied on the supreme court's statement that "[a]ppraisals require no attorneys, no lawsuits, no pleadings, no subpoenas, and no hearings." Id. And ABIC pointed out that "the right to demand an appraisal accrues when the parties reach an impasse in their negotiations" regarding the amount of loss. See In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 412 (Tex. 2011) (orig. proceeding). ABIC indicated that no impasse had been reached. ABIC stated that, to the contrary, the parties were still in the pre-suit stages, attempting to resolve the insurance claim without the necessity of litigation. ABIC also asserted that the suit should be dismissed because Phillips did not comply with Insurance Code Chapter 524A's pre-suit notice requirements. See Tex. Ins. Code §§ 542A.001-.007.[2]

         In its motion to dismiss, ABIC also sought attorney's fees and sanctions. ABIC requested sanctions against Phillips and his attorney under Rule 13 of the Rules of Civil Procedure and Chapters 9 and 10 of the Civil Practice and Remedies Code. See Tex. R. Civ. P. 13; Tex. Civ. Prac. & Rem. Code §§ 9.001-.014, 10.001-.006. ABIC claimed that it was entitled to sanctions because Phillips's petition was frivolous and groundless.

         At the hearing on the motion to dismiss, ABIC asserted that the suit should be dismissed because Phillips had not complied with the pre-suit notice requirements of Insurance Code Chapter 542A. ABIC also emphasized that Phillips's breach of contract claim, based on the allegation that ABIC would not engage in the appraisal process, was premature because ABIC had not been given the opportunity to conduct an appraisal. ABIC explained that Phillips had not invoked the appraisal process by providing ABIC proper written notification regarding his claim. ABIC stated that Phillips had provided an estimate of his damages to ABIC but had done so less than a week before the hearing, not affording ABIC an opportunity to begin the appraisal process.

         To provide ABIC the opportunity to engage in the appraisal process, the trial court recessed the hearing for two weeks. ABIC immediately appointed an appraiser. The appraiser went to Phillips's home where the appraiser discovered that Phillips had already made repairs. Because the home had been repaired, an appraisal could not be performed.

         When the hearing on the dismissal motion reconvened, ABIC informed the trial court that it could not conduct the appraisal because the home had been repaired. The trial court noted on the record that the relief Phillips had requested was an order requiring ABIC to appraise the home. The trial court agreed with ABIC that the suit should be dismissed because Phillips's claim for appraisal was mooted by the repair of the home.

         Phillips opposed the dismissal. He asserted that he anticipated ABIC would ultimately deny coverage under the insurance policy. The trial court informed Phillips that it would dismiss the suit without prejudice, allowing Phillips to refile the suit should he ultimately believe coverage was wrongfully denied.

         At the end of the hearing, Phillips's counsel asked whether the dismissal order would include sanctions, and ABIC's counsel stated on the record that the order would not include sanctions. On January 18, 2018, the trial court signed an order dismissing the case without prejudice. No sanctions or attorney's fees were awarded.

         Less than 30 days later, on February 13, 2018, ABIC filed a motion to modify the judgment of dismissal. ABIC requested $9, 287.31 for attorney's fees it claimed to have incurred from the filing of Phillips's suit through the suit's dismissal. ABIC asserted it was entitled to these fees under Rule of Civil Procedure 91a.7. It offered the affidavit of its attorney to support the amount of the fees.

         In the motion to modify, ABIC also informed the trial court that "the appraisal of the underlying insurance claim remain[s] ongoing." ABIC explained that, after the suit was dismissed, it sent a letter to Phillips's attorney and copied Phillips, requesting Phillips and his wife to submit to an examination under oath ("EUO") as part of its investigation of Phillips's claim. ABIC relied on a provision in the insurance policy requiring Phillips to submit to an EUO if requested.

         The EUO was scheduled to take place at the courthouse in Hempstead, Texas on January 30, 2018. ABIC never heard from Phillips or his attorney regarding whether they would attend the EUO. On the day of the EUO, ABIC's attorney drove from Fort Worth to Hempstead; however, neither Phillips nor his attorney showed up for the EUO.

         In its motion to modify, ABIC also sought "abatement of the appraisal process" and recovery of its attorney's fees incurred for its attorney to travel from Fort Worth to Hempstead for the EUO. ABIC asserted that Phillips's "failure to appear at the EUO as required in the policy breached an underlying condition of the insurance contract." ABIC requested "its reasonable costs and attorney's fees under Chapter 38 of the Texas Civil Practice and Remedies Code."[3] ABIC claimed, "The total reasonable and necessary attorney's fees and costs incurred by ABIC between dismissal of the underlying suit on January 18, 2018 through February 8, 2018 was $3, 954.12." ABIC did not request sanctions in the motion.

         The trial court conducted a telephonic hearing on ABIC's motion to modify the dismissal judgment. On February 22, 2018, the trial court signed an order regarding the motion, which provides as follows:

         After considering ABIC's Motion [to Modify], evidence and arguments of counsel, the Court makes the following findings:

1. The Court properly granted ABIC's Motion to Dismiss by Order entered and rendered January 18, 2018;
2. This Court retains plenary power to modify the January 18, 2018 Order under Rule 329b(g) of the Texas Rules of Civil Procedure because this Motion was filed within 30 days of the final order;
3. The Court finds that plaintiff's counsel and plaintiff committed sanctionable conduct after entry of the Order dismissing their case by refusing to attend and by failing to notify ABIC's counsel of their refusal to attend the properly requested and noticed examination under oath on January 30th;
4. The Court finds that ABIC incurred attorney's fees relating to the examination under oath that plaintiff and plaintiff's counsel should reimburse.

         In accordance with the Court's findings, the following rulings are issued:

1. The Court denies Defendant's Motion to Modify Judgment;
2. The appraisal is abated until such time as the requested examinations under oath have been completed; and
3. ABIC is entitled to reasonable and necessary costs and attorney's fees in the amount of $3, 954.12 for the refusal of plaintiff, plaintiff's wife and plaintiff's counsel to appear for the Examinations Under Oath.

         IT IS ORDERED and ADJUDGED that the appraisal be abated until such time as plaintiff complies with the request of ABIC to take the insureds' examinations under oath; and plaintiff and/or plaintiff's attorney must pay $3, 954.12 as sanctions for their wrongful conduct.

         The trial court then filed findings of fact and conclusions of law. Regarding the "sanctionable conduct" identified in the order, the trial court made ...

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