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Ortiz v. State Farm Lloyds

Supreme Court of Texas

February 20, 2019, Argued; June 28, 2019, Opinion Delivered

No. 17-1048

Opinion

 [*129]  We are asked in this case to determine the effect of an insurer's payment of an appraisal award on an insured's claims for breach of contract, bad faith insurance practices, and violations of the Texas Prompt Payment of Claims Act. We hold that the insurer's payment of the award bars the insured's breach of contract claim premised on failure to pay the amount of the covered loss. We further hold that the payment bars the insured's common law and statutory bad faith claims to the extent the only actual damages sought are lost policy benefits. Finally, in accordance with our contemporaneously issued opinion [**5]  in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806, 2019 Tex. LEXIS 687 (Tex. 2019), we hold that the insured may proceed on his claim under the Prompt Payment Act. Accordingly, we affirm the court of appeals' judgment in part and reverse it in part.

I. Background

Oscar Ortiz had a homeowners insurance policy with State Farm Lloyds and submitted a policy claim to State Farm for wind and hail damage to his home. State Farm sent an adjuster to inspect the property, and the adjuster estimated the amount of the damage caused by wind or hail to be $732.53, which was below the policy's $1,000 deductible. The adjuster "observed additional damage [that he concluded was] not caused by hail" and thus was not covered by the policy. In response to State Farm's request that Ortiz forward any estimates "related to this loss that exceed your deductible," Ortiz sent State Farm an estimate he received from a public adjuster valuing the loss at $23,525.99. State Farm conducted a second inspection with the public adjuster present and revised the damage estimate to $973.94, again concluding the damage amount did not exceed the deductible.

Approximately six weeks after being notified of the results of the second inspection,1 Ortiz sued State Farm for breach of contract, violations of [**6]  the Prompt Payment Act,2 and statutory and common law bad  [*130]  faith insurance practices.3 State Farm answered and, approximately two months later, demanded an appraisal pursuant to the parties' insurance policy, which provides in pertinent part:

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589 S.W.3d 127 *; 2019 Tex. LEXIS 678 **; 2019 WL 2710032

OSCAR ORTIZ, PETITIONER, v. STATE FARM LLOYDS, RESPONDENT

Subsequent History: Rehearing denied by Ortiz v. State Farm Lloyds, 2019 Tex. LEXIS 1252 (Tex., Dec. 13, 2019)

Prior History:  [**1] ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS.

Ortiz v. State Farm Lloyds, 568 S.W.3d 156, 2017 Tex. App. LEXIS 10395 (Tex. App. San Antonio, Nov. 8, 2017)

CORE TERMS

appraisal, insurer, appraisal award, damages, benefits, attorney's fees, actual damage, summary judgment, amount of loss, covered loss, trial court, policy benefits, breach of contract, bad faith claim, statutory violation, estimate, parties, breach of contract claim, court of appeals, insured's claim, deductible, adjuster, breached, costs

Civil Procedure, Appeals, Standards of Review, De Novo Review, Summary Judgment Review, Standards of Review, Judgments, Summary Judgment, Insurance Law, Claim, Contract & Practice Issues, Appraisals, Defenses, Demurrers & Objections, Affirmative Defenses, Waiver, Business & Corporate Compliance, Contracts Law, Breach, Breach of Contract Actions, Antitrust & Trade Law, Consumer Protection, Deceptive & Unfair Trade Practices, State Regulation, Liability & Performance Standards, Governments, Courts, Common Law, Liability & Performance Standards, Good Faith & Fair Dealing, Bad Faith & Extracontractual Liability, Payment Delays & Denials, Bad Faith & Extracontractual Liability, Legislation, Statutory Remedies & Rights, Remedies, Damages, Costs & Attorney Fees, Attorney Fees & Expenses, Basis of Recovery, Costs & Attorney Fees