Misrepresentation Clarified, A Little

Insured people in Weatherford, Fort Worth, Grand Prairie, Mineral Wells, Springtown, Azle, Aledo, and other places in Tarrant and Parker Counties might understand a little more about misrepresentation after reading about the case here.
The case is styled, Tellez v. Encompass Insurance Company of America.
This opinion was issued by the United States Federal District Court, Eastern District, in 2004. Here are some of the facts.
On December 25, 2000, an ice storm damaged Scott and Johnece Tellezs’ home. On December 28, 2000, they filed a claim for damage to a chain link fence, boat, and vehicle due to damage from fallen trees. Additionally, the Tellezs filed a claim for food spoilage and water damage due to leakage from a water pipe. At the time of the loss, the Tellezs’ home was insured by Encompass under a policy period of July 16, 2000 to July 16, 2001. Encompass paid these initial claims.
On June 17, 2002, the Tellezs filed a new claim alleging that they had discovered mold damage to their home due to the December 2000 ice storm. Encompass initially denied the claim based on the Tellezs late notice and the mold and surface water exclusions in the policy. Encompass also disputed whether the mold was caused by the 2000 ice storm. Subsequent to Encompass’ denial of the claim, the Tellezs brought suit alleging violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. In an amended complaint, the Tellezs alleged six other counts of violations under the Texas Insurance Code. Encompass filed a motion for summary judgment and the court granted the motion.
The court held that the Tellezs misrepresentation causes of action failed because they were unable to identify any action that would constitute misrepresentation. Their contention was that Encompass’s misrepresentation was hiring a second expert after Encompass’ first expert agreed with the Tellezs’ that damming had caused the mold damage. Encompass pointed out that the Tellezs were unable to identify any misrepresentation and their only complaint was that the claim was not paid. The court granted summary judgment on the misrepresentation claims holding that mere nonperformance of a contract is not actionable under the Texas Deceptive Trade Practices Act. Further, misrepresentation of the terms of a contract itself does not create a claim under the DTPA. In order to have a claim under the DTPA, the misrepresentation must be material.
The court granted the remainder of Encompass’ motion for summary judgment on the basis that the Tellezs did not make their claim for mold damage until more than a year and a half had elapsed since the storm. The policy issued by Encompass required prompt notice. Tellezs contended that the claim was prompt because the mold damage did not manifest until then and thus it would have been impossible to file a claim before this date. Encompass countered this argument by noting that even if this allegation were true, then the claim arose after the period of coverage had expired thus warranting summary judgment under either of the Tellezs theories.
The court held that the injury occurs at the time of manifestation. The court looked to the Fifth Circuit’s opinion in American Home Assurance Company v. Unitramp Ltd., a 1998 case, in which the Fifth Circuit held that the time of occurrence is when the damage occurs, not when a wrongful act is committed. The court noted that while the Texas Supreme Court has never ruled on this issue there were two Texas Courts of Appeals cases holding the same as American Home and that the Fifth Circuit has specifically relied on one of those cases.
As a result of the holding that the injury occurs at the time of manifestation, the court held that the Tellezs injury manifested outside of the policy period and granted Encompass’ motion for summary judgment. The court also held that the failure of the breach of contract claims necessitated the same ruling on the other extra-contractual claims brought by the Tellezs.