Summary
finding reasonable an insurer's preappraisal payment 3.64 times smaller than appraisal award
Summary of this case from Randel v. Travelers Lloyds of Tex. Ins. Co.Opinion
No. 4:18-cv-236-O
11-22-2019
Thomas CRENSHAW v. STATE FARM LLOYDS
Charlie Gustin, David Bergen, Jr., Richard D. Daly, Daly & Black PC, Houston, TX, Stephen Weikai Wu, Mackie Wolf Zientz & Mann PC, Dallas, TX, for Thomas Crenshaw. Sarah E. Bradbury, Bradbury Law PLLC, Amy M. Stewart, Keron Andre Wright, Tonika G.E. Brown, Stewart Law Group PLLC, Michele C. Spillman, Condon Tobin Sladek Thornton, Dallas, TX, for State Farm Lloyds.
Charlie Gustin, David Bergen, Jr., Richard D. Daly, Daly & Black PC, Houston, TX, Stephen Weikai Wu, Mackie Wolf Zientz & Mann PC, Dallas, TX, for Thomas Crenshaw.
Sarah E. Bradbury, Bradbury Law PLLC, Amy M. Stewart, Keron Andre Wright, Tonika G.E. Brown, Stewart Law Group PLLC, Michele C. Spillman, Condon Tobin Sladek Thornton, Dallas, TX, for State Farm Lloyds.
ORDER
Reed O'Connor, UNITED STATES DISTRICT JUDGE
Pending are Defendant's Motion for Summary Judgment (ECF No. 19), with Brief in Support (ECF No. 20); Plaintiff's Response to Defendant's Motion for Summary Judgment (ECF No. 28), with Brief in Support (ECF No. 29); Defendant's Reply in Support of Motion for Summary Judgment (ECF No. 35); Plaintiff's Supplemental Response (ECF No. 38); and Plaintiff's Response to Defendant's Motion for Leave (ECF No. 40), with Brief in Support (ECF No. 41). Defendant contends it is entitled to judgment as a matter of law because Plaintiff's breach of contract claim fails since it paid the full amount owed, and his Prompt Payment Act claim fails because it timely made all payments. For the following reasons, the Court GRANTS in part State Farm's Motion for Summary Judgment and DENIES it in part .
These facts are undisputed or, as set out below, there is no genuine dispute to any of them.
Defendant State Farm Lloyds ("State Farm") insured plaintiff Thomas Crenshaw's ("Crenshaw") home and property. Orig. Pet. 2, ECF No. 1. Following storm damage, Crenshaw filed a claim pursuant to this policy on July 10, 2017. Id. On July 18, 2017, State Farm inspected the home, it then notified Crenshaw that it accepted his claim, and on July 25, 2017, it paid him $1,123.33, which represented the loss caused by the storm damage, less his deductible and deprecation. See Am. Comp. 2, ECF No. 21.
Crenshaw later sued State Farm and alleged it underpaid and mishandled his insurance claims. Pl. Br. in Supp. of Resp. to Summ. J. 1, ECF No. 29. He sued in state district court, asserting breach of contract, insurance code, and deceptive trade practices act claims. See generally Orig. Pet., ECF No. 1. State Farm removed the case based on diversity of citizenship. Notice of Removal, 1, ECF No. 1. After removal, Crenshaw amended his complaint to assert only breach of contract and Prompt Payment Act claims, and he requests attorneys fees. See Am. Comp., ECF No. 21.
While this case was pending, State Farm invoked the insurance policy's appraisal provision. See generally Pl.'s Mot. for Reinstatement, ECF No. 14. The appraisal process became final on July 25, 2019 and determined that Crenshaw's loss amounted to $6,923.32. Def. Br. in Sup. Mot. Sum. J. 4. On August 9, 2019, State Farm paid Crenshaw, pursuant to the appraisal award, $4,086.99 (the appraisal award less the deductible, depreciation, and the initial claim payment). Id.
II. LEGAL STANDARDS
A. Summary Judgment
Summary judgment is proper when the pleadings and evidence on file show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The movant makes a showing that there is no genuine issue of material fact by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. See Fed. R. Civ. P. 56(c) ; Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
When reviewing the evidence on a motion for summary judgment, a court must decide all reasonable doubts and inferences in the light most favorable to the non-movant. See Walker v. Sears, Roebuck & Co. , 853 F.2d 355, 358 (5th Cir. 1988). A court cannot make a credibility determination in light of conflicting evidence or competing inferences. Anderson , 477 U.S. at 255, 106 S.Ct. 2505. As long as there appears to be some support for the disputed allegations such that "reasonable minds could differ as to the import of the evidence," the motion for summary judgment must be denied. Id. at 250, 106 S.Ct. 2505.
B. Interpretation of Insurance Contracts
Generally, under Texas law, a contract of insurance is subject to the same rules of construction as other contracts. Barnett v. Aetna Life Ins. Co. , 723 S.W.2d 663, 665 (Tex. 1987). When interpreting an insurance contract, terms are given their plain, ordinary meaning unless the policy itself shows that the parties intended the terms to have a different, technical meaning. DeWitt County Elec. Coop., Inc. v. Parks , 1 S.W.3d 96, 101 (Tex. 1999) ; Puckett v. U.S. Fire Ins. Co. , 678 S.W.2d 936, 938 (Tex. 1984). When terms are defined in an insurance policy, those definitions control. Trinity Universal Ins. Co. v. Cowan , 945 S.W.2d 819, 823 (Tex. 1997). Courts interpret the contract as a whole, giving effect to each part. Balandran v. Safeco Ins. Co. of Am. , 972 S.W.2d 738, 741 (Tex. 1998). If the policy terms are susceptible to only one reasonable construction, the terms are enforced as written. Puckett , 678 S.W.2d at 938. If an insurance contract is ambiguous however, a court construes the contract in favor of the insured. Barnett , 723 S.W.2d at 665 ; Canutillo Indep. Sch. Dist. v. Nat'l Union Fire Ins. Co. , 99 F.3d 695, 701 (5th Cir. 1996) (applying Texas law). Where an exclusionary clause is subject to two or more reasonable interpretations, a court must adopt the construction urged by an insured as long as the construction is reasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., Inc. , 811 S.W.2d 552, 555 (Tex. 1991) ; Glover v. Nat'l Ins. Underwriters , 545 S.W.2d 755, 761 (Tex. 1977).
C. Summary Judgment Evidence
At the summary judgment stage, evidence need not be authenticated or otherwise presented in an admissible form. See Fed. R. Civ. P. 56(c) ; Lee v. Offshore Logistical & Transp., LLC , 859 F.3d 353, 355 (5th Cir. 2017). "[M]aterials cited to support or dispute a fact need only be capable of being ‘presented in a form that would be admissible in evidence.’ " LSR Consulting, LLC v. Wells Fargo Bank, N.A. , 835 F.3d 530, 534 (5th Cir. 2016) (quoting Fed. R. Civ. P. 56(c)(2) ). "This flexibility allows the court to consider the evidence that would likely be admitted at trial—as summary judgment is trying to determine if the evidence admitted at trial would allow a jury to find in favor of the nonmovant—without imposing on parties the time and expense it takes to authenticate everything in the record." Maurer v. Indep. Town , 870 F.3d 380, 384 (5th Cir. 2017).
III. ANALYSIS
The Court will first consider Crenshaw's objections to State Farm's summary judgment evidence, and then evaluate whether State Farm is entitled to judgment as a matter of law on the breach of contract, Prompt Payment Act, and attorneys fees claims.
A. Plaintiff's Objections to Summary Judgment Evidence
Crenshaw objects to portions of the evidence State Farm included in support of its summary judgment motion. He contends Exhibits B, B-1, B-2, B-3, B-4, B-5, and B-6 are not properly authenticated, contain inadmissible hearsay, and are not based on personal knowledge. These exhibits are attached to a business records affidavit, authorized by Rule 902 of the Federal Rules of Evidence. The argument that an affiant must have "personal knowledge as to certain facts in the affidavit ‘[are] meritless, because personal knowledge of all the contents of a business record affidavit is not required.’ " U.S. Bank Nat'l Ass'n v. Dennings , No. 1:15-CV-00239-RP, 2016 WL 8904534, at *4 (W.D. Tex. June 7, 2016). In addition, all State Farm must show is that these records are capable of being presented in a form that would be admissible. And it has shown in its Reply that it can submit this information in admissible form, including attaching an affidavit demonstrating that the objected to exhibits are admissible as business records. Braden v. Allstate Vehicle & Prop. Ins. Co. , No. 4:18-CV-00592-O, 2019 WL 201942, at *3 (N.D. Tex. Jan. 15, 2019), appeal dismissed , No. 19-10198, 2019 WL 3948997 (5th Cir. Apr. 22, 2019). Accordingly, Plaintiff's objections to the summary judgment evidence used to decide the pending motion is DENIED .
Crenshaw objects to State Farm using the affidavit of Joshua Cole attached to its Reply. There does not appear to be any prejudice in permitting the use of the Cole affidavit. As such, State Farm's request to substitute it is GRANTED .
B. Breach of Contract
State Farm argues it is entitled to judgment as a matter of law on Crenshaw's breach of contract claim because it paid him the entire loss amount set by the policy's appraisal provision. Texas courts have repeatedly rejected breach of contract claims when an insurer timely paid an appraisal award. See, e.g., Quibodeaux v. Nautilus Ins. Co. , 655 F. App'x. 984, 986–87 (5th Cir. 2016) ; Blum's Furniture Co. v. Certain Underwriters at Lloyds London , 459 F. App'x. 366, 368–69 (5th Cir. 2012) ; Nat'l Sec. Fire & Cas. Co. v. Hurst , 523 S.W.3d 840, 844–47 (Tex. App.—Houston [14th Dist.] 2017, no pet. h.) ; Garcia v. State Farm Lloyds , 514 S.W.3d 257, 273–74 (Tex. App.—San Antonio 2016, pet. denied). "[A]ppraisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award." Franco v. Slavonic Mut. Fire Ins. Ass'n , 154 S.W.3d 777, 786 (Tex. App.—Houston [14th Dist.] 2004, no pet.). Courts will disregard the award only if the insured shows that the award was (1) made without authority, (2) the result of fraud, accident, or mistake, or (3) not in substantial compliance with the insurance policy. Meisenheimer v. Safeco Ins. Co. of Indiana , No. 3:17-CV-2153-M, 2018 WL 3869573, at *2 (N.D. Tex. Aug. 15, 2018).
"The effect of an appraisal provision is to estop one party from contesting the issue of damages in a suit on the insurance contract, leaving only the question of liability for the court." TMM Invs., Ltd. v. Ohio Cas. Ins. Co. , 730 F.3d 466, 472 (5th Cir. 2013) (quoting Lundstrom v. United Servs. Auto. Ass'n , 192 S.W.3d 78, 87 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) ). "Generally, tender of the full amount owed pursuant to the conditions of an appraisal clause is all that is required to estop the insured from raising a breach of contract claim." Hurst , 523 S.W.3d at 844–47 ; see also United Neurology, P.A. v. Hartford Lloyd's Ins. Co. , 101 F.Supp. 3d 584, 619 (S.D. Tex. 2015), aff'd , 624 F. App'x 225 (5th Cir. 2015). By payment of the full amount of an appraisal award, the insurer "complie[s] with every requirement of the contract, [and] it cannot be found to be in breach." Breshears v. State Farm Lloyds , 155 S.W.3d 340, 344 (Tex. App.—Corpus Christi 2004, pet. denied) ; see also Caso v. Allstate Tex. Lloyds , No. 7:12-CV-478, 2014 WL 528192, at *6 (S.D. Tex. Feb. 7, 2014).
Crenshaw argues summary judgment is improper because the evidence does not show State Farm actually paid the claim, it did not timely make it, and the payment provision is ambiguous. The Court will now turn to these issues.
1. No dispute of fact as to payment of the appraisal award.
Crenshaw contends State Farm has failed to show it paid the appraisal award or, even if it did, that it made the payment timely. To the extent Crenshaw relies on his objections to the summary judgment evidence, this argument fails for the reasons set out above. Beyond those objections though, Crenshaw contends that State Farm's evidence does not establish that it paid the appraisal award. Instead, he argues that all State Farm has shown is a cover letter which references the appraisal award, but it has not shown proof that it actually enclosed and sent a check containing the payment.
State Farm included in its attachments a letter dated August 9, 2019, that it sent to Crenshaw that provides, in pertinent part: "Your copy of the award is enclosed, along with payment in the amount of [the appraisal award amount]". See Def. Appx. in Sup. Mot. Sum. J. B-6. While the cancelled check or a bank statement is not included in the appendix, this letter is evidence that on August 9, 2019, State Farm tendered the full appraisal award to Crenshaw. That being the case, it is Crenshaw's burden to "designate specific facts showing that there is a genuine issue for trial." Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (if movant shows no genuine dispute of fact, burden then shifts to nonmovant to designate specific facts that show a dispute of fact for trial). This burden is not satisfied with unsubstantiated assertions or with some metaphysical doubt as to material facts. Id. Instead, disputed facts are resolved in favor of the nonmoving party only when there is an actual controversy, and that occurs when the nonmovant has submitted evidence of contrary facts. Id. Crenshaw has failed to point to facts disputing payment of the appraisal award. Accordingly, there is no dispute of fact regarding State Farm providing Crenshaw the appraisal award.
2. No dispute of fact as to timely payment of the appraisal award.
Next, Crenshaw argues disputed issues of fact remain on his breach of contract claim because State Farm has failed to establish that it timely paid the appraisal award under the Loss Payment provision of the policy. The Loss Payment provision provides:
If we notify you that we will pay your claim, or part of your claim, we must pay within 5 business days after we notify you. If payment of your claim or part of your claim requires the performance of an act by you, we must pay within 5 business days after the date you perform the act.
This provision requires payment within 5 days of State Farm notifying its insured it will pay the claim unless payment is dependent on some act of the insured, in which case payment is due within 5 days of the performance of that act.
Crenshaw argues "under the parties' agreement, State Farm's payment obligation was conditioned on Crenshaw's participation in the appraisal process, and the insurance contract required payment of the appraisal award within five business days of the performance of the condition precedent." Pl. Brief in Resp. 8. Crenshaw does not cite to or quote language within the policy that provides that payment must be made within 5 days of the appraisal award, and the policy contains no such language. Instead, the Loss Payment provision requires payment within 5 days from when State Farm notifies Crenshaw it will pay the claim unless payment is dependent on some act of the insured such that payment is due within 5 days of that act. Since the policy does not contain the language on which Crenshaw relies, there is no support for this argument.
To the extent Crenshaw asserts that his participation in the appraisal process triggered the condition that required payment under the Loss Payment provision, that argument is addressed in the next section when analyzing whether this provision is ambiguous.
3. The Loss Payment provision is unambiguous.
Crenshaw also asserts that summary judgment is improper because the policy is ambiguous regarding the deadline for payment of the appraisal award. He argues that while the Loss Payment provision unambiguously sets out the time period in which State Farm must pay, the policy is ambiguous on when State Farm has to decide whether to pay the appraisal award. Id. at 9. Allowing the insurance company to decide when to notify the claim holder that it will pay the appraisal award would, he argues, authorize the insurance company to "sit on [the award] for an infinite period of time without incurring a payment obligation because it has not yet ‘notified’ its insured that it would pay." Id. at 9. Crenshaw relies on three district court opinions in support of this argument. Id. at 11–13 (citing Cody v. American Bankers Ins. Co. of Fla. , No. 2:14-CV-187-J, 2015 WL 6460007 (N.D. Tex. Oct. 21, 2015) ; Gideon v. State Farm Lloyds , No. 4:19-CV-643, 2019 WL 4930161 (N.D. Tex. July 1, 2019) ; LaCross v. Liberty Ins. Corp. , No. H.-14-3403 (S.D. Tex. 2017)).
It appears that district courts in Texas are split on whether insurance policies with this type of loss payment provision are ambiguous. Compare Kezar v. State Farm Lloyds , No. 1:17-CV-389-RP, 2018 WL 6027115 (W.D. Tex. Nov. 16, 2018) (contract unambiguously requires payment within five days of notice) with Cody , 2015 WL 6460007 (payment deadlines are ambiguous). One of the cases Crenshaw relies on however does not support his argument as it actually concluded this type of loss payment provision is unambiguous. See Gideon , 2019 WL 4930161 ("The ‘Loss Payment’ provision is not ambiguous."). But the other two cases find this provision ambiguous because they conclude it can reasonably be read to require payment when the insurer provides the insured notice under the first prong or when the insured acts by participating in the appraisal process under the second prong. See Cody , 2015 WL 6460007, at *3 ; LaCross v. Liberty Ins. Corp. , No. H.-14-3403 (S.D. Tex. 2017); but see Gideon , 2019 WL 4930161.
These decisions concluded the Loss Payment provision was susceptible to two reasonable interpretations because they believed the provision could be read to either require payment within 5 business days of the insured notifying it will pay the claim under the first prong ("we must pay within 5 business days after we notify you") or 5 business days after an insured participates in the appraisal under the second prong ("we must pay within 5 business days after the date you perform the act."). They conclude these two reasonable, but conflicting, deadlines make the provision ambiguous. See Cody , 2015 WL 6460007, at *3 ("One person could reasonably conclude that the appraisal process required Plaintiff to act, and therefore, the deadline began to run when Plaintiff performed that act."); LaCross, supra. at 7 (relying on Cody ).
In addition to relying on the Cody conclusion, LaCross also finds ambiguity when comparing the Loss Payment provision deadline with the Appraisal provision. LaCross, supra. at 7. It does not explain how the date the appraisal award is set makes the 5 day notification provision ambiguous, except it appears the court concludes the policy is ambiguous because there is no time set by the policy requiring the insured to act. As the court in Gideon explained though, when this occurs the law imposes a reasonable time requirement. Gideon, supra at *5. Whether State Farm paid Crenshaw within a reasonable time is addressed in footnote 6 below.
After considering these cases, the Court respectfully disagrees with the ambiguous conclusions of Cody and LaCross because it is not reasonable to read the provision in that way. When the appraisal process is invoked, the insurance company does not know what the result of the appraisal process will be. And that process may, and almost always does, take much longer than 5 days from the completion of the insured's participation for the award to be made. Indeed, this case serves as a good example as Crenshaw's participation in the appraisal process ended well before the appraisal award was made, and much longer than 5 days.
Neither opinion sets out the date the appraisal process was completed and the date of the award, but it is reasonable to conclude the time period between these two took more than 5 days. See Cody , 2015 WL 6460007 at *1 ("Thereafter, Defendant invoked the appraisal process under the terms of the Policy. On July 20, 2015, the umpire and Plaintiff's appraiser signed and entered an appraisal award for $23,667.43."); LaCross , No. H.-14-3403 at *2(State Farm invoked the appraisal provision in December 2017 and "[T]he parties notified the Court ... that the umpire had signed the award on September 25, 2018, thereby concluding the process.").
But more importantly, interpreting this provision in this manner focuses on the appraisers' completion of performance even though the terms of the policy focuses on the insured's performance. And it is the appraiser's performance that permits timely payment of the correct amount. As such, this cannot be a reasonable interpretation. For these reasons, the Court does not follow the Cody and LaCross opinions on this issue. Instead, the Court concludes, in accordance with Kezar and Gideon , that the Loss Payment provision here unambiguously requires payment within five days of State Farm providing notice.
Because it is undisputed that State Farm paid the award within five days of notifying Crenshaw, Crenshaw's contention that State Farm failed to pay the award as required by the policy fails as a matter of law. See Am. Compl. ¶ 15 ("State Farm failed to pay the award within 5 days as required by the policy"). Based on the foregoing, State Farm's Motion for Summary Judgment on Crenshaw's breach of contract claims is GRANTED .
To the extent Crenshaw relies on these three cases to argue State Farm breached the contract by failing to notify him within a reasonable time from the date of the appraisal award that it would pay the claim, his argument fails because he did not plead that as a breach. As noted above, the facts he pled in support of his breach of contract claim center around his contention that "State Farm failed to pay the award within 5 days as required by the policy. " Am. Compl. ¶ 15. No-where does the amended complaint allege the time between the date the appraisal award became final (July 25, 2019) and the date State Farm paid the award (August 9, 2019) was unreasonable. But even inferring that his claim that State Farm's failure to pay within 5 days of the appraisal award as required by the policy also means State Farm acted unreasonable in this regard, Crenshaw has not pled or articulated any damages that arise from this delay. State Farm has alleged it has paid Crenshaw all it owes him. See Am. Answer ¶ 29; Def. Br. in Sup. Mot. Sum. J. 6. As stated above, State Farm's evidence supports this contention and, notably, Crenshaw has not pointed to facts in the record to contradict this. Therefore, no dispute of fact on payment remains. Finally, it appears State Farm paid Crenshaw 15 days from the date the appraisal award became final and this period of time is within the time frame previous cases applying Texas law have determined payment was made within a reasonable time. Turner v. Peerless Indem. Ins. Co. , 2018 WL 2709489 (Tex. App.—Amarillo June 5, 2018, no pet.) (8 days); Garcia v. Liberty Ins. Corp. , 2019 WL 825883 (N.D. Tex. Jan. 17, 2019) (10 days); National Security Fire & Casualty Co. v. Hurst , 523 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2017) (21 days).
C. Texas Prompt Payment Act Claim
Crenshaw also asserts State Farm violated the Prompt Payment Act by failing to pay his claim in compliance within the statute's deadlines. State Farm argues it is entitled to judgment as a matter of law on this claim because it timely, and reasonably, made an initial payment following Crenshaw's submission of his claim and, following the appraisal award, promptly paid all that it owed him.
State Farm also moves for judgment on Crenshaw's extra contractual claims. Those claims have been nonsuited by Crenshaw when he omitted them from his Amended Complaint. The only live claims addressed in this order therefore are breach of contract and Prompt Payment Act claims, along with a request for attorneys fees.
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As outlined above, Crenshaw filed a claim with State Farm on July 10, 2017. State Farm initially investigated it on July 18, 2017, t h e n accepted the claim, and, on July 25, 2017, paid $1,123.33 to Crenshaw, which represented its valuation of the claim less the deductible and depreciation. Crenshaw objected to that valuation and initiated this suit. Later, during this lawsuit, State Farm invoked the appraisal clause and then paid the increased loss amount as determined by the appraisal process within 15 days of the award. Based on this undisputed timeline of events, State Farm contends that it complied with the Prompt Payment Act. Crenshaw argues that the Texas Supreme Court's recent decision in Barbara Technologies Corp. v. State Farm Lloyds held that these steps are insufficient to avoid Prompt Payment Act liability. No. 17-0640, 589 S.W.3d 806, 2019 WL 2710089 (Tex. June 28, 2019).
In Barbara Technologies , the Texas Supreme Court held that an insurer's payment of an appraisal award "neither established liability under the policy nor foreclosed [Prompt Payment Act] damages." 589 S.W.3d at 822, 2019 WL 2710089 at *12. In that case, the insured filed a storm related damage claim and the insurer rejected the claim because the amount of loss was below the policy's deductible. After it was sued, the insured invoked the appraisal provision of the policy and subsequently paid the appraisal award.
The insured argued it was also entitled to Prompt Payment Act damages because the insurer did not pay the claim for more than a year, which violated the statute's deadlines. The Texas Supreme Court examined, in detail, the interplay between the Prompt Payment Act and the appraisal process and concluded that an insurer is liable for Prompt Payment Act damages when it (1) accepts liability or is adjudicated liable under the policy and (2) violates the statute's deadlines. Id. at 827, 2019 WL 2710089, at *16. It declared the use of the appraisal process has no bearing on Prompt Payment Act deadlines. Id. at 821, 2019 WL 2710089, at *11.
The dispute over Crenshaw's Prompt Payment Act claim in this case boils down to whether the Texas Supreme Court's opinion in Barbara Technologies repudiated the Fifth Circuit's decision in Mainali Corp. v. Covington Specialty Ins. , 872 F.3d 255 (5th Cir. 2017). If it did, State Farm's motion should be denied but, if it did not, State Farm's motion should be granted. Crenshaw contends " Mainali's ‘reasonable’ standard did not survive the [Texas Supreme] Court's opinion in Barbara Technologies. " Pl. Brief in Response, 19. Defendant argues not only did Barbara Technologies not repudiate Mainali , but the "opinion favorably cited two cases with similar facts: Mainali and Breshears. " Def. Reply 9.
In Mainali , the Fifth Circuit made an Erie guess and concluded that Texas would recognize that an insurer did not violate the Prompt Payment Act when it complied with its requirements to timely investigate, evaluate, and in good faith pay a claim after an appraisal award. In reaching this conclusion, Mainali determined that a previous federal district court opinion in Graber v. State Farm Lloyds , 2015 WL 3755030 (N.D. Tex. June 15, 2015) wrongly concluded there was no good faith exception to the Prompt Payment Act. Crenshaw argues that Barbara Technologies adopted the reasoning in Graber , and therefore repudiated Mainali.
Arguing that Barbara Technologies rejected Mainali when it favorably discussed a portion of Graber is reading too much into that discussion. Rather, in Barbara Technologies the Texas Supreme Court agreed with Graber's conclusion that an insurer's failure to promptly pay an insured's claim when liability had been established is a Prompt Payment Act violation, but it did not embrace all of Graber's reasoning. See Barbara Technologies , 589 S.W.3d at 820, 2019 WL 2710089, at *10. It is therefore too much to conclude, based on the Graber discussion, that Barbara Technologies rejected Mainali , particularly when over the next two pages it cites Mainali (and Brashear , a similar case) with approval. See Barbara Technologies , 589 S.W.3d at 821–22, 2019 WL 2710089, at *11–12.
While the Texas Supreme Court's view on Mainali may not be entirely clear, it certainly did not disapprove of it. See Barbara Technologies , 589 S.W.3d at 822, 2019 WL 2710089, at *12. Instead it appears Barbara Technologies distinguishes between those Prompt Payment Act claims where an insurer accepts and promptly pays a claim that is later determined to be less than a subsequent appraisal award as occurred in Mainali , with those claims that an insurer initially rejects but ultimately accepts or is held liable for as described in Barbara Technologies. See Hyewon Shin v. Allstate Texas Lloyds , No. 4:18-CV-01784, slip op. at 2, 2019 WL 4170259 (S.D. Tex. Sept. 3, 2019) ("the Court reads Barbara Technologies , in conjunction with Mainali , as standing for the proposition that, in order for an insurer to avoid a Prompt Payment Act claim by a plaintiff, the insurer must have made a reasonable preappraisal payment within the statutorily-provided period.").
In any event, a district court may not disregard Fifth Circuit precedent unless it has been unequivocally renounced. Id. at 1. It is evident that Barbara Technologies did not unequivocally repudiate Mainali , such that it remains controlling on district courts until further direction from the circuit. Id. ("A district court may not, however, treat Fifth Circuit precedent as having been overruled by a state court decision unless the state court decision is unequivocal in its renunciation of the earlier circuit precedent.").
Crenshaw contends it would be absurd to conclude that Barbara Technologies would apply if the "insurer finds damages $1.00 below the deductible but applies the ‘reasonable’ standard in Mainali when the insurer finds damages $1.00 over the deductible." Def. Brief in Resp. 21. To the extent he argues an insurer would manipulate the amounts to achieve this outcome, Barbara Technologies made clear that when an insurer does not act in good faith other insurance code remedies remain available to the insured. See Barbara Technologies , 589 S.W.3d at 824, 2019 WL 2710089, at *14. Otherwise, as stated above, Barbara Technologies provides that a good faith timely acceptance and payment of a claim that is later determined to have a higher value that is also timely paid is distinct, for Prompt Payment Act purposes, from one that is initially rejected and is only paid when liability is later determined or accepted.
As State Farm made a timely acceptance and payment, pre-appraisal, of Crenshaw's claim, and then made a timely payment of the appraisal award, it did not violate the Prompt Payment Act deadlines. Crenshaw does not dispute that State Farm made a timely pre-appraisal payment (he only contends it underpaid him), therefore the only remaining issue is whether the initial payment was reasonable. See Def. Brief in Resp. 14 ("Second, it is also important to note that ‘what is reasonable’ is a question of fact for the jury").
The difference between State Farm's pre-appraisal payment and the appraisal award is 3.64 times the original payment. See Def. Brief in Support 9. That multiplier is within the range of reasonableness found as a matter of law in other cases applying Texas law. See Def. Brief in Support 8; Shin , slip op. (5.6 times) and Hinojos v. State Farm Lloyds , 569 S.W.3d 304 (Tex. App.—El Paso 2019) (6.8 times). It was therefore a reasonable payment for Prompt Payment Act purposes.
Based on the foregoing, State Farm is entitled to judgment as a matter of law on Crenshaw's Prompt Payment Act claim.
D. Attorneys Fees
Finally, State Farm argues it is entitled to judgment as a matter of law that it owes no attorneys fees because Crenshaw has recovered no damages under the insurance code. See Def. Br. in Support 9-12; Def. Reply 10. In his amended complaint, Crenshaw asserts he is entitled to recover attorneys fees under both the insurance code and under § 38.001 of the Texas Practices and Remedies Code. Am. Compl. ¶¶ 26, 27. Crenshaw contends he has already prevailed following the appraisal award and is therefore entitled to attorneys fees. Br. in Resp. 26.
Texas law permits a party to recover attorneys fees on a suit involving a contract. Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8). "Under Texas law, when a prevailing party in a breach of contract suit seeks attorneys' fees, an award of reasonable fees is mandatory under Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8)." See Kona Tech. Corp. v. S. Pac. Transp. Co. , 225 F.3d 595, 614 (5th Cir. 2000). A prevailing party is one who prevails on a cause of action in which attorneys fees are recoverable and recovers damages, i.e. the party recovers money or something of value. Butler v. Arrow Mirror & Glass, Inc. , 51 S.W.3d 787, 796–97 (Tex. App.—Houston [1st Dist.] 2001).
It is undisputed that State Farm paid Crenshaw additional amounts owed under the policy only after this case was filed and the appraisal clause invoked. State Farm did not address Crenshaw's argument that he has already recovered more damages on the contract as a result of this lawsuit in any of its briefing. Accordingly, State Farm's request for judgment as a matter of law on Crenshaw's request for attorneys fees is DENIED .
IV. CONCLUSION
Based on the foregoing, State Farm is entitled to judgment as a matter of law on Crenshaw's breach of contract and Prompt Payment Act claims. Its request for judgment as a matter of law on attorneys fees is denied. Crenshaw's request for attorneys fees under § 38.001 of the Texas Practices and Civil Remedies Code remains. Crenshaw is directed to brief his entitlement to attorneys fees under § 38.001, and to submit his complete request for them, no later than December 2, 2019. State Farm may respond to these filings no later than December 20, 2019. Crenshaw then may reply to State Farm no later than December 30, 2019.