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by Kristin C. Cummings

A few months ago (in the August 2024 Lowdown), I wrote about a recent case that again reiterated the rule that payment of statutory interest with an appraisal award precludes attorneys’ fees. I was proud of my snarky title: “Once More for Those in the Back: Payment of Any Potential Statutory Interest Along with Payment of an Appraisal Award Precludes Claim for Attorneys’ Fees.” Well, now I wish I had saved that particular snark for this article, which could absolutely be called “Once More for Those in the Back: Texas Follows the Concurrent Causation Doctrine.” But having already used that particular title, I instead was forced to resort to alliteration for this one. (If you are a regular reader, you know we Zelle lawyers like our alliteration – Lonestar Lowdown, Todd Tippett’s Top Ten Tips, Lassoing Liability, and our newest addition, Beyond the Bluebonnets.)

Texas is unique for lots of reasons - one is that we are the only state that has its own power grid  – another is that we are in the minority of states that apply the doctrine of concurrent causation to insurance disputes. Concurrent causation occurs when an insured’s loss is caused by a combination of events that cannot be separated, but together resulted in the loss. As the Texas Supreme Court has explained, “[i]n cases involving concurrent causation, the excluded and covered events combine to cause the plaintiff's injuries[] [and] [b]ecause the two causes cannot be separated, the exclusion is triggered”[1] and there is no coverage. Again and again, Texas courts have reiterated this doctrine and held policyholders to their burden to segregate covered damage from non-covered damage. When policyholders can’t meet that burden – they don’t get coverage.

Although the law is clear, policyholder lawyers persist in trying to convince judges in the Lonestar State that as long as they can prove that some of the damage was caused by a covered peril – they get coverage for all of the damage. Thankfully, Texas courts (and federal courts sitting in Texas) are not falling for it and continue to hold insureds to their burden.

The latest example of this is out of the Western District of Texas, Amarillo Division. On September 16, 2024, the court issued its Order Granting State Farm Lloyds’ Motion for Summary Judgment in Espinoza v. State Farm Lloyds.[2] In Espinoza, the insured made a claim for wind and hail damage to his home. State Farm Lloyds inspected the property and found that the only damage from wind or hail that had occurred during the policy period was wind damage to a single shingle, which fell under the deductible. However, there was evidence of hail impacts occurring prior to the policy period and normal wear and tear and deterioration of shingles. Based on the fact that the only covered damage fell under the deductible, State Farm Lloyds issued a letter stating no payments were owed.

As is so often the next step when an insurer’s adjustment reveals there is no covered damage (or the covered damage is under the deductible), the policyholder retained an attorney and sued for, among other things, breach of contract and violations of the Texas Insurance Code.

In its Motion for Summary Judgment, State Farm Lloyds argued that the insured could not prove the insured’s claim fell within the insuring agreement of the Policy. Specifically, State Farm Lloyds argued that the insured had no evidence segregating the alleged covered damage from other damage and therefore could not meet his burden to provide evidence upon which the factfinder could allocate damages between covered and noncovered damages.

Acknowledging that the insured had the burden to segregate, the court turned to the evidence submitted by both parties. The court noted that State Farm Lloyds’ evidence demonstrated the storm on the alleged date of loss could not have caused all the claimed damage, pointing to observations by the investigating adjuster and expert witnesses. Based on this evidence the Court held that State Farm Lloyds “has made an initial showing that there is no evidence to support Plaintiff’s breach of contract claim,” and that therefore, “the burden is now on Plaintiff to come forward with competent summary judgment evidence of the existence of a genuine fact issue.”

The court then turned to the insured’s evidence and provided a catalogue: 1) expert witness testimony that a “significant hailstorm” passed through the Property’s immediate area on the alleged date of loss; 2) expert witness testimony that confirmed there was storm activity with wind gusts over 30mph on the date of loss; and 3) expert witness testimony that a severe hailstorm caused damage to the roof at the property. The court found this evidence did not meet the insured’s burden.

The court held the insured’s summary judgment evidence would not allow a jury to segregate pre-existing damage from damage occurring on the alleged date of loss. The court explained that while the insured’s evidence “may raise a fact issue as to whether there is hail damage to the Property, it does not raise any fact issue as to whether the damage occurred during the coverage period of the Policy, let alone the alleged date of loss.” The court went on to explain that the insured’s expert report suggested “that hail could have damaged the Property on May 30, 2021, but it does not provide any evidence that it actually did.”

The court’s holding in Espinoza shouldn’t warrant a write-up in the Lowdown; he simply applied the concurrent causation doctrine to the evidence submitted by the parties in order to reach a legal conclusion supported by the Texas Supreme Court and other courts throughout the state. But because policyholder attorneys continually fail to produce evidence sufficient to meet the insured’s burden, this issue remains an important one. Therefore, insurers should consider this case’s following take-aways:

1. Once an insurer provides evidence that at least some of the insured’s claimed damage was not caused by a covered peril, the burden is on the insured to produce evidence allowing the fact finder to segregate covered and noncovered damage;
2. An insured does not meet its burden by providing evidence that a covered peril could have damaged its property; it must provide evidence showing that a covered peril did damage its property;
3. If an insured fails to provide competent summary judgment evidence that would allow the trier of fact to segregate covered loss from non-covered losses, an insurer is entitled to summary judgment.

So, once more for those in the back: Texas Follows the Concurrent Causation Doctrine.

[1] Utica Nat’l Ins. Co. of Texas v. Am. Indem. Co., 141 S.W.3d 198, 204 (Tex. 2004)

[2] 1:23-CV-751-DH (W.D. Tex. Sept. 16, 2024).

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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.