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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`§
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`§
`§
`§
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`CASE NO. 4:13-CV-413
`Judge Mazzant
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`RONALD STUDER
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`v.
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`STATE FARM LLOYDS
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`MEMORANDUM OPINION AND ORDER
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`Pending before the Court are Plaintiff’s Motion to Set Aside Appraisal Award (Dkt. #57)
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`and Defendant’s Motion for Summary Judgment (Dkt. #58). After reviewing the relevant
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`pleadings, the Court finds that Plaintiff’s motion to set aside the appraisal award should be
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`denied, and Defendant’s motion for summary judgment should be granted.
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`BACKGROUND
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`The issue before the Court whether the appraisal award issued in the above-referenced
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`case should be set aside due to mistake. On or about June 21, 2011, Plaintiff’s property,
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`including his glass solarium, was struck by hail stones during a storm (Dkt. #57 at p. 1). Plaintiff
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`filed a claim for damage to his roof, gutters, siding, windows, skylight, and glass solarium with
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`Defendant State Farm Lloyds (“Defendant” or “State Farm”) (Dkt. #57 at p. 1). State Farm
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`inspected the property on several occasions (Dkt. #58 at p. 41; Dkt. #58, Exhibit B1). State Farm
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`retained Rimkus Engineering to inspect the solarium and give a cause of loss (Dkt. #58 at p. 4).
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`Rimkus inspected and photographed the property, interviewed Plaintiff, reviewed records at the
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`Denton County Appraisal District, and reviewed measurements and pictures of the solarium
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`1 As a preliminary issue, Plaintiff assert that Defendant’s Motion for Summary Judgment is procedurally defective
`because it does not contain “a ‘Statement on Undisputed Material Facts[.]’” (Dkt. #59 at pp. 1-2). The Court finds
`that Plaintiff’s objection should be overruled. Defendant’s Motion for Summary Judgment contains a “Relevant
`Background” section, which contains the facts of the present action. The Court finds that Defendant’s motion is not
`procedurally defective, and thus, will address the motion.
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`1
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 2 of 15 PageID #: 1284
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`(Dkt. #58 at p. 4; Dkt. #58, Exhibit B2). On May 29, 2012, Rimkus issued its report, and found,
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`in part, the following:
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`1.
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`2.
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`3.
`4.
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`5.
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`Cracks and separation in the sealant of the metal frame joints and along
`the edges of the metal frame components were due to long-term exposure
`to weather and normal wear and tear, but were not consistent with having
`been caused by hail.
`The water shedding ability of the solarium had been compromised due to
`long-term deterioration of the sealant and the rubber seal. Hail did not
`cause damage to the sealant and the rubber seal.
`Hail did not compromise the water shedding ability of the solarium.
`The cracked and missing exterior glass panels were consistent with having
`been caused by impact forces from unknown objects and not consistent
`with hail damage.
`The missing layer of the glass panel on the underside of the solarium roof
`was consistent with a suspected past impact from an unknown object
`inside the solarium. Hail did not cause the breaking of the inner glass
`pane.
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`(Dkt. #58, Exhibit B2 at p. 2). On June 12, 2012, State Farm discussed the Rimkus Report with
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`Plaintiff; Plaintiff disagreed with the findings (Dkt. #58 at p. 5). State Farm covered the hail
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`damage to the roof, gutters, siding, windows, and skylight, but denied coverage as to the glass
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`solarium, claiming that the damage was due to manufacturing defects that pre-dated the storm
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`(Dkt. #57 at p. 1).
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`On June 18, 2013, Plaintiff filed his Original Petition in the 362nd Judicial District of
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`Denton County, Texas (Dkt. #2). The case was later removed to this Court on July 22, 2013
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`(Dkt. #1). On April 30, 2014, Plaintiff filed his Second Amended Complaint, in which he
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`asserted the following claims: (1) breach of contract; (2) prompt payments of claims; and (3)
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`bad faith violations under § 541.051 of the Texas Insurance Code (Dkt. #33).
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`On June 6, 2014, Plaintiff invoked the appraisal provision of his State Farm insurance
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`policy, and appointed his appraiser, Ray Choate (“Choate”) (Dkt. #57 at p. 1; Dkt. #57, Exhibit
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`2
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 3 of 15 PageID #: 1285
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`A). Plaintiff invoked his right to appraisal under the standard State Farm policy language, which
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`stated as follows:
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`4. Appraisal. If you and we fail to agree on the amount of loss, either one can
`demand that the amount of the loss be set by appraisal. If either makes a written
`demand for appraisal, each shall select a competent, disinterested appraiser. Each
`shall notify the other of the appraiser’s identity within 20 days of receipt of the
`written demand. The two appraisers shall then select a competent, impartial
`umpire. If the two appraisers are unable to agree upon an umpire within 15 days,
`you or we can ask a judge of a court of record in the state where the residence
`premises is located to select an umpire. The appraisers shall then set the amount
`of the loss. If the appraisers submit a written report of an agreement to us, the
`amount agreed upon shall be the amount of loss. If the appraisers fail to agree
`within a reasonable time, they shall submit their differences to the umpire.
`Written agreement signed by any two of these shall set the amount of the loss.
`Each appraiser shall be paid by the party selecting that appraiser. Other expenses
`of the appraisal and the compensation of the umpire shall be paid equally by you
`and us.
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`(Dkt. #57, Exhibit A at p. 1). On June 26, 2014, State Farm agreed to participate in an appraisal,
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`limited to the glass solarium, and appointed its appraiser, Timothy Lozos (“Lozos”) (Dkt. #57 at
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`pp. 1-2; Dkt. #57, Exhibit B). On July 30, 2014, the Court appointed the Hon. Karen Gren
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`Scholer, State District Judge (ret.), as the umpire in the action (Dkt. #45).
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`Each appraiser’s estimate was submitted to the umpire in accordance with the insurance
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`policy (Dkt. #57 at p. 2). Lozos submitted an estimate to the umpire to repair the solarium at a
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`cost of $2,420.78 (Dkt. #57 at p. 2; Dkt. #60 at p. 1; see Dkt. #57, Exhibit C). Choate submitted
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`his estimate to the umpire to repair the solarium at a cost of $62,5782 (Dkt. #57 at p. 2; Dkt. #57,
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`Exhibit D). On March 20, 2015, the umpire issued her award, in which she awarded a total of
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`$2,420.78 (Dkt. #57, Exhibit E). The umpire and Lozos signed the appraisal award (Dkt. #57,
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`Exhibit E).
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`2 Plaintiff asserts that Choate’s estimate was at a cost of $75,093.60; however, upon the Court’s review of Choate’s
`appraisal it appears that his estimate to repair the glass solarium was at a cost of $62,578 (see Dkt. #60 at p. 1).
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`3
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 4 of 15 PageID #: 1286
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`After the award was issued, Choate contacted Binswanger Glass, who was used by Lozos
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`in his estimate, and “requested they inspect the property and provide a repair estimate for the
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`wind and hail damages to the solarium.” (Dkt. #57 at p. 2). After they inspected the solarium,
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`Binswanger determined that its cost of the repair would be $84,602 (see Dkt. #57, Exhibit F1).
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`On February 10, 2016, Plaintiff filed his Motion to Set Aside Appraisal Award (Dkt.
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`#57). On March 2, 2016, State Farm filed its response (Dkt. #60).
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`Also on February 10, 2016, Defendant filed its Motion for Summary Judgment (Dkt.
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`#58). On February 24, 2016, Plaintiff filed his response (Dkt. #59). On March 9, 2016,
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`Defendant filed its reply (Dkt. #61).
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`LEGAL STANDARD
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`The purpose of summary judgment is to isolate and dispose of factually unsupported
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`claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary judgment
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`is proper if the pleadings, the discovery and disclosure materials on file, and any affidavits
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`“[show] that there is no genuine dispute as to any material fact and that the movant is entitled to
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`judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is genuine
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`“if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
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`Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all
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`reasonable doubts in favor of the party opposing the motion for summary judgment. Casey
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`Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations
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`omitted). The substantive law identifies which facts are material. Anderson, 477 U.S. at 248.
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`The party moving for summary judgment has the burden to show that there is no genuine
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`issue of material fact and that it is entitled to judgment as a matter of law. Id. at 247. If the
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`movant bears the burden of proof on a claim or defense on which it is moving for summary
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`4
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 5 of 15 PageID #: 1287
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`judgment, it must come forward with evidence that establishes “beyond peradventure all of the
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`essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th
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`Cir. 1986). Where the nonmovant bears the burden of proof, the movant may discharge its
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`burden by showing that there is an absence of evidence to support the nonmovant’s case.
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`Celotex, 477 U.S. at 325; Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000).
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`Once the movant has carried its burden, the nonmovant must “respond to the motion for
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`summary judgment by setting forth particular facts indicating there is a genuine issue for trial.”
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`Byers, 209 F.3d at 424 (citing Anderson, 477 U.S. at 248-49). The nonmovant must adduce
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`affirmative evidence. Anderson, 477 U.S. at 257. No “mere denial of material facts
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`nor…unsworn allegations [nor] arguments and assertions in briefs or legal memoranda” will
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`suffice to carry this burden. Moayedi v. Compaq Comput. Corp., 98 F. App’x 335, 338 (5th Cir.
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`2004). Rather, the Court requires “significant probative evidence” from the nonmovant in order
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`to dismiss a request for summary judgment supported appropriately by the movant. United
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`States v. Lawrence, 276 F.3d 193, 197 (5th Cir. 2001). The Court must consider all of the
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`evidence, but must refrain from making any credibility determinations or weighing the evidence.
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`See Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
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`Plaitniff’s Motion to Set Aside Appraisal (Dkt. #57)
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`ANALYSIS
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`As a preliminary matter, State Farm objects to the Choate Affidavit (Dkt. #57, Exhibit F)
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`as Choate’s testimony is speculative, vague, and conclusory (Dkt. #60 at p. 7). State Farms also
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`contends that the Court should strike the affidavit because it is irrelevant, as Choate was not a
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`signatory to the appraisal award (Dkt. #60 at p. 7). To the extent that the Court considered the
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`5
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 6 of 15 PageID #: 1288
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`Choate Affidavit for purposes of this motion, the Court finds that State Farm’s objections should
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`be overruled.
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`State Farm also objects to the Binswanger bid proposal (Dkt. #57, Exhibit F-1), and
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`asserts that it is irrelevant and constitutes hearsay (Dkt. #60 at p. 7). To the extent that the Court
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`relies upon the Binswanger bid proposal, it finds that State Farm’s objections should be
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`overruled.
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`In a diversity case, state law provides the elements of the case pursuant to the substantive
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`law of the forum state. Thrash v. State Farm Fire & Cas. Co., 992 F.2d 1354, 1356 (5th Cir.
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`1993). “Therefore the Court looks to final decisions by the Texas Supreme Court or, where there
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`are none, attempts to determine as best as it can what that high court would decide about an issue
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`by examining decisions of intermediate appellate state courts.” United Neurology, P.A. v.
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`Hartford Lloyd’s Ins. Co., 101 F. Supp. 3d 584, 591 (S.D. Tex. 2015) (citing James v. State
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`Farm Mut. Auto. Ins. Co., 719 F.3d 447, 451 (5th Cir. 2013) (citing Westlake Petrochemicals,
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`L.L.C. v. United Polychemical, Inc., 688 F.3d 232, 238 n. 5 (5th Cir. 2012); Howe ex rel. Howe
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`v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000))).
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`The Texas Supreme Court has long recognized the validity of appraisal provisions.
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`Hudgens v. Allstate Tex. Lloyd’s, No. H-11-2716, 2012 WL 2887219, at *8 (S.D. Tex. July 13,
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`2012) (citing Scottish Union & Nat’l Ins. Co. v. Clancy, 8 S.W. 630, 631 (Tex. 1888)). Under
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`Texas law, “‘appraisal awards made pursuant to the provisions of an insurance contract are
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`binding and enforceable, and every reasonable presumption will be indulged to sustain an
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`appraisal award.’” JM Walker LLC v. Acadia Ins. Co., 356 F. App’x 744, 746 (5th Cir. 2009)
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`(quoting Franco v. Slavonic Mut. Fire Ins. Ass’n, 154 S.W.3d 777, 786 (Tex. App.—Houston
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`[14th Dist.] 2004, no pet.)). “The effect of an appraisal provision is to estop one party from
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`6
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 7 of 15 PageID #: 1289
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`contesting the issue of damages in a suit on the insurance contract, leaving only the question of
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`liability for the court.” Franco, 154 S.W.3d at 786 (citing Wells v. Am. States Preferred Ins. Co.,
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`919 S.W.2d 679, 683-85 (Tex. App.—Dallas 1996, writ denied)); MLCSV10 v. Stateside Enters.,
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`Inc., 866 F. Supp. 2d 691, 698 (S.D. Tex. 2012). “Because every reasonable presumption will be
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`indulged to sustain an appraisal award, the burden of proof is on the party seeking to avoid the
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`award.” Franco, 154 S.W.3d at 786 (citing Barnes v. W. Alliance Ins. Co., 844 S.W.2d 264, 267
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`(Tex. App.—Fort Worth 1992, writ dism’d by agr.)); MLCSV10, 866 F. Supp. 2d at 698. “Texas
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`courts recognize three situations in which the results of an otherwise binding appraisal may be
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`disregarded: (1) when the award was made without authority; (2) when the award was made as a
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`result of fraud, accident, or mistake, or (3) when the award was not in compliance with the
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`requirements of the policy.” Franco, 154 S.W.3d at 786 (citing Wells, 919 S.W.2d at 683;
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`Providence Lloyds Ins. Co. v. Crystal City Indep. Sch. Dist., 877 S.W.2d 872, 875 (Tex. App.—
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`San Antonio 1994, no writ)).
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`In the present case, Plaintiff argues that the second exception applies, or that the award
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`was made as a result of mistake (Dkt. #57 at p. 3). Plaintiff contends that “Mr. Choate…finds
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`that Mr. Lozos failed to use a reliable and reasonable appraisal methodology, the appraisal award
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`does not reflect the true intention of appraisal, and had Mr. Lozos utilized a reliable and
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`reasonable appraisal methodology, the true intention of appraisal…would have been realized
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`(Dkt. #57 at p. 5). Additionally, Plaintiff asserts that the award should be set aside as
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`the appraisal award was signed only by Lozos and the umpire, not Choate (Dkt. #57 at p. 5, see
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`Dkt. #57, Exhibit E).
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`After reviewing the relevant pleadings, the Court finds that Plaintiff has not met his
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`burden of demonstrating the award was made as a result of mistake. First, the appraisal
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`7
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 8 of 15 PageID #: 1290
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`provision in the State Farm contract states as follows: “Written agreement signed by any two of
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`these [the appraisers and/or the umpire] shall set the amount of the loss.” (Dkt. #57, Exhibit A at
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`p. 1). The appraisal award issued by the umpire was signed by the umpire and Lozos (Dkt. #57,
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`Exhibit E). As such, it follows the provisions of the State Farm policy, and the Court finds that it
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`is binding, as long as Plaintiff does not prove it was formed by mistake.
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`However, Plaintiff has presented no evidence that neither the umpire nor Lozos, the
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`signers of the appraisal award, disagree with the appraisal award, or believe that it was entered
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`into as a result of mistake. The evidence before the Court demonstrates that Choate disagreed
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`with the umpire’s decision, not that a mistake was made. During the appraisal process, the
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`umpire was presented with the appraisers’ competing estimates, and that “[t]he same evidence
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`[as is presented within Plaintiff’s motion] was presented to the appraisal panel (including the
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`umpire) by appraiser Choate and addressed in appraiser Lozos’ rebuttal report.” (Dkt. #60 at p.
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`5; see Dkt. #60, Exhibit 1). After reviewing the evidence presented, the umpire agreed with
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`Lozos’ estimate. The umpire’s decision to use Lozos’ estimate, rather than Choate’s, does not
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`mean that the appraisal award resulted from accident or mistake. See MLCSV10, 866 F. Supp. 2d
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`at 702.
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`It is well-settled that a court will not substitute its judgment for that of the appraisers in
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`the absence of a showing that the award was induced by fraud, accident, mistake, or some
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`circumstance that would render it unjust and unfair to one or both of the interest parties.
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`Providence Wash. Ins. Co. v. Farmers Elevator Co., 141 S.W.2d 1024, 1026 (Tex. App.—
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`Amarillo 1940, no writ). Plaintiff has not presented the Court with evidence that a mistake
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`occurred in the determination of the appraisal award; therefore, the Court finds that Plaintiff’s
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`motion to set aside the appraisal award should be denied.
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`8
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 9 of 15 PageID #: 1291
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`Defendant’s Motion for Summary Judgment (Dkt. #58)
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`State Farm moves for summary judgment on the following claims: (1) breach of
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`contract; (2) bad faith violations; and (3) prompt payment of claims violations (Dkt. #58).
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`Breach of Contract
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`In the present case, State Farm asserts that the Court should grant summary judgment as
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`to Plaintiff’s breach of contract claim because State Farm’s payment of the appraisal award bars
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`Plaintiff from maintaining the claim (Dkt. #58 at p. 6). Plaintiff asserts that the appraisal award
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`should be set aside, as it was made as the result of mistake, and therefore, Plaintiff’s breach of
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`contract claim should remain (Dkt. #59 at pp. 8-9).
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`Under Texas law, insurance policies are construed under the usual principles of contract
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`law. Id. (citing Am. States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir. 1998)). Therefore,
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`“[t]he court’s primary role is to give effect to the written expression of the parties’ intent.” Id.
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`(citing Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998)). “In defining the
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`scope of coverage, the court examines the entire policy to determine the true intent of the
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`parties.” Id. (citing Utica Nat’l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex.
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`2004)). The court must read the policy as a whole and give effect to each of its contractual
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`provisions, so that none are rendered meaningless. Id. (citing Am. Mfrs. Mut. Ins. Co. v.
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`Schaefer, 124 S.W.3d 154, 157 (Tex. 2003)). When a contract is clear and unambiguous, the
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`court enforces it as written. Id. (citing Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus.,
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`Inc., 907 S.W.2d 517, 520 (Tex. 1995)). However if an insurance policy is ambiguous, the court
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`must resolve the ambiguity in favor of the insured. Id. (citing Progressive Cty. Mut. Ins. Co. v.
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`Sink, 107 S.W.3d 547, 551 (Tex. 2003)); see Mid-Continent Cas. Co. v. Swift Energy Co., 206
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`F.3d 487, 491 (5th Cir. 2000) (“In Texas, when an insurance policy is ambiguous or inconsistent,
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`9
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 10 of 15 PageID #: 1292
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`the construction that would afford coverage to the insured must govern.”).
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`“Under Texas law, to prevail on a breach of contract claim, the plaintiff must prove (1)
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`the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3)
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`breach of the contract by the defendant, and (4) damages sustained as a result of the breach.”
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`United Neurology, P.A., 101 F. Supp. 3d at 593 (citing Mullins v. TestAmerica, Inc., 564 F.3d
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`386, 418 (5th Cir. 2009) (citing Aguiar v. Segal, 167 S.W.3d 443, 450 (Tex. App.—Houston
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`[14th Dist.] 2005, pet denied))); Quibodeaux v. Nautilus Ins. Co., No. 1:10-CV-739, 2015 WL
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`1406375, at *4 (E.D. Tex. Mar. 25, 2015). “To recover under an insurance policy, a plaintiff
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`must allege facts showing that the alleged damages are covered by his insurance policy.” United
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`Neurology, P.A., 101 F. Supp. 3d at 593 (citing Emp’rs Cas. Co. v. Block, 744 S.W.2d 940, 944
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`(Tex. 1998), overruled on other grounds by State Farm Fire & Cas. v. Gandy, 925 S.W.2d 696
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`(Tex. 1996); Data Specialties, Inc. v. Transcontinental Ins. Co., 125 F.3d 909 (5th Cir. 1997)
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`(“Texas law clearly states that for an insurance company to be liable for breach of its duty to
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`satisfy a claim presented by its insured, the insured must prove that its claim falls within the
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`insuring agreement of the policy. The insurer’s duty to indemnify, or provide coverage, is
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`triggered by the actual facts establishing liability in the underlying suit.”).
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`However, “[a]n appraisal clause…‘binds the parties to have the extent or amount of the
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`loss determined in a particular way.’” Quibodeaux, 2015 WL 1406375, at *4 (quoting State
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`Farm Lloyds v. Johnson, 290 S.W.3d 886, 895 (Tex. 2009) (quoting In re Allstate Cty. Mut. Ins.
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`Co., 85 S.W.3d 193, 195 (Tex. 2002))). “The effect of an appraisal provision is to estop one
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`party from contesting the issue of damages in a suit on the insurance contract, leaving only the
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`question of liability for the court.” Id. “Though the line between the two is not always clear, the
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`scope of appraisal is limited to questions of damages, not liability.” Id. (citing Johnson, 290
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`10
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 11 of 15 PageID #: 1293
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`S.W.3d at 889-90).
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`“To estop a breach of insurance claim a defendant must show ‘(1) the existence and
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`enforceability of an appraisal award; (2) the timely payment of the award [by the insurer]; and
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`(3) the acceptance of the appraisal award.’” United Neurology, P.A., 101 F. Supp. 3d at 598
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`(quoting Gabriel v. Allstate Tex. Lloyds, No. 7:13-CV-181, 2013 WL 7885700, at *3 (S.D. Tex.
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`Nov. 1, 2013) (citing Blum’s Furniture Co., Inc. v. Certain Underwriters at Lloyds London, 459
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`F. App’x 366, 368 (5th Cir. 2012))); Breshears v. State Farm Lloyds, 155 S.W.3d 340, 344 (Tex.
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`App.—Corpus Christi 2004, pet. denied) (insurer met every requirement of the insurance
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`contract where is participated in the appraisal process and paid the appraisal amount set by the
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`appraisers and umpire; because the insurer “complied with every requirement of the contract, it
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`cannot be found to be in breach.”); see Quibodeaux, 2015 WL 1406375, at *4. “[W]here the
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`parties disagree on the amount of loss and submit to the contractual appraisal process to resolve
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`the dispute, and the insurer pays all covered damages determined by the award, the insured may
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`not then argue that the initial failure to pay those damages equates to a breach of the contract.”
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`Scalise v. Allstate Tex. Lloyds, No. 7:13-CV-178, 2013 WL 6835248, at *5 (S.D. Tex. Dec. 20,
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`2013); see Quibodeaux, 2015 WL 1406375, at *4.
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`“The reason for the estoppel defense is to prevent the insured from taking advantage of
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`the binding appraisal process to determine the value of its claim and then, after the insurer fully
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`pays the appraisal award, suing the insurer for its initial failure to pay.” Quibodeaux, 2015 WL
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`1406375, at *5 (citing Devonshire Real Estate & Asset Mgmt., LP v. Am. Ins. Co., No. 3:12-CV-
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`2199-B, 2014 WL 4796967, at *15 (N.D. Tex. Sept. 26, 2014) (citing Breshears, 155 S.W.3d at
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`343)). “The defense applies with special force when the contract the insured claims is being
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`breached provides for resolution of disputes through appraisal.” Id.
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`11
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 12 of 15 PageID #: 1294
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`Plaintiff’s insurance policy set out the appraisal procedure invoked in the present action
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`(Dkt. #58, Exhibit A). The standard State Farm policy language stated as follows:
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`4. Appraisal. If you and we fail to agree on the amount of loss, either one can
`demand that the amount of the loss be set by appraisal. If either makes a written
`demand for appraisal, each shall select a competent, disinterested appraiser. Each
`shall notify the other of the appraiser’s identity within 20 days of receipt of the
`written demand. The two appraisers shall then select a competent, impartial
`umpire. If the two appraisers are unable to agree upon an umpire within 15 days,
`you or we can ask a judge of a court of record in the state where the residence
`premises is located to select an umpire. The appraisers shall then set the amount
`of the loss. If the appraisers submit a written report of an agreement to us, the
`amount agreed upon shall be the amount of loss. If the appraisers fail to agree
`within a reasonable time, they shall submit their differences to the umpire.
`Written agreement signed by any two of these shall set the amount of the loss.
`Each appraiser shall be paid by the party selecting that appraiser. Other expenses
`of the appraisal and the compensation of the umpire shall be paid equally by you
`and us.
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`(Dkt. #58, Exhibit A at p. 13). The Court has already found that the appraisal award is valid, and
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`should be not set aside. The clause is not ambiguous, and neither party argues otherwise. The
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`independent umpire, Judge Scholer and State Farm’s appraiser, Lozos, satisfied the requirements
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`of the policy’s appraisal process by signing the appraisal award, even though Plaintiff’s
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`appraiser, Choate, refused to sign (Dkt. #58, Exhibit B4). The Court has rejected Plaintiff’s
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`argument, in his motion to set aside the appraisal award (Dkt. #57), that the appraisal award was
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`determined as the result of mistake.
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`
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`Additionally, there is evidence that State Farm paid the appraisal award to Plaintiff (Dkt.
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`#58, Exhibit B5; Dkt. #59, Exhibit 5). Plaintiff does not contend that the appraisal award has not
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`been accepted. However, “[a] number of court have addressed the issue of the insured’s
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`rejection of a timely and full payment of the appraisal award amount by the insurer under Texas
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`law and determined that if the appraisal award has been reached in accordance with the terms of
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`the insurance policy and the insurer has timely tendered the full amount awarded by the
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`12
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 13 of 15 PageID #: 1295
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`appraisers, that conduct is legally sufficient to entitle the insurer to summary judgment on the
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`breach-of-contract claim against it.” United Neurology, P.A., 101 F. Supp. 3d at 619; see, e.g.,
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`Providence Lloyds Ins. Co., 877 S.W.2d at 875-76 (holding that the appraisal award was made in
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`substantial compliance with the terms of the contract, was not made without authority, and was
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`not the result of fraud, accident or mistake, and is therefore binding, and that appellee should
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`take nothing on its breach of contract claim); Toonen v. United Servs. Auto. Ass’n, 935 S.W.2d
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`937, 940 (Tex. App.—San Antonio 1996, no writ) (holding that the insurer was entitled to
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`summary judgment on the insured’s breach of contract claim because it had paid the appraisal
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`award pursuant to the contract); Caso v. Allstate Tex. Lloyds, Civ. A. No. 7:12-CV-748, 2014
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`WL 528192, at *5 (S.D. Tex. Feb. 7, 2014) (“[T]he award remains both binding and enforceable
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`until it is set aside, not withstanding Plaintiffs’ rejection of Allstate’s tender, an apparently-
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`baseless rejection for which Plaintiffs have not offered an explanation.”); Devonshire, 2014 WL
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`4796967, at *18 (“[S]o long as there is a binding and enforceable appraisal award and the insurer
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`timely and full[ly] pays the resulting award, estoppel should apply regardless of whether the
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`insured actually accepts payment.”). Therefore, the Court finds that the other two elements have
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`been proven by State Farm, and Plaintiff is estopped from bringing its breach of contract claim. 3
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`Therefore, the Court finds that Defendant’s motion for summary judgment should be granted.
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`Extra-Contractual Claims
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`3 In his response, Plaintiff asserts that the breach of contract claim should remain because “State Farm and the
`Plaintiff disagree as to State Farm’s liability under [the Loss Settlement clause of the Policy].” (Dkt. #59 at p. 8).
`Additionally, Plaintiff contends that “there is a question of policy coverage that cannot be determined by the
`appraisers or the umpire[].” (Dkt. #59 at p. 8). Plaintiff asserts that Quibodeaux is not applicable because “the court
`found that the Plaintiff[s] had not raised a genuine issue of material fact because they had not presented a claim to
`the insurance company for contents that were left out of the appraisal award. (Dkt. #59 at p. 9). The Court finds
`that Quibodeaux is applicable. In the present case, State Farm covered hail damage to the roof, gutters, siding,
`windows, and skylight. The only claim that went through the appraisal process was Plaintiff’s claim for damages to
`the solarium, and State Farm has subsequently paid the appraisal award (Dkt. #59, Exhibit 5). Therefore, the Court
`finds that Plaintiff is estopped from bringing its breach of contract claims.
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`13
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 14 of 15 PageID #: 1296
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`State Farm also asserts that the Court should grant summary judgment as to Plaintiffs’
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`extra-contractual claims (See Dkt. #58).
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`“Under Texas law, timely payment of an appraisal award under the policy precludes an
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`award of statutory penalties under the Texas Insurance Code §§ 541 and 542 as a matter of law.”
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`United Neurology, P.A., 101 F. Supp. 3d at 598 (citing Breshears, 155 S.W.3d at 344; Amine v.
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`Liberty Lloyds of Tex., Inc., 2007 WL 2264477, at *4-6 (Tex. App.—Houston [1st. Dist.] Aug. 9,
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`2007, no pet.); Blum’s Furniture Co. v. Certain Underwriters at Lloyds London, No. Civ. A. H-
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`09-3479, 2011 WL 819491, at *3 (S.D. Tex. Mar. 2, 2011), aff’d, 459 F. App’x 366 (5th Cir.
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`2012); Waterhill Cos. Ltd. v. Great Am. Assurance Co., Civ. A. No. 05-4080, 2006 WL 696577,
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`at *2 (S.D. Tex. Mar. 16, 2006) (once appraisal is invoked, a delay in payment pursuant to the
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`appraisal process does not constitute a violation of the Texas Insurance Code); see also Church
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`on the Rock N. v. Church Mut. Ins. Co., No. 3:10-CV-0975-L, 2013 WL 497879, at *6 (N.D.
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`Tex. Feb. 11, 2013); Scalise, 2013 WL 6835248, at *5. As the Deceptive Trade Practices Act
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`(“DTPA”) claims are analyzed under the same standard, the Court finds that those claims are
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`estopped, as well. See Scalise, 2013 6835248, at *8. Because Plaintiff’s breach of contract
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`claim fails, its extra-contractual claims for bad faith violations under the DTPA and the Texas
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`Insurance Code also fail.
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`Furthermore, no genuine issue of material facts exists on Plaintiff’s prompt payment of
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`claims violation under Chapter 542, as the evidence show that the appraisal provision of the
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`insurance policy was invoked, and State Farm timely paid the appraisal award (Dkt. #58, Exhibit
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`B5; Dkt. #58, Exhibit C; Dkt. #59, Exhibit 5). Quibodeaux, 2015 WL 1406375, at *9; see
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`Medistar Twelve Oaks Partners, Ltd. v. Am. Economy Ins. Co., No. H. 09-3828, 2011 WL
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`3236991, at *9 (S.D. Tex. July 27, 2011) (citing Breshears, 155 S.W.3d at 344-45). “Texas
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`14
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`Case 4:13-cv-00413-ALM Document 63 Filed 07/29/16 Page 15 of 15 PageID #: 1297
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`courts considering the [prompt payment] issue have concluded that full and timely payment of an
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`appraisal award under the policy precludes an award of penalties under the [Texas] Insurance
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`Code’s prompt payment provisions as a matter of law.” In re Slavonic Mut. Fire Ins. Ass’n, 308
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`S.W.3d 556, 563 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding); see Amine, 2007
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`WL 2264477, at *4 (Tex. App.—Houston [1st Dist.] Aug. 9, 2007, no pet.) (mem. op.);
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`DeLaGarza v. State Farm Mut. Auto. Ins. Co., 175 S.W.3d 29, 32-33 (Tex. App.—Dallas 2005,
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`pet. denied); Breshears, 155 S.W.3d at 344-45. Therefore, Defendant’s motion for summary
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`judgment is granted.
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`CONCLUSION
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`
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`It is therefore ORDERED