Interpreting An Insurance Policy

What Is An Insurable Interest?

March 15, 2018 | Mark S. Humphreys

An “insurable interest” exists when the insured derives a pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain a pecuniary loss from its destruction, according to the 1993, Dallas Court of Appeals opinion, Jones v. Texas Pacific Indemnity Co.

In the 1986, Tyler Court of Appeals opinion, Thompson v. Trinity Universal Insurance Co., the sole owner of a corporation that was a holding company for business interests who suffered a pecuniary loss from the destruction of a building owned by the corporation has an insurable interest in the building.

In the 1985, San Antonio Court of Appeals opinion, St. Paul Fire & Marine Insurance Co. v. Daughtry, the owner of a house offered the house to a house mover, as long as he could remove it by December 31, 1982. The owner also gave the insured a letter permitting him to move it after January 1, 1983, if the mover failed to exercise his option. Before the mover’s option expired, the insured applied for a “builder’s risk” policy on the house, and the insured’s agent issued a binder on the policy. A fire destroyed the house on December 21, 1982. The court held that the insured did not have an insurable interest in the property, as he suffered no pecuniary loss as a result of the destruction of the property.

Commercial Property Insurance

March 11, 2018 | Mark S. Humphreys

Commercial property insurance includes all forms of insurance covering property loss exposures of both business and non-profit organizations. The most common commercial property coverages are provided under standard forms developed by Insurance Services Office, Inc. (ISO) or the American Association of Insurance Services (AAIS). In many instances, an organization’s property is provided through “package policy.” A package policy ordinarily provides different types of coverage (e.g., property insurance and liability insurance). A monoline policy, in contrast, provides only one distinct type of coverage. The most common form of commercial property insurance is the Commercial Package Policy printed by ISO since 1986. Commercial property insurance can consist of:

Building and contents insurance which provides coverage on insured building and the property contained in the buildings.
Machinery insurance covers steam boilers, pressure vessels, and various types of machinery such as air conditioning equipment, air compressors, turbines and all types of production machines.

Punitive Damages And Auto Policy

January 6, 2018 | Mark S. Humphreys

Dallas and Fort Worth area insurance lawyers need to read this November, 2017, opinion from the San Antonio Court of Appeals. It is styled, Farmers Texas County Mutual Insurance Company v. Zuniga.

Zuniga was walking to school and struck by a car driven by Christopher Medina. Zuniga sued Medina for negligence and gross negligence. A jury awarded Zuniga $93,244.91 in actual damages and $75,000.00 in punitive damages. Farmers insured Medina and paid the actual damages but then filed a declaratory judgment action seeking a declaration that the policy did not cover punitive damages.

Zuniga filed a motion for summary judgment on the punitive damages issue. Farmers prevailed in this case.

Responsibility Of Insureds

December 7, 2017 | Mark S. Humphreys

An insurance contract will impose conditions on the insured person or entity. For example, most policies require that the insured give notice of the claim and cooperate with the insurance company. Policies may require that the insured file a formal proof of loss, if the insurer requests one. When one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligations to perform. In the 1994, Texas Supreme Court opinion, Hernandez v. Gulf Group Lloyds, the court said that the breach be “material.” The court explained stating:

In determining the materiality of a breach, courts will consider, among other things, the extent to which the non-breaching party will be deprived of the benefit that it could have reasonably anticipated from full performance … The less the non-breaching party is deprived of the expected benefit, the less material the breach ….

The other factors courts consider in determining the materiality of a breach are: (1) the extent to which the injured party can be adequately compensated for the part of that breach of which he will be deprived; (2) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (3) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (4) the extent to whic the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Auto Policy And Punitive Damages

November 11, 2017 | Mark S. Humphreys

Lawyers handling car wreck cases would be especially interested in this 2017 opinion from the Texas Supreme Court. It is styled, Farmers Texas County Mutual Insurance Company v. Jennifer L. Zuniga et al.

This is an appeal from the granting of a summary judgment in favor of Zuniga wherein Farmers had asked the court to rule that there is no coverage under the policy at issue for punitive damages. This Court reversed that summary judgment.

Determining whether exemplary damages for gross negligence are insurable requires a two-step analysis. First, the Court decides whether the plain language of the policy covers exemplary damages sought in the underlying suit against the insured. Second, if the Court concludes that the policy provides coverage, it determines whether the public policy of Texas allows or prohibits coverage in the circumstances of the underlying suit.

Home Owners Policy – Rebuild Costs

November 9, 2017 | Mark S. Humphreys

The San Antonio Division, Western District, issued an opinion dealing with rebuild costs under a homeowners policy that insurance attorneys need to read. It is styled, Kirk McClelland and Tamre McClelland v. Chubb Lloyd’s Insurance Company of Texas, and Robert Lynn Pritchard.

This is a dispute over coverage and the conduct of Chubb in its payments totaling $145,290.72 to the McClellands. The McClellands assert they are entitled to greater amounts and sued Chubb and its adjuster for breach of contract and various violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. The Court granted summary judgment in favor of Chubb and the McClellands seek to alter that judgment. The course refused to alter the judgment.

The background facts are summarized as follows. The McClellands garage apartment was destroyed by fire. Chubb insured the property under a “Texas Standard Homeowners Endorsement” as well as a “Texas Platinum Homeowner’s Endorsement.” Their extended policy limits allowed for “reconstruction cost even if this amount exceeds the limit of liability for your dwelling or other structures as shown on the declarations page.” The Platinum Endorsement defined “reconstruction cost”:

Disability Policy Language

October 28, 2017 | Mark S. Humphreys

As in all insurance policies, the language used in the policy will be used in enforcing and interpreting the policy.

In the 2003, Texas Supreme Court opinion, Provident Life and Accident Insurance Co. v. Knott, the court read the policies in question defining the term “total disability” to mean that the insured must, in order to be considered totally disabled under the policies, be unable to “perform all of the important daily duties of his occupation.” The then held that the trial court’s granting of summary judgment in favor of the insurance company was appropriate given that the insured, a gynecologist seeking benefits for total disability under those policies was able to see patients, perform surgery, consult with other physicians and perform administrative duties.

A long term disability policy that defined disability in part as the inability to perform “each of the material duties” of the insured’s regular occupation required only that the insured be unable to perform any single material duty of her occupation in order to be considered disabled, not that she be unable to perform all duties of that occupation. This was in the 2002, U.S. 5th Circuit opinion, Lain v. UNUM Life Insurance Co. of America. No concrete evidence disability insurer’s determination of non-disability for insured who suffered recurring severe chest pains, while overwhelming evidence supported disability claim, warranting benefit award under ERISA civil enforcement provision: the insured’s time at home doing research on her medical condition did not equate to ability to practice law, as insurer contended; insurer focused on certain “normal” test results to support its finding, but test results were primarily abnormal and also could not clinically measure insured’s pain; and insurer’s reliance on insured’s failure to seek psychiatric care prior to ceasing employment was misguided since her disability was physical.

Notice Of Replacement Vehicles

October 1, 2017 | Mark S. Humphreys

Insurance attorneys need to read an August 2017, opinion from the 14th Court of Appeals. It is styled, Tiffany Falkenhagen Thompson v. Geico Insurance Agency, Inc.

Texas Personal Automobile Policy’s require the policyholder to notify the insurer of the policyholder’s acquisition of a replacement vehicle for the coverage to extend to damage to the newly acquired vehicle. This case is presented on cross motions for summary judgment regarding the notification requirement in the policy. Tiffany says the policy provision does not apply to leased vehicles or alternatively, the policy language is ambiguous. Geico says they were not timely notified of the replacement vehicle and thus, there is no coverage. The trial court ruled in favor of Geico and this appeals court upholds that ruling.

Tiffany owned a 201 Infiniti G37 auto and secured insurance from Geico. She traded in the G37 and leased a 2015 Infiniti Q50 auto. A few months later while driving the Q50, Tiffany was involved in an accident.

When Is An Appraisal Waived By The Insurer?

September 28, 2017 | Mark S. Humphreys

Insurance lawyers who handle home owners claims need to read this opinion from the 14th Court of Appeals. It is styled, Ron Pounds v. Liberty Lloyds of Texas Insurance Company.

This case concerns whether an insurer waived appraisal of a homeowner’s insurance claim by denying it. A summary judgment in favor of Liberty was granted by the trial court.

The facts in this case are undisputed. Pounds purchased a home insurance policy from Liberty. The policy covered damage caused by wind and or hail.

Concurrent Causation And The Insurance Code

September 2, 2017 | Mark S. Humphreys

When two events 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. In the San Antonio Court of Appeals case, Wallis v. United Serv. Auto. Assoc., the court held that the insurance company will only be liable for that portion of the damage that was caused by a covered event.

When the covered and excluded perils combine to cause 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 damages.

Generally, courts have held that if a loss occurs as a result of two concurring perils, one insured and one not, then the loss is covered only to the extent that it can be traced to the covered peril. Expert testimony allocating damage between covered and excluded causes may satisfy this burden of proof, according the United States 5th Circuit, in Fiess v. State Farm Lloyds.