It would be natural for someone in Grand Prairie, Fort Worth, Arlington, Dallas, Mesquite, Garland, Farmers Branch, Duncanville, De Soto, or anywhere else to think that a claim should be paid pretty soon after it is made. Here is a case to read and think about the next time an insurance conmpany is slow paying a claim.
The case was decided by the Court of Appeals, Dallas, and is an appeal from County Court at Law No. 5. The opinion was issued in May 2011. The style of the case is “Cypress Texas Lloyds Property and Casualty Insurance Co. v. Fred Carrington.
Carrington won at the trial level and Cypress appealed. Here are some of the facts of the case.
Carrington had a homeowner’s policy issued by Cypress. He sustained a loss to his home when the hot water heater ruptured on September 11, 2005. After Carrington filed a claim with Cypress, they settled. The insurance policy required Cypress to pay a loss claim within five business days after it notifies the insured that it will pay the claim. By two separate letters dated October 27, 2005, Cypress notified Carrington that Cypress agreed to pay the claim. CSC, a vendor of Cypress, printed and mailed three settlement checks by regular mail to Carrington. The checks were dated October 28, 2005, and were properly addressed. The issued checks were in the amounts of $22,274.37, $3,840, and $2,240 as specified in one of the letters from Cypress agreeing to pay the claim. Subsequently, a fourth check in the amount of $1,058 for depreciation taken on the personal property was mailed to Carrington in the same manner. Carrington received this check and it was not at issue at trial. On November 14, 2005, Carrington contacted Corey Holder, an independent adjuster working for Cypress, regarding the status of the checks. Holder stated the checks had been mailed. Carrington told him the checks had not been received. Holder tried to stop payment on the checks, but they were already deposited at a bank in Dallas. On December 16, 2005, Carrington filed a report with the Grand Prairie Police Department that the checks had been stolen. Then, Carrington contacted Cypress and asked that the checks be reissued because they had been stolen. Cypress refused to reissue the checks. Carrington sued Cypress alleging a claim for breach of contract among others. Holder testified that, according to his notes, the fourth check was mailed on November 7, 2005, more than five days after the agreement to pay the claim. He testified further that the other three checks should have been mailed on October 27, 2005. Also at trial, the evidence showed one of the stolen checks listed Washington Mutual as a co-payee. Thomas Bamesberger, claims specialist for Cypress, testified that Cypress did receive from Carrington a copy of a release of lien showing that Washington Mutual was no longer the mortgagee of Carrington’s house. He admitted that Cypress erred in listing Washington Mutual as a co-payee on the check. Holder acknowledged that Carrington faxed the release of lien to him and agreed with Bamesberger that it was an error to list Washington Mutual as a co-payee. Carrington was awarded damages for breach of contract.
Cypress contended that by placing the properly addressed checks in the mail which were then presented to and honored by a bank, it satisfied its obligation under the policy. Carrington contends there is evidence to support the jury’s answer because Cypress did not pay the claim within five days of its agreement to pay and it erroneously included Washington Mutual as a payee on one of the checks.
Based on the above the appeals court agreed that there was sufficient evidence to find that Cypress had failed to comply with the terms of the policy and upheld the jury’s verdict.
Here in Texas, in addition to what was written in the policy there is an Insurance Code chapter titled, “Prompt Payment of Claims Act” and it provides guidelines for insurance companies to follow in paying claim in a prompt manner. In addition, this part of the insurance code provides punishments when the statutes are not complied with in a tmely manner.
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