For Insurance Lawyers handling claims caused by “Mother Nature” it is important to understand Texas Insurance Code, Section 542A. This is a specific section for claims related to hail damage, tornados, hurricane’s, etc. As it relates to attorney fees on this type of claim the Southern District of Texas, Houston Division, issued an opinion in June 2024, that needs to be read and understood. The opinion is styled, Carole Baker v. American Economy Insurance Company.
In January 2023, Carole Baker’s home and contents suffered storm damage. She filed an insurance claim with American, which had issued her homeowner’s policy, to recover her covered losses. American sent two independent companies to inspect the residence and analyze mitigation and buildback costs. Following these inspections and the reports on the estimated costs, American paid Baker in accordance with these estimates.
In a series of emails from May to July 2023, Baker contacted American with her own estimates of mitigation and buildback costs based on quotes from a different inspector. Baker asked American to supplement its preceding payment based on the estimates from her own inspector. Baker also asked American to reopen her claim for damage to her roof, which had previously been denied. American sent Baker a revised repair estimate and made an additional payment based on the estimate she submitted.
In January 2024, Baker asked American to reimburse her for the costs she incurred for contents storage and mitigation. Baker acknowledged that American had issued payment for mitigation previously, “but not before interest began accruing on the outstanding amounts.” In response, American requested an update on the status of repairs. Baker stated that mitigation was complete and that sheetrock repairs were beginning.
In February 2024, Baker sued American, claiming that the payments under the policy had been inadequate, breaching the policy and giving rise to violations of the Texas Insurance Code.
In April 2024, American filed a motion to preclude attorneys’ fees. Based on the pleadings, the briefing, and the applicable law, the motion is granted. The reasons are set out below.
Section 542A.003 of the Texas Insurance Code requires a “presuit notice stating the specific amount alleged to be owed by the insurer” “on the claim for damage to or loss of covered property.” The plaintiff must provide presuit notice “at least 61 days” before filing suit. The 61-day cutoff is a bright line rule that allows few exceptions. The requirement to state a “specific amount” is not excused merely because the amount is “easily calculable.” According to Section 542A.007(d), a plaintiff who fails to provide adequate presuit notice is barred from recovering “any attorney’s fees incurred after the date the defendant files the pleading with the court.”
The purpose of Section 542A.007(d)’s presuit notice requirement is to “discourage litigation and encourage settlements of consumer complaints.” Accordingly, courts in this district have held that adequate presuit notice cannot be given until the insurer has made a “final coverage decision” on the insurance claim. This requirement fulfills the legislative purpose of discouraging litigation until an insurance claim is investigated to conclusion and any dispute is clearly identified.
The stated law needs to be understood. This Court provided the details of this case and articulated how those details required their decision to deny the claim for attorney fees.