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Fourth Court of Appeals Affirms Post-Appraisal Summary Judgment for Insurer
12.16.16

Candelaria Garcia v. State Farm Lloyds and Sylvia Garza, No. 04-16-00209-CV (Tex. App.—San Antonio 2016, no pet.)

Counsel of Record:
Appellant: M. Alex Nava, Bernie R. Kray, and Troy A. Glander of Allan, Nava, Glander & Holland, PLLC
Appellee State Farm Lloyds: Elliot Clark and Linda J. Burgess of Winstead PC
Appellee Sylvia Garza: Sofia A. Ramon, Dan K. Worthington, and Elizabeth Cantu of Atlas, Hall & Rodriguez, LLP

On December 14, 2016, the Fourth Court of Appeals, San Antonio, affirmed a post-appraisal summary judgment for State Farm, concluding that summary judgment on breach of contract and extra-contractual claims was appropriate after State Farm tendered the appraisal award.

Candelaria Garcia (“Garcia”) sued State Farm Lloyds (“State Farm”) for underpayment of alleged storm damages to her home. Following appraisal of the homeowner’s claim, State Farm tendered the award less depreciation and deductible to Garcia and moved for summary judgment on all of the plaintiff’s breach of contract and extra-contractual claims. Garcia then amended her petition asking that the appraisal award be set aside. On March 10, 2016, the trial court rendered summary judgment in favor of State Farm.

Breach of Contract Claims Estopped:

Garcia argued that she was not estopped from pursuing her breach of contract claim because the appraisal award was made without authority and was made as a result of fraud, accident, or mistake. Garcia claimed that because the appraisers omitted certain damage items that were part of the Plaintiff’s and State Farm’s adjuster’s estimates, the appraisal award was not valid. Garcia further contended that the parties had a dispute regarding the amount necessary to repair items, not whether the items were part of the covered loss and by omitting certain damages, the appraisers were determining coverage issues. The Court found that not only is there no summary judgment evidence establishing that the appraisers determined the omitted items were not damaged by hail, appraisers are not required to rely on or even refer to any prior damage estimates. The fact that initial estimates included certain damages that are not included in the appraisal award does not render the appraisal award invalid. Likewise, the Court found that Garcia had not shown that the appraisal award did not speak the intention of the appraisers. Garcia only offered evidence that the appraisal award differed from the Plaintiff’s and State Farm’s estimates.

Garcia also argued that an insured is not estopped from pursuing a breach of contract claim if she does not accept payment of the appraisal award, relying on a letter from her attorney to State Farm regarding the payment. The Court found this argument unpersuasive and held that an insured cannot defeat a binding appraisal award by simply rejecting the payment. The insurer’s conduct of timely tendering the full award payment entitled it to summary judgment on the breach of contract claim.

In Garcia’s final breach of contract argument, she alleged that even if the appraisal award is binding, there are still genuine issues of material fact on whether State Farm breached the insurance contract based on items included in the appraisal award that State Farm had previously denied. The Court held that a discrepancy between the initial estimate and the appraisal award is no evidence of a breach of contract, noting that the Plaintiff’s argument has been rejected by numerous courts.

Prompt Payment Claim Barred Despite Graber:

Garcia argued that notwithstanding a valid appraisal award, she is still entitled to statutory interest damages for violations of the Act that occurred before appraisal was invoked, relying on the opinion in Graber. Graber v. State Farm Lloyds, No. 13-CV-2671-B, 2015 WL 3755030, at *10 (N.D. Tex. June 15, 2015). Contrary to the authorities on which Garcia and Graber relied, the Court agreed with a long line of cases in holding that full and timely payment of the award precludes the insured from recovering prompt payment penalties as a matter of law.

Other Extra-Contractual Claims Fail for Lack of Independent Injury:

Garcia’s claims for violations of the DTPA, unfair insurance practices, and common law breach of the duty of good faith and fair dealing similarly failed. Garcia argued that an independent injury is not required to maintain her extra-contractual claims based on AMJ Investments, LLC and Menchaca. The Court found that in most cases, an insured must prove breach of contract in order to prevail on a bad faith claim. Thus, when a breach of contract claim is precluded, the insured must allege an independent tort. The Court found that payment of an appraisal award does not necessarily bar extra-contractual claims for pre-appraisal conduct, but that the pre-appraisal conduct must be so extreme in that it produces damages independent of the policy claim. Rather than point to an independent tort, Garcia relied on AMJ Investments, LLC and Menchaca to assert that an independent tort is not required. The Court distinguished both cases because neither were appraisal cases, holding that because Garcia did not present any evidence of an independent injury, she cannot maintain any extra-contractual claims.