Interpreting An Insurance Policy

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.

What Is An “Occurrence” In An Insurance Policy?

July 26, 2016 | Mark S. Humphreys

Arlington insurance lawyers need to understand the definition of “occurrence” as used in an insurance policy. A 1998, San Antonio Court of Appeals opinion lends some insight into how the Courts look at that definition. The opinion is styled, Foust v. Ranger Insurance Company.

In 1994, Foust farmed various tracts of land which abutted land owned and farmed by Walters Farms. In May 1994, Walters Farms retained Lindeman to crop dust the milo crop on its property. The herbicide used is dangerous to cotton. Some of the herbicide drifted from the target area on to various tracts of land being farmed by Foust, causing severe damage to Foust’ cotton crop. Foust sued Lindeman, Walters Farms and the manufacturer of the herbicide for loss of income suffered as a result of the damaged cotton crop.

Ranger insured Lindeman under an aircraft insurance policy which had limits of $100,000 per occurrence and $200,000 per policy. Ranger provide Lindeman a defense in the underlying litigation and instituted this declaratory judgment action to determine whether the damages arose from a single occurrence or multiple occurrences under the terms of the policy. The trial court granted Ranger’s Motion for Summary Judgment finding, as a matter of law, that Lindeman’s application of the herbicide on May 14, 1994, amounted to a single occurrence under the terms of the Ranger policy.

Knowledge Of Policy And The Law

July 24, 2016 | Mark S. Humphreys

Irving insurance attorneys know that an insured is responsible for knowing what is in their policy. Courts have also ruled that insureds are responsible for knowledge of certain areas of the law. A Federal, Galveston Division opinion is a good read to understand this imputed knowledge. The opinion is styled, Danuta Lobeck v. Tina M. Licatino, et al.

The basic premise of each of Lobeck’s claims, when considered under relevant law, makes any lengthy summary of the facts in the light most favorable to Lobeck a waste of time. In a nutshell, Lobeck bought property that, unknown to her, was located within the boundaries of the Coastal Barrier Resources System. Lobeck’s mortgage loan required her to maintain flood insurance on the property so she innocently procured an SFIP through these Defendants. The policy was subsequently reissued and then renewed the following year. During the renewal year Hurricane Ike completely destroyed the building on the property and only then was Lobeck informed that her policy was void and had never afforded coverage. She received nothing for her property damage. Consequently, Lobeck filed suit against, inter alios, these Defendants alleging that they knew or should have known that the property was ineligible for flood insurance under the NFIP, that the policy was void when issued, and that the policy offered absolutely no coverage. According to Lobeck, the express and implicit misrepresentations of these Defendants, upon which she ignorantly, but reasonably relied, caused her losses.

The United States Supreme Court held that all citizens are charged with the knowledge of the law regarding federal insurance programs, like the NFIP. The Supreme Court has held that citizens seeking to benefit from a federal benefit program, like the NFIP, are charged with familiarizing themselves with the requirements of that program “and may not rely on the conduct of government agents contrary to the law.” The Fifth Circuit declared that a prospective SFIP holder cannot rely on a WYO’s representations to determine a property’s SFIP insurability, but instead has his own duty to determine whether its location in the CBRS disqualifies it. The Court has held that under this reasoning any reliance by a Plaintiff on misrepresentations of private insurance agents regarding the scope of coverage afforded by an SFIP are unreasonable as a matter of law and, therefore, cannot raise a genuine issue of material fact to avoid summary judgment.

Is Your Child Covered Under Your Policy?

July 5, 2016 | Mark S. Humphreys

Insurance attorneys in Dallas and Fort Worth need to be able to give advise on the above question. An Austin Division, Western District case is a good read for attorneys. The style of the case is, State Farm Fire and Casualty Company v. Clayton J. Neuman.

Clayton Neuman was the driver of a car that crashed on November 11, 2011. A passenger in the car, Ellis McClane was killed. Neuman sought coverage under the umbrella policy that Neuman’s parents had with State Farm. State Farm filed this Declaratory Judgment action to determine whether or not they had any responsibility under the policy.

The policy had been issued to Grover and Laura Neuman in September of 2009. The policy provides coverage for to “insureds” and defines “insureds” as “you or your relatives whose primary residence is your household.”

Federal Court – Paying Attention To Detail

May 31, 2016 | Mark S. Humphreys

Insurance lawyers in the Dallas and Fort Worth areas can tell you that paying attention to detail is most important. A McAllen Division opinion illustrates this point. The style of the case is, Mark Dizdar et al v. State Farm Lloyds, et al.

Mark Dizdar, et al (Plaintiffs’) claims arise from damage sustained to their property as a result of an alleged March 29, 2012 storm event in Hidalgo County, Texas. Shortly after the storm, Plaintiffs reported an insurance claim to State Farm for the damages sustained to their property.

Thereafter, Mr. Wallis inspected the property on behalf of State Farm on June 22, 2012, estimating the loss to the property at $8,654.13. Consequently, State Farm issued to Plaintiffs a payment of $4,955.60, after applying depreciation and deductible.

Use Of An Automobile

May 22, 2016 | Mark S. Humphreys

Dallas insurance lawyers understand that a key to being able to help a client is understanding how courts interpret insurance policies. A 14th Court of Appeals opinion gives some insight. The style of the case is, Farmers Insurance Exchange and Allstate County Mutual v. Rodriguez.

The following facts are undisputed. Using a trailer hitched to his pickup truck, Woodling transported a deer stand from his deer lease to his residence. He pulled into his driveway and attempted to remove the deer stand from the trailer. He pushed the deer stand out of the trailer until the legs on the stand touched the driveway. He left the stand resting at a 30-degree angle against the trailer. He then attached a come-along 2 to a fence post and to the stand and attempted to raise the stand upright. Realizing he could not accomplish the task alone, he requested assistance from his neighbor, Rodriguez.

Rodriguez and Woodling decided to lift the stand manually by walking forward out of the trailer and onto the driveway. They began in the trailer, each using both hands to push the stand upward. Then they stepped onto the driveway and took “one or two” more steps. When the stand was no longer touching the trailer, Woodling realized it was too heavy and yelled, “Juan, I can’t hold it. Jump.” Woodling then jumped away, leaving Rodriguez alone to hold the stand, which weighed approximately 350 pounds. The stand fell, and Rodriguez was injured.

The Eight Corners Rule In Insurance Law

May 17, 2016 | Mark S. Humphreys

The “Eight Corners Rule” is unique to insurance law. Dallas / Fort Worth insurance lawyers should be able to explain this rule to their clients. A 2016, Fourteenth Court of Appeals opinion explains the law related to this rule. The style of the case is, Allstate County Mutual Insurance Company v. Bobby Wootten and Mary Wootten, D/B/A Wootton Construction and is an appeal from the 434th Judicial District Court.

In the Policy at issue, Allstate promised to defend and indemnify the Woottons. The duty to defend is distinct from, and broader than, the duty to indemnify. An insurer must defend its insured if a plaintiff’s factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured. Thus, an insurer may have a duty to defend but, in the long run, no obligation to indemnify.

In determining whether an insurer has a duty to defend its insured, Texas courts follow the eight-corners rule, also known as the complaint-allegation rule, which the Supreme Court of Texas has described as follows: An insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations. Thus, even if the allegations are groundless, false, or fraudulent the insurer is obligated to defend. In making the duty-to-defend determination, the court must resolve all doubts regarding the duty to defend in favor of the existence of a duty, and the court will construe the pleadings liberally. If the petition does not contain factual allegations sufficient to clearly bring the underlying case within or without the coverage, the general rule is that the insurer is obligated to defend if the petition potentially includes a claim that falls within the coverage of the policy. The duty to defend is not affected by facts ascertained before suit or developed in the course of litigation, or by the ultimate outcome of the suit. In applying the eight-corners rule, courts may not read facts into the pleadings or look outside the pleadings; but, the eight- corners rule does not require the court to ignore the inferences that logically flow from the facts alleged in the petition. If a petition potentially includes a covered claim, the insurer must defend the entire suit. With this legal standard in mind, the courts then turn to the language of the Policy.

Insurance And Hunting

May 14, 2016 | Mark S. Humphreys

Texas insurance lawyers, with the prevalence of hunting in the state, may see a situation where hunting needs to be defined. A 1989, Corpus Christi Court of Appeals case addressed this issue in an opinion. The opinion is styled, Warrilow v. Norrell.

In that case three hunting friends, Norrell, Kerr, and Wolfe, had been on a deer hunting trip in Colorado. Upon arriving, the three men rented a four-wheel drive vehicle from a local resident for easy transport to and from the hunting fields. On the last day of the hunt, Norrell shot a deer and secured it to the vehicle, while Kerr did not. To take advantage of the last few hours of the hunt, Norrell suggested that Kerr keep his holster and fully loaded pistol handy in case they spotted a deer on the way to return the vehicle.

On the way to return the vehicle, the left rear tire went flat, and the three hunters exited the vehicle to change the tire. To assist in the operation, Kerr removed his belt and moved to set his holster on the ground. Tragically, he dropped the pistol, which then discharged and hit Norrell in the left temple. Norrell died almost a week later. Norrell’s family first brought suit agains the pistol manufacturer, Ruger, on product defect theories. Ruger then made Kerr a third-party defendant and sought contribution. Kerr’s homeowners insurer, Foremost, provided a defense and also tendered its $50,000 limits in contribution to Ruger. The Norrell’s next brought suit directly against Kerr.

When Your Own Insurance Finds You At Fault

April 30, 2016 | Mark S. Humphreys

Farmers Branch insurance lawyers will have a client walk in and say that their own insurance company has found them at fault for an accident and paid the other party. What can be done? A Dallas Court of Appeals case gives some insight. The style of the case is, Van K. Martin v. State Farm Mutual Automobile Insurance Company.

This is an appeal from a declaratory judgment action and an appeal from an adverse finding in a summary judgment.

Martin’s son was involved in an auto accident with another State Farm insured, Jeffery Lonsdale. No one was injured in the accident, but Lonsdale filed a claim for property damage, which was submitted to State Farm under Part A of Martin’s liability policy. Martin filed a claim for property damage to his vehicle under Part D of the policy. State Farm settled Lonsdale’s claim and provided coverage for the property damage to Martin’s vehicle. Martin alleges that State Farm unreasonably concluded his son was primarily responsible for the accident without interviewing Martin’s son or other witnesses in the car. Martin alleges he paid the deductible to have his vehicle repaired and paid “incremental semi-annual premiums” related to the accident.

Making Home Owner Claims

March 20, 2016 | Mark S. Humphreys

Homeowner insurance policies can be difficult to interpret when it comes time to make a claim for benefits. This 5th Circuit Court of Appeals opinion provides some insight into how the courts review and interpret insurance policies. The case is styled Claudia Ayoub; Gerald C. Ayoub v. Chubb Lloyds Insurance Company of Texas.

The principal question presented in this dispute over a homeowner’s insurance policy is whether a section of the policy setting forth a “reconstruction cost less depreciation” standard for dwelling loss is a coverage provision, on which the insured has the burden of proof, or a limitation of liability provision, on which the insurer has the burden. The court also had to decide how insureds can prove market value under Texas law for personal items which may have no such thing. For the reasons discussed below, the court found that summary judgment in favor of the insurer was not warranted on either issue.

The Ayoubs’ own a home in El Paso. Prior to the loss in this case, it was worth in the neighborhood of $2 million. The home was insured under a “Texas Standard Homeowners Policy” issued by Chubb. Coverage A of the Policy insured the dwelling for up to $2,511,000. Coverage B insured personal property in the home for up to $1,506,600. At additional cost, the Ayoubs purchased replacement cost endorsements for both their dwelling and personal property.