Toney v. State Farm Lloyds, Case No. 14-40914, 2016 WL 4784012 (5th Cir. Sept. 13, 2016).

After a March 2012 hail storm damaged his home in Mission, Texas, Kenneth Toney (“Toney”) filed a claim with State Farm Lloyds (“State Farm”), his homeowners insurance carrier.  The parties were unable to agree on the amount to which Toney was entitled for the claim.  Specifically, Toney believed he should receive approximately $9,000 to replace a portion of his roof with a different type of roof structure, an action that he believed was mandated by local building codes.  Following the storm, Toney received two letters from the city of Mission:  one indicating that the type of roof he had needed to be replaced under the building code; and a second which retracted the first and specified that, under the relevant code, the existing roof structure did not need to be replaced with a different type of structure unless such replacement was essential to making repairs. 

Although the policy covered changes required by local building codes, State Farm eventually denied the portion of Toney’s claim that involved changing the roof design, citing the second letter from Mission.  Toney brought claims for breach of contract and violations of the bad-faith provisions of the Texas Insurance Code and the Texas Deceptive Trade Practices Act.

The district court granted summary judgment for State Farm, and the Fifth Circuit Court of Appeals affirmed.  The Circuit Court noted that under Texas law, the insured bears the burden of establishing that the claim falls within the policy’s coverage.  To determine whether the claim was covered, the Court delved into the details of Mission’s building code, eventually concluding that nothing in the code required the replacement of undamaged materials.  As it was undisputed that the underlying structural components of Toney’s roof were undamaged and the roof could be repaired without replacing them, the Court held that the code did not mandate the replacement Toney sought, and thus the policy did not provide coverage for the claim.  Accordingly, State Farm was entitled to summary judgment on Toney’s contract and bad faith claims.