For the second time in two months, the 15th Court of Appeals has held that governmental immunity does not bar a junior college’s affirmative defenses exonerating the college from compliance with certain provisions of its property coverage policy provided by the fund.
Appellant, Texas Association of School Boards Risk Management Fund//Cross-Appellant, Southwest Texas Junior College v. Appellee, Southwest Texas Junior College//Cross-Appellee, Texas Association of School Boards Risk Management Fund (No. 15-25-00134-CV; August 25, 2026) arose from a dispute between an insurer and its insured over benefits under a property and casualty policy. TASBRMF, a self-insurance risk pool with more than 1,000 governmental entity members, provided property coverage to STJC when the college became a fund member in 2012. The policy covered, among other things, wind and hail property damage. In 2021 a hailstorm blew through Uvalde that allegedly damaged the college’s property. The college filed a claim, which the fund subsequently investigated.
The policy required the college to elect within 180 days of the loss whether (1) “to repair or replace” the covered property and be reimbursed for costs actually and necessarily incurred, or (2) “to receive payment for the Actual Cash Value (ACV)” of the covered property.” If the insured elected option 1, it had 365 days to complete the repairs, unless the fund granted an extension upon written request. But the college elected option 2, resulting in this lawsuit. The college sued the fund for breach of contract, alleging that the fund failed to pay “adequate compensation” for its damaged covered property. It sought actual and consequential damages, reasonable and necessary attorney’s fees, pre- and post-judgment interest, statutory interest, costs of court, and treble damages. It further asserted the affirmative defenses that the policy contained provisions that were void, unconscionable, and waived by the fund.
The fund responded with a plea to the jurisdiction based on government immunity, as well as claims of fraud and bad faith, and requests for consequential, punitive, and treble damages. It asserted that the college’s affirmative defenses were barred by immunity because they are equitable, extra-contractual claims for relief. The fund further pleaded affirmative defenses of governmental immunity, unsatisfied conditions precedent, denial of notice of loss, coverage exclusions, and other defenses. The trial court granted the fund’s pleas in part, dismissing the college’s claims for consequential, punitive, and treble damages. But the trial court denied the plea with respect to the college’s waiver and estoppel, reliance on statements made on the fund’s webpage, fraud or misrepresentation by the fund, and bad faith claims. Both parties appealed.
In an opinion by Justice Farris, the court of appeals affirmed. The fund conceded that immunity was waived for the college’s breach of contract claim but not for the college’s affirmative defenses and fraud or bad faith claims. The college’s cross-appeal asserted that the trial court erred by granting the fund’s plea with respect to consequential damages. Turning first to the college’s affirmative defenses, the court observed that the fund contended that the policy required the college to “fully repair its damaged property within the extended 365-day deadline.” The college’s response was to assert that certain conditions precedent in the policy were unenforceable because they were unconscionable, void, and waived. The fund countered that the college’s affirmative defenses were offensive and “in fact claims seeking to rewrite the express terms of the Coverage Documents by voiding the College’s obligations therein and creating coverage where none existed before.” Further, the fund contended that immunity bars “affirmative defenses seeking relief based on equitable theories,” as well as the college’s fraud and bad faith claim
The court sided with the college, holding that the college’s affirmative defenses were “part and parcel of its breach of contract claim and so the immunity waiver encompasses them.” The court further agreed with the college that it didn’t plead fraud or bad faith claims in the first place. Citing its recent decision in Texas Association of School Boards Risk Management Fund v. Southwest Texas Junior College, No. 15-25-00115-CV, 2026 WL 1911630 (Tex. App.—15th Dist. July 2, 2026, pet. filed) (mem. op.), which concerned whether the college could recover repair and replacement damages under the policy for damage caused by a 2020 hailstorm, the court reiterated its holding in that case that the college’s affirmative defenses of waiver and voidness were not barred by governmental immunity. “We reasoned that the College raised these defenses,” the court wrote, “‘to avoid conditions precedent in the Coverage Documents—such as the requirement that the College repair its property within 365 days to be entitled to [] damages—in order [to] prevail on its breach of contract claim and acquire these damages.’” Consequently, the defenses didn’t “stand on their own but [were] rather means to the end of prevailing on the College’s breach of contract claim.” And it followed from that the defenses were “part of the College’s breach of contract claim, thus subjecting them to the immunity waiver under Section 271.152 of the Texas Local Government Code.”
This case produced the same result. The college’s waiver, voidness, and unconscionability defenses sought “to avoid conditions precedent in the Coverage Documents” (the 365-day deadline) so that it could prevail on its breach of contract claim. As in the earlier case, the defenses didn’t stand alone but were “part and parcel of the College’s breach of contract claim and are thus subject to” the immunity waiver. As to the fund’s contention that the college pled bad faith and fraud claims that were barred by immunity, the court determined that insofar as the college’s pleading alleged bad faith and misrepresentations, they were factual allegations and not causes of action. The college’s petition didn’t “recite any of the elements for bad faith,” nor did it provide enough of a “statement” of bad faith or fraud “sufficient to provide ‘fair notice’ of these claims.”
Finally, the court affirmed the trial court’s dismissal of the college’s claims for consequential damages. The college argued that “an exception to the immunity bar for ‘owner-caused delays’ applies, allowing [it] to bring consequential damages.” The fund responded that the exception didn’t apply. The court agreed with the fund, pointing to § 271.153(b)(1), which states that “[d]amages awarded in an adjudication brought against a local governmental entity arising under a contract” don’t include consequential damages. While an exception exists for “any amount owed as compensation for increased cost to the perform the work as a direct result of owner-caused delays or acceleration,” the court concluded, as it did in the prior decision, that the fund wasn’t an “owner.” Rather, the fund administers an insurance pool that provides coverage to its members under a “contractual relationship between the Fund members through an interlocal agreement, and that the Fund was created as a self-insurance pool to administer the program to its member entities pursuant to the Texas Interlocal Cooperation Act.”
