A few weeks ago, the Texas Supreme Court issued a trilogy of per curiam opinions: TopDog Properties v GuideOne National Insurance Company, 1Alvarez v State Farm Lloyds, 2, and Lazos v State Farm Lloyds, 3 and referred these cases back to court for litigation and Appeals courts disagreed with the Texas Supreme Court in Barbara Technologies Corp. v State Farm Lloyds, 4 and Ortiz v State Farm Lloyds.5 With the exception of TopDog, whose policy includes a one-sided assessment clause, almost all three cases have identical facts.
However, TopDog illustrates the facts, arguments, and results of all three cases well. In TopDog, there was significant wind and hail damage to residential properties owned and operated by TopDog, a commercial property owner. GuideOne has issued the policy that covers the loss. While processing claims, it was TopDog's position that GuideOne, in order to avoid paying the damage, had deliberately undervalued the repair costs below the TopDog deductible policy of $ 5000. TopDog requested a second reassessment, which confirmed its conclusion on GuideOne's tactics. After GuideOne rejected a third re-evaluation request, TopDog attempted to initiate the evaluation process in its policy. GuideOne, however, declined the assessment because the policy contained a unilateral assessment clause that only GuideOne allowed to evoke. The unilateral evaluation clause states:
If the named insured and the company cannot agree on the amount of the loss, the company may request that the amount of the loss be determined by valuation. If the company requires a written assessment, each party selects a competent independent reviewer. Each party will notify the other party of the identity of the selected reviewer within 20 days of receipt of the written request.
TopDog was unable to enforce the assessment clause and had to pay the costs of filing a lawsuit against GuideOne for breach of contract, customary law and bad faith, and breaches of the Texas Insurance Code, chapters 541 and 542. The latter was titled Texas Prompt Claims Payment Act (“TPPCA”). After TopDog filed a lawsuit, GuideOne decided to rely on an assessment. The expert appointed by GuideOne agreed with TopDog that GuideOne had underestimated the loss by 98%. The loss from the evaluation process was set at $ 168,808 and GuideOne paid the evaluation price. Afterwards, both parties applied for a summary judgment. The court issued GuideOne's summary judgment on all TopDog's pleas based on GuideOne's payment of the assessment price and rejected TopDog's summary judgment.
The Court of Appeal upheld a summary judgment by the Court for GuideOne for the following reasons:
(1) TopDog did not address a factual issue regarding damages for breach of contract because GuideOne paid all the services available under the policy when paying the assessment price, and (2) TopDog's malicious claims and TPPCA failed because no claim was made for infringement became independent of the insurance benefits and without evidence that the insurance benefits were withheld after payment of the valuation price.
TopDog petitioned the Texas Supreme Court and the case was accepted. Shortly afterwards, the Supreme Court Barbara Technologies found that a plaintiff's TPPCA damage was not excluded by paying an appraisal price, but did not determine whether paying an appraisal price was an acknowledgment or a finding of liability under the policy for the TPPCA's purpose was damage. In Ortiz, the court affirmed its participation in Barbara Technologies and also found that paying an evaluation price precludes a plaintiff's breach of contract and legal and customary malice, unless a plaintiff can demonstrate an independent breach.
TopDog argued before the Texas Supreme Court that GuideOne is liable under Barbara Technologies and is therefore entitled to compensation under Section 542.060 of the TPPCA. Alternatively, TopDog argued that section 542.058 does not require liability before an insurer is required to pay TPPCA damages, and asked the Supreme Court to address the open question in Barbara Technologies.
Regarding TopDog's claims for breach of contract and malicious will, TopDog argued that the court should find an exception to the independent violation rule in Ortiz and should instead find that an insured person does not have to provide an independent breach to deal with breach of contract and malicious intent to recover if an insurer relies on a unilateral valuation clause to force the insured person to file a suit, force a valuation and then pay the valuation price. In this situation, TopDog argued, paying the appraisal price itself was actual damage. TopDog also argued that the unilateral assessment clause was illusory and unenforceable, but the Supreme Court did not respond to this argument.
The Texas Supreme Court ruled that in all three cases, Barbara Technologies and Ortiz's trial and affirmative appeals courts had made a mistake by finding that the insured plaintiffs could not sustain their TPPCA pleas and that TopDog's breach of contract and malicious claims were excluded. The Supreme Court reversed TopDog, Alvarez, and Lazos and sent them back to the court to correct the errors, finding that Ortiz did not contain a unilateral evaluation clause. For TopDog, the Supreme Court therefore asked the court to consider whether the payment of an assessment price by an insurer after a unilateral assessment clause has been lifted in order to force the insured to file a lawsuit represents actual damage sufficient to Support claims for breach of contract and malicious will.
Prior to TopDog, Alvarez, and Lazos, these cases would have ended up being that the insurers would only have paid the appraiser's damage assessment, even though the insured had to go through the lengthy claims process and file a lawsuit, which would have resulted in additional losses, including valuation costs. Legal fees and other costs just to get your legitimate policy payment. The insurers prevailed in this situation because they usually did not pay more than if they had paid the true value of the damage in the first place, but they caused the insured person a great delay and more costs.
According to TopDog, Alvarez, and Lazos, only the tactic of the payment amount may no longer be a defense for Texas insurers, who are now faced with additional claims for compensation for obviously covered losses. Policyholders can now claim damages other than just the amount covered, including attorney fees, and immediate payment penalties.
We haven't heard the last of TopDog, Alvarez, or Lazos in pre-trial detention, but these cases have so far been a remarkable departure from Texas, where insurers were generally strongly preferred.
1Top Dog Properties v. GuideOne National Ins. Co., Cause No. 18-0911, 2020 WL 1898538 (Tex. April 17, 2020).
2Alvarez v State Farm Lloyds, Cause No. 18-0127, 2020 WL 1898528 (Tex. April 17, 2020).
3Lazos v State Farm Lloyds, Cause No. 18-0225, 2020 WL 1898534 (Tex. April 17, 2020).
4Barbara Technologies Corp. v State Farm Lloyds, 589 S.W.3d 806, 823, 829 (Tex. 2019, repetition refused).
5Ortiz v State Farm Lloyds, 589 S.W.3d 127.131 (Tex. 2019, repetition refused).