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Silo Restaurant Inc v. Allied Property and Casualty Insurance Co.

United States District Court, W.D. Texas, San Antonio Division

November 12, 2019

SILO RESTAURANT INC., et al., Plaintiffs,



         In this first party insurance action, a tenant/insured, Silo Restaurants, Inc. (“Silo”), and the owner of the property, Phil Dyer, who the applicable insurance policy also lists as mortgagee and payee, have sued the insurance company, Allied Property and Casualty Insurance Company (“Allied”), under various theories for hail damage to the insured property's roof in 2016. The Court has three motions under consideration: (1) Defendant Allied Property and Casualty Insurance Company's Motion for Summary Judgment (ECF No. 10); (2) Plaintiffs' Written Objections to Defendant's Summary Judgment Evidence, Exhibit B and Motion to Strike Defendant's Summary Judgment Evidence, Exhibit B (ECF No. 19); and (3) Plaintiffs' Motion for Leave to File Plaintiffs' Surreply to Defendant's Reply in Support of its Motion for Summary Judgment (ECF No. 22). The summary judgment motion is fully briefed, including evidence submitted by both sides.[1] Defendant has responded to the motion to strike, but Plaintiffs have not filed a reply brief. Defendant has not responded to the motion for leave to file surreply. Regardless of the briefing filed, all motions are ready for ruling.

         I. BACKGROUND

         The factual background is essentially undisputed. Allied issued an insurance policy, with effective dates March 17, 2016 to March 17, 2017, to Silo to cover a restaurant located at 1133 Austin Highway in San Antonio, Texas. See Premier Businessowners Policy No. ACP BPFC 7245584525 [hereinafter “Policy”]. Silo is the named insured. Id. at 2, 13.[2] Dyer owns the property, leases it to Silo who “has a duty to maintain fire and casualty insurance on the property for [Dyer's] benefit, ” and Dyer is “included in that policy as a mortgagee and loss payee.” Decl. Dyer ¶ 2; see also Policy at 16 (showing Dyer listed as mortgagee). Patrick Richardson is President of Silo and handles all daily operations, including obtaining insurance to comply with the lease obligations with Dyer. Richardson Decl. ¶¶ 2-3. Silo engaged Insurance One Agency to act on its behalf and Ryan Hutchinson of that entity was “the writing agent for Silo.” See Ex. B-8. The policy contains a limitations provision that applies to the contractual claims of Plaintiffs. See Policy at 157.

         During the period of coverage, a hailstorm affected the insured property. On August 25, 2016, Delia Willis, an insurance agent with Insurance One Agency, L.C., acting on behalf of Silo and as agent for Richardson, submitted a Property Loss Notice to Defendant alleging hail damage to the roof and air-conditioning (“AC”) unit of the property. See Ex. B-1; Richardson Decl. ¶ 9. Defendant assigned Terry Nichols as the adjuster on the claim. Decl. Bailey ¶ 3. Following an initial inspection, Nichols engaged EFI Global to inspect and report on possible hail damage to the property. Id. ¶ 4; Ex. B-3. Following the engineer's inspection, Defendant agreed to pay Silo and Dyer (as a mortgagee) for covered damages to an AC unit. Ex. B-4.

         EFI sent its report to Nichols on September 28, 2016. Ex. B-5. Relying on that report, Nichols sent the following email to Richardson and his Insurance One Agent, Ryan Hutchinson:

Please see attached letter and engineer's report. Based on the engineer's findings I am unable to help you on the roof as no hail damage was found to the flat roof, rather it is leaking due to wear and tear at seams, penetrations, etc. Let me know if you have any questions.

Ex. B-6. The attached letter informed Richardson and Hutchinson that coverage was denied for hail damage to the roof and provided reasons for the denial. See Ex. B-7. The report from EFI concluded that (1) the property was exposed to hail resulting in visible “spatter marks on the sheet metal roofing panels over the silo, distress to AC fins, dents to light gauge metal roof vents, and spatter marks on mechanical equipment, ” but “[o]therwise the roof and associated components were found to be free of hail related damage”; (2) the “[s]patter marks to the sheet metal roofing panels are cosmetic in nature and does [sic] not constitute functional damage”; and (3) there were observed “potential sources of water infiltration” but they were “not storm related damage.” Ex. A-1 at 7.

         The day he received the claim denial, Hutchinson sought clarification from Nichols, but did not include either Plaintiff on the email. See Ex. B-8. Nichols explained:

There is a lot of difference in thin aluminum a/c fins and commercial roofing material made of tar and gravel and rubber compounds. I did not see hail damage to the roof and that is why I had the engineer look at it. If they think differently, they can get their own expert and submit it to us to consider. Basically, what I saw was an old roof that needs to be replaced.

Ex. B-9.

         Defendant closed the case file on November 3, 2016. See Ex. B-2 at 167. Nichols noted: “Kept claim open for a period of time in case of further actions . . . regarding roof. I am closing claim at this time.” Id.

         Because leaks later began to appear in the same areas of the roof, Richardson contacted another roofer for repairs with approval from Dyer. Richardson Decl. ¶ 20; Decl. Dyer ¶ 7. On October 5, 2018, Richardson informed Dyer that the newly hired roofer disagreed with the prior denial of hail damage claim. Richardson Decl. ¶¶ 21-22; Decl. Dyer ¶ 8.

         Plaintiffs commenced this action by filing an Original Petition in state court on October 8, 2018. See Orig. Pet. (ECF No. 1-1). Defendant timely removed the action to this Court the next month based upon diversity of citizenship. See Notice of Removal, (ECF No. 1).

         On April 30, 2019, Defendant filed its motion for summary judgment on grounds that Plaintiffs untimely commenced this action under the insurance policy and applicable statutes of limitations. Plaintiffs first responded with an unopposed motion for leave to amend their complaint and filed the amendment with court permission. In their amended complaint, Plaintiffs assert five theories of liability and two defenses to the asserted limitations bar. See Pls.' First Am. Compl. (ECF No. 13) at 7-16. Following the filing of the amended complaint, Plaintiffs responded directly to the motion for summary judgment and the parties filed the other motions and briefing currently before the Court. All motions are ripe for ruling.


         “Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996); accord Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Because jurisdiction in this case is based on diversity of citizenship, the Court must “apply Texas law, ” including its law regarding statutes of limitations. Ocwen Loan Servicing, L.L.C. v. Berry, 852 F.3d 469, 473 (5th Cir. 2017); accord West v. Conrail, 481 U.S. 35, 39 n.4 (1987); Walker v. Armco Steel Corp., 446 U.S. 740, 752-53 (1980); Hensgens v. Deere & Co., 869 F.2d 879, 880 (5th Cir. 1989). Accrual of a claim or cause of action is also governed by state law. See Milton v. Stryker Corp., 551 Fed.Appx. 125, 127 (5th Cir. 2014) (per curiam) (applying Texas law on accrual in diversity case).

         Although “federal law, rather than state law, invariably governs procedural matters in federal courts, ” Camacho v. Tex, Workforce Comm'n, 445 F.3d 407, 409 (5th Cir. 2006), classifying “law as ‘substantive' or ‘procedural' for Erie purposes is sometimes a challenging endeavor, ” Gasperini, 518 U.S. at 427. But when a matter is “covered by the Federal Rules of Civil Procedure, the characterization question is usually unproblematic, ” because “if the Rule in point is consonant with the Rules Enabling Act, 28 U.S.C. § 2072, and the Constitution, the Federal Rule applies regardless of contrary state law.” Id. at 427 n.7 (citing Hanna v. Plumer, 380 U.S. 460, 469-74 (1965); Burlington N. R. Co. v. Woods, 480 U.S. 1, 4-5 (1987)). As will be discussed in more detail later in this memorandum opinion, one such procedural rule that is governed by federal law is “the federal rule of summary judgment procedure.” FDIC v. Shrader & York, 991 F.2d 216, 220 (5th Cir. 1993).

         “When reviewing issues of state law, federal courts look to the law of that state's highest court.” City of Alexandria v. Brown, 740 F.3d 339, 351 (5th Cir. 2014); accord Price v. City of San Antonio, Tex., 431 F.3d 890, 892 (5th Cir. 2005). Absent a final decision by the Texas Supreme Court that “‘precisely' resolves the legal issue, federal courts “must make an Erie guess and determine as best [they] can what the Supreme Court of Texas would decide.” Martinez v. Walgreen Co., 935 F.3d 396, 398 (5th Cir. 2019) (citation omitted). When compelled to make an Erie guess, federal courts “defer to intermediate state appellate court decisions, unless convinced by other persuasive data that the highest court of the state would decide otherwise.” Mem'l Hermann Healthcare Sys. Inc. v. Eurocopter Deutschland, GMBH, 524 F.3d 676, 678 (5th Cir. 2008) (citations and internal quotation marks omitted); accord Price, 431 F.3d at 893 n.5. The federal courts not only look to the intermediate state appellate decisions, but also to “the general rule on the issue, decisions from other jurisdictions, and general policy concerns.” Martinez, 935 F.3d at 398 (citation omitted).

         The Court will first address two procedural motions before considering the summary judgment motion.


         Although Plaintiffs have moved to strike a declaration presented by Defendant in support of its motion for summary judgment, their primary thrust is to provide written objections to the declaration. They state no rule or other basis for striking the evidence. They merely urge the Court to strike the evidence as “not proper summary judgment evidence.”

         “Prior to December 1, 2010, the proper method by which to attack an affidavit was by filing a motion to strike, ” but amendments to the Federal Rules of Civil Procedure changed that practice. Cutting Underwater Techs. USA, Inc. v. Eni U.S. Operating Co., 671 F.3d 512, 515 (5th Cir. 2012) (per curiam). “As amended in December 2010, Fed.R.Civ.P. 56(c)(2) makes motions to strike unnecessary to challenge evidence presented in the summary judgment context.” Reitz v. City of Abilene, No. 1:16-CV-0181-BL, 2018 WL 6181493, at *8 n.8 (N.D. Tex. Nov. 27, 2018). Accordingly, the Court denies the motion to strike as unnecessary. It will instead consider the filing as Plaintiffs' Rule 56(c)(2) objections and will rule on such objections as necessary.

         Although the Court cited the alleged objectionable declaration in the background section, it did so only for matters not in dispute. Furthermore, Plaintiffs did not object to the cited portions of the declaration. In addition, as noted in footnote 1 and the motion to strike, Defendant and the declarant have misread the date of the email attached as Ex. C to the motion for summary judgment. That objection is well-taken as to that email and the Court does not rely on Ex. C or the declarant's statements about that exhibit. Because the Court does not consider any objectionable portions of the declaration, the Court deems all other objections moot.


         Plaintiffs move for leave to file a surreply purportedly to respond to new arguments raised for the first time by Defendant in its reply in support of its motion for summary judgment. They state that “there are several new arguments made of which is necessary for Plaintiffs to succinctly address with supporting case law.” Neither the motion nor the proposed surreply identify with any specificity the new arguments purportedly made in the reply brief. The proposed submission, furthermore, appears to be little more than rehashing of prior arguments and submitting various case law in support.

         As a general practice, neither the Federal Rules of Civil Procedure nor the local rules of this Court permit the filing of a surreply. But the local rules do contemplate a party seeking leave to file a post-reply submission. See W.D. Tex. Civ. R. 7(f)(1). Furthermore, because defendant has filed no response to the motion for leave, the Court could grant the motion as unopposed. See W.D. Tex. Civ. R. 7(e)(2). While such practice is permissible, resorting to it in the context of leave to file a surreply may unnecessarily downplay the importance of a proper response to a motion as well as permitting briefing that is simply unwarranted.

         Although surreplies “are heavily disfavored, ” it is within the sound discretion of the courts to grant or deny leave to file such additional briefing. Warrior Energy Servs. Corp. v. ATP Titan M/V, 551 Fed.Appx. 749, 751 n.2 (5th Cir. 2014) (per curiam) (quoting Weems v. Hodnett, No. 10-CV-1452, 2011 WL 2731263, at *1 (W.D. La. July 13, 2011)). Because “the scope of the reply brief must be limited to addressing the arguments raised” in the response or memorandum in opposition, Petty v. Portofino Council of Coowners, Inc., 702 F.Supp.2d 721, 729 n.3 (S.D. Tex. 2010) (citation omitted), and “it is improper for the movant to sandbag and raise wholly new issues in a reply memorandum, ” Weems, 2011 WL 2731263, at *1, the need for post-reply briefing should be rare. As aptly explained in Weems,

This court's experience, shared by others in reported decisions, is that surreplies often amount to little more than a strategic effort by the nonmovant to have the last word on a matter. The fourth brief usually just repeats arguments from the memorandum in opposition and serves only to delay resolution of the underlying motion. Accordingly, it is proper to deny a motion for leave to file a surreply where the party fails to demonstrate exceptional or extraordinary circumstances warranting the relief sought. In other words, in seeking leave to file a surreply brief, a party must identify the new issues, theories, or arguments which the mo-vant raised for the first time in its reply brief.

Id. (citations omitted).

         Of course, as recognized by the Fifth Circuit, “[a]rguments raised for the first time in a reply brief are generally waived.” Jones v. Cain, 600 F.3d 527, 541 (5th Cir. 2010). Such waiver often reduces a need for a sur-reply. Nevertheless, granting leave to file a sur-reply in extraordinary circumstances “on a showing of good cause” is a viable alternative to the general practice to summarily deny or exclude “all arguments and issues first raised in reply briefs.” Layne Chris-tensen Co. v. Bro-Tech Corp., No. CIV.A. 09-2381-JWL, 2011 WL 3880830, at *1 n.1 (D. Kan. Aug. 31, 2011) (citation omitted).

         In this case, however, Plaintiffs have simply made conclusory statements about new arguments without identifying any new issue, theory, or argument first raised in the reply brief. They have not shown exceptional or extraordinary circumstances that warrant a surreply. Nor have they shown good cause for the relief requested. To the extent that Defendant has asserted a new argument in reply, the Court either will not consider it in making its ruling on the motion for summary judgment or its consideration does not prejudice Plaintiffs. For these reasons, the Court denies the motion for leave to file a surreply.


         Defendant presents a single, legal basis for seeking summary judgment. It argues that the applicable statutes of limitations expired for all asserted claims before Plaintiffs filed this action in state court on October 8, 2018. In response, Plaintiffs argue that some claims are timely even using Defendant's accrual date and assert the discovery rule and fraudulent concealment doctrine to counter Defendant's limitations defense. They also argue that a lack of payment or notice to Dyer delays the accrual date as to him.

         A. Summary Judgment Standard

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[3] Fed.R.Civ.P. 56(a). “As to materiality, the substantive law will identify which facts are material” and facts are “material” only if they “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over material facts qualify as “genuine” within the meaning of Rule 56 when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Given the required existence of a genuine dispute of material fact, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment.” Id. at 247-48. A claim lacks a genuine dispute for trial when “the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.” Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

         The “party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When seeking summary judgment on an affirmative defense, such as claims being barred by a statute of limitations, the movant “must establish beyond peradventure” each essential element of the defense. Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986); accord Hagan v. Mazda Motor Co. of Am., Inc., 690 Fed.Appx. 242, 243 (5th Cir. 2017) (per curiam) (“Under Texas law, a defendant moving for summary judgment on an affirmative defense must irrefutably establish its elements.”).

         When considering a motion for summary judgment, courts view all facts and reasonable inferences drawn from the record “in the light most favorable to the party opposing the motion.” Heinsohn v. Carabin & Shaw, P.C., 832 F.3d 224, 234 (5th Cir. 2016) (citation omitted). Once the movant has carried the burden to establish that “claims are time-barred as a matter of law, ” the burden shifts to the non-movant to establish a genuine dispute of material fact on the timeliness of asserted claims. Dommert v. Raymond James Fin. Servs., Inc., No. 1:06-CV-102, 2009 WL 275440, at *8 (E.D. Tex. Feb. 3, 2009) (adopting recommendation of Mag. J.). With this shifting burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586. “Unsubstantiated assertions, improbable inferences, and unsupported speculation are not sufficient to defeat a motion for summary judgment.” Heinsohn, 832 F.3d at 234 (citation omitted). Additionally, the courts have “no duty to search the record for material fact issues.” RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 857 (5th Cir. 2010); accord Hernandez v. Yellow Transp., Inc., 670 F.3d 644, 651 (5th Cir. 2012).

         B. Summary Judgment Analysis

         In general, the parties agree on the facts and timeline presented. Based on those facts and timeline, the Court must determine, as a matter of law, when Plaintiffs' claims accrued and whether they are untimely under the applicable statutes of limitations. Such determination may include considering Plaintiffs' assertions of the discovery rule and fraudulent concealment doctrine.

         1. Applicable Limitations Periods

         In their amended complaint, Plaintiffs assert five theories of liability: (1) breach of contract; (2) violations of Section 542 of the Texas Insurance Code through failures to promptly pay the claim under Tex. Ins. Code Ann. §§ 542.055, 542.056, and 542.058; (3) violations of the Deceptive Trade Practices and Consumer Protection Act (“DTPA”), namely Tex. Bus. & Com. Code Ann. § 17.46(b)(2), (5), (7), (9), (12), (20), and (24); (4) unfair insurance practices in violation of Section 541 of the Texas Insurance Code, specifically Tex. Ins. Code Ann. §§ 541.060(a)(1), (2)(A), (3), (4), and (7); and (5) breach of common law ...

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