Dallas Fort Worth Insurance Lawyer Blog

Proper Notice Letter Against Insurer Is Required

October 20, 2019 | Mark S. Humphreys

Sending a proper notice letter is the first step in a legal process against an insurance company when an insured believes the insurer has improperly handled a claim. This is even more relevant under the new section of the Insurance Code, Section 542A.003. This is also required in Section 541.154. This requirement was the subject of a recent Southern District of Texas, Corpus Christi opinion styled, Libardo Taboada, et al v. State Farm Lloyds, et al.

In this case, Taboada had five opportunities to comply with the substantive requirements of notice letters. First, he could have complied when he gave the original pre-suit notice on August 21, 2018.

Second, he could have complied after State Farm filed its verified plea in abatement as required by Section 542A.005(c). But, Taboada did nothing. His failure to file an affidavit in response made abatement pending the service of a new letter automatic under that Section.

Agent Sells The Wrong Policy Or Misrepresents The Policy

October 19, 2019 | Mark S. Humphreys

Insurance agents who do not sell the insurance policy that was requested by their customer can be held liable for selling the wrong policy or misrepresenting the policy. This is illustrated in the Northern District of Texas, Dallas Division, opinion styled, Steve and Ellen Malone v. Blue Cross and Blue Shield of Texas and Garrison & Associates.

Negligent procurement of an insurance policy is recognized as a legally cognizable claim against an insurance agent. The Texas Supreme Court held that an insurance agent “owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so.” In this case the Malones allege they informed the Agent of Steve Malone’s specific cancer diagnosis and his ongoing care and treatment. More explicitly, the Malones allege they made known to that their health insurance policy under Humana, which was being discontinued covered Steve Malone’s ongoing cancer treatments and they “specifically requested” the insurance Agent furnish them with a health insurance policy that would “provide the same or better coverage as Humana, especially as it relates to Steve Malone’s cancer treatments.” The insurance Agent allegedly agreed to procure the specific coverage requested and, thereafter, provided the Blue Cross Blue Shield (BCBS) Policy. The Agent allegedly told Malones the BCBS Policy would provide the requested insurance coverage, specifically including Steve Malone’s ongoing cancer treatments and the Rituxan therapy. The Agent also allegedly represented to Malones that “the BCBS Policy was as good as or better than the Humana plan, and would provide the same or better coverage.” The Malones then enrolled in the BCBS Policy. However, shortly thereafter, the Malones’ claim submitted for Steve Malone’s ongoing Rituxan therapy “was denied on the basis that the BCBS Policy does not provide coverage for the needed medical care.” The repeated denial of coverage for this cancer treatment claim spanned six months. The Malones allege they were irreparably harmed because Steve Malone was taken out of the Rituxan therapy during this time period and prevented from re-entering, and any benefits he had received from it were nullified.

The Court stated this pleading is consistent with causes of action related to the Texas Insurance Code, Section 541.051 and the Texas Deceptive Trade Practices Act.

Delay In Reporting A Claim

October 16, 2019 | Mark S. Humphreys

Insurance policies are of two types of it relates to the coverage of a claim. One is called an “occurrence” policy. An occurrence policy covers losses that occur during the policy period. The other type of coverage is a “claims made” policy. A claims made policy covers claims that are made only while the policy is effective irregardless of when the event/claim actually occurred.

This distinction was discussed in 2019, Amarillo Court of Appeals opinion styled, In Re Landmark American Insurance Company. This is a mandamus case.

Landmark, the insurer, petitioned the appeals courts seeking an Order for the Judge in the underlying case to vacate his Order allowing a deposition of a Landmark representative. This appeals courts conditionally granted the writ.

ERISA And The Claims File

October 13, 2019 | Mark S. Humphreys

In an ERISA case, the plan administrator, upon request, is required to give a copy of the claims file to the insured. The most common way this occurs is when a claim is denied, the plan administrator informs the insured of the denial in a written letter and in the letter the insured is informed of their right to an appeal and a copy of the claims file. The insured should then request a copy of that file.

In a recent case out of the Southern District of Texas, Houston Division, the insured claimed they did not timely receive a copy of the claims file and thus, argued that the statute of limitations on their claim was tolled until such time that she received the claims file. This case is styled, Cynthia Sternberg v. Metlife Insurance Company.

In this case, the insured has clearly let the statute of limitations pass for her appeal. These limitations were made clear in the policy. So, the insured made arguments regarding the tolling of the limitations period.

ERISA And Limitations

October 12, 2019 | Mark S. Humphreys

Statute of Limitations issues are not usually seen in ERISA cases, but here is one. This is a 2019, opinion from the Southern District of Texas, Houston Division. It is styled, Cynthia Sternberg v. Metlife Insurance Company.

This case is currently before the Court on a Rule 12(b)(6) Motion to Dismiss filed by Metlife. The Court granted the motion.

Sternberg filed for short term disability (STD) benefits from her employers claims administrator. The STD benefits were granted. Metlife is the claim administrator and it issued the group policy that funds the benefits under the Plan. Sternberg later, filed for long term disability (LTD) benefits. The claim for LTD was denied.

Prompt Payment Penalty Calculation

October 9, 2019 | Mark S. Humphreys

How do you calculate the beginning date and end date for violation of the Texas Prompt Payment of Claims Act? The start date was calculated in the previous post. Here is a discussion on the end date for calculation.

The statute does not say when the penalty stops accruing. No court has addressed this specific issue. Several courts have simply held that the penalty accrues from the date of the violation up to the date of judgement, without any analysis for choosing that date. This was done in the 2010, 5th Circuit opinion, Great American Insurance Co. v. AFS/IBEX Financial Services, Inc. Also in the 2004, Texas Supreme Court opinion, Texas Farmers Insurance Co. v. Cameron. Other courts have held that the penalty accrues until the insurer settled. This was seen in the 2000, San Antonio Court of Appeals opinion, Cater v. United Services Automobile Ass’n and in the 1196, Texarkana Court of Appeals opinion, Southland Lloyd’s Insurance Co. v. Tomberlain. One approach is to end the accrual of the 18% damages on the day of the judgment. This is the approach taken in Mid-Century Insurance Co. v. Barclay, which is from the 1994, opinion of the Austin Court of Appeals. The statute itself, neither embraces nor rejects this approach.

Another approach would be to continue accruing the 18% damages until the insurer fully discharges its liability, including payment of the 18% damages and attorney’s fees. An argument for this approach is that, presumably, the Legislature intended the 18% damages partially to compensate claimants for the delay and partially to punish insurers for violations. If the 18% damages accrue only up to the time of judgment, this would mean that while the insurer is contesting liability, perhaps even in good faith and reasonably, these extra damages would accrue, but once the claim is finally established, the incentive to pay would be removed. Arguably, it makes no sense to compensate the claimant when his claim is disputed, but once it is certain to no longer compensate him. Likewise, it makes no sense to punish the insurer for withholding a disputed claim, but to no longer punish it for withholding an established claim. Case law makes clear the statute recognizes that the insurer denies the claim at its risk. If the insurer gambles and loses, it pays these additional damages. Similarly, if the insurer wants to gamble on continuing to contest the claim once judgment has been rendered, that choice may bear financial consequences. Interestingly, in the Cater case above, the court ended the penalty on the date the claim was paid, to shorten the time period, presumably as a reward or encouragement for the insurer to pay the claim. Conversely, the penalty should be extended when the insurer continues to refuse to pay, especially after the judgment is rendered.

Prompt Payment Of Claims Violations

October 6, 2019 | Mark S. Humphreys

When does the time to start calculating the time a payment is due under an insurance policy claim? Good question but not an easy answer.

The penalty for violation of the Texas Prompt Payment of Claims Act is an 18% penalty on the amount due and owing on the claim according to Insurance Code, Section 542.060. However, the date that amount accrues is not so easy.

The statute does not say when the penalty accrues. On approach would be to begin accruing the 18% damages from the date the claim was received. This focuses on the length of time the claimant has been without his or her money, instead of focusing on the length of time the insurer has been in error. This approach encourages prompt payment of claims. As the claim proceeds towards payment, the insurer’s incentive to pay the claim would increase. Any error, even at the last stage, would accrue damages at 18%, retroactive to the date the claim was filed. This approach has the benefit of making payment of the claim more important to the insurer, even as the passage of time makes payment of the claim more important to the insured.

Uninsured Motorist Claims And Breach Of Contract

October 5, 2019 | Mark S. Humphreys

Uninsured motorist (UM) claims are in a category unto themselves. This is illustrated in a 2019, opinion styled, Ali Duhaly v. The Cincinnati Insurance Company. The opinion is from the Southern District of Texas, Houston Division.

Duhaly sued Cincinnati alleging breach of contract, among various other causes of action. Duhaly worked for an employer who was insured by Cincinnati for (UM) coverage. Duhaly was injured when a passenger in a vehicle owned by the employer. The policy states that Cincinnati will “pay all sums the insured is legally entitled to recover as compensatory damages from the owner or operator of … an uninsured motor vehicle” to which ” no liability bond or policy applies at the time of the accident” or an underinsured motor vehicle to which the insurance coverage is insufficient to cover the damages.

Duhaly sued Cincinnati in State Court and Cincinnati timely removed the case to Federal Court. Cincinnati filed a motion for summary judgment as to Duhaly’s breach of contract claim.

Improperly Sued Adjuster And Dismissal

October 2, 2019 | Mark S. Humphreys

Here is a situation where a lawsuit to which Texas Insurance Code, Section 542.006 applies. The remedy this Court applied to the case appears to be a distinction without a difference.

The case is a 2019, Southern District of Texas, Laredo Division, opinion. The case is styled, Axel Brokers, Inc. v. United Fire & Casualty Company and David S. Walton.

This case concerns alleged liability for storm damage to a commercial building insured by United Fire. Axel sued United Fire, the insurer, and Walton, the adjuster, for various violations of the Texas Insurance Code.

Insurance Law – New For September 1, 2019

September 29, 2019 | Mark S. Humphreys

Here are some new laws enacted in the State of Texas that went into effect on September 1, 2019. There were several transparency and consumer protection bills that were passed in the wake of Hurricane Harvey. The most significant bills were related to flood, wind, and hail, although significant legislation related to adjusters was also passed.

Senate Bill (SB) 442 requires any insurance company that issues residential property insurance policies without coverage against flood loss to provide written notice to the insured. This bill gives the Texas Insurance Commissioner rule making authority to issue the form and content of the notice.

House Bill (HB) 1306 provides for additional flood coverage access under insurance policies issued by surplus lines insurance companies. Surplus lines coverage is only to be used if the full amount of coverage cannot be obtained in the Texas market.