Articles Posted in Home Owners Policies

A recent case filed in Tarrant County was removed to Federal Court, Northern District, Fort Worth Division.  One issue dealt with the appraisal provision in the insurance contract.  The style of the case is, Reese Hallak v. Allstate Vehicle and Property Insurance Company.

Hallak sued Allstate for breach of contract and violations of the Texas Insurance Code.  Hallak’s petition alleges Allstate mishandled and underpaid him for two separate property damage claims.  After removal to Federal Court, Allstate filed a Motion To Abate Pending Appraisal, arguing that, pursuant to the terms of the insurance contract between the parties, this case should be abated until conclusion of the appraisal process.

There is no specific federal statute or rule which expressly authorizes a motion to abate.  The court’s decision to do so is largely a matter of judicial discretion.

Lawsuits need to be specific when claiming what an insurance company, adjuster, or agent did that caused harm to their insured.  This is illustrated in an Eastern District opinion styled, Scott Jengemuhle and Ty Properties, LLC v. Acceptance Indemnity Insurance Company and Robert Saucier.

This case relates to an insurance claim for storm related damages to Plaintiffs’ business and property.  Plaintiffs file suit in State Court and Defendants removed the case to Federal Court.  Plaintiffs allege that Acceptance did not provide coverage sufficient to complete necessary repairs to the property.  Saucier is the adjuster assigned to the claim.  Acceptance asserts that Saucier was improperly joined in the lawsuit and thus, his joinder should be disregarded for purposes of diversity.  Plaintiff asserts that he has sufficiently alleged causes of action against Saucier to maintain the claim against him.

To establish fraud in joining a non-diverse defendant, the removing party must establish the plaintiffs’ inability to establish a cause of action against the non-diverse party in state court.  The Court must decide whether there is a reasonable basis for predicting that Plaintiffs might be able to establish liability on the pleaded claims in state court.

The Houston Chronicle ran a story of September 20, 2017, that all homeowners need to read.  It is titled “Flooded Houston Homeowners Might Have Been Spared Ruin — But Only If They Read The Fine Print.”

25 words of a public document that could have spared thousands of homeowners from losing everything sat tucked away in a Fort Bend county clerk’s office for the past 20 years.

“This subdivision is adjacent to the Barker Reservoir and is subject to extended controlled inundation under the management of the U.S. Army Corps of Engineers.”  These 25 words, in the finest of fine print were of public record.

As it relates to homeowner’s policies, the Texas courts have adopted a rigid rule for when a loss occurs.  The Texas Supreme Court in, Don’s Building Supply, Inc. v. OneBeacon Ins. Co. has emphasized that the applicable rule for when a loss occurs depends upon the language in the policy.

In Don’s Building Supply, the Court interpreted a policy that provided coverage for “bodily injury” or “property damage” that was “caused by an ‘occurrence’ that takes place in the ‘covered territory;'” and “occurs during the policy period.”  The policy defined “property damage” to mean “Physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it,” or “Loss of use of tangible property that is not physically injured.  All such loss shall be deemed to occur at the time of the ‘occurrence’ that caused it.  Based on this language, the court determined that “property damage under this policy occurred when actual physical damage to the property occurred.”

In Don’s Building Supply, the Court stressed that it was not attempting to fashion a universally applicable rule.  Accordingly, the actual injury or injury-in-fact rule may not apply in all situations.  For example, other cases have determined that a “loss” occurs when the physical damage first manifests itself or becomes apparent.

Texas insurance lawyers need to know what an insured’s duties are after a loss.  One of the most common homeowners policies for Texas home owners is an HOB policy.  The HOB policy requires that the insured cooperate with the insurer’s investigation of the claim by promptly submitting notice of the claim, completing an inventory of the damaged property, providing access to the damaged property and records, and signing a sworn proof of loss form.  These requirements on the insured constitute a condition precedent to coverage under the policy according to our 5th Circuit in the 1999 opinion styled, Griggs v. State Farm Lloyds.

In Griggs, the court stated that absent the insured’s compliance with the conditions precedent to coverage, the insurance company has no duty to provide benefits under the contract.

HOB Policy language is this:

When two elements combine to cause damage, one being covered and the other not covered, issues arise regarding whether the loss is covered, and who bears the burden of proof to allocate causation between the covered cause and the excluded cause.

Courts have held that the insurance company will only be liable for that portion of the damage that was caused by a covered event.  In the 1999, San Antonio Court of Appeals opinion, Wallis v. United Services Automobile Association, the court noted that a “straight Balandran analysis” would not apply in a situation involving multiple causes.  Thus, as a practical matter, the practitioner must evaluate the claim underlying any lawsuit to determine if it involves allegations of damage allegedly attributable to multiple causes or simply one peril deemed to have caused the entire loss.

When covered and excluded perils combine to cause an injury, the Texas Supreme Court has held that the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage.  This is seen in the 1993 opinion, Lyons v. Millers Casualty Insurance opinion and in the 1965 opinion, Paulson v. Fire Insurance Exchange opinion.

News from Law 360.  While some Texas lawyers are encouraging property owners to quickly lodge claims for Hurricane Harvey damage before a new state property insurance law takes effect on Friday, the reality is that the potential downsides of the legislation — including a lower interest rate on successful lawsuits against insurers — don’t warrant such swift filings, several attorneys told Law360.

Starting at the beginning of the week, a slew of law firms began to issue alerts on social media platforms recommending that homeowners and business owners file claims for Harvey losses with their insurers prior to the Friday effective date of House Bill 1774, which Gov. Greg Abbott signed into law in May.  Among other things, the law reduces from 18 percent to about 10 percent the amount of prejudgment interest an insurer must pay if it is found to have delayed payment on or wrongfully denied a meritorious claim.

Opponents of HB 1774 say the law scales back important deterrents for insurers to comply with statutory deadlines for responding to and paying claims for losses tied to natural disasters.  As such, some attorneys say, property owners would be well-served to file Harvey claims before the new law takes effect, so that if those claims wind up in litigation down the road, they will still be subject to current law.