United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT August 16, 2007
Charles R. Fulbruge III
Clerk
No. 07-20235
Summary Calendar
ADMINISTRATIVE SERVICES OF NORTH AMERICA, INC.,
Plaintiff-Appellant,
versus
THE HARTFORD FIDELITY & BONDING COMPANY;
HARTFORD CASUALTY INSURANCE COMPANY,
Defendant-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
(4:03-CV-3949)
Before REAVLEY, SMITH, and BARKSDALE, Circuit Judges.
PER CURIAM:*
Administrative Services of North America, Inc. (ASONA)
contests the summary judgment awarded Hartford Casualty Insurance
Company on ASONA’s breach-of-contract, bad-faith, and statutory-
delay claims.
ASONA had an employment contract with its President and CEO.
Subsequently, ASONA purchased a commercial crime policy from
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
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Hartford to insure against losses due to “employee dishonesty”.
The policy required ASONA to notify Hartford of any covered loss as
soon as possible, but not later than 60 days after discovery of the
loss, and to provide Hartford a detailed, sworn proof of loss
within 120 days of discovering the loss; and permitted an action
against Hartford no sooner than 90 days after ASONA filed the proof
of loss but within two years from the date the loss was discovered.
In early March 1999, ASONA discovered its President and CEO
allegedly had misappropriated funds from its bank and trust
accounts. On 19 March 1999, ASONA reported this loss to Hartford;
the reported amount and nature of the loss, however, remained
variable. On 8 February 2002, Hartford formally denied ASONA’s
claim under its policy.
In Texas state court in August 2003, ASONA filed claims
against Hartford for breach of contract, breach of common-law duty
of good faith and fair dealing, violations of former Articles 21.21
(statutory bad faith) and 21.55 (statutory delay) of the Texas
Insurance Code, and violations of the Texas Deceptive Trade
Practices Act (DTPA). After this action was removed to district
court, Hartford obtained summary judgment on all of ASONA’s claims.
For the breach-of-contract claim, the district court held:
because the policy barred an action against Hartford no sooner than
90 days from the time ASONA submitted the proof of loss, and no
later than after two years had passed from the time the loss was
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discovered, the time during which an action could be filed was
shorter than two years and thus void pursuant to Texas law. TEX.
CIV. PRAC. & REM. CODE ANN. § 16.070 (Vernon 1997). The four-year
limitations period provided by Texas common law, however, also had
run, calculated from the contractually-provided time the loss was
discovered (March 1999) to the date the action was filed (August
2003). See id. § 16.051.
For the bad-faith claims pursuant to common law, the Texas
Insurance Code, and the DTPA, the court held: there was no genuine
issue of material fact that Hartford denied ASONA’s claim while it
knew, or should have known, it had no reasonable basis for denying
coverage, as required for such claims; and, in any event, ASONA
failed to allege sufficient, independent injury resulting from
Hartford’s alleged deceptive acts, as required for DTPA and Article
21.21 claims.
For the statutory-delay claim, the court held: Hartford could
not be found liable for coverage because ASONA was barred from
litigating its breach-of-contract claim, and Article 21.55 required
liability to be determined as a result of arbitration or
litigation.
A summary judgment is reviewed de novo, applying the same
standard as the district court. Jones v. Robinson Prop. Group,
L.P., 427 F.3d 987, 991-92 (5th Cir. 2005). Such judgment is
proper if, viewing the evidence in the light most favorable to the
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nonmovant, there is no genuine issue as to any material fact and
the movant is entitled to a judgment as a matter of law. Id. at
992; FED. R. CIV. P. 56(c).
Essentially for the reasons stated in the magistrate judge’s
two detailed and well-reasoned reports and recommendations, adopted
by the district court, summary judgment was proper. The policy
provided that a claim accrues when the loss is discovered. That
its two-year term is void and replaced by four years under Texas
law does not require that other agreed-upon terms, such as the
accrual provision, be replaced. See TEX. CIV. PRAC. & REM. CODE ANN.
§ 16.051 (providing only that an action “must be brought not later
than four years after the day the cause of action accrues”); Gulf
Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000)
(“The primary goal [of courts] is to ascertain and give effect to
the parties’ intent as expressed in the contract.”); see also
Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d
847, 853 (5th Cir. 2003) (“Texas courts interpret insurance
policies using the rules of interpretation and construction
generally applicable to other contracts.”). Because the loss was
discovered over four years before ASONA filed this action, its
breach-of-contract claim is barred, pursuant to the policy’s
limitations period.
Regarding the bad-faith claims, ASONA has not shown there is
a genuine issue of material fact that Hartford breached its duty to
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attempt in good faith to effectuate a prompt, fair, and equitable
settlement by denying ASONA’s policy claim while it knew, or should
have known, it had no reasonable basis for doing so. See U.S. Fire
Ins. Co. v. Williams, 955 S.W.2d 267, 268 (Tex. 1997); see also
Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 460
(5th Cir. 1997) (noting Texas courts have ruled that DTPA and
Article 21.21 claims “require the same predicate for recovery as
bad faith causes of action in Texas”).
Finally, Article 21.55 “provides for statutory damages for
failure to pay an insurance claim within a specified time if an
insurer is found liable under a policy, even if the insurer had a
reasonable basis for denying coverage”. Performance Autoplex II
Ltd., 322 F.3d at 861. Because ASONA is barred from litigating its
breach-of-contract claim, Hartford cannot be found liable for
statutory delay. See id.
AFFIRMED
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