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State Automobile Mutual Insurance Co. v. Freehold Management, Inc.

United States District Court, N.D. Texas, Dallas Division

August 22, 2019

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, Plaintiff,
v.
FREEHOLD MANAGEMENT, INC.; RETAIL PLAZAS, INC.; and RPI DENTON CENTER, LTD., Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge

         Before the court is Defendants' Amended Motion for Partial Summary Judgment on State Auto's Affirmative Defenses (Doc. 186), filed August 30, 2018; and State Automobile Mutual Insurance Company's Amended Motion for Summary Judgment (Doc. 193), filed August 30, 2018. For the reasons herein explained, the court denies both parties' summary judgment motions (Docs. 186, 193).

         I. Factual and Procedural Background

         On August 3, 2016, Plaintiff State Automobile Mutual Insurance Company (“Plaintiff” or “State Auto”) filed this declaratory judgment action, pursuant to 28 U.S.C. § 2201 and 28 U.S.C. §1332, against Defendants Freehold Management, Inc. (“Freehold”) and Retail Plazas, Inc. (“Retail”), seeking a declaratory judgment regarding the parties' rights and obligations under a commercial insurance policy (“Policy”) issued by State Auto with a policy period of September 30, 2013, to September 30, 2014. At issue is whether roof damage alleged to have been sustained during a storm on April 3, 2014, to several properties located in a shopping center in Denton, Texas (collectively, “Property”), is covered by the Policy. RPI Denton Center, Ltd. (“RPI”) was subsequently allowed to join the action as a Defendant and Counterclaimant. The court refers collectively to Freehold, Retail, and RPI as “Defendants” or “Freehold.”

         Defendants have asserted counterclaims against State Auto based on theories of breach of contract, violations of Chapters 541 and 542 of the Texas Insurance Code, violations of sections 17.46(5), (7), (12), and (20) of the Texas Deceptive Trade Practices Act (“DTPA”), and breach of the duty of good faith and fair dealing under Texas common law. At the heart of these claims is Defendants' contention that State Auto failed to conduct an adequate and reasonable investigation of their claim for additional damages before denying it, unreasonably delayed in denying their claim for additional damages, used unfair claims settlement practices that involved the hiring of Haag Engineering (“Haag”), an allegedly biased engineering firm, and failed to pay their claim for additional damages after it knew or reasonably should have known, the claim for additional damages was covered under the Policy. Plaintiff and Defendants have also both asserted a number of affirmative defenses to each other's claims.

         Defendants originally countersued, seeking approximately $900, 000. The parties agree that State Auto paid Defendants $1, 036, 397.17 in 2014 for claimed damages that it determined were covered under the Policy. Defendants, however, now contend that they are entitled to recover approximately $16 million in additional damages to the Property under the Policy as a result of the April 2014 storm.

         On March 31, 2019, the court entered a memorandum opinion and order addressing the parties' various expert motions. As a result of this opinion, the testimony of several experts was excluded under Federal Rule of Civil Procedure 702 and Daubert v. Merrell Dow Pharmaceuticals, Incorporated, 509 U.S. 579, 589 (1993), or Federal Rule of Civil Procedure 26. In their cross-motions for summary judgment, which were filed before the court ruled on the parties' expert motions, the parties contend in part that they are entitled to judgment on the claims and defenses asserted by the opposing party because the expert evidence relied on by the opposing party is unreliable or inadmissible.

         II. Summary Judgment Standard

         Summary judgment shall be granted when the record shows that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all facts and inferences in the light most favorable to the nonmoving party and resolve all disputed facts in favor of the nonmoving party. Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005). Further, a court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.

         Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine dispute of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). On the other hand, “if the movant bears the burden of proof on an issue, either because he is the plaintiff or as a defendant he is asserting an affirmative defense, he must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original). “[When] the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine [dispute] for trial.'” Matsushita, 475 U.S. at 587. (citation omitted). Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994).

         The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his or her claim. Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to “sift through the record in search of evidence” to support the nonmovant's opposition to the motion for summary judgment. Id.; see also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n.7 (5th Cir. 1992). “Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. Disputed fact issues that are “irrelevant and unnecessary” will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

         III. Plaintiff's Summary Judgment Motion

         State Auto moves for summary judgment on Defendants' counterclaims for breach of contract, breach of the duty of good faith and fair dealing, and violations of Chapters 541 and 542 of the Texas Insurance Code and DTPA. State Auto contends that it is entitled to judgment on Defendants' breach of contract claim because it paid for covered losses and timely investigated Defendants' insurance claim; Defendants have not overcome their burden under the concurrent causation doctrine of proving that the damages alleged were not caused by another event outside of the Policy period or other matters expressly excluded under the Policy such as wear and tear, cracking, inadequate maintenance, or water damage. In addition, State Auto asserts that Defendants failed to adhere to unambiguous Policy requirements such as: (1) providing prompt notice of a claim and submitting a sworn proof of loss within 91 days of a request by State Auto; (2) taking steps to protect the covered Property from further damage and document expenses related to any mitigation efforts; (3) cooperating with State Auto to investigate the insured's claim.

         State Auto contends that Defendants' counterclaim for breach of the duty of good faith and fair dealing also fails because such claims survive in the absence of a breach of contract by the insurer. State Auto maintains that, even if the court determines that Defendants are able to produce evidence demonstrating a breach of contract, they still cannot establish that State Auto acted in bad faith in denying their claim, given that: (1) “it had a reasonable basis for denying or delaying payment of Defendants' ever-changing claim” and continuous revisions to their damage estimate during the four years after the storm; (2) a bona fide dispute as to liability or coverage is not enough to support a claim for bad faith, and it did not commit an act so extreme that it caused an independent injury to Defendants; and (3) Defendants' claim of bias by Haag, David Teasdale (“Teasdale”) of Haag, the engineering firm hired by State Auto to investigate Defendants' claim, and their contention that State Auto knowingly hired a biased engineer, are unsupported. Pl.'s S.J. Br. 9-11. Plaintiff contends that Defendants' claims for alleged violations of the Texas Insurance Code and the DTPA similarly fail, as the evidence refutes their contention that State Auto unreasonably delayed the ...


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