Dallas Fort Worth Insurance Lawyer Blog

How much should a person be compensated when their vehicle is declared a total loss?   A better question is – what are the elements that make up the total amount to be compensated?

This issue is discussed in a 2020 opinion from the United States Fifth Circuit.  The opinion is styled, Jessica Singleton and Tony Cooper v. Elephant Insurance Company.

When an insured automobile is so damaged that it would cost more to repair than to replace, it is usually deemed a total loss.  The insurance company then reimburses the policyholder for the value of the vehicle, with the expectation that the policyholder will probably use this money to purchase a replacement.  Of course, purchasing and registering the replacement vehicle requires the payment of taxes and fees to the state.

For Insurance Lawyers, Covid-19 has become a hot topic.  Hardly a day goes by that a client is not asking questions regarding their insurance policy and whether or not the policy covers losses stained due to Covid-19.  The National Law Review published an article recently that needs to be read by lawyers handling these Business Interruption cases.

The article tells us that the legal media have been inundated with articles by lawyers who represent policyholders and insurance companies discussing business interruption claims arising from the COVID-19 pandemic.  Some of this discussion has carried over into the mainstream media, including a recent Wall Street Journal article titled, “Restaurants v. Insurers Shapes Up As Main Event In D.C. Lobbying Fight.”  Much of the discussion focuses on two issues.  The First, property insurance policies require “direct physical loss or damage” to property (either to the insured property, or non-insured property within a certain distance of the insured property for a coverage called “civil authority”).  A virus has never been found to cause damage to property.  Second, most, but not all, of these policies have a virus exclusion.  We are not writing here about those issues.  Plenty of barrels of ink has been already spilled on those issues.  But I haven’t seen any authors write about another exclusion that seems likely to apply to these claims if policyholders can somehow convince a court that there was “direct physical loss or damage” to property: it is the the ordinance or law exclusion.

The ordinance or law exclusion typically provides that the insurer “will not pay for loss or damage caused directly or indirectly by . . . the enforcement of or compliance with any ordinance or law . . . regulating the . . . use . . . of any property . . . .”  That seems to be precisely what many of the governmental orders being issued do.  For restaurants, for example, government orders typically regulate the use of the business premises by limiting operations to takeout and delivery, prohibiting dine-in service.  At some point it is expected that dine-in service will be allowed, but limited to tables spaced six feet or more apart, as has begun occurring in some other countries.  With respect to other businesses, governmental orders may limit their operations to curbside delivery of items purchased by phone or online, or require or urge them to have employees work from home except for certain limited operations that can only be conducted in the office.

When it comes to interpreting an insurance policy, the Courts are suppose to read the relevant portions of a policy and see how the policy language tracks with whatever the facts are in a claim.  Many claims are denied due to the insurance company believing the policy says something or is interpreted in such a way as to allow the insurance company to deny the claim.

When an insurance company interprets the policy language in such a way as to allow the insurer to deny the claim and the insured interprets the language in such a way as to believe coverage exists, a lawsuit is going to result.  Insurance companies want these policy interpretations to be litigated in Federal Court because, most of the time, Federal Courts are much stricter in their interpretation than most State or County Courts.

The normal way to get a ruling in these policy interpretation cases is for the insurer or either party to file a motion for summary judgment.  In this motion the party asks the Court to rule as a matter of law what the policy is saying and how that is relevant to the facts of the claim.  This was an issue in a 2020 opinion from the Southern District of Texas, Galveston Division, styled, Louise Odom Hayes v. Blue Cross And Blue Shield Of Texas, Inc. And Health Care Service Corporation.

Insurance lawyers will always ask for a copy of the policy when an insured complains that their claim for benefits has been denied and the reason for denial is based on the language in the policy.  In Texas, insurance companies are required to explain to a policy holder the reason for denial of benefits.  Whether or not the reason for denial is proper is usually based on the language in the policy as applied to the facts of the particular case.

A 2020, opinion from the Southern District of Texas, Galveston Division, provides some insight as to how the Courts interpret policies.  The case is styled, Louise Odom Hayes v. Blue Cross and Blue Shield of Texas, Inc. and Health Care Service Corporation.

Hayes sued Blue Cross for breach of the health insurance policy Hayes had purchased from Blue Cross wherein Blue Cross refused to pay for additional benefits Hayes claims she should have received.  Blue Cross filed a motion for summary judgment based on its contention that its determination of benefits was consistent with its contractual obligations to Hayes.