Charles and Cecelia Wall v. State Farm Lloyds , 573 S.W.3d 281 ( 2018 )

Opinion issued December 31, 2018
In The
Court of Appeals
For The
First District of Texas
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NO. 01-17-00681-CV
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CHARLES WALL AND CECELIA WALL, Appellants
V.
STATE FARM LLOYDS, Appellee
On Appeal from the 269th District Court
Harris County, Texas
Trial Court Case No. 2014-20688
OPINION
Charles Wall and Cecilia Wall sued State Farm Lloyds for breach of contract
and insurance code violations, among other things. The jury found no breach of
contract but awarded the Walls damages for their insurance code claim. The trial
court rendered a take-nothing judgment. In three issues on appeal, the Walls argue
that (1) the trial court erred by denying their motion for judgment notwithstanding
the verdict on the jury’s response to the breach-of-contract liability question, (2) they
were entitled to judgment on their insurance-code violations claim, and (3), in the
alternative, they are entitled to a new trial.
We affirm.
Background
The Walls lived in Tomball, Texas in 2013. Their property was insured by
State Farm. On April 27, 2013, a hailstorm struck the area. The Walls filed a claim,
asserting damage to their roof. State Farm denied the claim. The Walls hired an
appraiser and initiated an appraisal process under the terms of the insurance policy.
They later terminated the process.
In December 2013, State Farm sent a second appraiser to the home. This
appraiser found hail damage and recommended repairing the entire roof. State Farm
estimated that the cost of replacement minus depreciation and the Walls’ deductible
resulted in $6,878.87 owed under the policy. It issued a check in that amount to the
Walls. It also later issued a check for $851.47, which State Farm determined was
owed as a penalty based on its determination that it had violated “subchapter B of
Chapter 542 of the Texas Insurance Code.”
The Walls sent State Farm a demand letter, claiming they were owed
$65,994.95 more in damages, including attorneys’ fees. In their demand, the Walls
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asserted damage to their fence and garage door in addition to the roof. After a third
inspection, State Farm denied that any additional money was owed.
The Walls filed suit. The case was tried to a jury. Question Number 6 asked
the jury, “Did State Farm fail to comply with the Policy?” The question also
included this instruction: “State Farm failed to comply with the Policy if it failed to
pay for the damages that resulted from physical loss to the dwelling on the Property
caused by wind or hail damage.” The jury answered, “No.”
Question Number 9 asked the jury, “Did State Farm engage in any unfair or
deceptive act or practice that caused damages to Charles and Ceclia Wall?” The
question defined “unfair or deceptive act or practice” based on six of the grounds
identified in the Texas Insurance Code.1 The jury answered, “Yes.”
Question Number 10 was contingent on the jury answering “yes” to Question
Number 9. It asked, “What sum of money, if any, if paid now in cash, would fairly
and reasonably compensate Charles and Cecelia Wall for their damages, if any, that
were caused by such unfair or deceptive act or practice?” The question also included
this instruction: “Do not include in your answer any amount that Charles and Cecelia
Wall could have avoided by the exercise of reasonable care.” The question gave the
jury one category of damages: “The actual cash value at the time of the loss of the
damaged part of the Property.” The jury answered, “$14,500.”
1
See TEX. INS. CODE § 541.060(a)(1), (a)(2)(A), (a)(3), (a)(4)(A), (a)(4)(B), (a)(7).
3
After trial, the parties filed motions related to the verdict. The Walls filed a
motion asking the trial court to disregard the jury’s answer to Question Number 6,
the breach of contract question. State Farm filed a motion asking for a judgment on
the verdict. State Farm argued that the jury’s answer to Question Number 6
prevented any recovery. The trial court abated the case pending an opinion from the
Supreme Court of Texas. After the opinion issued,2 the trial court reinstated the case
and rendered a take-nothing judgment against the Walls.
Standard of Review
We review a challenge to a trial court’s ruling on a motion for JNOV under a
legal-sufficiency standard. City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex.
2005). To successfully challenge the legal sufficiency of an adverse finding on
which it bore the burden of proof, a party must show that the evidence conclusively
proves all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d
237, 241 (Tex. 2001); Pham v. Harris Cty. Rentals, L.L.C., 455 S.W.3d 702, 709
(Tex. App.—Houston [1st Dist.] 2014, no pet.).
In contrast, a no-evidence challenge “‘will be sustained when (a) there is a
complete absence of evidence of a vital fact, (b) the court is barred by rules of law
or of evidence from giving weight to the only evidence offered to prove a vital fact,
2
See USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018). The opinion
issued originally in April 2017. Since then, the court has issued an opinion on
rehearing. See id. at 484.
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(c) the evidence offered to prove a vital fact is no more than a mere scintilla, or (d)
the evidence conclusively establishes the opposite of the vital fact.’” King Ranch,
Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms.,
Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)).
In our legal-sufficiency review, “we must view the evidence in a light that
tends to support the finding of disputed fact and disregard all evidence and inferences
to the contrary.” Wal–Mart Stores, Inc. v. Miller, 102 S.W.3d 706, 709 (Tex. 2003).
With that evidence, we review “whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review. . . . [L]egal-
sufficiency review in the proper light must credit favorable evidence if reasonable
jurors could, and disregard contrary evidence unless reasonable jurors could not.”
City of Keller, 168 S.W.3d at 827.
Breach of Contract
In their first issue, the Walls argue that the trial court erred by denying their
motion for judgment notwithstanding the verdict on the jury’s response to Question
Number 6, the breach-of-contract liability question.
The Walls argue they established as a matter of law that the jury’s answer to
Question Number 6 should have been yes. Question Number 6 asked the jury, “Did
State Farm fail to comply with the Policy?” The question also included this
instruction: “State Farm failed to comply with the Policy if it failed to pay for the
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damages that resulted from physical loss to the dwelling on the Property caused by
wind or hail damage.” The jury answered, “No.”
The Walls argue that they proved their claim because the evidence shows that,
while State Farm paid on the policy, they paid late. They argue that “a subsequent,
late payment does not cure State’s Farm’s breach.” The question, however, defined
a failure to comply with the policy as “fail[ure] to pay for the damages.” By the
Walls’ own admission, State Farm did this. Even if untimely payment would
otherwise constitute a failure to comply with the policy, this was not included in the
definition for the jury.
When there is no objection to a question or instruction, we review the evidence
to support the question or instruction as written. Akin, Gump, Strauss, Hauer &
Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 112 (Tex. 2009). The
Walls did not object to the definition of failure to comply with the policy.
Accordingly, late payment does not establish failure to comply with the policy.
We overrule the Walls’ first issue.
Insurance Code Violations
In their second issue, the Walls argue they were entitled to a judgment on their
insurance-code violations claim. Both parties agree the outcome of this issue is
controlled by USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018).
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In Menchaca, the homeowner suffered damage from Hurricane Ike in
Galveston, Texas. Id. at 485. USAA determined that the damage did not exceed the
deductible and did not pay any benefits as a result. Id. The homeowner sued,
alleging breach of contract and insurance code violations. Id. The jury found no
breach of contract but did find insurance code violations. Id. at 485–86.
For the insurance code violations, the liability question “asked whether USAA
engaged in various unfair or deceptive practices, including whether USAA refused
‘to pay a claim without conducting a reasonable investigation with respect to’ that
claim.” Id. at 486. The damages question tasked the jury with determining “the
amount of Menchaca’s damages that resulted from either USAA’s failure to comply
with the policy or its statutory violations, calculated as ‘the difference, if any,
between the amount USAA should have paid Gail Menchaca for her Hurricane Ike
damages and the amount that was actually paid.’” Id. The trial court disregarded
the jury’s answer to the breach-of-contract question and awarded damages to the
homeowner under the insurance-code-violations claim. Id.
The main issue on appeal was “whether an insured can recover policy benefits
as ‘actual damages’ caused by an insurer’s statutory violation absent a finding that
the insured had a contractual right to the benefits under the insurance policy.” Id. at
489. The court held that, in most cases, the answer is no. Id. The court also held
that this did not necessarily mean that a jury must find breach of the policy before it
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can find statutory violations. Id. at 494. “Thus, although we have referred to both
‘breach’ and ‘coverage,’ what matters for purposes of causation under the statute is
whether the insured was entitled to receive benefits under the policy.” Id. Thus,
“the general rule [is] that an insured cannot recover policy benefits as actual damages
for an insurer’s statutory violation if the insured has no right to those benefits under
the policy.” Id. at 495.
To recover policy benefits as actual damages for a statutory violation, the
insurer’s violation under the statute must have caused the loss of the benefits. Id.
“Because the Insurance Code provides that the statutory remedies are cumulative of
other remedies, we concluded that the insureds could elect to recover the benefits
under the statute even though they also could have asserted a breach-of-contract
claim.” Id. To recover policy benefits from an insurance-code violation claim, then,
the fact finder “must find that the violation caused the insured to lose benefits she
was otherwise entitled to receive under the policy.” Id. at 503.
An exception to the general rule is that an insured can recover policy benefits
that the insured is not entitled to under the policy if the insurer’s conduct caused the
insured to lose the rights to those benefits. Id. at 497. This can arise either when the
insurer misrepresents the policy or when it commits a violation that causes an
“insured to lose a contractual right to benefits that it otherwise would have had.” Id.
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In contrast to these rules, “if an insurer’s statutory violation causes an injury
independent of the insured’s right to recover policy benefits, the insured may recover
damages for that injury even if the policy does not entitle the insured to receive
benefits.” Id. at 499. The damages must be truly independent, however. Id. at 499–
500. This rule “does not apply if the insured’s statutory or extra-contractual claims
‘are predicated on [the loss] being covered under the insurance policy’ or if the
damages ‘flow’ or ‘stem’ from the denial of the claim for policy.” Id. at 500 (quoting
Progressive Cty. Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 920 (Tex. 2005); Provident
Am. Ins. Co. v. Castañeda, 988 S.W.2d 189, 198 (Tex. 1998)). It is worth noting
that the possibility of an insurer causing independent injury is so rare that it has not
yet been found in Texas case law. Id.Based on these rules, the court rejected the insurer’s argument that the answer
to the breach of contract liability question defeated the homeowner’s right to recover
under her insurance-code violations claim. Id. at 504. The court held, however, that
the trial court erred by disregarding the jury’s answer to the liability question on the
breach-of-contract claim. Id. The court further held that the jury’s answer to the
liability question on the breach-of-contract claim created an irreconcilable and fatal
conflict with the answers to the insurance-code violations claim. Id. A plurality
held that a judgment based on a fatal conflict does not constitute fundamental error
and that the error was not preserved. Id. at 504–05.
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Based on Menchaca, we hold that the jury’s answer to Question Number 6,
the breach-of-contract liability question, does not, by itself, defeat the Walls’
insurance-code violations claim. See id. at 504. We further hold, however, that the
jury’s answers to the questions for the insurance-code violations claim do not
support a judgment for the Walls on the claim.
As we have recognized, Menchaca holds that, to recover policy benefits from
an insurance-code violation claim, the fact finder “must find that the violation caused
the insured to lose benefits she was otherwise entitled to receive under the policy.”
Id. at 503. The court held that the jury’s answers to the questions for the insurance-
code violations claims satisfied this requirement. See id. at 506. The liability
question asked if the insurer engaged in certain acts that would constitute statutory
violations. Id. at 485–86, 506. The other question “was a causation-and-damages
question.” Id. at 506. It asked the jury to find the amount of damages but limited
the damages to those the homeowner should have received under the policy. Id.
Here, the damages question does not also incorporate a causation
determination. It asked, “What sum of money, if any, if paid now in cash, would
fairly and reasonably compensate Charles and Cecelia Wall for their damages, if
any, that were caused by such unfair or deceptive act or practice?” The only
instruction provided, “Do not included in your answer any amount that Charles and
Cecelia Wall could have avoided by the exercise of reasonable care.” The question
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gave the jury one category of damages: “The actual cash value at the time of the loss
of the damaged part of the Property.” Nothing in the question limited the damages
to those that would be available under the policy. Accordingly, the jury was never
called on to determine if the damages it awarded was available under the policy. See
id. at 503 (holding fact finder must find that violation caused insured to lose benefits
she was otherwise entitled to receive under policy).
This distinction is critical. In Menchaca, the homeowner “obtained two
conflicting findings.” Id. at 507. First, under the breach-of-contract liability
question, the jury determined that the homeowner did not have the right to receive
policy benefits. Id. Second, under the insurance code violations causation-and-
damages question, the jury determined that the homeowner “did have the right to
policy benefits.” Id. “If [the latter question] did not contain that finding, the[n] no
conflict would exist.” Id. at (emphasis added).
Here, while the Walls did not argue that they had suffered damages
independent of the policy, they did assert damages to the fence and garage that State
Farm argued was not recoverable under the policy because any damages constituted
normal wear and tear. The jury’s answers to the questions in the charge, then, can
be reconciled: the damages awarded under the insurance code violations claim were
damages that were not available under the policy. See Anderson v. Durant, 550
S.W.3d 605, 616 (Tex. 2018) (holding courts must uphold jury verdict if any
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reasonable version of the evidence supports it by reconciling apparent conflicts in
jury’s findings if reasonably possible considering pleadings and evidence, manner
of submission, and other findings considered as a whole).
The Walls did not argue that State Farm’s insurance code violations caused
them to lose the benefits under the policy, and the jury did not make any relevant
determination to that end. Accordingly, the Walls cannot recover the damages
awarded by the jury under the insurance-code violations claim. See Menchaca, 545
S.W.3d at 494 (holding general rule is that insured cannot recover policy benefits as
actual damages for insurer’s statutory violation if insured has no right to those
benefits under policy).
We overrule the Walls’ second issue.
Remand
In their third issue, the Walls argue that, if we do not render a judgment in
their favor, we should remand the case for a new trial in the interest of justice so that
the parties can try the case with the benefit of Menchaca. In Menchaca, a plurality
of the Supreme Court of Texas, while not finding error in the trial court’s judgment,
remanded for a new trial in the interest of justice “in light of the parties’ obvious and
understandable confusion over our relevant precedent and the effect of that
confusion on their arguments in this case.” Id. at 521. It did so under authority of
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rule 60.3 of the Texas Rules of Appellate Procedure. Id. (citing TEX. R. APP. P.
60.3).
Rule 60.3 provides, “When reversing the court of appeals’ judgment, the
Supreme Court may, in the interest of justice, remand the case to the trial court even
if a rendition of judgment is otherwise appropriate.” TEX. R. APP. P. 60.3. The
corollary rule for intermediate appellate courts provides, “When reversing a trial
court’s judgment, the court must render the judgment that the trial court should have
rendered, except when: (a) a remand is necessary for further proceedings; or (b) the
interests of justice require a remand for another trial.” TEX. R. APP. P. 43.3.
Based on this rule, intermediate courts of appeals are only authorized to
remand for a new trial in the interest of justice when we have first found error
warranting reversal in the trial court’s judgment. Id.; see also Chrismon v. Brown,
246 S.W.3d 102, 116 (Tex. App.—Houston [14th Dist.] 2007, no pet.) (holding,
while Supreme Court of Texas has authority to reverse and remand errorless
judgment in interest of justice, intermediate courts of appeals can only remand
judgment in interest of justice when reversible error has been found).
We have not found any reversible error in the trial court’s judgment.
Accordingly, we lack the authority to remand in the interest of justice. See TEX. R.
APP. P. 43.3.
We overrule the Walls’ third issue.
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Conclusion
We affirm the judgment of the trial court.
Laura Carter Higley
Justice
Panel consists of Justices Jennings, Higley, and Massengale.
Justice Massengale, concurring in the judgment.
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