Ngakoue v. Safeco Ins. Co. of Ind.

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MICHEL NGAKOUE, Plaintiff v. SAFECO INSURANCE COMPANY OF INDIANA, Defendant

No. 1:22-CV-00363-LY

United States District Court, W.D. Texas, Austin Division

December 19, 2022

HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

SUSAN HIGHTOWER UNITED STATES MAGISTRATE JUDGE

Before the Court are Defendant's Motion for Summary Judgment filed September 2, 2022 (Dkt. 5); Plaintiff's Response to Defendant's Motion for Summary Judgment, filed October 7 2022 (Dkt. 9); and Defendant's Reply to Plaintiff's Response, filed October 14, 2022 (Dkt. 10). On November 8 2022, the District Court referred the motion and related filings to the undersigned Magistrate Judge for report and recommendation, pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Dkt. 11.

I. Background

Plaintiff Michel Ngakoue brings this insurance coverage lawsuit against his insurance company, Defendant Safeco Insurance Company of Indiana, after his property damage claim under his landlord protection insurance policy was denied.^[1]

In October 2015, Plaintiff purchased property located at 15407 Connie St., Austin, Texas (“Property”). Plaintiff's First Amended Complaint (Dkt. 4) ¶ 8. Three buildings were located on the Property: two dwellings to be rented out as residences and a “main building” that could be used for commercial purposes (“Main Building”). Id.; Dkt. 10 at 3. Plaintiff contends that he bought the Property “with the intention of opening numerous rental properties and utilizing the main building as a community center to which the space could be rented out” for “various meetings and parties.” Dkt. 9 at 2-3. After buying the Property, Plaintiff alleges, he began using the Main Building “for commercial purposes and not as a residence.” Dkt. 4 ¶ 8.

Shortly after buying the Property, Plaintiff purchased a landlord protection insurance policy for the Property, which Defendant underwrote (“Policy”). Id. ¶ 7. The Policy provides coverage for certain “accidental direct physical loss” to the “dwelling” and “other structures” on the Property. Dkt. 9-1 at 14, 19. The original policy period was October 19, 2015 to October 19, 2016, “with renewals occurring every year until Plaintiff terminated the policy in June 2021.” Dkt. 9 at 3. On August 16, 2020, Plaintiff renewed the Policy to provide continued coverage to the Property for the policy term October 19, 2020 to October 19, 2021. Dkt. 9-1 at 5, 10.

Section A of the Policy provides coverage to “the dwelling on the Described Location shown in the Declarations, used principally for dwelling purposes.” Id. at 14. Section B provides coverage to “Other Structures” on the Property, including “fences, patios, driveways and walkways,” and “other structures on the Described Location, separated from the dwelling by clear space, including other structures connected to the dwelling by only a fence, utility line, plumbing, or similar connection.” Id. The Policy excludes coverage to other structures “used in whole or in part for commercial, manufacturing or farming purposes.” Id.

Plaintiff alleges that on February 20, 2021, the Main Building sustained direct physical damage as a result of a severe winter storm, with “extensive interior damage, including walls, ceilings, flooring, and fixtures, due to a storm created rupture in the ceiling.” Dkt. 4 ¶ 10; Dkt. 9 at 1-2.

Plaintiff alleges that the damage to the Main Building is approximately $24,326.39. Dkt. 4 ¶ 17. Plaintiff submitted a claim to Defendant under the Policy for the alleged property damage. Plaintiff alleges that Defendant's agent, Kiva Cotham, investigated the claim and performed an inspection of the main building on April 13, 2021. Id. ¶ 13. On April 16, 2021, Defendant denied the claim on the basis that it was “unable to identify any hail related damage to your property.” Dkt. 9-2 at 2. On June 14, 2021, Plaintiff cancelled the Policy. Dkt. 9-1 at 3.

On March 4, 2022, Plaintiff filed this lawsuit in Travis County District Court, alleging breach of contract, common law bad faith, fraud, d violations of the TDTPA and Sections 541 and 542 of the Texas Insurance Code. Ngakoue v. Safeco Ins. Co. of Indiana, Cause No. D-1-GN-22-001095 (261st Dist. Ct. Travis County, Tex. Mar. 4, 2022) (Dkt. 1 at 8-24). Plaintiff also alleged that Defendant “waived and is estopped from asserting any coverage defenses, conditions, exclusions, or exceptions to coverage not contained in any reservation of rights letter to Plaintiff.” Dkt. 1 at 20. In its Answer, Defendant argued that there is no coverage under the Policy for the claimed property damage because the Main Building was being used for commercial purposes, and the Policy “specifically excludes coverage for structures used primarily for commercial purposes.” Id. at 26. On April 4, 2022, Defendant removed this case to federal court on the basis of diversity jurisdiction under 28 U.S.C. §§ 1332, 1441(b)(2). Dkt. 1. On August 23, 2022, Plaintiff filed his First Amended Complaint, asserting the same claims as in his state court petition. Dkt. 4.

Defendant now moves for summary judgment on all of Plaintiff's claims under Federal Rule of Civil Procedure 56(a). Defendant argues that: (1) Plaintiff's breach of contract claim fails because the Policy does not cover the claimed damage to the Main Building, which was used for commercial purposes, excluded under the Policy; and (2) Plaintiff's extra-contractual claims fail because there is no coverage under the Policy. Plaintiff opposes Defendant's motion.

II. Legal Standards

A. Rule 56(a)

Summary judgment shall be rendered when the pleadings, the discovery and disclosure materials, and any affidavits on file show that there is no genuine dispute as to any material fact and that 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, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material fact is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. A court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); see also Anderson, 477 U.S. at 254-55.

Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation also are not competent summary judgment evidence. Id.

The party opposing summary judgment must identify specific evidence in the record and to articulate the precise manner in which that evidence supports its claim. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006). “Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence to support a party's opposition to summary judgment.” Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

B. Texas Insurance Law

Because this case was removed from Texas state court on diversity jurisdiction, Texas substantive law applies. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938). Under Texas law, insurance policies are written contracts. As with other contracts, courts “interpret and enforce them according to settled rules of construction” and “must give the policy's words their plain meaning, without inserting additional provisions into the contract.” Nat'l Union Fire Ins. Co. of Pittsburgh v. Crocker, 246 S.W.3d 603, 606 (Tex. 2008). Accordingly, courts must begin their analysis with the terms of the policy because they “presume parties intend what the words of their contract say.” Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 126 (Tex. 2010). The words of the policy “are given their ordinary and generally-accepted meaning unless the policy shows the words were meant in a technical or different sense.” Id. All parts of the policy are read together, and courts must give “effect to each word, clause, and sentence, and avoid making any provision within the policy inoperative.” State Farm Lloyds v. Page, 315 S.W.3d 525, 527 (Tex. 2010).

In insurance coverage disputes, Texas law directs courts to apply a burden-shifting scheme. Initially, the insured has the burden of establishing coverage under the policy. Gilbert, 327 S.W.3d at 124. If the insured proves coverage, to avoid liability, the insurer then must prove the loss is within an exclusion. Id. If the insurer proves that an exclusion applies, the burden shifts back to the insured to show that an exception to the exclusion brings the claim within coverage. Id.

III. Analysis

As...