JAW The Pointe, LLC v. Lexington Ins. Co. (Opinion)
Annotate this CaseJAW The Pointe, LLC obtained insurance to cover an apartment complex located in Galveston from an insurer that purchased several policies providing multiple layers of coverage for the 300 complexes it insured. Lexington Insurance Company provided the primary coverage layer. Hurricane Ike struck, causing substantial damage to The Pointe apartments. Under city ordinances, JAW was required to be brought into compliance with current code ordinances. The insurance policy covered the costs of complying with city ordinances but only if the policy covered the property damage that triggered the enforcement of the ordinances. In this case, the property damage that triggered the ordinances resulted from wind, which the policy covered, and flooding, which the policy expressly excluded. Lexington informed JAW that the policy did not cover the losses JAW incurred to comply with the ordinances. JAW sued Lexington, asserting claims for violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. The jury returned a verdict in JAW’s favor. The court of appeals reversed, concluding that the policy excluded coverage for JAW’s code-compliance losses. The Supreme Court affirmed, holding that the policy did not cover JAW’s losses, and thus JAW could not recover for Lexington’s bad faith failure to effectuate a prompt and fair settlement of the claim.
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