Deciding to Deny a Claim Based on Investigation and the Report of an Expert is not Bad Faith

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Plaintiff sued Defendant Safeco regarding a claim for damage to Wheeler’s residence, which she contends was caused by a hailstorm in San Antonio. In Wheeler v. Safeco, No. SA-21-CV-00343-XR, USDC, (April 29, 2022) the USDC was faced with motions for summary judgment.

BACKGROUND

An inspector for Safeco, inspected the property after a claim for hailstorm damage. Erik Valle, an engineer inspected the property and determined there was non-cosmetic damage to the metal roof’s ridge and high-cap panels, but the other dents to the roof panels were cosmetic and had not affected the roof’s functionality.

DISCUSSION

The burden of establishing coverage rests upon the insured. The burden of establishing an exclusion to coverage rests upon the insurer. Safeco points to the Policy’s exclusion for any cosmetic loss or damage to the metal roof. The Policy defines “cosmetic loss or damage” as “any loss that is limited to the physical appearance of a metal roof surface.”

Because there is genuine dispute of material fact as to whether the damage to Wheeler’s metal roof panels was cosmetic or non-cosmetic, and thus whether Safeco failed to perform under the contract, the Court denied summary judgment as to Wheeler’s breach of contract claim.

Defendant’s Motion for Summary Judgment

Safeco moved for summary judgment as to Wheeler’s extra-contractual claims. Wheeler’s claim that Safeco unreasonably investigated her insurance claim is not supported by any evidence.

An insurer does not act in bad faith if they are incorrect as to the proper construction of the policy. Where the dispute concerns “the factual basis for the claim, the proper legal interpretation of the policy, or both, ” such claims are subject to a breach of contract analysis rather than bad faith. Safeco investigated the claim, and while there is a dispute over whether Safeco properly denied coverage, Safeco may deny coverage based on a misapplication of the policy without being subject to bad-faith liability.

Plaintiff’s motion for declaratory and summary judgment was denied. Defendant’s motion for summary judgment was granted as to the claim of bad faith. 

Plaintiff’s breach of contract and Texas Prompt Payment Act claims remain pending.

ZALMA OPINION

Neither party were total winners. Both lost parts of their motions for summary judgement. The suit, with such a simple difference of coverage opinion wasted the time of the parties and the court. The two may now go to trial on the breach of contract claim.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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