It’s bad enough when private insurance companies mistreat life insurance beneficiaries but an April 2017, story from the Chicago Tribune shows that the U.S. Government does the same thing. The story is titled, USPS Agrees To $49 Million Settlement For ‘Dawdling” In Paying Life Insurance Beneficiaries.
It’s bad enough for family members when a loved one dies.
Getting cheated by Uncle Sam afterward makes it worse.
Life insurance lawyers know about Texas Insurance Code, Section 1103.151. Also known as the Texas Slayer Statute, it states:
A beneficiary of a life insurance policy or contract forfeits the beneficiary’s interest in the policy or contract if the beneficiary is a principle or an accomplice in wilfully bringing about the death of the insured.
Section 1103.152, goes on to say the proceeds of the policy go to the contingent beneficiary if there is one or goes goes to the estate if there is not.
Experienced insurance law lawyers in Hamilton, Texas, know the above is true. This obligation is illustrated in a 2017, hail damage claim opinion out of the Southern District, Houston Division. The opinion is styled, Metro Hospitality Partners, Ltd., d/b/a Crowne Plaza Hotel v. Lexington Insurance Company.
When a business sues its property insurer and the type of damage is clearly covered, the usual pattern is that the insurance company has failed to pay anything, has failed to pay anything close to what the insured claimed, or has taken too long to pay. This case is different. Here, the property insurer promptly adjusted the claim the insured presented and paid a large sum within the month after the hailstorm that damaged the insured’s hotel. The insurer identified and paid what it concluded were the remaining amounts owed about two months after that. The insured claimed that more money was owed. The insurer asked for documents and information substantiating the demand for additional payment. The insured refused. The policy required the insured to “cooperate” with the insurer. What we have here, says the insurer, is a failure to cooperate. What we have here, says the insured, is a breach of the insurance contract and of the duty of good faith and fair dealing.
After a hail storm, the insured, Metro, promptly notified its Lexington. Lexington quickly responded, inspected, and identified the amount of covered damage and the amount it owed. The parties disputed whether the hailstorm damage justified an insurer-paid new roof, or whether normal wear and tear made a new roof Metro’s responsibility.
Insurance lawyers need to understand how the Courts interpret insurance policies. The 1991, Texas Supreme Court opinion styled, National Union Fire Insurance Company of Pittsburgh, PA. v. Hudson Energy Company, Inc., is good reading on this subject.
On May 23, 1980, Hudson, the president of Hudson Energy purchased a Cessna P-120 from Johnny Walker, owner of Eastex Aviation. The plane was a single engine model equipped with dual controls. Hudson sought Walker’s help in obtaining insurance. Walker contacted Ragsdale, an employee of Cooper Aviation Insurance. Walker was the only one to have direct contact with Ragsdale. Hudson submitted an insurance application showing he was a student pilot. In a letter to Hudson dated June 10, 1980, Ragsdale explained that the quoted insurance premium was based on an understanding that Hudson was a private pilot and that such information was necessary before a policy could be issued. Hudson then completed a new application indicating he was a private pilot. An insurance binder from National Union was issued on May 30, 1980, and the policy was effective for one hear beginning May 23, 1980.
On July 13, 1980, Hudson, his flight instructor (Bishop) and a passenger flew the plane with both having control of the plane’s controls at various times. The plane crashed when landing while both Hudson and Bishop were attempting to operate the controls.
For Texas insurance lawyers, here is a new opinion from the Texas Supreme Court. It is styled, Menchaca v. Texas Lloyds.
This claim arises from an insured’s claim for losses sustained during Hurricane Ike. The insured sued USAA for (1) breach of contract and for (2) Unfair Settlement Practices under the Texas Insurance Code. As damages for both claims, the insured sought only policy benefits plus court costs and attorney’s fees. In evaluating the bad faith claims brought by the insured against USAA, the Supreme Court acknowledges that some of its previous decisions have created uncertainty in the law. As a result, this opinion is designed to put that uncertainty to rest as nearly as possible.
The primary issue is whether the insured can recover policy benefits based on jury findings that the insurer violation the Texas Insurance Code and that the violation resulted in the insured’s loss of benefits the insurer “should have paid” under the policy, even the jury also failed to find that the insurer failed to comply with its obligation under the policy. USAA argued that because the jury found there was no breach of contract, Menchaca could not recover for “bad faith” or extra-contractual liability as a matter of law. The Court disagreed with USAA and re-affirmed its holding in Vail v. Texas Farm Bureau Mut. Ins. Co., where the Court held that an insurer’s “unfair refusal to pay the insured’s claim causes damages as a matter of law in at least the amount of the policy benefits wrongfully withheld.”
What do Texas Courts do when a policy is ambiguous? Guidance on the answer is provided in a 2009, Texas Supreme Court opinion styled, Progressive County Mutual Insurance Company v. Regan Kelley.
Regan Kelley was struck by a car while riding her horse. Medical expenses for her injuries are alleged to exceed $1 million. After receiving $100,000 in benefits from the motorist’s insurer, Kelley made a claim with Progressive for underinsured benefits under a policy issued to her parents, which also covered Kelley. Progressive paid the policy limits of $500,025 to cover the remaining damages. Kelley then made a claim under an alleged second policy with a limit of $500,025, also issued by Progressive. At the time of the accident, Progressive insured five of the Kelleys’ vehicles. Four vehicles were listed on a two page document, and the fifth was listed on a separate two page document. However, the documents had separate policy numbers. Nevertheless, Progressive denied there was a second policy and refused to make any additional payments.
Kelley sued Progressive for breach of contract and Insurance Code violations, while Progressive sought a declaratory judgment requiring it to pay the maximum policy limit amount under only one policy.
The 2000, Texas Supreme Court opinion styled, Texas Association of Counties v. Matagorda County is a type of case not seen too often, but is worth knowing.
Matagorda County had a liability policy with The Texas Association of Counties (TAC) for its law enforcement activities. The policy contained a “jail exclusion” which excluded legal action brought by the county’s jail inmates. Following just such an event, TCA agreed to indemnify and defend Matagorda but twice repeated its right to question coverage and seek reimbursement. TAC settled the case, and brought suit to obtain reimbursement. The trial court in the coverage case ultimately ruled that TAC was entitled to reimbursement of defense and indemnity costs because the underlying liability claims were not covered.
TAC claimed that the policy’s “jail exclusion” clause and Matagorda County’s refusal to reply to TCA’s letters reserving reimbursement rights amounted to create a contractual obligation. The Texas Supreme Court disagreed and held that an insurer’s unilateral reservation of rights letter did not create rights which are not specifically created by the insurance policy. TAC’s reservation letter was a unilateral offer to pay a disputed claim in exchange for the right to later seek reimbursement. The insured’s failure to respond to the insurer’s reservation letter was not construed as an acceptance of the insurer’s reimbursement offer.
What if someone with the insurance company does something to cause you to believe you have coverage that you do not have? Mason County lawyers should read this 2008, Texas Supreme Court opinion. It is styled, Ulico Casualty Company v. APA.
In this case, the court considered what has become known as the “Wilkinson exception” to the general rule that coverage cannot be created by estoppels or waiver. The Wilkinson exception stated that if a carrier undertook to defend an insured without issuing a proper reservation of rights that identified all policy defense then known to the carrier, and the insured was prejudiced, then the carrier was estopped to deny coverage and had waived its policy defenses.
In Ulico, the insured reported a claim after the claims-made-and-reported policy had expired. The carrier mistakenly agreed to defend the insured. The carrier issued two reservation of rights, sent the insured’s counsel litigation guidelines, and stated that Ulico agreed to reimburse the insured for reasonable defense expenses. The attorney submitted his invoice of $635,000.00.
Irving life insurance lawyers need to know every little aspect of the law in order to properly represent their clients. A 1996, San Antonio Court of Appeals opinion deals with one of these “little” aspects of the law. The opinion is styled, Mendoza v. American National Insurance Company.
Jerry Mendoza purchased a $25,000.00 life insurance policy from American on August 1, 1991. The October premium was not paid. The policy provided for a 31 day grace period. On November 1, 1991, the last day of the grace period, American’s district manager, Sitka, verbally agreed to extend the grace period until November 4, 1991. The policy, however, specifically provided that only American’s president, vice president, or secretary had the authority to extend this time period. Jerry Mendoza died in an automobile accident on November 3, 1991. The premium was never paid. In a prior appeal, this Court affirmed a summary judgment in favor of American on Plaintiff’s breach of contract, negligence and bad faith claims. This appeal concerns the trail court’s granting of summary judgment on Plaintiffs’ claims for intentional infliction of emotional distress, Insurance Code and DTPA violations.
The Court held that in order to qualify as a consumer under the DTPA, a person must seek to acquire goods or services by purchase or lease and those goods or services must form the basis of the complaint. Lack of privity between plaintiff and defendant does not preclude a plaintiff from establishing status. Section 541.060 provides standing to “any person” who has been injured by another’s engaging in an unfair or deceptive act or practice in the business of insurance as declared in the Insurance Code; rules and regulations issued under the Insurance Code or Section 17.46 of the DTPA. Therefore, a plaintiff may assert causes of action under the Insurance Code for violations of Section 17.46 of the DTPA even though the plaintiff is not a “consumer.” Carrion, a named beneficiary of the policy, would clearly be injured as a result of Sitka’s alleged misrepresentations. Therefore, Clarion has standing under the Insurance Code. Mendoza’a mother, in her capacity as representative of the the estate, however, does not have standing to assert Insurance Code or DTPA claims because those claims do not survive Mendoza’s death and his mother is not a “consumer” in her own right.
Llano County insurance lawyers need to keep up with how the Courts interpret insurance policies. The 5th Circuit issued an opinion worth reading in 2016. It is styled, AIG Specialty Insurance Co. v. Tesoro Corp.
In this case the 5th Circuit had to decide whether a subsidiary not designated as an additional insured under an excess policy, was covered, because the insurer ought to have known the insured intended the subsidiary to be covered.
The facts of this case begins with a refinery, subject to a series of federal and state pollution remediation orders, changing hands twice. First, Tosco Corp. sold the refinery to Unltramar. Tosco indemnified Ultramar $50 million, and Ultramar acquired $100 million in excess insurance coverage from AIG. Then Ultramar sold the refinery to Tesoro, and transferred the policy as well.
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