By Blair Dancy
In Wall v. State Farm Lloyds, the First Court of Appeals addresses jury charge practice under USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018). See — S.W.3d –, No. 01-17-00681-CV, 2018 WL 6843781, at *4 (Tex. App.—Houston [1st Dist.] Dec. 31, 2018, no pet. h.).
The underlying facts are unremarkable: Homeowners made a claim for hail damage to their roof, and their insurer denied the claim. The insurer re-inspected the roof later that year, concluded there was hail damage, paid the claim ($6,878.87), and unsolicited paid Prompt Payment Act penalties ($851.47). The homeowners then demanded another $65,994.95 which included claims of hail damage to their fence and garage door and attorney’s fees. State Farm denied any additional money was owed. Id. at *1.
The verdict mirrored the verdict in Menchaca: The jury found no breach of contract but did find insurance code violations. Nevertheless, the trial court entered judgment for State Farm. The homeowners appealed, asserting that the trial court erred or that alternatively—like in Menchaca—the case should be remanded for new trial. See id. at *1–2. But the appellate court distinguished Menchaca due to differences in the jury charges and affirmed judgment for the insurer.
The court of appeals noted that under Menchaca, an insurance code violation does not necessarily depend on a breach of the policy. Id. at *4. The homeowners could have claimed insurance code violations caused either independent damages or lost benefits owed under their policy. See id. at *4 (discussing Menchaca). However, the Walls failed to obtain a jury charge supporting either. See id. at *5.
The insurance code damages question did not assert independent damages, but neither was it limited to a measure of damages reflecting benefits owed under the policy:
“What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Charles and Cecelia Wall for their damages, if any, that were caused by such unfair or deceptive act or practice?” The only instruction provided, “Do not included in your answer any amount that Charles and Cecelia Wall could have avoided by the exercise of reasonable care.” The question gave the jury one category of damages: “The actual cash value at the time of the loss of the damaged part of the Property.” Nothing in the question limited the damages to those that would be available under the policy. Accordingly, the jury was never called on to determine if the damages it awarded was available under the policy.
Id. at *4.
To support a Menchaca claim for lost benefits, “the fact finder ‘must find that the violation caused the insured to lose benefits she was otherwise entitled to receive under the policy.’” Id. (quoting Menchaca, 545 S.W.3d at 503). Here, the question failed to account for State Farm’s defense to coverage based on normal wear and tear. See id. at *5. Specifically, the question failed to “limit the damages to those that would be available under the policy.” See id. at *4.
Because no such “causation-and-damages” question was answered by the jury, the split verdict—rejecting a breach of contract claim but finding an insurance code violation—did not present an irreconcilable conflict as in Menchaca, but was reconcilable: “the damages awarded under the insurance code violations claim were damages that were not available under the policy.” Therefore, the appellate court affirmed the trial court’s take-nothing judgment for the insurer and rejected the homeowners’ alternative request for remand. Id. at *5.
In essence, the only damages theory submitted was based on State Farm’s alleged breach of the policy. So when the jury rejected a separate finding of breach of contract, the insurance code claim also failed.
The Wall lesson for plaintiffs and defendants alike is to understand the insurance code claims being made under Menchaca to ensure the jury charge is accurate.