# Welch v. State Farm Lloyds

> District Court, S.D. Texas · April 24, 2025

URL: https://www.frixlaw.com/law-library/cases/10851241

## Case

- **Court:** District Court, S.D. Texas
- **Decided:** April 24, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT April 24, 2025
SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk
GALVESTON DIVISION
RICHARD WARNER WELCH, et al., §
§
Plaintiffs. §
§
V. § CIVIL ACTION NO. 3:23-cv-00392
§
STATE FARM LLOYDS, §
§
Defendant. §

ORDER, MEMORANDUM AND RECOMMENDATION
Pending before me is Defendant State Farm Lloyds’ Motion for Summary
Judgment (Dkt. 23) and Motion to Exclude Plaintiffs’ Expert Witness Testimony
(Dkt. 26). Having reviewed the briefing, the record, and the applicable law, I deny
State Farm’s Motion to Exclude, and recommend that State Farm’s Motion for
Summary Judgment be denied in part and granted in part.
BACKGROUND
Plaintiffs Richard and Robbin Welch brought this suit against State Farm
claiming that State Farm wrongfully denied an insurance claim the Welches made
under a homeowners’ policy with State Farm (the “Policy”).
On August 9, 2022, Richard Welch reported to State Farm that his home
(the “Property”) sustained water damage because of a plumbing leak. On August
17, 2022, State Farm retained Herndon/Muncey, Inc. to conduct plumbing tests to
confirm the presence of a leak. On August 26, 2022, Herndon/Muncey conducted
a static test, a hydrostatic test, and a flow test at the Property. Herndon/Muncey’s
testing confirmed leaks in the plumbing system under the foundation and an above
grade plumbing leak. The Welches retained Herndon/Muncey to repair the leaks.
Around the same time, the Welches retained Olshan Foundation to make repairs
to their foundation.
The Welches then filed a claim to recoup the payments they made for these
repairs. As to Herndon/Muncey’s repairs, State Farm denied the claim on the
ground that the Policy does not cover repairs to a plumbing system and provides
coverage for the “reasonable cost” incurred “to tear out and replace only that
particular part of the building structure necessary to gain access to the specific
point of that system or appliance from which seepage or leakage occurred.”
Dkt. 24-1 at 19 (emphasis removed). State Farm argues that, because the plumbing
repairs were made by tunneling under the slab, no tearing out or replacing was
required, thus the work is not covered under the Policy.
As to the foundation repairs, State Farm denied the claim on the ground that
the Policy covers damage to the foundation only when it is “caused by seepage or
leakage of water or steam from within a plumbing, heating, air conditioning or
automatic fire protective sprinkler system.” Id. at 12. State Farm based this denial
on the opinion of Peter J. Kosmoski, an engineer that State Farm hired to inspect
the Property. Kosmoski concluded that the plumbing leaks did not cause the
foundation damage, attributing the damage to drainage conditions, adverse
weather conditions, and animal activity. Kosmoski inspected the Property on
September 15, 2022. State Farm denied the Welches’ claim on October 16, 2022.
Following the denial of their claim, the Welches retained Barret F. Angst to
inspect the Property on their behalf. Angst inspected the Property on November 8,
2024. Unlike Kosmoski, Angst attributed the foundation damage to the plumbing
leaks, concluding that “[d]ue to the continuous flow of water from the plumbing
leaks, the soils were eroded, causing voids and slab settlement.” Dkt. 24-9 at 8.
On December 14, 2023, the Welches filed this lawsuit. They assert seven
claims against State Farm: (1) bad faith, (2) breach of contract, (3) deceptive
insurance practices in violation of the Texas Insurance Code and Texas Deceptive
Trade Practices Act (“DTPA”), (4) late payment of claims in violation of the Texas
Prompt Payment of Claims Act (“TPPCA”), (5) common law fraud, (6) fraud by
nondisclosure, and (7) fraud in the sale of an insurance policy. State Farm has
moved for summary judgment on all of the Welches’ claims.
ORDER ON STATE FARM’S MOTION TO STRIKE1
Before turning to State Farm’s Motion for Summary Judgment, I must
address State Farm’s Motion to Exclude Plaintiffs’ Expert Witness Testimony. See
Dkt. 26. State Farm seeks to exclude the testimony of three expert witnesses. First,
State Farm seeks to exclude testimony from two of the Welches’ non-retained
experts—Sandra Davis and John Wade. State Farm contends that the Welches have
failed to make the required disclosures for Davis, and that Wade is unqualified to
provide causation opinions regarding foundation movement. As to the Welches’
retained expert, Angst, State Farm argues that he “has provided a causation
opinion as to the foundation movement that is speculative and not reliable.” Dkt.
26 at 2.
In response to State Farm’s Motion to Exclude, the Welches have withdrawn
the designation of Davis, and represented that they “will not seek expert testimony
from John Wade on the issue of causation.” Dkt. 27 at 1. Accordingly, State Farm’s
Motion to Exclude is denied as moot as to Davis and Wade.
As for Angst, the Welches note that State Farm presents but a mere three-
sentence challenge to Angst:
a. While Angst’s inspection and review of information may suggest
that the slab deflection (foundation movement) is consistent with a
plumbing leak, Angst does not actually state that the plumbing leak in
fact caused the foundation movement.
b. Plaintiffs’ expert also did not provide any citations or publications
which support the assertions and claims he makes in his report.
c. Additionally, he does not establish how these broad assertions apply
to the specific facts to reach his conclusions or what reliable methods
he used to reach these conclusions.

1 “District courts in the Fifth Circuit have universally treated motions to strike expert
testimony as non-dispositive matters within the statutory jurisdiction of magistrate
judges.” Lloreda v. Dolgencorp of Tex., Inc., No. 3:21-cv-00171, 2022 WL 203258, at *1
n.1 (S.D. Tex. Jan. 24, 2022).
Dkt. 27 at 2 (quoting from Dkt. 26 at 8).
As to the first of State Farm’s arguments—that Angst does not actually state
that the plumbing leak caused the foundation movement—I agree with the Welches
that State Farm is just plain wrong. As noted above, Angst opines: “Due to the
continuous flow of water from the plumbing leaks, the soils were eroded, causing
voids and slab settlement.” Dkt. 24-9 at 8 (emphasis added). Thus, Angst states
quite clearly that the plumbing leaks caused the foundation movement (i.e., slab
settlement).
State Farm is also just plain wrong as to its second argument that Angst’s
report is unsupported. Angst cites the following “key documents” that informed his
investigation:
Guidelines & References
This will serve as our citation page which references our standard source (ASTM E2713
Standard Guide to Forensic Engineering ), as well as the other sources listed below. These are
key documents that have contributed to our knowledge base as we conduct our investigation.
1. ASCE standard SEI/ASCE 11, Guideline for Structural Condition Assessment of Existing
Buildings
2. ASCE standard SEI/ASCE 30, Guideline for Condition Assessment of Building Envelope
3. ANSI/IIRC S500-2015 — Fourth Edition Reference Guide for Professional Water Damage
Restoration (Details the definitions and restoration procedures for water damage.)
4. IBC 2021—!/nternational Building Code
5. IBC 2021—/nternational Existing Building Code
Dkt. 24-9 at 6. To the extent State Farm believes that, like in a legal opinion, each
assertion or claim in an expert’s report must be directly supported with a citation,
State Farm offers no legal authority for this position. As a trial lawyer for 25 years,
a federal judge for eight years, and an adjunct professor who teaches evidence, I
can confidently say that “lack of citations” is a spurious objection.
Similarly bogus is State Farm’s third objection—that Angst fails to establish
what methods he used to reach his conclusions. While Angst’s report and analysis
may not be as lengthy as that of State Farm’s expert, Angst provides more than
enough detail to demonstrate that his testimony is “grounded in the methods and

procedures of science and [is] more than unsupported speculation or subjective
belief.” Manning v. Walgreen Co., 638 F. Supp. 3d 730, 733 (S.D. Tex. 2022)
(quoting Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012)). Given State
Farm’s factually incorrect objections and my “broad discretion in deciding whether
to admit expert testimony,” Manning, 638 F. Supp. 3d at 734, I deny State Farm’s
Motion to Exclude as to Angst. Having established that Angst may testify as an
expert, I turn to State Farm’s Motion for Summary Judgment.
SUMMARY JUDGMENT STANDARD
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.” FED. R. CIV. P. 56(a). A genuine issue of material fact exists if a
reasonable jury could enter a verdict for the non-moving party. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Evidence is viewed “in the light most
favorable to the non-moving party, and the movant has the burden of showing this
court that summary judgment is appropriate.” QBE Ins. Corp. v. Brown & Mitchell,
Inc., 591 F.3d 439, 442 (5th Cir. 2009) (citation omitted).
ANALYSIS
A. BREACH OF CONTRACT AND LATE PAYMENT CLAIMS
“A Texas breach of contract claim has four elements: (1) a valid contract,
(2) plaintiff’s performance, (3) defendant’s breach, and (4) resulting damages.”
Taylor v. Root Ins. Co., 109 F.4th 806, 809 (5th Cir. 2024) (quotation omitted).
In a coverage dispute, the insured has the burden first to prove
that their loss falls within the terms of the contract. Once the insured
demonstrates this, the burden shifts to the insurer, who, to avoid
liability, must show that the loss falls into an exclusion to the policy’s
coverage. Finally, if the insurer proves that an exclusion applies, the
burden shifts back to the insured to show that an exception to the
exclusion brings the claim back within coverage.
Buchholz v. Crestbrook Ins. Co., 65 F.4th 766, 769–70 (5th Cir. 2023) (cleaned
up). Here, the parties dispute only the third element: breach. Specifically, the
parties dispute whether the loss falls within the terms of the contract.
The Welches argue “that State Farm breached the contract by refusing to pay
for (1) the interior and exterior foundation damages caused by the plumbing leak,
and (2) the cost to tear out and penetrate the dwelling’s exterior brick walls to
access the plumbing leak.” Dkt. 24 at 9. State Farm contends that (1) the
foundation damage was not caused by the plumbing leak, and (2) the tunneling
that Herndon/Muncey did to repair the plumbing leak did not require tearing out
or replacing part of the building.
That summary judgment should be denied as to the Welches’ breach of
contract claim is a no-brainer. Unlike many insurance coverage disputes, the
parties do not dispute what the Policy means. Rather, the dispute here turns on a
single fact: whether the plumbing leak caused the foundation damage to the
Property. State Farm’s expert, Kosmoski, says it did not. See Dkt. 23-5 at 38
(“These leaks have not caused or contributed to the detected foundation movement
or associated cosmetic damages.”). The Welches’ expert, Angst, says it did. See Dkt.
24-9 at 8 (“Due to the continuous flow of water from the plumbing leaks, the soils
were eroded, causing voids and slab settlement.”). “[C]ourts have again and again
concluded that the dueling theories of ostensibly credible experts create a triable
issue of fact.” Lalumandier v. State Farm Mut. Auto. Ins. Co., No. 3:13-00426,
2016 WL 3211515, at *3 (M.D. La. Jan. 28, 2016) (collecting cases); see also Hansen
v. State Farm Lloyds, No. 4:22-cv-03833, 2025 WL 963079, at *4 (S.D. Tex. Mar.
28, 2025) (denying summary judgment where, as here, insured’s breach of
contract claim turned on causation because “dueling expert opinions about [the
cause of the] damage create factual disputes for a jury to resolve”). Because
Kosmoski and Angst’s dueling expert opinions create a genuine dispute of material
fact as to whether the plumbing leak caused the foundation damage, State Farm is
not entitled to summary judgment on the Welches’ breach of contract claim.2

2 As for the Welches’ claim that State Farm breached the Policy by refusing to pay for the
cost to tear out the dwelling’s exterior brick walls to access the plumbing leak, State Farm
acknowledges that “the three-square feet of brick veneer” that Herndon/Muncey tore out
during its repairs “qualifies as [] part of the building structure.” But State Farm “does not
Because a jury should decide the Welches’ breach of contract claim, State
Farm is also not entitled to summary judgment on the Welches’ late payment
claim. “An insurer does not become ‘liable’ for purposes of the [TPPCA] ‘until
it . . . [has] been adjudicated liable by a court or arbitration panel.” Schnell v. State
Farm Lloyds, 98 F.4th 150, 159 (5th Cir. 2024) (quoting Barbara Techs. Corp. v.
State Farm Lloyds, 589 S.W.3d 806, 819 (Tex. 2019)); see also Agredano v. State
Farm Lloyds, 975 F.3d 504, 507 (5th Cir. 2020) (“[I]t is not necessary for a plaintiff
to prove that the insurer acted wrongfully or in bad faith. . . . The [TPPCA] requires
only liability under the policy and a failure to comply with the timing requirements
of the TPPCA.”). State Farm’s liability on the late payment claim, if any, hinges on
the breach of contract claim. Thus, State Farm would not be entitled to judgment
on the late payment claim unless and until the breach of contract claim is decided
in State Farm’s favor.
B. BAD FAITH AND DECEPTIVE TRADE PRACTICES
The Welches’ remaining claims for bad faith and deceptive insurance
practices in violation of the Texas Insurance Code and DTPA both require that “the
insurer had no reasonable basis for denying or delaying payment of a claim, and
the insurer knew or should have known that fact.” Universe Life Ins. Co. v. Giles,
950 S.W.2d 48, 50–52 (Tex. 1997) (cleaned up); see also Parkans Intern. LLC v.
Zurich Ins. Co., 299 F.3d 514, 519 (5th Cir. 2002) (“claims under DTPA and § 21.21
of the Texas Insurance Code require same predicate for recovery as a bad faith

agree that the tie-in at that location was to access the specific point of the system where
the leak occurred as required by the policy.” Dkt. 23 at 11–12 n.4. State Farm’s mere
assertion, in a footnote, that the exterior wall penetration is not covered by the Policy is
insufficient to demonstrate the absence of a genuine dispute of material fact. State Farm
also notes that, even if covered by the Policy, it is undisputed that “the [$500] cost for the
exterior wall penetration” is well below the Policy’s $2,787.00 deductible. Id. at 11 n.4.
That may be true, but if the trier of fact concludes that the plumbing leak caused the
foundation damage, then the Welches would potentially have damages in excess of the
Policy’s deductible. Thus, a jury should decide whether the exterior wall penetration is
covered by the Policy at the same time it decides whether the plumbing leak caused the
foundation damage.
cause of action”); Erazo v. State Farm Lloyds, No. 4:23-cv-1965, 2024 WL
2805328, at *4 (S.D. Tex. May 3, 2024) (“Three of Plaintiffs extra-contractual
claims (breach of the common-law duty of good faith and fair dealing, DTPA
violations, and violation of Texas Insurance Code Chapter 541) share the same
predicate for recovery: a showing of common law bad faith.” (cleaned up)).
The Welches contend that State Farm acted in bad faith by investigating
their claim “in a manner calculated to construct a pretextual basis for denial.”
Dkt. 24 at 10. Specifically, the Welches argue that Kosmoski:
e Never mentions the types/species of trees and bushes on the Property,
and “never points to any testing, scientific evidence, or literature” to
support his opinion that vegetation on the Property caused soil
shrinkage (id. at 11);
e “[A]ttributed the damages to foundation work performed seventeen
(17) years earlier without determining whether damage appeared in
the home during those almost two intervening decades” (id. at 13);
e “[Al]ttributes the voids beneath the foundation to ‘animal activity”
without providing any support for this conclusion (id.);
e “[N]ever explains how he reached the conclusion that water flowing
from the leaking pipes had absolutely no effect on the foundation
movement or did not contribute to the slab deflection” (id. at 14).
According to the Welches, the “wide analytical gap between the data included in
Kosmoski’s report and his subjective findings” means that “a reasonable juror
could determine that State Farm had no reasonable basis to rely on Kosmoski’s
report.” Id.
State Farm’s sole retort is that the court should “grant summary judgment
as to Plaintiffs’ bad faith / fraud claims as the only opinion that State Farm had at
the time of its claim decision was that the foundation movement was not caused
by a plumbing leak.”3 Dkt. 25 at 3. But the Texas Supreme Court has

3 State Farm also argues in its reply brief that summary judgment should be granted
because the Welches “fail[ed] to put forth evidence that the plumbing leak caused the
foundation movement.” Dkt. 25 at 3. But this argument rests upon the false premise that
Angst did not state that the plumbing leak caused the foundation damage, and the
assumption that Angst’s testimony would be excluded.

never held that the mere fact that an insurer relies upon an expert’s
report to deny a claim automatically forecloses bad faith recovery as a
matter of law. Instead, we have repeatedly acknowledged that an
insurer’s reliance upon an expert’s report, standing alone, will not
necessarily shield the carrier if there is evidence that the report was
not objectively prepared or the insurer’s reliance on the report was
unreasonable.
State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997).
The Welches have argued that State Farm’s reliance on Kosmoski’s report
was unreasonable and State Farm has not challenged that argument in its reply.
When a party “fails to properly address another party’s assertion of fact . . . , the
court may . . . consider the fact undisputed for purposes of the motion.” FED. R.
CIV. P. 56(e)(2). Accordingly, I find that State Farm has not carried its burden to
demonstrate the absence of a genuine issue of material fact concerning whether it
had a reasonable basis for denying the Welches’ claim. Thus, State Farm is not
entitled to summary judgment on the Welches’ bad faith and deceptive trade
practices claims.
C. FRAUD CLAIMS
State Farm is, however, entitled to summary judgment on the Welches’ three
fraud claims: (1) common law fraud, (2) fraud by nondisclosure, and (3) fraud in
the sale of an insurance policy. The Welches state in their response brief that their
“fraud claims are based on information that has been requested from State Farm
in discovery but not yet received from State Farm.” Dkt. 24 at 15. In other words,
the Welches acknowledge that they have no evidence to support their fraud claims.
The Welches filed their response brief on February 21, 2025. In that brief
they stated they “are in the process of drafting the required position letter as
required by the Court rules. Plaintiffs plans to seek leave to supplement their
summary judgment response once the parties resolve the dispute or once the Court
addresses the parties’ discovery dispute.” Id. at 16. That was nearly two months
ago. The Welches have brought no discovery dispute to this court, nor have they
sought to supplement their summary judgment response. If the Welches believed
that they could not defend State Farm’s summary judgment motion due to facts
not available to them, there is a procedure for that, but it requires an “affidavit or
declaration that, for specified reasons, [the non-movant] cannot presents facts
essential to justify its opposition.” See FED. R. CIV. P. 56(d). Because the Welches
have not presented evidence to create a genuine issue of material fact as to their
fraud claims, and have not given the court specified reasons for why such evidence
is not available to them, State Farm is entitled to summary judgment on each of
the Welches’ fraud claims.
CONCLUSION
For the reasons discussed above, State Farm’s Motion to Exclude (Dkt. 26)
is DENIED. As for State Farm’s Motion for Summary Judgment (Dkt. 23), I
recommend it be DENIED IN PART and GRANTED IN PART. Specifically, I
recommend the Motion for Summary Judgment be denied as to the Welches’
breach of contract, late payment, bad faith, and deceptive trade practices claims; I
recommend the motion be granted as to the Welches’ fraud claims.
The parties have 14 days from service of this Memorandum and
Recommendation to file written objections. See 28 U.S.C. § 636(b)(1)(C); FED. R.
CIV. P. 72(b)(2). Failure to file timely objections will preclude appellate review of
factual findings and legal conclusions, except for plain error.
SIGNED this day of April 2025.

______________________________
ANDREW M. EDISON
UNITED STATES MAGISTRATE JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10851241. Public record. Not legal advice.