Articles Posted in Claims Denial

To sue an insurance company, a person must have “standing.”

Texas is not a direct action state.  In other words, when Fred and Ted collide in their cars, the resulting lawsuit is styled Fred vs Ted, and their respective liability insurers are not named parties.  Fred can’t sue Ted’s insurer; he has to sue Ted.  Because of the lack of privity between a liability insurer and a third-party claimant, an insurer had no duty to a third party to settle a claim brought against its insured until the insured’s liability has been established.  This was made clear by the Texas Supreme Court in 1997, in a case styled, Farmers Texas County Mutual Insurance Co. v. Griffin.  Indeed, until the liability of the insured is judicially established, a third-party plaintiff does not have standing to bring a direct action against the insurer to recover for the liability of the insured.  For further guidance there is more case law.

This rule of law is so well ingrained in the jurisprudence of the State that it is embodied within the Texas Rules of Civil Procedure.  Rule 51(b) regarding the Joinder of Claims and Remedies provides:

Rock Springs, Texas insurance lawyers would want to know about this Houston Division, Southern District case.  The opinion was issued in January 2017, and is styled, JYC Enterprise Inc. v. Allied Property and Casualty Insurance, et al.

In this case JYC sued Allied, its adjuster (Heller), and Bay Area Fire & Safety, Inc., after a fire destroyed property belonging to JYC.  The suit was filed in state court and removed to federal court by the Defendants.  The Defendants are alleging the suit against Bay Area is a fraudulent and only brought in order to defeat diversity because Bay Area is a Texas corporation.

JYC asserted claims against Allied and Heller as to the sufficiency of the payment under the policy for Business Income losses and as to disputes about the policy’s coverage.  JYC asserted a claim against Bay Area for negligence in its inspection of the fire suppression system.  Allied responded, contending that because the claim against Bay Area was fraudulently misjoined, the Bay Area claim should be severed and remanded.

Parker County insurance attorneys know that it is best for their clients to try and keep their case in State or County Court.  The insurance lawyers know it is best to get their case in Federal Court.  The U.S. McAllen Division had a case where the argument on this issue was a little different from what is usually seen.  The case is styled, Ida Rodriguez v. Allstate Texas Lloyds.

Rodriguez sued Allstate for a property damage claim that allegedly was not properly paid.  Rodriguez sued Allstate in State Court and Allstate removed the case to Federal Court.  Rodriguez filed a Motion to Remand the case back to the State Court.

One argument in this case was that the amount in controversy did not exceed $75,000.

Horror stories abound in the insurance claims arena, but what has happened to one Texas resident is at the top.  The Houston Press reported on a story titled, Eight Years After Ike, Insurance Firm Still Won’t Pay Homeowner.

It has been eight years since Hurricane Ike ripped through the Gulf and Houston’s surrounding areas, but homeowner Gail Menchaca’s insurance company has still not paid her a cent for the damages to her home.

In a case that could have sweeping implications for how thoroughly insurance companies choose to inspect property damage and whether firms have any real motivation to pay you anything, Menchaca’s insurance company, USAA Texas Lloyd’s Company, has fought her all the way to the Texas Supreme Court.  Even after a Montgomery County trial court and appeals court ordered USAA to pay Menchaca not only for the property damages covered under the policy, but also thousands more in court and attorneys fees, USAA has refused.  At the heart of the case is this: If an insurance company fights you in court for eight years, at the end of it all, are you entitled to recover any damages beyond the money you need to fix your house?

Springtown insurance lawyers know about the importance of an insurance policy being correctly filled out.  This was illustrated in a 2016 opinion out of the Southern District, Houston Division, styled, Perfit Vision, et al v. Mount Vernon Fire Insurance Company.

John Luong owed a portion of Eyewear Express and in 2013, Eyewear bought a store and renamed it Perfit Vision.  Mount Vernon issued Loung a one-year casualty policy beginning coverage on Feb. 21, 2014.

Luong reported to Mount Vernon that the store had been burglarized on March 8-9.  Mount Vernon denied the claim.

Insurance lawyers know to tell their clients to cooperate with their insurance company investigation of a claim.  Failure to cooperate can void the coverage.  This issue was litigated in a Southern District, Houston Division case styled, Rosie’s Chicken & Waffles Restaurant, et al v. Acceptance Indemnity Company.

In a jury trial, the jury answered questions 1 and 2 in favor of Rosie’s, finding that the entire fire at their business was not the cause of arson attributable to its owners or employees.  The jury also found by inference that Acceptance failed to establish its defense that the premises did not have a working smoke alarm at the time of the fire.  The jury in questions 4 and 5 went on to find that the owner failed to provide financial information relating to the daily business transacted at Rosie’s business location and that her failure to provide financial documents prejudiced Acceptance.

This Court found that the jury’s answers to questions 4 and 5 are irrelevant in light of their answers to questions 1 and 2.

When an insurance company denies a claim they have certain responsibilities under the Texas Insurance Code.  Insurance lawyers know to immediately check and see if the insurance company has properly performed their responsibility.

Texas Insurance Code, Section 542.056(c) states that if the insurer rejects the claim, the notice required under Subsection (a) or (b) must state the reasons for the rejection.  Arguably, an insurance company that fails to comply with this requirement could be held to have waived additional reasons that were not timely raised.  However, this argument was rejected in a United States, 5th Circuit opinion in 2005, styled Ridgelea Estate Condo. Association v. Lexington Insurance Company.  In the case, the court stated that the insurance company could raise an additional defense, where there was no allegation that the initial reason was unreasonable or made in bad faith.

The phrase “rejects the claim” does not specifically address a situation where an insurer pay part, but not all, of a claim.  It also does not specifically state whether a claim is “rejected” when the insurance company refuses to pay, for a reason not related to coverage — as for example, it the claim is closed without payment because of noncooperation by the insured.  Construing the statute liberally to promote its underlying purposes, it is reasonable to construe the term “reject” to mean any decision by the insurance company not to pay the claim or not to pay a part of the claim.  The insurance company should state in writing the reason for any such decision.  If the insurance company pays part of the claim, the insurance company should state in writing the reason it did not pay the rest.

Insurance attorneys in the Dallas / Fort Worth area know to be suspicious of reports from insurance companies but even a story that recently ran in the New York Times was surprising. The story is titled, Long Island Company Charged In Insurance Scheme After Hurricane Sandy.

A Long Island engineering company and one of its former executives were charged on Monday in a scheme to minimize insurance payments to homeowners whose residences were damaged by Hurricane Sandy in 2012.

In a 50-count indictment, Eric T. Schneiderman, the New York attorney general, accused the company, GEB Hi-Rise Engineering, of Uniondale, N.Y., and Matthew Pappalardo, a former director, of forging documents and engaging in illegal business practices. The government said they had altered engineering reports that had been used to assess the structural damage to homes caused by the storm.

Weatherford insurance lawyers need to understand how to properly make allegations when filing a lawsuit. The Fort Worth Division, Northern District of Texas issued an opinion wherein it is pointed out allegations were not properly made. The opinion is styled, Mark Buettner, et al., v. USA Gymnastics, et al.

Bailey was a competitor at an event run by Gymnastics when she landed wrong upon a dismount from uneven parallel bars and suffered a torn ACL, which required surgical repair. Bailey was insured under a policy of insurance issued by Mutual to Gymnastics as policyholder. Specialty administered claims made under the policy and corresponded with plaintiff regarding Bailey’s injury and his claim for payment under the policy.

Bailey sued Mutual and Gymnastics for breach of contract, Insurance Code violations, and DTPA violations. Suit was filed in State Court and removed to Federal Court by Mutual and Gymnastics.