# Watson > District Court, N.D. Texas · September 3, 2026 URL: https://www.frixlaw.com/law-library/cases/11435586 ## Case - **Full name:** Misty Watson and Olen Watson v. State Farm Lloyds - **Court:** District Court, N.D. Texas - **Decided:** September 3, 2026 - **Opinion:** 100trialcourt - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11435586 ## Opinion text UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION MISTY WATSON and OLEN § WATSON, § § Plaintiffs, § § v. § Civil Action No. 3:25-CV-2878-X § STATE FARM LLOYDS, § § Defendant. § MEMORANDUM OPINION AND ORDER Before the Court is Defendant State Farm Lloyds’s (State Farm) motion for summary judgment. After reviewing the motion, the briefing, and the applicable law, the Court GRANTS IN PART and DENIES IN PART the motion. The Court DISMISSES WITH PREJUDICE Plaintiffs Misty and Olen Watson’s (collectively “the Watsons”) common law claim for breach of duty of good faith and fair dealing and statutory claims under the Texas Insurance Code section 541. I. Background If you give a rat a water pipe, it might eat more than one. This is contract case about whether the rodent infestation in the Watsons’s home was a single incident under their policy or if each nibble constitutes a new incident. During Christmas break of 2024, a rodent infestation in Watson’s home caused a series of pipe leaks. The Watsons contacted State Farm, and State Farm promptly denied coverage. Then the Watsons retained contractors to both mitigate and repair the damage the rodents caused and make renovations to the property while the home was under construction. II. Legal Standard District courts can grant summary judgment only if the movant shows “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”1 A dispute “is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party.”2 If the movant presents a properly supported motion, “the burden shifts to the nonmoving party to show that summary judgment is inappropriate.”3 “[M]ere allegations or denials” will not suffice; nor will “unsubstantiated or conclusory assertions that a fact [dispute] exists.”4 The nonmovant must present “evidence sufficient to support a jury verdict.”5 III. Analysis Watson’s complaint contains four claims: (1) breach of contract, (2) breach of duty of good faith and fair dealing, (3) violations of the Texas Insurance Code section 541, and (4) violation of the Texas Insurance Code section 542. State Farm moves for summary judgment on each claim. For the reasons explained below, the Court grants in part the motion, and the remaining claims must go to trial. 1 FED. R. CIV. P. 56(a). 2 Goodson v. City of Corpus Christi, 202 F.3d 730, 735 (5th Cir. 2000) (cleaned up). 3 Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998). 4 Id. 5 Id. A. Breach of Contract State Farm asserts two bases to dismiss the Watsons’s breach of contract claim. Both arguments fail. First State Farm asserts that the rodent infestation does not qualify as one “occurrence” under the policy. State Farm does not quote or cite the language of the contract or any definition of “occurrence” in the policy. While generally “[w]hether eight separate leaks occurring over a two week period constitute a single occurrence under the Policy involves interpretation of policy language and applicable law, which are questions for the Court,”6 the Court cannot perform that task in absence of arguments based on the text of the policy itself. In this Court, the text is king, and without arguments on the parties’ contractual definition of “occurrence” or the context the term is issues, the Court cannot construe the phrase as a matter of law. Accordingly, this argument fails. Second, State Farm asserts that the Watsons did not segregate damages as to covered and non-covered perils under the contract. Texas’s concurrent causation doctrine instructs that “when covered and excluded perils combine to cause an injury, the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage.”7 State Farm argues that the Watson fails to meet their burden because the concurrent causation doctrine bars relief and because the Watsons do not segregate 6 Doc. 23 at 1. 7 Overstreet v. Allstate Vehicle & Prop. Ins., 34 F.4th 496, 498 (5th Cir. 2022) (cleaned up). what damages were caused by each of the eight pipe leaks. But this argument relies on the theory, which the Court rejects at this stage, that each pipe leak is a separate occurrence. And the Watsons expressly disclaim recovery for all “condition[s] identified during demolition regardless of cause.”8 So neither the failure to expressly delineate the damages at this stage, nor the other repairs performed after State Farm denied coverage warrant dismissal. Here, on the evidence presented at summary judgment, a “reasonable jury drawing all inferences in favor of the nonmoving party could arrive at a verdict in [the Watsons’s] favor.”9 The Court will not permit recovery for remodels done during the repair, but that issue cannot be resolved before the jury determines liability. Thus, the Court DENIES the motion as to the Watsons’s breach of contract claim. B. Breach of Duty of Good Faith & Fair Dealing Insurance companies have a duty to deal fairly and in good faith with an insured in the processing of claims.10 A plaintiff may sue for a breach of this duty if its insurer denies or delays its claim without any reasonable basis for the denial or delay.11 But under Texas law, “[e]vidence establishing only a bona fide coverage dispute does not demonstrate bad faith.”12 This means that “[a]s long as the insurer 8 Doc. 21 at 10. 9 Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991) (cleaned up). 10 Arnold v. Nat’l Cnty. Mut. Fire Ins., 725 S.W.2d 165, 167 (Tex. 1987). 11 Id. 12 Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins., 801 F.3d 512, 526 (5th Cir. 2015) (cleaned up). has a reasonable basis to deny or delay payment of a claim, even if that basis is eventually determined by the fact finder to be erroneous, the insurer is not liable for the tort of bad faith.”13 Here, State Farm has carried its burden that established a bona fide coverage dispute. First, it is undisputed that State Farm construed the policy to require each pipe leak to be its own incident. And the Watsons’s response presents no evidence that would otherwise raise a genuine fact dispute on its common law bad faith claim. The Court therefore GRANTS State Farm’s Motion with respect to the Watsons’s claim for duty of good faith and fair dealing claim. C. Violation of the Texas Insurance Code Section 541 Texas courts have recognized the close relationship between common law bad faith claims and the statutory bad faith claims found in the Texas Insurance Code section 541. “Although these claims are individual causes of action which do not depend on each other for support, Texas courts have clearly ruled that these extra-contractual tort claims require the same predicate for recovery as bad faith causes of action in Texas.”14 Stated otherwise, “[b]ecause the statutory and common law standards are now the same, a finding that there is no common law violation as a matter of law also eliminates the statutory claims alleged by plaintiffs in this case.”15 13 Higginbotham v. State Farm Mut. Auto. Ins, 103 F.3d 456, 459 (5th Cir. 1997). 14 Id. at 460; TEX. INS. CODE § 541.001 et seq. 15 Avila v. State Farm Fire & Cas. Co., 147 F. Supp. 2d 570, 579 (W.D. Tex. 1999). Therefore, the Court’s reasoning with respect to the Watsons’s common law claim of breach of duty of good faith and fair dealing applies to the Watsons’s statutory claims as well. Accordingly, the Court GRANTS State Farm’s Motion as to the Watsons’s section 541 claim. D. Violation of the Texas Insurance Code Section 542 Finally, State Farm seeks judgment as a matter of law on the Watsons’s claims under section 542 of the Texas Insurance Code. State Farm only moved to dismiss this claim because it asserts the breach of contract claim fails. But because the Watsons’s breach of contract claim survives dismissal, so too does their section 542 claim. Accordingly, the Court DENIES the motion for summary judgment. IV. Conclusion For the above reasons, the Court GRANTS IN PART and DENIES IN PART the motion for summary judgment. The Court DISMISSES WITH PREJUDICE the Watsons’s common law duty of good faith and fair dealing claim and section 541 of Texas Insurance Code claim. The jury must decide the remaining claims—breach of contract and section 542 of Texas Insurance Code claim. IT ISSO ORDERED this 3rd day of September, 2026. UNITED STATES DISTRICT JUDGE --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11435586. Public record. Not legal advice.