An insurance attorney in Grand Prairie will run across a situation where a loss has been the result of multiple causes. When this happens, how are the policy limits determined is a question that needs to be answered. All situations are different and each case needs to be examined on a case by case basis would be the short answer. A 2004, a United States Federal, Southern District of Texas case gets specific and gives some guidance as to how the courts look at the various situations that may arise. The style of this case is, Ramirez v. State Farm Lloyds. Here is some of the relevant information from that case.
Pedro and Paulita Ramirez purchased a homeowner’s policy from State Farm Lloyds insuring their residence against property damage with liability limits of $90,800.00 for the property damage and $54,480.00 for loss to the contents of the home. In April 2001, they notified State Farm that they had water damage in the home due to leaking appliances and wind driven rain. State Farm investigated the claim and determined that seven different water sources caused the damage and set up a separate claim for each source. The cost to repair the damage to the home exceeded the policy limit. State Farm paid the policy limit but Ramirez filed suit alleging breach of contract, breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code and violations of the Prompt Payment of Claims Act, and violations of the Texas Deceptive Trade Practices Act (DTPA). State Farm filed a motion for summary judgment on all counts. The trial court granted the summary judgment in favor of State Farm.
In the holding of the court, the court found that the loss settlement provision in the Texas Homeowners Policy limits the insured’s recovery to a single policy limit as stated on the declaration page, despite the fact that seven different water sources resulted in damage to the insured residence and despite the fact separate claims were set up for each water event. Since the policy limits were paid, State Farm did not breach the contract.
With regard to the common law bad faith claim, Ramirez contended that State Farm should have paid the policy limits for each source of property damage. State Farm’s position was that the policy limited liability to either (1) the limit of liability or (2) the cost to repair or replace the covered premises. Since State Farm’s action was reasonable, it cannot, as a matter of law, be liable for bad faith.
The court also rejected Ramirez’s claim for breach of the duty of good faith and fair dealing because it was based on the same predicate as the common law bad faith claim. It also held that Ramirez’s claims under the bad faith statutes of the Texas Insurance Code and under the Prompt Payment of Claims Act also required the same factual predicate; that is, an unreasonable denial of coverage.
There are situations where a person is able to collect above and beyond the policy limits and it is important to consult with an experienced Insurance Law Attorney who can look at the facts and the policy and see whether or not the recovery beyond the policy limits is possible.