ABRAHAM CO INC v. MARKEL INSURANCE COMPANY (2025)

OPINION

In this insurance-coverage case the main issue is whether the trial court correctly determined that an endorsement to the insurance policy limited the insurer's liability to $750,000 under the coverage in question. Concluding that under the policy's unambiguous language the trial court did not err in concluding that such a limit applies, we affirm the trial court's summary judgment as to the insured's breach-of-contract claim. We also affirm the trial court's dismissal of various extra-contractual claims; however, we reverse the trial court's summary judgment as to the insured's general negligence claim against a claims adjuster because the only summary-judgment ground asserted against this claim lacks merit. We affirm in part and reverse and remand in part.

I. Factual and Procedural Background

Appellant/plaintiff Abraham & Co. Inc. (“Abraham”) is in the business of selling Oriental rugs. Appellee/defendant Markel Insurance Company (“Markel”) issued insurance policy number 7002RS455240–3 to Abraham (the “Policy”), effective from November 16, 2020 until November 16, 2021. Under the Policy as to property at Abraham's premises, Markel's liability for all covered property in any one occurrence is limited to $2 million. During Winter Storm Uri in February 2021, the pipes at one of Abraham's locations covered by the Policy (5120 Woodway Drive in Houston, Texas) froze and burst, saturating numerous rugs stored at that location. The Woodway location was a leased showroom. According to Abraham a substantial number of Abraham's rugs were damaged and the total damage to Abraham's property exceeded the $2,000,000 policy limit. The Policy contains an endorsement (“Endorsement”) providing that “[t]he most [Markel] will pay in any one loss or damage directly or indirectly caused by water damage as defined herein is $750,000.” Abraham filed a claim under the Policy. Abraham argues that the Endorsement is incomplete and does not limit Markel's liability for a loss caused by water damage to $750,000.

Appellee/defendant Hirschfield Risk Services, Inc. d/b/a H&H Claims Consultants (“H&H”) handled the claims adjusting services for Markel for Abraham's claim. Abraham alleges that it wanted to remove the saturated rugs to a dry location but that H&H instructed Abraham to leave the rugs in place for days, while still wet, leading to a mold infestation that made the rugs unrestorable. Abraham also alleges that during the claims handling process H&H misrepresented to Abraham that the Endorsement was a proper endorsement to the Policy that limited Markel's liability for a loss caused by water damage to $750,000.

Relying on the Endorsement, Markel paid $750,000 on Abraham's claim and refused to pay the $2 million that Abraham argues should be paid on its claim. Abraham filed suit against Markel and H&H. Abraham asserted claims against Markel for breach of contract, breach of an alleged common law duty of good faith and fair dealing, fraud, violations of chapters 541 and 542 of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. Abraham asserted claims against H&H for negligence and violations of chapter 541 of the Texas Insurance Code. Markel and H&H (collectively the “Markel Parties”) answered and counterclaimed seeking declaratory relief and reasonable and necessary attorney's fees under the Texas Declaratory Judgments Act. Abraham filed a motion for partial summary judgment as to its breach-of-contract claim against Markel. The Markel Parties filed a traditional motion for summary judgment, seeking dismissal of all of Abraham's claims, and judgment as a matter of law on their requests for declaratory relief. Abraham filed a response in opposition. The trial court signed an order denying Abraham's summary-judgment motion, granting the Markel Parties summary-judgment motion, and making the following declarations:

1. The coverage limit for [Abraham's] water damage claim at issue in this lawsuit is $750,000;

2. [Abraham] has received payment of the full $750,000 limit for its water damage claim and therefore, there has been no breach of contract by [Markel] as a matter of law;

3. [Abraham's] other remaining extra-contractual causes of action against [Markel] for violations of §§ 541 and 542 of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, breach of the common law duty of good faith and fair dealing, and fraud, fail as a matter of law.

4. [H&H] is not in privity of contract with [Abraham] and cannot be held liable to [Abraham] for breach of contract;

5. Texas does not recognize a cause of action for negligent claims handling, therefore, [H&H] cannot be liable to [Abraham] on a theory of negligence; and

6. [The Markel Parties] are entitled to recover their reasonable and necessary attorneys’ fees and costs from [Abraham] as authorized by § 37.009 of the Texas Civil Practice & Remedies Code.

The trial court stated that the Markel Parties would submit an attorney's fees affidavit and that all of Abraham's claims against the Markel Parties would be dismissed upon the issuance of an attorneys’ fees award in their favor or other instruction by the trial court. The Markel Parties filed an attorneys’ fees affidavit, and Abraham filed objections to the affidavit. The trial court signed a final judgment, overruling Abraham's objections to the affidavit, awarding the Markel Parties attorney's fees and costs, and dismissed Abraham's claims with prejudice. Abraham timely appealed the trial court's judgment.

II. Issues and Analysis

On appeal Abraham presents the following issues:

1. Did the [t]rial [c]ourt err in granting summary judgment dismissing Abraham's entire case by:

A. Finding that H&H could not be liable for negligence?

B. Construing the coverage limit for Abraham's water damage claim as $750,000?

C. Determining that Abraham's extra-contractual causes of action against [the Markel Parties] for violations of §§ 541 and 542 of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, breach of the common law duty of good faith and fair dealing, and fraud depend on a successful breach of contract claim?

2. Are H&H's summary judgment arguments sufficient to throw out Abraham's negligence claims?

3. Is there a legal claim to be made against H&H where H&H took control of Abraham's property and negligently prevented Abraham from restoring and salvaging the damaged property?

4. Is the Endorsement promoted by Markel ambiguous?

5. Is there a fact issue regarding whether the Endorsement changes the limits of the Policy entirely or just for certain locations?

6. Does the Motion for Summary Judgment sufficiently address the causes of action under the Texas Insurance Code, the Texas Deceptive Trade Practices Act, fraud, and the common law duty of good faith and fair dealing?

In a traditional motion for summary judgment, if the movant's motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine issue of material fact sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In our de novo review of a trial court's summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).

A. Did the trial court err in concluding as a matter of law that the Policy's coverage limit for Abraham's claim is $750,000?

Abraham argues that the trial court erred in concluding as a matter of law that the Policy's coverage limit for Abraham's claim is $750,000. To analyze this argument we must interpret the Policy. Texas courts generally interpret insurance policies under the same rules of construction that apply to other contracts, reading all parts of an insurance policy together and viewing the policy in its entirety to give effect to the written expression of the parties’ intent. Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 740–41 (Tex. 1998). Applying the ordinary rules of contract construction to insurance policies, this court must ascertain the parties’ intent by looking to only the four corners of the policy to see what the policy states without considering what the parties allegedly meant. Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006); Williams Consol. I, Ltd./BSI Holdings, Inc. v. TIG Ins. Co., 230 S.W.3d 895, 902 (Tex. App.—Houston [14th Dist.] 2007, no pet.). This court seeks to harmonize and give effect to all of the policy's provisions so that none will be meaningless. See Gilbert Tex. Const., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 126 (Tex. 2010).

If this court can ascertain only one reasonable meaning of the policy provision, then this court will not adjudge the insurance contract ambiguous and will enforce it as written. Fiess, 202 S.W.3d at 746; State Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998). But, when this court finds words prone to more than one reasonable interpretation, the court will deem the contract ambiguous. See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). A policy is not ambiguous simply because the parties disagree about the policy's meaning. Great Am. Ins. Co. v. Primo, 512 S.W.3d 890, 893 (Tex. 2017); RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113, 119 (Tex. 2015). For an ambiguity to exist, both sides’ interpretations must be reasonable. Great Am. Ins. Co., 512 S.W.3d at 893. If this court determines that only one party's interpretation of the policy is reasonable, then the court will find the policy unambiguous and adopt the reasonable interpretation. Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 258 (Tex. 2017). Like all contracts, an insurance policy is ambiguous if, “after applying the pertinent rules of contract interpretation,” its language is susceptible to two or more reasonable interpretations. Id.

The Endorsement provides as follows:

The Endorsement is referred to in the Policy's cover sheet that lists the Policy documents. The declarations page of the Policy refers to the Endorsement as one of the “Forms and Endorsements applying to this Coverage Part and made a part of this policy at time of issue.” Another part of the Policy states that the limit of insurance for Abraham's premises at five different addresses, including 5120 Woodway Drive and 2515 Bartlett Street in Houston, is $2 million and that the deductible is $5,000. As noted by Abraham, this part of the Policy makes no mention of a lower limit of liability for losses caused by water damage.

Because no box in the Endorsement was checked, Abraham argues that the unambiguous language of the Policy provides that the most Markel will pay as to any loss or damage caused by water damage is $2 million, not $750,000. Abraham asserts that if Markel wanted to make this limit $750,000, then it would have checked a box in the Endorsement. In the alternative, Abraham argues that the Policy is ambiguous on this point and therefore the Policy is construed in favor of the insured. The Endorsement was created when customized language limiting Markel's liability as to losses caused by water damage was added to a pre-printed endorsement form and signed by an agent of Markel. An endorsement to an insurance policy may add, delete, or revise language in the policy. The pre-printed form contains the following language before the space to insert text: “The following item(s): [14 items are listed with a box next to each] is (are) changed to read {See Additional Page(s)}:” (“Initial Sentence”).² By using the term “changed to read” the form indicates that a part of the insurance policy will be identified and then the revised text for that part will be stated in the space on the form. Yet the “item(s)” listed do not refer to a specific part of the policy that may be revised and restated.

The language that was added to the pre-printed form is unambiguous and provides that the most Markel will pay as to any loss or damage caused by water damage is $750,000 (“Limit of Liability”). The Endorsement states, “THIS ENDORSEMENT CHANGES THE POLICY.” If we give effect to the Limit of Liability as additional language added to the Policy by the Endorsement without changing or replacing any language in the Policy, then the Initial Sentence will be rendered meaningless. If we conclude that there is no Limit of Liability because none of the boxes are checked, then the entire Endorsement will be rendered meaningless. As Abraham notes, though we seek to give effect to all of the policy's provisions so that none will be meaningless, sometimes it is not possible to do so. See Gilbert Tex. Const., L.P., 327 S.W.3d at 126; Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332 (Tex. 1983).

We agree with the United States Court of Appeals for the Fifth Circuit that “It is thus unreasonable for an insured that agreed to an endorsement to think that the endorsement has no effect; it begs the question of why an insurer would include an endorsement in the first place.” Big Binder Express, L.L.C. v. Liberty Mut. Fire Ins. Co., 843 Fed. Appx. 548, 553 (5th Cir. 2021) (not designated for publication). Abraham's interpretation of the Endorsement would make the entire Endorsement meaningless, as opposed to only the Initial Sentence.³ We conclude that Abraham's interpretation of the Endorsement and the Policy is unreasonable, and that the only reasonable interpretation of the Policy is that the Limit of Liability is effective despite the failure to check any box in the Endorsement. See id. (rejecting interpretation of policy that would make an entire endorsement meaningless); Kayihura v. Homeowners of America MGA, Inc., No. 14-22-00680-CV, 2023 WL 5286911, at *5 (Tex. App.—Houston [14th Dist.] Aug. 17, 2023, pet. denied) (rejecting interpretation of endorsement limiting liability for water damage to covered property because the interpretation would make the endorsement meaningless as to the personal property coverage) (mem. op.). In addition, a conflict between pre-printed terms in a form and customized terms typewritten on the form must be resolved in favor of the typewritten terms. See McMahon v. Christmann, 157 Tex. 403, 303 S.W.2d 341, 344 (1957); Lebco, Inc. v. MacGregor Park Nat'l Bank of Houston, 500 S.W.2d 698, 704 (Tex. Civ. App.— Houston [14th Dist.] 1973, writ ref'd n.r.e.); Fabela v. Printz Property Management LLC, No. 11-21-00178-CV, 2023 WL 4239857, at *8 (Tex. App.—Eastland Jun. 29, 2023, no pet.) (mem. op.).

Abraham also argues that even if the Limit of Liability is effective, there is a fact issue as to whether the Limit of Liability applies to property loss caused by water damage at all five locations listed in the Policy or only at the Bartlett Street location. Abraham asserts that after Hurricane Harvey, Abraham made a claim on a prior Markel policy for water damage at the Bartlett Street location and that after Hurricane Harvey, Markel first imposed a lower limitation of liability for water damage in its policy with Abraham. Therefore, Abraham contends that it is equally plausible that the Limit of Liability applies only to the Bartlett Street location. But nothing in the four corners of the Policy refers to this history or suggests that the Limit of Liability only applies to the Bartlett Street location. Under the plain text of the Endorsement the Limit of Liability applies to any loss caused by water damage at any of the five locations. Therefore, no such fact issue exists.

The trial court did not err in concluding that under the Policy's unambiguous language the coverage limit for Abraham's claim is $750,000. It is undisputed that Abraham's claim is based on a loss caused by water damage and that Markel has paid $750,000 on this claim. Therefore, the trial court did not err in granting summary judgment and dismissing with prejudice Abraham's breach-of-contract claim against Markel. See Big Binder Express, L.L.C., 843 Fed. Appx. at 553; McMahon, 303 S.W.2d at 344; Kayihura, 2023 WL 5286911, at *5; Lebco, Inc., 500 S.W.2d at 704. We overrule Abraham's fourth and fifth issues and the part of the first issue in which he challenges the trial court's conclusion that the Policy's coverage limit for Abraham's claim is $750,000.

B. Did the trial court err in granting summary judgment as to Abraham's extracontractual claims against Markel and as to Abraham's claim against H&H for alleged violations of chapter 541 of the Texas Insurance Code?

Abraham asserted claims against Markel for breach of an alleged common law duty of good faith and fair dealing, fraud, violations of chapters 541 and 542 of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act and a claim against H&H for alleged violations of chapter 541 of the Texas Insurance Code (collectively the “Extra-Contractual Claims”). Under the sixth issue Abraham asserts that the Markel Parties’ summary-judgment motion is not sufficient to assert a summary-judgment ground against the Extra-Contractual Claims. In their summary-judgment motion the Markel Parties (1) state that Abraham has never asserted any independent injury, (2) assert that the Supreme Court of Texas has made it clear that a party's extra-contractual claims fail if the party cannot prove a breach-of-contract claim and there is no independent injury, (3) cite the Menchaca case, and (4) contend that they are entitled to summary judgment as to the Extra-Contractual Claims. See USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479, 490, 499–501 (Tex. 2018). We conclude that the Markel Parties’ summary-judgment motion sufficiently addressed the Extra-Contractual Claims and sufficiently asserts a summary-judgment ground as to the Extra-Contractual Claims. See Arguelles v. Kellogg Brown & Root, Inc., 222 S.W.3d 714, 724 n.6 (Tex. App.—Houston [14th Dist.] 2007, no pet.).

Abraham asserts that the trial court erred in granting summary judgment as to the Extra-Contractual Claims because Markel breached the Policy by refusing to pay more than $750,000. Because we have held that the trial court did not err in granting summary judgment on the breach-of-contract claim this point lacks merit. Abraham also asserts that the trial court erred in granting summary judgment as to the Extra-Contractual Claims because in determining whether to grant summary judgment as to these claims the trial court was required to presume that Markel breached the Policy as alleged by Abraham. Abraham has cited no case in support of this argument, and it lacks merit under this court's precedent. See Pounds v. Liberty Lloyds of Tex. Ins. Co., 528 S.W.3d 222, 229 (Tex. App.—Houston [14th Dist.] 2017, no pet.).

Abraham further asserts that the summary-judgment ground asserted by the Markel Parties as to the Extra-Contractual Claims lacks merit as to Abraham's claim against H&H for alleged violations of chapter 541 of the Texas Insurance Code because this ground may only be invoked by parties whom the insured sued for breach of contract and Abraham did not sue H&H for breach of contract. Because Abraham did not raise this point in its summary-judgment response, we cannot reverse the trial court's summary judgment on this basis. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979); Norris v. Texas Dev. Co., 547 S.W.3d 656, 662 (Tex. App.—Houston [14th Dist.] 2018, no pet.).

We have addressed all of Abraham's arguments as to the Extra-Contractual Claims and have not found merit in any of them. Therefore, we conclude that the trial court did not err in granting summary judgment as to the Extra-Contractual Claims, and we overrule the sixth issue and the first issue to the extent it challenges the trial court's ruling on the Extra-Contractual Claims.

C. Did the trial court err in granting summary judgment as to Abraham's negligence claims against H&H?

In part of its first issue and in its second issue Abraham challenges the trial court's granting of summary judgment as to its negligence claims against H&H. The only summary-judgment ground that H&H asserted as to Abraham's negligence claims is “[Abraham] cannot recover against H&H under a theory of negligence because Texas does not recognize a cause of action for negligent claims handling. See Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456 (5th Cir. 1997).” Abraham argues that the trial court erred in granting summary judgment on this ground because it asserted a negligence claim against H&H that was not a negligent-claims-handling claim. H&H asserts that the trial court did not err because Abraham's only negligence clam was a negligent-claims-handling claim. Texas does not recognize a claim for negligent claims handling. Methodist Hosp. v. Zurich Am. Ins. Co., 329 S.W.3d 510, 520–21 (Tex. App.—Houston [14th Dist.] 2009, pet. denied); Flynn v. State Farm Fire & Cas. Ins. Co. (Texas), 605 F.Supp.2d 811, 816–18 (W.D. Tex. Feb. 18, 2009). Therefore, we must determine whether Abraham asserted a negligent-claims-handling claim against H&H.

In its live pleading Abraham alleges as follows:

• “The claim adjusting was handled by [H&H].”

• “[H&H] instructed [Abraham] to leave the rugs in place for days, while still wet, leading to a mold infestation making the rugs unrestorable.”

• In a paragraph labeled “Count 7 – Negligence,” Abraham alleged that “[H&H] owed a duty to [Abraham] to properly handle the claim, including but not limited [to] instructions on the handling of damages goods. [H&H] breached that duty as set out above, and this breach caused damage to [Abraham].”

• “For negligence, [Abraham] is entitled to actual, pecuniary, consequential, and future damages.”

Because no special exceptions were sustained against Abraham's petition in the court below, this court must construe that pleading liberally in Abraham's favor to include all claims that reasonably may be inferred from the language contained in the petition, even if the petition does not include all the elements of the claim in question. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex. 2000). Under this liberal construction, we conclude that Abraham pleaded both a claim for negligent claims handling and a claim for general negligence based on H&H's alleged instruction to Abraham to leave the rugs in place for days, while still wet, which allegedly led to a mold infestation making the rugs unrestorable (“General Negligence Claim”). See id. The trial court did not err in granting summary judgment as to Abraham's claim for negligent claims handling. See Methodist Hosp., 329 S.W.3d at 520–21; Flynn, 605 F.Supp.2d at 816–18, 820–827. The only summary-judgment ground H&H asserted against the General Negligence Claim is that Texas does not recognize a claim for negligent claims handling. Because the General Negligence Claim is not a claim for negligent claims handling, the trial court erred to the extent it granted summary judgment and dismissed this claim. Therefore, to the extent the trial court granted summary judgment as to Abraham's claim for negligent claims handling, dismissed the claim, and determined that H&H cannot be liable based on a theory of negligent claims handling, the trial court did not err, and we affirm the trial court's judgment. To the extent the trial court granted summary judgment as to Abraham's General Negligence Claim, dismissed the claim, and determined that H&H cannot be liable on a theory of general negligence, the trial court erred, and we reverse the trial court's judgment and remand for further proceedings as to this claim.⁴ Accordingly we overrule in part and sustain in part the part of the first issue in which Abraham challenges the trial court's determination that H&H cannot be liable for negligence, and we overrule in part and sustain in part the second issue.⁵

III. Conclusion

The trial court did not err in concluding that under the Policy's unambiguous language the coverage limit for Abraham's claim is $750,000. It is undisputed that Abraham's claim is based on a loss caused by water damage and that Markel has paid $750,000 on this claim. Therefore, the trial court did not err in granting summary judgment and dismissing with prejudice Abraham's breach-of-contract claim against Markel. The trial court did not err in granting summary judgment as to the Extra-Contractual Claims. To the extent the trial court granted summary judgment as to Abraham's claim for negligent claims handling, dismissed the claim, and determined that H&H cannot be liable based on a theory of negligent claims handling, the trial court did not err, and we affirm the trial court's judgment. To the extent the trial court granted summary judgment as to Abraham's General Negligence Claim, dismissed the claim, and determined that H&H cannot be liable on a theory of general negligence, the trial court erred, and we reverse the trial court's judgment and remand for further proceedings on this claim.

FOOTNOTES

2.   The Endorsement also states that each separately occurring claim for loss or damage resulting from water damage will be adjusted separately and will be subject to a $50,000 deductible. Another Policy endorsement contains the same provision. There is nothing improper with restating the applicable deductible.

3.   The Policy contains three other endorsements that also used this pre-printed form and in which no box is checked. Although none of these endorsements is at issue in this appeal, Abraham's interpretation of the Policy would also make all of these endorsements meaningless.

4.   We make no comment or determination as to the merits of the General Negligence Claim.

5.   We need not and do not address the third issue.

Randy Wilson, Justice