Marilyn Tennissen Jan. 21, 2015, 3:58pm


The owners of an apartment complex in Galveston that was damaged by Hurricane Ike are seeking insurance payouts to cover the costs of demolition and rebuilding.


On Jan. 20, JAW The Pointe LLC asked the Texas Supreme Court to reinstate a jury verdict of almost $4 million against Lexington Insurance Co.



JAW purchased The Pointe apartments in 2007 for $5.7 million. The complex consisted of 13 two-story buildings located on the Galveston seawall.


The owners had a group policy with Lexington that provided property insurance up to $25 million to about 300 apartment complex owners.


However the policy covered wind damage, but not damage caused by flood. It also excluded damage caused by a combination of wind and flooding.


The Pointe sustained both wind and water damage.


After the hurricane, the city of Galveston required apartment owners to demolish and rebuild up to current city codes if the damage to the complex exceeded 50 percent of the market value. The cost to rebuild would be about $6.2 million.


JAW had a separate policy to cover floods and had other policies, which resulted in about $5.7 million in settlements.


But Lexington denied payment, citing the policy’s “anti-current causation clause.” The insurer also said it had paid out all of the $25 million to other apartment complex owners.


JAW sued Lexington for violations of the Texas Insurance Code. The case went to trial in Galveston County, with Judge Lonnie Cox presiding. The jury found Lexington owed almost $4 million. The owners were awarded $1.23 million for actual damages, $2.5 million for punitive damages and $170,000 in attorneys’ fees.


The jury found that Lexington denied the claim in “bad faith,” and not because the policy had been exhausted.


Lexington Insurance appealed the verdict, and the Texas 14th District Court of Appeals reversed the jury award.


The appellate court said JAW failed to prove its claims were covered losses.


JAW recovered “far more in settlements than the jury found in damages, for which Lexington is entitled to a settlement credit.”


The insurance company claimed the apartment owners recovered approximately $10.5 million for a complex it bought for $5.7 million.


It also said JAW had the duty to separate the covered from the non-covered losses, but never did. Since the causes were not separated, none of the losses could be covered.


After the appeals court reversed the jury verdict, the owners of The Pointe filed an appeal to the Supreme Court of Texas on Oct. 7, 2013.


On Jan. 20, JAW sent a letter to the court asking that the verdict be reinstated.


Counsel for The Pointe are Marc E. Gravely, James Cornell, Matthew Pearson, Shannon Elizabeth Loyd and Brendan McBride.


Representing Lexington Insurance are Michael Choyke, David Jay Campbell and Thomas C. Wright.


Supreme Court Case No. 13-0711


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