Articles Posted in Claims Denial

Insurance policies are contracts.  A violation of an insurance policy is a usually going to be a breach of the contract.  A lot of insurance law, simply put, is contract law.

So what about the relationship of breach of contract to other theories of liability?

The 1996, Texas Supreme Court opinion, Liberty National Fire Insurance Co. v. Akin, says that “Insurance coverage claims and bad faith claims are by their nature independent.  But, in most circumstances, an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract.”

Here is a complicated case regarding policy cancellation.  The case is from the Eastern District of Texas, Sherman Division, and is styled, Scottsdale Insurance Company v. All Citizens Transportation, LLC, et al v. Burns & Wilcox of Texas, Inc. et al.

The procedural history is complicated and the opinion needs to be read to have a full understanding of the facts.  The lawsuit is over the issue of whether an auto insurance policy had been properly cancelled when the finance company had not been properly notified of the policy cancellation.

This is a summary judgment case that was decided in favor of the insurer.  A policy cancellation notice had been sent to the insured but not to the finance company as required by Texas law.  The question before the Court, therefore, is whether an insurance company may cancel a policy despite a premium finance company’s failure to meet notice-of-cancellation requirements imposed by Texas law.  The answer is yes.

In the majority of cases it is best for a cases wherein an individual or small company litigates the case in State Court rather than Federal Court.  As a result, knowing how to keep a case in Federal Court is important.  Here is a 2020 opinion from the Eastern District of Texas, Sherman Division, wherein the Federal Court was not willing to allow the case to be in State Court.  The opinion is styled, Helayas Logistics LLC v. Jacob Christian Stineman, Streamline Insurance, Inc., Luis Alberto Roman, and Great Lakes Insurance SE.

Helayas sued the Defendants in State Court and the Defendants timely removed the case to Federal Court based on diversity jurisdiction and Helayas timely filed a motion to Remand back to the State Court.  The Defendants assertion was that there were not proper causes of action asserted against the three non-diverse defendants, Stineman, Streamline, and Roman.

The Court is to conduct a Rule 12(b)(6) type analysis to determine whether there are sufficient detailed causes of action against the non-diverse defendants.  Where the well-plead facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged, but has not shown, that the pleader is entitled to relief.  Although the pleading standard Rule 8 announces does not require detailed factual allegations, it demands more than labels and conclusions.

Prior to filing a lawsuit, if the lawsuit is filed making claims for violations of the Texas Deceptive Trade Practices Act, or the Texas Insurance Code, Chapters 541 or 542A, it is required that at least a 61 day pre-suit notice be given if the claimant wishes to recover all that is legally allowed under those laws.

A 2020 case from the Western District of Texas, San Antonio Division, makes this clear.  The opinion is styled, PMG International, LTD. v. Travelers Indemnity Company of America.

This lawsuit results from an insurance dispute between PMG and Travelers related to storm damage to one of PMG’s properties insured by Travelers.  PMG sued Travelers alleging breach of contract and various violations of the Texas Insurance Code after the claim was denied.

The purpose of exemplary damages is to punish someone for wrongful conduct.  So, should an insurance company be required to pay for exemplary damages when the policy does not provide coverage for exemplary damages?

This issue was addressed in a 2020, Western District of Texas, San Antonio Division, opinion styled, Richard Brett Frederking v. Cincinnati Insurance Company.

Frederking had been seriously injured in an auto accident wherein Carlos Sanchez, while driving for his employer, caused the wreck while driving while intoxicated (DWI).  The case went to trial and Frederking was paid for his injuries and the jury also awarded exemplary damages of $207,550.00.  The insurer, Cincinnati paid the injuries portion of the judgement but refused to pay the exemplary damages and this lawsuit for that amount resulted.

Here is another one of those removal cases wherein the situation is a situation that will not occur very often.  This case is from the Northern District of Texas, Dallas Division, and is styled, Jeff Conkey and Shannon Mitchell v. Monica Corker, IAT Insurance Group Specialty, and Acceptance Indemnity Insurance Company.

In this case the Mitchell’s (Plaintiffs) filed a State Court lawsuit alleging violations of the Texas Insurance Code and the DTPA against IAT and Acceptance and conversion and trespass claims against Corker.  This Court sue sponte determined that it lacked subject matter jurisdiction and remanded to the State Court.

Plaintiffs owned property insured by IAT and Acceptance.  Allegedly, Corker entered the property and stole equipment belonging to the Plaintiffs.  The insurers denied the claim.

Insurance lawyers seem to have a lot of confusion regarding insurance contracts with appraisal provisions contained within them and how to interpret and handle them.  This issue was addressed in a January 2020 opinion from a Southern District of Texas, Houston Division.  The opinion is styled, William A. Linnus and Sarah J. Linnus v. Metropolitan Lloyds Insurance Company of Texas.

Texas insurance policies frequently include provisions requiring or allowing appraisal to resolve disputes about loss amounts.  An appraisal clause binds the parties to have the extent or amount of the loss determined in a particular way.  An appraiser must decide the amount of loss, not to construe the policy or decide whether the insurer should pay.  Unless the amount of loss will never be needed appraisals should generally go forward without preemptive intervention by the courts.

The contractual right to appraisal may be waived.  The Texas Supreme Court in the opinion styled, In re Universal Underwriters of Texas Insurance Co., explained that: to constitute waiver of the right to appraisal the acts relied on must be reasonably calculated to induce the assured to believe that compliance by him with the terms and requirements of the policy is not desired, or would be of no effect if performed.  The acts relied on must amount to a denial of liability, or a refusal to pay the loss.  As the Court more recently concluded, waiver requires intent, either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.

Failure to follow the rules related to Insurance Law can have bad consequences.  This is seen in a September 2019, opinion from the Southern District of Texas, Corpus Christi Division.  The opinion is styled, Libardo Taboada v. State Farm Lloyds.

This case was dismissed by the Court for Libardo’s failure to follow rules set out in the Texas Insurance Code, Sections 542A.003 and 541.154.

First there was non-compliance with the pre-suit notice which was sent on August 21, 2018.

As has been stated many times, insurance companies prefer to litigate lawsuits in Federal Court rather than State Court.  Conversely, it is usually better for someone suing an insurance company to litigate the case in State Court rather than Federal Court.

Here is a 2019, opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Antonio Diaz v. GeoVera Specialty Insurance Company.  In this case, Diaz alleges “GeoVera improperly denied and / or underpaid the claim.”  On August 22, 2019, a lawsuit was filed in State Court against GeoVera claiming violations of the Prompt Payment of Claims Act, various violations of the Texas Insurance Code, and breach of contract.  GeoVera timely removed the case to Federal Court on October 10, 2019.  Diaz timely filed a motion to remand.

Pursuant to 28 U.S.C., Section 1332(a)(1), Federal courts have original jurisdiction over all civil actions between citizens of different states where the amount in controversy exceeds $75,000, exclusive of interest and costs.

Insurance lawyers know and understand that before suing an insurance company for denying a claim, the insurance company must be given the statutory presuit notice of the intent to file a lawsuit.  This was recently illustrated in a December 23, 2019, opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Gateway Plaza Condo v. The Travelers Indemnity Company Of America.

Travelers had denied Gateway’s claim for storm damage.  There was significant disagreement about the respective parties’ conduct in the early stages of the dispute.

Gateway alleges the property was damaged by a severe storm on June 2, 2017.  Gateway contends it cannot recall when Travelers was notified of the loss.  Gateway suggests that Travelers retained an inspector, JNT Developers, to survey the property on August 16, 2017.  Gateway alleges Travelers denied the claim but does not know exactly when the claim was denied.  The evidence indicates that Travelers sent Gateway a letter on October 6, 2017, stating Gateway’s policy does not cover damage to the roof.  Gateway asserts that Travelers must have denied the claim earlier because the letter references the parties’ “recent conversations about the claim.”