Encalade et al v. State Farm Lloyds

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RICKEY AND KIMBERLY ENCALADE,
Plaintiffs,
v.
STATE FARM LLOYDS,
Defendant.
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CIVIL ACTION NO. H-24-4310
MEMORANDUM AND OPINION
This is an insurance dispute over wind and hail damage to a home. Rickey and Kimberly
Encalade owned a homeowners’ insurance policy issued by State Farm Lloyds. After the
Encalades gave State Farm notice of damage caused by the storm, State Farm Lloyds investigated.
Its adjuster concluded that the home had sustained no covered damage. The Encalades disagreed
and invoked appraisal under the policy. An umpire adjudicated the dispute and found that the
Encalades’ home had suffered approximately $50,000 in storm damage. State Farm declined to
pay, maintaining that the damage was outside the policy coverage. The Encalades sued for breach
of the insurance policy and moved for summary judgment on their breach-of-contract claim, Texas
Prompt Payment of Claims Act claim, and bad-faith claim. They also moved for a declaratory
judgment that the appraisal award binds the parties.
Based on the pleadings, the motion, the record, and the applicable law, the court grants the
Encalades’ motion for declaratory judgment but denies their motion for summary judgment. The
reasons for these rulings are set out below.
United States District Court
Southern District of Texas
ENTERED
December 29, 2025
Nathan Ochsner, Clerk
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I. Background
Rickey and Kimberly Encalade owned a homeowners’ insurance policy issued by State
Farm Lloyds with effective dates from January 31, 2022, to January 31, 2023. (Docket Entry No.
1-2 at 2). The policy covered wind and hailstorm damage. (Id.).
The Encalades allege that their property sustained extensive damage from a wind and hail
storm. State Farm assigned a date of loss of January 7, 2023. (Docket Entry No. 12 at 3). On
January 12, 2023, the Encalades filed a claim for damage from the storm. (Id.). On January 24,
2023, a State Farm claims specialist informed the Encalades that an inspection with the public
adjuster found no covered damage. (Docket Entry 12-2 at 1). Dissatisfied with the coverage
decision, the Encalades hired another public adjuster, Morgan Elite Specialist Services, LLC, to
assist with their claim. (Docket Entry No. 1-2 at 3). In July 2023, State Farm sent an engineer,
Joseph Presswood, to again assess the roof, confer with the Encalades’ public adjuster, and
determine if the roof was damaged by wind or hail. (Docket Entry No. 12-6 at 2). Presswood
submitted a report to State Farm finding no covered damage. (Id. at 4).
In January 2024, a year after the first claim denial, the Encalades invoked the appraisal
clause in the policy. (Docket Entry No. 11-2 at 66). The policy permitted each party to select an
independent appraiser, who would jointly determine the losses and submit a binding report to the
parties. (Docket Entry No. 12-3 at 1–2). The Encalades’ appraiser, Kevin Funsch, and State
Farm’s appraiser, Ryan Samson, failed to agree. (Docket Entry No. 11 at 3). Under the policy
terms, the Encalades and State Farm agreed on an umpire, Allen Burns, to adjudicate the
differences between the two appraisers’ reports. (Id.).
On May 24, 2024, Burns and Funsch signed an appraisal award that found $50,513.04 in
replacement costs and $37,370.99 as the actual cash value. (Docket Entry No. 12-4 at 1). On July
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10, 2024, State Farm informed the Encalades that it had received the $50,513.04 appraisal award|.
(Docket Entry No. 12-5 at 1). State Farm declined to cover those damages because its investigation
had found no property damage from wind or hail. Instead, according to State Farm, the property
condition was due to wear, tear, deterioration, or mechanical damage. (Id.). State Farm reiterated
its denial of the claim. (Id.). The Encalades submitted a post-appraisal notice for settlement in the
amount of the appraisal award. (Docket Entry No. 1-2 at 4). State Farm again denied the claim.
The parties do not dispute that appraisal awards are binding. They agree that the appraisal
sets the value of the loss, which is binding. The issue is whether an appraiser’s assessment of
causation is binding.
The Encalades argue that under Texas law, appraisers may determine whether damage was
caused by a particular event or a pre-existing condition. (Docket Entry No. 11 at 13). They argue
that this determination is binding. (Id.). The Encalades provide testimony from both Funsch and
Burns that their appraisal award included only damage caused by hail and wind and excluded
damage due to wear and tear. (Docket Entry No. 11-2 at 77, 97). The Encalades assert that the
appraisers’ finding that the damage was caused by hail and wind, not wear and tear, is binding on
the parties. (Docket Entry No. 11 at 13).
State Farm disagrees. It argues that appraisers’ conclusions as to causation are not binding
if they are disputed. (Docket Entry No. 12 at 12). State Farm argues that there are many potential
causes of the claimed damage—including wear and tear “and a post-wind hail damage for which
Plaintiffs made no separate claim.” (Id. at 10). State Farm argues that appraisal cannot replace
litigation when, as here, the cause of the damage is still disputed. (Id. at 11).
The Encalades move for summary judgment on their claims for breach of contract,
violation of the Texas Prompt Payment of Claim Act, and violation of the Deceptive Trade
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Practices Act. (Docket Entry No. 11). The Encalades move for a declaratory judgment that the
appraisal award is valid and that State Farm’s interpretation is invalid and against public policy.
(Id.).
II. The Legal Standard
Summary judgment is appropriate when no genuine issue of material fact exists and the
moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a); Celotex Corp. v.
Catrett, 477 U.S. 317, 322–23 (1986). An issue of fact is genuine if a reasonable trier of fact could
return judgment for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). And a fact is material if it “might affect the outcome of the suit under the governing law”
and is not “irrelevant or unnecessary.” Id. “The court must construe all the evidence and draw all
reasonable inferences from the evidence in the light most favorable to the non-moving party.”
Maldonado v. Harris County, 2025 WL 2443389, at *2 (S.D. Tex. Aug. 25, 2025) (citing Walker
v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir. 1988)). “If the non-moving party prevails
as a matter of law after so construing the record, or if reasonable minds could differ on the import
of the evidence presented, the court must deny the motion for summary judgment.” Id. (citing
Sanchez v. Young County, 956 F.3d 785, 791 (5th Cir. 2020)).
III. Analysis
The Encalades moved for partial summary judgment on their breach-of-contract, Texas
Prompt Payment of Claim Act, and bad-faith claims. (Docket Entry No. 11). They also move for
a declaratory judgment that the appraisal award is binding on the parties. (See id.). The Encalades’
motion for declaratory judgment is granted. Their motion for summary judgment is denied.
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A. Breach of Contract
The Encalades ask “that this Court enter judgment in Plaintiffs’ favor and declare that the
appraisal award is owed under the terms of the Policy and that Defendant’s failure to timely pay
the appraisal award was a breach of the Policy.” (Docket Entry No. 11 at 1). There are two
requests: first, for a declaratory judgment that the appraisal amount is owed; and second, for
summary judgment on their claim that the failure to pay the appraisal award was a breach of
contract. The court grants first, but not the second, request.
To recover on a breach of contract claim, the insured must prove the following elements:
(1) the existence of a valid contract, (2) the insured performed or tendered performance, (3) the
insurer breached the contract, and (4) the insured was damaged as a result of the breach. Texas
Windstorm Ins. Ass’n v. Dickinson Indep. Sch. Dist., 561 S.W.3d 263, 272 (Tex. App.—Houston
[14th Dist.] 2018, pet. denied). “Texas insurance policies frequently include provisions specifying
appraisal to resolve disputes about the amount of loss under the policy.” Glenbrook Patiohome,
Owners Ass’n v. Lexington Ins. Co., 2011 WL 666517, at *4 (S.D. Tex. Feb. 14, 2011). “Appraisal
clauses in property insurance policies in Texas provide a method to resolve disputes regarding the
amount of loss for a covered claim.” United Neurology, P.A. v. Hartford Lloyd’s Ins., 995 F. Supp.
2d 647, 648–49 (S.D. Tex. 2014). “Because courts seek to implement the intention of the parties
as expressed in the language of a contract, it has long been the rule in Texas that appraisal awards
made pursuant to the provisions of an insurance contract are binding and enforceable.” TMM Invs.,
Ltd. v. Ohio Cas. Ins. Co., 730 F.3d 466, 471–72 (5th Cir. 2013) (cleaned up).
“[A]n appraisal award, by itself, does not entitle either the insured or the insurer to
judgment in its favor as to the insured’s claim against the insurer for breach of contract.”
Rodriguez v. State Farm Lloyds, 2017 WL 7000563, at *2 (S.D. Tex. Mar. 8, 2017) (quoting
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Security Nat. Ins. Co. v. Waloon Inv., Inc., 384 S.W.3d 901, 905 (Tex. App.—Houston [14th Dist.]
2012, no pet.)). First, an appraisal does not determine every element of a breach claim. “The
effect of an appraisal provision is to estop one party from contesting the issue of damages in a suit
on the insurance contract, leaving [open] the question of liability for the court.” Lundstrom v.
United Servs. Auto. Ass’n-CIC, 192 S.W.3d 78, 87 (Tex. App.—Houston [14th Dist.] 2006, pet.
denied). Second, a party may be able to “set aside” an appraisal award if “the contesting party
shows the award was (1) made without authority; (2) the result of fraud, accident, or mistake; or
(3) not in substantial compliance with the insurance policy.” Great Am. Ins. Co. of New York v.
Midland Chin Baptist Church, Inc., 2021 WL 9860723, at *3 (W.D. Tex. Nov. 21, 2021).
Although “[e]very reasonable presumption will be indulged to sustain an appraisal award,” TMM
Invs., 730 F.3d at 472, the appraisal provision allows the parties to contest an award in court as
beyond the scope of the policy.
Texas courts have wrestled with whether, under insurance policies, appraisers have the
authority to determine the cause of damage. See, e.g., Wells v. American States Preferred
Insurance Co., 919 S.W.2d 679, 683–85 (Tex. App.—Dallas 1996, writ denied); Lundstrom, 192
S.W.3d at 87–89. The key Texas case is State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex.
2009). See TMM Invs., 730 F.3d at 473–74 (“That case, State Farm Lloyds v. Johnson, does indeed
provide the controlling law on the issue of the scope of the appraisal panel’s authority.”).
Under Texas law, “the scope of appraisal is damages, not liability.” Johnson, 290 S.W.3d
at 890. “Causation relates to both liability and damages because it is the connection between
them.” Id. at 891–92. Although, “[i]n the abstract, it is hard to say whether causation is more a
question of liability or damages,” in practice, “causation usually falls into one category or the
other.” Id. at 892. Whether a causation determination exceeds an appraiser’s authority requires a
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fact-intensive inquiry into “the nature of the damage, the possible causes, the parties’ dispute, and
the structure of the appraisal award.” Id. at 893.
Johnson allows appraisers to assess what amount of damage were caused by a specific
event, which necessitates some causation determination. But Johnson does not authorize
appraisers to allocate a loss amount from a single event between different causes. “When different
causes are alleged for a single injury to property, causation is a liability question for the courts.”
Id. at 892. But appraisers can—and must—“allocate damages between covered and excluded
perils” by “separating loss due to a covered event from a property’s pre-existing condition.”
Id. “Any appraisal necessarily includes some causation element, because setting the ‘amount of
loss’ requires appraisers to decide between damages for which coverage is claimed from damages
caused by everything else.” Id. at 893.
“Johnson may be read to expand the powers of appraisers to make causation
determinations.” Tippett v. Safeco Ins. Co. of Indiana, 2020 WL 827143, at *10 (Tex. App.—Fort
Worth Feb. 20, 2020, no pet.). “[W]hether the appraisers have gone beyond the damage questions
entrusted to them will depend on the nature of the damage, the possible causes, the parties’ dispute,
and the structure of the appraisal award.” Johnson, 290 S.W.3d at 893. The courts in this circuit
are consistent in affirming that, under Texas law, “[a]ppraisal panels act within their authority
when they determine whether damage was caused by a covered event or was the result of non-
covered pre-existing conditions like wear and tear.” United Neurology, 995 F. Supp. 2d at 657;
see, e.g., MLCSV10 v. Stateside Enters., Inc., 866 F. Supp. 2d 691, 705 (S.D. Tex. 2012).
In sum, to prove that the appraisers acted within their authority, which would make their
finding of loss binding, the Encalades must show that the appraisers “separat[ed] loss due to a
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covered event from a property’s pre-existing condition,” rather than allocated loss for a “single
injury” between “different causes.” Johnson, 290 S.W.3d at 892.
The record shows that the appraisers did separate the loss due to a covered event—the
storm—from loss due to the property’s pre-existing condition. Kevin Funsch, one of the
appraisers, found that “all of the damages included in the appraisal award and estimate were caused
by a hail storm event at the property” and that other damages, “including wear and tear, were not
part of the award.” (Docket Entry No. 11-2 at 77). Allen Burns, the umpire, also found “that all
of the damages included in the appraisal award and estimate were caused by a hail storm event at
the property” and that other damages, “including wear and tear, were not part of the award.” (Id.
at 97). The appraisers’ findings fall squarely within the rule that “appraisal panels” act “within
their rights when they consider whether damage was caused by a particular event or was instead
the result of non-covered pre-existing perils like wear and tear.” TMM Invs., 730 F.3d at 474.
MLCSV10 v. Stateside Enterprises, Incorporated, is instructive. In that case, the court held
that an appraiser did not exceed his authority by determining causation because he considered both
covered damage and pre-existing conditions. See 866 F. Supp. 2d at 704–05. The appraiser did
not believe that Hurricane Ike, as opposed to wear and tear, caused the moisture damage because
there was no penetration of the roof membrane. See id. at 704–05. Although the appraiser
recognized that there could be other sources of moisture in a roof, he could not attribute the
moisture he found to storm damage because there was no evidence of penetration. Id. The court
held that the appraiser’s assessment did not exceed the scope of his authority, reasoning that a
contrary conclusion would mean that “appraisers can never allocate damages between covered and
excluded perils . . . unless a roof is brand new.” Id. at 705 (quoting Johnson, 290 S.W.3d at 892–
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93). As in Stateside, the appraisers here focused on the distinction between covered events and
pre-existing conditions, so that any “causation” opinion was within the scope of their authority.
State Farm urges a different conclusion, arguing that there are multiple possible causes for
the Encalades’ loss that require a court to allocate damages among them. (Docket Entry No. 12 at
10). State Farm argues that there was existing wear and tear damage in the Encalades’ roof, which
would preclude the appraisers from determining that the storm caused the damage. (Id.; Docket
Entry No. 12-2 at 1). But, as discussed, Johnson stands for the opposite principle: separating
damage caused by a covered event from wear and tear is the kind of question appraisers must
determine. See TMM Invs., 730 F.3d at 474; Stateside Enters., Inc., 866 F. Supp. 2d at 704–05.
The appraisers here did not exceed their authority by distinguishing between damage caused by
wear and tear and covered damage caused by the storm.
State Farm argues in its motion that the other potential causes of the Encalades’ losses
include “excluded damages” and “post-wind hail damage.” (Docket Entry No. 12 at 10). But
State Farm offers no facts to support these other potential causes. Unsubstantiated assertions,
conclusory allegations, improbable inferences, and unsupported speculations are not competent
summary judgment evidence. Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994). “[S]uch
allegations are insufficient, therefore, to defeat a motion for summary judgment.” Eason v. Thaler,
73 F.3d 1322, 1325 (5th Cir. 1996) (per curiam).
In Johnson, the Texas Supreme Court held that the insurer could not create a factual dispute
on causation because the record did not establish that “Johnson’s roof was damaged by anything”
other than hail. 290 S.W.3d at 891. “In State Farm’s denial letter, its summary judgment motion,
and even its briefs” before the Texas Supreme Court, there was “neither evidence nor even a hint
about what else caused the damage.” Id. The same is true here. State Farm’s letter disputing the
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appraisal award simply asserted that the damage to the “roof and gutters/downspouts were not
caused by wind or hail.” (Docket Entry No. 11-2 at 73). The letter asserts that the damages “were
determined to be caused by wear, tear, deterioration, or to be mechanical in nature.” (Id.). The
letter reflects Presswood’s evaluation of the property. (See Docket Entry No. 12-6). State Farm’s
bald assertions of alternative causes are insufficient to preclude summary judgment. A court
cannot find a “causation dispute just because State Farm” claims that there is one. Johnson, 290
S.W.3d at 891. Appraisal may bind the parties to the amount of loss caused by covered events as
opposed to wear and tear. Without evidence of an alternative cause or additional facts creating a
causation dispute, State Farm cannot avoid the appraisal award on the ground that the appraisal
exceeded the scope of the insurance policy.
State Farm also claims that “a fact issue exists” because it “has asserted that Plaintiffs’ roof
was either undamaged or damaged by uncovered circumstances.” (Docket Entry No. 12 at 13).
But State Farm is estopped from challenging the amount of the damages determined by the
appraisal award. See United Neurology, 995 F. Supp. 3d at 649 n.2 (“The effect of an appraisal
provision is to estop one party from contesting the issue of damages in a suit on the insurance
contract . . . .”). State Farm cannot assert that there is no damage, because the binding appraisal
has determined the amount of loss. And State Farm’s allegations that the roof was “damaged by
uncovered circumstances,” (Docket Entry No. 12 at 13), are, as noted above, conclusory and not
competent summary judgment evidence, see Forsyth, 19 F.3d at 1533.
Because State Farm does not sufficiently support its assertion of alternative causes of the
Encalades’ losses, the appraisers’ determination of causation was limited to separating damage
due to a covered event from the pre-existing condition of the property. This was within the
appraisers’ authority. Johnson, 290 S.W.3d at 892–93. State Farm presents no other objections
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to the validity of the appraisal award. (See Docket Entry No. 12). As a result, the court grants the
Encalades’ motion “with respect to [their] request for declaratory relief as to the binding effect of
the Appraisal Award signed by the Umpire,” Great Am. Ins. Co. of New York v. Midland Chin
Baptist Church, Inc., 2021 WL 9860723, at *5 (W.D. Tex. Nov. 21, 2021), because “an
enforceable appraisal award, like the one issued in this case, is binding on the parties with respect
to that amount,” Ortiz v. State Farm Lloyds, 589 S.W.3d 127, 132 (Tex. 2019).
Still, this conclusion does not entitle the Encalades to summary judgment on their contract
claim. “Failure to pay an appraisal award, by itself, does not entitle the plaintiff to judgment or
establish a breach of contract.” Salinas v. Lloyds, 2023 WL 9007291, at *3 (S.D. Tex. Dec. 28,
2023). Here, the Encalades do not argue the elements of a breach claim. Instead, they state that,
if the appraisal award is binding, they are entitled to judgment on their breach claim. This is
insufficient. Though appraisal and breach issues are closely related, an “appraisal award by itself
does not determine the merits of [the Encalades’] breach-of-contract claim[] or entitle [them] to
judgment on th[at] claim[].” Waloon, 384 S.W.3d at 906–07. At this stage of the case, the
Encalades have not shown that State Farm breached the insurance agreement by withholding
payment until this court resolved issues of causation. The Encalades do not argue that the
insurance agreement required payment within a certain date. Nor do they argue that State Farm
breached the agreement by delaying payment for an unreasonable period. The Encalades are not
entitled to summary judgment on their breach of contract claim.
The Encalades’ request for declaratory judgment is granted; the appraisal award is binding
on the parties. The Encalades’ request for summary judgment is denied; they did not establish
each essential element of a breach claim.
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B. The Texas Prompt Payment of Claims Act
The Encalades allege that State Farm violated the Texas Prompt Payment of Claims Act
by failing to timely pay for the storm damages. To recover under this statute, “an insured must
establish: (1) a claim under an insurance policy; (2) that the insurer is liable for the claim; and (3)
that the insurer has failed to comply with one of the requirements of [the statute] with respect to
the claim.” Evergreen Nat’l Indem. Co. v. Tan It All, Inc., 111 S.W.3d 669, 678 (Tex. App.—
Austin 2003, no pet.). Under Section 542.058 of the statute, an insurer is liable for statutory
damages if, after receiving all the necessary items, statements, and forms required under § 542.055,
“it delays payments of the claim for a period exceeding the period specified by other applicable
statutes or, if other statutes do not specify a period, for more than sixty days.” Lee v. Catlin
Specialty Ins. Co., 766 F. Supp. 2d 812, 826 (S.D. Tex. 2011) (citing TEX. INS. CODE § 542.058(a)).
“By requiring insurers to promptly satisfy claims that they owe in their entirety, the Legislature
incentivizes insurers to resolve disputes and invoke the appraisal process sooner rather than later.”
Hinojos v. State Farm Lloyds, 619 S.W.3d 651, 658 (Tex. 2021). “A significant delay in requesting
an appraisal” or in paying the amount determined by appraisal, “may cause additional interest to
accrue.” Id. If the Encalades are correct that State Farm is liable for the appraisal amounts, “those
amounts are untimely as a matter of law, warranting penalty interest under Tex. Ins. Code §
542.060.” Tex. Friends Chabad-Lubavitch, Inc. v. Nova Cas. Co., 539 F. Supp. 3d 669, 681 (S.D.
Tex. 2021).
The outstanding element on this motion is liability. The TCCPA claim is intertwined with
the breach claim. An appraisal award is not a determination of liability. Johnson, 290 S.W.3d at
890. Because the Encalades have not established that they are entitled to summary judgment on
their breach claim, they are not entitled to summary judgment on their TPPCA claim. The
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Encalades’ motion for summary judgment on their claim under the Texas Prompt Payment of
Claims Act is denied.
C. Bad Faith
The Encalades allege that State Farm acted in bad faith, violating the Deceptive Trade
Practices Act and breaching the duty of good faith and fair dealing, by failing to account for and
investigate the appraisal award’s binding effect.
“There is a common law duty of good faith and fair dealing (for ‘denying or delaying
payment of a claim if the insurer knew or should have known it was reasonably clear the claim
was covered,’ which includes the insurer’s obligation to conduct an adequate investigation of the
claim), as well as a statutory one under the Texas Insurance Code § 541.060(a)(2) (an insurer
commits an unfair or deceptive act when it ‘fail[s] to effectuate a prompt, fair, and equitable
settlement’ of a claim for which its liability ‘has become reasonably clear’) or § 541.060(a)(7)
(where it fails to reasonably investigate a claim in order to determine whether its liability is
reasonably clear).” United Neurology, P.A. v. Hartford Lloyd's Ins. Co., 101 F. Supp. 3d 584, 593
(S.D. Tex.) (footnote omitted), aff’d, 624 F. App’x 225 (5th Cir. 2015). “[T]he standard for bad
faith is the same under section 541 as that for common law bad faith.” Id. at 609.
“A cause of action for breach of the duty of good faith and fair dealing exists when the
insurer has no reasonable basis for denying or delaying payment of a claim or when the insurer
fails to determine or delays in determining whether there is any reasonable basis for denial.”
Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 459 (5th Cir. 1997). “The insured
must prove that there were no facts before the insurer which, if believed, would justify denial of
the claim.” Id. “A bona fide controversy is sufficient reason for failure of an insurer to make a
prompt payment of a loss claim.” Id.
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“An insured’s claim for breach of an insurance contract is ‘distinct’ and ‘independent’ from
claims that the insurer violated its extra-contractual common-law and statutory duties.” USAA
Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 489 (Tex. 2018). “A claim for breach of the policy
is a ‘contract cause of action,’ while a common-law or statutory bad-faith claim ‘is a cause of
action that sounds in tort.’” Id. (quoting Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 666
(Tex. 1995)). A plaintiff “may still recover damages for a statutory violation that caused an injury
‘independent from the loss of the benefits.’” Ahmad v. Allstate Fire & Cas. Ins. Co., No. 4:18-
CV-4411, 2021 WL 1429523, at *5 (S.D. Tex. Feb. 28, 2021) (quoting Ortiz, 589 S.W.3d at 134),
report and recommendation adopted, No. 4:18-CV-4411, 2021 WL 1428491 (S.D. Tex. Mar. 24,
2021). But “[t]here can be no recovery for extra-contractual damages for mishandling claims
unless the complained of actions or omissions caused injury independent of those that would have
resulted from a wrongful denial of policy benefits.” Parkans Intern. LLC v. Zurich Ins. Co., 299
F.3d 514, 519 (5th Cir. 2002). Successful independent-injury claims for acting in bad faith are
rare. See Ahmad, 2021 WL 1429523, at *6 (“As the Texas Supreme Court recognized, ‘a
successful independent-injury claim would be rare, and we in fact have yet to encounter one.’”
(quoting Menchaca, 545 S.W.3d at 500)).
State Farm treats the Encalades’ bad-faith claim as contingent on a finding of breach of
contract and contends that, because the court should not grant summary judgment on the contract
claim, the bad faith claim must be irrelevant. (Docket Entry No. 12 at 6). Because bad faith is an
independent injury, this is not wholly correct: “Regardless of whether an insured is entitled to
benefits under the policy, he may recover damages for a statutory violation that causes an injury
‘independent from the loss of the benefits.’” Ortiz, 589 S.W.3d at 134 (quoting Menchaca, 545
S.W.3d at 499–500). “There can be no recovery for extra-contractual damages for mishandling
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claims unless the complained of actions or omissions caused injury independent of those that
would have resulted from a wrongful denial of policy benefits.” Parkans Intern., 299 F.3d at 519.
But the Encalades allege no such injury. “Like in Ortiz, the [Encalades] only seek damages
for their alleged wrongful loss of benefits under their policy and did not present evidence that they
suffered an independent injury that would entitle them to damages in excess of their policy.”
Navarra v. State Farm Lloyds, 2024 WL 3174505, at *2 (5th Cir. June 25, 2024) (per curiam).
The Encalades argue that State Farm conducted an “improper investigation” and that its
interpretation of the appraisal award was “actionable misrepresentation.” But neither of these
alleged actions are “injur[ies] independent of those that would have resulted from a wrongful
denial of policy benefits.” Parkans Intern., 299 F.3d at 519. As a result, the Encalades do not
make a sufficient case for bad-faith damages, particularly one with no material facts in dispute.
See Celotex Corp., 477 U.S. at 322.
The Encalades’ motion for summary judgment on their bad faith and DTPA claim is
denied.
IV. Conclusion
The Encalades’ motion for declaratory judgment is granted; the appraisal award is binding
on the parties. Their motion for summary judgment on their breach-of-contract claim is denied.
Their motion for summary judgment on their bad faith and DTPA claim is denied. Their motion
for summary judgment on their claim under the Texas Prompt Payment of Claims Act is denied.
SIGNED on December 29, 2025, at Houston, Texas.
________________________________
Lee H. Rosenthal
Senior United States District Judge
Case 4:24-cv-04310 Document 18 Filed on 12/29/25 in TXSD Page 15 of 15