Claims Denial

Texas Bad Faith Insurance

December 19, 2009 | Mark S. Humphreys

Most people do not understand that there are two main kinds of law. The first, most people are familiar with, and we will call statutory law. This is the law that is written down by the legislative branch of government. For purposes of Insurance Law, it is the Sections, Chapters, and Subchapters of the Insurance Code.

The other kind of law, which most people are not aware of, is called the “common law”. The common law is the law that applies to situations even though the law is not specifically written down in a book somewhere.

Under Texas law, there is a “common law” duty for an insurance company to deal with one of its insureds in certain ways. This is called the the duty of good faith and fair dealing. When an insurance company does not honor its common law duty of dealing with one of its insureds in good faith, it is called “bad faith”. This concept was discussed by the Texas Supreme Court in 1987, in the case Arnold v. Nat. County Mut. Fire Ins. Co.

Texas Deceptive Trade Practices Act And The Insurance Code

November 28, 2009 | Mark S. Humphreys

A resident of Grand Prairie, Arlington, Fort Worth, Weatherford, or any other area in Texas can sue an insurance company for violations of the Texas Insurance Code under the Texas Deceptive Trade Practices Act. This is important because both of these areas of the law allow for favorable theories of recovery to the consumer who is wronged when dealing with an insurance company.

Texas Insurance Code, Section 541.151, specifically says that a person who sustains actual damages may bring an action against another for damages caused by the other person engaging in an act or practice, “specificaly enumerated in Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice …” The Business & Commerce Code is where the Texas Deceptive Trade Practices Act is located. The whole purpose of the DTPA is to prevent companies from doing wrongs to consumers.

In business and legal circles, Section 17.46(b) is referred to as the “laundry list” of things companies are prohibited from doing. Violations of this laundry list can result in actions by the States Attorney General plus numerous private causes of action by the consumer.

Jury Says No To Punitive Damages

November 21, 2009 | Mark S. Humphreys

The previous post to this blog talked about penalties Texas insurance companies face when they do not properly handle a claim that is presented to them by one of their insureds. Recently an insurance case was tried in Federal Court in Mississippi. The case arose out of a lose suffered by Reginald Bossier for damages resulting from Hurricane Katrina. In the case, the jury declined to award any amount of monies for punitive damages.

The insurance company being sued was State Farm. Notice also, that this case was in Federal Court. Earlier posts on this blog have pointed out that the insurance company would always prefer to be in Federal Court, rather than State Court. In this case, the jury compensated Bossier $52,300 for damages to an outbuilding destroyed by Hurricane Katrina. However, the jury refused to punish State Farm for any amount of punitive damages. State Farm had paid for some home damage resulting from the high winds but was refusing to pay for damages caused by water.

The attorney for Bossier had asked the jury to award Bossier $2 million to punish State Farm. That anything less than $2 million would not get State Farm’s attention. The attorney also pointed out that “State Farm would rather pay its lawyers than its insureds.” She also told the jury that if State Farm were not punished then they would continue to deny claims.

Penalties For Insurance Companies In Texas

November 18, 2009 | Mark S. Humphreys

Let’s say your house in Dallas burns down and the insurance company wrongfully denies your claim. Or your boat in Weatherford sinks in the lake and your insurance company tries to tell you they are not going to pay because of a late payment on your insurance policy. How about you are driving your car in Fort Worth and are involved in a wreck and your insurance company denies coverage due to the car not being properly listed on the policy. Another example, your neighbors wife, in Grand Prairie, dies of an illness she has had and when the husband makes a claim for life insurance benefits he is denied because the insurance company says they committed a fraud in the application for coverage.

Okay, now lets say you can prove the insurance company was wrong in each of the above situations. What next? Do they just pay the benefits and go away? What about the extra heart ache you went through? What about the ten month delay in paying you the benefits you were entitled to? What about legal expenses? Can the insurance company just intentionally do you wrong and get away with it, by just paying what they should have paid in the first place?

Here are some answers. First, get to an experienced Insurance Law Attorney to help you. Then if you are so inclined, go to the Texas Department of Insurance web-site and read a few of the rules the insurance companies have to follow.

Good Health Requirement For Life Insurance Policy

November 17, 2009 | Mark S. Humphreys

A person who buys a life insurance policy in Dallas, Texas, or in Arlington, Grand Prairie, Fort Worth or out in Weatherford in Parker County should have the same concern as everyone else when they purchase the policy. Is this policy going to pay benefits to the benficiary named in the policy? After all, that is the only reason it is being purchased.

A Federal Court case decided in 2007, gives good reason for looking over the policy and reading it well before purchasing it. The case, Assurity Life Insurance Company v. Grogan, was presented with the following policy condition: The policy coverage did not go into effect until the “first full premium was paid during the Proposed Insured’s lifetime and continued good health.”

Soon after purchashing the policy, the insured had a biopsy performed on a lump on his neck and was diagnosed with Hodgkin’s disease. He died a few months later from complications.

Under-Payment Of Texas Insurance Claims

November 14, 2009 | Mark S. Humphreys

Can it be a surprise? Insurance companies appear to be getting caught in under paying on claims. The Texas Windstorm Insurance Association (TWIA) seems to be caught in some controversy regarding its claims handling along the Texas Gulf Coast. Keep in mind the problems being experienced could just as easily be happening in Fort Worth, Dallas, Grand Prairie, Arlington, or even a small town like Weatherford out in Parker County.

This problem is written about in an article in the Houston Chronicle titled “Lawsuit Says Windstorm Insurer Rigged Process”. The article discusses TWIA using prices lower than market rates to estimate materials and repair costs. TWIA is said to also be unfairly limiting costs on roof repairs and discouraging the reopening of closed claims.

In a lawsuit resulting from some of the abuses by TWIA, documents and software is said to have been discovered that supports the claims that the abuses are being committed. One example of the abuse was discovered when one adjusting firm reported the market rate for roof repairs to be $230 to $255 per 100 square feet, but TWIA’s price was $182. In another situation it is said that they suggested using shingles off one house that were not in too bad shape, to put on another house. This does not sound right to most people but may actually be allowed depending on the language in the insurance policy.

What To Do In Texas When The Insurance Company Says There Is No Coverage Under The Policy

November 8, 2009 | Mark S. Humphreys

An incident happens. Maybe your house in Dallas has someone inside who falls down the stairs. Maybe your car in Arlington is involved in a wreck. Maybe your business in Grand Prairie suffers a loss due to someone falling on the steps. Maybe the life insurance policy you purchased on your Mom in Weatherford is now denying coverage, after the funeral. What if the disability policy you had on your wife’s job in Fort Worth is denied, after she becomes disabled?

If any of the above happens you actually have two main things you can do. The first and most common is to just sue the insurance company for various violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act. You can sue for breach of contract and fraud and misrepresentation and a few other things that are variations of the Insurance Code and DTPA causes of action.

The second thing that can be done is called a Declaratory Judgement cause of action. Attorneys refer to this as a “dec action”. This is where an attorney files papers with a Court saying, “Judge, declare this thing we have before you as (fill in the blank)”. A dec action is used quite often in insurance disputes. It is used both by attorneys for individuals requesting benefits under a policy and by insurance company attorneys asking the Court to declare that certain benefits do not exist within a policy.

“Claims Made” v. “Occurrence” Policies In Texas

October 30, 2009 | Mark S. Humphreys

The Supreme Court of Texas decided a case this year wherein the distinction between “claims made” policies and “occurrence” policies was discussed. This case is, Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Company.

As discussed in an earlier case on this blog, the PAJ case, the main issue was whether or not the inusrance company was still responsible under the terms of the insurance policy even though the insured person or entity did not timely notify the insurance company of the claim. As in PAJ, the court ruled that because the insurance company could not show it was harmed by the delay in being informed of the claim, the court ruled that the insurance company must provide coverage.

The difference in this case, Prodigy, as compared with PAJ, was the different types of policies at issue. When dealing with insurance policies it is important to understand the distinctions between these two types of policies.

Limitations Periods In Texas Insurance Cases

October 28, 2009 | Mark S. Humphreys

An opinion issued by the Texas Court of Appeals in Houston on October 15, 2009 is noteworthy. Atleast one part of this decision addresses a law in Texas that most attorneys do not know.

The case is Anthony Sheppard v. Travelers Lloyds of Texas Insurance Company. This case discusses limitations periods. Limitiations periods are the timelines within which a lawsuit must be filed or otherwise it is barred. These limitations periods are in Chapter 16 of the Texas Civil Practice & Remedies Code. There are 44 sections in Chapter 16 addressing different causes of actions and the limitations applicable to them. Plus there is a ten page chart that breaks down these sections and tries to make them easier to understand.

A carefull reading of Sheppard goes a long way in making these limitations periods as they relate to insurance contracts understandable. And it is important to understand that breaches of an insurance contract usually go hand in hand with other violations of the Texas Insurance Code. Most Insurance Code violations, which are also violations under the Texas Deceptive Trade Practices Act have a 2 year statute of limitations. Texas Insurance Code, Section 541.162 sets out the limitations period for insurance code violations at two years with some variations to the two year period.

Your Duties After An Accident Or Loss In Texas

October 27, 2009 | Mark S. Humphreys

An appeal from a Dallas, Texas Court decision was decided by the Texas Supreme Court, in the case PAJ, Inc., d/b/a/ Prime Art & Jewel, v. The Hanover Insurance Company. This case was decided in January, 2008. It discussed the responsibilities of holders of an insurance policy as it relates to their duties after an accident or loss and how the failure of fulfilling those duties affects coverage under an insurance policy.

As a general rule almost all insurance policies require the policy holder to do the following: 1) promptly notify the insurance company of any loss or claim, 2) cooperate with the insurance company investigation of the claim or loss, 3) take reasonable actions to protect against further loss.

When a claim is denied due to a policy holder not promptly notifying the company of the claim or loss the insurance company has the burden of proving that this failure to promptly notify caused harm to the insurance company. This was the issue in PAJ.