The Texas Supreme Court has granted the U.S. Fifth Circuit Court of Appeals’ request for clarification of Texas law with respect to concurrent causation of a loss in the property and casualty insurance context. The Court’s response to the Fifth Circuit’s questions may have a significant impact on how weather-related claims are tried in Texas courts, particularly with regard to pretrial proceedings.
The case, Frymire Home Services, Inc.; Whitfield Capital, L.L.C. v. Ohio Security Insurance Company (No. 20-10012) arose from a 2018 hailstorm that struck Dallas. Frymire had contracted with Ohio Security to provide insurance coverage for an office building, including coverage for loss resulting from windstorm or hail. As is generally the case, the policy did not cover cosmetic damage or ordinary wear and tear. Following the storm, Frymire filed a claim for a total loss of the building’s roof. It supported its claim by producing its adjuster’s determination that the hailstorm was the sole cause of the damage. Ohio Security denied coverage based on its adjuster’s findings that wear and tear had damaged the roof, not the hailstorm. Frymire filed suit in a Dallas district court for breach of contract and other extracontractual claims, and Ohio Security sought removal to federal court based on diversity jurisdiction. The federal district granted Ohio Security’s motion for summary judgment on all claims. Frymire then appealed to the Fifth Circuit.
In reviewing whether the trial court properly granted summary judgment, the Fifth Circuit found no definitive Texas jurisprudence resolving three questions: (1) whether the preexisting damage to the roof makes this a concurrent cause case; (2) if so, whether Frymire must attribute their losses to the covered and excluded causes; and (3) if so, whether Frymire can satisfy its attribution obligation by attributing 100% of the loss to the hailstorm. The Fifth Circuit cited a 1993 SCOTX opinion holding that when a loss is caused by both covered and non-covered perils, the insured must present “some” evidence to attribute the loss solely to the covered peril. See Lyons v. Millers Casualty Ins. Co. of Texas, 866 S.W.2d 597, 601 (Tex. 1993). Here Frymire presented its adjuster’s report attributing the loss solely to the storm. But that does not end the inquiry, for the Fifth Circuit found that while Lyons addresses what happens when the concurrent cause rule applies, it does not say what triggers application of the rule in the first place.
According to the Fifth Circuit, the key question is: “whether the presence of any preexisting damage (e.g., wear and tear or cosmetic damage) necessarily triggers the concurrent cause doctrine.” As the Court points out, no roof of any age completely lacks some wear and tear, while cosmetic damage rarely causes a roof to leak and holes to appear. “Put another way,” the Court asks, “an ugly roof can function until it is hit by a hailstorm. Would the hail damage that rendered it nonfunctional be covered in full?” The Fifth Circuit further inquired that if the concurrent cause rule does apply here, it leaves open evidentiary questions. Does an insured arguing sole cause nevertheless have to meet an attribution burden when faced with evidence of wear and tear? Can an insured overcome that burden only with evidence of sole cause?
SCOTX has scheduled oral argument on December 1. Appellants’ brief on the merits is due on October 11, followed by the Appellee’s on November 1.