Dallas Fort Worth Insurance Lawyer Blog

All parts of an insurance policy are important.  An insured needs to understand what is contained in any policy he has.  Texas laws assumes a person has read and understands the contents of his insurance policy.

The insuring clause of a policy in the insurance company’s agreement to provide coverage to the insured.  A policy may include several insuring clauses.

The 1997, Houston Court of Appeals [1st Dist.] stated in State Farm Lloyds v. Marchetti, that the insuring clause is the foundation of the agreement and forms the basis for all obligations owed to the insured.  Unless this clause provides coverage for a claim, it is unlikely that any other term of the policy will do so.

Insurance policies are normally going to have a declarations page.  This page will identify the insured, the policy limits, and times of coverage.  The declarations page is to show the insured what the insurance policy covers.

In determining the coverage provided by an insurance policy, always review the declarations page.  The declarations page will list the various forms and endorsements that make up the policy.  There are situations where the insurance company attaches the wrong forms to the policy.  That is why it is important to compare what is on the declarations page to what is actually attached to the policy.

The declarations page should include the following information:

According to the Fort Worth Court of Appeals opinion from 1995, styled, Truck Insurance Exchange v. Musick, insurance policies are normally issued on standard forms containing terms drafted by the insurance company.

Keep in mind that Texas has standard automobile policy forms approved by the Texas Department of Insurance.  For homeowners insurance there are three standard policies — the HO-A, HO-B, and HO-C.  In addition insurers may offer alternative policies, if approved by the Texas Department of Insurance.

As stated by the 1999, Texarkana Court of Appeals opinion, Tri-State Pipe & Equipment, Inc. v. Southern County Mutual Insurance Co., because the insurance company prepares the standard forms of its insurance policies, it controls what clauses are contained in the policies, and the insured has little or no bargaining power over the nature and extent of those clauses.  Therefore, the law places on the insurance company the burden to include in its policies the various provisions relating to the kind and extent of coverage that the law requires.

Without an insurable interest, an insurance contract is a gambling contract, and gambling contracts cannot legally be enforced.  For example, David cannot insure Paul’s house in which David has no insurable interest, betting (gambling) the house will suffer a loss.  If David could win this bet, he would receive a return far in excess of the premium he otherwise would pay, but would face no risk other than the cost of the premium.

Insurance provides well recognized opportunities for profit to an insured who deliberately causes an insured event to occur.  For example, after purchasing property insurance on Paul’s house, David might deliberately start a fire to collect the insurance.  The insurable interest requirement therefore reduces intentional losses created by one party having a disproportionate financial interest in causing a loss.  The temptation to cause loss will be reduced when an insurable interest exists.  For example, although Paul might destroy the property of an unrelated person like David for his own financial gain, he will be less willing to set fire to his own house, because of the inevitable loss of his own possessions.

The principle of indemnity means a person should not profit from an insured loss.  Most property and casualty insurance contracts are contracts of indemnity.  In contrast to a valued contract, which provides for the payment of some pre-established dollar amount, a contract of indemnity provides for payment of the sum directly related to the amount lost, subject to the limitations of the policy.  The insurer therefore indemnifies the insured for pecuniary loss to that property or activity in which the insured has a personal interest.  This is discussed in the 1963, Texas Supreme Court opinion styled, Smith v. Eagle Star Insurance Co.