August 19, 2014

Damages For Claim Denial

Mineral Wells insurance lawyers need to be able to discuss the value of a claim with a client when asked. It is often times difficult to do so. Sometimes part of the value is easy to determine while other parts are very difficult. For instance:
If a $200,000 house burns down and your insurance company denies the claim, it is easy to calculate the base value of the claim, i.e., the $200,000 for the value of the house. Losses such as mental anguish, if it can be proved the insurance company acted improperly in a knowing and intentional manner in the denial of your claim, is harder to determine.
The United States District Court, Northern District of Texas, issued an opinion in 2008, that helps determine damages as it relates to the attorney fees incurred by the claimant due to the wrongful denial of benefits by the insurance company. The style of the case is, Trammell Crow Residential Co. v. Virginia Surety Co., Inc. Here is some of the relevant information to know.
This was a case of first impression for the court. They had to determine whether a policyholder was entitled to damages under Chapter 542 of the Texas Insurance Code, also known as the Prompt Payment of Claims Act, beginning before the legal bills were submitted for payment. Trammell Crow sued its insurance company seeking a declarataion of Virginia Surety's duty to defend it in an underlying lawsuit involving claims alleging that Trammell Crow discriminated against persons with disabilities. After determining that Trammell Crow was owed a defense, the court turned to whether Trammell Crow was entitled to damages for Virginia Surety's alleged breach of Chapter 542 in refusing to provide a defense. Despite the court's determination that a duty to defend was triggered, Virginia Surety argued that Trammell Crow was not entitled to damages under Chapter 542 because Trammell Crow never submitted any legal bills or invoices for expenses incurred in defending the underlying litigation. Virginia Surety argued that without these bills Trammell Crow had not submitted information to make a final proof of loss as required under Chapter 542.
In rejecting this argument, the court looked to the original Texas Supreme Court opinion dealing with calculating attorney fees in Chapter 542 cases, Lamar Homes, and interpreted it to instruct that the invoices are only required to value the loss because the actual loss has already occurred when the defense was wrongfully refused. The court concluded that Trammell Crow was entitled to damages and interest under Chapter 542, and will allow Trammell Crow to present evidence of its damages at trial.

August 17, 2014

Insurance Claims And Subrogation

Tarrant County Insurance Attorneys need to understand how insurance claims work with subrogation issues. The Texas Supreme Court, in 2006, issued an opinion as it relates to subrogation and Personal Injury Protection (PIP) benefits. The style of the case is Allstate Indemnity Company v. Forth. Here is what the opinion says.
In this breach of contract suit, the Court considered whether an insured has standing to sue her insurance company for settling her medical bills in what the insured considered to be an arbitrary and unreasonable manner. In reversing the trial court and remanding the case for trial, the court of appeals concluded that the insured had standing even though the insured had no out-of-pocket expenses, and her health care providers had not, and now could not, collect any additional sum from her.
Because there are no allegations that the insured suffered damages or that the manner in which the insurance company settled the insured's medical expenses caused her any injury, this Court concluded that the trial court was correct to dismiss her suit, and accordingly reversed the court of appeals' judgment.
Pat Forth's daughter required medical treatment in 1997 as the result of an auto accident. The personal-injury-protection (PIP) of Forth's Allstate auto insurance policy, covered "reasonable medical expenses incurred for necessary medical services." Allstate settled Forth's medical bills for less than the actual amount billed. Forth sued Allstate for injunctive and declaratory relief, alleging that it arbitrarily reduced her bills without using an independent and fair evaluation to determine what amount of her medical expenses were reasonable. According to Forth, Allstate routinely discounts medical expenses by comparing those charges to a third-party contractor's computerized database. Allstate then offers about eighty-five percent of the medical expenses reflected in that database for the same treatment or procedure. Forth did not claim that Allstate's conduct had caused her any damage.
In the trial court, Allstate filed a motion to dismiss, arguing that Forth lacked standing because she had no claim for damages, and Allstate had not caused her any actual injury. The trial court granted Allstate's motion, and the court of appeals affirmed in part and reversed in part, holding that Forth lacked standing to seek prospective relief because Allstate no longer insured her, but that she could seek retrospective relief for any injury suffered while she was a policy holder. The court concluded that if a fair and independent evaluation of the medical bills revealed that Allstate paid less than the full amount of Forth's "reasonable expenses," then Forth could claim injury because the terms of the insurance contract required that reasonable expenses be paid.
The court of appeals relied on prior Court opinions to support its view that the insured had standing to sue her insurance company despite its settlement of her medical claims to the apparent satisfaction of the medical providers. Both cited cases held that the insurance companies' obligation to pay under the respective policies was triggered by the insured's incurrence of medical expenses and was not affected by the fact that the insured had not, in fact, had to pay those expenses. In both cases, a third party paid the medical expenses, but the respective courts concluded that such fact did not alter the obligation of the insurance company to pay under its policy. Unlike the insurance companies in the prior case, Allstate did not question whether Forth had incurred medical expenses and did not refuse to pay the medical providers. Instead, Allstate paid the medical bills according to its own evaluation.
Under Texas law, to have standing a party must have suffered a threatened or actual injury. Forth does not claim that she has any unreimbursed, out-of-pocket medical expenses. She does not assert that these providers withheld medical treatment as a result of Allstate reducing their bills, or threatened to sue her for any deficiency, or harassed her in any other manner. Moreover, Forth has no exposure in the future because limitations has now run on the medical claims. From all appearances, her medical providers have accepted the amount Allstate paid them without complaint, thereby satisfying Allstate's obligation under the policy.
Because Forth does not claim that the manner in which Allstate settled her claim caused her any injury, thus the Court concluded that she does not have standing in this case. Accordingly, the court of appeals' judgment was reversed and, without hearing oral argument, judgment rendered dismissing Forth's claims against Allstate.

August 16, 2014

Life Insurance Application

Life insurance application - Insurance attorneys need to know about the law related to life insurance applications. A 1994, Texas Supreme Court case discusses one aspect of this. The style of the case is, Fredonia State Bank v. General Life Insurance Company.
The principal issue in this case is whether an insurance company may assert the defense of misrepresentation for statements made in an application not attached to a life insurance policy.
The insured died as a result of a gunshot wound to the head. Prior to his death, he had purchased tow life insurance policies issued by General American. General American denied the beneficiary's claims for benefits. Fredonia State Bank, an assignee of one of the two policies and executor of the insured's estate, sued to collect the proceeds of the policy.
General American asserted as defenses that the insured had committed suicide and that the insured had made misrepresentations regarding his medical history, which were material to the risk assumed by American General.
The bank argued that the insured's application did not contain misrepresentations and that even if it did, the misrepresentations would not constitute a defense since the application was not attached to the policies when they were issued.
The jury found that (1) the insured did not commit suicide, (2) the medical portion of his application was not attached to the insurance policies, and (3) the insured did not misrepresent his medical history in order to obtain insurance. The trial court granted judgment for the bank. The Appellate Court reversed the trial court's judgment finding that the great weight and preponderance of the evidence was contrary to the jury's findings and that the insured had made misrepresentations in order to obtain insurance.
The Texas Supreme Court granted writ and ultimately reversed the appellate court's decision. According to the Court, the Texas Insurance Code precludes an insurance carrier from relying on misrepresentations contained in an application as a basis for denying claims, unless the application is attached to the insurance policy.
This requirement is intended to enable the insured to have the material terms of the contact at hand, so that he may correct any misrepresentations which may have been the basis of the insurance coverage.
What is relevant about this case is that it makes clear that when an insurance company alleges misrepresentation in an application as grounds for denying a claim for benefits, the application must be have been made part of the insurance contract.
Texas Insurance Code, Section 1101.003, says it clearly. "A life insurance policy must provide that the policy of the policy and the application for the policy constitute the entire contract between the parties."

August 14, 2014

Penalty For Late Payment Of Insurance Claim

Insurance attorneys in Dallas County need to be aware of the penalties that can be imposed on an insurance company for being late in paying a claim. Part of how this works is illustrated in a 2000, San Antonio Court of Appeals opinion. The style of the case is, Cater v. United Services Automobile Association. Here is the relevant information from this case.
Cater appeals the trial court's denial of her claim for statutory damages and attorneys' fees under Section 542.060 of the Texas Insurance Code. She asserts that United Services failed to pay her foundation claim inside the statutorily mandated time period, rendering it liable for the damages and fees.
In 1993, Cater filed a claim with United Services Automobile Association ("USAA") for damage to her foundation, which she believed was caused by a plumbing leak. USAA denied her claim based on its conclusion that the damage to her foundation was not caused by a plumbing leak. Cater subsequently sued USAA for violation of Texas Insurance Code, Section 542.051. In January, 1999, the parties mediated the claim and reached a settlement. The settlement agreement required USAA to pay Cater $40,000 in contract damages and required Cater to dismiss all other claims and demands she had against USAA. The agreement, however, explicitly excluded Cater's claim for additional damages and attorney fees from the dismissal requirement. Instead, the parties agreed to submit to a bench trial for a determination on her remaining issue.
On April 20, 1999, the Judge heard Cater's claim, ruled in USAA's favor, and filed findings of fact and conclusions of law to substantiate his ruling. It is from this ruling that Cater appeals. She asserts the trial court erred in granting judgment for USAA because USAA delayed payment to her. She claims this violation entitles her to recover an additional 18% of the contract claim plus reasonable attorney fees.
The Texas Insurance Code provides time deadlines that insurers must follow when responding to a claim. These deadlines are tied to the insurer's receipt of notice of a claim. The statute sets out when an insurer should act in dealing with a claim and guides an insurer's conclusion regarding a submitted claim.
The statute also deals with when an insurer should pay a claim and what happens should the insurer delay making that payment. It requires an insurer to pay the claim within five business days after the insurer has notified the insured that it has accepted the claim. If, however, an insurer delays payment for more than 60 days from the date it received all the information reasonably requested and required, the insurer must pay the claim, 18% per annum of the amount of that claim as damages, and reasonable attorney fees. This is stated clearly in Section 542.058(a). It is this damages provision under which the dispute in this case arises. According to Cater, if an insurer delays payment beyond sixty days, then the insurer is liable for damages and attorney fees. USAA, on the other hand, asserts the section applies only in cases where the insurer has not complied with the other deadlines in the statute. In other words, under USAA's interpretation of the statute, an insurer is not subject to the 18% penalty and attorney fees so long as the delayed payment is due, in fact, to a good faith denial of the claim.
A fundamental rule of statutory construction is that a court should first ascertain the legislature's intent in enacting the statute as expressed in its plain language. However, where an application of a statute's plain language leads to absurd results, we will not enforce the statute under a literal interpretation.
The plain language of the statute states that if an insurer delays payment of a claim sixty days after it has received all the information reasonably necessary to determine coverage, then the insured is entitled to recover damages as provided for in the statute.
A wrongful rejection of a claim may be considered a delay in payment for purposes of the 60-day rule and statutory damages. More specifically, if an insurer fails to pay a claim, it runs the risk of incurring this 18 percent statutory fee and reasonable attorneys' fees. In sum, State Farm took a risk when it chose to reject Higginbotham's claim. State Farm lost when it was found liable for breach of contract. Therefore, it must pay this 18 percent per annum interest and reasonable attorneys' fees.
The plain language of the statute is clear. The damages should be in the amount of 18 percent per annum of the amount of the damages, plus attorneys fees.
Cater and USAA agree that the accrual date used for calculating the statutory damages is April 20, 1994, the date upon which USAA rejected Cater's claim. Cater asserts that the damages should continue to accrue through the date a final judgment is rendered. However, she fails to take into account that the claim was paid on January 29, 1999. Therefore, Cater is entitled to 18% of the $40,000 as damages, that accrued during the time between April 20, 1994, and January 29, 1999.

August 12, 2014

Insurance Companies Can Be Forced To Pay Denied Claims

Weatherford insurance attorneys already know what lots of people are learning - that is an insurance company can be forced to pay claims they have denied when the denial is wrong. KXAN did an investigation into this issue in July 2014. Here is what their report tells us.
Most of us have to pay for some kind of insurance whether it is coverage for a car, home, or health. But sometimes the company you trust to be there when you need it most doesn't pay on a claim.
Last year Jason Brockdorf was hit by a driver who ran a red light. His car was damaged but that was not the only thing that took a hit.
"I was shocked, pretty out of it," said Brockdorf. "I got knocked in the head pretty hard. I think it was from the airbag but it could have been from my head hitting the window."
But Brockdorf says he hit a roadblock dealing with the other driver's insurance company, State Farm.
"It was a pretty big battle to get reimbursement for my lost wages, medical bills, Et cetera," Brockdorf said. "I didn't think they were acting in good faith...they weren't being cooperative at all."
Seven months after the accident, Brockdorf finally got his money from the insurance company. But his story is all too familiar for many Texans.
A KXAN investigation into insurance companies uncovered information which had never been released. It details which companies most often leave Texas consumers no choice but to turn to state regulators to get their claims paid.
Records obtained from the Texas Department of Insurance showed more than $27 million was paid out to consumers in 2013 after they went through department's consumer complaint process. That came after insurance carriers initially refused to pay.
"A lot of times it's a complex situation," says Mark Hanna with The Insurance Council of Texas, which represents companies providing home and auto insurance. "It's not black or white."
The data KXAN obtained from TDI also detailed which companies were forced to pay back money to consumers over the past five years. State Farm Mutual Auto Insurance has had to pay back more than $4.9 million in 761 cases from 2009 through 2013, the most of any auto insurance carrier.State Farm Lloyd's tops the list of home insurance carriers, paying back more than $6.1 million in 419 consumer claims initially denied over the last five years.
For health insurance carriers United Healthcare is tops, having to pay back $7,280,950.49 in 1,518 cases.
And American General had to pay back nearly $2.7 million in 39 life insurance claims it first declined to pay.
In these cases, millions of dollars had to be returned to the consumers because insurance companies did not pay out when TDI says they should have.
"There can be a lack of communication" Hanna said. "We're talking about a lot of money involved here and sometimes two sides cannot come to an agreement."
But Alex Winslow with the consumer watch dog group Texas Watch says insurance companies "routinely engage in underhanded tactics."
Winslow is highly critical of the insurance industry.
"Insurance companies have a profit motive," claims Winslow. "They have a business plan in place...to keep as much of your money in their pockets as long as they can...So the longer they drag out that claims process the more money they continue to make."
But consumers like Brockdorf say sometimes patience and persistence pays off.
No one from State Farm would talk to us on camera about Brockdorf's claim, or the amount of unpaid claims TDI has determined it should have paid in the first place. A spokesperson sent an email stating the company cannot discuss individual insurance claims, and it has a 99.9 percent customer satisfaction rate:
Regarding the TDI information, it's important to note that State Farm is the largest insurer in Texas, and our complaint ratio is one of the lowest among the large insurers in state.
In 2013, State Farm paid over $2.79 billion for more than 872,000 auto and homeowner claims in Texas, 99.9% of them to our customers' satisfaction. While we are proud of that record, there is room for improvement and we continue to work with the one-tenth-of-one percent of our customers who believe we can do a better job.
If you have a dispute with an insurance company you can file a complaint with the Texas Department of Insurance or contact an experienced Insurance Law Attorney.

August 10, 2014

Penalties For Delay In Paying Claim

Arlington insurance lawyers will usually know the penalties for insurance companies that do not promptly pay a claim. A 1997, United States 5th Circuit Court of Appeals case illustrates the penalties. The style of the case is, Higginbotham v. State Farm Automobile Insurance Company. Here is what the case tells us.
Higginbotham's Porsche was stolen on June 8, 1993, from an unsecured parking lot next to his residence. The car was recovered later that day but had been stripped of its top, seats, interior and exterior trim but was not damaged or destroyed with regard to mechanical connections, wiring harnesses or the engine. Higginbotham reported the theft to State Farm on June 9, 1993. State Farm denied his claim five months later on November 19, 1993.
Higginbotham filed suit for breach of contract, violations of the DTPA, violations of the Texas Insurance Code, negligence, breach of duty of good faith and fair dealing, and violation of the Prompt Payment of Claims Act which imposes an 18% penalty on the carrier under certain circumstances. At trial, the jury returned a verdict in favor of Higginbotham for $30,000.00, the amount of his coverage, but the Court directed a verdict in favor of State FArm on the bad faith and extracontractual claims under the DTPA and Insurance Code. Higginbotham appealed.
In a bad faith claim, the insured must establish the absence of a reasonable basis for denying or delaying payment of the claim and that the insurer knew or should have known that there was no reasonable basis for denying the claim. A bona fide controversy is sufficient reason for failure of an insurance company to make prompt payment of a loss claim. In this case, State Farm's investigation found a number of suspicious circumstances. Higginbotham was associated with Tommy Vander, the owner of Luxury Auto Unlimited. Vander had pled guilty in 1991 to felony theft of a stolen Porsche. Higginbotham began parking the Porsche in the unsecured parking lot two weeks before it was stolen. His girlfriend allegedly reported it stolen to the apartment complex four days before the alleged theft. Higginbotham's Porsche was recovered 25 miles from his residence but only 1.6 miles from Vander's shop. The car was stripped in a manner so as not to destroy mechanical connections, wiring harnesses or the engine. Based on these facts, State Farm had a reasonable basis to dispute the validity of the claim and, as a matter of law, State Farm did not act in bad faith.
Extracontractual claims under the DTPA and the Texas Insurance Code require the same predicate for recovery as bad faith causes of action. An insurance company will not be faced with a tort suit for challenging a claim if there was any reasonable basis for denial of that coverage.
The Prompt Payment of Claims Act provides that if an insurance company delays payment of a claim for more than 60 days, the insurance company shall pay, among other damages, 18% per annum as a penalty. In this case, State Farm delayed rejection of the claim for five months. An insurance company's good faith assertion of a defense does not relieve the insurance company of liability for penalties for tardy payment as long as the insurance company is finally judged liable. In this case, State Farm was judged liable on the coverage claim. State Farm did not notify Higginbotham of its rejection for five months. Therefore, it must pay the 18% penalty.

August 9, 2014

Insurance Claims And Breach Of Contract

Insurance lawyers in Texas must know how to assert bad faith claims. A 2005, Waco Court of Appeals case styled, United States Fire Insurance Company v. Fugate, is good reading for understanding how to properly assert a bad faith claim. Here is what the case tells us.
The insured and her family were injured in a collision with another vehicle. After the insured filed suit against the driver of the other vehicle, the parties settled. The insured then sued her employer's insurer, United States Fire Insurance Company (US Fire), alleging breach of the insurance contract seeking to recover underinsured and uninsured motorist (UIM) benefits under the employer provided insurance policy. The insured did not assert any bad faith claim against US Fire in her breach of the insurance contract lawsuit. After a jury trial and judgment in favor of the employee on the breach of the insurance contract claim, the insured filed a second lawsuit against US Fire asserting a claim under the bad faith statutes and seeking statutory penalties and attorney's fees on the ground that US Fire did not timely acknowledge her UIM claim. US Fire sought summary judgment in the bad faith cause of action, asserting that the claim was barred by res judicata because it could have been litigated in the first suit. The trial court granted Fugate's motion for summary judgment and awarded her statutory penalties and attorney's fees and this appeal followed.
The Waco Court of Appeals reversed and rendered judgment in favor of US Fire on its res judicata defense. The court held that the bad faith statutes of the Texas Insurance Code must be asserted contemporaneously with a breach of the insurance contract claim or be barred by res judicata. Finding that the second lawsuit for bad faith damages involved the same parties was premised upon the same claims as the breach of the insurance contract action and that the bad faith claims could have been raised in the first action because the claim for untimely acknowledgement of a UIM claim related to the breach of the insurance contract claim for UIM benefits, the court concluded that the second suit based solely on bad faith was therefore barred by res judicata.
The insurance laws can be complicated. That is why it is vital that an experienced Insurance Law Attorney be consulted when a claim is being made against an insurance company.

August 7, 2014

Insurance Company Backs Down

Parker County insurance attorneys need to keep up with events happening in the insurance legal world. An article from The Texas Tribune titled, "Insurer Drops Suit Against Tyler Widow" is worth knowing about. Here is what the article tells us.
Crystal Davis, a stay-at-home mom from Tyler, got some welcome news in her battle against an insurance company that sued to cut off the workers' compensation benefits she got after her husband was killed on the job.
Davis' lawyer called to inform her early Thursday evening that ACE American Insurance had dropped its lawsuit against her and her children. Davis' story was featured in The Texas Tribune's four-part series published this week, Hurting for Work, about the struggles people face after they or their loved ones are hurt or killed on the job in Texas.
"I feel like I'm dreaming. I'm relieved," she said. "My whole family is relieved."
Wayne Davis, a traveling sales and profit coach for Burger King, was killed in a traffic accident in September 2012 while driving to an appointment with a Burger King franchise in Coushatta, Louisiana. Like many Texans, his wife and children were entitled to receive death benefits under his employer's workers' compensation policy.
But Davis' case demonstrated that the promised benefits don't always materialize in Texas, where employees are only winning about a third of the major disputes against insurance companies in the state-regulated workers' compensation system.
Crystal Davis, a stay-at-home mom from Tyler, got some welcome news in her battle against an insurance company that sued to cut off the workers' compensation benefits she got after her husband was killed on the job.
Davis' lawyer called to inform her early Thursday evening that ACE American Insurance had dropped its lawsuit against her and her children. Davis' story was featured in The Texas Tribune's four-part series published this week, Hurting for Work, about the struggles people face after they or their loved ones are hurt or killed on the job in Texas.
"I feel like I'm dreaming. I'm relieved," she said. "My whole family is relieved."
Wayne Davis, a traveling sales and profit coach for Burger King, was killed in a traffic accident in September 2012 while driving to an appointment with a Burger King franchise in Coushatta, Louisiana. Like many Texans, his wife and children were entitled to receive death benefits under his employer's workers' compensation policy.
But Davis' case demonstrated that the promised benefits don't always materialize in Texas, where employees are only winning about a third of the major disputes against insurance companies in the state-regulated workers' compensation system.
The insurer argued in this case that Wayne Davis was not in his workday, even though he was in a company car fueled with company gas. When the dispute went to the Texas Division of Workers' Compensation, Crystal Davis beat ACE American at all three stages of the administrative process. But, under its right of "judicial review," the insurer sued her and her two children, Cash, 6, and Lucy, 3, to stop payment of the benefits.
Representatives of Burger King and ACE did not immediately return emails Thursday evening.
Davis' lawyer, attributed the sudden move to drop the lawsuit to the publicity the case generated.
"What people think matters,'' he said. "It's a different world."
Davis' lawyer theorized that ACE was emboldened to act aggressively because there is little consequence for pushing the envelope too far. He pointed in particular to a controversial Texas Supreme Court ruling that essentially eliminated lawsuits against insurance companies over so-called bad-faith handling of claims.
Davis said she was elated that her case is over but said she felt sympathy for others who are still battling it out in the workers' compensation system.
"Justice was served for Wayne. But for all of the people who have had their legitimate claims denied, my heart goes out to them," she said. "The outlook is bleak. The workers' compensation system is failing them.''

August 5, 2014

Death Benefits Denied

A Fort Worth life insurance attorney will want to know the best way to handle a situation where death benefits are denied a beneficiary. The Texas Tribune ran an article that shows how bad some situations can be. Here is what the article says.
Crystal Davis was headed to the grocery store when the text message popped up on her phone. It was from her next-door neighbor.
"Can you come home?" it said. "Something has happened."
Crystal lives south of Tyler in a tight-knit community called Flint, where neighbors watch out for one another. She headed home, wondering the whole way what trouble might be brewing.
When she pulled up to her house, Crystal noticed a police car parked across the street. Two state troopers got out and walked toward her.
It was about her husband, Wayne Davis, they said. He had been in a car accident outside of Jacksonville, about 40 miles southeast of Tyler. A distracted driver had crossed into his lane. Wayne tried to swerve, but the car was coming too fast.
They were very, very sorry.
It had to be a mistake, Crystal thought. They had left the house at virtually the same time that morning.
"I didn't believe it was him," she recalled later. "He wasn't gone very long."
Then she saw a black phone case smeared with blood in one of the trooper's hands.
Nearly two years later, the mental image of her husband's iPhone still brings her to tears. That was the moment Crystal discovered how fleeting life can be. On Tuesday morning, she kissed Wayne goodbye as he headed out the door to work. On Friday morning, she buried him.
If only her nightmare had ended there.
After Wayne died, the state ruled her husband's death a workplace fatality and awarded her family benefits under the workers' compensation system. But the insurance company is fighting the order in court. The lawyers have even sued her two young children to take away their half of the proceeds.
Crystal felt like they were adding insult to her husband's fatal injury, like they didn't know or care how hard he worked, or how much time he spent in that company car. She felt baffled and confused navigating an acronym-laden bureaucracy, which seemed to do everything but help her at her most vulnerable -- precisely what the law says it's supposed to do.
In Texas, where disputes in the workers' compensation system tend to cut the way of the insurer, critics say she is not alone.
Like most young couples, Wayne and Crystal discussed insurance coverage and retirement savings once a year or so, then quickly got back to their busy lives. If calamity struck, they figured they were covered.
Wayne, 28, had good benefits at Burger King Corp., where he made $60,000 a year as a traveling "Sales, Profit and Operations Coach." He helped franchise owners in his southeastern U.S. territory boost their performance and adhere to corporate standards.
Crystal who had just turned 30, was a stay-at-home mom, taking care of their two young children, Cash, 5, and Lucy, 1.
That all changed the morning of Sept. 4, 2012. In an instant, she became the jobless head of a one-parent family. How would she keep the house they had bought a year earlier? How would she make a living and care for the kids the way she and Wayne wanted? How would she pay for his funeral?
Crystal's mother-in-law came up with one possible answer: workers' compensation insurance. Lynne Davis and her husband, Terry, own 16 Burger King franchises in East Texas, where their son had been initiated into the restaurant business as a teenager. Lynne thought the company carried workers' comp.
Texas is the only state in the nation that doesn't require private employers to carry the state-regulated policies, so Crystal felt a surge of relief that her husband's company did. Under state law, all workers' compensation polices offered by employers must include burial expenses and partial replacement income for families of employees killed on the job. In exchange for agreeing to the terms of the state-regulated plans, employers are shielded from workplace negligence lawsuits.
That coverage seemed like a godsend for Crystal, who was facing a $9,000 funeral bill, a Christmas holiday with no sure way to buy presents for her kids and a home with mortgage payments as far as the eye could see. Two weeks after Wayne died, she went to the workers' compensation office in Tyler and filed a claim for his "fatal car accident while on the job." Then she waited. And waited.
Unwelcome news came via certified letter in early November. Burger King's insurer, ACE American Insurance Company, denied the claim. Crystal said the notice arrived one day before a deadline that would have stripped the insurer of its right to dispute the claim.
The reason the insurer gave for the denial: Wayne wasn't in the "course and scope of employment" at the time. Translation: They didn't think he was on the clock.
Crystal was stunned.
The Burger King job description for his position said he would travel "80-90 percent" of the time. Though he had a home office, he would be "assigned anywhere in the specified region based on business need." While in the car on the way to work assignments, he often participated in conference calls on his cellphone. He practically lived in the charcoal-colored 2012 Chrysler 200 that Burger King acquired for him.
If he wasn't on the clock when he died in that car, Crystal wondered, where was he?
"That's one of the hardest things to kind of swallow," she said. "They are saying he wasn't working. You know, you're talking about a man that worked and worked and worked all the time."
Citing the pending litigation, both ACE American and Burger King declined to comment for this story.
Crystal didn't know anything about workers' compensation insurance before her husband died.
After he did, she threw herself into legal research and tried to navigate the bewildering workers' compensation bureaucracy on her own. She was overwhelmed and outgunned, she said, against the deep-pocketed insurance company.
It's a common scenario. Nearly half of all claims are initially disputed or denied wholly or in part, according to state workers' compensation data. And the odds are stacked against employees when they formally dispute an insurer's denial at the state's Division of Workers' Compensation, the agency within the Texas Department of Insurance that oversees such disputes, according to state data. Crystal couldn't afford to hire a lawyer, so she sought help from the Office of Injured Employee Counsel. The state agency, which currently has a monthlong waiting list, assigned an ombudsman to her case. Together, they requested an informal benefit review conference with the Division of Workers' Compensation, the first stage of a workers' compensation dispute.
The hearing was set for Jan. 3, 2013, which meant a meager Christmas for young Lucy and Cash.
"That's what hurt my heart, that financially, I couldn't give them that -- give everything that I know we would have if he would have been home, had he been working," she said.
Because Wayne had been working in and out of his family's franchise business since he was 13, he qualified for Social Security survivor benefits even at his young age. With that and their long-term savings -- plus some help with funeral expenses from her in-laws -- Crystal was able to make ends meet while she fought the insurance company's denial.
As she slowly pulled together the evidence and legal research in preparation for her battle with ACE American, Crystal saw a ray of hope.
Under the original state law drafted in the early 1900s, an employee is deemed to be in the "course and scope" of employment when he is performing any work-related activity in "furtherance of the affairs or business of his employer, whether upon the employer's premises or elsewhere."
That would be easy to prove, she thought. Wayne's calendar showed he had planned to make an unannounced visit to the Burger King in Coushatta, La., on the day he was killed. An email from his supervisor, Debbie Salkill, indicated that he had scheduled phone calls from his car to other franchise owners in Louisiana.
"He was definitely in his workday," Salkill, who no longer works for Burger King, told The Texas Tribune.
He was driving Burger King's car, fueled with Burger King's gas. Under the state's Labor Code, an employee traveling for business reasons using transportation paid for by his employer is generally presumed to be at work.
It seemed like a slam-dunk case to Crystal and to the ombudsman assigned to her case.
At the Jan. 3, 2013, benefit review conference, the division sided with Crystal, ordering ACE to pay her a lump sum for the four months when they had paid nothing, then regular weekly payments of $787 for her and her children. (Crystal's portion continues until she remarries or dies. Her children are covered through college, if they attend.)
The insurer appealed the state agency's ruling. ACE quibbled with the route Wayne took, arguing it wasn't the most direct path to the store he was scheduled to visit. In its denial letter, ACE said Wayne's employment location "varied day to day" -- presumably contending that he wasn't at work because he hadn't reached the Burger King restaurant before he died.
The state agency didn't buy the insurer's arguments; the next month, it sided with Crystal a second time.
ACE made a last-ditch effort to cut off the payments before a workers' compensation appeals panel, the final step in the administrative hearing process. On June 3, 2013, nine months after the accident, the panel upheld the previous decisions. Crystal had aced ACE at all three levels of the administrative dispute process at the workers' compensation division.
She didn't know it, but Crystal had defied the odds. When serious disputes arise at the Division of Workers' Compensation, employees win less than a third of the time, according to data from the Office of Injured Employee Council.
Once the insurer began issuing her the weekly payments, Crystal didn't have to worry about the mortgage anymore. She could take care of the kids the way she and Wayne had envisioned.
"I was very relieved that we did win and that, you know, Wayne would be proud and Wayne would know that he worked for something and that justice was served," she said.
But on a quiet summer morning two weeks after the appeals panel decision, a man knocked on Crystal's door in Flint and handed her a stack of papers.
"You have been sued," the page on top said.
There were three citations in all -- one each for her, Lucy and Cash. ACE had sued them in state district court in Tyler, hoping to stop the payments and get its money back. Crystal had to start all over again, and this time she'd need a lawyer.
She felt light-headed and sick.
"When you get papers that they're suing your kids, that they're suing your kids for anything they've paid you and anything that you would get in the future, your heart just kind of sinks and your stomach twists," Crystal said. "I don't know anybody who would do that to a 6-year-old and a 2-year-old, you know, to take that from them."
The case has been set for trial in September, two years after Wayne's death. Crystal's lawyer, Frank Weedon of Longview, has told her not to expect a speedy resolution. He said the insurer's attorney, Scott Skelton of Lufkin, informed him he would appeal the case as far as possible, and in an appellate court system in Texas with a pro-business track record, the outcome is uncertain at best.
Skelton declined to comment, citing the ongoing lawsuit.
Weedon said he would like to countersue Burger King's insurance company for acting in bad faith -- for allegedly dragging its feet on statutorily guaranteed funeral benefits and fighting clearly established liability. But about three years ago, in a controversial 5-4 decision, the Texas Supreme Court overturned years of common law jurisprudence in Texas Mutual Insurance Co. v. Timothy J. Ruttiger, essentially eliminating that legal avenue. The court's argument: The state's Division of Workers' Compensation has the power to punish insurers that behave badly.
Mike Doyle, the Houston attorney who represented the losing plaintiff in the Ruttiger decision, said the lawsuit against Crystal and her two minor children demonstrates how far insurers can take a dispute now without fearing repercussions.
"This is a good example of the floodgates for bad behavior being more fully opened by the Supreme Court's rollback of protections," Doyle said. "If you make it harder to penalize, you're going to get more misbehavior."
That's not the view inside Texas Mutual Insurance Company, the state's largest workers' compensation carrier, which prevailed in the Ruttiger case. Without referring to any specific case, Senior Vice President Terry Frakes said misbehavior by carriers should be handled not in court but by the Department of Insurance administrative process set up to oversee such disputes.
When Texas Mutual does take claimants to court after losing at the agency level, it's because the company believes there are far-reaching legal issues that could have "major effects" on the workers' compensation system in Texas, he said.
"When we feel strongly like that, we don't hesitate to go to court, but we don't just go to court to screw somebody over," Frakes said.
The implications of ACE's lawsuit against the Davis family could be far-reaching.
If ACE is victorious and narrows the definition of "course and scope" to classic workplace settings, Texans who spend a lot of time working at home or in their cars could find their rights to compensation limited.
For Crystal, that threat is real.
About six months after ACE sued her, and more than a year after her husband's death, the insurer finally sent her a $6,000 check -- the maximum funeral allowance, which the workers' compensation division ruled Crystal was entitled to receive. Weedon said he had to threaten legal action to compel the payment. The workers' compensation division technically has the authority to punish companies for such delays, but officials could not produce any evidence that they have reprimanded the insurer.
"I can't comment on this particular case, if that was handled properly or not,'' said Workers' Compensation Commissioner Rod Bordelon, who is stepping down from the position in August. "It sounds like there may have been some problems there. If there were, it's something that we could absolutely investigate and take action against the carrier."
At Wayne's childhood home in Tyler, it's impossible to escape memories of the gregarious cut-up who loved to fish in the stocked pond behind the house, and who would climb up on the roof to install Christmas lighting displays that grew more elaborate each year.
Some of those lights now twinkle at night in the front yard, illuminating giant wooden letters spelling out his initials, W.D. His aging white lab, 'Bama -- named after his parents' home state of Alabama and his favorite college football team -- still lumbers around the acreage. Pictures of Wayne dot the walls and countertops inside.
"We all live as though he could walk through the front door at any moment," Crystal said. His parents had planned for Wayne, after his stint working directly for Burger King, to take over the family's restaurant franchise business, to become an owner of their Burger Kings and a few other chain restaurants.
"Our whole life has been Burger King," said Terry, Wayne's father.
That makes the current dispute all the more emotional. The Davises still don't know whether Burger King -- which stands to lose money over Crystal's claim since its workers' compensation policy carries a $500,000 deductible -- supports the insurer's effort to deny benefits to Wayne's family.
Burger King spokesman Alix Salyers refused to comment on the lawsuit, citing the ongoing dispute.
"Wayne was a valued member of the Burger King family," he said in a written statement. "He is missed, and because no amount of time can make up for his loss, our thoughts remain with Wayne's family and friends."
In the meantime, the state of Texas is powerless to stop the lawsuit or to remove the uncertainty that hangs like a dark cloud over the Davis family's future.
Until it happened to her, Crystal said she had no idea how hard it was for workers and their families to obtain the benefits that are supposedly guaranteed under state law -- even when they win their cases at the Division of Workers' Compensation.
"We're a middle class family all the way, and for there to be such a gap and uncertainty in our income, that's a huge, huge hole in the system," she said. "I think the policymakers need to think more about the injured and what they actually go through -- and their families go through -- than all of the dollar signs that they see.

August 3, 2014

Accidents And Tragic Situations

Fort Worth insurance lawyers will see some pretty tragic situations where a person is ill treated by an insurance carrier. The Texas Tribune ran a story talking about tragic situations in July 2014. The title of the story is, "After Catastrophic Fall, The Fight Of One Worker's Life." Here is what it tells us.
Along a street lined with warehouses on the east side of Houston, nine Mexican laborers working about 20 feet off the ground are tearing up a concrete roof with hand-made pick axes.
They are chiseling it out, one mattress-sized panel at a time, then shoving the debris onto the floor below. There's a giant pile of rubble down there, a jumble of dirty insulation, tar-covered roof decking and fire-suppression water pipes ripped from the building's interior.
To call the work hazardous would be an understatement. The workers are standing on the very roof they are demolishing, and none of them is wearing so much as a hard hat, let alone fall protection equipment like harnesses and lanyards. Technically, federal authorities require that, but the chances of a surprise inspection -- or any interference from a state government that brags about its light regulations -- are about as likely as a cool breeze on this warm October day.
Santiago Arias is acutely aware of the risks. He knows accidents can happen. Just 11 months earlier he lost his left eye while working for the same contractor who is running this demolition site. And as temperatures soar toward 90 degrees, he is struggling to see through the sweat stinging his one good eye.
But the day's work is almost done, and with any luck Arias will be back in Mexico in a few months, hopefully with enough money to finish the convenience store he's building for his family.
Up on the roof, as each section is removed, the workers retreat from its receding edge, constantly moving backward toward the remaining panels.
Arias' nephew, Jorge Luis Torres, grabs the handle of the ax and swings it down a few feet in front of them. A section of roof breaks. Another panel is dislodged and lifted.
Like he's done countless times before, Arias reaches out with his hands to snatch the concrete decking. He starts to push it off the roof. But this time, he loses his balance. He tries to regain his footing, but the treads on his boots are worn, and he slips.
Torres grabs for his uncle's arm, but it all happens so quickly. Just like with the concrete, gravity pulls Arias, and he careens into the void.
With his one good eye, Arias glimpses a piece of metal rebar jutting out across the gaping hole. He frantically grabs the thin steel rod.
And for a horrifying moment, Torres sees his uncle, 20 feet off the ground, swinging like a pendulum from the rebar until he is horizontal -- face to the sky, back to the rubble below.
Then he falls.
The story of Arias' plunge from an industrial warehouse roof on Oct. 18, 2006 is based on interviews with eyewitnesses and lawyers, court documents and Arias' own recollections.
An expert hired by Arias' lawyers in his negligence suit against the contractor described the work conditions on the job site where he fell as perhaps "the most hazardous" he'd seen in 40 years of engineering practice, according to trial testimony.
The contractor who hired Arias has denied any responsibility for accidents that happened on his job sites and said that workers on his sites were responsible for their personal safety equipment.
But safety experts and advocates for injured workers say the scenario Arias' case presents is hardly unique: An unskilled laborer, often without valid work papers, gets injured doing a dangerous and dirty job. The contractor may have a history of workplace accidents and working under various company names. There is no state-provided workers' compensation insurance or private equivalent because, unlike every other state, Texas doesn't require it. Taxpayers and charities end up paying for most of the worker's medical care. The worker and his or her family see their income and quality of life decimated.
But for the contractor, business continues as usual, and another eager laborer, often an undocumented immigrant, is standing in line to take the injured worker's place.
"You've just got an incredibly unhealthy subculture that nobody wants to talk about, that everybody wants to, you know, kind of pretend isn't happening. But it is happening," said Houston workplace safety consultant Tara Amavi, who was speaking broadly and not specifically about the Arias case. Amavi opined that "those kinds of employers are able to continue to operate, take advantage of undocumented workers, kill them, maim them, blind them and dump them, and then go down and pick up a few more on the next corner."
The precarious plight of workers who get injured or killed on the job goes unmentioned in the slick brochures and boosterish TV ads beckoning businesses to relocate and take part in the vaunted "Texas miracle."
While Texas has created more jobs than any other state over the last decade, it also leads the nation in the number of worker deaths, according to the federal Bureau of Labor Statistics. The problem is particularly acute in the Texas construction industry, where 60 percent of the workforce has never received basic safety training and one in five workers reports sustaining an injury that required medical attention, according to the report "Build A Better Texas," compiled last year by the Worker's Defense Project and researchers from the University of Texas at Austin. About 40 percent of employers in the construction business offer workers' compensation insurance, the report found.
Lawmakers have proposed making workers' compensation insurance mandatory in the construction industry, but in pro-business Texas that idea has been a nonstarter.
"We have always been concerned about singling out the construction industry," said Ned Muñoz, head of regulatory affairs for the Texas Association of Builders. After all, he said, construction is not the only hazardous business in Texas.
The federal government's Occupational Health and Safety Administration, OSHA, is the first line of defense for Texas construction workers, Muñoz added.
"They require that you have a safe workplace," he said. "It's not like we don't have anything."
In 2012, however, there was just one OSHA inspector for every 104,000 Texas workers, one of the lowest ratios in the nation.
And while OSHA does attempt to make workplaces safe on the front end, helping injured workers who don't have money or workplace insurance is not part of the agency's mission.
The absence of a social and financial safety net would become clear to Arias and his family soon enough. But for the first week after his accident, he lay unconscious in a bed at Memorial Hermann Hospital in Houston. He wasn't aware yet that he had slipped through the cracks of the Texas miracle.
He didn't know how badly his body had been mangled. Or that he was about to run up an $841,000 medical bill. He didn't know that he was wearing a diaper and a catheter, or that he would never walk again.
Arias has no memory of the fall itself. One minute he was on a hot roof on Clinton Drive, getting ready to go home for the day. The next thing he remembers is waking up in a hospital bed with tubes sticking out of his body. He thought somebody was violently shaking him, but realized later that he was experiencing involuntary nerve spasms.
For weeks he couldn't talk. All he could do was lie there, listen and think. "I heard, 'Listen, you're a tetraplégico,'" he said -- the Spanish word for paralysis of all four limbs. "You're not going to be able to move anything."
Panic and dread washed over him. "In that moment, when I realized the situation I was in, I thought about God," he said in Spanish. "I said, 'Well, God, look at me. You know what? Just take me. I don't want to be in this situation.'"
Arias grew up in southern Mexico, in the coastal state of Tabasco near the Guatemalan border. He helped his father sell fish, mangos and wild game in the streets of Frontera.
After his family moved to Mexico City, he met Remedios Ramirez, a neighbor, whom he married at age 21. They bought a house in 1987 in Iztapalapa, a large slum in Mexico City known for its theft rings, dangerous prisons and grinding poverty.
In 1999, at age 36, Arias was lured north by the prospect of better-paid work in the United States. He paid a smuggler $1,500 to ferry him across the Rio Grande from Matamoros to Brownsville. He made his way to Houston, where he bought a fake Social Security card and went to work with his brothers-in-law, Martin and Mario Ramirez, who had crossed into the U.S. before him. They helped find him a job making about $6 an hour constructing metal buildings.
Arias returned to Mexico City in 2004 after he lost a finger in a work-related auto accident and had trouble finding reliable work in the U.S.
He had saved up a little money, and began building a convenience store adjacent to his house in Iztapalapa. Arias hoped the project eventually would support his family and allow him to stay in Mexico.
But he ran out of money and decided to go back to Houston to work and save for the project.
In July of 2005, Arias again joined his wife's brothers in Houston. They were working for a contractor named Gary White, an Oregon native who quit school in the 10th grade to follow his father and grandfather into the construction business.
A review of court documents, interviews with workers and government records suggest that Arias and his brothers-in-law had stumbled into the kind of devil's bargain that unskilled laborers in low-wage jobs often encounter: They needed steady work and money. White needed cheap labor. Safety took a back seat.
When Arias began working for White, his first construction contracting company had already gone belly up. White was paying his workers as independent subcontractors through Degar Fuel Systems, Inc., which had built gas stations, according to records and interviews.
Arias and Torres, his nephew, describe their former jefe as a coffee-drinking chain-smoker with a temper, a man who liked his jobs done quickly.
"He wanted everything done quick, quick, quick," Torres said. "What he wanted was to get paid."
From his depositions, White comes off as a hard-charging businessman who has little use for lawyers and bureaucrats -- the kind of job-creating entrepreneur politicians hail in stump speeches about the Texas miracle.
White, 55, was questioned about his background and business history in two depositions stemming from lawsuits involving serious workplace accidents that happened on his watch, including Arias' catastrophic fall.
In the sworn depositions, White repeatedly denied any responsibility for accidents that happened on his contracting jobs. He said he expected his workers -- whom he paid as nonemployee subcontractors -- to wear personal safety equipment, though he didn't consider it his responsibility to provide it.
In a brief telephone conversation with The Texas Tribune in April -- the only interview he permitted -- he said he bought thousands of dollars worth of safety equipment for his workers and had the canceled checks to prove it.
The statements White gave about the safety at his worksites in his depositions were very different from the recollections of several of his workers.
Regarding a job three years after Arias fell, White told lawyers in a deposition that workers "were not allowed to be up on the building" without fall protection. White's foreman said in a deposition that none of White's subcontractors had or ever wore such equipment.
What is beyond dispute is that at least two workers were catastrophically injured on job sites where White was the contractor. For Arias, the first serious injury came in November 2005 when he says he was helping White install a large garage door on a metal building in the Houston area. A metal joint broke while they were moving a section of the door, and a piece of the iron frame came loose. It shot outward violently, striking Arias in the left eye.
Doctors at Memorial Hermann Hospital tried to save his eye, but the damage was too severe. Now, it sits shriveled and lifeless behind droopy eyelids. Arias couldn't afford the $2,500 glass eye doctors recommended.
The injury put Arias in a coma for two weeks, and sidelined him from work for several months. His $100,000 hospital bill, which included charges for a life-flight helicopter ride, went unpaid, he said.
Arias said White continued to pay him about $400 a month while he recovered.
As he convalesced, Arias remembers thinking that he was damaged goods, and that he wouldn't have many options for work to support his wife and their three children, who at the time were 7, 13 and 18.
"I said to myself, 'At some other place they will see that I only have one eye, that I can't see, and they are not going to give me a job,'" he recalled.
Regret doesn't begin to describe the way he views his fateful choice to return to work on White's job site.
"For me to go back and return to the mouth of the wolf -- that was a mistake," he said.
White's specialty in the construction business was raising roofs on industrial buildings. Workers would tear off an existing roof. Then they extended metal columns upward and put on a new one. The expanded space made the buildings attractive to lease out for the company that had hired him, GSL Investments, Inc. of Houston.
In 2006, when Arias returned to work, White was doing a roof-raising job for GSL at 5800 Clinton Drive, near the ship channel, court records indicate.
The demolition part of the job was nearing completion, and debris littered the 133,000-square-foot floor, according to interviews and court records.
All through the rubble lay dozens of red water pipes from the building's fire suppression system. When Arias fell off the roof, the back of his neck struck one of those metal pipes, fracturing his vertebrae in three places.
After Torres scrambled off the roof, he saw his uncle convulsing atop the construction debris. His broken glasses lay next to his face.
"I felt a pain in my heart. I felt like I couldn't breathe," Torres recalled. "He had already lost an eye. I wondered what he was going to do because he wouldn't be able to live like he lived before."
The next day, he said the workers were back on the roof, with no hard hats or fall protection, pulling up concrete panels just like the day before -- as if nothing had happened.
OSHA has no record of any investigations into Arias' fall, but that's not unusual. It takes more than a single catastrophic accident, or even two, to prompt a mandatory OSHA probe, according to agency rules. Businesses are required to report to the federal agency only fatalities or accidents that leave three or more workers hospitalized. OSHA officials say complaints from workers usually prompt inspections -- though the inspections are not required.
The blow to his neck fractured Arias' C-3 vertebra, the third one down from the skull. He underwent multiple surgeries, but the damage left him paralyzed from the chest down.
At first, he wanted to die. Despite his paralysis, Arias can still feel intense pain. He experiences burning sensations all over his body that, he says, feel like someone is pouring lime juice into an open wound. His joints ache and his muscles spasm violently. He constantly battles urinary tract infections, skin ulcers and insomnia. At one point, he took 26 pills a day to treat his ailments.
The financial toll on Arias' family was debilitating. For a while, White continued to pay him $500 weekly, but when Arias started talking to lawyers, that stopped, he said. Family members, including the ones still working for White, stepped in, buying everything from medicine and groceries to catheters and adult diapers.
Arias knew that family generosity wasn't a permanent solution.
He was referred to charities that serve injured immigrants like him -- people who aren't eligible for major federal disability and health care programs and have nowhere else to turn. Living Hope Wheelchair Association, which has been providing medical supplies to undocumented immigrants since 2005, got him a wheelchair.
Casa Juan Diego, a Catholic charity in Houston, helped with rent and disposable medical supplies.
Most importantly, his health providers helped arrange for a humanitarian visa for Arias' wife, Remedios. She went to her husband's side and found the strength -- from God, she said -- to embrace her challenging new reality.
"I'm the nurse. I change him, bathe him, feed him. Well, everything. I brush his teeth. It's like he's a baby," she said.
Arias can breathe on his own, although sometimes with difficulty. He has enough sensation in his right arm to wedge the joystick of his motorized wheelchair between his thumb and forefinger and stiffly move it in the direction he wants to go.
For several years after his accident, Arias took charity handouts and hawked bracelets, necklaces, belts, hats, hairbrushes and perfume at Houston's La Michoacana and Teloloapan Meat Markets.
It was demoralizing. Arias got slapped and nearly knocked out of his chair by a deranged drunkard. A gang of young men at the Teloloapan market robbed him. Then about a year ago, he decided to return to Mexico City.
In September 2013, he bought a used, wheelchair-accessible taxi. His relatives stuffed it with as many donated adult diapers and catheters as they could and drove back home.
When a reporter and photographer visited Arias at his home in January, packages of the donated diapers were stacked near crates of inventory -- sodas, snacks and other items -- waiting to be sold next door in their convenience store. It's finished now, though it hasn't been as successful as the family had hoped.
Arias' paralyzed legs were secured to his wheelchair with little strips of fabric, to keep him strapped in when the spasms hit. His wrists are twisted from a neurological condition that has frozen them in a permanent downward curve, his palms facing outward as if he's bracing for a fall that never comes.
In spite of the hardships, Arias was smiling and positive, and even managed to laugh at himself. At one point, he joked that his disabilities would make him a natural fit at a Halloween party. After spending several years in the U.S., he said he's happy to be back in his home country with his family. He has two daughters, Nallely and Miriam, and a son, Santiago Jr., the latter of whom graduated from Northbrook High School in Houston in 2012.
Arias' smile belies the expense and the immeasurable toll of the catastrophe that has befallen him. His unpaid health care bills from the two accidents that occurred while he worked for White reached nearly $1 million, he said.
Then there's the multimillion-dollar jury verdict he'll never collect.
A new attorney eager for courtroom experience, Brant Stogner of the plaintiff's firm Abraham Watkins, took White's company to court in 2008. He thought he'd at least get a splashy verdict, through probably not a big payday. He was right.
White was a no-show during the trial, and jurors awarded Arias $21 million, the largest workplace negligence verdict in Texas in 2009, according to Verdict Search, which tracks lawsuit awards. White had few resources, and his insurance policy specifically excluded subcontractors like Arias, according to Stogner and court testimony.
"Unfortunately it is common and it goes with a state that does not regulate as heavily as the other states," Stogner said.
In the end, Arias' lawyer sued White's insurance agency. They settled for a fraction of the jury award -- roughly one-half of 1 percent of the verdict amount when legal fees and court costs were subtracted.
Arias received less out of that settlement than the $125,000 that doctors estimated his care would cost in the U.S. each year for the rest of his life. A nondisclosure agreement keeps the exact amount confidential.
GSL Investments settled with Arias for $50,000 in May of 2008, records show.
Stogner said he had hoped the big verdict would "send a message" and possibly discourage unsafe working conditions in the construction business in Texas.
As a result of the lawsuit, White began working under another company name in 2007, switching from Degar Fuel Systems to White's Building Service, Inc. It was at least the third construction company White had created since 1994, according to business and court records.
Less than three years after Arias fell, another Mexican immigrant working for White on top of a GSL-owned building suffered a workplace calamity. The worker, Juan Meza, fell to his death, according to federal investigative files and court records.
A beam at the job site toppled over and struck Meza, knocking him off of a wall.
In a deposition, White said he was responsible in "no way, shape or form," and blamed the fall on Meza's allegedly shoddy welding.
Following protocol when a worker is killed, OSHA launched an investigation. Laborers at the site were not wearing fall protection equipment, the federal investigation showed. Officials concluded there were "serious" violations of federal safety laws, including White's failure to provide fall-protection equipment. The agency fined White $5,100.
In his deposition in the Meza case, White called OSHA "idiots" and promised he would never pay the fine. He claimed the welders were responsible for the safety violations.
Meza's family sued White and settled for approximately $450,000, court records show. After the accident, GSL Investments cut ties to White. Company president David Ebro said GSL now requires its contractors to carry workers' compensation insurance. He wouldn't comment about the Arias or Meza cases specifically, but Ebro called them "heart-wrenching" and said he's praying for the families of the two workers.
As for White, his last company, White's Building Services, forfeited its corporate charter and is no longer in good standing with the Texas secretary of state's office, records show.
In a few passages in his depositions, White expressed sympathy for the accident victims even though he repeatedly said he was not at fault.
Looking back on the Meza incident, White said he felt bad for the welder's family, including a young son who had been left without a father.
"I feel bad when any human loses a finger," White said. "I'm very sensitive in that aspect."
In another deposition, he called Arias a "very, very good guy," though in his brief telephone interview he said Arias only had himself to blame for "throwin' some concrete the wrong way."
Arias said he never saw White again after he was paralyzed. After all these years, he wishes he could tell his former boss to "be a little more humane with people."
His wife thinks the whole construction ecosystem, a key driver of the Texas miracle that politicians tout, could use a little more humanity.
"After all of the work he did, what they did to him was very cruel," she said. "In construction, it's the Mexicans who are doing all the work. And when they can't work anymore, nobody helps them. They don't pay them. They just discard them.

August 2, 2014

Life Insurance And Tragic Situations

Dallas life insurance attorneys will run across tragic situations in their legal practice. The Texas Tribune has published an article describing some of these situations. It is titled, "Behind Texas Miracle, A Broken System For Workers." Here is what it tells us.
Drive almost anywhere in the vast Lone Star State and you will see evidence of the "Texas miracle" economy that policymakers like Gov. Rick Perry can't quit talking about.
From the largest U.S. refinery in Port Arthur to the storied Permian Basin in West Texas, Big Oil is back. In formerly depressed South Texas, gas flares from the fracking boom can be seen from outer space.
Toyota is moving its North American headquarters to suburban Dallas. And in the once-laid-back university town of Austin, it's hard to find a downtown street without a construction crane towering overhead.
This hot economy, politicians say, is the direct result of their zealous opposition to over-regulation, greedy trial lawyers and profligate government spending. Perry now regularly recruits companies from other states, telling them the grass is greener here. And his likely successor, Attorney General Greg Abbott, has made keeping it that way his campaign mantra.
It's hard to argue with the job creation numbers they tout. Since 2003, a third of the net new jobs created in the United States were in Texas. And there are real people in those jobs, people with families to feed.
There's something about the thriving economy, though, that state leaders rarely mention: Texas has led the nation in worker fatalities for seven of the last 10 years, and when Texans get hurt or killed on the job, they have some of the weakest protections and stingiest benefits in the country.
While Texas has a Division of Workers' Compensation, it is the only state that doesn't require any private employer to carry workers' compensation insurance or a private equivalent, so more than 500,000 people have no occupational benefits when they get injured at work. That means they often rely on charities or taxpayers to pay for their care.
Most Texans who are outside the workers' comp system -- more than a million people -- do get private occupational insurance from their employers. But those plans aren't regulated by the state and can be crafted to sharply limit employees' benefits, legal rights and health care choices. Only 41 percent of the plans include death benefits, for example, according to state surveys.
Then there's the state-regulated workers' compensation system, which covers 81 percent of the Texas workforce. On paper, the policies look great: They all include death benefits, partial income replacement for employees too hurt to work and lifetime medical benefits for serious injuries.
But for thousands of workers, the promised benefits never materialize. Nearly half of all employee claims are initially denied or disputed in whole or in part, and when those denials blossom into a major disagreement before the Texas Division of Workers' Compensation, workers lose most of the time, according to state data.
"They throw these workers away like tissue paper. They're nothing more than a used Kleenex," said Joe Longley, an Austin employment attorney who served as chief of the consumer protection division of the attorney general's office in the 1970s. "We don't provide for the workers. We provide for the businesses."
Workers' Compensation Commissioner Rod Bordelon has a different view. He calls the state-regulated insurance program a "terrific system," and describes a series of positive trends: Claims are down. Rates for coverage are down. Fewer injuries are occurring in Texas and the nation. And within his Division of Workers' Compensation, enforcement actions against insurers that don't pay on time or unfairly deny claims have risen.
"I know I'm selling the miracle here, but it's true," said Bordelon, who is stepping down from his post in August. "I think we're trying to do the right thing."
Workers' compensation insurance sprang up in the U.S. in the early 1900s as a social contract of sorts -- a "grand bargain" between employers and workers. In exchange for their promise to take care of employees who get hurt, employers gain fairly broad immunity from workplace negligence lawsuits.
While every other U.S. state eventually required most private employers to carry workers' compensation insurance, Texas never did. Here, employers are permitted to "go bare," meaning they can roll the dice, purchase no insurance for workplace mishaps and hope nothing bad happens.
Unfortunately for Mexican day laborer Santiago Arias, an undocumented immigrant, something bad did happen: three times. He got a finger chopped off in a work-related car wreck in 2001, lost an eye in a construction accident in 2005 and, in October of 2006, was paralyzed from the chest down after falling off a roof.
After racking up over $800,000 in unpaid hospital bills from the 2006 accident, Arias sued his boss. Doctors said his care would cost $125,000 every year for the rest of his profoundly disabled life. The payout he eventually got from the lawsuit didn't even cover the amount he'd need to spend on health care for one year.
When employees like Arias get hurt, they generally receive care from public hospitals, private charities or, if they're eligible, federal disability programs. This further shifts costs -- away from employers who weren't paying taxes or occupational insurance premiums on behalf of their workers in the first place, and onto taxpayers and communities.
Neither the federal government nor hospitals have reliable figures on the percentage of unpaid urgent care or long-term disability costs attributed to workplace injuries, but study after study has shown a link. One found that in Texas, less than half of work-related injuries are paid for by workers' compensation insurance, the lowest among the 10 states studied.
"It's not just a bad, rotten apple. The barrel is rotten," said Francisco Argüelles, director of Living Hope Wheelchair Association, the Houston charity that gave Arias his wheelchair. "When the workers literally break their backs building our houses, the contractors just leave them there."
While many states have created agencies that police workplace safety, Texas leaves that up to the federal Occupational Safety and Health Administration -- and the state has one of the lowest inspector-to-worker ratios in the country.
State law does require the Division of Workers' Compensation to operate a 24-hour telephone hotline so employees can report unsafe conditions around the clock. But it's only staffed during weekday business hours, and officials recently acknowledged that the after-hours voicemail had been disabled for an undetermined period of time.
Bureaucrats are also allowing most employers outside the workers' comp system to ignore the handful of rules designed to shed light on their coverage status and safety records.
Statistics buried in reports produced by the Division of Workers' Compensation, which falls under the Texas Department of Insurance, show that more than 90 percent of employers without workers' compensation are flouting requirements to notify the state about their opt-out status.
Bordelon, the workers' compensation commissioner, said most employers who opt out of the system simply don't know they have a duty to report their status. One possible explanation for that could be the agency's timid enforcement record.
The division can fine employers that fail to report -- and there are tens of thousands of them -- up to $25,000 a day until they comply. From 1992 through 2008, the state initiated only seven enforcement actions against such violators, according to division records. After issuing warning letters a few years ago, Bordelon began fining noncomplying employers in 2012, generally issuing penalties in the $500 to $1,500 range.
All told, the division has levied a little over $80,000 for reporting violations since 2009, officials said, representing a tiny fraction of the total fines during that period. The division could not identify any instance in which it had levied the maximum fine.
"A bigger fine would get somebody's attention," Bordelon acknowledged, adding that at some point officials will stop allowing so many employers to wriggle out of their responsibility by declaring ignorance of the law.
"We're going to start hitting them with bigger and bigger penalties, absolutely," he said.
Random audits of these nonsubscribers -- the term for individuals or companies that do not subscribe to workers' compensation insurance -- suggest that even the employers that file opt-out notification reports significantly understate injuries. Opt-out companies with five or more employees are supposed to tell authorities how many lost-time injuries and fatalities they have, but a quarter or more contacted by the workers' comp division in recent years failed to report recordable injuries, legislative reports show.
A review of online enforcement reports turned up a single $1,500 fine, from 2012, tied to an explicit violation of the requirement to report injuries.
Bordelon, who oversees the compliance efforts, downplayed the significance of the reporting failures, saying the state focuses on employers that do carry workers' compensation insurance because that's where its true regulatory power lies.
"If you're talking about reporting by a nonsubscriber, that's not going to help that particular injured employee that works for that employer one way or the other" he said.
Patricia Zavala, employment and legal services director for the Workers Defense Project, which advocates for low-income workers, called Bordelon's statement "shocking." She said if employers thought the state was paying attention to their safety records, they would be more careful and less willing to cut corners to save a buck.
"What's the point of having the law if you're not going to enforce it?" she said.
Like clockwork during biennial legislative sessions, Texans tell lawmakers their horror stories about on-the-job accidents that occurred while they or their loved ones worked for an uninsured employer. That prompts a predictable round of legislative hand-wringing about the voluntary nature of workplace insurance in Texas.
But opposition from politically powerful nonsubscribers is so fierce that even modest attempts at reform fail.
Three years ago, state Rep. Paul Workman, R-Austin, tried to pass legislation making workers' compensation mandatory in the construction industry. Some 40 percent of employers don't carry it, according to a study jointly compiled by the Workers Defense Project and researchers at the University of Texas at Austin.
The bill went nowhere.
"We live in a state which prides itself on fewer government regulations, and some see mandatory work comp as just another government regulation hampering business," said Workman, founder of an Austin construction company.
More than two-thirds of the employers that opt out of workers' compensation offer some occupational benefit package in lieu of the state-regulated plan. The private alternatives generally save employers 40 to 80 percent on insurance premiums, and the business lobby has fought tooth and nail to keep that option.
Among the ranks of nonsubscribers are some of the largest and most recognizable employers in the state, including Wal-Mart, Costco, H-E-B, Home Depot, Lowe's, AutoZone, Christus Health, James Avery Craftsman and Tractor Supply. The state does not require them to submit data about their unregulated occupational benefit packages.
The opt-out crowd vigorously fought a bill last year that would have compelled such reporting. When an incredulous lawmaker asked Margaret Greenshield what harm would befall members of her Texas Alliance of Nonsubscribers by being more transparent, she suggested it would lead policymakers down a slippery slope toward more government control.
"What would the data be used for?" Greenshield, chairwoman of the group, asked at an April 2013 hearing. "Possibly look at doing mandatory workers' comp?" The bill died shortly thereafter.
Richard Evans, the head lobbyist for the alliance, said nonsubscribers already provide various data to state and federal authorities and don't support new initiatives that would increase employers' costs.
Evans said injured employees working for nonsubscribers often get quicker and better care than the workers' compensation system delivers. And employers that opt out of the state-regulated system lose the protection from lawsuits that workers' compensation subscribers have, he said.
Suing an employer in Texas -- even one that opts out of workers' compensation coverage -- is easier said than done, however. Employers that provide private occupational insurance make it hard, if not impossible, to sue them in the fine print of policies that all employees must sign as a condition of employment.
A 1998 Texas Supreme Court ruling, Texas Mexican Railway Company v. Bouchet, also cleared the way for employers that don't carry workers' compensation to terminate injured workers without fearing a state retaliatory firing lawsuit. It's still illegal for employers in the workers' compensation system to retaliate against a worker for pursuing an injury claim. But the Bouchet decision -- authored by then-Justice Abbott, now the leading 2014 contender for Texas governor -- removed that prohibition for employers that don't carry workers' comp.
Since the Bouchet ruling, Lockhart employment lawyer Paul Schorn said he has quit taking retaliatory firing cases from injured Texans not covered by workers' compensation policies.
"You're allowed to fire those people," he said. "It's not right, but it doesn't break any law."
Federal lawsuits are sometimes possible, but they are far more difficult to successfully wage, he said. Schorn still finds plenty of business within the workers' comp system, where he said post-injury dismissals are not uncommon.
While workers' compensation insurance can be a lifesaver for employees who have nothing else to rely on, people who have tried to navigate the system, particularly those who can't hire a lawyer, have their own horror stories.
In the workers' compensation system, private insurance companies still write the policies, but all of them must cover the benefits spelled out in state law.
If there's a dispute -- about doctors, the extent of the injury, whether the employee was on the clock -- the insurer and the employee can either work it out informally or take it to the Division of Workers' Compensation, which runs a court-like system with hearing officers who settle disagreements.
In most injury cases -- a little more than 90 percent -- the parties resolve the issue informally. Bordelon, a Perry appointee, says that's because he has encouraged the two sides to work out their differences. Advocates for injured employees say workers often just give up when insurers deny their claims.
And deny they do: Over the last five years, insurance companies have denied in whole or in part about 45 percent of claims, according to unpublished data obtained by The Texas Tribune. (The word "denial" does not appear in the division's 2012 biennial report to Texas lawmakers, but the data was provided upon request.)
Employees who do seek a formal contested case hearing are losing to insurance companies in overwhelming numbers. Overall, employees were winning less than a third of their issue disputes in these major cases in the first half of fiscal year 2013, compared to about 48 percent in fiscal year 2008, according to state figures compiled by the Office of Injured Employee Counsel (OIEC).
Employees who hire lawyers to help them navigate the bureaucracy perform slightly better than those who rely on a free "ombudsman" from OIEC, but it's an uphill climb for the worker either way, particularly on the key disputes that determine income benefit levels or the seriousness of an injury.
"When I say the system is broken, it is broken whenever only 29 percent of the workers with serious issues get their benefits," said OIEC chief Norman Darwin.
Sometimes insurers cut off benefits years after an injury by hiring a "peer review" doctor to review an injured worker's records and dispute the claim. Then it's up to the worker to prove all over again that he or she sustained an injury, even if the insurer originally accepted the injury as work-related.
An insurer can also categorize what the worker believes is a serious injury as a bruise or "sprain-strain," hiring doctors to bolster the finding. In these "extent of injury" disputes, insurers are winning about 70 percent of the time, state figures show.
Even when claimants beat the odds and win their disputes at an administrative hearing, they sometimes face "judicial review," meaning the insurer can take them to state district court. Workers can file such challenges too, but it takes money to wage a lawsuit.
After Crystal Davis' husband died in 2012 in a company car near Tyler, on the way to what his supervisor said was a work assignment, the state awarded her death benefits. Now, the insurer has sued her and her minor children to take the benefits away.
"It's such a twisted system to weed through," she said. "Anybody that does have a job and could be covered under workman's comp really needs to think about how they are covered, and if they are covered, and how much they're willing to fight for what they think they're covered by."
Bordelon said cases that wind up in a formal hearing typically involve more complicated issues with medical evidence that can be difficult for workers to navigate. But he said the system was generally fair to workers.
"Overall, the system is a terrific system for all participants," he said. "We have greater safety programs, we have fewer claims, fewer injuries, fewer disputes that come before us."
Texas Mutual Insurance, the largest workers' compensation carrier in Texas, said insurers have no incentive to delay care to workers or tie up their cases because that requires expenditures on legal fees and can trigger administrative fines from the state.
"I have an enormous faith in the adjusters here," said Mary Nichols, the top lawyer for the company. "We really want to do the right thing. We like our reputation as a high compliance company."
When insurers don't do the right thing, though, claimants can do little except ask the Division of Workers' Compensation to punish them. Two years ago, in the landmark case Texas Mutual Company v. Timothy J. Ruttiger, the Texas Supreme Court eliminated "bad faith" lawsuits brought against workers' compensation carriers in a 5-4 decision.
The court argued that the Legislature intended for state bureaucrats -- not plaintiffs' lawyers -- to punish through fines and administrative actions any insurance companies that behave badly or process claims unfairly.
Former state Sen. John Montford, D-Lubbock, included a provision in his 1989 workers' compensation overhaul that allowed lawsuits for bad faith as "fallback" protection for workers in case insurers went too far. He said the Ruttiger ruling was a stretch.
"Had we intended to repeal that provision on bad faith, we would have taken it out," he said.
Bordelon, for his part, said he welcomes the enforcement role invested in the workers' compensation commissioner. There's no specific administrative violation for "bad faith" actions, but he said the agency is cracking down on insurer misdeeds and now levies more than $1 million in fines a year, most of them targeting insurance companies.
"Even before Ruttiger we've stepped up enforcement efforts in the division for all kinds of violations," he said. "We are penalizing more and more carriers for inappropriate denials."
Critics say they aren't seeing much restraint from insurers. With such a large swath of the workplace unregulated, and a pro-insurer bent in the slice of it that is, they say rank-and-file workers are taking on most of the risk these days in the land of the Texas miracle.
Schorn, the Lockhart employment attorney, shrugged when asked how Texans could prevent a workplace accident from turning into a legal or medical nightmare.
"Don't get injured. Don't get anybody mad at you. Don't let anybody misunderstand you. Don't be in the wrong place at the wrong time," he said. "I really can't think of any way that someone can protect themselves from this anymore than you can protect yourself from a lightning strike. It's just, if you work in Texas, it can happen to you."

July 31, 2014

Loss Of Use - Another Opinion

Attorneys handling insurance cases will run into situations dealing with "loss of use" claims. The Waco Court of Appeals issued an opinion in June of 2014, that is worth reading. The style of the case is, American Alternative Insurance Corporation v. Robert Davis and J & D Towing, LLC. Here is relevant information from that case.
The crux of this case involves whether a chattel owner should be compensated for measurable loss-of-use damages suffered when the owner's chattel is totally destroyed and the owner is unable to replace the chattel or obtain a substitute immediately. The dispute arises from an automobile accident between Robert Davis and Cassandra Brueland that occurred in Huntsville, Texas on December 29, 2011. At the time of the accident, Davis was driving a wrecker owned by his business, J & D. It is undisputed that Brueland was at fault for the accident and that the wrecker was rendered a total loss and unusable as a result of the accident. The only issue submitted to the jury pertained to J & D's damages for the loss of use of its wrecker.
At trial, Davis testified that the wrecker in question was a 2002 Dodge 3500 with an 806 Vulcan wheel-lift unit on the rear. Davis stated that this was J & D's only wrecker. Davis did not replace the wrecker until the second week of March 2012 because he claimed that he was financially unable to purchase a replacement wrecker.
Accordingly, J & D was unable to continue operations for a period of approximately four months.
In explaining the delay in replacing the wrecker, Davis noted that Brueland's insurance company "low-balled" him on the value of the wrecker. After several rounds of negotiations, J & D finally settled its claim against Brueland's insurance company for her policy limit of $25,000, which was more than the appraised value and purchase price of the wrecker. Afterwards, J & D made a claim for loss-of-use damages under its underinsured-motorist policy with AAIC, which had a policy limit of $85,000. AAIC denied J & D's claim and ultimately cancelled the policy. This lawsuit followed.
With regard to damages, Davis stated that the primary income of J & D comes from "repossessions; city rotation, which is through HPD of the City of Huntsville; and my private property tow aways and private calls as well, but the primary would be rotations--rotations, repossessions and private properties." As a result of the accident, Davis was forced to turn down dispatch calls from the Huntsville Police Department. Davis also noted that the accident prevented J & D from fulfilling contractual repossessions for Capital Asset and Recovery and other tows requested by private parties. After explaining his calculations, Davis asserted that J & D lost between $27,866.25 and $29,416.25 from the time of the accident until the wrecker was replaced in March 2012.
At the conclusion of the evidence, the jury returned a verdict in favor of J & D in the amount of $28,000. The trial court remitted the verdict to $22,500 and entered a final judgment on May 21, 2013. Subsequently, AAIC filed, among other things, a motion for judgment notwithstanding the verdict (hereinafter "JNOV"), arguing that the verdict violated Texas law regarding loss-of-use damages.
Texas law distinguishes between property that was damaged to the point of being totally destroyed and damaged property that can be repaired. For decades, Texas courts have held that, in a suit for damages for personal property that has been totally destroyed, the proper measure of damages is the fair market value of the property at the time it was destroyed. In other words, a chattel owner can recover only the market value of the property, not loss-of-use damages, in a total-loss case. On the other hand, when personal property, such as a vehicle, is damaged but repairable, the owner may recover the cost of repairs and damages for the loss of use of the vehicle.
In the instant case, it is undisputed that J & D's wrecker was a total loss. In this case, the jury was not asked whether AAIC or Brueland's insurer "unreasonably" delayed paying a claim. Instead, the jury in this case was asked a single question pertaining to loss-of-use damages. The court believed that the determination of unreasonable delay would be a fact question for the jury to answer--something that was not done in this case.
A complete reading of this case is necessary to understand the reasoning used to reach the outcome decided upon.

July 29, 2014

Homeowners Policy And Fire

Insurance law attorneys will one day see a claim wherein the insurance company is denying a fire loss by asserting that the fire was the result of arson by the homeowner. The Houston Court of Appeals [14th Dist.] issued an opinion in a case wherein that denial occurred. The style of the case is, American Risk Insurance Company, Inc. v. Ahmad Abousway and Ibrahim Abousway. Here is the relevant information from that case.
Ahmad and Ibrahim Abousway had a homeowner insurance policy with American Risk Insurance Company, Inc., insuring a home the two brothers bought together in early 2008. The policy included coverage for fire loss. Following a 2010 fire that rendered the home uninhabitable, the Abousways submitted a claim for losses under the policy. American Risk hired a fire expert to investigate the fire. Based on his findings, American Risk refused payment of the claim until further investigation had concluded.
The Abousways sued American Risk, asserting claims for breach of contract and violations of chapters 541 and 542 of the Texas Insurance Code. American Risk answered the suit, asserting that the fire was an act of arson, thereby voiding the policy. The case was tried to the bench.
On October 22, 2012, the trial court signed a final judgment in favor of the Abousways, finding that American Risk was liable for breach of contract and for violating provisions of chapters 541 and 542 of the Texas Insurance Code. As a result of American Risk's breach of contract, the trial court awarded the Abousways $200,000 in insurance benefits for the structure, $37,317.61 in benefits for lost personal property, and $72,509.88 in statutory penalties. In addition, the trial court awarded the Abousways attorney's fees of $115,537.89 under chapter 541 of the Texas Insurance Code.
Arson is an affirmative defense to a civil suit for insurance proceeds from a loss resulting from a fire. To establish arson as a defense, the insurer must show by a preponderance of the evidence that the insured set the fire or caused the fire to be set. ften, parties attempt to prove arson by circumstantial evidence that the fire had an incendiary origin and that the insured had an opportunity and motive to set it.
American Risk asserts that testimony from Ahmad Abousway demonstrates his motive and opportunity to set the fire. Ahmad testified that, at the time of the fire, he and his brother were behind on several mortgage payments and the electricity to the home had been disconnected for lack of payment. He testified that the house was not being remodeled, and he did not cook anything on the morning of the fire. Ahmad was at a local coffee shop with his dog when he learned of the fire from a neighbor. Although Ahmad testified that their living room had several couches and a large-screen television, the television was not present after the fire. Additionally, Ahmad's father's "Hummer" automobile was parked across the street. The record reflects that there were no signs of forced entry, and Ahmad testified that he locked the door to the house on the morning of the fire.
Furthermore, American Risk contends that evidence from its fire expert and its senior claims examiner established the fire's incendiary origin. Richard Benson, American Risk's cause and origin expert, concluded that the fire was an "incendiary act," evidenced by multiple areas of origin and the possible use of petroleum distillates as accelerants. Benson smelled strange odors in several places that, based on his experience, smelled like charcoal starter fluid or lacquer thinner. Four places in the home were tested for petroleum distillate, and three tests yielded positive results. Benson also testified that he noticed the gas burner knobs on the stove were missing, and he suspected the burners may have been used to help start the fire. When Benson investigated the house, he did not see the large screen television. The record also reflects that pamphlets for prospective tenants for other residences, which American Risk asserts demonstrate the Abousways' plans to move, were found among the fire-damaged remains. Eduardo Schleh, American Risk's senior claims examiner, testified that he thought the results of the investigation suggested arson.
The trial court could have concluded that American Risk failed to prove arson because the fire's origin was not incendiary. Although Benson, in expert testimony, concluded that the fire was an incendiary act, the trial court was not bound by his conclusion because his findings were based more on the lack of evidence for alternative explanations than direct evidence supporting his theory. Eduardo Schleh testified that his conclusions were based on the Benson report, but Schleh was only a fact witness, not an expert witness.
Given the uncertain nature of this testimony, the trial court could have concluded that American Risk failed to prove by a preponderance of the evidence that the fire had an incendiary origin.
Alternatively, the trial court could have determined that American Risk failed to prove that the fire was set or caused to be set by the Abousways. On cross-examination, Eduardo Schleh testified that he was not accusing any particular person of causing the fire. In a deposition, Schleh stated he did not have any information or evidence suggesting that the Abousways were involved in setting the fire, fraudulently concealed information about the fire, or gave false statements about the fire. Similarly, Richard Benson testified that his purpose in investigating the fire was to determine the fire's cause and origin, not to determine who set the fire. Although Benson testified that lab results showed petroleum distillate in three of four areas tested, none of the areas with the positive results actually burned; the only sample taken from an area that actually burned tested negative. The presence of any chemicals was explained by Ahmad, who testified that he stored turpentine and mineral spirits in his garage as part of his flooring business. Ahmad explained that the prospective-tenant pamphlets actually belonged to his girlfriend, who subsequently moved into an apartment. At the time Benson investigated the house, he observed the stove burners in the "off" position, and admitted he did not have any evidence showing the burners were in the "on" position at the time of the fire. Finally, Benson did not investigate the house until seven days after the fire, and admitted he was unsure if anyone else had been in the house.
Viewing the evidence in the light most favorable to the verdict, this court held that the evidence would enable a reasonable and fair-minded factfinder to conclude that American Risk failed to prove by a preponderance of the evidence that the fire was deliberately set or that the Abousways set the fire or caused the fire to be set. Thus, the evidence is legally sufficient to sustain the trial court's verdict.

July 27, 2014

Prompt Payment Penalty Calculation

Texas insurance law lawyers need to be able to calculate how the Prompt Payment Act when calculating damages. A 2008, Fort Worth Court of Appeals case is good to read for guidance. The style of the case is, GuideOne Lloyds Insurance Company v. First Baptist Church of Bedford. Here is some of the relevant information.
First Baptist brought suit against GuideOne for hail damage to the roof of its church building. GuideOne's engineer concluded the roof had to be replaced and could not be repaired. GuideOne solicited an estimate to repair the roof anyway, and the church obtained an estimate for the replacement cost, including a statutorily required insulation upgrade. GuideOne agreed to pay only its repair estimate and did not include any cost for the required insulation upgrade. The jury awarded the church approximately $286,000 for the covered losses, $60,000 in damages on the church's bad faith claim, and $30,000 in compensatory and $55,000 in exemplary damages for a knowing violation, along with $100,000 in attorneys' fees, and $188,000 based on the 18% interest penalty under the Prompt Pay Act for untimely payment of claims. The jury found that GuideOne had made an unconditional tender of $155,000 to the church after the church had filed suit. GuideOne argued that the trial court erred in disregarding the jury's finding regarding its unconditional offer and that the interest penalty should not have been calculated without subtracting the $155,000 that the jury found it had unconditionally offered after the suit was filed. GuideOne also challenged certain questions on the jury charge as erroneous.
This appeals court held the trial court erred in disregarding the jury's finding that GuideOne had unconditionally offered $155,000 to settle the claim because there was some evidence to support the jury's finding. In applying the offer to arrive at a new interest calculation, the court applied the $155,000 tender first to the accrued prejudgment interest on the amount of the coverage with the balance applied the principle coverage amount owed, and then use the adjusted principle to calculate the 18% interest penalty for untimely payment. The court rejected GuideOne's argument that First Baptist had not received a finding on the accrual date for its Prompt Pay claim because the accrual date was undisputed and need not be submitted to the jury.
With regard to the jury charge issues, the court found that submission of multiple alternative definitions of an "unfair or deceptive act or practice" was harmless even if erroneous, and that a question on "false, misleading or deceptive" acts was not duplicative of the question about "unfair or deceptive acts or practices." Other challenges to the jury's findings were not erroneous because the judgment was not based on the challenged findings and otherwise waived its challenges to the jury charge.

July 26, 2014

Insurance Kickbacks To Banks

Texas insurance law attorneys need to keep up with what is happening in the world of insurance. The Washington Examiner ran an article in June 2014 that is interesting. The article is titled "US Weighs Lawsuits On Alleged Insurance Kickbacks." Here is what the article tells us.
The government is considering suing banks and other mortgage servicers over alleged insurance kickbacks that may have cost government-controlled mortgage companies Fannie Mae and Freddie Mac hundreds of millions, according to an internal federal report.
The agency responsible for guarding the mortgage giants' finances told its inspector general's office that it will decide over the next year whether to sue.
Fannie Mae and Freddie Mac, which have been under the agency's conservatorship since 2008, lost an estimated $168 million from the fees in 2012 alone, according to the report.
The Federal Housing Finance Agency did not accept that figure. But the agency said in response to the report that it "does not object" to the recommendation that it consider suing.
The FHFA barred banks and other mortgage servicers from collecting payments from insurers on June 1. But the agency does not normally discuss prospective litigation and has not previously indicated that it might consider suing over past misbehavior.
Should the agency decide to sue, the cases could reopen a controversy over how the biggest banks profited from what is known as "force-placed insurance."
This high-cost version of property insurance protects the homes of uninsured borrowers. Banks typically buy it when a borrower falls behind on mortgage and insurance payments.
After the 2008 housing bust, force-placed insurance ballooned into a $1 billion-a-year industry.
According to a 2012 investigation by New York's Department of Financial Services and private lawsuits, large banks and insurers colluded to inflate the price of force-placed insurance and split the profits.
Insurers paid banks for referring business. Struggling homeowners and mortgage investors such as Fannie Mae and Freddie Mac bore the cost in the form of higher insurance premiums, often many times the price of normal homeowners insurance.
Because insurance kickbacks are illegal, major banks and insurers allegedly contrived to mask the payments as legitimate business transactions.
The FHFA inspector general's report did not name specific institutions. But some banks, including JPMorgan Chase, Wells Fargo and Citigroup, set up insurance agencies to accept supposed commissions from the two dominant force-placed insurers, Assurant and QBE.
But as New York and private plaintiff's attorneys separately uncovered, these bank-owned insurance agencies were little more than empty shells.
In one example, JPMorgan's own employees stated in court documents that a bank-owned insurance agency did not employ a single insurance agent. In other instances, insurers rewarded banks through generous reinsurance deals or simple, lump-sum multimillion-dollar payments, the state found.
In the wake of New York's investigation, other state probes and private suits, many of the largest mortgage servicers, including JPMorgan, Wells Fargo and Citigroup, renounced commissions in 2012 and 2013.
Those banks and other mortgage servicers that might be subject to such suits either declined to comment or did not immediately respond to telephone calls and email messages seeking comment on the threat of litigation.
Consumer advocates, who have pressed the FHFA to be more aggressive on force-placed insurance, praised the internal report and the agency's declaration that it would consider the merits of legal action.
"The report lays out clearly what happened, and it proposes going after the damages done to the (government sponsored) enterprises," said Robert Hunter, director of insurance for the Consumer Federation of America.
Hunter, a former Texas insurance commissioner who has served as an expert witness in force-placed insurance cases, said that if the FHFA sues, "it will encourage private lawyers to go after the damages to regular people who paid excessive premiums."
Over the past three years, mortgage servicers and their force-placed insurers have paid out $674 million to settle such cases, preventing a single one from reaching trial. Last September, JPMorgan and Assurant reached the biggest single settlement, a $300 million payout.
According to New York's Department of Financial Services, JPMorgan Chase took in more than $600 million from force-placed reinsurance deals since 2006.