Unreported / Non-Citable
Background
Mark C. Hendon II’s insured home was damaged when two trees fell on it during Hurricane Beryl, causing flooding and damage to the gas lines. After inspecting the property, State Farm Lloyds estimated the storm damage at $204,858.93 and paid Hendon $166,323.93 after depreciation and the deductible. Hendon’s public adjuster later submitted a $414,718.20 estimate.
State Farm determined that another inspection was necessary, but Hendon’s public adjuster did not respond to its initial request. State Farm eventually conducted a second inspection and revised its estimate to $307,780. It then paid Hendon an additional $96,945.20 plus $18,545.08 in interest.
Hendon sued for breach of contract and violations of Chapters 541 and 542 of the Texas Insurance Code, alleging that State Farm conducted a substandard investigation and undervalued the loss. State Farm moved for partial summary judgment only on the Chapter 541 claims and objected to three of Hendon’s exhibits.
The Court’s Holding
The court granted State Farm partial summary judgment and dismissed Hendon’s Chapter 541 claims with prejudice. It first declined to consider Hendon’s Exhibits G, I, and L because, although they likely could qualify as business records, Hendon had not supplied the foundation required to place them within the hearsay exception.
On the claims under Sections 541.060(a)(2)(A) and (a)(7), the court held that State Farm had a reasonable basis for its coverage determination because it performed two inspections, reconciled competing estimates, and substantially revised its original estimate. Hendon offered no competent evidence from which a jury could find an unreasonable or outcome-driven investigation; disagreement with the amount paid established only a bona fide coverage dispute.
The court also rejected Hendon’s claims under Sections 541.060(a)(3) and (a)(4). State Farm provided two detailed letters explaining its estimates, and Hendon produced no evidence that those explanations were unclear or unreasonable. The record also showed that State Farm promptly inspected and initially paid the claim, continued investigating the competing estimate, and never wholly denied coverage. The ruling did not dispose of Hendon’s breach-of-contract or Chapter 542 claims.
Key Takeaways
- A dispute over the amount of a covered loss does not, without evidence of an unreasonable investigation or decision, establish liability under Sections 541.060(a)(2)(A) or (a)(7).
- An insurer’s claim explanation need not address every possible detail when its communications reasonably explain the policy basis and calculation underlying payment.
- Documents that may qualify as business records can still be excluded at summary judgment when the proponent fails to provide the necessary evidentiary foundation.
Why It Matters
The decision illustrates the evidentiary showing Texas policyholders need to move Chapter 541 claims beyond a disagreement over repair costs. Evidence that an insurer reached an incorrect valuation is not necessarily evidence that it acted unreasonably, particularly when it inspected the property, considered competing estimates, revised its valuation, and issued additional payment.
The ruling also underscores that summary-judgment exhibits must be supported in a form that can be admitted at trial. Potentially relevant business documents may carry no weight if the party offering them does not establish the applicable hearsay exception.