Carrollton insurance lawyers need to make sure when a client is filing an insurance claim that the claim is a written claim for benefits. Most insurance companies will take an oral claim report but at least one court in Texas is requiring that a notice of claim be in writing. This is the situation in a 2005, Austin Court of Appeals opinion styled, McMillin v. State Farm Lloyds.
The claims underlying this appeal arose while the McMillins were renovating their house. The McMillins had removed a portion of the roof and covered the opening with tarp. On October 6, 2000, a storm hit and the tarp failed to prevent water from entering the house. The McMillins filed a claim with their homeowners’ insurance carrier, State Farm, and, within a few days, State Farm made a payment of $2508.35 for viewable damage. Later that same month, after additional inclement weather, the McMillins reported additional water damage, along with mold growth throughout the house. Unlike the case with the McMillins’ initial claim, several months passed before State Farm paid the second claims. On March 1, 2001, a mold remediator sent a fax to State Farm opining that remediation was so expensive that it was no longer cost-effective; State Farm did not share that estimate with the McMillins. On August 7, 2001, a week after getting another estimate from the mold remediator, State Farm paid $344,367.27 to the McMillins on their claim of water damage resulting in mold; thus, State Farm paid $346,875.62 to compensate the McMillins for their covered losses, an amount that excludes the $1000 deductible. By August 2001, the McMillins had purchased another home and moved there, partly in order to enable their planned adoption of a child to move forward.
The McMillins sued State Farm for among other things, violations of the Texas Prompt Payment of Claims Act.
The parties present cross-issues relating to the assessment of an interest penalty of $425.59 on the $1000 damage award under the insurance code’s provisions intended to promote prompt payment of claims. State Farm argues that the McMillins’ failure to make a claim in writing makes the interest penalty of 542.060 unavailable to them.
The claim-handling periods of the Prompt Pay Statute are triggered by the insurance company’s “receipt of notice of claim.” The code defines a “notice of claim” as “any notification in writing to an insurer, by a claimant, that reasonably apprises the insurer of the facts relating to the claim.” State Farm argues that the McMillins’ telephonic report of their damages did not satisfy the statutory requirement for written notice. State Farm argues that, because the report therefore did not trigger State Farm’s statutory obligation to resolve the complaint within the statutory periods, State Farm cannot be penalized for failing to do so.
The McMillins respond that such a construction unfairly diminishes the protections to insureds. They note that the statute “shall be liberally construed to promote its underlying purpose which is to obtain prompt payment of claims made pursuant to policies of insurance.” They argue that their telephonic report satisfied the purpose of the statute by reasonably apprising State Farm of the basis of their claim, and that State Farm never told them that their oral report of their problems constituted a waiver of statutory protections. To the extent that a writing is required, they argue that State Farm’s telephone logs memorializing their telephonic notice suffice.
The McMillins’ arguments require either ignoring the plain language and meaning of the statute or grafting meaning onto the statute. The statute requires compliance with its provisions to trigger the insurance penalties. It does not require the insurer to inform the insured of the necessity of a writing to trigger statutory penalties, nor does it contain a provision permitting actual notice to satisfy its provisions. Section 542.051(4) requires a notification in writing of a claim “to” an insurer that is “by” a claimant. Although State Farm’s logs are in writing and memorialize a notification by the claimant, they are written by the insurer instead of being written by the claimant to the insurer as required, and they are not sent by the claimant to the insurer.
Because there was no evidence that the McMillins triggered the provisions of the statute by providing notice in writing to State Farm of their claim, State Farm won.
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