Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163
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Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel sent a demand notice letter to HAIC stating that Menchaca had sustained $48,757.98 in economic damages based on an estimate prepared by Henry Sienema, Vice President of Case Strategies Group. The letter demanded that HAIC pay $48,757.98 in actual damages, $2,400 in attorney’s fees, and $2,000 in expenses, totaling $53,157.98, to resolve the matter without litigation.
HAIC Invoked the Appraisal Process
HAIC’s appraiser and the agreed umpire signed an appraisal award setting the amount of loss for Menchaca’s claim. On June 4, 2021, without admitting liability, HAIC issued a check to Menchaca in the amount of $7,085.86- the actual cash value of $13,145.86 assigned by the appraisers minus the $6,060 deductible under Menchaca’s policy.
Trial began and the jury returned a verdict for Menchaca. The trial court rendered final judgment on the jury’s verdict on May 31, 2023, ordering that Menchaca recover from HAIC $300,000 in mental anguish damages, $250,000 for his reasonable and necessary attorney’s fees, and $93,000 in pre- judgment interest. This appeal followed.
KEY POINTS OF CASE
- Initial Claim and Appraisal:
Menchaca’s initial claim was denied as the estimated repair cost was less than his deductible . Menchaca then demanded $48,757.98 in damages, leading HAIC to invoke the appraisal process .
- Legal Proceedings:
HAIC filed for declaratory judgment, questioning the qualifications of Menchaca’s appraiser and requesting an Examination Under Oath (EUO) from Menchaca . Menchaca counterclaimed, alleging violations of the Texas Insurance Code, fraud, breach of contract, and bad faith .
- Jury Verdict:
The jury found in favor of Menchaca, awarding him $300,000 in mental anguish damages, $250,000 in attorney’s fees, and $93,000 in pre-judgment interest .
- Appeal:
HAIC appealed, arguing that it had complied with its obligations under the policy by paying the appraisal award and that Menchaca’s mental anguish damages were not recoverable as an “independent injury”. The Court of Appeals agreed with HAIC, reversing the trial court’s judgment and ruling that Menchaca take nothing on his counterclaims.
DISCUSSION
The only actual damages Menchaca sought were lost policy benefits which HAIC paid when it paid the appraisal award. The only “actual damages” Menchach sought are the policy benefits wrongfully withheld, and those benefits have already been paid pursuant to the policy. The trial court erred in rendering judgment in favor of Menchaca on his contractual and extracontractual claims and awarding him $300,000 in mental anguish damages.
HAIC discharged its liability under the policy by paying the appraisal amount in full, along with statutory interest, and complied with its obligations under the policy. Because HAIC has paid the full appraisal award and any possible statutory interest, Menchaca cannot recover attorney’s fees and the trial court erred in awarding him such. The Court of Appeals also sustained HAIC’s claims that trial court’s May 31, 2023 final judgment was erroneous and rendered judgment that Menchaca take nothing on his counterclaims against HAIC.
ZALMA OPINION
It is axiomatic that an appraisal award sets the amount of loss in accordance with the terms and conditions of the contract of insurance. The jury was either improperly instructed or ignored the law when it was established that the insurer paid the full amount of the appraisal award in full with interest. An insurer that pays everything it owes under the terms of the policy cannot be held for tort and bad faith damages.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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ZIFL Volume 30, Number 2
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post number 5260
Read the full article at https://lnkd.in/gzCr4jkF, see the video at https://lnkd.in/g432fs3q and at https://lnkd.in/gcNuT84h, https://zalma.com/blog, and at https://lnkd.in/gKVa6r9B.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles about insurance fraud:
Read the full 19 page issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/01/ZIFL-01-15-2026.pdf.
The Contents of the January 15, 2026 Issue of ZIFL Includes:
Use of the Examination Under Oath to Defeat Fraud
The insurance Examination Under Oath (“EUO”) is a condition precedent to indemnity under a first party property insurance policy that allows an insurer ...
ERISA Life Policy Requires Active Employment to Order Increase in Benefits
Post 5259
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In Katherine Crow Albert Guidry, Individually And On Behalf Of The Estate Of Jason Paul Guidry v. Metropolitan Life Insurance Company, et al, Civil Action No. 25-18-SDD-RLB, United States District Court, M.D. Louisiana (January 7, 2026) Guidry brought suit to recover life insurance proceeds she alleges were wrongfully withheld following her husband’s death on January 9, 2024.
FACTUAL BACKGROUND
Jason Guidry was employed by Waste Management, which provided life insurance coverage through Metropolitan Life Insurance Company (“MetLife”). Plaintiff contends that after Jason’s death, the defendants (MetLife, Waste Management, and Life Insurance Company of North America (“LINA”)) engaged in conduct intended to confuse and ultimately deny her entitlement to...
Failure to Respond to Motion to Dismiss is Agreement to the Motion
Post 5259
Read the full article at https://lnkd.in/gP52fU5s, see the video at https://lnkd.in/gR8HMUpp and at https://lnkd.in/gh7dNA99, and at https://zalma.com/blog plus more than 5250 posts.
In Mercury Casualty Company v. Haiyan Xu, et al., No. 2:23-CV-2082 JCM (EJY), United States District Court, D. Nevada (January 6, 2026) Plaintiff Mercury Casualty Company (“plaintiff”) moved to dismiss. Defendant Haiyan Xu and Victoria Harbor Investments, LLC (collectively, “defendants”) did not respond.
This case revolves around an insurance coverage dispute when the parties could not be privately resolved, litigation was initiated in the Eighth Judicial District Court of Nevada. Plaintiff subsequently filed for a declaratory judgment in this court.
On or about April 15, 2025, the state court action was dismissed with prejudice pursuant to a stipulation following mediation. Plaintiff states that the state court dismissal renders its ...
Court Must Follow Judicial Precedent
Post 5252
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Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine
In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
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He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...
