Articles Posted in Claims Denial

Claim denial attorneys know that a prerequisite to filing a lawsuit against an insurance company for a first party claim is to give a pre-suit notice letter.  Failure to do so will result in a loss of potential causes of action.  This is illustrated in a 2020, opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Nexxt Holding, Inc. v. Travelers Cas. Ins. Co. of Am.

Nexxt Holding sued Travelers in 2020, alleging that Travelers failed to pay repair costs due under the insurance policy  after a August 2017 storm.  Nexxt asserted Texas statutory and common-law claims and sought actual, consequential, and statutory damages, as well as attorneys’ fees.  Travelers answered the lawsuit and filed a verified plea of lack of presuit notice under Texas Insurance Code, Section 542A.003.

Texas Insurance Code, Section 542A.007(d) states that, if an insured plaintiff asserts a first-party claim for storm damage against its property insurer and the defendant insurer “pleads and proves” that it “was entitled to but was not given a presuit notice stating the specific amount alleged to be owed . . . under Section 542A.003(b)(2) at least 61 days before the date the action was filed . . . the court may not award to the [plaintiff] any attorney’s fees incurred after the date the defendant files the pleading with the court.”

Here is a case from the Northern District of Texas, Dallas Division, that discusses the voluntary / involuntary rule related to joining adjuster in a lawsuit.  This 2020, opinion is styled, Jason Bowers and Casi Bowers v. Chubb Lloyd’s Insurance Company of Texas.

The Bowers who alleged to have suffered hail and wind damage sued their insurer, Chubb, and Chubb’s adjuster Bernard Dang, for denial of the claim.

On July 28, 2019 the Bowers provided the defendants with the pre-suit notice required under Texas Insurance Code, Section 542A.003.  Then on October 22, 2019, filed suit in State Court against Chubb and Dang.

When a claim gets denied and the insured has to file a lawsuit, a decision has to be made as to which Court the lawsuit should be filed.  For the insured, that decision is usually to file suit in the State or County Court.  However, the insurance company is virtually always going to remove the case to Federal Court when it can do so.

The above brings us to a 2020, opinion from the Western District of Texas, San Antonio Division.  The opinion styled, Pablo Cerda v. Allstate Fire and Casualty Insurance Company, discusses what sometimes happens if everything is not done properly by the attorney.

The undisputed facts show Cerda filed an Original Petition in State Court naming Allstate as the sole defendant on March 27, 2020.  On May 6, 2020, at 3:21 p.m., Allstate filed in this Federal Court its Notice of Removal, attaching the Original Petition and other required documents.  Also on May 6, 2020, at 3:27 p.m., Cerda filed in State Court a First Amended Petition.  Finally, at 3:51 p.m., on May 6, 2020, Allstate filed in State Court its Notice of Removal of the case to this federal court.

The issue of which county is a proper county to file a lawsuit against an insurance company is not normally an issue.  However, a 2020, Beaumont Court of Appeals had this issue before them in a mandamus action styled, In Re Mountain Valley Indemnity Company, Shane Waddell, Lonnie Tidwell, National General Insurance Company, and Prostar Adjusting.

Plaintiff sued the above Defendants, including the insurance company and adjusters and agents in a lawsuit arising out of homeowners insurance policy claim wherein Plaintiff’s home suffered property damage.  Plaintiff filed the lawsuit in Jefferson County, where some of the acts complained of occurred, and then Defendants filed a motion to have the case transferred to Montgomery County, where the home is located,  pursuant to Texas Civil Practices & Remedies Code, Section 15.011.  The Judge in the case denied the Defendants motion to transfer the case and this mandamus action ensued.

Defendants argued that Section 15.011 is a mandatory venue provision and since the property was located in Montgomery County, it was mandatory that the case be heard there.  They also argue that Section 15.032, a permissive venue statute applies because Montgomery County is where the insured property is located.

For insurance lawyers this post points out an area where frequent mistakes are made.  This has to do with the pleading standards in Federal Court and necessity of pleading proper facts to support a claim in Federal Court.

A 2020, opinion from the Northern District of Texas, Fort Worth Division, illustrates this problem.  The opinion is styled, Benjamin Lester, Et Al. v. Unitrin Safeguard Insurance Company.

Lester was insured by Unitrin at a time when Lester suffered a hail damage loss to his property.  A claim for benefits was made and Unitrin denied the claim based on its assertion that the damage to Lester’s roof is simple wear and tear.

Insurance lawyers who have cases that could potentially end up in Federal Court need to know and understand Federal pleading standards.  This is illustrated in a 2020, opinion from the Eastern District, Sherman Division.  The case is styled, Angelina’s Restaurant v. Allied Insurance Company of America and Mary Keefer.

Angelina’s suffered wind and hail damage and eventually made a claim against their insurance company, Allied.  Allied assigned adjuster Keefer to handle the claim.  An impasse resulted from the claim and Angelina’s filed suit in State Court against Allied and Keefer for their handling of the claim.  Allied and Keefer had the case removed to Federal Court alleging Keefer had been improperly joined to defeat diversity jurisdiction.  Angelina’s filed a Motion to Remand.

A party seeking removal based on improper joinder bears a heavy burden of proving that the joinder of the in-state party was improper.  The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff’s pleading of jurisdictional facts.  In deciding whether a party was improperly joined, we resolve all contested factual issues and ambiguities of state law in favor of the plaintiff.  Any doubt about the propriety of removal must be resolved in favor of remand.

Insurance lawyers will often get a call from a potential new client and this potential new client describes a pretty good case against the insurance company.  But as the discussion progresses the attorney learns the event the potential new client is describing or relating to the attorney happened many years ago.  The problem is that there are statutes of limitations that apply to almost every wrong a person or business commits.

According to the Texas Civil Practices & Remedies Code, Section 16.051, the statute of limitations in insurance breach of contract lawsuits is four years, the same as other breach of contract suits.  Even worse than that, insurance companies have begun to use endorsements intended to reduce the period in which an insured may bring suit against the insurance company.  Some companies for example, have begun using a “Suit Against Us Endorsement,” which provides that “an action against us must be made within two years and one day after the cause of action accrues.”  Sometimes the period is for three years.  Insureds should be aware of these contractual limitations periods.

The reason for the two years and one day is that the laws of Texas do not allow a breach of contract claim to be less than two years.  This law is found in the Texas Civil Practices & Remedies Code, Section 16.070.  It clearly says that regarding contractual limitations periods, any period of time shorter than two years is made void.  This includes stipulations, contracts, or agreements.  When the period is made shorter than the two years and thus void, the normal four year limitations period will apply instead.  This has been made clear in the 1984, 14th Court of Appeals opinion styled, Duster v. Aetna Insurance Company.

So, who has the burden of proof in an insurance case, the insurance company or the insured.  Like most issues in the law, it depends.

According to the 1994, San Antonio Court of Appeals opinion styled, Telepak v. United Service Automobile Association, the insured has the initial burden to prove damages are covered by the policy.  According to the 1943, Texas Supreme Court opinion styled, Trevino v. American National Insurance Company, the insured may make a prima facie case by showing that the policy was in force when the loss occurred.

On the flip side, a 2003, opinion by the Fort Worth Court of Appeals styled, Venture Encoding Service, Inc. v. Atlantic Mutual Insurance Company, the insurance company bears the burden of proving the applicability of an exclusion that permits it to deny coverage.

Here is another one of those cases where an insured sues the insurance company and the adjuster in State Court for various violations of the Texas Insurance Code.  The insurance company a adjuster then remove the case to Federal Court alleging that the adjuster has not been properly sued.

This case is from the Eastern District of Texas, Sherman Division, and is styled, Angelina’s Restaurant v. Allied Insurance Company Of America And Mary Keefer.

Angelina’s property sustained wind and hail damage.  Allied insured the property and Keefer was assigned to adjust the claim.  Angelina eventually sued Allied and Keefer for various violations of the Texas Insurance Code.  The case was filed in State Court and then removed to Federal Court by the Defendants.  Angelina then filed a motion to remand, which is the subject of this opinion.

The law is as clear as it can be in the State of Texas.  An insured has a duty to cooperate with his insurance company regarding the investigation of a claim.

The next question is – Are there exceptions to this duty?  Here is my response.

The insurance contract may impose conditions on the insured.  For example, most policies require that the insured give notice of the claim and cooperate with the insurance company.  Policies may require that the insured file a formal proof of loss, if the insurer requests one.  The Texas Supreme Court in a 1994 opinion said that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligation to perform.  The opinion is styled, Hernandez v. Gulf Group Lloyds.  It is necessary that the breach be “material.”  The Court explained it this way: