Articles Posted in Claims Handling Process

It’s probably not right to pick only on State Farm.  Most if not all, of the insurance companies or their individual employees will break the rules for their own gain.  This is illustrated in a Chicago Tribune story titled, State Farm Pays $250 Million, Ducks Trial Over Allegations It Tried To Rig Illinois Justice System.

The story tells us State Farm agreed to pay $250 million on the brink of a trial to customers who claimed the company tried to rig Illinois justice system to wipe out a $1 billion jury verdict from 19 years ago.

The customers were seeking as much as $8.5 billion in damages in a civil racketeering trial that was set to start Tuesday in federal court in East St. Louis, Illinois.  A judge granted preliminary approval to the accord and set a final fairness hearing for December.

Insurance lawyers who handle home owner and property claims must know this case.  It is a 2018 case from the Northern District of Texas, Dallas Division.  It is styled, Meisenheimer v. Safeco Insurance Company of Indiana.

This is a storm damage claim.  Plaintiff suffered damage and made a claim.  Safeco sent out an adjuster who found total damage that was less than the $7,700 deductible amount.  Plaintiff hired a public adjuster who determined the loss to be $129,794.  Safeco re-inspected the property and the parties still could not reach a resolution.  Plaintiff claims the inspections were substandard.

The insurance contract includes an appraisal provision for resolving disputes over the proper amount of the claim.  Safeco invoked the appraisal process and both parties participated.  An umpire issued a final appraisal award of $54,535.  Safeco timely paid the final appraisal amount.

Anytime an insurance company is sued from conduct arising from insurance policy and the investigation of a claim, the insurance company is going to seek to have the case heard in a federal court.  This is seen again in the 2018, opinion from the Western District of Texas, San Antonio Division, styled, Electro Grafix, Corp. D/B/A Aetna Sign Group, LTD., D/B/A Aetna Sign Company, Inc. v. Acadia Insurance Company, and Marlin Douglas Odermatt.

This is a lawsuit filed in State District Court arising out of claim for property damage wherein Acadia claims there was no damage or minimal damage to Aetna’s property.  Marlin was an engineer assigned to investigate the claim by Acadia.  Aetna claims Acadia has not accepted responsibility for the conduct of Marlin and thus Marlin is being sued in his individual capacity.

Acadia had the case removed to federal court and Aetna is filing this motion remand based on Marlin being improperly joined.

As is normal, an insurance company will remove a case to federal court anytime they can.  When an insured sues parties besides the insurer, the insurance company claims the joinder of the other party is fraudulent.  To often the insurer wins this removal battle.  Here is a case where the insured won the removal battle.

The case is a 2018 case styled, Ramona L. Smith v. Government Employees Insurance Company and R&M Towing and Recovery.  The case is from the Eastern District of Texas.

Smith’s husband was killed in an accident.  R&M towed Smith’ vehicle.  Smith contends R&M agreed to maintain possession of the vehicle while she pursued a civil action against the manufacturer.  R&M subsequently released the vehicle to GEICO.  She then contacted GEICO and reached an agreement for GEICO to ensure the continued storage and preservation of the vehicle.  GEICO then sold the vehicle for salvage without Smith’s permission and allowed it to be destroyed.

Attorneys who handle insurance cases in Fort Worth and around Texas will want to read this 2018, opinion from the U.S. District Court, Eastern Texas, Sherman Division.  It is styled, Bradley Sanson v. Allstate Texas Lloyd’s.

This situation deals with property that was substantially destroyed in a storm.  Allstate was the insurer.  The insureds were Bradley and Vicki Sanson.  Bradley submitted a claim and after attempts to settle the claim were unresolved, Bradley filed a suit alleging breach of contract, and violations of the Texas Insurance Code among other causes of action.

Allstate filed a Rule 12(b)(7) motion to dismiss based on Bradley failing to join a party under Rule 19 .  Under a Rule 12(b)(7) motion to dismiss the Court makes two inquiries under Rule 19.  The Court must first determine under Rule 19(a) whether a person should be joined in the lawsuit.  If joinder is warranted, then the person will be brought into the lawsuit.  But if such joinder would destroy the court’s jurisdiction, then the court must determine under Rule 19(b) whether to press forward without the person or to dismiss the litigation.  Allstate has the burden of showing that Vicki Sanson is a necessary and required party as they allege.

The law in Texas is pretty clear, an insurance company is entitled to received a notice before a lawsuit is filed.  This is recently illustrated in a Southern District, Houston Division, opinion styled, Jose Luis Perrett v. Allstate Insurance Company.

This is a dispute arising out of damage caused by Hurricane Harvey.  Perrett sued Allstate and Allstate moved to have the case abated due to Perrett’s failure to comply with Texas Insurance Code, Section 542A.003, which requires a presuit notice.  The Court granted Allstate’s motion.

542A.003 says:

Here a situation that is not seen very often, but it does occur.  This 2018,  case is from the Tyler Court of Appeals and is styled, In Re: Metropolitan Property And Casualty Insurance Company, et al.

This is a mandamus action wherein Metropolitan is appealing the trial court’s decision of denying Metropolitan’s Motion to Transfer Venue.

A starting point for understanding an Examination Under Oath (EUO) is start with the principle that an insured has a duty under their insurance contract to cooperate with the insurer’s investigation of a claim.

In the first-party setting, which is the setting under which EUO’s are sought:  Duties of cooperation include the duty to submit to an EUO, the duty to respond to reasonable requests for information and documents, and the duty of candor which would prohibit the insured from concealing information from the insurer or providing false information in support of the insured’s claim.  An EUO and the information obtained therefrom is the core of the duty to cooperate.  The regard the courts have for the duty to cooperate is illustrated in the case, Aetna Casualty & Surety Co. v. State Farm Mutual Auto Insurance Co., a federal case out of Pennsylvania.  Mona Dobbins, the State Farm insured, refused to give a statement to State Farm regarding a car wreck that occurred in August, 1987.  In the accident, Dobbins struck and killed a pedestrian with the vehicle she was driving, which had been leased by her employer Brookline Social Club.  Dobbins fled the scene of the accident.  In light of the criminal proceedings against her, Dobbins refused to give a statement to State Farm based on her 5th Amendment privilege against self-incrimination.  Later, in August of 1987, State Farm sent Dobbins a reservation of rights letter.  In December of 1987, a civil action was filed against State Farm’s insured, Dobbins, by the estate of the pedestrian killed.  After a default judgment was obtained by the estate against Dobbins, State Farm sent two letter to Dobbins in March of 1989 “denying coverage under its liability policy issued to the Brookline Social Club and refusing to defend or indemnify her because of her refusal to cooperate with State Farm’s investigation.  Following State Farm’s denial of coverage, the estate of the pedestrian killed presented an uninsured motorist (UM) claim to Aetna, the uninsured motorist insurer.  After Aetna paid the UM claim, it filed an action against State Farm for indemnification from State Farm for the UM claim paid by Aetna.  The jury returned a verdict in favor of State Farm finding that State Farm insured, Dobbins, breached her duty to cooperate and that State Farm had suffered substantial prejudice.  Aetna filed a motion for judgment notwithstanding the verdict.  Upon consideration of Aetna’s motion for judgment notwithstanding the verdict, the court upheld State Farm’s coverage denial, rejecting Aetna’s argument that Dobbins’ 5th Amendment privilege excused her breach of contract as a matter of law.  As one commentator indicated, “In these trying times of exaggerated and intentionally false claims, EUO’s offer the insurance company’s best chance of aggressively investigating first party claims in a good faith atmosphere.  EUO’s should be effectively utilized by the insurance company in its search for truth in the war against arson and false claims.”

A frequent phone call to insurance law lawyers is someone asking about participating in an examination under oath (EUO).

Most people understand what taking the 5th means.  It refers to our right to not be compelled to say anything that may be self-incriminating.  It usually is discussed in the context of a criminal proceeding or investigation.  However, the privilege against self-incrimination also applies in civil proceedings.  Just because you are in a civil case rather than a criminal case does not require a person to surrender this right.

In an insurance situation, an insurance investigation is contractual in nature.  Almost all insurance policies are going to contain a cooperation clause that requires the insured to cooperate with the investigation of a claim for which the insured is seeking policy benefits.  Courts in interpreting the cooperation clause have universally found that the insured cannot use the 5th Amendment to avoid cooperating with the insurance company yet insist that the insurance company provide the requested coverage.

Insurance cases involving umpire’s are a little different.  The Amarillo Court of Appeals issued an opinion on May 14, 2018, styled, Mahmoud Abdalla v. Farmers Insurance Exchange.  The case deals with, among other issues, when an umpire’s appraisal award can be challenged.

This case is an appeal by Abdalla from a summary judgment in favor of Farmers.  Abdalla sued Farmers over an insurance dispute resulting from water damage.  The extent of the damage and insurance proceeds payable was ultimately submitted to appraisers in accordance with policy terms.  An umpire appointed by the trial court eventually (1) found the appraisal developed by Farmer’s appraiser (Albright) to be the “more sound and well supported appraisal” ad (2) designated the actual cash value of the loss at $345,664.21.  Farmer’s timely paid the umpire’s decision.

Abdalla filed motions to set aside the decision based on the umpire’s decision being a mistake and to appoint a new umpire.