Dallas Fort Worth Insurance Lawyer Blog

Segregating Damages In Hail Storm

November 3, 2016 | Mark S. Humphreys

Attorneys who handle hail damage claims have to know the law discussed in this Northern District, Dallas Division opinion. The opinion is styled, One Way Investments, Inc. vs. Century Surety Company, et al.

This is a summary judgment case for breach of contract. One Way had property insurance with Century and made a claim for damages alleged to have happen in a severe hail storm that caused significant damage to the roof and appurtenances and interior of One Way’s property.

Century’s adjuster estimated the cost of repairs to be $2,372.43, which was less than the amount of One Way’s deductible and resulted in One Way filing this lawsuit.

Going For Bad Faith

November 1, 2016 | Mark S. Humphreys

Garner insurance lawyers who know insurance law, know that actually prevailing in a bad faith claim is difficult. Getting the insurance company to pay what they should is not hard but getting the extra money for bad faith in Texas is difficult because of the way Texas Courts interpret the law. An Appeals Court in Corpus Christi was making it easier in a 2016 opinion styled, In Re State Farm Lloyds. This is a mandamus opinion dealing with discovery issues.

Angelica Gongora’s home was damaged in hailstorms. She submitted a claim with State Farm. The adjuster, Sylvia Garza, inspected Gongora’s home and asserted that the damage did not exceed the deductible and therefore did not pay the claim. Gongora sued State Farm stating that Garza failed to include all of the damages in her estimate and that Garza grossly undervalued the damages and failed to include adequate funds in the estimate to cover the costs of repairs.

Gongora subsequently invoked the appraisal clause in her homeowner’s policy and the appraisal came back at more than ten times the amount Garza had estimated. State Farm paid the appraisal amount. In the lawsuit Gongora propounded discovery to State Farm seeking production of:

Cooperating With Insurance Company Investigation

October 30, 2016 | Mark S. Humphreys

Insurance lawyers know to tell their clients to cooperate with their insurance company investigation of a claim. Failure to cooperate can void the coverage. This issue was litigated in a Southern District, Houston Division case styled, Rosie’s Chicken & Waffles Restaurant, et al v. Acceptance Indemnity Company.

In a jury trial, the jury answered questions 1 and 2 in favor of Rosie’s, finding that the entire fire at their business was not the cause of arson attributable to its owners or employees. The jury also found by inference that Acceptance failed to establish its defense that the premises did not have a working smoke alarm at the time of the fire. The jury in questions 4 and 5 went on to find that the owner failed to provide financial information relating to the daily business transacted at Rosie’s business location and that her failure to provide financial documents prejudiced Acceptance.

This Court found that the jury’s answers to questions 4 and 5 are irrelevant in light of their answers to questions 1 and 2.

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.