MCALLEN - On Friday morning Houston attorney Steve Mostyn found himself 400 miles from home in the small border town of McAllen, forced to stand in front of a federal judge to explain why he shouldn't be sanctioned for bringing factually unsupported hail suits against insurers.
In March, U.S. District Judge Micaela Alvarez granted a State Farm motion for summary judgment in a hail suit, reminding Mostyn that evidence is needed when filing a claim and warning him that Rule 11 authorizes the court to impose sanctions for disregarding the obligation.
Three weeks later, on April 13 Judge Alvarez once again granted State Farm summary judgment in a separate hail lawsuit, finding that no factual issues developed in the life of the litigation to support the claims making up the action.
In her order, Judge Alvarez called for a hearing to show cause on why Mostyn shouldn't be sanctioned, which took place on May 6.
The mood of the hearing was not unlike a mother lecturing a child, with Judge Alvarez saying that she was "concerned" that Mostyn and his firm were "not being careful in screening" the hail cases coming to them.
In the past decade, the Mostyn Law Firm has filed tens of thousands of lawsuits against insurers in the wakes of storm-related disasters.
Judge Alvarez told Mostyn his cases "appear" not to be "factually supported," surmising that "someone" was going to the home of hail victims and telling them they could get more money by suing.
She continued by accusing Mostyn attorneys of "doing a very poor job," remarking that the firm's hail pleadings are "almost identical" and use the same format, with only the name changing from lawsuit to lawsuit.
Judge Alvarez then suggested that maybe the Mostyn Law Firm should try talking to the insurance company first before filing a lawsuit.
At the hearing's conclusion, she advised Mostyn to have a "serious talk" with the younger lawyers in his firm, to which he replied: "Will do."
No immediate ruling was issued following the hearing. Judge Alvarez said it may be some time before handing down an order, as she needs to evaluate the evidence.
A day prior to the hearing, Mostyn filed a 15-page memorandum in response to court's April 13 order, in which he references his experience in suing State Farm.
"(The Mostyn Law Firm's) knowledge and experience in handling thousands of storm-damage claims against State Farm has given MLF a certain advantage, or at least an experience based perspective, in evaluating particular claims-handling procedures and practices, as in the present case."
In attendance was Texas House candidate Abraham Padron, a Rio Grande Valley local who told the Record after the hearing he was glad to see an area judge addressing the issue of mass hail litigation.
Padron is president of the SafeGuard Insurance Agency, an independent agency with 11 office locations spanning from Brownsville to Laredo.
The case
Plaintiffs Mark and Kelly Dizdar's claims arise from damage caused to their Hidalgo County home by a hailstorm that ravaged the area on March 29, 2012.
State Farm had the property inspected and estimated the loss at $8,654.13. After applying depreciation and the deductible, a payment of $4,955.60 was issued, court records show.
The couple requested a re-inspection and State Farm issued a supplemental payment of $3,125.67.
The insurance company closed the claim and had no further discussions with the Dizdars in regards to any concerns and complaints until they filed a lawsuit nearly two years later on April 16, 2014, court records show.
The case was abated while an appraisal process took place. Last fall, the parties advised the court an appraisal award had been issued and State Farm had tendered payment.
However, the plaintiffs declined to dismiss the case, arguing the appraisal award shows State Farm breached the contract by failing to properly estimate the amount of damages.
State Farm moved for summary judgment and the court found that contrary to Plaintiffs' assertions, Texas law clearly holds the discrepancy between the initial estimate and the appraisal award cannot be used as evidence of breach of contract, court records show.
“To the extent Plaintiffs even sufficiently alleged extra-contractual claims in their original petition, the bad-faith causes of action relate solely to State Farm's investigation and handling of Plaintiffs' policy claim,” the order states.
“Plaintiffs do not allege that these claims extend beyond the coverage dispute. Thus, far from providing evidence creating a genuine issue of material fact on these claims, Plaintiffs have failed to even allege an action (that) would constitute an independent injury.
“Accordingly, the Court GRANTS summary judgment in Defendants' favor on Plaintiffs' common-law and statutory claims of bad faith.”
Mostyn refuses to comment on articles produced by the Record.
State Farm is represented by Micah Kessler and Ryan Newman, attorneys for the Houston law firm Nistico, Crouch & Kessler.
Case No. 7:14-cv-00514