Articles Posted in Delay in Paying Claim

The United States 5th Circuit Court of Appeals issued an opinion on August 12, 2021, that is noteworthy for Insurance Law attorneys.  The opinion is styled, Randy Randel; Debra Randel v. Travelers Lloyds of Texas Insurance Company.

After a fire at their home, the Randels filed a claim for benefits from their home insurance company, Travelers.  Eventually the parties agreed to an appraisal and the appraisal award was closer to the Randel’s view of the damages.  Travelers had already paid an amount they thought was proper.  After the appraisal Travelers paid the full appraisal amount.

The Randels brought suit against Travelers for breach of contract and violation of the Texas Prompt Payment of Claims Act.  The breach of contract claim was denied by the Court but the Texas Prompt Payment of Claims violation went forward in the lawsuit.

A Federal Court for the Western District of Texas, Midland/Odessa Division issued an opinion in 2021, that deals with the Texas Prompt Payment of Claims Act (TPPCA).  The style of the opinion is long.  We will call it Woodcrest Capital, LLC, et al v. Zurich American Insurance Company.

The TPPCA is found in Chapter 542 of the Texas Insurance Code.  Chapter 542 of the TIC does not contain a statute of limitations.  District courts in the Fifth Circuit are split on whether a two–year or four–year statute of limitations applies to claims brought under Chapter 542, and the Fifth Circuit has not considered the issue.  The dispute is whether the two-year statute of limitations included in Chapter 541 of the TIC or the four-year statute of limitations in Section 16.051 applies to claims arising under Chapter 542.

Plaintiffs contend Defendant violated Section 542.058 when it failed to pay Plaintiffs’ insurance claims within sixty (60) days after receiving all items, statements, and forms requested.  Plaintiffs conclude that their TPPCA claim arises under the statute, not under the Policies; therefore, the contractual limitation does not apply to their TPPCA claim.  Additionally, Plaintiffs argue the contractual limitation in the Policies does not apply to the TPPCA claim because the language in the Policies suggests that it only applies to claims for breach of duties imposed by the Policies.  The Court agrees with Plaintiffs.

Insurance Companies are supposed to promptly make payment of claims made by an insured.  A May 2021, case from the Fifth Circuit Court of Appeals confirms this.  The style of the opinion is Hyewon Shin v. Allstate Texas Lloyd’s.

In this case, the insured, Hyewon Shin asserted a claim for penalties under the Texas Prompt Payment of Claims Act.  The relevant statutes are Sections 542.058 and 542.060.  The lower level court granted summary judgment in favor of Allstate, concluding that Allstate’s pre-appraisal payment to Shin was both timely and reasonable as a matter of law notwithstanding that the final appraisal amount, $25,944.94 was 5.6 times greater than the pre-appraisal payment of $4,616.63.

This opinion is based on the Texas Supreme Court ruling in Hinojos v. State Farm Lloyds, et al.  The Texas Supreme Court said in relevant part:

Insurance attorneys need to be know this 2021, opinion from the Texas Supreme Court.  It is styled, Louis Hinojos v. State Farm Lloyds and Paul Pulido.

The Texas Prompt Payment of Claims Act, codified in Insurance Code Chapter 542, imposes deadlines on insurers to pay valid claims.  If an insurer fails to comply with Chapter 542, then it is liable for statutory interest on the amount of the claim and attorney’s fees.  The insurer in this case accepted a homeowner’s claim and paid part of it before the statutory deadline.

Dissatisfied with that amount, the homeowner sued, seeking full payment of the claim plus interest and attorney’s fees under Chapter 542.  While suit was pending—and after the statutory deadline for payment had passed—the insurer invoked the policy’s appraisal process.  The appraisers awarded the homeowner substantially more than the amount the insurer had paid.

When an insurance company delays in paying a claim, there is likely a violation of the Texas Prompt Payment of Claims Act.  As a result it is important to have a good understanding of how the Prompt Payment of Claims Act is interpreted by the Courts.

The statute, at Section 542.054, provides that “This subchapter shall be liberally construed to promote the prompt payment of insurance claims.”  This purpose is re-inforced in case law supporting this goal including, Dunn v. Southern Farm Bur. Cas. Ins. Co., a 1999, Tyler Court of Appeals opinion.  And it is supported in the 1997, Texarkana Court of Appeals opinion, Bekins Moving & Storage Co. v. Williams.  The Federal Courts follow this purpose as is illustrated in the 1997, Eastern District of Texas opinion, Teate v. Mutual Life Ins. Co. of New York.

The meaning of “liberal construction” has been applied expansively under other consumer statutes.  This was seen in the 1981, Texas Supreme Court opinion, Cameron v. Terrell & Garrett, Inc., wherein the court said that a liberal construction mandates that court give statute most comprehensive application possible without doing violence to the statute’s terms.

Life insurance lawyers run into situations where a person eventually recovers life insurance benefits they are entitled to receive.  A common situation where this occurs is when a life insurance lawyer sends a notice letter to the insurance company letting the insurance company know that the claim has not been paid and that if it is not paid immediately that a lawsuit will be filed.  Then, the insurer pays.  Is that the end of it?

Not necessarily.  The Prompt Payment of Claims statute , Texas Insurance Code, Section 542.054, says in one sentence, “This subchapter shall be liberally construed to promote the prompt payment of claims.”   This statute was used in the 1999, Tyler Court of Appeals opinion, Dunn v. Southern Farm Bur. Cas. Ins. Co.  It was also used in the 1997, Texarkana Court of Appeals opinion, Bekins Moving & storage Co. v. Williams.  And in the 1997, Federal Eastern District of Texas opinion, Teate v. Mutual Life Ins. Co. of New York.

The meaning of ‘liberal construction” has been applied expansively under other consumer statutes, as discussed in the 1981, Texas Supreme Court opinion, Cameron Terrell v. Garrett, Inc.  Liberal construction mandates that courts give the statute the most comprehensive application possible without doing violence to the statute’s terms.

Claim Denial Attorneys need to read this opinion from the Southern District of Texas, Houston Division.  It is styled, Caramba, Inc. d/b/a Pueblo Viejo v. Nationwide Mutual Fire Insurance Company.

This is a summary judgment case in favor of Nationwide.

This insurance coverage dispute arises out of claim filed seeking damages for various violations of the Texas Insurance Code.  The focus here is on Section 542.058.  The timeline of Facts of the case by a reading of the case.  Discussed here is the Courts reasoning in the case so that Insurance Lawyers can understand how the Courts interpret Section 542.058  when deciding the case.

Insurance lawyers need to read this 2020, opinion from the United State Fifth Circuit Court of Appeals.  It is a good opinion for attorneys who represent policy holders.  The opinion is styled, Jesus Agredano: Margaret Agredano v. State Farm Lloyds.

The Agredando’s sued State Farm after State Farm denied their claim for windstorm damage to their home.  The District Court granted summary judgment in favor of State Farm on various causes of action but allowed the Agredano’s breach of contract claim to be presented to a jury, which granted a verdict in the Agredano’s favor.  Althoughm the Agredano’s had sought attorney’s fees and statutory interest of 18%, the District Court ruled that the failure to specifically plead relief under Texas Insurance Code, Section 542.060 barred the requested relief and entered judgment only in the amount of the breach of contract damages found by the jury, together with pre-judgment and post judgment interest.  This appeal was filed.  This Court reversed and remanded to the District Court for reconsideration consistent with this opinion.

Two provisions of the Texas Insurance Code are relevant.  Section 542.058 provides a cause of action against insurers who delay paying claims:

Recent Texas Supreme Court opinions have been helpful to Texas insureds.  The help comes in the form of the Court deciding that an insurer by merely paying an appraisal award is no longer able to wash their hands of the case.  The insured can still seek remedy under the Texas Prompt Payment of Claims Act (TPPCA).

The case is from the Texas Supreme Court and is styled, William Marchbanks v. Liberty Insurance Corporation.

At issue in this insurance dispute is whether an insurer’s payment of an appraisal award bars an insured’s claims under the TPPCA, codified as Chapter 542 of the Insurance Code.  The court of appeals concluded it did.  Because the court of appeals’ opinion is inconsistent with recent decisions on this issue, this Court now reverses.

The Texas Prompt Payment of Claims Act (TPPCA) sets forth rules for payment of claims and penalties for violation of those rules.  Here is a case that deals with the TPPCA when there is an appraisal involved.  The case is from the Northern District of Texas, Dallas Division, and is styled, Corinne Pearson v Allstate Fire and Casualty Insurance Co.

In February 2019, Pearson filed suit against Allstate alleging violations of the TPPCA and breach of contract and bad faith.  We will look at the TPPCA claim.  Allstate obtained an abatement of the case pending an appraisal of the damage to Pearson’s property.  In June the parties notified the Court that the appraisal was completed and Allstate filed this summary judgment motion.

The facts in evidence here were that Pearson had a policy with Allstate.  Pearson timely submitted a claim for damages.  After an inspection by Allstate there resulted a repair estimate that was lower than the policy deductible and this lawsuit was filed.