Insurance And Unjust Enrichment

Do you own the property that is insured?  That is a question that matters in an insurance claim.  This is illustrated in a Southern District, Houston Division opinion issued in late 2016.  The opinion is styled, Cynthia Banion V. Geovera Specialty Insurance Company and Rick Calvert.

Cynthia sued Geovera to recover policy proceeds for damage to the insured property on a homeowners policy.  Geovera counterclaimed, alleging that it had paid  Cynthia over $57,000 for the property damage and then discovered that Cynthia never owned the property despite her representation to the contrary on the policy application.

The court dismissed Cynthia’s claim and Geovera filed a motion for summary judgment on its unjust enrichment claim and sought attorney fees and court costs.

The evidence shows that Cynthia applied for a residential property insurance on a policy form from Geovera in March 2015, covering a house in Sugar Land, Texas.  The application is styled a “Homeowner Application.”  The application, which she signed under the declaration that the information was “true and complete,” stated that the residence was occupied by “Owner Only.”  The Application also stated that the applicant’s signature was intended to induce Geovera to issue the policy.

The policy was issued.  The evidence showed Cynthia misrepresented that she owned the house and no mortgages were on it.

Cynthia made a claim for water damage under the policy and was paid the over $57,000 in preliminary payments while the claim was being investigated.  Geovera asked for documents showing Cynthia’s ownership interest and she sent a document titled “Contract for Sale of Personal Property” between herself and Reliable Resource, Inc., and a promissory note she owed to Reliable.  The document required a down payment of $15,000 and stated the property was free and clear of liens and stated that the contract was for a deed.  The seller would retain the deed to the property until the promissory note was paid.

The County property records show Reliable Resources Emergency Response Team, Inc., not Cynthia or Reliable Resource, Inc. as the owner.  Documents also show the property had been foreclosed upon.

In a deposition given by Cynthia, she gave several ambiguous and inconsistent answers about her ownership of the property.  These statements indicated she did not actually own the property.  Geovera cancelled the policy and returned the payments she had made on the policy.

After the cancellation, was when Cynthia filed this lawsuit and Geovera counterclaimed.

Texas courts recognize unjust enrichment as an independent cause of action.  Unjust enrichment is an implied-contract basis for requiring restitution when it would be unjust to retain benefits received.  Unjust enrichment allows recovery when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.  Unjust enrichment includes a transfer to the defendant by the plaintiff, resulting in a material gain to the defendant and material loss by the plaintiff.  A plaintiff may also recover under the equitable doctrine if a contemplated agreement is unenforceable, impossible, not fully performed, thwarted by mutual mistake, or void for other legal reasons.

Section 541.153 of the Texas Insurance Code provides for fee-shifting “if the court finds that an action under this subchapter is groundless and brought in bad faith or brought for the purpose of harassment.”  The term “groundless” in section 17.50 of the DTPA has the same meaning as “groundless” under Rule 13 of the Texas Rules of Civil Procedure.  An action is “groundless” if it has no basis in law or fact, and is not warranted by any good faith argument for extension, modification, or reversal of existing law.  Determining whether an action is groundless requires a court to consider whether the totality of the tendered evidence demonstrates an arguable basis in fact and law for the plaintiff’s claim.   A suit is brought in bad faith if it is motivated by malicious or discriminatory purpose.

In this case, the court ruled that the $57,000 should be returned and allowed judgment for it but refused to award attorney fees and costs.