Dallas Fort Worth Insurance Lawyer Blog

Life Insurance And Spouses

July 14, 2018 | Mark S. Humphreys

Married persons naming their spouse as a beneficiary in a life insurance policy is common and maybe even the most often seen beneficiary under a life insurance policy.

However, Texas law makes clear that a spouse can designate his or her estate as the beneficiary of the policy, at the expense of the other spouse, absent a showing of actual or constructive fraud. This was made clear in the 1994, Fort Worth Court of Appeals opinion styled, Street v. Skipper.

In the 1981, Eastland Court of Appeals opinion styled, Pilot Life Insurance Co. v. Koch, the policy at issue contained provisions automatically divesting the spouse of any interest in the proceeds, if the parties are “legally separated” or divorced. Also, the divorce decree may divest the former spouse of any right to the insurance proceeds. This was made clear in the 1987, 14th Court of Appeals opinion styled, Novotny v. Wittner. By statute, a divorce invalidates any pre-divorce designation of the former spouse as beneficiary, unless the former spouse is re-designated. If the pre-divorce designation is invalidated, the proceeds may go to any alternate beneficiary or to the insured’s estate. If the insurer pays the former spouse based on an invalidated designation, the insurer is liable to pay the proper beneficiary. This is made clear in the Texas Family Code, Section 9.301.

Where A Lawsuit Can Be Filed

July 12, 2018 | Mark S. Humphreys

Here a situation that is not seen very often, but it does occur. This 2018, case is from the Tyler Court of Appeals and is styled, In Re: Metropolitan Property And Casualty Insurance Company, et al.

This is a mandamus action wherein Metropolitan is appealing the trial court’s decision of denying Metropolitan’s Motion to Transfer Venue.

In 2013, Patti Wan was involved in an automobile collision with Fidel Campos’s minor son, an uninsured motorist. Wan was covered by an insurance policy issued

Insurance Policies And Punitive Damages

July 10, 2018 | Mark S. Humphreys

Coverage for punitive damages are not always covered in an insurance policy. This issue came up in the 2018, case styled, Richard Brett Frederking v. The Cincinnati Insurance Company, Inc. The case is from the U.S. District Court, Western District of Texas, San Antonio Division.

This is a summary judgment case if favor of Cincinnati. The Court held that the insurance policy at issued does not afford coverage for the punitive damages award attributed to the negligence of Carlos Sanchez.

Frederking was injured when his vehicle was struck by an intoxicated driver, Carlos Sanchez. A trial was held in State Court and the jury found Sanchez was grossly negligent and awarded Frederking $207,550.00 in punitive damages plus interest. The issue is whether the policy held by Sanchez’s employer covers this punitive damages award.

Examination Under Oath – Duty To Cooperate

July 8, 2018 | Mark S. Humphreys

A starting point for understanding an Examination Under Oath (EUO) is start with the principle that an insured has a duty under their insurance contract to cooperate with the insurer’s investigation of a claim.

In the first-party setting, which is the setting under which EUO’s are sought: Duties of cooperation include the duty to submit to an EUO, the duty to respond to reasonable requests for information and documents, and the duty of candor which would prohibit the insured from concealing information from the insurer or providing false information in support of the insured’s claim. An EUO and the information obtained therefrom is the core of the duty to cooperate. The regard the courts have for the duty to cooperate is illustrated in the case, Aetna Casualty & Surety Co. v. State Farm Mutual Auto Insurance Co., a federal case out of Pennsylvania. Mona Dobbins, the State Farm insured, refused to give a statement to State Farm regarding a car wreck that occurred in August, 1987. In the accident, Dobbins struck and killed a pedestrian with the vehicle she was driving, which had been leased by her employer Brookline Social Club. Dobbins fled the scene of the accident. In light of the criminal proceedings against her, Dobbins refused to give a statement to State Farm based on her 5th Amendment privilege against self-incrimination. Later, in August of 1987, State Farm sent Dobbins a reservation of rights letter. In December of 1987, a civil action was filed against State Farm’s insured, Dobbins, by the estate of the pedestrian killed. After a default judgment was obtained by the estate against Dobbins, State Farm sent two letter to Dobbins in March of 1989 “denying coverage under its liability policy issued to the Brookline Social Club and refusing to defend or indemnify her because of her refusal to cooperate with State Farm’s investigation. Following State Farm’s denial of coverage, the estate of the pedestrian killed presented an uninsured motorist (UM) claim to Aetna, the uninsured motorist insurer. After Aetna paid the UM claim, it filed an action against State Farm for indemnification from State Farm for the UM claim paid by Aetna. The jury returned a verdict in favor of State Farm finding that State Farm insured, Dobbins, breached her duty to cooperate and that State Farm had suffered substantial prejudice. Aetna filed a motion for judgment notwithstanding the verdict. Upon consideration of Aetna’s motion for judgment notwithstanding the verdict, the court upheld State Farm’s coverage denial, rejecting Aetna’s argument that Dobbins’ 5th Amendment privilege excused her breach of contract as a matter of law. As one commentator indicated, “In these trying times of exaggerated and intentionally false claims, EUO’s offer the insurance company’s best chance of aggressively investigating first party claims in a good faith atmosphere. EUO’s should be effectively utilized by the insurance company in its search for truth in the war against arson and false claims.”

Examination Under Oath And 5th Amendment

July 7, 2018 | Mark S. Humphreys

A frequent phone call to insurance law lawyers is someone asking about participating in an examination under oath (EUO).

Most people understand what taking the 5th means. It refers to our right to not be compelled to say anything that may be self-incriminating. It usually is discussed in the context of a criminal proceeding or investigation. However, the privilege against self-incrimination also applies in civil proceedings. Just because you are in a civil case rather than a criminal case does not require a person to surrender this right.

In an insurance situation, an insurance investigation is contractual in nature. Almost all insurance policies are going to contain a cooperation clause that requires the insured to cooperate with the investigation of a claim for which the insured is seeking policy benefits. Courts in interpreting the cooperation clause have universally found that the insured cannot use the 5th Amendment to avoid cooperating with the insurance company yet insist that the insurance company provide the requested coverage.

Life Insurance And Spouses

July 5, 2018 | Mark S. Humphreys

Are spouses entitled to life insurance benefits? That is a normal question in a lot of life insurance cases. Here is some law in that regard.

One spouse can designate his or her estate as the beneficiary of the policy, at the expense of the other spouse, absent any showing of actual or constructive fraud. This was made clear in the 1994, Fort Worth Court of Appeals opinion, Street v. Skipper.

The 1981, Eastland Court of Appeals opinion styled, Pilot Life Insurance Co. v. Koch, says, policies may contain provisions automatically divesting a spouse of any interest in the proceeds, if the parties are “legally separated” or divorced. Also, according to the 1987, 14th District Court of Appeals opinion styled, Novotny v. Wittner, the divorce decree may divest the former spouse of any right to the insurance proceeds. By statute, Texas Family Code, Section 9.301, a divorce invalidates any pre-divorce designation of the former spouse as beneficiary, unless the former spouse is redesignated. If the pre-divorce designation is invalidated, the proceeds go to any alternate beneficiary or to the insured’s estate. If the insurer pays the former spouse based on an invalidated designation, the insurer is liable to pay the proper beneficiary.

Subrogation

July 3, 2018 | Mark S. Humphreys

Many situations involving insurance claims also involve issues dealing with subrogation and liens. Here is a little information for insurance lawyers who might have to deal with subrogation.

Subrogation is an element of insurance law. In 1944, the United States Supreme Court in the case styled, United States v. South-Eastern Underwriters Association, determined that insurance is a form of interstate commerce subject to federal regulation. Shortly thereafter, Congress passed the McCarran-Ferguson Act, which is found in U.S.C.S., Section 1011. The McCarran-Ferguson Act granted authority to the states to regulate the “business of insurance.” Various federal laws continued to govern the “peripherals of the industry” These peripherals included labor, tax, and securities. State laws which regulated the core nature of the insurance business thereafter overrode most federal laws to the contrary. There are numerous papers written designed to analyze the myriad of state and federal statutes and cases on the subject of subrogation, from the standpoint of lawyers and in particular lawyers handling cases involving personal injury.

In an attempt to harmonize the proliferation of insurance policies and laws to protect workers, Congress passed the Employee Retirement and Income Security Act, commonly known as ERISA, in 1974. ERISA did not vitiate the McCarran-Ferguson’s grant of state regulation; it did spawn a spate of lawsuits trying to determine which state laws qualify as state regulation, which is not pre-empted by ERISA, and which laws deal with peripheral issues, which are preempted by ERISA. ERISA also recognized that some health plans are self-funded, not funded by insurance premiums, and those plans are exempt from state regulation.

Negligent Claims Handling

July 1, 2018 | Mark S. Humphreys

This may come as a surprise to many but here goes, — There is no such thing as “negligent claims handling” recognized by Texas courts.

This is re-stated by the U.S. District Court, Western District, Austin Division, in the case styled, Thomas G. Kezar and Sylvia Kezar v. State Farm Lloyds.

The Kezars home was damaged in a fire and they made a claim with their insurer, State Farm. A lawsuit was eventually filed as a result of the claim.

Commercial Insurance Policy And Leased Equipment

June 30, 2018 | Mark S. Humphreys

The 5th Circuit Court of Appeals issued an opinion regarding commercial policies that would be of interest to some businesses. The case is styled, Sierra Equipment, Incorporated v. Lexington Insurance Company.

Lexington insured LWL Management for construction equipment leased from Sierra. Sierra argues that, even though it was not a party to the insurance policy, it has standing to sue Lexington for coverage pursuant to Texas’s equitable lien doctrine. Because the lease agreement between LWL and Sierra did not require LWL to obtain insurance with loss payable to Sierra, this Court determined that the equitable lien doctrine does not apply and thus, Sierra lacks standing to sue Lexington for coverage under Texas law.

The lease agreement between Sierra and LWL required LWL to insure the leased equipment, deliver a copy of the insurance policy to Sierra , and obtain a policy in form, in terms, in amount, and with insurance carriers reasonably believe satisfactory to Sierra. The agreement did not require that the policy list Sierra as an additional insured or contain a loss payable clause listing Sierra.

Umpire’s Decision In Insurance Disputes

June 28, 2018 | Mark S. Humphreys

Insurance cases involving umpire’s are a little different. The Amarillo Court of Appeals issued an opinion on May 14, 2018, styled, Mahmoud Abdalla v. Farmers Insurance Exchange. The case deals with, among other issues, when an umpire’s appraisal award can be challenged.

This case is an appeal by Abdalla from a summary judgment in favor of Farmers. Abdalla sued Farmers over an insurance dispute resulting from water damage. The extent of the damage and insurance proceeds payable was ultimately submitted to appraisers in accordance with policy terms. An umpire appointed by the trial court eventually (1) found the appraisal developed by Farmer’s appraiser (Albright) to be the “more sound and well supported appraisal” ad (2) designated the actual cash value of the loss at $345,664.21. Farmer’s timely paid the umpire’s decision.

Abdalla filed motions to set aside the decision based on the umpire’s decision being a mistake and to appoint a new umpire.