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by Adrienne Nelson

On May 19, 2026, Chief United States District Judge Reed O'Connor of the Northern District of Texas issued a memorandum opinion and order in Sunshine Eastgate Plaza LLC v. Lexington Insurance Company, et al., Civil Action No. 3:25-CV-02986-O, granting motions to dismiss and to strike filed by defendants Axis Surplus Insurance Company and StarStone Specialty Insurance Company.

The case arose from an insurance coverage dispute over alleged storm damage to a commercial building. The property was insured under three separate commercial property policies issued by Lexington Insurance Company, Axis, and StarStone, with effective dates from November 1, 2023 to November 1, 2024. Plaintiff Sunshine Eastgate Plaza LLC alleged that the property sustained wind and hail damage on September 24, 2024, and that after filing a claim and submitting to an inspection, the defendants failed to pay the full benefits owed under the policies. On September 26, 2025, Sunshine Eastgate filed suit asserting claims for breach of contract, violations of Chapters 541 and 542 of the Texas Insurance Code, and declaratory judgment.

Axis and StarStone moved to dismiss Sunshine Eastgate's extracontractual claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, arguing that the complaint contained only threadbare and conclusory allegations in support of claims for various violations of Texas Insurance Code Chapter Sections 541.060 and 541.061 and 542.055-542.058. Notably, the plaintiff filed no response to the motions to dismiss.

The court applied the well-established plausibility standard set forth in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, requiring that a complaint plead "enough facts to state a claim to relief that is plausible on its face". Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Critically, because Sunshine Eastgate's claims were intertwined with allegations of misrepresentation, the court also applied the heightened pleading standard of Federal Rule of Civil Procedure 9(b), which requires plaintiffs to plead the "who, what, when, where, and how" of the alleged misconduct.

The court found that the complaint's allegations were little more than "legal conclusions couched as factual allegations."  Sunshine Eastgate, 2026 WL 1399341 at *3. For instance, the complaint alleged that the defendants "failed to properly investigate, evaluate, and adjust Plaintiff's claim" and "performed an outcome-oriented investigation," but offered no explanation as to how the investigation was deficient or how any specific defendant misrepresented material facts. Id. at *2. Similarly, the plaintiff's claims under Sections 542.055 through 542.058 of the Code were "essentially verbatim recitations" of the statutory provisions, devoid of any supporting factual content. Id. at *3. The court dismissed all of the plaintiff's extracontractual claims against both Axis and StarStone.

Perhaps equally significant was the court's ruling on the defendants' motion to strike the plaintiff's claim for attorney's fees. Under Section 542A.003 of the Texas Insurance Code, a claimant must provide written notice to each defendant insurer at least 61 days before filing suit, including a statement of the acts or omissions giving rise to the claim, the specific amount alleged to be owed by each insurer, and the amount of attorney's fees incurred. Tex. Ins. Code §§ 542A.003 (a)-(b). If notice is provided by an attorney or representative on the claimant’s behalf, compliance with § 542A.003(c) is also required.

Here, Sunshine Eastgate had sent a single pre-suit Notice of Intent letter addressed only to Ryan Vesta and Lexington Insurance Company. That letter described no acts or omissions by either StarStone or Axis and failed to separately state the amount owed by each insurer. Citing the Texas Supreme Court's decision in In re Lubbock Independent School District, the court held that a "single notice to all insurers" that does not separately state the amount alleged to be owed by each insurer fails to satisfy the statute's requirements. In re Lubbock Indep. Sch. Dist., 700 S.W.3d 426, 428 (Tex. 2024) (per curiam). Because the plaintiff only provided notice to Lexington, its pre-suit obligations to StarStone and Axis were not met.

The plaintiff argued in the alternative that, if the court found notice deficient, the appropriate remedy should be a limited abatement to allow supplemental notice rather than striking attorney's fees. The court rejected this argument, noting that the 2017 amendments to the Insurance Code provide defendant-insurers with a choice of remedies when pre-suit notice is deficient, and that StarStone and Axis had elected to limit the plaintiff's attorney's fees under Section 542A.007(d). The court ordered that the plaintiff shall not recover any attorney's fees incurred after the filing date of StarStone's Section 542A.007(d) pleading on November 10, 2025.

The Sunshine Eastgate decision serves as a pointed reminder that federal courts in Texas will not tolerate boilerplate pleading in insurance bad faith cases. Complaints that merely parrot the statutory language of Chapters 541 and 542 without articulating specific facts — particularly where misrepresentation claims trigger Rule 9(b) — are vulnerable to dismissal at the earliest stages. Plaintiffs must identify specific acts by specific defendants and explain, with factual particularity, how those acts violated the Insurance Code.

Second, the decision underscores the importance of individualized pre-suit notice when multiple insurers are involved. A blanket notice sent to one insurer does not satisfy the statutory obligation to each insurer, and the failure to comply can result in the forfeiture of attorney's fees — a significant financial consequence. 

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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.