No Final District Court Order, No Bankruptcy Appeal; Insureds Must Segregate Covered From Non‑Covered Storm Losses and Prove Comparable Materials to Recover RCV

Introduction

In New York Inn v. Associated Industries Insurance Co., No. 24-10338 (5th Cir. Apr. 3, 2025) (per curiam) (unpublished), the Fifth Circuit resolved a multi-front dispute arising from property and business interruption claims after Winter Storm Uri damaged the Viva Inn Motel in Arlington, Texas. The policyholder side comprised two affiliated entities—Viva Inn, Inc. (the named insured for property coverage) and New York Inn, Inc. (seeking status as an additional insured). Their insurer, Associated Industries Insurance Company, had paid substantial amounts for building repairs and limited payments for contents and business interruption.

The litigation took root in an adversary proceeding within New York Inn’s Chapter 11 case. After the bankruptcy court recommended summary judgment for Associated on all merits claims and separately issued orders dismissing New York Inn (for lack of standing) and curtailing attorneys’ fees, the district court adopted the summary judgment recommendation but did not enter final rulings on the dismissal and fee orders. On appeal, the Fifth Circuit:

• Affirmed summary judgment on breach-of-contract, extra-contractual (bad faith and statutory) claims, and reformation.
• Held it lacked appellate jurisdiction to review the bankruptcy court’s orders dismissing New York Inn and denying attorneys’ fees because there was no final district court order under 28 U.S.C. § 158(d)(1) and no certified direct appeal under § 158(d)(2).
• Remanded to the district court to adjudicate the outstanding appeals of the bankruptcy court’s dismissal and attorneys’ fees orders.

The opinion reinforces three practical rules: (1) Section 158(d) appellate jurisdiction depends on a final district court decision (consent to bankruptcy court rulings does not supply jurisdiction); (2) under Texas law, insureds must segregate covered from non-covered damages and substantiate RCV and contents claims with policy-compliant proof; and (3) extra-contractual claims seeking policy benefits collapse when coverage fails, absent an independent injury.

Summary of the Opinion

• Jurisdiction: The Fifth Circuit dismissed for lack of appellate jurisdiction the challenges to the bankruptcy court’s orders dismissing New York Inn and restricting attorneys’ fees because the district court had not entered final orders on those appeals and there was no certification for direct appeal under § 158(d)(2). It remanded for the district court to rule on those pending appeals.
• Breach of Contract:
  • Building repairs: Affirmed summary judgment. The insureds failed the “concurrent causes” segregation requirement and did not show entitlement to additional RCV where the replacement used non-comparable materials (metal vs. original plastic piping) for the fire suppression system.
  • Contents: Affirmed summary judgment. The insureds did not submit the required contents inventory and valuation documentation; a 2019 valuation did not establish ACV as of the 2021 loss.
  • Business interruption: Argument on appeal was inadequately briefed (no authorities or record citations) and thus abandoned.
• Extra-contractual claims: Affirmed summary judgment. Because the insureds were not entitled to additional policy benefits, their statutory (DTPA and Texas Insurance Code §§ 541, 542, 542A) and common-law bad faith claims could not survive in the absence of an independent injury, which was neither alleged nor supported.
• Reformation: Affirmed summary judgment. Evidence (an email requesting “additional insured” status and insurer’s knowledge of property ownership) did not show mutual mistake or the prerequisites for unilateral mistake to reform the policy to add New York Inn for property coverage.

Analysis

Precedents Cited and Their Role

• Bankruptcy appellate jurisdiction and finality:
  • 28 U.S.C. § 158(d)(1) and (2): Appellate jurisdiction exists over final district court decisions; direct appeals require certification and authorization. The court relied on In re Greene County Hospital, 835 F.2d 589 (5th Cir. 1988), and In re Yazoo Pipeline Co., 746 F.3d 211 (5th Cir. 2014) to underscore finality, and In re Burch, 835 F. App’x 741 (5th Cir. 2021) to confirm lack of jurisdiction where a party effectively appeals bankruptcy court orders without a final district court disposition. Green Valley Special Util. Dist. v. City of Schertz, 969 F.3d 460 (5th Cir. 2020) (en banc), emphasized the court’s obligation to police its jurisdiction sua sponte.
• Summary judgment standards:
  • Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); DIRECTV, Inc. v. Minor, 420 F.3d 546 (5th Cir. 2005). The opinion applied these bedrock standards, requiring the nonmovant to present specific facts showing a genuine dispute for trial once the movant identifies the absence of evidence on essential elements.
• Texas insurance contract principles:
  • Kinsale Ins. Co. v. Flyin’ Diesel Performance & Offroad, L.L.C., 99 F.4th 821 (5th Cir. 2024); Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517 (Tex. 1995) (per curiam). Policies are construed under general contract rules; plain meaning governs.
  • Burden of proof on coverage: Seger v. Yorkshire Ins. Co., 503 S.W.3d 388 (Tex. 2016); Data Specialties, Inc. v. Transcon. Ins. Co., 125 F.3d 909 (5th Cir. 1997); Dall. Nat’l Ins. Co. v. Calitex Corp., 458 S.W.3d 210 (Tex. App.—Dallas 2015, no pet.). The insured must prove a covered loss; then the burden shifts to the insurer to show an exclusion.
  • Concurrent cause and segregation: Travelers Indem. Co. v. McKillip, 469 S.W.2d 160 (Tex. 1971); Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co., 130 S.W.3d 181 (Tex. App.—Houston [14th Dist.] 2003, pet. denied); Dallas Nat’l Ins. Co. v. Calitex Corp., 458 S.W.3d 210. Failure to segregate covered from non-covered damages is fatal to recovery.
  • Expert proof can be essential: Betzel v. State Farm Lloyds, 480 F.3d 704 (5th Cir. 2007).
  • Sham affidavit rule: Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795 (1999) (a party cannot create a fact issue by contradicting prior sworn testimony without explanation).
  • RCV “comparable materials” requirement: Republic Underwriters Ins. Co. v. Mex–Tex, Inc., 150 S.W.3d 423 (Tex. 2004) (insured prevailed where proof showed old and new roofs were comparable; by contrast, the court here found no proof of comparability).
  • Briefing and abandonment: Fed. R. App. P. 28(a)(8)(A); Dardar v. Lafourche Realty Co., 985 F.2d 824 (5th Cir. 1993); Cinel v. Connick, 15 F.3d 1338 (5th Cir. 1994).
  • Extra-contractual claims and independent injury: USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018); State Farm Lloyds v. Page, 315 S.W.3d 525 (Tex. 2010); Hamilton Props. v. Am. Ins. Co., 643 F. App’x 437 (5th Cir. 2016); Tchakarov v. Allstate Indem. Co., 2021 WL 4942193 (N.D. Tex. Oct. 22, 2021). If coverage fails, extra-contractual claims seeking policy benefits fall away absent independent injury.
  • Reformation principles: Cherokee Water Co. v. Forderhause, 741 S.W.2d 377 (Tex. 1987); Nat’l Resort Comm’tys. v. Cain, 526 S.W.2d 510 (Tex. 1975); Howard v. INA Cnty. Mut. Ins. Co., 933 S.W.2d 212 (Tex. App.—Dallas 1996, writ denied); TIG Ins. Co. v. Sedgwick James, 276 F.3d 754 (5th Cir. 2002); Estes v. Republic Nat’l Bank of Dallas, 462 S.W.2d 273 (Tex. 1970); Hardy v. Bennefield, 368 S.W.3d 643 (Tex. App.—Tyler 2012, no pet.); Donias v. Old Am. Cnty. Mut. Fire Ins. Co., 649 S.W.3d 789 (Tex. App.—El Paso 2022, no pet.); Davis v. Grammer, 750 S.W.2d 766 (Tex. 1988); Holley v. Grigg, 65 S.W.3d 289 (Tex. App.—Eastland 2001, no pet.); Oldaker v. Travelers Ins. Co., 497 S.W.2d 402 (Tex. Civ. App.—El Paso 1973, no writ).

Legal Reasoning in Depth

1) Appellate Jurisdiction Over Bankruptcy Orders

The court emphasized that appellate jurisdiction under § 158(d)(1) extends only to final decisions, judgments, orders, and decrees of the district court. Here, the district court had not entered final rulings on the appeals from the bankruptcy court’s (a) dismissal of New York Inn and its declaratory action and (b) order denying fees beyond a date certain. Consent to the bankruptcy court’s adjudication—while relevant to Article III or Stern concerns in some contexts—does not create appellate jurisdiction for the Fifth Circuit. Nor was there certified direct appeal under § 158(d)(2). Result: the Fifth Circuit declined to reach those issues and remanded for the district court to complete its work.

2) Breach of Contract

a) Building Repair

The policy covered direct physical loss or damage from covered causes but expressly excluded damage caused directly or indirectly by certain hazards (including “organic pathogens,” which the parties and court treated as encompassing mold). The policy also imposed a duty to mitigate and pay RCV only upon proof that the property is repaired or replaced with materials of comparable quality, up to the least of the applicable policy limits, the comparable replacement cost, or the amount actually spent.

On the core “concurrent cause” issue, the insureds sought to recover costs that included both covered (flooding from frozen burst pipes) and non-covered (mold and related consequences of delayed mitigation) components. Texas law required them to segregate the covered portion with competent evidence. Their proof failed for multiple reasons:

• The general contractor’s invoices (Decagon) and subcontractor invoices did not apportion or describe with specificity which line items addressed covered water damage versus non-covered mold or unrelated work.
• The contractor-expert (Pate) gave deposition testimony acknowledging non-covered work (e.g., replacing fire extinguishers because they were old), but later submitted an affidavit broadly asserting that the invoices reflected only flood remediation. The court applied the sham affidavit rule (Cleveland) to reject the contradiction absent a persuasive explanation.
• The policy’s mitigation clause and the insurer’s contemporaneous admonitions to begin drying the structure undercut any claim that delays (including denied moisture mapping) shifted responsibility for mold to the carrier. The court noted the record showed at least a six-week lag before remediation began; scarcity of contractors and limited funds, while understandable, do not negate the segregation requirement nor the mitigation duty the insured accepted under the policy.

On the discrete fire suppression system dispute, Associated had already paid ACV and a further RCV increment. Seeking more, the insureds had to show the replacement used “comparable” materials and quality. The record showed original plastic piping was replaced with metal piping; the insureds offered no evidence that these were comparable within the policy’s meaning. By contrast to Mex–Tex (where proof established comparability), the absence of such proof here defeated further RCV recovery.

b) Contents

The policy required, at the insurer’s request, a complete contents inventory detailing descriptions, quantities, ages, costs, and claimed losses. Associated advanced $10,000 pending proof. The insureds never submitted the requested inventory. Nor could they rely on a 2019 valuation to prove ACV as of the 2021 date of loss, because ACV is measured at the time of loss and must account for depreciation. The record also lacked credible evidence of replacement expenditures beyond $9,600. Summary judgment was therefore proper.

c) Business Interruption

The insureds argued for BI through December 2022 (reopening), asserting that duration was “reasonable and feasible.” But they offered no policy-based analysis (e.g., of the “period of restoration”), no authorities, and no record citations. Under Rule 28, inadequately briefed issues are abandoned on appeal. The Fifth Circuit affirmed on that basis.

3) Extra-Contractual Claims (Common Law Bad Faith and Texas Insurance Code/DTPA)

Menchaca and Page supply the controlling framework. When the insured seeks policy benefits as damages for extra-contractual violations, those claims generally do not survive if coverage itself fails—unless the insured proves an independent injury caused by the insurer’s extreme conduct. Here, because the court held the insureds were not owed additional policy benefits on any disputed component, their extra-contractual claims collapsed absent an independent injury (none was alleged with supporting authority or proof). Requests for exemplary or treble damages premised on entitlement to policy benefits fell with the underlying coverage claims.

4) Reformation (Adding New York Inn for Property Coverage)

The insureds asked to reform the policy to add New York Inn (which owned the motel) as an additional insured for all coverages, retroactive to inception. The record contained an email from Viva’s representative asking to add “New York Inn as an additional insured,” and insurer notes reflecting a bank’s desire to see New York Inn named. The court held:

• Mutual mistake: The proof could suggest Viva intended full additional-insured status, but there was no “clear, exact, and satisfactory” evidence that the insurer shared that understanding. At most, the record showed the insured’s request and the insurer’s acknowledgment—not a mutually agreed intention to extend additional-insured status beyond general liability to property coverage.
• Unilateral mistake: Reformation on unilateral mistake requires, among other things, knowledge by the other party or circumstances rendering enforcement unconscionable with a path to restore the status quo. Insurer awareness that New York Inn owned the property did not equate to knowledge that the insured sought and obtained full additional-insured status across all coverages. Oldaker’s result is instructive: a general request for “full coverage” did not prove the parties mutually intended UM coverage. So too here.

Impact

• Bankruptcy appeals finality: The court’s jurisdictional message is crisp—without a final district court decision (or certified direct appeal), the Fifth Circuit cannot review bankruptcy court orders. Parties must ensure the district court concludes the appeals process or obtain § 158(d)(2) certification.
• Property insurance litigation in Texas (storm losses):
  • Segregation is indispensable. Global or generalized invoices, expert opinions that fail to apportion, and records that blend covered and excluded work will not raise a triable fact issue. The “concurrent causes” doctrine remains a potent defense where mitigation-related damage (e.g., mold) accompanies covered water loss.
  • Mitigation obligations matter. Post-loss delays—whether due to funding, contractor scarcity, or strategic preferences (e.g., moisture mapping)—do not rewrite the duty to protect property from further damage. Courts will enforce explicit mitigation clauses.
  • RCV is not automatic. Policyholders must strictly comply with RCV conditions, including proving that replacements are of comparable material and quality, and that “amounts actually spent” fall within policy limits. Deviations (plastic-to-metal piping) without proof of comparability may cap recovery at ACV or prior payments.
  • Contents claims live or die by documentation. Carriers can condition further payment on a detailed contents inventory. A pre-loss valuation years earlier is not a proxy for ACV at the time of loss.
  • Briefing rigor on appeal: Courts will deem inadequately briefed issues abandoned—especially BI disputes that must be tied to policy definitions (e.g., the “period of restoration”).
• Extra-contractual claims post-Menchaca: Plaintiffs must either establish entitlement to policy benefits under the contract or plead and prove an independent injury. Allegations of delay or dispute alone, without more, will not survive summary judgment if coverage fails.
• Corporate structuring and insurance procurement: Entities that separate property ownership (New York Inn) from operations (Viva) must ensure the owner is a named or additional insured for the specific coverages at issue (here, property). Vague requests to “add” an entity as an additional insured, without clarifying the applicable coverage parts, invite disputes that reformation cannot easily cure.
• Persuasive but unpublished: Though non-precedential under 5th Cir. R. 47.5, the opinion offers a clear roadmap for summary judgment practice in Texas property coverage disputes and for bankruptcy-appellate finality.

Complex Concepts Simplified

• Actual Cash Value (ACV): The value of property at the time of loss, accounting for depreciation (wear and tear, age). ACV is typically less than replacement cost.
• Replacement Cost Value (RCV): The cost to replace or repair with new materials of like kind and quality, without depreciation. RCV payments often require the insured to complete repairs and prove comparability and amounts actually spent.
• Concurrent Causes Doctrine: When both covered and non-covered causes contribute to a loss, Texas law requires the insured to segregate damages and recover only the part caused solely by the covered peril. Failure to segregate is fatal.
• Mitigation Duty: Policies commonly require insureds to take reasonable steps to protect property from further damage after a loss (e.g., promptly dry out a water-damaged building). Additional damage from failure to mitigate is typically not covered.
• Independent Injury (Menchaca): Extra-contractual damages that exist apart from policy benefits (e.g., a separate economic or personal injury caused by extreme insurer misconduct). Without such an injury, extra-contractual claims usually fall if coverage fails.
• “Comparable Materials and Quality”: For RCV, insurers typically owe only the cost to repair or replace with materials of similar type and quality. Upgrades or changes (like plastic to metal piping) may not be reimbursable unless shown to be comparable or otherwise required under the policy.
• Section 158(d) Finality: The Fifth Circuit can review only final district court decisions on bankruptcy appeals or certified direct appeals. Parties cannot appeal straight from the bankruptcy court to the Fifth Circuit without satisfying the statutory pathways.
• Reformation: An equitable remedy that changes a written contract to match the parties’ true, prior agreement when a mutual (or qualifying unilateral) mistake caused a mismatch. It demands strong proof of the parties’ shared intent or the stringent elements of unilateral mistake.

Conclusion

New York Inn underscores a trio of immutable realities in Fifth Circuit practice and Texas insurance law. First, appellate jurisdiction over bankruptcy matters hinges on district court finality or certified direct appeal—consent to a bankruptcy court’s rulings does not bridge the gap. Second, in Texas property claims, insureds must carry their evidentiary burdens: segregate covered from non-covered loss, comply meticulously with documentation requirements for contents and RCV, and align appellate arguments with policy language and record support. Third, extra-contractual theories cannot substitute for failed coverage unless the insured proves a truly independent injury.

On the merits, the insureds’ generalized invoices, inconsistent expert statements, and lack of policy-compliant proof for contents and RCV doomed their breach claims; their BI argument was abandoned through inadequate briefing; and reformation foundered on the absence of mutual or qualifying unilateral mistake evidence. Practitioners should take note: after catastrophic events like Winter Storm Uri, courts will apply the concurrent cause segregation rule rigorously, enforce mitigation duties, and demand precision in proving RCV comparability and contents valuation. The opinion, though unpublished, is a detailed primer on how to win—or lose—Texas first-party property cases at summary judgment, and a reminder to perfect bankruptcy appellate jurisdiction before seeking review in the Fifth Circuit.