Texas Windstorm Insurance Association v. Kevin Kelly and Tiffany Kelly

In The

Court of Appeals

Ninth District of Texas at Beaumont

__________________

NO. 09-22-00173-CV
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TEXAS WINDSTORM INSURANCE ASSOCIATION, Appellant

V.

KEVIN KELLY AND TIFFANY KELLY, Appellees

__________________________________________________________________

On Appeal from the 136th District Court
Jefferson County, Texas
Trial Cause No. D-203,415
__________________________________________________________________

OPINION

This is a permissive interlocutory appeal from a “Summary Judgment Order

With Permission to Appeal” (the Order), granting Plaintiffs’/Appellees’ summary

judgment and denying the Texas Windstorm Insurance Association’s (TWIA)

Defendant’s/Appellant’s summary judgment. The Order included the following

controlling questions of law: (1) whether section 2210.208 of the Texas Insurance

Code requires TWIA to provide wind-driven rain coverage in its basic residential

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policy and prohibits the provision of wind-driven rain coverage through an

endorsement; (2) whether TWIA’s failure to provide such wind-driven rain coverage

in its basic residential policy constitutes a breach of the common-law duty of good

faith and fair dealing that is actionable against TWIA notwithstanding the

prohibition of common-law claims against TWIA in Chapter 2210 of the Texas

Insurance Code; and (3) whether TWIA’s failure to provide wind-driven rain

coverage in its basic residential policy constitutes an “unfair or deceptive act or

practice” in violation of the Texas Deceptive Trade Practices-Consumer Protection

Act (DTPA) that is actionable against TWIA notwithstanding the prohibition of

DTPA claims against TWIA in Chapter 2210 of the Texas Insurance Code. See Tex.

Civ. Prac. & Rem. Code Ann. § 51.014(d); Tex. Ins. Code Ann. § 2210.028.

On appeal, TWIA argues that the trial court erred in granting Kevin Kelly’s

and Tiffany Kelly’s (the Kellys’) motion for summary judgment, and the trial court

erred in denying TWIA’s motion for summary judgment. In three appellate issues,

TWIA argues: (1) the Kellys have no viable claims against TWIA under the Texas

Windstorm Insurance Act (the Act) because TWIA complied with the Act “by

offering coverage for wind-driven rain damage through a commissioner-approved

endorsement[,]” which the Kellys didn’t purchase; (2) the Kellys’ common law and

DTPA claims, which resulted from TWIA’s denial of the claim the Kellys submitted

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when their property was damaged by wind-driven rain, were barred by the Act; and

(3) there was a fact issue precluding the granting of the Kellys’ motion for summary

judgment.

We hold that even though section 2210.208 of the Texas Insurance Code

requires Windstorm and Hail Insurance policies issued by TWIA to include coverage

for wind-driven rain, that coverage may be made available through an endorsement

that requires the insured to pay an additional premium to the carrier to compensate

the carrier for insuring against the additional risk of covering the property against

the casualty of being damaged by wind-driven rain. Furthermore, we hold that since

the Insurance Code limits a claimant’s recovery to a remedy under their policy, the

Act necessarily prohibits insureds, like the Kellys, from suing TWIA on claims

alleging a breach of the duty of good faith and fair dealing and violating the DTPA

when the Legislature did not expressly authorize claimants to bring those types of

claims against TWIA under the Act. 1 See Tex. Ins. Code. Ann. 2210.576.

1In supplemental briefing, Appellees urge us to reverse and remand this case

for assignment to a judge appointed by the judicial panel on multidistrict litigation.
To support their argument, Appellees rely on Pruski v. Tex. Windstorm Ins. Ass’n.,
667 S.W.3d 460, 464–67 (Tex. App. – Corpus Christi 2023, pet. filed), which held
that a presiding judge who was not appointed to hear cases by the judicial panel of
multidistrict litigation (MDL) did not have the power to grant summary judgment,
and thus the judgment was void, even though the insured did not timely request
appointment of an MDL judge. Opinions from our sister courts “are not binding on
this Court.” Rhinoceros Ventures Grp., Inc. v. TransCanada Keystone Pipeline, L.P.,
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We reverse the trial court’s Order granting summary judgment in favor of the

Kellys, we reverse the trial court’s Order denying TWIA’s summary judgment, and

we remand this case back to the trial court for further action consistent with this

opinion.

BACKGROUND

Tiffany Kelly and Kevin Kelly live in Port Arthur, Texas. In 2017, the Kellys

purchased a windstorm and hail insurance policy from TWIA through their

insurance agent to cover their residential property. 2 The policy insures the property

“against direct loss resulting from the perils of Windstorm and Hail only[.]” The

policy specifically excluded the following loss to the covered property:

6. Rain. We do not cover loss or damage caused by or resulting from
rain, whether driven by wind or not, unless direct force of wind or hail
makes an opening in a roof or wall and rain enters through this opening
and causes the damage.

The Kellys’ home was damaged by Hurricane Harvey on or about August 29,

2017. On September 1, the Kellys filed a notice of claim with TWIA. The adjuster

hired by TWIA completed a loss report that same month, finding both covered and

388 S.W.3d 405, 409 (Tex. App—Beaumont 2012, pet. denied). Therefore, we
decline to follow Pruski to the extent that Pruski could be interpreted to require
appointment of a judge by an MDL panel under the circumstances that resulted in
this appeal.
2The Kelly’s insurance agent is Defendant “McFerrin Insurance Agency,

Inc.,” which is not a party to this appeal.
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non-covered damage. The adjuster made the following findings: (1) the Kellys’

property sustained covered damage to the garage door tracks, (2) damage to the roof

was not caused by wind or hail, and (3) water damage to the interior of the property

did not result from a wind or hail created opening in the roof or walls, as required

for coverage under the policy. TWIA issued a Notice of Claim Acceptance in Part

and Denial in Part, accepting coverage for damage to the tracks on the detached

garage but denying coverage from rainwater intrusion.

After TWIA denied that the policy it issued to the Kelly’s covered damage

caused by the intrusion of the rain, the Kellys sued TWIA and their insurance agent

for breach of the common law duty of good faith and fair dealing (i.e., “bad faith”),

breach of contract, and violations of the DTPA. The Kellys complained that TWIA

denied coverage for their interior water damage caused by wind-driven rain. The

Kellys asserted that under Texas Insurance Code section 2210.208, every TWIA

windstorm policy must contain wind-driven rain coverage. According to the Kellys’

Original Petition, since they paid their insurance premiums, wind-driven rain

damage must have been included under the policy they purchased from TWIA.

TWIA filed a combined no-evidence and traditional motion for summary

judgment. In response, the Kellys filed a traditional cross-motion for summary

judgment. Both motions rely on the language in Texas Insurance Code section

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2210.208. That section, which is titled “Windstorm and Hail Insurance: Coverage

for Certain indirect Losses,” provides:

(a) Except as provided by Subsections (e) and (f), a windstorm and hail
insurance policy issued by the association for a dwelling, as that term
is defined by the department or a successor to the department, must
include coverage for:
(1) wind-driven rain damage, regardless of whether an opening is
made by the wind;
(2) loss of use; and
(3) consequential losses.
(b) A windstorm and hail insurance policy issued by the association for
tenant contents of a dwelling or other residential building must include
coverage for loss of use and consequential losses.
(c) The coverage required under Subsection (a) or (b) must be made:
(1) according to forms approved by the commissioner; and
(2) for a premium paid by the insured based on rates established by
commissioner rule.
(d) The association shall provide coverage under this section as
directed by commissioner rule.
(e) The association is not required to offer coverage for indirect losses
as provided by Subsection (a) or (b) unless that coverage was excluded
from a companion policy in the voluntary market.
(f) The association is not required to provide coverage for:
(1) loss of use, if the loss is loss of rent or loss of rental value; or
(2) additional living expenses, if the insured property is a
secondary or a nonprimary residence.

The parties’ dispute centers on whether the “must include coverage for” clause

is satisfied by TWIA’s offering their insureds the opportunity to purchase a

Department of Insurance approved endorsement, which extends the basic coverage

in TWIA’s windstorm and hail policy to damages caused by wind-driven rain. In its

motion, TWIA argued the mandatory requirement in section 2210.208 was satisfied

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because the Kellys had the opportunity to purchase a wind-driven rain endorsement

to their policy, which they declined. On the other hand, the Kellys argued the statute

requires wind-driven rain coverage to be included with every TWIA windstorm and

hail policy.

According to TWIA, it discharged its statutory obligations to the Kellys by

making wind-driven rain coverage available to them through the purchase of a 320

Endorsement, an endorsement that had been approved by the Commissioner of

Insurance. More specifically, the 320 Endorsement contains a provision that states,

“In consideration of an included additional premium, the policy is extended to

provide the following coverages: … Wind-Driven Rain Coverage: We cover loss to

the dwelling and personal property caused by wind-driven rain whether or not an

opening is made in the dwelling by the direct force of wind or hail.” The Kellys had

the option to purchase the 320 Endorsement by paying an additional premium, but

they failed to do so. Since the Kellys weren’t covered for damages to their property

caused by wind-driven rain, TWIA argued, TWIA acted properly in denying their

claim. And because the statute limited claimants to whether TWIA’s denial of

coverage was proper and limited the damage to the losses payable under the policy,

prejudgment interest and attorney’s fees, the Kellys could not bring non-statutory

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claims alleging TWIA acted in bad faith or claim that TWIA had violated the DTPA.

See Tex. Ins. Code Ann. §§2210.572, 2210.576.

After a hearing on the cross-motions for summary judgment, the trial court

signed a “Summary Judgment Order With Permission to Appeal.” The order granted

the Kellys’ motion for summary judgment and denied TWIA’s motion for summary

judgment. The trial court found that (1) the TWIA policy issued to the Kellys

improperly and ineffectively omits coverage for wind-driven rain in violation of

section 2210.208, and (2) the Kellys have stated actionable claims against TWIA for

breach of the duty of good faith and fair dealing and for violations of the DTPA

based on TWIA’s omission of coverage from such policy. After concluding that its

order involved a controlling question of law on which there was a substantial ground

for difference of opinion, the trial court granted TWIA permission to file an

interlocutory permissive appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(d).

In the exercise of our discretion, we accepted the appeal. Id. § 51.014(f); see also

Tex. R. App. P. 28.3.

Again, in its Order, the trial court identified three controlling questions of law

on which there are substantial grounds for difference of opinion:

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• (1) whether section 2210.208 of the Texas Insurance Code requires TWIA to

provide wind-driven rain coverage in its basic residential policy and prohibits

the provision of wind-driven rain coverage through an endorsement;

• (2) whether TWIA’s failure to provide such wind-driven rain coverage in its

basic residential policy constitutes a breach of the common-law duty of good

faith and fair dealing that is actionable against TWIA notwithstanding the

prohibition of common-law claims against TWIA in Chapter 2210 of the

Texas Insurance Code; and

• (3) whether TWIA’s failure to provide wind-driven rain coverage in its basic

residential policy constitutes an “unfair or deceptive act or practice” in

violation of the DTPA that is actionable against TWIA notwithstanding the

prohibition of DTPA claims against TWIA in Chapter 2210 of the Texas

Insurance Code.

STANDARD OF REVIEW

“On cross-motions for summary judgment, each party bears the burden of

establishing that it is entitled to judgment as a matter of law.” Miles v. Tex. Cent.

R.R. & Infrastructure, Inc., 647 S.W.3d 613, 619 (Tex. 2022) (quoting City of

Garland v. Dall. Morning News, 22 S.W.3d 351, 356 (Tex. 2000)). When the trial

court grants one motion and denies the other, as is the case here, we “‘determine all

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questions presented’” and “‘render the judgment that the trial court should have

rendered.’” Id. (quoting City of Garland, 22 S.W.3d at 356).

We construe statutory language de novo. Crosstex Energy Servs., L.P. v. Pro

Plus, Inc., 430 S.W.3d 384, 389 (Tex. 2014). Our goal is to determine and give effect

to the Legislature’s intent. Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex.

2012). We look to and rely on the plain meaning of a statute's words as expressing

legislative intent unless a different meaning is supplied, is apparent from the context,

or the plain meaning of the words leads to absurd or nonsensical results. Crosstex

Energy Servs., L.P., 430 S.W.3d at 389-90. We read words and phrases in a statute

“in context and construed according to the rules of grammar and common

usage.” Tex. Gov’t Code Ann. § 311.011. We construe the language of a statute so

that each part has meaning and no part is left out. Columbia Med. Ctr. of Las Colinas,

Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008) (“The Court must not interpret the

statute in a manner that renders any part of the statute meaningless or

superfluous.”). We presume “the Legislature chooses a statute's language with care,

including each word chosen for a purpose, while purposefully omitting words not

chosen.” TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex.

2011). A court must take a statute as it finds it, and it must refrain from rewriting the

Legislature’s chosen test. Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433,

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443 (Tex. 2009). Pedernal Energy, LLC v. Bruington Eng’g, LTD., 536 S.W.3d 487,

491-92 (Tex. 2017)

ANALYSIS

In the trial court, the Kellys argued that the plain language of section

2210.208(a) obligated TWIA to issue windstorm and hail insurance policies that

included coverage for damage caused by wind-driven rain. Specifically, they relied

on the phrase “must include coverage” in the statute to support their argument that

the Legislature mandated TWIA’s policies include coverage for wind-driven rain.

TWIA, on the other hand, argued that the Kellys’ interpretation of the statute

erroneously focused only on subsection (a). TWIA points to subsection (c) of the

statute, which it argued allowed TWIA to comply with the statute by offering to

cover wind-driven rain through an endorsement on a form approved by the Texas

Commissioner of Insurance, which is what the summary judgment evidence TWIA

attached to its motion shows it did.

In TWIA’s first issue, it argues that it complied with the Act by offering to

cover losses caused by wind-driven through an endorsement to the basic windstorm

and hail policy that it issued to the Kellys, an endorsement the Kellys did not obtain.

To determine whether TWIA could comply with the Act by offering coverage

through an endorsement rather than under the terms of its basic policy, we start with

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the plain language of the Act. Although the Act does not define “windstorm and hail

insurance,” it does define “Texas windstorm and hail insurance” as

deductible insurance against: (A) direct loss to insurable property
incurred as a result of windstorm or hail, as those terms are defined and
limited in policies and forms approved by the department; and (B)
indirect losses resulting from the direct loss.

Id. § 2210.003(13). “When used in a statute, the term “must” creates or recognizes

a condition precedent.” Helena Chem. Co., 47 S.W.3d at 493; Tex. Gov’t Code Ann.

§ 311.016(3). “While Texas courts have not interpreted ‘must’ as often as ‘shall,’

both terms are generally recognized as mandatory, creating a duty or obligation.” Id.

(citing Tex. Gov’t Code Ann. § 311.016(2), (3)) (other citations omitted). “The word

‘must’ is given a mandatory meaning when followed by a noncompliance penalty.”

Id. (citation omitted). “However, we have held language that appears to impose a

mandatory duty to be only directory when this interpretation is most consistent with

the Legislature’s intent.” Id. (citations omitted).

“To determine whether the Legislature intended a provision to be mandatory

or directory, we consider the plain meaning of the words used, as well as the entire

act, its nature and object, and the consequences that would follow from each

construction.” Id. at 494. “When a statute is silent about the consequences of

noncompliance, we look to the statute’s purpose to determine the proper

consequences.” Id.

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The Kellys’ interpret section 2210.208(a)’s “must include clause” in a vacuum

without considering how the other subsections within the same section of the statute

affect the statute’s intended meaning. See Tex. Ins. Code Ann. §§ 2210.208. For

example, when read in context, the Kellys’ interpretation of the “must include

clause” would render other provisions in the statute meaningless. See id. For

example, subsection (e) of the statute provides that TWIA “is not required to offer

coverage for indirect losses as provided by Subsection (a) or (b) unless that coverage

was excluded from a companion policy in the voluntary market.” Id. § 2210.208(e)

Thus, the statute clearly provides circumstances under which indirect losses caused

by wind-driven rain would not be covered under TWIA’s form windstorm and hail

policies.

Likewise, subsection (c) states that the coverage “required by Subsection (a)

or (b) must be made: (1) according to forms approved by the commissioner; and (2)

for a premium paid by the insured based on rates established by commissioner rule.”

Tex. Ins. Code Ann. § 2210.208(c). When reading subsections (a) and (c) of the

statute together, they mean that an insured must pay a premium based on rates

established by commissioner rule to obtain an endorsement to a policy that covers

damage to the insured’s property caused by wind-driven rain. See id. § 2210.208(a),

(c). Importantly, the Legislature didn’t specify that the coverage for wind-driven

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couldn’t be offered to an insured through an endorsement applicable to the policy’s

basic terms. Finally, we note the Act imposes no non-compliance penalty on TWIA

but instead allows it to comply with the statute by offering its insureds the

opportunity to obtain an endorsement that covers damage caused by wind-driven

rain by paying an additional premium approved by the commissioner when

purchasing a windstorm and hail policy. This suggests the Legislature’s intent was

to create a market that required TWIA to offer insureds the opportunity to purchase

coverage for wind-driven rain, not that each policy’s basic form language was

required to include that coverage (which would have required all insureds to pay a

premium commensurate with the risk) had such coverage been intended as

mandatory. Id. § 2210.208(c); see Helena Chem. Co., 47 S.W.3d at 494.

Our reading of the statute supports the policy that led to the enactment of the

windstorm statute. The Texas Legislature passed the Act to provide “an adequate

market for windstorm and hail insurance in the seacoast territory of this state.” Tex.

Ins. Code Ann. § 2210.001. When the Legislature created TWIA, it intended that

TWIA “serve as a residual insurer of last resort for windstorm and hail insurance in

the seacoast territory.” Id. In carrying out its mission, the Legislature provided that

TWIA “function in such a manner as to not be a direct competitor in the private

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market[,] and provide windstorm and hail insurance coverage to those who are

unable to obtain that coverage in the private market.” Id.

“Under well-established rules of statutory interpretation, we may not interpret

one portion of a statute so as to render another portion of the statute meaningless.”

Harris Cty. Appraisal Dist. v. Tex. Gas Transmission Corp., 105 S.W.3d 88, 98

(Tex. App.—Houston [1st Dist.] 2003, pet. denied). Interpreting Section 2210.208

as the Kellys propose – that every single policy sold by TWIA include wind-driven

rain coverage, regardless of whether an opening is made by the wind – would ignore

both subsection (c) and subsection (e) of the statute, which gives the commissioner

the ability to offer such coverage to insureds in certain circumstances and to

determine how to issue such coverage. See Tex. Ins. Code Ann. § 2210.208(c), (e).

Accordingly, we hold that TWIA complied with the requirements of section

2210.208 by offering the Kellys the opportunity to obtain coverage for damage

caused by wind-driven rain through the purchase of an endorsement that, if

purchased, would have provided coverage for losses caused by wind-driven rain. We

sustain TWIA’s first issue.

In its second issue, TWIA argues that the Kellys do not have valid claims

against it for allegedly breaching its duty of good faith or for violating the DTPA

because their claims are limited by section 2210.576 of Act to certain claims, a claim

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over whether TWIA’s denial “was proper[,]” a claim to recover the amount of

damages recoverable under the policy for the loss less the amount, if any, already

paid, and a claim for prejudgment interest and attorney’s fees. Tex. Ins. Code. Ann.

§ 2210.576. In response, the Kellys argue that Chapter 2210 of the TWIA Act sets

out the general remedy and the damages they may recover but does not limit them

to the statutory claims listed in the Act.

We review statutory interpretation de novo and use the same principles of

statutory interpretation we used in deciding issue one. City of Rockwall v. Hughes,

246 S.W.3d 621, 625 (Tex. 2008). In 2011, the Texas Legislature passed House Bill

No. 3 (“H.B. 3”), which made significant changes to Chapter 2210, including the

addition of restrictions on policyholders’ remedies and specific procedural

requirements. See Act of June 28, 2011, 82nd Leg., 1st C.S., ch. 2, § 41, 2011 Tex.

Gen. Laws 5180, 5192–98 (current version at Tex. Ins. Code Ann. § 2210.572(a));

Tex. Windstorm Ins. Ass’n v. Jones, 512 S.W.3d 545, 549 (Tex. App.—Houston [1st

Dist.] 2016, no pet.). Section 2210.572(a) now provides the exclusive remedies for

a claim against TWIA under the Act. See Tex. Ins. Code Ann. § 2210.572(a). Section

2210.14(a) provides that “[a] person may not bring a private action against [TWIA],

including a claim against an agent or representative of [TWIA], under Chapter 541

[(unfair settlement practices)] or Chapter 542 [(prompt payment of claims)].” See id.

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§ 2210.014(a). Section 2210.572(c) provides that “[TWIA], and an agent or

representative of [TWIA], may not be held liable for damage under Chapter 17 of

the Business & Commerce Code (the DTPA), or, except as otherwise provided

specifically provided by this chapter, under any provision of any law providing for

additional damages, punitive damages, or a penalty. See id. § 2210.572(c). Subject

to Section 2210.576, TWIA “may not be held liable for any amount other than

covered losses payable under the terms of the association policy.” Id. § 2210.572(b).

When the Legislature creates a statutory cause of action and remedy for its

enforcement dealing with an administrative agency, such as TWIA, rather than by

common law, the statutory provisions are mandatory and exclusive. See Tex.

Catastrophe Prop. Ins. Ass’n v. Council of Co-Owners of Saida II Towers Condo

Ass’n, 706 S.W.2d 664, 645-46 (Tex. 1986), abrogated on other grounds by Dubai

Petroleum Co. v. Kazi, 12 S.W.3d 71, 76 (Tex. 2000); Housing & Cmty. Servs., Inc.

v. Tex. Windstorm Ins. Ass’n, 515 S.W.3d 906, 909 (Tex. App.—Corpus Christi,

2017, no pet.). Since section 2210.576 of the Act limits claimants to a claim over

whether TWIA’s denial was proper and limits claimants to claims that seek damages

to covered losses under the policy (less the amount already paid), prejudgment

interest, court costs, and reasonable and necessary attorney’s fees, we agree with

TWIA that the Kellys did not have causes of action for TWIA’s alleged breach of

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its duty of good faith or for TWIA’s alleged violations of the DTPA. We therefore

sustain TWIA’s second issue.

In its third issue, TWIA argues that there was a fact issue precluding the

granting of Kelly’s summary judgment, because Section 2210.208(a) does not apply

“unless the coverage was excluded from a companion policy in the voluntary

market.” See id. § 2210.208(e). However, having sustained issues one and two, the

third issue raised would not result in greater relief, so it is not necessary that we

address it. TEX. R. APP. P. 47.1.

CONCLUSION

Having decided the controlling questions of law in TWIA’s favor, we reverse

the trial court’s Order granting summary judgment in favor of the Kellys, we reverse

the trial court’s Order denying TWIA’s summary judgment, and we remand this case

back to the trial court for further action consistent with this opinion.

REVERSED AND REMANDED.

W. SCOTT GOLEMON
Chief Justice

Submitted on November 4, 2022
Opinion Delivered September 21, 2023

Before Golemon, C.J., Horton and Wright, JJ.

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