Duty To Co-operate With Insurance Investigation Of Claim

Dallas insurance attorneys need to know about this recent Federal Court case. The style of the case is Mario Santacruz v. Allstate Texas Lloyds, Inc.
Mario, “Plaintiff” claimed that he reported the damage to Allstate “Defendant”, but Defendant could not inspect the home at that time. Based on a contractor’s recommendation, Plaintiff had the roof repaired to prevent further damage. Defendant then denied coverage for the claim. Plaintiff raises causes of action against Defendant for (1) breach of the common law duty of good faith and fair dealing; (2) violations of the Texas Deceptive Trade Practices Act (“DTPA“); (3) violation of Texas Insurance Code bad faith sections 541.060(a)(2)(A) and (a)(7); and (4) intentional infliction of emotional distress.
Defendant states that immediately after the storm that is alleged to have damaged Plaintiff’s roof, a tarp was placed on the roof to prevent further water intrusion. Plaintiff did not know whether the shingles were blown off by the wind. The next morning, Plaintiff reported the damage to Defendant and spoke to employee Almirna Martinez. Plaintiff told Martinez about the storm and about the roof being tarped and stated that he had workers at the house ready to fix the roof. Because the workers were already on site, Plaintiff requested that Defendant send someone to his home to examine the roof. Martinez informed Plaintiff that Defendant could send an adjuster to his home in a couple of days. Nevertheless, Plaintiff had the entire roof replaced that day. Thus, when Defendant’s adjuster arrived at Plaintiff’s home two days later to inspect the roof, it had already been replaced. Defendant claims that due to its inability to investigate the loss, it did not indemnify Plaintiff’s claim.
Defendant contends that Plaintiff’s homeowners policy required him to provide Defendant with access to the damaged property as often as Defendant required. Defendant asserts that Plaintiff’s replacement of the roof before Defendant could inspect the damage deprived it of access to the property and the opportunity to investigate the loss and also constituted a violation of the policy’s provisions. Further, Defendant argues that Plaintiff cannot prove that Defendant acted in bad faith in denying his insurance claim because he cannot show either (1) that the damage to his roof was covered under the policy; or (2) the amount of his damages since he replaced the roof before Defendant could conduct its investigation.
Plaintiff responds that he provided Defendant with immediate access to the damaged property, but Defendant delayed in scheduling a meeting. Plaintiff points out that Paragraph 3 of the insurance policy required him to protect the property from further damage and make reasonable and necessary repairs, which he did. Plaintiff has submitted an affidavit from his roofer, Jose Pedraza, stating that wind blew the shingles off the roof of Plaintiff’s home in three areas, and a new roof had to be put on the home right away because another storm was approaching and tarping or patching the existing roof would not have protected the home from further damage. Pedraza also avers that the damage to the inside of Plaintiff’s home was caused by rain entering the home through the holes in the roof. Plaintiff argues that he has proved that he suffered a covered loss under his homeowners policy as evidenced by Pedraza’s sworn testimony that (1) the wind blew shingles off the house, and (2) rain entered through the roof in several different areas where the shingles had been blown off.
Moreover, Plaintiff contends that he has adequately proved his damages in that (1) he testified that prior to this storm, water had never leaked through the roof, (2) Pedraza described the damage and why the roof had to be replaced, (3) Plaintiff described what the roof cost and stated that he paid the bill, (4) Plaintiff explained which areas of his house were damaged, (5) Plaintiff provided an estimate of what it will cost to fix the damaged interior of his house and replace the damaged personal property, and (6) Plaintiff testified that he moved out of his house on the day of the storm, has not moved back, and is paying $750 a month to live with his brother as well as paying his mortgage.
In reply, Defendant maintains that it had a reasonable basis to deny payment of Plaintiff’s claim because, through the acts of Plaintiff (1) Defendant could not investigate the claim to assess whether it fell within the coverage afforded under the policy, and (2) Plaintiff has not properly established his right to coverage by showing both that the loss was caused by a covered incident and the extent of his damages. Defendant insists that, at a minimum, there is a bona fide dispute as to coverage for Plaintiff’s claim, which precludes liability for a bad faith cause of action. Further, Defendant asserts that Pedraza’s testimony establishes only that roof shingles were missing, not that the claim is covered, and Pedraza is not qualified as an expert to testify as to causation, i.e. that the roof was damaged by “the direct force of wind making an opening in the roof allowing rain to enter.” Moreover, Defendant argues that Plaintiff failed to demonstrate an issue of fact as to damages because he did not present expert testimony on that point.
Plaintiff’s homeowners policy included the following condition of coverage:
3. Duties After Loss a. Your Duties After Loss. In case of loss to covered property caused by a Peril Insured Against, you must:
** * (5) as often as we reasonably require: (a) provide us access to the damaged property.
The gist of Defendant’s argument is that Plaintiff violated this condition by repairing his roof before Defendant could conduct its investigation into the loss, thereby denying Defendant “access to the damaged property.” The question is thus whether Defendant acted reasonably in denying Plaintiff’s claim for that reason or any other reason Defendant presents.
As an initial matter, Plaintiff’s alleged violation of the policy’s requirement that he allow Defendant access to the property was not a sufficient reason to deny coverage. This is per Insurance Code, Section 862.054.
The Court will next address whether Defendant’s duty to cover Plaintiff’s claim was reasonably clear at the time of Defendant’s conduct. Generally, a claim for bad faith will not lie when an insurer denies a claim that is, in fact, not covered. Plaintiff’s homeowners policy covered damage caused by rain if the “direct force of wind or hail makes an opening in the roof . . . and the rain . . . enters through this opening and causes the damage.”
Plaintiff testified that he was not home when the storm damaged his home, and although he averred that his wife was home when water began coming into the home, no deposition testimony from her was entered into the record.
As Defendant points out, there is insufficient evidence demonstrating that wind blew the shingles off the roof, as opposed to some other cause of the shingles coming off the roof such as wear and tear or the weight of the rain. As such, Plaintiff has not presented competent evidence that would create a factual issue as to whether the damage to his home was covered under his homeowners policy. He thus has not shown that Defendant had a duty to cover his claim that was reasonably clear at the time of Defendant’s conduct. Moreover, Defendant had a reasonable basis for denying payment of the claim when it did because, by the time an adjuster went to Plaintiff’s house, it was not possible to investigate the cause of the damage to the old roof due to Plaintiff’s actions in putting a new roof on the house.
Thus, the Court ruled that Plaintiff has not carried his burden of proving the absence of a reasonable basis to deny his claim.