Dallas Fort Worth Insurance Lawyer Blog

Property Claims Valuation

October 29, 2016 | Mark S. Humphreys

Lawyers handling property damage claims will find this article interesting. The article is from the Claims Journal. It was published in September 2016, and is titled, Damage To Property Without Market Value.

The amount and dollar value of insurance claims relating to property loss alone dwarf all other lines of insurance. Water losses in the U.S. result in more than $9 billion in property damage annually. Fire losses result in more than $12 billion in annual damage. Hailstorms cause over $1 billion in damage. Homeowners’ and commercial property policies often provide that the insurer is not required to pay more than the actual cash value (ACV) of the damaged property. Increasingly, however, policies may provide for replacement cost value (RCV) once the insured has replaced the damaged policy in such first-party claims.

When the insurer attempts to subrogate such property losses, there is a big disconnect between the damages recoverable by the insured in a first-party claim and the damages the insurer can recover when it subrogates the claim against the third-party tortfeasor responsible for causing the loss. First-party claim payments are governed by applicable policy language. Third-party property damage recovery is governed by applicable state tort damage laws. First-party replacement value insurance claim payments cannot be recovered in third-party subrogation cases because the default rule for measuring direct damages from partial destruction of personal property is the difference in the market value immediately before and immediately after the damage to such property at the place where the damage was occasioned. “Replacement cost insurance” is optional additional coverage that may be purchased for casualty insurance to insure against the possibility that the improvements will cost more than the ACV and that the insured cannot afford to pay the difference. Unlike standard indemnity, replacement cost coverage places the insured in a better position than he or she was in before the loss and any purported windfall to the insured that purchases replacement cost insurance is precisely what the insured contracted to receive in the event of a loss.

Insurance Claims And Statute Of Limitiations

October 27, 2016 | Mark S. Humphreys

The Statute of Limitations for insurance claims will vary with the facts of the case. In general this limitation begins to run once a claim is denied. A Southern District , Galveston Division case arose in 2016, that is a good read. The case is styled, Linda Grayson v. Lexington Insurance Company.

The case was a summary judgment decided in favor of Lexington.

On September 22, 2009, Grayson’s home was damaged by fire resulting from a lightning strike. The house was insured for $370,000.00. As Lexington began to adjust the claim, Grayson expressed concern about the potential for lingering smoke odor. Lexington determined the damage could be repaired and all smoke odor could be eliminated by a process of “encapsulation.” Grayson decided to insist that the entire house be demolished and rebuilt.

Insurance Company Denying Claim – What Next

October 25, 2016 | Mark S. Humphreys

When an insurance company denies a claim they have certain responsibilities under the Texas Insurance Code. Insurance lawyers know to immediately check and see if the insurance company has properly performed their responsibility.

Texas Insurance Code, Section 542.056(c) states that if the insurer rejects the claim, the notice required under Subsection (a) or (b) must state the reasons for the rejection. Arguably, an insurance company that fails to comply with this requirement could be held to have waived additional reasons that were not timely raised. However, this argument was rejected in a United States, 5th Circuit opinion in 2005, styled Ridgelea Estate Condo. Association v. Lexington Insurance Company. In the case, the court stated that the insurance company could raise an additional defense, where there was no allegation that the initial reason was unreasonable or made in bad faith.

The phrase “rejects the claim” does not specifically address a situation where an insurer pay part, but not all, of a claim. It also does not specifically state whether a claim is “rejected” when the insurance company refuses to pay, for a reason not related to coverage — as for example, it the claim is closed without payment because of noncooperation by the insured. Construing the statute liberally to promote its underlying purposes, it is reasonable to construe the term “reject” to mean any decision by the insurance company not to pay the claim or not to pay a part of the claim. The insurance company should state in writing the reason for any such decision. If the insurance company pays part of the claim, the insurance company should state in writing the reason it did not pay the rest.

Requesting Coverage On A Claim

October 23, 2016 | Mark S. Humphreys

Insurance attorneys know what the requirements are that are placed on an insurance company when one of their customers make a claim. These requirements are found in Texas Insurance Code, Section 542.051 thru 542.061.

Section 542.056(a) requires the insurance company to give written notice it is accepting or rejecting the claim. The Court of Appeals, Houston [14th Dist.] in a 1998 opinion, styled Daugherty v. American Motorists Insurance Company, tells us a telephone call from the insurance company notifying the insured of the amount of the loss will not constitute “notice of payment of claim,” because the statute requires that the acceptance or rejection be in writing. However, an insurance company’s written response acknowledging only that a claim has been received does not constitute an acceptance or rejection under the statute either. This is pointed out in a 2002, Corpus Christi Court of Appeals opinion styled, Northern County Mutual Insurnace Company v. Davalos.

The statute does nor require that the insurer pay every claim, only that it promptly investigate, and accept or reject the claim. In Dunn v. Southern Farm Bureau Casualty Insurance Company, a 1999, Tyler Court of Appeals opinion, the court stated:

Abuse Of Discretion

October 22, 2016 | Mark S. Humphreys

Attorneys who handle ERISA claims can tell you how difficult these ERISA cases are to win. When someone makes a claim under an ERISA policy, the plan administrator renders a decision. The claimant is advised how to appeal the decision if the claimant does not like the result. When the claim is denied on appeal, the only thing left to do is to file a lawsuit.

The case is going to be in a Federal Court. The claimant is not entitled to a jury trial. A Federal Judge then reviews the materials / information that was before the plan administrator at the time they made their decision. The standard the Federal Judge uses in reviewing the decision is called an “abuse of discretion” standard. In other words did the plan administrator abuse the discretion given them by the plan when rendering their decision. No new information is allowed to be presented to the Federal Judge. Only the information used when the claim was originally filed and any information added at the time of appeal can be looked at under this abuse of discretion standard.

The other way for the case to proceed is “de novo.” Under the de novo review, a claimant essentially gets a second bite at the apple in retrying the case. In other words the claimant gets to provide new information for the Federal Judge to consider in reaching a decision.

State Farm And Bad Faith Insurance

October 20, 2016 | Mark S. Humphreys

Dallas and Fort Worth insurance lawyers know all too well the games some insurance companies play to beat the system. That knowledge has taken on new meaning after reading this story from BloomBerg. The story is titled, State Farm Faces Suit Over Claims It Bankrolled Judge.

Some customers of State Farm Mutual Automobile Insurance Co. claim the company conspired to help elect an Illinois Supreme Court justice candidate so he could vote to throw out a $1 billion award against the company. Now they will be able to bring their case as a group.

A federal judge on Sept. 16 ruled that 4.7 million State Farm policyholders can band together to sue the insurer for allegedly lying about its efforts to financially back Lloyd Karmeier for a seat on Illinois’ highest court. Customers contend in their class-action lawsuit that State Farm defrauded them by secretly bankrolling Karmeier’s 2004 campaign. In exchange, they allege, Karmeier provided a key appellate vote against upholding the $1 billion verdict in a case over the use of generic parts in car repairs.

Penalties For Delay In Paying Claim

October 18, 2016 | Mark S. Humphreys

Benbrook insurance attorneys can discuss the penalties for delays in paying a claim. These penalties are spelled out in the Texas Prompt Payment of Claims Act (TPPCL) and are found in the Texas Insurance Code.

The amount of an insured’s claim (and/or the amount for which an insurer is liable) is often based on third-party invoices that the insured has not incurred, in amounts the insured cannot necessarily predict, at the time the insured submits its notice of claim to the insurer. Consider duty to defend or environmental clean-up coverage, where the amount of the claim can increase every month.

Naturally, there are questions regarding when the 18% penalty begins to accrue on such claims. The TPPCA language does not provide specific guidance on these calculations, but courts in the Fifth Circuit have recently indicated the methodology is based on the date of the TPPCA violation and not necessarily the date the cost was incurred.

Pre-Suit Demands In Insurance

October 16, 2016 | Mark S. Humphreys

Mineral Wells insurance lawyers know that when making a pre-suit demand on an insurance company that making an excessive demand can be more harm than good. This is discussed in a Houston Court of Appeals [1st Dist.] opinion released in August 2016. The case is styled, United Services Automobile Association v. Hayes. The opinion is over 50 pages long and discusses various issues on appeal but one of those issues deals with excessive pre-suit demands.

Texas law holds that a creditor who make an excessive demand upon a debtor is not entitled to attorney’s fees for subsequent litigation required to recover the debt, even if it prevails in its suit. A demand is not excessive simply because it is greater than the amount eventually awarded by the fact finder. However, a claim for an amount greater than that which a jury later determines is actually due may indeed be some evidence of an excessive demand. Nevertheless, it cannot be the only criterion for determination, especially where the amount due is un-liquidated.

The dispositive question in determining whether a demand is excessive is whether the claimant acted unreasonably or in bad faith. Further, application of the excessive demand doctrine is limited to situations in which a creditor has refused a tender of the amount actually due or has clearly indicated to the debtor that such a tender would be refused.

Suing The Agent When A Claim Is Denied

October 15, 2016 | Mark S. Humphreys

Insurance lawyers in the Dallas and Fort Worth area know that insurance companies prefer to litigate cases in Federal Court while the opposite is true for lawyers representing an insured. A recent Northern District, Dallas Division case deals with suing the agent in Federal Court. The case is styled, B&B Car Wash and Mini Storage v. State Automotive Mutual Insurance Company, Jennifer Caldwell, and Danny Duncan d/b/a Duncan Insurance Agency.

This is a case about State Auto allegedly denying coverage for B&B’s wind and hail damaged storage facility. B&B owns a car wash, five storage buildings, and an RV shed. B&B purchased a State Auto policy from agents Jennifer Caldwell and Danny Duncan. The parties dispute the extent of coverage provided by that policy. B&B says it covers the entire complex and the defendants disagree.

After B&B filed its complaint, State Auto removed the case to Federal Court, arguing that, because B&B is a Texas citizen and State Auto is an Ohio citizen, complete diversity exists, and thus, federal jurisdiction. The next day, B&B amended its complaint to add Caldwell and Duncan as additional defendants, based on the fact that they sold the policy in question. Thus, because Caldwell and Duncan are both Texas residents, B&B filed a motion to remand the case to State Court since diversity jurisdiction no longer existed.

Insurance Agent Involved In Fraud

October 13, 2016 | Mark S. Humphreys

Insurance law attorneys can tell war stories about situations where an insurance agent has been caught stealing from customers. This was recently highlighted in an August 29, 2016, article published by the Insurance Journal. The article is titled “California Insurance Agent Nabbed For Fraud Scheme Involving 100-Plus Policies.”

Vicki Lee McGinley, 58, a licensed insurance agent in California, was arrested by the Kern County Sheriff’s department on seven counts of identity theft and seven counts of insurance fraud after allegedly misrepresenting policy and premium information to clients resulting in losses to her employers and increased premiums for her clients.

The California Department of Insurance Investigation Division began an investigation after receiving a complaint from McGinley’s previous employer.