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TOMMY MANION OF TEXAS, INC. v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, INC.

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
4:13-cv-00742 Search Pacer
Opposing Party: 
Tommy Manion of Texas, Inc.
Court Type: 
Federal
US District Court: 
Eastern District of Texas
Date Filed: 
Dec 14 2013

SUMMARY OF SUIT
1. This is a suit brought by an insured against its insurance company for failure to honor
its insuring agreements to cover and pay for property damages of almost $1 million caused by a
hail storm at the Ranch on or about May 15, 2013. This suit presents claims for breach of the
insuring contract, violation of the Texas Prompt Pay Statute, and breach of various statutory and
common law duties prohibiting an insurer from engaging in bad faith settlement practices,
including violations of the Texas Insurance Code, the Texas Deceptive Trade Practices Act, and
an insurer's common law duty to act in good faith and to deal fairly in settling a claim with an
insured. Based upon the foregoing breaches of contract, statutory duties, and common law
duties, TMT brings this suit to obtain a money judgment to recover: (1) damages for failure to
pay wrongfully denied policy benefits; (2) interest of 18% per annum for failure to honor the
Prompt Pay Statute; (3) damages for bad faith settlement practices, including recovery for
independent injuries suffered separate from the wrongfully denied policy benefits; (4) statutory
treble damages under the Deceptive Trade Practices Act; (5) exemplary damages; (6) attorney's
fees and costs; and (7) pre and post judgment interest.

PARTIES
2. TMT is a Texas corporation with its principal place of business at Highway 377
North, Aubrey Texas, 76227. ("Manion Ranch").
3. Indemnity is a Pennsylvania corporation with its principal place of business at 436
Walnut Street, Philadelphia, Pennsylvania, 19106. Indemnity registered with the Texas
Department of Insurance to transact business in Texas in September, 1987, and has been
registered to do business in Texas continuously since then. Indemnity's registered agent for
service of process is CT Corporation System, 350 North St. Paul Street, Dallas, Texas, 75201

COUNT ONE
BREACH OF THE INSURANCE CONTRACT
16. Plaintiff incorporates and realleges paragraphs 1 - 15 in this Count One, as if set
forth fully herein.
17. The Insurance Policy is a valid contract which was in existence at all material
times, including May 15, 2013, the date the Manion Ranch incurred losses from a hail storm.
Plaintiff has fully performed all of its obligations under the Insurance Contract, including the full
and timely payment of all premiums due.
18. The Policy provides insurance coverage for physical loss or damage to dwellings,
barns, outbuildings and other farm structures at the Manion Ranch, many of which suffered
physical loss and damage as a result of the hail storm that hit the Ranch on or about May 15,
2013.
19. Plaintiff gave timely notice to Indemnity of its claim, provided all required
information, and cooperated with Defendant's assessment of the claim.
20. However, Defendant has breached the Insurance Contract by failing to timely pay
for all covered losses in an amount of approximately $1 million, which amount will be shown
with specificity at trial.
21. Plaintiff also seeks recovery from Indemnity of reasonable and necessary
attorneys' fees incurred in prosecuting its claim pursuant to Section 38.001 of the Texas Civil
Practices & Remedies Code.
22. All conditions precedent to Plaintiffs bringing this claim have occurred, will
occur, or have been waived, including all required or proper notices and demands.

COUNT TWO
VIOLATION OF THE TEXAS PROMPT PAY STATUTE
23. Plaintiff incorporates and realleges paragraphs 1 through 22, as if set forth fully
herein.
24. Pursuant to Section 542.060(a) of the Texas Insurance Code ("TIC), Plaintiff
seeks recovery from Defendant of interest on the full amount of its claim, without deduction for
any partial payments, at the rate of 18% per year from May 16, 2013 until the claim, or if
applicable, a judgment, is paid in full.
25. Pursuant to section 542.060(b) of the TIC, Plaintiff also seeks the recovery from
Indemnity of reasonable and necessary attorney's fees taxed as part of the costs of this case.
26. Defendant is liable to Plaintiff for "Prompt Pay" interest and reasonable and
necessary attorney's fees because (a) Defendant is liable for a claim under a policy of insurance
that it issued as alleged more specifically above, (b) Defendant did not comply with its TIC
obligations as more specifically set forth herein, and (c) Defendant is an insurer authorized to
engage in business as an insurance company, to provide insurance in the State of Texas as
described in Sections 541.002(2) and/or 542.052 of the TIC.
27. Defendant failed to comply with Section 542.056 of the TIC because it failed to
notify TMT in writing of its acceptance or rejection of the Claim within the time required by the
TIC.
28. Defendant failed to comply with Section 542.058 of the TIC because it delayed
payment on the Claim for more than 60 days after receiving notice of the claim under Section
542.055 of the TIC.
29. All conditions precedent to Plaintiffs bringing this claim have occurred, will
occur, or have been waived, including all required or proper notices and demands.

COUNT THREE
CLAIM FOR STATUTORILY DEFINED UNFAIR SETTLEMENT PRACTICES
30. Plaintiff incorporates and realleges paragraphs 1 through 29, as if set forth fully
herein.
31. Plaintiff also sues Defendant for unfair settlement practices as prohibited by
Chapter 541 of the TIC and related regulations adopted by the Texas Department of Insurance.
32. As described in more detail in this Complaint, Defendant engaged in a series of
acts and practices amounting to bad faith settlement practices in violation of Chapter 541 of the
TIC. More specifically, Defendant violated the following Sections of Chapter 541 of the Code
("TIC") and related regulations adopted by the Texas Department of Insurance:
(a) Sections 541.051(1), 541.060(a)(1), 541.061 of the TIC and 28 TAC, Section
21.203(1) prohibiting misrepresentations to a claimant regarding material facts relating to
coverage.
(b) Sections 541.060(a)(2)A) and 542.003(b)4) of the TIC prohibiting the failure to
attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim.
(c) Section 541.060(a)(3) of the TIC and 28 TAC, Section 21.203(9) prohibiting the
failure to promptly provide to a policy holder a reasonable explanation for the basis for a
compromise settlement of a claim.
(d) Section 541.060(a)(4)(A) of the TIC and 28 TAC, Section 21.203(1)) for failing,
within a reasonable period of time, to affirm or deny coverage of a policy holder.
(e) Section 541.060(a)(7) of the TIC and 28 TAC, Section 21.203(15) for refusing to pay
a claim without conducting a reasonable investigation of a policyholder's claim.
(f) 28 TAC, Section 21.203(18) for violating the Prompt Payment of Claims Statute as
alleged in Count Two above.
(g) Breaching the common law duty of good faith and fair dealing as alleged below.
33. Plaintiff suffered damages as a proximate consequence of the above actions in
violation of the TIC and related regulations, in an amount equal to the policy benefits wrongfully
denied, all as set out in the holding in Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d
129, 136 (Tex. 1988). Plaintiff seeks judgment of Indemnity for such damages.
34. Plaintiff also suffered damages as a proximate consequence of the above actions
in violation of the TIC and related regulations in the form of an injury separate and independent
from the policy benefits wrongfully denied. More specifically, as a direct consequence of
Defendant's wrongful and bad faith settlement practices as more particularly described above,
Plaintiff was required to hire and pay an attorney to address the particularized insurance
coverage issues raised by Defendant's bad faith settlement practices. In addition, Defendant's
failure to timely pay a fair settlement amount has caused Plaintiff to delay repairs to the hail
damaged structures on the Manion Ranch, which delays have caused other damages to those
structures, including damages to supports and foundations. Plaintiff seeks judgment of
Indemnity for of all such actual damages suffered as a consequence of Defendant's violations of
the TIC and related regulations, which damages exceed $75,000 and will be shown with
specificity at trial.
35. Pursuant to Section 541.152 of the TIC, Plaintiff also seeks recovery from
Indemnity of all of its court costs and reasonable and necessary attorney's fees attributable to this
claim.
36. Defendant knowingly committed the prohibited acts identified in this Count
Three. Based upon such knowing violations and pursuant to Sections 541.002(1) and 541.152(b)
of the TIC, Plaintiff also seeks judgment of Defendant of three times the amount of actual
damages attributable to this claim.
37. All conditions precedent to bringing this claim have occurred, will occur, or have
been waived, including all required or proper notices and demands.

COUNT FOUR
CLAIM FOR VIOLATION OF THE DECEPTIVE TRADE PRACTICES ACT
38. Plaintiff incorporates and realleges Paragraphs 1 through 37, as if set forth fully
herein.
39. Under Section 17.50(a)(4) of the Texas Deceptive Trade Practices Act ("DTPA"),
the use or employment by any person of an act or practice in violation of the Texas Insurance
Code is also a violation of the DTPA. The use of any unconscionable action or course of action
is a violation of section 17.50(a)(3) of the DTPA. Defendant's course of conduct as alleged in
Counts Two through Five of this Complaint is a violation of Section 17.50(a)(3) of the DTPA.
40. Plaintiff is a consumer entitled to maintain an action under the DTPA.
41. Defendant's violations of the DTPA were a producing cause of economic
damages to Plaintiff, in an amount equal to the policy benefits wrongfully denied plus other
separate and independent injuries alleged in this Complaint, including the cost of retaining an
insurance coverage expert lawyer (who is not an attorney in this case), and damages to the
foundation and structural supports related to certain hail damaged structures at the Manion
Ranch. Such damages are slightly more than $1 million in policy benefits and more than
$75,000 in separate and independent injuries.
42. Pursuant to section 17.50(d) of the DTPA, Plaintiff also seeks recovery from
Indemnity of its costs of court and its reasonable and necessary attorneys' fees attributable to this
claim.
43. Each of the acts described above, together and singularly, was committed
"knowingly" and "intentionally" and was a producing cause of Plaintiff's damages.
Consequently and pursuant to section 17.50(b)(1) of the DTPA, Plaintiff also seeks judgment of
Defendant of three times the amount of actual damages attributable to this claim.
44. All conditions precedent to bringing this claim have occurred, will occur, or have
been waived, including all required or proper notices and demands.

COUNT FIVE
CLAIM FOR THE BREACH OF DUTY OF
GOOD FAITH AND FAIR DEALING
45. Plaintiff incorporates and realleges Paragraphs 1 through 44, as if set forth fully
herein.
46. As an insurer in the State of Texas, Defendant owes Plaintiff, its insured, the duty
to deal fairly and in good faith in the processing of a claim for insurance benefits. Defendant's
violations of the TIC are also violations of Defendant's common law duty to deal with Plaintiff
fairly and in good faith, such as Defendant's failure to timely pay Plaintiffs claim without a
proper reason for so doing. Indemnity first delayed, then denied, a full and fair payment of the
Claim while using a variety of fraudulent and deceptive practices designed to cause Plaintiff to
accept less than the full amount owed under the Insurance Contract. Defendant did so knowing
that the Claim was covered by the Policy and how much was owed. It's intentionally deceptive
use of an altered report prepared by its own adjuster is, standing alone, clear and convincing
evidence that Defendant knew that it was acting in bad faith when first tendering less than 10%
of the claim, and later tendering, as full payment, less than half of it's own adjuster's calculated
damage loss estimate.
47. Defendant's breach of the duty of good faith and fair dealing caused Plaintiff to
suffer damages as more particularly described in Count Four. That same breach was knowing,
intentional, deceptive, fraudulent, malicious and done with the specific intent to injure Plaintiff,
or alternatively, done with a conscious disregard of the rights and welfare of Plaintiff. As a
result, Plaintiff seeks, and is entitled to recover, exemplary damages from Defendant in an
amount to be determined by the trier of fact which amount Plaintiff alleges to be twice the
amount of withheld policy benefits.
48. All conditions precedent to bringing this claim have occurred, will occur, or have
been waived, including all required or proper notices and demands.

COUNT SIX
DECLARATORY JUDGMENT
49. Plaintiff incorporates and realleges paragraphs 1-48, as if set forth fully herein.
50. As provided in 28 U.S.C. Sections 2201-2202, Plaintiff seeks an order of this
Court declaring that it is not obligated to participate in the appraisal process as demanded by
Defendant in its October 18, 2013 letter, a copy of which is attached to this Complaint.
51. There is an actual case or controversy regarding whether any part of this dispute is
subject to the appraisal process as demanded by Defendant, and, absent an order of this Court to
the contrary, Plaintiff respectfully refuses to participate in such process for the reasons set forth
in this Complaint.
52. Declaratory relief is proper, because it will settle legal relations necessary to
resolve the dispute surrounding the Claim for insurance benefits for damages suffered by
Plaintiff during the May 15, 2013 hailstorm.
(a) Defendant Has Waived the Appraisal Process
53. Plaintiff seeks declaratory relief that Defendant has waived the right to compel
Plaintiff to participate in the appraisal process by failing to timely invoke such process within a
reasonable time after a bone fide impasse was reached between the parties. Sanchez v. Property
& Casualty Ins. Co., 2010 WL 414687 (S.D. Tex. 2010)
54. Although unbeknownst to Plaintiff at the time, the actual impasse between the
parties arose in May, 2013 when Indemnity began its planned, unlawful, and intentional course
of conduct which was designed to cheat Plaintiff out of its rightful insurance benefits through the
concealment, misrepresentation, and alteration of the contents and substance of the Bates report
in order to trick Plaintiff into accepting much less than it was entitled to recover from Defendant.
55. The Bates report is believed to have reported Defendant damages to the Ranch
buildings in excess of $900,000.00; that nearly all of such damages were covered by the Policy
issued to Plaintiff by Defendant; and that Plaintiff was entitled to have its claim promptly paid in
such amount.
56. The fraud, deception and bad faith set out in this Complaint which was practiced
upon the Plaintiff by Defendant for more than five months between the time of the actual
impasse between the parties in May, 2013, and Defendant's demand in October, 2013 for the use
of the appraisal process, was a waiver by Defendant of the right to compel the use of the
appraisal process.
(b) Defendant Improperly Seeks to Use the Appraisal
Process to Determine Liability
57. Defendant's demand for the use of the appraisal process should also be denied as
having been waived because Defendant seeks to use the process for the improper purpose of
resolving questions of liability (rather than damages) contrary to established case law, including
particularly, State Farm Lloyds v. Johnson, 290 S.W.3d 886, 890 (Tex. 2009)("Johnson
Decision") and TMM Investments, Ltd. v. Ohio Casualty Ins. Co., 730 F.3d 466, 474 (5th Cir.
2013)(applying Texas law)('TMM Decision")^damage questions [are] for appraisers and
liability questions [are] for the courts[.]'").
58. The proper scope of the appraisal process is limited to determining damages, i.e. the
amount of the loss, not issues of liability.
59. While distinctions between liability and damage may be blurred when considered
in the abstract, the Johnson Decision (at 892) makes it clear that,
"in actual cases, causation usually falls into one category or the other."
In this case, the alteration of the Bates report coupled with the use of the questionable Haag
Engineering Report as bolster, establishes beyond a doubt that Indemnity intends to use the
appraisal process as the means for resolving questions of liability by interjecting improper
arguments into that process since there is nothing to prevent it from submitting such arguments
to the appraisers in the form of "briefs" or some other advocacy submission, or from having its
own appointed appraiser make such arguments to the other appraisers.
60. The Engineering Report concludes in plain language that certain observed damage
to TMT's roofs resulted from footfall or mechanical contact, causes which are not at issue in this
case. Neither cause, if proved in this case, would invoke Defendant's coverage obligation; rather
such evidence would tend to tilt the appraisal to a lesser-than-justified amount. The same as in
the Johnson Decision, this is the precise kind of dispute that Defendant improperly wants to have
interjected into the appraisal process. See the Johnson Decision, at 892, citing Wells v. American
Swiss Preferred Ins. Co. where foundation damage claimed to be result of plumbing leaks
(covered event) or earth settling (non covered event) liability issues were implicated, and the
Court held that the use of the appraisal process was improper.
61. Unfortunately, there is nothing, absent an order of this Court, to prevent the
Defendant from submitting improper arguments to the appraisers through vehicles such as the
Engineering Report. There are no rules in the process itself which prohibits the unfettered
submission of improper arguments to the appraisers, thus submitting them to the influence of
arguments which should never reach their eyes or ears, and which cannot be regarded as
harmless. For example, the Engineering Report maintains there was no hailstorm on May 15, a
ridiculous suggestion, but one which cannot be left unanswered if raised because there would be
no coverage for TMT's claim if no such storm occurred. This is only one of many examples of
evidence of liability which can be improperly interjected into the appraisal process.
62. Another example from Defendant's own conduct in this matter is its argument in
various documents that there is no coverage under the Policy for damage that does not impact the
functionality of the roof, i.e. "cosmetic damage" only. This argument is purely a question related
to the scope of policy coverage from the language of the policy itself, i.e. a liability issue not
properly addressed by the appraisal process.
(c) Defendant's Unlawful and Unsavory Conduct
Voids It's Ri2ht to Invoke the Appraisal Process
63. Absent waiver, appraisals generally should go forward without preemptive
intervention by the courts (Johnson Decision, at 895). However, that general rule does not apply
when a party's fraudulent practices undermine the efficacy of the process. Under the Fifth
Circuit's TMM Decision (at 472), the effect of the appraisal process is to estop the parties from
contesting the issue of damages in a suit on the insurance contract, leaving only the question of
liability for the court. That decision (at 472) also notes that the damage award in the appraisal
process will not be upheld if it is,
"the result of fraud, accident, or mistake."
As presently postured, the appraisal process cannot be purged of Defendant's fraudulent and bad
faith practices, and the trial of the issue of damages must be conducted under the auspices of this
Court in order to insure a fair trial. Otherwise, the Defendant will be allowed to profit from its
own wrongful conduct, a result which the law does not condone.
64. As noted in the Johnson Decision (at 894), the appraisal process is conducted
without rules, attorneys, pleadings, subpoenas and hearings. In substance, the parties each
appoint their own appraiser, those two appraisers select an umpire, and the umpire resolves any
difference between the damage assessments of the two appraisers. Under this process, the
umpire will not be afforded the opportunity to resolve discrepancies with the knowledge (which
he or she should surely have) that the Defendant's first, untainted damage assessment by Bates
was more than twice the altered appraisal that Defendant now disingenuously presents as the real
thing, when in fact it is nothing more than a fraud. Under any circumstance, this Court should
order that the full, untainted Bates report be made part of the appraisal process, if such process is
allowed to proceed. The appraisal process could never be fairly conducted without the use of the
actual Bates report and a full explanation of the Defendants fraudulent and bad faith use of that
report, matters best left to this Court by trial of the damages issues.
65. It is most efficient to have this Court determine the issue of Policy losses since it,
not the appraisal panel, must also address the issue of damages under Plaintiffs bad faith claims.
Such a procedure would save the parties the cost of the appraisers and the extra legal expenses in
conducting two damages proceedings.
(d) Remedies Sought Under Count Six
66. Plaintiff asks this Court to declare that it is not obligated to first proceed with the
appraisal process before prosecuting its Policy claims against the Defendant.
67. Plaintiff also seeks recovery from Indemnity of reasonable and necessary
attorneys fees incurred in prosecuting its claim for declaratory relief, such attorneys fees being
properly recoverable under the Texas Civil Practices & Remedies Code, Section 37.009, and/or
applicable provisions of the Federal Declaratory Judgment Act, 28 U.S.C. Section 2202.
68. All conditions precedent to bringing this claim have occurred, will occur, or have
been waived, including all required or proper notices and demands.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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