     Case: 15-10382      Document: 00513465674         Page: 1    Date Filed: 04/14/2016




         IN THE UNITED STATES COURT OF APPEALS
                  FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                   Fifth Circuit

                                                                               FILED
                                                                             April 14, 2016
                                      No. 15-10382
                                                                            Lyle W. Cayce
                                                                                 Clerk
HAMILTON PROPERTIES; HAMILTON 1101 LP; HAMILTON
PROPERTIES CORPORATION; GO-KAL LLC; and ULYSSES L.L.L.P,

                                                 Plaintiffs – Appellants,

v.

AMERICAN INSURANCE COMPANY; FIREMAN’S FUND INSURANCE
COMPANY; ARTHUR J. GALLAGHER; ALLIANZ GLOBAL RISKS,

                                                 Defendants – Appellees.



                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 3:12-CV-5046


Before DENNIS, ELROD, and GRAVES, Circuit Judges.
PER CURIAM: *
       This case arises out of an insurer’s denial of a property damage claim.
The insured, Hamilton Properties (Hamilton) appeals the district court’s order
granting summary judgment on all claims for the insurance company, The
American Insurance Co. (AIC). We AFFIRM the judgment of the district court.




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                  No. 15-10382
                                       I.
      In July 2009, a hailstorm in Dallas, Texas, allegedly caused damage to
the Dallas Plaza Hotel, owned by Hamilton. At the time of the hailstorm, the
property was covered under Hamilton’s insurance policy with AIC. The policy
insured the property against “all risks of direct physical loss or damage, except
as excluded or limited elsewhere.” The policy excluded from coverage “[w]ear
and tear, gradual deterioration, inherent vice, latent defect, depletion, erosion,
corrosion, mold, wet or dry rot,” “[s]ettling, cracking, shrinking, bulging, or
expansion of pavements, foundations, walls, floors, roofs, or ceilings,” and
“[f]aulty inadequate or defective . . . [d]esign specifications, workmanship,
repair, construction,” or faulty “[m]aterials used in repair, construction,
renovation, or remodeling; or maintenance.” Importantly, the policy required
the insured to provide “prompt notice” of any claims. The policy also required
that the insured “[t]ake all reasonable steps to protect the covered property
from further damage by a Covered Cause of Loss.” The policy’s coverage ended
on September 24, 2009.
      When the hailstorm occurred, the property was no longer being used as
a hotel, but there were multiple individuals living in the building. One of those
individuals, Tom Coughlin, acted as a caretaker of the property. Coughlin
stated at his 2013 deposition that he had been in the property during the
hailstorm and had witnessed ping-pong-ball-sized hailstones hitting the
property. Following the hailstorm, Coughlin saw water dripping from the
ceiling of the twelfth floor, and after several months, ceiling tiles began falling
from the twelfth floor ceiling. Coughlin stated that he notified Hamilton of the
damage within a couple of weeks but no more than a couple of months and on
several occasions. At the time of his deposition in 2013, Coughlin stated that
the water leak from the roof of the twelfth floor had continued to the present.



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                              No. 15-10382
       Hamilton took no action with regard to the property damage until
November 2010, when Hamilton’s representative, Larry Hamilton, hired an
inspector to inspect the damage to the roof and the twelfth floor. In February
2011, Mr. Hamilton emailed an AIC insurance agent about the damage. The
agent responded that it was no longer Hamilton’s broker of record and thus
could not accept or report the claim on Hamilton’s behalf. In October 2011,
Hamilton properly filed its claim with AIC.
       After investigating the claim, AIC denied coverage. In its denial letter,
AIC explained that because so much time had passed and because there were
multiple hailstorms both before and after the July 2009 hailstorm, AIC could
not determine what caused the damage or when the claimed damage occurred,
including whether the damage had occurred during the coverage period of
February 16 to September 24, 2009. AIC also noted that an inspection report
by one of its engineers on July 27, 2009—nineteen days after the hailstorm—
had not indicated any damage from water or hail. AIC’s roof expert inspected
the property during the investigation in 2012 and found that “the roof was done
with only one layer of base sheet covered with gravel, which [was] not
acceptable” for that type of roof and that “the worst interior damage was over
an area that was previously patched,” which suggested that the damage could
have also resulted from a faulty, worn, or unmaintained roof.
      In response to the denial letter, Hamilton brought suit against AIC,
alleging breach of contract and several non-contractual claims. 1 The district
court granted AIC’s motion for summary judgment on all claims. Hamilton
now appeals.




       1 All Plaintiffs except Hamilton dismissed with prejudice all claims against all
Defendants. Hamilton dismissed with prejudice all claims it asserted against all Defendants
except for AIC. Thus, only Hamilton and AIC remain in this case.
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                                  No. 15-10382
                                       II.
      We review a district court’s grant of summary judgment de novo,
applying the same legal standard as the district court. Kariuki v. Tarango,
709 F.3d 495, 501 (5th Cir. 2013). “Summary judgment is appropriate if the
movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Miller v. Metrocare Servs.,
809 F.3d 827, 831–32 (5th Cir. 2016) (citing Fed. R. Civ. P. 56(a)). All evidence
is viewed in the light most favorable to the non-moving party. Id. at 832. “A
dispute about a material fact is ‘genuine’ if the evidence would permit a
reasonable jury to return a verdict for the non-moving party.” Chaplin v.
NationsCredit Corp., 307 F.3d 368, 372 (5th Cir. 2002).
      We first turn to Hamilton’s breach of contract claim. Under Texas law,
the elements of a breach of contract claim are: “(1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach
of the contract by the defendant; and (4) damages to the plaintiff resulting from
that breach.” Hunn v. Dan Wilson Homes, Inc., 789 F.3d 573, 579 (5th Cir.
2015) (citing Foley v. Daniel, 346 S.W.3d 687, 690 (Tex. App.—El Paso 2009,
no pet.)), cert. denied, 136 S. Ct. 592 (2015). “[F]or an insurance company to
be liable for a breach of its duty to satisfy a claim presented by its insured, the
insured must prove that its claim falls within the insuring agreement of the
policy.” Data Specialties, Inc. v. Transcontinental Ins. Co., 125 F.3d 909, 911
(5th Cir. 1997).
      The district court granted summary judgment for AIC on Hamilton’s
breach of contract claim on two independent grounds. First, the district court
determined that because Hamilton had failed to provide “prompt notice,” as
required by the policy, AIC’s duty to pay Hamilton’s claim had been discharged
as a matter of law. Second, the district court concluded that Hamilton failed
to establish a prima facie claim for breach of contract because Hamilton could

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                              No. 15-10382
not show that its claimed damages were covered by the policy. We address
each ground in turn.
      The policy required that Hamilton provide to AIC “prompt” notice of any
claim. Under Texas law, compliance with a provision in an insurance policy
requiring prompt notice “is a condition precedent, the breach of which voids
policy coverage.” Blanton v. Vesta Lloyds Ins. Co., 185 S.W.3d 607, 611 (Tex.
App.—Dallas 2006, no pet.). However, the insured’s breach of a prompt notice
provision does not absolve the insurer from liability “unless the lack of notice
prejudices the insurer.” Id. The parties dispute whether “notice” occurred in
February 2011 (when Hamilton emailed an incorrect AIC agent and was
promptly notified that the agent could not file Hamilton’s claim) or November
2011 (when Hamilton actually filed its claim with AIC).             We assume for
purposes of our review of the grant of summary judgment that AIC was notified
in February 2011. See Miller, 809 F.3d at 832. The district court determined
that even if Hamilton notified AIC in February 2011, the notice was not prompt
as a matter of law.
      Where, as here, the policy does not define “prompt” notice, Texas courts
construe the phrase to mean “that notice must be given within a reasonable
time after the occurrence” of the damage. Ridglea Estate Condominium Ass’n
v. Lexington Ins. Co., 415 F.3d 474, 479 (5th Cir. 2005) (citing Stonewall Ins.
Co. v. Modern Exploration, Inc., 757 S.W.2d 432, 435 (Tex. App.—Dallas
1988)). Here, Hamilton claims that the property was physically damaged by
the hailstorm on July 8, 2009, and the earliest it may have given AIC notice
was February 2011—nineteen months after the damage occurred. Hamilton
does not provide any excuse for waiting nineteen months to give AIC notice of
the damage. 2 The damage was not hidden, and Coughlin, Hamilton’s own


      2  When asked why Hamilton did not investigate the cause of water leaking on the
twelfth floor after Coughlin reported the leaking, Mr. Hamilton replied:
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                                 No. 15-10382
witness, testified in his deposition that he notified Hamilton several times
about the damage within a couple of months after the hailstorm. Because the
delay here occurred “without explanation,” we agree with the district court that
Hamilton’s notice to AIC was not prompt as a matter of law. See, e.g., Alaniz
v. Sirius Int’l Ins. Corp., 626 F. App’x 73, 77 (5th Cir. 2015) (“[I]f the delay
occurs without explanation, it is appropriate to conclude that prompt notice
was not given as a matter of law.”); id. at 77 n.2 (citing Texas cases where
delays of 46 days, three months, and six months, were unreasonable as a
matter of Texas law).
       To be absolved from any duty under the policy, AIC must further show
that it was prejudiced by Hamilton’s unreasonably late notice. See Ridglea,
415 F.3d at 480; PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630, 634 (Tex. 2008).
Prejudice can arise when the failure to timely notify results in the insurer’s
“inability to investigate the circumstances of an occurrence to prepare
adequately to adjust or defend any claims.” Blanton, 185 S.W.3d at 615; see
Stonewall, 757 S.W.2d at 435 (“The purpose of the notice requirement is to
enable the insurer to promptly investigate the circumstances of the accident
while the matter is fresh in the minds of the witnesses, to prevent fraud, and
to enable it to form an intelligent estimate of its rights and liabilities under
the policy so that it may adequately prepare to defend any claim that may
arise.”).
       Hamilton argues that AIC cannot show prejudice because two AIC
employees made statements indicating that AIC was able to investigate



       We had closed the hotel. There wasn’t immediate harm to the operating hotel.
       The leak that was happening was happening on the 12th floor. When we found
       out that it was a big casualty loss because of the hailstorm, we started—we
       took efforts to get a new roof that the insurance company still hasn’t paid for.
There is also undisputed evidence that Mr. Hamilton hired an inspector in November 2010
to inspect the damage to the roof. When asked why the claim was not reported to AIC in
November 2010, Mr. Hamilton stated that he did not know.
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                            No. 15-10382
Hamilton’s claim insofar as AIC determined that coverage should be
disclaimed due to its inability to determine the cause or time period of the
damage.      We agree with the district court that the testimony of the AIC
employees does not raise a genuine issue of material fact in light of AIC’s
evidence that Hamilton’s unreasonably late notice prejudiced AIC.                         It is
undisputed that because of Hamilton’s delay, AIC lost access to critical
evidence, including the condition of the twelfth floor before and after the July
hailstorm and up until the end of the coverage period. As the district court
observed, “there is no indication that Plaintiffs attempted to mitigate the
damage or document the changes in the interim,” which surely “limited AIC’s
ability to determine whether and to what extent the July hailstorm damaged
the property.” Because the AIC employees’ testimony does not raise a fact
issue on the question of prejudice, we agree with the district court that AIC
was prejudiced as a matter of law and thus that AIC’s obligations under the
policy were discharged by Hamilton’s unreasonably late notice.
       Even assuming arguendo that AIC was not prejudiced by Hamilton’s late
notice, we agree with the district court that Hamilton also failed to establish a
prima facie claim for breach of contract. Under Texas law, to recover under an
insurance policy, the insured must show that its claimed damages are covered
by the policy. See Data Specialties, 125 F.3d at 911. The policy here covers
damage by a hailstorm “provided such loss or damage occurs during the term
of this policy.” As, the term of the policy was from February 16 to September
24, 2009, Hamilton can only recover for damages that: (1) were caused by a
hailstorm and (2) occurred on or between February 16 and September 24,
2009. 3


       3“Texas recognizes the doctrine of concurrent causes, so that when ‘covered and non-
covered perils combine to create a loss, the insured is entitled to recover only that portion of
the damage caused solely by the covered peril(s).’” Nat’l Union Fire Ins. of Pittsburgh, Pa. v.
Puget Plastics Corp., 735 F. Supp. 2d 650, 669 (S.D. Tex. 2010) (quoting Wallis v. United
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                                No. 15-10382
       Hamilton points to no evidence describing or quantifying the extent of
the hailstorm damage on or before September 24, 2009. Coughlin, Hamilton’s
main witness, testified that the roof problem on the twelfth floor has continued
since the time he first noticed the leak until “today.” Coughlin did not specify
the damage to the property prior to or as of September 24, 2009. Hamilton’s
expert witness, Thomas Shingler, inspected the property on August 19, 2013—
over four years after the July hailstorm. While Shingler concluded that the
July hailstorm “impact-damaged” part of the “building roof perimeter” such
that it “ruptured the waterproofing skin of the cant element producing flow
paths for the intrusion of water to the interior,” Shingler was unable to
determine the extent of the damage to the property between July 8 and
September 24, 2009. At most, Shingler claimed he could show that the current
damage to the property (or the damage he observed in August 2013) can be
linked to the July hailstorm. This does nothing to enable a jury to segregate
damages for only that property damage caused by covered perils that occurred
within the policy period. 4 Hamilton’s failure to provide evidence upon which a
jury or court could segregate covered damages from uncovered damages is fatal
to its claim. Wallis v. United Servs. Auto Ass’n, 2 S.W.3d 300, 304 (Tex. App.—
San Antonio 1999, pet. denied).
       Finally, we agree with the district court that Hamilton cannot prevail on
its extra-contractual claims for violation of the Texas Deceptive Trade


Servs. Auto Ass’n, 2 S.W.3d 300, 302–03 (Tex. App.—San Antonio 1999, review denied)). As
such, “[f]ailure to provide evidence upon which a jury or court can allocate damages between
those that resulted from covered perils and those that did not is fatal to an insured party’s
claim.” Id. (citing Wallis, 2 S.W.3d at 304). The Texas Court of Appeals held in Wallis that
“[b]ecause an insured can recover only for covered events, the burden of segregating the
damage attributable solely to the covered event is a coverage issue for which the insured
carries the burden of proof.” 2 S.W.3d at 303.
        4 Hamilton’s expert admitted that the claimed damage he saw in August 2013 would

not have been there at the end of the policy period in 2009 because such damage “takes time
to develop.”

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                                 No. 15-10382
Practices Act, Sections 541 and 542 of the Texas Insurance Code, and the duty
of good faith and fair dealing. A claim under Section 542 requires a showing
that the insurer “is liable for the claim,” which, as discussed above, Hamilton
cannot show. Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins. Co.,
801 F.3d 512, 518 (5th Cir. 2015) (citing GuideOne Lloyds Ins. Co. v. First
Baptist Church of Bedford, 268 S.W.3d 822, 830–31 (Tex. App.—Forth Worth
2008, no pet.)). Hamilton’s other three claims can be collectively analyzed
under the same standard as a common-law bad faith claim. Texas Mut. Ins.
Co. v. Sara Care Child Care Ctr., Inc., 324 S.W.3d 305, 317 (Tex. App.—El Paso
2010, review denied) (explaining that that standard for liability under § 541 of
the Texas Insurance Code and the Texas Deceptive Trade Practices Act
“incorporate[s] the common-law bad faith standard”).
       In general, “an insured does not have a bad faith claim in the absence of
a breach of contract by the insurer.” Toonen v. United Servs. Auto. Ass’n, 935
S.W.2d 937, 941 (Tex. App.—San Antonio 1996, no writ); see also Republic Ins.
Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995)). The only exceptions to this
general rule are when the insurer “commit[s] an act, so extreme, that would
cause injury independent of the policy claim” or “failed to timely investigate its
insureds’ claims.” Toonen, 935 S.W.2d at 941–42. Because Hamilton’s breach
of contract claim fails, and because Hamilton neither proffered any evidence of
an injury “independent of the policy claim” nor argued that AIC failed to timely
investigate its claim, Hamilton cannot prevail on its remaining extra-
contractual claims. 5 See id.
       AFFIRMED.



       5 As Hamilton did not brief his other extra-contractual claims, any arguments that
the district court erred in granting AIC summary judgment on those claims are forfeited. See
United States v. Valdiosera-Godinez, 932 F.2d 1093, 1099 (5th Cir. 1991) (“[A]ny issues not
raised or argued in the appellant’s brief are considered waived and will not be entertained on
appeal.”).
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