Bad Faith Insurance

Suing For Bad Faith

July 24, 2014 | Mark S. Humphreys

A Texas insurance law lawyers needs to know the proper way to sue on bad faith insurance cases. The proper way will differ depending on the type of case. When the claim arises out of an uninsured motorist claim it is different than other types of bad faith claims. The Houston Court of Appeals [1st Dist.] recently addressed this issue. The style of the case in In re Progressive County Mutual Insurance Company. This is a mandamus proceeding. Here is some of the relevant information from that case.

Following an automobile collision with an uninsured motorist’s vehicle, Guia sued her insurer, Progressive. While investigation into the claim was ongoing, Guia sued Progressive for breach of the uninsured motorist provisions in her policy, violations of Chapter 542 of the Texas Insurance Code, violations of the Deceptive Trade Practices-Consumer Protection Act, and breach of the duty of good faith and fair dealing. Guia served Progressive with a number of discovery requests, some of which would not be relevant to the breach-of-contract claim. Progressive filed a motion to sever the breach of contract claim for uninsured motorist coverage from the extra-contractual claims. The trial court judge signed an order abating the motion to sever, allowing discovery to move forward on all claims, and deferring the other issues covered by the motion until the pretrial hearing. Progressive filed a writ seeking to compel severance and abatement.

Texas Rule of Civil Procedure 41 governs severance of claims. The rule provides, in part, that “actions which have been improperly joined may be severed . . . on such terms as are just. Any claim against a party may be severed and proceeded with separately.” Id. The predominant reasons for a severance are to do justice, avoid prejudice, and promote convenience. Claims are properly severable if: (1) the controversy involves more than one cause of action; (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted; and (3) the severed claim is not so interwoven with the remaining action that it involves the same facts and issues. Only the third element is in dispute here.

Stating A Claim Against An Insurance Adjuster

July 19, 2014 | Mark S. Humphreys

Arlington insurance attorneys want to know the proper way to state a claim against an insurance adjuster so as to keep a case in State Court rather than have an insurance company get the case removed to Federal Court. A recent case from the US District Court, Northern District, Dallas Division, shows how to be successful in this effort. The case is styled, Sara Esteban v. State Farm Lloyds and Aaron A. Galvan. Here is the relevant information from the case.

This case arises out of an insurer’s alleged failure to properly adjust and pay the full proceeds due on a claim made under an insurance policy. Esteban purchased an insurance policy fromState Farm to insure real property that she owned. A wind and hailstorm struck, causing significant damage to homes and businesses in the area. The Property suffered roof and water damage as a consequence of the storm, and Esteban submitted a claim to State Farm to cover the costs of repair. Galvan was assigned by State Farm to adjust Esteban’s claim. At all relevant times during the adjustment of Esteban’s claim, Galvan acted as an independent adjuster and was not an employee of State Farm. Esteban alleges that Galvan “improperly adjusted” her claim, and that his subsequent report “failed to include many of Esteban’s damages.” More specifically, Esteban charges that “his estimate did not allow adequate funds to cover repairs to restore her home” and that Galvan “misrepresented the cause of, scope of, and cost to repair the damage to Plaintiff’s Property, as well as the amount of and insurance coverage for Plaintiff’s claim/loss under Plaintiff’s insurance policy.” Esteban also insists that Galvan advised her as to how she could repair the Property in order to prevent further damage, but that this advice was negligent and false.

Esteban maintains that, as a consequence of Galvan’s misrepresentations, State Farm wrongfully denied portions of her claim and misrepresented the amount of damages, which in turn prevented her from properly repairing the Property and caused further damage. Specifically, while State Farm and Galvan represented that Esteban’s damages were only $1,932.72, Esteban insists that her damages exceed $33,000. Esteban asserts that State Farm has not performed its contractual duty under the Policy and that it has failed to settle her claims in a fair manner. She also insists that Defendants’ respective failures to properly adjust, inspect, or communicate with her regarding her claims, or to later fully compensate her, constitute violations of the Texas Insurance Code.

Life Insurance Beneficiary And Bad Faith

June 29, 2014 | Mark S. Humphreys

Dallas life insurance attorneys need to know about this Federal case. It is a 1996, Southern District of Texas opinion. It is styled, Bates v. Jackson National Life Insurance Company. Here is some of the relevant information.

Bates’ children sued Jackson National for proceeds of a life insurance policy issued to Bates. Plaintiffs asserted causes of action for breach of contract, bad faith, Insurance Code violations and DTPA violations.

On October 31, 1991 and November 1, 1991, Bates was diagnosed with phlebothrombosis and diabetes, respectively. On November 12, 1991, Bates submitted an application to Jackson National in which he represented he had not consulted or been treated by a physician in the last five years and that he had not submitted to an x-ray or any laboratory studies or tests. Furthermore, Bates represented in the application that he had not been told he had any disease, abnormality or diabetes. The policy was issued and the application was attached to and made a part of the policy.

Insurance Company Fraud

June 8, 2014 | Mark S. Humphreys

Not very many Texas insurance lawyers really understand what went on in the Farmers fraud case several years ago. The public in general did not know what was going on, only that Farmers was refusing to renew home- owners policy. This was causing the public to be upset. The whole story isn’t that difficult but it is essentially over.

Texas Watch ran an article in April 2014, titled “Judge Concerned About Sweetheart Deal For Farmers Insurance” and the story does not discuss the underlying facts that gave rise to what was discovered but it does talk about some of the repercussions. Here is what the article tells us.

A Texas district court judge refused to allow a sweetheart deal between Farmers Insurance and the State of Texas to move forward today. At a hearing in Judge Scott Jenkins‘ court, lawyers for Farmer Insurance and Attorney General Greg Abbott’s office argued in favor of a deal that allows the insurance giant to avoid paying interest on millions of dollars in excessive premiums.

Insurance Claims And Punitive Damages

April 15, 2014 | Mark S. Humphreys

Insurance lawyers who seek punitive damages in bad faith cases need to be able to determine when they apply. A 1995, Beaumont Court of Appeals case is a good one to read for this issue. The style of the case is, Liberty Mutual Fire Insurance Company v. Crane. Here is some of the relevant information from this case.

A claimant seeking these damages must establish:

1. That there was an absence of a reasonable basis for denying or delaying payment of the benefits of the policy.

Breach Of The Insurance Contract By Itself Is Not Enough To Support A Bad Faith Claim

April 13, 2014 | Mark S. Humphreys

Dallas insurance lawyers need to know that when an insurance company breaks the contract it has with it’s insured, that is not enough by itself to support a claim for bad faith insurance. The 1988, Beaumont Court of Appeals case, Gulf States Underwriters v. Wilson, states this very clearly. Here is some of the relevant information from that case.

Wilson entered into an insurance contract with Gulf States effective June 29, 1979, and initially paid $85. This case has as its basis a dispute between Wilson and the insurance company over how this $85 should be classified: as a “deposit” against future premium shortfalls (according to Gulf States) or as a premium paid in advance (according to Wilson). The regular monthly premium was to be based on a percentage of cords of pulpwood Wilson’s employer produced each month. In late April 1982, Wilson paid $419 premium. Gulf States applied this payment to Wilson’s coverage from March 28, 1982, through April 29, 1982. Wilson was subsequently injured on May 1, 1982. On May 10, 1982, Gulf States mailed Wilson a notice of intention not to renew his policy. Wilson did not pay a premium on the next due date at the end of May. According to Gulf States, the letter did not actually cancel the policy, but rather, the policy lapsed for non-payment of the premium due at the end of May.

Gulf States theory at trial was that Wilson’s first payment of $85 was not the first month’s premium, but merely a “deposit” which was consideration for issuing the policy but did not effect coverage for any period of time. Following this logic, the first premium was not paid until the end of July 1979. That premium would apply retrospectively for coverage during July 1979. Gulf States thus maintains that the payment at the end of April 1982 was for insurance coverage during the month of April 1982. And, since Wilson paid no premium at the end of May, the policy lapsed as of the end of April 1982, so the injury on May 1, 1982, was not covered.

A Wrongful Denial Does Not Mean Bad Faith

April 12, 2014 | Mark S. Humphreys

All insurance cases have to looked at closely by insurance attorneys. Not every time an insurance company denied a claim means that the insurance company has breached its duty of good faith and fair dealing. The 2006, Texas Supreme Court case Minnesota Life Insurance Company v. Vasquez is a good illustration of this. Here is the relevant information on this case.

Minnesota Life issued a Mortgage Accidental Death Insurance policy to Joe and Elia Vasquez, promising to pay their home mortgage in the event either died due to an accident. In June 2000, Joe Vasquez became ill, was hospitalized, suffered a seizure, and lapsed into a coma. Twelve days later, he emerged from the coma and was transferred to a hospital room. Later that day, while no one else was present, he apparently fell, hit his head, and died.

On October 6, 2000, Elia Vasquez filed a claim with Minnesota Life requesting payment of the balance due on her mortgage (about $41,000) and submitted copies of the death certificate and autopsy report. After reviewing the documents, Minnesota Life sought advice from a medical consultant as to whether Mr. Vasquez’s death resulted from an accident “independently of all other causes,” as required by the policy. The consultant advised that he needed to see the relevant medical records.

Failure To Pay Claim And Bad Faith

April 10, 2014 | Mark S. Humphreys

Most insurance lawyers can tell a new client that the fact an insurance company refuses to pay a claim it should have paid does not make the insurance company liable for a bad faith insurance claim. The 1998, Texas Supreme Court case, Provident American Inc. v. Castanden, helps explain this.

Denise Castaneda sought damages from Provident for alleged violations of the Insurance Code and the Deceptive Trade Practices Act arising out of the denial of her claim for benefits under a health insurance policy and the manner in which her claim was handled. Because the evidence was legally insufficient to support the jury’s verdict, this court reversed and rendered judgment that Castaneda take nothing.

Denise Castaneda’s father, Guillermo Castaneda, Sr., applied for medical insurance with Provident in May 1991. He sought a policy that would cover the entire family including his daughter Denise, who was twenty-one years old at the time, her sister, and their brother Guillermo, Jr. During the application process, Guillermo Castaneda, Sr. failed to disclose that just two days before he applied for the policy, Guillermo, Jr. had received medical attention from a physician for jaundice, anemia, and suspected hepatitis. Denise had received medical treatment for jaundice and hepatitis several years prior to the date her father applied for health insurance.

Bad Faith And The Common Law

April 8, 2014 | Mark S. Humphreys

Lawyers handling “bad faith” insurance cases need to understand how bad faith is treated by Texas common law.

This blog spends a lot of space dealing with the Texas Insurance Code and how violations of those statutes is bad faith insurance. Under Texas law, there is also a common law cause of action for breach of the duty of good faith and fair dealing in cases where an insurance company has no reasonable basis for denial or delay of payment or fails to reasonably investigate its basis for denying a claim. This has been explained by the 1987, Texas Supreme Court case styled, Arnold v. National County Mutual Fire Insurance Co. The precise meaning of phrases such as “liability becomes reasonably clear” and “reasonable basis for denial” are not yet clearly defined, but they are continually being litigated in an effort to formulate more exact definitions. There are a trio of Texas Supreme Court cases dealing with this subject. This trio of cases purport to redefine the breach of the duty of good faith and fair dealing, but Texas courts have treated these cases in much the same fashion as they have for years. Under the new standard for looking at bad faith cases an unpublished Dallas Court of Appeals case observed: “Under the new standard, the insured must show that the insurer denied the claim after liability became reasonably clear. To show that liability was reasonably clear, the insured must show that the insurer had no reasonable basis for denial. As noted by a majority of justices on the Supreme Court, the change is merely semantic.”

The above should be confusing to most people. This writer would suggest that the above being confusing is ok. The reason it is ok is that insurance lawyers now have the statutes in the Texas Insurance Code that are ample ammunition for fighting wrongs committed by insurance companies.

Is There Negligent Claim Handling?

March 15, 2014 | Mark S. Humphreys

Most Parker County attorneys who handle insurance claims know that there is not a claim for “negligent claim handling,” that the claim that probably exists has to fall under one of those listed in the Texas Insurance Code. A 1991, San Antonio Court of Appeals case styled, United Services Automobile Association v. Pennington, helps explain the difference between negligent claim handling and simple breach of contract.

Here is some of the relevant information.

Gary Lochte had a homeowner’s insurance policy from USAA . The policy excluded coverage for damages arising out of “business pursuits.” Lochte is a car salesman. He also ran a quarter horse breeding business with his father. Apart from the breeding business, he and Don Rowland, a co-worker at the car lot, purchased a quarter horse in order to experiment with a new training system to condition horses for racing competition. They placed an advertisement in the local newspaper to hire someone to ride the horse. Pennington answered the advertisement. During her interview with Lochte and Rowland she was asked to demonstrate her riding abilities by riding Viking Vanny. The horse reared while Pennington was mounted on her. Pennington slid off the back of the horse and the horse fell on top of her, crushing her pelvis.