Raul Alcala and Yazmin Alcala v. Republic Lloyds

Opinion

NUMBER 13-18-00026-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

RAUL ALCALA AND YAZMIN ALCALA, Appellants,

v.

REPUBLIC LLOYDS, Appellee.

On appeal from the 445th District Court of Cameron County, Texas.

MEMORANDUM OPINION

Before Justices Longoria, Hinojosa, and Rodriguez1 Memorandum Opinion by Justice Hinojosa

Appellants Raul and Yazmin Alcala (the Alcalas) sued appellee Republic Lloyds

(Republic), disputing Republic’s handling of a homeowner’s insurance claim filed by the

1 The Honorable Nelda V. Rodriguez, former Justice of this Court, was a member of the panel at the time this case was submitted but did not participate in this decision because her term of office expired on December 31, 2018. Alcalas. The Alcalas appeal the trial court’s order granting Republic’s motion for summary

judgment. In two issues, which we treat as one, the Alcalas argue that the trial court erred

in granting summary judgment solely on the basis of Republic’s payment of an appraisal

award. We affirm in part and reverse and remand in part.

I. BACKGROUND

On January 9, 2015, a hailstorm damaged the Alcalas’ home in Brownsville, Texas.

The Alcalas filed a claim with their insurer Republic on January 21. Republic assigned an

independent adjuster, who inspected the home and estimated the actual cash value of

the damages to be $904.46. On February 3, Republic issued a check to the Alcalas for

$354.46 which represented the adjuster’s estimate less the policy’s deductible. In

December of 2015, counsel for the Alcalas communicated to Republic their disagreement

with the damage estimate and provided their own estimate of $17,701.46. On January

13, 2016, Republic notified the Alcalas’ attorney that it was demanding an appraisal

pursuant to the policy’s appraisal provision. While the appraisal process was pending, the

Alcalas sued Republic, asserting a breach of contract claim and various extra-contractual

claims which can be classified as follows: (1) statutory bad faith claims under both chapter

541 of the insurance code and the Deceptive Trade Practices Act (DTPA); (2) violations

of the Texas Prompt Payment of Claims Act (TPPCA); and (3) common law bad faith and

fraud claims. While the lawsuit was pending, Republic and the Alcalas selected

appraisers, and the trial court appointed an appraisal umpire. The appraisers and the

umpire agreed on an actual cash value for damages of $6,045.68. On December 29,

2 2016, Republic issued a check for $5,141.22, which represented the appraisal award less

the deductible and Republic’s prior payment.

Republic filed a traditional motion for summary judgment arguing that its timely

payment of the appraisal award negated liability for all of the Alcalas’ claims as a matter

of law. Republic relied on the policy’s appraisal provision which provides in relevant part

as follows:

8. Appraisal. If you and we fail to agree on the amount of loss from an occurrence claimed by you in accordance with the loss settlement provisions of your policy, either may demand an appraisal of the loss.

In the event of a demand for an appraisal of loss, each party shall choose a competent and disinterested appraiser within 20 days after receiving a written request from the other. During this same time period, the parties shall provide to each other in writing the name and contact information for their selected appraiser. The two appraisers shall attempt to select a competent and disinterested umpire.

If they cannot agree upon an umpire within 15 days after the selection of the second appraiser, you or we may request that the choice of a competent and disinterested umpire be made by a judge of a court of record in the state where the residence premises is located. ....

Stating separately the items and amounts of loss for each item, and in accordance with your policy’s loss settlement provisions, the appraisers shall determine the amount of loss from the occurrence claimed by you. Both you and we and each of our representatives shall cooperate with the appraisal process, allow the appraisers and umpire reasonable and timely access to inspect the damaged property, and make reasonable efforts to allow completion of the appraisal process in a timely manner.

If the appraisers fail to reach agreement on the amounts, the appraisers shall submit their differences, only, to the umpire. An appraisal decision in writing, so itemized, of any two of these three, when received by us shall set the amount of loss. ....

3 This appraisal shall be binding on you and us concerning only the amount of loss. You will retain your right to bring suit against us following the appraisal award, subject to Texas law and compliance with the Suit Against Us provisions of the policy as modified by this Endorsement. We will retain our right to deny all or part of your claim and to dispute liability for any portion of the appraisal award based on lack of coverage or violation of the terms or conditions of the policy.

Republic argued that its participation in the contractual appraisal process and timely

payment of the appraisal award negated the Alcalas’ breach of contract claim as a matter

of law. Republic further argued that the Alcalas could not maintain any extra-contractual

claims in the absence of a breach of contract unless the Alcalas suffered an injury

independent of the loss of policy benefits. Republic attached the insurance policy to its

motion as well as correspondence and documents establishing Republic’s timely handling

of the Alcalas’ claim, its invocation of the policy’s appraisal provision, and its timely

payment of the appraisal award.

The Alcalas filed a response to the motion for summary judgment. Relying on

Republic’s summary judgment evidence, the Alcalas focused their argument on their

extra-contractual claims. The Alcalas conceded that payment of the appraisal award

“might negate” their breach of contract claim. However, they argued that they are not

required to establish a breach of contract in order to recover on their extra-contractual

claims, only that they have a right to benefits under the policy. The Alcalas moved

separately for summary judgment on their TPPCA claim. They argued that the summary

judgment record “conclusively establishes that Republic made full payment on [their]

claim late in violation of [the TPPCA] after [the Alcalas] became entitled to benefits under

the policy.”

4 The trial court signed an order granting Republic’s motion for summary judgment,

thereby dismissing the Alcalas’ suit in its entirety. 2 The Alcalas have since appealed. 3

We abated the case and ordered the parties to file supplemental briefs addressing two

Texas Supreme Court opinions that were handed down after this Court heard oral

argument. See Barbara Techs. Corp. v. State Farm Lloyds, ___ S.W.3d ___, No. 17-

0640, 2019 WL 2710089 (Tex. June 28, 2019); Ortiz v. State Farm Lloyds, ___ S.W.3d

___, No. 17-1048, 2019 WL 2710032 (Tex. June 28, 2019). The parties have filed their

supplemental briefs, and we have since reinstated the appeal.

II. DISCUSSION

A. Standard of Review

We review summary judgments de novo. KCM Fin. LLC v. Bradshaw, 457 S.W.3d

70, 79 (Tex. 2015); Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013). A movant for

traditional summary judgment has the burden to establish that no genuine issue of a

material fact exists and that it is entitled to judgment as a matter of law. TEX. R. CIV. P.

166a(c); Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex.

2014). A defendant seeking traditional summary judgment must either disprove at least

one element of each of the plaintiff’s causes of action or plead and conclusively establish

each essential element of an affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341

(Tex. 1995) (per curiam); Sanchez v. Matagorda County, 124 S.W.3d 350, 352 (Tex.

2 The Alcalas filed a motion for new trial which was overruled by operation of law.

3 The Alcalas do not challenge the trial court’s implicit denial of their motion for summary judgment

in their appellants’ brief.

5 App.—Corpus Christi–Edinburg 2003, no pet.). If the defendant carries this burden, the

burden shifts to the plaintiff to raise a genuine issue of material fact precluding summary

judgment. Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018). We review the summary

judgment evidence in the light most favorable to the non-movant, indulging every

reasonable inference and resolving any doubts against the motion. Buck v. Palmer, 381

S.W.3d 525, 527 (Tex. 2012) (per curiam); City of Keller v. Wilson, 168 S.W.3d 802, 824

(Tex. 2005).

B. Analysis

As requested by the Court, the Alcalas filed a supplemental brief addressing the

impact of two intervening Texas Supreme Court opinions. See Barbara Techs., ___ 2019

WL 2710089; Ortiz, 2019 WL 2710032. The Alcalas represent to this Court that they are

no longer appealing the dismissal of their breach of contract and extra-contractual “bad

faith” claims, and they have requested that the Court affirm that portion of the trial court’s

judgment dismissing those claims. See Ortiz, 2019 WL 2710032, at *5, *15 (concluding

that an insurer’s payment of an appraisal award bars an insured’s breach of contract claim

as well as common law and statutory bad faith claims to the extent the only actual

damages sought are lost policy benefits). However, the Alcalas continue to maintain, as

they did in their initial brief, that the trial court erred in granting summary judgment as to

their TPPCA claim. See TEX. INS. CODE. ANN. ch. 542. Specifically, the Alcalas argue that

an insurer’s payment of an appraisal award does not as a matter of law bar an insured’s

claim under the TPPCA. We agree.

6 The TPPCA sets out guidelines facilitating the timely payment of insurance claims.

See id. §§ 542.054, 542.057; Barbara Techs., 2019 WL 2710089, at *3; see also Lambert

v. State Farm Lloyds, No. 02-17-00374-CV, 2019 WL 5792812, at *3 (Tex. App.—Fort

Worth Nov. 7, 2019, no pet. h.) (mem. op.). To prevail under a claim for TPPCA damages,

the insured must establish: (1) the insurer’s liability under the insurance policy, and (2)

that the insurer has failed to comply with one or more sections of the TPPCA in processing

or paying the claim. Barbara Techs., 2019 WL 2710089, at *4. While the TPPCA does not

explicitly address how initiating the appraisal process affects the Act’s timing guidelines,

the Texas Supreme Court has recently issued an opinion that discusses the effect of an

appraisal award on a TPPCA claim. See id. at *1; see also Lambert, 2019 WL 5792812,

at *3.

In Barbara Technologies, the insurer twice denied its insured’s claim for storm-

related damages because the damages did not exceed the policy’s deductible. 2019 WL

2710089, at *1. The insured sued, prompting the insurer to invoke the policy’s appraisal

provision. Id. The insured accepted the resulting appraisal award, but it claimed that

statutory damages were appropriate because the insurer failed to comply with the

TPPCA’s sixty-day time limit for payment. Id. The trial court granted summary judgment

in favor of the insurer. Id.

The Texas Supreme Court concluded that the payment of an appraisal award does

not bar an insured’s TPPCA claim as a matter of law. Id. at *2, *17. The Court interpreted

the TPPCA’s lack of any appraisal-related language to mean that the legislature intended

neither to impose specific deadlines for the contractual appraisal process within the

7 prompt-pay scheme nor to exempt the contractual appraisal process from the deadlines.

Id. at *5, *8 (“Nothing in the TPPCA would excuse an insurer from liability for TPPCA

damages if it was liable under the terms of the policy but delayed payment beyond the

applicable statutory deadline, regardless of use of the appraisal process.”).

The Court noted that an appraisal’s outcome only binds the parties as to the

amount of the loss determined, leaving open the question of liability for such loss. Id. at

*8. Therefore, “payment in accordance with an appraisal is neither an acknowledgment

of liability nor a determination of liability under the policy for purposes of TPPCA

damages[.]” Id. at *9. The Court explained that the insurer had not accepted liability under

the policy and had not yet had its liability adjudicated; therefore, the insured was not

entitled to TPPCA damages as a matter of law. Id. at *16. It noted that, on the other hand,

the insurer’s invocation of the appraisal clause and prompt payment of the appraisal

award did not automatically exempt it from TPPCA damages. Id. For these reasons, the

Court held that the trial court erred in granting summary judgment in favor of the insurer.

Id. at *17.

Here, Republic moved for summary judgment solely on the basis of its timely

payment of the appraisal award. However, this fact does not excuse Republic from liability

for TPPCA damages if it was liable under the terms of the policy—an element that

Republic did not challenge in its motion for summary judgment—but delayed payment

beyond the applicable statutory deadline. See id. at *8. We conclude that Republic failed

to carry its summary judgment burden in seeking dismissal of the Alcalas’ TPPCA claim. 4

4 We reject Republic’s argument that Barbara Technologies v. State Farm Lloyds is factually distinguishable because Republic initially paid $354.46 to the Alcalas, whereas the insurer in Barbara 8 See TEX. R. CIV. P. 166a(c); Amedisys, 437 S.W.3d at 511. Therefore, we hold that the

trial court erred in granting summary judgment on this claim. See Bradshaw, 457 S.W.3d

at 79. We sustain the Alcalas’ sole issue.

III. CONCLUSION

We reverse that portion of the trial court’s judgment dismissing the Alcalas’ TPPCA

claim, and we remand that portion of the case to the trial court for further proceedings

consistent with this memorandum opinion. We affirm the remainder of the trial court’s

judgment.

LETICIA HINOJOSA Justice

Delivered and filed the 20th day of February, 2020.

Technologies initially paid nothing because it determined that the damages were less than the policy’s deductible. ___ S.W.3d ___, No. 17-0640, 2019 WL 2710089 (Tex. June 28, 2019). We observe no meaningful distinction between an insurer’s initial determination that damages are less than the deductible versus a determination that damages exceed the deductible by some nominal amount—whether it be $1 or $354.46. In either case, the plaintiff is relying on the insurer’s pre-appraisal underpayment of the claim as a basis for its TPPCA claim. See Ortiz v. State Farm Lloyds, ___ S.W.3d ___, No. 17-1048, 2019 WL 2710032, *3 (Tex. June 28, 2019) (discussing body of related case law as concerning allegations of “pre- appraisal underpayment” of a claim). 9