Home Owners Policies

Homeowners Insurance – Accident Or Intentional?

February 12, 2017 | Mark S. Humphreys

Lawyers in Mason Texas who handle insurance claims know that many accidents are covered by a persons’ homeowners insurance. But, intentional acts are not covered. The Claims Journal published an article discussing this issue in January 2017. The title of the article is, No Homeowner Liability Coverage For an Insured’s Negligent Assault, Even If Insured Was Intoxicated.

Nicholas Fiocchi sued Ronald Zatyco for assaulting him after a verbal argument between them at a bar earlier the same evening. Fiocchi’s complaint attempted by artful pleading to capture Zatyco’s parents’ homeowners coverage, alleging that the assault was made “negligently” and “without provocation,” but offering no other factual detail. In fact, the complaint was limited to just four paragraphs and, significantly, did not allege that Zatyco consumed any alcohol, was intoxicated or in any way cognitively impaired at the time of the assault.

Zatyco asked his parents’ homeowners insurer, Nationwide Property & Casualty, to defend and indemnify him against Fiocchi’s claim. Nationwide defended Zatyco under a reservation of rights but refused to agree to indemnify him. Instead, Nationwide brought its own lawsuit against Zatyco federal court to support a denial of all coverage for the claim.

Property Damage Claims

January 31, 2017 | Mark S. Humphreys

The Insurance Journal has published an article that insurance lawyers and anybody who has property insurance needs to pay attention to. The article is titled, Battle Over Property Claims And Litigation In Texas Set To Continue In 2017.

If a Dec. 1, 2016, hearing is any indication, Texas lawmakers will be encouraged in the coming legislative session to take up what the property/casualty insurance industry claims to be a problematic trend following sever weather-related events in the state: increased attorney and public adjuster involvement in residential property damage claims.

The Texas House of Representatives, Insurance Committee heard testimony from invited speakers about the preliminary results of a Texas Department of Insurance (TDI) study aimed at gathering information on residential property claims and any resulting litigation. The legislature had asked TDI to study whether the data showed a trend of increased public adjuster or increased attorney involvement and, if so, to identify what impact such a trend might have on the property insurance market in the state. This writer would argue that whether or not there is such a trend, it would be important to know what is the cause of the trend, i.e., impropriety on the part of the insurance companies or on the part of public adjusters or on the part of attorneys.

Definition Of Residence Premises In Homeowners Policy

January 24, 2017 | Mark S. Humphreys

For lawyers handling homeowners claims, a 14th Court of Appeals opinion needs to be read. The case is styled, American Risk Insurance Company, Inc. v. Veronika Serpikova.

Veronika purchased a house in Houston (the Property). She purchased a policy to insure the house from American. At first, Veronika and her husband lived in the house but in May 2012, they moved to another location. They leased the Property to two tenants, and did not move back into the Property.

On September 6, 2012, a renewal homeowner’s insurance policy became effective. American issued the policy and Veronika was the named insured. In November 2012, a fire severely damaged the Property. Veronika made a claim and it was denied. The denial was based on the fact that Veronika did not reside at the Property at the time of the loss and thus, the Property did not fall within the Policy’s definition of “residence premises” as required for dwelling coverage under the Policy.

Properly Suing The Adjuster

December 24, 2016 | Mark S. Humphreys

Insurance lawyers will usually attempt to keep their clients cases in State Court rather than Federal Court. Trying to do so and being successful at doing it are two different matters. Here is a case where it was successful. It is a Southern District, Houston Division opinion. The case is styled, Marcus Richard, et al v. Geovera Specialty Insurance Company, et al.

Plaintiffs allege in essence that there was a leak and water overflow from the plumbing system within their home that caused significant damage to walls, flooring, windows, and balcony of the home, as well as damage to Plaintiffs’ personal belongings and contents of the home. Plaintiffs allege they submitted a claim under their policy with Geovera and that the adjusters handling the claim were inadequately and/or improperly trained and supervised, and failed to perform a thorough and reasonable investigation.

A lawsuit was filed in State Court and promptly removed to Federal Court by the Defendants. The Defendants claim the removal was proper pursuant to diversity jurisdiction, 28 U.S.C. Sections 1332(a), 1441(a), and 1446. The Defendants allege that the adjuster were improperly joined in an effort to defeat diversity jurisdiction. This Federal Court ultimately ruled in favor of Plaintiffs.

Homeowner’s Policy And Intentional Act

December 17, 2016 | Mark S. Humphreys

Insurance lawyers in Brock Texas need to understand what a homeowners policy covers and what it does not cover. A 1997, United States 5th Circuit opinion lets us know one of the occurrences not covered. The style of the opinion is, State Farm Fire & Casualty Company v. Fullerton.

Fullerton killed his wife and step daughter. His motive was never explained. He immediately called to the sheriff’s department and turned himself in. Based on advice of his attorney, Fullerton pleaded guilty to the lesser offense of simple murder. The Court sentenced him to life in prison. The heirs of two of the victims brought a wrongful death action against Fullerton in state court. At the time of the shooting, Fullerton held a homeowners policy that provided coverage for, among other things, personal liability for bodily injuries. In general, the policy covered injuries “caused by an occurrence” and defined an “occurrence” as “an accident, including exposure to conditions, which results in bodily injury … during the policy period.” It excluded, however, injuries caused intentionally by or at the direction of the insured.

State Farm provided Fullerton with a defense under a reservation of rights and filed a declaratory judgment action. Fullerton himself did not answer the suit. He stated by affidavit: “I do not believe that insurance coverage exists for these claims because any action taken by me was intentional and intended to cause harm” to his wife and step daughter. The Court granted the defendant’s motion to appoint a guardian ad litem. State Farm moved for summary judgment on the theory that Fullerton’s conviction collaterally estopped the heirs from litigating Fullerton’s intent and that the evidence that Fullerton shot his wife and Jones intentionally left no genuine issue of material fact. The trial court denied the motion for summary judgment. At trial, the jury found that the killings were unintentional. State Farm appealed.

Duty To Defend

December 15, 2016 | Mark S. Humphreys

When a Texas homeowner is being sued by someone, will the homeowner’s policy defend against the lawsuit. This is a good question and a 1998, Houston Court of Appeals [1st Dist.] opinion gives some insight to the answer. The case is styled, Freedman v. Cigna Insurance Company.

The Freedmans sold their house in 1990 to Marx. After buying the house, Marx noticed the roof leaked. In 1992, a portion of the roof collapsed. Marx sued the Freedmans for not disclosing the problems with the roof asserting causes of action for fraud, DTPA violations, negligence and fraud in a real estate transaction. The Freedmans asked their insurers, Cigna and ICNA, to defend them. The insurers refused to defend the Freedmans. The Freedmans eventually settle with Marx and then sued Cigna and ICNA claiming the insurers breached their contracts by not defending the Freedmans and not indemnifying the Freedmans from the resulting liability. The Freedmans also asserted a cause of action for violations of the Tex. Ins. Code. The trial court granted Cigna and ICNA a summary judgement. The Freedmans appealed.

The judgment of the trial court was affirmed by this Court of Appeals. An “occurrence” is defined as an accident, including exposure to conditions, resulting in the bodily injury or property damage during the policy period. As a matter of law, fraudulent promises, misrepresentations, and untrue statements do not fall within the plain meaning of the definition of occurrence. Marx sued the Freedmans not for the roof collapse, but rather for the Freedmans misrepresentations about the condition of the roof. Marx alleged the Freedmans represented that the roof was seven years old and needed no repairs, and that they took affirmative steps to conceal the roof’s defects. On the face of the pleadings, Marx was suing the Freedmans for intentional acts, not an “accident.” The trial court correctly granted the insurers’ summary judgement.

Kids Pranks And Homeowners Policies

December 13, 2016 | Mark S. Humphreys

Graford insurance attorneys will eventually see something that happened in an Eastland Court of Appeals opinion. It is a 2005 opinion, styled Curb v. Texas Farmers Insurance Company.

A high school sophomore and a friend strung fishing line ankle-high across a courtyard area of the school. They intended to lure their friends to the area but became distracted and allegedly “forgot” about the fishing line. The following evening a teacher walked through the area, tripped over the line, was injured in the resulting fall, and then subsequently filed suit against the pranksters. She was awarded $55,000 in damages “resulting from Defendants’ negligent acts.” The insurer initially provided a defense but later withdrew it believing the claims were not covered under one prankster’s parent’s homeowner’s policy. The student filed this suit against his father’s homeowner’s insurer, alleging that the insurer’s refusal to defend the insured in the underlying tort action violated the Texas DTPA and constituted a breach of contract. The insurer counterclaimed, seeking a declaration that it had no duty to defend or indemnify the insured. The trail court held that because the underlying suit was based on intentional acts, which were excluded from coverage under the insured’s homeowner’s policy, the insurer’s duty to defend was not triggered. The court granted summary judgment in favor of the insurer and appeal followed.

The Eastland Court of Appeals affirmed, finding that a homeowner’s insurer had no duty to provide coverage for a personal injury lawsuit arising from a misdirected high school prank. The court addressed the duty to defend under an “eight corners” analysis noting that the petition expressly claimed that the boys “intentionally” strung the fishing line. While the petition also alleged “negligence,” the court ruled that factual allegations rather than legal theories were the focus in determining whether the duty to defend existed. Here, “the origin of the damages was the intentional behavior” and not an “accident” and, thus, not an “occurrence” under the policy. Addressing the duty to indemnify, and despite the underlying negligence finding, the court noted that the actions resulting in the damages were intentional: “When a result is the natural and probable consequence of an act or course of action, it is not produced by accidental means. The natural result of an act is the result that ordinarily follows, maybe reasonably anticipated, and ought to be expected.” Therefore, the insurer had no duty to defend or to indemnify the insured.

Coverage For Innocent Spouse?

December 8, 2016 | Mark S. Humphreys

Insurance attorneys in the Dallas and Fort Worth area will eventually find themselves in a situation like that presented in a 1999, Texas Supreme Court case. The case is styled, Texas Farmers Insurance Company v. Murphy.

Mr. Murphy obtained homeowners insurance with Texas Farmers in 1993. Seven days later the home was ransacked and intentionally burned down. Mr. Murphy submitted a proof of loss claiming $115,000 for damage to the structure and $69,000 for damage to personal property.

Texas Farmers filed a declaratory judgment action seeking a determination that it need not pay the insurance because Mr. Murphy had set or caused the fire to be set. While the action was pending, Mrs. Murphy filed for divorce and obtained a partition of one-half interest in claims against Texas Farmers.

Exclusions In Homeowners Policies

August 4, 2016 | Mark S. Humphreys

Fort Worth insurance attorneys will advise their clients to carefully read the exclusions in their homeowners policy. A 2006, Houston Court of Appeals [14th Dist.] case illustrates why. The opinion is styled, Fire Insurance Exchange v. Sullivan.
The insured brought suit against Fire Insurance Exchange for breach of contract, bad faith, violations of the DTPA and the Texas Insurance Code. A pipe in the attic had burst at the home of the insured, to which the carrier’s claims adjuster assessed the repairs at $2,944.75. The insured obtained a second estimate which was an additional $5,000. The insured hired an attorney who sent a written claim to the carrier, and after claiming they did not receive a satisfactory response from the carrier, the insured hired a contractor. The contractor found several additional leaks, which the insured reported to the carrier. The carrier assigned a second claims adjuster who concluded nearly the entire house had mold growth. Subsequently, the carrier issued two checks to the insured, totaling $82,430.57. The insured was unsatisfied with this amount and brought suit alleging the delay and mishandling of the claims by the carrier resulted in the deterioration of the home. In the trial court, the jury found that the carrier had breached the dwelling coverage portion of the policy, but not the personal property and additional living expenses coverage provisions. However, the jury awarded costs for mold remediation and repair of the home, as well as property damage. Ultimately, the trial court concluded that the insured was entitled to: (1) recover damages on the breach of contract and DTPA claims; (2) recover penalty under the Prompt Payment of Claims Act; and recover reasonable attorney fees. The trial court awarded $85,864.78 in total damages. The carrier appealed.
This Court reversed the trial court judgment in favor of the insured and rendered judgment that the insured take nothing on the claims against the carrier. The court improperly disregarded the jury’s finding that accidental leakage or discharge caused only 45% of cost of mold remediation; the trial court should have disregarded the jury finding on cost to clean or replace personal property since the policy provided no coverage for that loss; the cost to remediate damage to personal property could not be awarded to insureds under the DTPA or the Prompt Payment of Claims Act; any liability for interest stopped when the insurer tendered more than the amount it owed prior to trial; the insureds could not recover attorney fees on claims for breach of contract or DTPA; and the parties stipulation limited liability for attorney fees to 40% of interest. The potential total liability of carrier to the insured was $64,534.50, which was less than the amount the carrier had previously tendered to the insured. The court also noted that the jury did not find that the carrier breached the personal property portion of the policy and failed to attribute any cause of the damage to the covered causes. Therefore, the jury’s award for damages for that breach under the Prompt Payment Act should have been disregarded. Finally, the court found that the carrier’s unconditional payments should have been applied before assessing attorney’s fees and interest.

Vacancy Clause In Homeowners Policy

June 5, 2016 | Mark S. Humphreys

Colleyville insurance lawyers should be able to discuss “vacancy” clauses in homeowners policies. A 1997, San Antonio Court of Appeals case discusses the vacancy clause found in a USAA homeowners policy. The style of the case is Lynn v. USAA Casualty Insurance Company.
Mr. and Mrs. Lynn’s country home was insured by USAA. The house was completely destroyed by fire and USAA denied coverage based on vacancy and arson. The Lynn’s brought suit against USAA for breach of contract and breach of duty of good faith and fair dealing. The trial court granted USAA’s Motion for Summary Judgement and this court affirmed the ruling.
Although there were some contents in the house six months before the fire, the testimony established that the house was vacant when it burned. The Court of Appeals stated that the house was “without contents of substantial utility” due to the lack of heating equipment, air conditioning, appliances, sleeping accommodations or efforts to preserve the contents for several months. Therefore, the “vacancy” clause precluded recovery. Furthermore, although the illegal acts (such as arson) of a co-insured do not bar recovery under an insurance policy, the “vacancy” clause, on the other hand, does not have a limitation for who “caused” or was aware of the “vacancy.” The clause excludes coverage regardless of the innocent spouse’s knowledge of the “vacancy.” Finally, a bad faith claim is established by showing that the insurer had no reasonable basis for denying the claim or that the insurer failed to investigate. In this case, USAA was justified in denying the claim under the “vacancy” clause. Therefore, there was no bad faith.