Insurance Company’s Advertising Not Enough to Bring Misrepresentation and Deceptive Trade Practice Suit

A Federal trial court in Texas recently dismissed a homeowner’s claims that related to State Farm making misrepresentations in advertising and violating the Texas Deceptive Trade Practices Act (DTPA).¹

Bob Click filed a claim with his insurer, State Farm Lloyds, after his home suffered water damage. State Farm agreed that his insurance policy covered the claim. State Farm estimated $9,015.05 and later $11,824.76 to repair the water damage. Mr. Click prepared his own estimate of $82,819.29 to cover the damage. State Farm increased its damage payout to $25,741.14.

Mr. Click sued State Farm, contending this amount was not enough to fix the damage to his home and therefore did not comply with the policy. He also alleged that State Farm’s delay in compensating him for all his damages violated the DTPA. After removing the case to federal court, State Farm moved to dismiss, asserting that the claims did not meet the heightened pleading standard for claims of fraud under Federal Rule of Civil Procedure 9(b).

The court ruled that the insured had insufficiently pleaded the allegations of violation of the DTPA. Mr. Click had not explained how the facts plead showed DTPA violations. The court pointed out that he had not alleged how State Farm purportedly made its misrepresentations, other than a “repeated general reference to advertising materials claiming to fully restore the insured following a loss.”

The court found the argument regarding advertisements “unsound” because “the insured cannot decide that the multiple estimates prepared by an adjustor were insufficient, provide his own estimate, and then claim that the insurer violates the DTPA by declining to pay out the total of his estimate, whether or not the insurer advertised the policy as compensating for all loss.” The court then stated that the insured had failed to allege sufficiently that State Farm acted to deceive or defraud him, instead citing the DTPA provisions generally and asking the court to infer a supporting factual allegation based upon “advertising puffery.”

At the end of the day, insurance companies like State Farm spend billions of dollars a year to convince consumers that they will treat you like a good neighbor; that you are in good hands and that you will be protected from mayhem, but the reality is that if they don’t live up to their public personas, suing them for these statements of advertising puffery may be difficult.
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¹ Click v. State Farm Lloyds, No. 1:17-CV-00108 (N.D. Tex. Mar. 13, 2018).