Advertising full coverage does not establish a misrepresentation where amount of loss is disputed.
Plaintiffs in first-party property insurance cases often include a misrepresentation claim, typically arguing that the carrier’s failure to pay sufficient amount for covered damage to the property constitutes a misrepresentation. While state court judges may sometimes allow these claims to go to a jury, Texas law clearly holds that disputes about the amount of the loss do not constitute misrepresentations of the policy.
In Click v. State Farm Lloyds, No. 1:17-CV-00108-BL, 2018 WL 1322167 (N.D. Tex. March 13, 2018) (slip op.), an insured attempted to circumvent application of Texas law regarding misrepresentations by pointing to State Farms advertising materials as the basis for his claims.
Click made a claim for water damage to his home. State Farm inspected the property and prepared two estimates, both of which Click disputed as being insufficient to repair the damage to the home. Click ultimately submitted his own estimate, which was more than four times the estimate State Farm had prepared. State Farm declined to issue payment based Click’s estimate and Click eventually filed suit.
State Farm filed a 12(b)(6) motion to dismiss, arguing that Click’s complaint did not meet the federal pleading standards. Among other things, Click alleged that State Farm made misrepresentations but was unable to point to any specific statement supporting the claim other than a “repeated general reference to advertising materials claiming to fully restore the insured following a loss.” Magistrate Judge E. Scott Frost rejected Click’s argument, stating that the insured cannot decide that multiple estimates prepared by an adjuster are insufficient, provide his own estimate, and then claim that the carrier violated the DTPA by declining to pay the total of his estimate, whether or not the insurer advertised the policy as compensating for “all loss.” Simply put, the mere fact that plaintiff disputes the amount paid out by the carrier is no evidence of actionable misrepresentation.
Judge Frost also rejected Click’s bad faith claim, holding that State Farm’s revisions to its estimate established at most a bona fide dispute that does not give rise to bad faith. The court ultimately granted State Farm’s motion and dismissed Click’s claims.