Delay In Paying A Claim

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.
Under the “Property Covered” section, the Policy provides coverage for “Property in Vehicles,” defined as “direct physical loss caused by a covered peril to property of others described on the ‘schedule of coverages’ while in due course of ‘transit’ including loading and unloading.” The parties did not dispute that theft is a “covered peril.” The Policy also provides that all of Rowland’s terminals must be “100% fenced, gated, locked and lighted 24 hours per day, 7 days per week,” or else the “[c]overage is null and void.” The Policy had a limit of $300,000, and included a $2,500 deductible.
Following the theft, Rowland filed a claim with Alterra. Alterra investigated the loss and determined that the thieves entered and left the property by cutting a hole in the fencing along the eastern perimeter of the Dallas terminal. However, Alterra ultimately denied the claim because it discovered that there were gaps in the fence along the southern and western perimeters in violation of the Policy’s fencing provision.
Rowland subsequently filed this lawsuit alleging negligence, breach of contract, and violations of the Texas Insurance Code and the Texas DTPA. The parties filed cross Motions for Summary Judgment. The district court entered summary judgment in Rowland’s favor, and it ordered Alterra to pay the claim plus 18% interest per year in damages.
Alterra claims that the court erroneously ordered Alterra to pay an 18% penalty to Rowland, in addition to the amount of the claim and that the district court improperly calculated the date from which the interest would accrue. The Texas Prompt Payment of Claims says that in the event an insurance carrier fails to meet its obligations under the statute, such as by refusing to timely pay a valid claim, the claimant is entitled to 18% interest as damages. By its terms, the Prompt Payment Statute only applies to first-party claims. Alterra argues that Rowland’s claim is a third-party claim, so the statute does not apply.
The Prompt Payment Statute does not define first-party claims, but Texas law distinguishes between first-party and third-party claims “based on the claimant’s relationship to the loss.” In a first-party claim, the insured “seeks recovery for the insured’s own loss”; in a third-party claim, the insured “seeks coverage for injuries to a third party.” Because a bailee has an insurable interest in the bailed goods insurance claims to recover for losses to the bailed goods are first-party claims. Rowland’s claim is a first-party claim because Rowland has an insured interest in the game consoles. Thus, the Prompt Payment Statute applies.
Alterra also claims that the court’s imposition of the penalty with an accrual date of April 11, 2011, was improper because it claims that it was not presented with proof of the value of the stolen cargo until March 15, 2013. Rowland contends that the accrual date of April 11, 2011, was appropriate because Alterra had sixty days from when Alterra issued its February 9, 2011 report to pay the claim, and Alterra’s own report showed that the loss exceeded the $300,000 policy limit. Since Alterra was fully aware that the loss exceeded the policy limit as of April 11, 2011, this court found that the district court did not abuse its discretion in awarding prejudgment interest accruing as of that date.