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Click here for the full text of this decision FACTS:John and Shahin Coats had a homeowner’s insurance policy with Farmers Insurance Exchange. The policy had a $138,000 limit for damage to the dwelling, an $82,800 limit for loss of the dwelling contents and $27,600 in coverage for loss of use. In April 2001, the homeowners filed a claim for hail damage to their home. Farmers told them in May that their damages did not exceed the $1,000 deductible on their policy. The homeowners filed another claim on June 14 for damages resulting from Tropical Storm Allison. Farmers initially denied the claim, and then reopened it to investigate. They found damage had resulted from leaks in the heating and air conditioning system, the roof and the hot tub. By March 2002, Farmers concluded the home was a total loss and paid the homeowners $138,000 for the dwelling, $37,671 for the contents and $27,600 for loss of use. In July 2002, the homeowners filed another claim alleging that the leaks from the HVAC system had caused water and mold damage. Farmers investigated, concluding that the damage claimed was already considered in assessing the prior claim. Five months later, the homeowners sued Farmers for breach of contract, negligence, gross negligence, violations of the Deceptive Trade Practices Act and Insurance Code, and breach of the duty of good faith and fair dealing. Farmers moved for summary judgment on the ground that it had already paid the homeowners the policy limits. The homeowners argued that they were entitled to receive a sum not to exceed policy limits for each source of damage. The trial court granted Farmers’ motion, and the homeowners appealed. HOLDING:Affirmed in part; reversed in part. The court confirms that the homeowners’ policy included a standard Homeowners Form B, which in turn included certain conditions. The first condition for insurable interest and limit of liability subheading states, “Even if more than one person has an insurable interest in the property covered, we will not be liable in any one loss: a. to the insured for more than the amount of the insured’s interest at the time of the loss; or b. for more than the applicable limit of liability.” The provision goes on to say, “Each time there is a loss to any building insured under Coverage A (Dwelling), the amount of insurance applicable to that building for loss by fire will be reduced by the amount of the loss. As repairs are made, the amount of insurance will be reinstated up to the limit of liability shown on the declarations page.” The fourth condition for loss settlement states, “We will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed. Repair or replacement must be completed within 365 days after loss unless you request in writing that this time limit be extended for an additional 180 days.” The provision goes on to state that payment will not exceed the smallest of: 1. the limit of liability under this policy applicable to the damaged or destroyed building structures; 2. the cost to repair or replace that part of the building structures damaged, with material of like kind and quality and for the same use and occupancy on the same premises; or 3. the amount actually and necessarily spent to repair or replace the damaged building structures. The homeowners argue that the phrase “any one loss” in the first condition creates an ambiguity or expressly requires Farmers to remit an amount not to exceed the declared limit of liability for each loss sustained during the policy period. They also argue there is ambiguity in the omission of reinstatement clauses for losses caused by perils other than fire regardless of the number of losses during the policy period. Farmers contends there is no ambiguity when the policy is read and interpreted as a whole. The court says that whether these two conditions create an ambiguity is a matter of first impression in Texas. The court rejects the homeowners’ reliance on a 2002 Kansas Supreme Court case that found an ambiguity to exist in similar provisions. “Generally, insurable interest clauses describe who will be entitled to receive payments if more than one insured person or corporation has equitable or legal title to the insured property. When considered in context of the heading and language that follows, the phrase”any one loss’ refers to a scenario where two or more insured persons or corporations are disputing allocation of loss payments. In other words, Farmers will be required to pay an amount not to exceed the applicable limit of liability to be allocated between the insureds as their interests appear.” The court instead concludes that the policy unambiguously entitles the homeowners to the smaller of two amounts: either the limit of liability or the cost to repair or replace the home. Since Farmers has already paid the limit of liability, it has met its contractual obligations. The court then addresses the homeowners’ Insurance Code issues. The court observes that it took Farmers 11 months to pay the April 2001 claim, while Insurance Code Art. 21.55 requires the insurer to notify a claimant in writing of the acceptance or rejection of a claim not later than the 15th business day after the date the insurer receives all items necessary to secure final proof of loss. The provision also states that an insurer that an insurer who delays payment beyond the period of time specified by applicable statutes, or if the statutes do not specify a period, delays payment for more than 60 days, to pay interest and attorneys’ fees. Taking into account the dates of claimed loss or sources of loss, the court finds Farmers has not presented conclusive proof that it met the necessary payment and response deadlines. Summary judgment on these claims was improper. OPINION:Seymore, J.; Hudson, Frost and Seymore, J.J.

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