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DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 1 of 15 IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
MIDLAND-ODESSA DIVISION
MTP HOSPITALITY SOLUTIONS, INC,
Plaintiff,
v. AFFILIATED FM INSURANCE
COMPANY,
Defendant.
§
§ § § § § § § § §
CIVIL ACTION NO. 7:23-cv-00099
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S
ORIGINAL ANSWER AND DEFENSES
Defendant Affiliated FM Insurance Company (“AFM” or “Defendant”) files this its
Answer and Defenses to Plaintiff MTP Hospital ity Solutions, Inc.’s (“ Plaintiff” or “MTP”)
Original Petition and would respectf ully show the Court as follows:
ANSWER
I.
DISCOVERY CONTROL PLAN LEVEL1
1. The allegations in this paragraph of Plaintiff’s Original Petition are legal
conclusions and require no response from AFM.2 To the extent a response is required, AFM states
that this paragraph makes proced ural requests under state law that are nullified by removal to
federal court.
1 AFM has included in this Answer the various headings us ed by Plaintiff in its Original Petition. AFM does not
believe any response to these headings is required. To th e extent a response to these headings is required, the
statements contained therein are denied.
2 AFM has numbered the paragraphs in Plaintiff’s Orig inal Petition for the convenience of the Court. A copy of
Plaintiff’s Original Petition with numbered paragraphs is attached as Exhibit A. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 1 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 2 of 15 II.
PARTIES AND SERVICE
2. Defendant admits the information set forth by Plaintiff in this pa ragraph. In addition
to the information provided, Plaintiff is a Texas corporation with its principal place of business in
Texas.
3. Denied.
4. Admitted.
III.
JURISDICTION AND VENUE
5. The allegations in this paragraph of Plaintiff’s Original Petition are legal
conclusions and require no respons e from AFM. To the extent a re sponse is requi red, AFM admits
that the conduct giving rise to th is lawsuit occurred in whole or in part in Midland County, Texas
and the property that is the subjec t of this suit is located in whol e or in part in Midland County,
Texas. AFM denies the remaining allegations in this paragraph.
IV.
BACKGROUND FACTS
6. AFM admits that the property listed in para graph 6 of Plaintiff’s Original Petition
is covered by a policy of insura nce, numbered ES676 (the “Policy”), issued by AFM to Plaintiff.
This coverage is subject to all terms, conditions, and ex clusions found in the Policy.
7. AFM admits Plaintiff noticed a claim to AFM for a freeze loss and resulting water
damage. AFM admits it assigned an adjuster to this loss. AFM denies the remaining allegations in
paragraph 7.
8. Denied.
9. Denied. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 2 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 3 of 15 V.
CAUSES OF ACTION AGAINST DE FENDANT AFFILIATED FM
A. BREACH OF CONTRACT
10. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theories and conclusions of law to whic h no response is required. To the
extent a response is required, AFM de nies that Plaintiff is entitled to any relief in this action and
accordingly denies the allegations in paragraph 10.
11. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly de nies the allegations in this pa ragraph. AFM specifically denies
that Plaintiff has carr ied out and accomplished all conditions precedent to recovery under the
Policy. B. NONCOMPLIANCE WITH TE XAS INSURANCE CODE
1. UNFAIR SETTLEMENT PRACTICES
12. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theori es and conclusions of law to which no response is required. AFM
denies that Plaintiff is entitled to any relief in this action and accordingly denies the allegations in
Paragraph 12.
13. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations in paragraph 13.
2. THE PROMPT PAYMENT OF CLAIMS
14. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theories and conclusions of law to whic h no response is required. To the Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 3 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 4 of 15 extent a response is required, AFM de nies that Plaintiff is entitled to any relief in this action and
accordingly denies the allegations set forth in this paragraph.
15. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the al legations set forth in this paragraph.
16. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
17. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
18. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
19. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
C. BREACH OF THE DUTY OF GOOD FAITH AND FAIR DEALING
20. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theories and conclusions of law to whic h no response is required. To the
extent a response is required, AFM de nies that Plaintiff is entitled to any relief in this action and
accordingly denies the allegations set forth in this paragraph. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 4 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 5 of 15 21. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
22. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
VI.
KNOWLEDGE
23. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theories and conclusions of law to whic h no response is required. To the
extent a response is required, AFM de nies that Plaintiff is entitled to any relief in this action and
accordingly denies the allegations set forth in this paragraph.
VII.
DAMAGES
24. Defendant incorporates by reference its an swers to the preceding allegations. This
paragraph contains legal theories and conclusions of law to whic h no response is required. To the
extent a response is required, AFM de nies that Plaintiff is entitled to any relief in this action and
accordingly denies the allegations set forth in this paragraph.
25. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph.
26. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the allegations set forth in this paragraph. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 5 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 6 of 15 27. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the al legations set forth in this paragraph.
28. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the al legations set forth in this paragraph.
29. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the al legations set forth in this paragraph.
30. This paragraph contains legal theories a nd conclusions of law to which no response
is required. To the extent a response is required, AF M denies that Plaintiff is entitled to any relief
in this action and accordingly denies the al legations set forth in this paragraph.
VIII.
31. Defendant incorporates by re ference its answers to th e preceding allegations. The
allegations in this paragraph of Plaintiff’s Original Petition purport to characterize the insurance
Policy between AFM and Plaintiff, which speaks for itself. AFM respectfully refers the Court to
the Policy for its complete contents. AFM denies the allegations in this paragraph to the extent
they are facts and not legal theories or conclusions.
32. The allegations in this paragraph of Pl aintiff’s Original Petition purport to
characterize the insurance Policy between AFM and Plaintiff, which speaks for itself. AFM
respectfully refers the Court to the Policy for its complete contents. AFM denies the allegations in
this paragraph to the extent they are facts and not lega l theories or conclusions.
33. The allegations in this paragraph of Pl aintiff’s Original Petition purport to
characterize the insurance Policy between AFM and Plaintiff, which speaks for itself. AFM Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 6 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 7 of 15 respectfully refers the Court to the Policy for its complete contents. AFM denies the allegations in
this paragraph to the extent they are facts and not lega l theories or conclusions.
IX.
34. Defendant incorporates by reference its an swers to the preceding allegations. AFM
specifically denies that Plaintiff is entitled to any judgment against AFM in this matter and/or the
recovery of any actual damages, punitive damages, exemplary damages, pre- and post-judgment interest, attorneys’ fees, court costs, and equitabl e relief. To the extent necessary, AFM denies the
allegations in this paragraph of Plaintiff’s Original Petition.
DENIAL OF CONDITIONS PRECEDENT
Defendant specifically denies th at Plaintiff has satisfied all conditions precedent to the
recovery it seeks in this lawsuit.
FIRST DENIAL
1. The Policy applies only to loss that occu rs during the policy period, which is
September 24, 2020 to September 24, 2021 at 12:01 A. M., Standard Time. To the extent that any
part of the loss of which Plain tiff complains did not occur during this period, the Policy provide
no coverage for such loss.
SECOND DENIAL
2. Defendant’s obligation to pay under the Policy extends, if at all, only to a covered
loss that exceeds the applicable Policy’s deductibl e(s). If there is an obligation to pay, it applies
only to the amount of covered loss, if any, that exceeds the applicable deductible(s).
THIRD DENIAL
3. Plaintiff’s loss is only recoverable, if at all, to the extent provided by the Policy’s
Valuation provision, whic h states in part: Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 7 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 8 of 15 1. Adjustment of physical loss to property wi ll be determined based on the lesser of the
following unless stated otherwise belo w or elsewhere in this Policy:
a) The cost to repair.
b) The cost to rebuild or replace on the same site with new materials of like size, kind
and quality. c) The cost to rebuild, repair or replace on the same or another site, but not to exceed
the size and operating capacity that existed on the date of loss.
* * *
12. On property if not repaired, replaced or rebuilt on the same or another site within two
years from the date of loss, unless su ch time is extende d by the Company, the actual
cash value .
FOURTH DENIAL
4. Plaintiff’s claims are barre d, in whole or in part, by th e Policy’s Requirements in
Case of Loss / Requirements in Case Loss Occu rs, which includes a require ment that the insured
send AFM a proof of loss, including setting forth “the amount of loss to each it em,” within 90 days
of the loss.
FIFTH DENIAL
5. Plaintiff’s claims are barred, in whole or in part, by the Policy’s Legal Action
Against This Company and Suit Against Company provisions, which include a requirement that
Plaintiff has fully complied with all the provisions of the Policy before bringing suit. This includes
but is not limited to compliance with the Appraisal provision of the Policy, with which Plaintiff
has refused to comply. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 8 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 9 of 15 DEFENSES
FIRST DEFENSE
6. Plaintiff’s claims are subject to all of the terms, cond itions, limitations, exclusions,
and deductibles contained in the Policy issued to Plai ntiff, including any e ndorsements attached
thereto.
SECOND DEFENSE
7. The amount recoverable for Plai ntiff’s claims is limited by the applicable limits and
any sub-limits contained in the Policy.
THIRD DEFENSE
8. Plaintiff’s claims are barred, in whole or in part, to th e extent any damage was not
caused by or resulting from a covered cause of loss.
FOURTH DEFENSE
9. Plaintiff’s claims are barred, in whole or in part, to the extent the physical loss or
damage claimed under the Policy was pre-existing and/or did not occur w ithin the applicable
Policy period.
FIFTH DEFENSE
10. Plaintiff’s claims are barred, in whole or in part, by Plaint iff’s failure to allocate its
alleged damages between losses caused by a co vered cause of loss and those caused by non-
covered losses such as damages which occurred pr ior to the inception of the Policy and/or damages
which were caused by excluded cau ses of loss under the Policy. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 9 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 10 of 15 SIXTH DEFENSE
11. Plaintiff’s claims are barred, in whole or in part, by Plaintif f’s failure to make
reasonable and necessary repairs to protect the in sured property from furthe r damage, as required
by the Policy.
SEVENTH DEFENSE
12. Plaintiff’s claims are barred, in whole or in part, to th e extent Plaintiff failed to
mitigate its claimed damage.
EIGHTH DEFENSE
13. Plaintiff’s claims are barred, in whole or in part, to the extent Plaintiff and/or its
agents’ acts or omissions pr oximately caused or contribu ted to Plaintiff’s loss.
NINTH DEFENSE
14. Plaintiff’s claims are barred, in whole or in part, on the basis that Plaintiff’s petition
fails to state a claim against Defenda nt upon which relief can be granted.
TENTH DEFENSE
15. Plaintiff’s claims are barred, in whole or in part, by the Policy’s Ordinance or Law
exclusion, which excludes loss from the enforcem ent of any ordinance or law regulating the
construction, use or repair of any property; or requiring the tearing down of any property, including
the cost of removing its debris.
ELEVENTH DEFENSE
16. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusions for
indirect or remote loss or damage, loss of use or loss of market, and loss or damage or deterioration
arising from any delay. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 10 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 11 of 15 TWELTH DEFENSE
17. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusion for
settling, cracking, shrinki ng, bulging or expansion of foundati ons, walls, floors, pavements or
roadways, roofs, and ceilings.
THIRTEENTH DEFENSE
18. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusion for wear
and tear, deterioration, depl etion, rust, corrosion, eros ion, inherent vice or la tent defect in property
that causes it to dama ge or destroy itself.
FOURTEENTH DEFENSE
19. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusion for faulty
workmanship, material, construction or desi gn that causes physical loss or damage.
FIFTEENTH DEFENSE
20. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusion for loss
or damage caused by or resulting from cha nges of temperature a nd/or relative humidity.
SIXTEENTH DEFENSE
21. Plaintiff’s claims are barred, in whole or in part, by the Policy’s exclusion for
contamination, and any cost due to contamination including the inability to use or occupy property
or any cost of making pr operty safe or suitable for use or occupancy.
SEVENTEENTH DEFENSE
22. To the extent there is other insurance applic able to Plaintiff’s a lleged losses, and/or
to the extent that plaintiff has or will recover a ll or part of its alleged losses or damages from any
third party, any recovery under the Policy must be reduced by the applic ation of such other
insurance or third-party recovery. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 11 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 12 of 15 EIGHTEENTH DEFENSE
23. Plaintiff’s claims for allege d bad faith and violations of the Texas In surance Code
are barred to the extent Plaintiff did not sustain damages (if any) independe nt of the denial of
benefits under the Policy.
NINTEENTH DEFENSE
24. A bona fide controversy exists concerning the extent of Plaintiff’s entitlement to
benefits under the Policy. AFM and its employees , agents, representatives, and adjusters are
entitled to value claims differe ntly from AFM’s policyholders w ithout facing bad faith or extra-
contractual liability. AFM would s how that a bona fide controvers y exists regarding the scope of
any alleged covered loss and/or whether and the extent to which any asserted loss was the result
of a covered occurrence to covered property.
TWENTIETH DEFENSE
25. AFM denies any liability to Plaintiff for alleged extra-contractual damages.
Pleading alternatively, any award to Plaintiff of exemplary, additional, treble or punitive damages
or penalties is limited pursuant to Tex. Civ. Pr ac. & Rem. Code Ann. Chapter 41 and Tex. Ins.
Code Sections 541.152 and 542.060. Under the facts of this case, howev er, an award of exemplary,
additional, treble or punitive damages or penaltie s consistent with the maximum awards permitted
under these statutes would violate AFM’s st ate and federal constitutional rights. AFM
affirmatively pleads that an award of exemplary, additional, treble or punitive damages or penalties
would violate the due process and equal protection clauses of the United States and Texas
Constitutions. An award of exemplary, additional, treble or punitive damages or penalties would be both arbitrary and excessive in that (1) Texas procedure lacks adequate safeguards in violation
of the due process clauses of the United States and Texas Constitutions, and (2) AFM will not be Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 12 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 13 of 15 afforded equal protection against extra-contract ual damages that would be limited or capped for
others.
26. As a specific defense, AFM asserts that Plaintiff’s claims for punitive damages, if
any, cannot be sustained pursuant to Texas law re garding the standards fo r determining liability
for and the amount of punitive damages. The impos ition of punitive damages in this case would
be fundamentally unfair and would violate th e Constitution of the United States and the
Constitution of the State of Texas in one or more of the following respects:
a) Due process requires proof of punitive damages by a standard greater than the
“preponderance of the evidence” standard. Due pro cess requires proof of such claims by at
least clear and convincing ev idence standard of proof.
b) The assessment of punitive damages, a reme dy that is essentially criminal in nature
without safeguards greater than that afforded by Texas Civil Procedure and the civil law,
constitutes infliction of a criminal penalty without the safeguards guaranteed by the Fifth,
Sixth, and Fourteenth Amendm ent of the Constitution of th e United States, the Eighth
Amendment to the Constitution of the United States, and Article I, §§ 13 and 19 of the Constitution of the State of Texas.
TWENTY-FIRST DEFENSE
27. Plaintiff’s claim for attorney’s fees is barred, in whole or in part, by the doctrine of
excessive demand.
TWENTY-SECOND DEFENSE
28. Plaintiff’s claims are barred, in whole or in part, by the Policy’s Appraisal
provision, which Defendant has invoked. Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 13 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 14 of 15 RESERVATION OF RIGHTS
By appearing and answering here in, Defendant does not waive, and expressly reserves, all
rights and defenses that Defendant may have (or that may arise) under the Policy and/or applicable
law. Nothing herein shall constitute or be deemed a waiver of, or an estoppel to assert, any of the
rights and defenses that Defendant may have (or that may arise) under the Policy and/or applicable
law. In particular, Defendant ha s demanded appraisal for the remain ing issues in dispute and will
seek to stay all litigation pendi ng resolution of that process.
PRAYER
Affiliated FM Insurance Company prays that (i) Plaintiff’s claims for relief be denied, (ii)
Plaintiff take nothing by its claims, and (iii) Affi liated FM Insurance Company be granted such
other and further relief to which the C ourt may find it is justly entitled.
Respectfully submitted,
Z
ELLE LLP
By: /s/ Shannon M. O’Malley
Shannon M. O’Malley
Texas Bar No. 24037200 [email protected]
Michael P. O’Brien
Texas Bar No. 24103418 [email protected]
901 Main Street, Suite 4000 Dallas, TX 75202-3975 Telephone: 214-742-3000 Facsimile: 214-760-8994 ATTORNEYS FOR AFFILIATED FM INSURANCE COMPANY
Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 14 of 15
DEFENDANT AFFILIATED FM INSURANCE COMPANY ’S ORIGINAL ANSWER AND DEFENSES Page 15 of 15 CERTIFICATE OF SERVICE
A true and correct copy of the foregoing has b een served on the following counsel of record
in accordance with the T EXAS RULES OF CIVIL PROCEDURE on this 7th day of July 2023:
Shannon E. Loyd [email protected]
Robert A. Pollom
[email protected]
LOYD & POLLOM , P.L.L.C.
12703 Spectrum Drive, Suite 201 San Antonio, TX 78249 Telephone: 210-775-1424 Facsimile: 210-775-1410 ATTORNEYS FOR PLAINTIFF
/s/ Shannon M. O’Malley
Shannon M. O’Malley
4895-1299-0061v2 Case 7:23-cv-00099-DC Document 2 Filed 07/07/23 Page 15 of 15