Dallas Fort Worth Insurance Lawyer Blog

“Knowing” Conduct By Insurance Company

August 27, 2016 | Mark S. Humphreys

A 1998, Dallas Court of Appeals case is a good read for lawyers handling bad faith insurance cases. The case is styled, State Farm Lloyds v Johns.

Johns house was built in 1964. Johns moved in to her house in 1972. In the summer of 1990, Johns noticed evidence of extensive foundation problems including door misalignment, significant cracks in the interior walls and a slope on the floor. Repairmen later discovered two plumbing leaks under the house. Johns made a claim for foundation damage alleging that the plumbing leaks caused the soil underneath the house to expand resulting in upheaval of the foundation, thereby damaging the structure. State Farm concluded that John’s foundation problems were not cause by the plumbing leaks, but rather asserted that the damage occurred from natural soil movement common to north Texas. State Farm’s homeowners policy excludes damage caused by ordinary settlement. Based on the exclusion, State Farm denied the claim.

Johns filed suit against State Farm alleging wrongful denial of her claim, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. The trial court rendered judgment on the verdict in favor of Johns based on the DTPA and Insurance Code claim. State Farm appealed.

Insurance Claims And Emotional Distress

August 25, 2016 | Mark S. Humphreys

Damages and coverages available under an insurance policy will vary depending on the circumstances and policy language. As it relates to a claim for emotional distress, a 1994, 5th Circuit Court of Appeals case is a good read. The opinion is styled, Travelers Indemnity Co. v. Holloway.

In this declaratory judgment action, the insurance carrier, Travelers contended that it had no duty to defend its insured, Wanda Holloway, against a lawsuit for intentional infliction of emotional distress, since it was not covered under the policy. Holloway, the mother of a junior high school student competing for a cheerleader position, allegedly plotted to kill Heath, the mother of one of her daughter’s competitors. The mother of the competitor brought suit against Holloway alleging “outrageous conduct causing severe emotional distress” or “intentional infliction of emotional distress.” Holloway sought a defense from Travelers. Travelers argued that Holloway was not entitled to a defense and that there was no coverage, since (1) the conduct did not constitute an “occurrence” under the policy, (2) the conduct was excluded from coverage as intentional conduct, and (3) the conduct was not alleged to have caused “bodily injury” as defined by the policy.

The 5th Circuit affirmed the District Court’s opinion that there was no duty to defend or coverage since there was no allegation or evidence of a bodily injury.

Hail Claims And Staying Out Of Federal Court

August 23, 2016 | Mark S. Humphreys

Lawyers who handle hail claims know the insurance companies prefer to fight lawsuits in Federal Court. Hail claims lawyers know one way of defeating the insurance company desire to be in Federal Court is by suing the adjuster. The Sherman Division, Eastern District issued an opinion illustrating how to Not file a lawsuit against an adjuster. The style of the opinion is Walters v. Metro. Lloyds Ins. Co.

The Walters residence sustained hail damage. The insurance company, Metropolitan, assigned Buchanan to adjust the claim. The claim was denied and Walters sued Metropolitan and Buchanan in State Court and the case was then moved to Federal Court by Metropolitan and Buchanan.

The only question at this point in the case is whether or not Buchanan was improperly joined as a defendant to defeat diversity jurisdiction.

Motion To Remand – Water Damage

August 21, 2016 | Mark S. Humphreys

Insurance lawyers would prefer to fight their cases in State Court rather than Federal Court. The opposite is true for insurance companies. Unfortunately, the insurance companies win most these battles for which court the case should be contested. A U.S. District Court, Galveston Division opinion illustrates some of the arguments. The case is styled, Lopez v. United Prop. & Cas. Ins. Co.

Lopez sued United in State Court alleging his home sustained water damage and that United failed to fully cover the damages. Suit was filed for violations of the Sections 541 and 542 of the Texas Insurance Code.

In order to defeat diversity jurisdiction, Lopez sued the adjuster, Bibiana Aguilar, assigned to handle the claim also.

ERISA – Total Disability

August 20, 2016 | Mark S. Humphreys

ERISA lawyers know how tough these ERISA claims are. This is illustrated in a case from the Texas Southern District styled, Sarmiento v. Metropolitan Life Insurance Co.

Tammy Sarmiento sued for wrongful denial of benefits under ERISA, 29 U.S.C. 1332. The plan is through her employer, American Airlines. Her claim for long-term benefits was denied by the plan administrator. The Plan automatically ends long-term disability benefits (a) when the employee is no longer totally disabled as defined by the Plan and (b) after twenty-four months if the disability is for a mental-health disorder.

Tammy worked as a staff assistant. In August of 2011, she stopped working because she was having short-term memory loss. She was diagnosed with encephalopathy, major depression disorder, and frontal lobe syndrome. Under the Plan, encephalopathy is a physical condition. She applied for and received short-term and long-term benefits.

You’ve Got To Sue The Adjuster Properly

August 18, 2016 | Mark S. Humphreys

For Mansfield insurance adjusters, a 2016 opinion from the U.S. District Court, Houston Division, is an example of one way to properly sue an adjuster. The style of the case is, Robinson v. Allstate Tex. Lloyds & Timothy James Wesneski.

Robinson, a Texas citizen is insured with Allstate. She alleges she filed a claim with Allstate after her house was damaged during a storm on November 25, 2015. She alleges Wesneski, a Texas citizen and the adjuster Allstate hired to investigate the claim, conducted a substandard investigation. She alleges that Wesneski’s inadequate investigation caused her claim to be improperly evaluated and underpaid. Wesneski found that the amount of damage to Robinson’s property at $484.93, below the amount of the policy deductible. Robinson hired a private adjuster, who estimated the damage caused by the storm to be $25,818.77.

Robinson filed this lawsuit in Texas state court, naming Allstate and Wesneski as defendants. Robinson asserted that Wesneski violated the Texas Insurance Code and the Texas DTPA. She alleges Wesneski failed to conduct a reasonable and adequate investigation, which caused Allstate to undervalue her insurance claim. Allstate caused the case to be removed to Federal Court based on Allstate not being a Texas citizen and that Wesneski was joined just to defeat diversity jurisdiction and Robinson filed a Motion to Remand.

Life Insurance And Lifestyle

August 16, 2016 | Mark S. Humphreys

Life insurance attorneys know that in Texas, a life insurance claim cannot be denied after two years have passed. However, what happens when a person purchases life insurance and then his policy gets rejected because the underwriters don’t like the persons lifestyle. According to an article published by Insurance Journal, this denial is occurring. The article is titled, Marijuana Ties May Signal Risky Lifestyle To Insurers.

A few weeks ago, Derek Peterson got a letter from Mutual of Omaha, turning him down for life insurance.

“Our decision was based on,” the letter said, then trailed off (Monty Python-style) and picked up in all caps:

First Party Claim vs Third Party Claim

August 14, 2016 | Mark S. Humphreys

Oak Cliff insurance lawyers need to understand the difference between a first party claim and a third party claim. A 1996 Beaumont Court of Appeals opinion may help. The case is styled, Rumley v. Allstate Indemnity Co.

The wife, Joyce Rumley, sustained personal injuries in a one car vehicle accident in which her husband, Wilburn Rumley, was the driver. Mrs. Rumley filed a claim for benefits under their insurer, Allstate. Allstate paid PIP benefits but refused to pay liability because the policy contained a family member exclusion. At the time the Texas Supreme Court had granted writ of error but had not yet issued an opinion in National County Mutual Ins. Co. v. Johnson. In that decision, the Texas Supreme Court invalidated the family member exclusion. Wife sued Allstate and Ted Pate, a senior staff claims representative for Allstate, for breach of duty of good faith and fair dealing, violations of the Texas Insurance Code, and violations of the Texas DTPA.

Allstate filed a Motion for Summary Judgement on the grounds that Wife’s claim was a third-party claim for which Defendants owed no duty of good faith and fair dealing; there was a reasonable basis for denying the claim in that the family member exclusion was an unsettled issue of law; and there was no special or contractual privity between Pate and Rumley. The trial court granted summary judgment and wife appealed.

Life Insurance – Unusual Situation

August 13, 2016 | Mark S. Humphreys

This San Antonio Court of Appeals opinion is one for life insurance lawyers to read and know about. It is a 1996 opinion styled, Mendoza v. American National Insurance Co.

Jerry Mendoza purchased a $25,000.00 life insurance policy on August 1, 1991. The October premium was not paid. The policy provided for a thirty-one day grace period. On November 1, 1991, the last day of the grace period, American National’s district manager, Sitka, verbally agreed to extend the grace period until November 4, 1991. The policy, however, specifically provided that only American National’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 National on Plaintiff’s breach of contract, negligence and bad faith claims. This appeal concerns the trial court’s granting of summary judgment on Plaintiff’s claims for intentional infliction of emotional distress, Insurance Code and DTPA violations.

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 consumer status. The Insurance Code 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 Code; rules and regulations of the 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 misrepresentation. Therefore, Carrion has standing under the Texas Insurance Code. Mendoza’s mother, in her capacity as representative of his 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.

Who Is An Agent Of An Insurance Company?

August 11, 2016 | Mark S. Humphreys

The answer to the question can be found by Arlington insurance lawyers in the 1994, Texas Supreme Court opinion styled, Celtic Life Insurance Company v. Coats.

The insured’s owner met with a soliciting agent of Celtic to discuss the potential purchase of insurance. The owner advised the agent he wanted a policy providing benefits for psychiatric care equal to or better than the $20,000 coverage provided under the company’s existing policy. The owner explained to the agent that the coverage was needed because his oldest son had previously required psychiatric care, and he was concerned that his youngest son might require similar care. The agent advised the owner that he understood his needs. The agent then proposed the purchase of a specific policy written with Celtic with a maximum lifetime hospital benefit of $1,000,000. However, the agent did not point out the the psychiatric benefits under the policy were limited to $10,000. The policy was purchased by the insured.

The policy issued and premiums were paid. Later, the owner’s son was admitted to the hospital for psychiatric care. The owner filed a claim and assured by the agent the care would be covered. Celtic, however, paid only $10,000 of the $27,000 in medical expenses.