Articles Posted in Delay in Paying Claim

Arlington insurance lawyers will usually know the penalties for insurance companies that do not promptly pay a claim. A 1997, United States 5th Circuit Court of Appeals case illustrates the penalties. The style of the case is, Higginbotham v. State Farm Automobile Insurance Company. Here is what the case tells us.

Higginbotham’s Porsche was stolen on June 8, 1993, from an unsecured parking lot next to his residence. The car was recovered later that day but had been stripped of its top, seats, interior and exterior trim but was not damaged or destroyed with regard to mechanical connections, wiring harnesses or the engine. Higginbotham reported the theft to State Farm on June 9, 1993. State Farm denied his claim five months later on November 19, 1993.

Higginbotham filed suit for breach of contract, violations of the DTPA, violations of the Texas Insurance Code, negligence, breach of duty of good faith and fair dealing, and violation of the Prompt Payment of Claims Act which imposes an 18% penalty on the carrier under certain circumstances. At trial, the jury returned a verdict in favor of Higginbotham for $30,000.00, the amount of his coverage, but the Court directed a verdict in favor of State FArm on the bad faith and extracontractual claims under the DTPA and Insurance Code. Higginbotham appealed.

Texas insurance law lawyers need to be able to calculate how the Prompt Payment Act when calculating damages. A 2008, Fort Worth Court of Appeals case is good to read for guidance. The style of the case is, GuideOne Lloyds Insurance Company v. First Baptist Church of Bedford. Here is some of the relevant information.

First Baptist brought suit against GuideOne for hail damage to the roof of its church building. GuideOne’s engineer concluded the roof had to be replaced and could not be repaired. GuideOne solicited an estimate to repair the roof anyway, and the church obtained an estimate for the replacement cost, including a statutorily required insulation upgrade. GuideOne agreed to pay only its repair estimate and did not include any cost for the required insulation upgrade. The jury awarded the church approximately $286,000 for the covered losses, $60,000 in damages on the church’s bad faith claim, and $30,000 in compensatory and $55,000 in exemplary damages for a knowing violation, along with $100,000 in attorneys’ fees, and $188,000 based on the 18% interest penalty under the Prompt Pay Act for untimely payment of claims. The jury found that GuideOne had made an unconditional tender of $155,000 to the church after the church had filed suit. GuideOne argued that the trial court erred in disregarding the jury’s finding regarding its unconditional offer and that the interest penalty should not have been calculated without subtracting the $155,000 that the jury found it had unconditionally offered after the suit was filed. GuideOne also challenged certain questions on the jury charge as erroneous.

This appeals court held the trial court erred in disregarding the jury’s finding that GuideOne had unconditionally offered $155,000 to settle the claim because there was some evidence to support the jury’s finding. In applying the offer to arrive at a new interest calculation, the court applied the $155,000 tender first to the accrued prejudgment interest on the amount of the coverage with the balance applied the principle coverage amount owed, and then use the adjusted principle to calculate the 18% interest penalty for untimely payment. The court rejected GuideOne’s argument that First Baptist had not received a finding on the accrual date for its Prompt Pay claim because the accrual date was undisputed and need not be submitted to the jury.

Aledo insurance lawyers need to know how partial payment of an insurance claim works in a claim for violating the Prompt Payment of Claims Act. A 2004, Texas Supreme Court case styled, Republic Underwriters Insurance Company v. Mex-Tex, Inc. helps an insurance law attorney to understand. Here is the relevant information.

Facts: The roof atop a shopping mall was damaged by a hail storm. Before Republic agreed to pay for the replacement, Mex-Tex, owner of the mall, retained a roofer on a priority basis to replace the roof in order to avoid further injury to the tenants from future rains at a total cost of $179,000. Republic estimated the cost of replacing the roof with an identical make to be $145,460 and tendered that amount. The new roof was substantially similar in kind and quality to the old one, but the additional cost was due to the method of the roof’s attachment to the building and the high priority of the job. Republic refused to pay the balance of the claim and Tex-Mex sued. Tex- Mex sought to recover the balance of the amount owed plus a statutory 18% penalty on the entire claim. Republic argued that the penalty, if any, should be assessed only on the disputed amount, rather than on the entire claim. The trial court entered the judgment in favor of Tex-Mex and Republic appealed. The Amarillo Court of Appeals affirmed, holding that the policy did not require the replacement roof to be identical and that Republic’s tender of the amount it believed was owed on a claim did not stop the accrual of Texas Insurance Code, Prompt Payment of Claims Act penalties, or prejudgment interest, on what was later judicially determined to be the full amount of the claim. The Texas Supreme Court granted review.

The Texas Supreme Court reversed and remanded, agreeing that replacement of a damaged roof with one of “like kind and quality” fell within the policy but rejecting the lower court’s holding that the Prompt Payment of Claims Act calls for an 18% penalty of the amount of the claim, not just the amount outstanding after partial tender.

Dallas insurance lawyers will tell you that when involved in a lawsuit, it is necessary to prove the case. In this regard, a recent opinion from the United States District Court for the Northern District of Texas, Dallas Division, needs to be read and understood. The style of the case is, Robert Bell and Cheryl Bell v. State Farm Lloyds. Here is the relevant information from the opinion.

Plaintiffs Robert and Cheryl Bell (“Plaintiffs”) purchased from Defendant an insurance policy covering property damage to Plaintiffs’ property. On June 22, 2012, after a hail and wind storm, Plaintiffs made a claim to Defendant for damage resulting from the storm. On June 27, 2012, Defendant acknowledged receipt of the claim and commenced an investigation. On July 24, 2012, State Farm adjuster Donald Kimberlin inspected Plaintiffs’ property with Mr. Bell and Plaintiffs’ contractor, Roland Vitullo. Kimberlin determined that Plaintiffs’ roof had been damaged and agreed that replacement was required. On August 21, 2012, Vitullo sent a copy of his estimate to Defendant. Defendant requested additional information.

On September 16, 2012, Defendant received an estimate from a public adjuster hired by Plaintiffs, Steve Whitehood of H&S Claim Recovery, that was lower than both Vitullo’s estimate and Defendant’s adjuster’s estimate. On September 21, 2012, Plaintiffs requested Defendant make a second inspection of their property. On October 6, 2012, Defendant sent another adjuster, Brandon White, who conducted an inspection with public adjuster Elvis Spoon. White estimated $32,907.45 in damages, which exceeded Kimberlin’s estimate. White’s estimate was sent to Plaintiffs. On December 13, 2012, after receiving a purported “final invoice,” for $32,879.33 from the construction firm that did the repair work, State Farm sent a payment for $32,907.45 less Plaintiffs’ deductible.

Fort Worth insurance attorneys need to be aware of this 5th Circuit Court of Appeals decision. The style of the case is W.W. Rowland Trucking Company, Inc. v. Max America Insurance Co. Here is the relevant information from the case.

W.W. Rowland Trucking Company, Inc.’s Dallas, Texas truck terminal, in addition to an 18% penalty. For the foregoing reasons, the judgment of the court was affirmed.

Rowland transported a load of video game consoles valued at $354,000 from Marshall, Texas, to its Dallas, Texas terminal. Thieves stole the tractor/trailer loaded with the consoles while it was located at the Dallas terminal. At the time of the theft, Rowland had an insurance policy Max America, also known as Alterra. The Policy’s section entitled “Coverage” provides for “Legal Liability Coverage,” which covers Rowland’s [L]egal liability for loss to covered property: a. while under [Rowland’s] care, custody, and control; [and] b. that [Rowland] become[s] legally obligated to pay as a common or contract carrier under a bill of lading, contract of carriage, or shipping receipt that is issued by [Rowland] or that is issued on [Rowland’s] behalf.

Attorneys who handle insurance claims will generally know what is going on within the insurance industry. While most claims are handled properly and an insurance attorney never hears about those that are handled properly, it is the ones that are not handled properly that come to the attention of insurance attorneys.

The Insurance Journal published an article in early 2014, told of insurance complaints being filed in Texas. Here is the title of the article, “Insurer Group: Texas Auto, Homeowner Complaints at a record Low.” Here is what the article tells us.

“In 2013, Texas drivers and homeowners filed the fewest number of complaints against their insurance companies since the Texas Department of Insurance (TDI) began keeping records, the Insurance Council of Texas reports.