There are lots of older homes in Grand Prairie, Arlington, Fort Worth, Weatherford, and all through Texas. These homes need homeowners insurance coverage. That insurance coverage needs to be have proper limits in case a loss is suffered. The following is an example of what might happen it there are not proper limits.
The Texas Court of Appeals, Third District, handed down a decision on April 1, 2010, affirming a judgment against a homeowner and in favor of the homeowners insurance company. The style of the case is, William D. Bryce and Sarah R. Bryce v. Unitrin Preferred Insurance Company and Evans, Ewan & Brady Insurance Agency, Inc.
The Bryces’ home was built in 1889 and is located in a registered historic district. The Bryces purchased the house in 1983 for $210,000 and immediately invested approximately $242,000 in renovations, bringing the total purchase and renovation cost to approximately $452,000. In April 2006, a fire destroyed the Bryces’ home. As a result of the fire, Unitrin Preferred Insurance Company (Unitrin) paid the Bryces their full policy limits of $474,000 for the dwelling and $284,400 for the contents of the home. The problem here is that the home replacement value cost was approximately $1.7 million and the contents approximately $864,000. From the time of the purchase until some time after the fire, the Bryces used Evans, Ewan & Brady Insurance Agency, Inc. (EEB) as their insurance agent.
The history from the purchase date in 1983 til the fire is long and well documented regarding the value of the home and the efforts of other insurance companies and their adjusters in attempting to properly value the home and it’s contents. There was also lots of evidence about efforts by the Bryces in trying to limit the amount of money they were paying for homeowners insurance.
The Bryces sued Unitrin and EEB for violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act for allegations that Unitrin and EEB failed to properly insure the Bryces’ home and contents. The Texas Supreme Court has stated that “an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so.” Relying on this language, the Bryces argued that by allowing their home to be insured for less than its full replacement cost, EEB failed to obtain the requested coverage and therefore should have informed them of its inability to do so. The Bryces further argued that the Supreme Court standard should apply to insurance carriers as well, so both Unitrin and EEB breached a duty to inform the Bryces that they were underinsured.
In response, this Court said the Supreme Court did not create a duty on the part of either an agent or an insurance company to monitor a homeowners policy to ensure that the requested coverage is adequate. The Court further stated that it is not necessarily the case that a replacement cost policy covering less than 100% of the replacement cost of the dwelling is inadequate, as Unitrin’s expert witness testified that it is widely accepted in the insurance industry that a homeowner might choose to insure their home at less than the full replacement cost, particularly if the homeowner wants to reduce their insurance premiums, as was the case here.
The Court said that the record is clear that Unitrin did not set the Bryces’ policy limit, but simply adopted the dwelling coverage amount requested by the Bryces on their application. Similarly, the Court said, the evidence reflects that Unitrin did not negligently maintain or fail to correct the replacement cost limit, as it was up to the Bryces to make any desired adjustments to their replacement cost coverage.
A final point the Court relied upon was the annual renewal letters from EEB to the Bryces, directing them to review the coverage limits on their policy and notify EEB immediately if the coverage amounts were insufficient.
This case result was hard news for the Bryces and an alert to other homeowners to make sure they have adequate coverge for the loss of their home and contents. It should be noted that all cases have their own fact pattern and issues and that whenever a loss is incurred an experienced Insurance Law Attorney should be consulted.
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