Dallas Fort Worth Insurance Lawyer Blog

Policyholders in Arlington, Aledo, Farmers Branch, Grand Prairie, De Soto, Lancaster, Fort Worth, Mansfield, Weatherford, or any other town in Texas might have the following question. What happens if I am in an accident when I am out of state? Or they might ask, what happens when someone from out of state has an accident with me in Texas when they are at fault?
Let's consider the last question first. What happens when someone from out of state has an accident in Texas when that out of state person is at fault in the accident? The only part of an extensive answer to this question that is relevant is this:
In a state like Oklahoma, who has minimum policy limits that are less than the minimum limits in Texas, what happens. The Texas Transportation Code, Section 601.001 et seq. sets the minimum liability limits in Texas at $25,000 per person or $50,000 per incident on the bodily injury portion of an automobile policy. The State of Oklahoma has limits as low as $15,000 per person. When someone is driving in Texas with an automobile insurance policy issued from some state other than Texas, the minimum limits in Texas apply. This is the case regardless of the fact that the Oklahoma policy clearly says the minimum limits are $15,000. Other differences are not relevant or, are not going to arise very often.
So now lets get back to the first question from above. What happens if I am in an accident when I am out of state?
First, start from the premise that the law of the state where a policy is issued generally governs coverage issues. Texas has a provision in the Insurance Code that spills Texas law into some out of state policies. From a legal standpoint, Texas follows the "most significant relationship rule" articulated in the Texas Supreme Court case, Duncan v. Cessna Aircraft Company, issued in 1984, in applying a particular state's law to an insurance contract. This is detailed and discussed in the case, and basically looks at issues regarding where the insurance contract was entered into, where it was payable, where acts were to be performed, etc.
For Texas residents the answer to the question is found in Texas Insurance Code, Section 21.42. It says:
Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and goverened thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same.
In the case, Scottsdale Insurance Company v. National Emergency Services, Inc., the Texas Court of Appeals, Houston [1st Dist.], in 2004, said that the above Insurance Code section mandates that Texas law will apply to the contract if, (1) the proceeds are payable to a Texas citizen or inhabitant, (2) the policy is issued by a carrier authorized to do business in Texas, and (3) the policy is issued in the course of the carrier's Texas business.
Much of this can be confusing and even the courts have different ways of ruling, depending on the facts of each particular situation. This is yet another example of why an experienced Insurance Law Attorney should be consulted when someone finds themselves in this type of situation. Often times the wording in the contract of insurance is improper and unenforceable.

A policyholder in Weatherford, Fort Worth, Grand Prairie, Arlington, Mansfield, Colleyville, Newark, or any other city in Texas could find themselves in a position where they are having to sue their underinsured/uninsured (UIM) insurance company. And at the same time, they might be having to sue the person with whom they had the accident with.
When the other driver, who caused an accident, has to be sued and that person does not have insurance or does not have enough insurance to cover the damages you have sustained, most experienced Insurance Law Attorneys will tell you to sue both the driver and your own insurance company at the same time rather than having to incur the time and expense of two separate lawsuits. When this becomes necessary there are usually several options about where the lawsuit can be filed. Choosing the best county to file a lawsuit can often times make a big difference as to the value of the case.
The Texas Civil Practice & Remedies Code, Section 15.002, cites the general rules governing where a lawsuit can be filed. Sometimes the options are limited, but other times there are many options and when a lawsuit is filed the attorney filing the lawsuit will want to file in a county where the best results are possible. In contrast, the person being sued will make efforts to get the lawsuit transferred or moved to a county they believe is more favorable to themselves, or as it relates to insurance, a county more favorable to the position the insurance company will be taking.
When the at fault driver is sued and the insurance company is sued, one or the other or both, will file papers with the court asking that the cases be separated, rather than tried at the same time. This does not always happen but sometimes when it does, the lawyers for the severed case will sometimes try to get the severed case transferred to a county that they believe will be more favorable to the defenses they will be claiming. The reasons are varied and include, (1) wanting a different Judge, (2) it is more convienient, (3) a favorable jury pool, etc.
When the other side tries to accomplish this transfer it is usually improper. The relevant law in this regard was set out not too long ago in the case, Finlan v. Peavy, in 2006. This Waco Court of Appeals case, was not an insurance case but is relevant for the procedural reasons applicable when a court makes a ruling that the cases cannot be tried at the same time.
The following are some of the statements made by the court in refusing to allow the transfer:
1) It is well settled that the court in which suit is first filed acquires dominant jurisdiction to the exclusion of other courts.
2) Even though the cause is severed, the res controversa remains pending in the court of dominant jurisdiction, the parent suit. This would be to the exclusion of all other coordinate courts.
3) Thus, the severed cause of action remains pending in the court which it originated.
4) And if an action pending in one court is filed in a second court, generally, the second court must dismiss a subsequent suit involving the same parties and subject matter. Any subsequent suit involving the same parties and the same controversy must be dismissed if a party to that suit calls the second court's attention to the pendency of a prior suit.

Policyholders in Grand Prairie, Arlington, Mansfield, Fort Worth, Weatherford, Aledo, Azle, or any other city in Texas who have one of the coverages listed above would want to know how those coverages work if they are in a situation where the coverages may apply. A case decided by the Texas Supreme Court in 1999, gives some insight into how these types of claims are handled.
The court actually decided two cases together. They are Mid-Century Insurance Company of Texas v. Jack Kidd, and the other is Nationwide Mutual Insurance Company v. Catherine Gerlich.
The issue in both cases revolved around how PIP benefits were paid when a claim was being made against the liability portion of the same policy.
To begin with, in order to make sure that a policyholder is being treated properly, they should consult with an experienced Insurance Law Attorney. Putting that aside, and rather than getting into the specifics of each case, lets assume the following scenario:
A policyholder has PIP coverage of $2,500 and liability coverage of $20,000. The policyholder is involved in an accident wherein he has injuries and resulting medical bills and lost wages that exceed the limits of both coverges.
The question before the court was whether or not Mid-Century Insurance Company of Texas (Mid-Century) and Nationwide Mutual Insurance Company (Nationwide) only had to pay the policy limit on the larger coverage or pay the limits on both coverages. Mid-Century and Nationwide argued that they only had to pay one limit.
Without gettting into the logic of their decision, which is a good read for understanding how it works, the court's ruling was essentially this:
1) PIP is payable up to its limits;
2) the liability portion of the policy gets an offset for the monies paid under the PIP portion of the policy; and
3) where the PIP limits and the liability limits are less than the total damages, the limits of both are payable.
Using the courts ruling the policyholder would be able to recover a total of $22,500 per the above scenario.
In a second scenario assume the limits are the same but the total damages are only $14,000. In this second scenario, the injured person would be entitled to the $2,500 in PIP but only $11,500 in liability because the liability portion of the policy gets an offset for the benefits paid by the PIP portion of the policy.
The Texas Insurance Code Section 1952.159 helps explain the above to a certain degree. It says;
If a liability claim is made by a guest or passenger described by Section 1952.151 against the owner or operator of the motor vehicle in which the guest or passenger was riding or against the owner's or operatior's liability insurer, the owner or operator of the motor vehicle or the owner's or operator's liability insurer is entitled to an offset, credit, or deduction against any award made to the guest or passenger in an amount equal to the amounts paid by the owner, the operator, or the owner's or operator's automobile liability insurer to the guest passenger under personal injury protection.
This law was enacted in 2005 in response to the Supreme Court's Mid-Century decision.
How this works is not really all that confusing to an attorney familiar with it, but can be very confusing the first time it is encountered.

Whether your agent is in Grand Prairie, Arlington, Mansfield, Richardson, Plano, Fort Worth, or anywhere else in Texas, he has duties he owes to his insurance clients. So, what are an agents duties?
For starters, insurance agents do not have a general duty to obtain coverage nor to make sure any coverage you get is adequate. On the other hand, courts have found insurers liable for affirmative misrepresentations, and an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so. This is discussed in the 1992, Texas Supreme Court case, May v. United Services Association of America.
What if the notice of expiration on an insurance policy is sent to the agent rather than to the policy holder it was intended for? Then the agent is responsible for forwarding that information. This was the issue in Kitching v. Zamora and Horn v. Hedgecoke Insurance Agency.
In the May case above, the court suggested an agent could be found negligent if an explicit agreement or course of conduct showed the agent undertook to determine the customer's insurance needs and counseled the customer as to how they could be met.
Contrast May with McCall v. Marshall, a Supreme Court case that said, even a seven year relationship was not enough to create such a special relationship where, even though the insured sought advice on the types of coverage available, the insured alone decided the total dollar amounts of insurance he wanted. Likewise, in Pickens v. Texas Farm Bureau Insurance Company, the Amarillo Court of Appeals, said in 1992, the agent was not liable for failing to suggest higher liability limits. The facts in the Pickens case definitly favored the insurance agent.
In addition to the case of special relationships, the May case also suggests that an agent may be held liable for his negligence in obtaining an adequate policy where the adequacy of the policy can be "assessed by some objective measure." For this proposition, the May court cited McAlvain v. General Insurance Co. of America. In McAlvain, an agent was held liable after the customer requested sufficient insurance to cover his business, including inventory, fully, and furnished to the agent an appraisal showing that the inventory was worth $45,000, and the agent procured a policy with a $30,000 limit.
The May court also suggests that an agent may be held liable to the extent that the customer puts him on notice of reliance on his expertise to compare and contrast various policies. Exactly what precise information is necessary to put the agent on notice, however, remains unclear.
In 1977, the Beaumont Court of Appeals, recognized a duty by the agent to keep the insured informed, when the court stated:
A local agent ... owes his clients the greatest possible duty. He is the one the insured looks to and relies upon. Most people do not know what company they are insured with. The insured looks to the agent he deals with to get the coverage he seeks, with a sound company who can and will properly and promptly pay claims when they are due. It is his duty to keep his clients fully informed so that they can remain safely insured at all time.
Certainly, when a person is dealing with an independent agent who writes insurance for any number of companies, this ruling would be important to note. However, maybe it is less relevant when the agent only represents one company, such as a State Farm agent, or a Farmers agent.

Let's say your insurance agent is in Aledo, Arlington, Azle, Grand Prairie, Fort Worth, Mansfield, Weatherford, or anywhere else in Texas. Now, let's say he does something wrong in the way he handles your insurance needs. Can he be held liable for what he does or fails to do for you?
The answer is yes. An agent can be held accountable on a number of different theories of law related to insurance. He can also be held accountable under the most fundamental of legal theorys, that being "negligence."
The Lectric Law Library defines negligence as, "The failure to use reasonable care. The doing of something which a reasonably prudent person would not do, or the failure to do something which a reasonably prudent person would do under like circumstances. A departure from what an ordinary reasonable person would do in the same community."
In Texas case law, negligence, in the insurance context as in others, consists of three elements:
1) a legal duty owed by one person to another;
2) a breach of that duty; and
3) damages proximately resulting from the breach.
These three elements are cited often in Texas case law. One of these cases is a 1990, Texas Supreme Court case, Greater Texas Transportation Company v. Phillips.
In the context of insurance agents, one of the more major problems that arise is an agent misrepresenting what an insurance policy covers. In this context, courts have adopted the tort of "negligent misrepresentation" as described by the Restatement of Torts, Section 552. This is approved by the courts in the Texas Supreme Court case, Chicago Title Insurance Company v. McDaniel, decided in 1994.
Section 552(1) provides:
One who, in the course of his business, profession or employment, or in any transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
One example of the above is found in the 2002 case, Nast v. State Farm Fire & Casualty Company. In this case, Nast stated a negligence claim against their State Farm Fire & Casualty Company agent for affirmative misrepresentations about coverage, saying they were not eligible for flood insurance and that neighbors who had flood insurance had purchase "fake" insurance from a "shyster."
An experienced Insurance Law Attorney can be very helpful in discussing potential claims against insurance agents. Usually, the biggest problem with these claims against agents for their misrepresentations, is proving the misrepresentation. These matters are usually swearing matches between the agent and the insured. This is where an attorney can use his experience to find ways to prove it is the agent who is on the wrong end of the swearing match.

Auto policy holders in Grand Prairie, Arlington, Fort Worth, Mansfield, Azle, Dallas, Weatherford, or any other city in Texas would want to know what all that "stuff" in their auto policy means. One part that is pretty easy to explain is the "Named Driver Exclusion." This is other times called the "515-A Exclusion" or "515-A Endorsement".
The normal automobile insurance policy is going to have a part that reads, "You agree that none of the insurance coverage afforded by this policy shall apply while ______________ is operating your covered auto or any other motor vehicle. These exclusions and endorsements are legal in insurance contracts. The language used is partly governed by laws published in the Texas Insurance Code. See Sections 1952.051 et al and Sections 2301.001 et al. As for the "Named Driver Exclusion", it is legal and is intended to give policy holders the option to exclude from coverage drivers who, by virtue of their driving history or other factors, are deemed high risk drivers. This category of drivers would include drivers who have been convicted of violating the Driving While Intoxicated laws found in the Texas Penal Code, drivers with too many moving violations, too many wrecks, and other high risk drivers such as teenagers who have just got their license. It is important to realize that almost all of these drivers can get insurance but the cost of the insurance is much higher than what other drivers must pay.
The Texas Corpus Christ Court of Appeals decided a case in 1996 that is often cited for the validity of the Named Driver Exclusion. The style of the case is, Janie Zamora, Pete Zamora, Jesus Toc, and Gracie Vela v. Dairyland County Mutual Insurance Company. In this case the excluded driver was Gracie Vela, who was driving Jesus Toc's vehicle. She had a wreck with the Zamoras causing them injury. In this case, the court upheld the validity of the exclusion and discussed the reasons for its validity.
Gracie Vela was a known risk to drive because she suffered from epileptic seizures, had been advised not to drive, and did not even have a driver's license.
The court stated that the Named Driver Exclusion furthered Texas public policy on two levels; first, the named driver exclusion furthers public policy by enabling drivers with family members having poor driving records to secure insurance they can afford, rather than being relegated to securing coverage from an assigned risk pool at a much greater cost. And, second, by detering insured drivers from entrusting their automobiles to unsafe drivers, thus, keeping those unfit drivers off public roadways.
Here, Dairyland County Mutual Insurance Company denied the claim made by the Zamora's when the Zamora's were sued for negligently entrusting their vehicle to Vela for her to drive. Toc sued along with rest of the plaintiffs, challenging the validity of the exclusion. It was upheld as being valid by the court.
An experienced Insurance Law Attorney on rare occassion can beat this exclusion. However, the facts allowing this exclusion to be deafeated are limited and each case has to be looked at closely.

How does the policyholder in Grand Prairie know if his insurance company is acting in bad faith? This same question might be asked in Arlington, Aledo, Mansfield, Fort Worth, or anywhere else in Texas.
When an insurance company denies a claim it should be obvious that there are times when they have a good reason for doing so. But how do you know if their reason is a good reason or not? What the courts ask or look for is, "proof that the insurance company had a reasonble basis to deny the claim, delay payment, or cancel the policy." Legally, this is often times called the "bona fide dispute" defense, an insurance company will use to escape some of the liability accusations that are tied to bad faith cases. Another way of putting this is, an insurance company is not liable merely for being wrong on a coverage issue, only for being unreasonable. Even an experienced Insurance Law Attorney will often times have trouble knowing for sure whether the actions and conduct of the insurance company rise to the level of bad faith. Some cases are easy to call, but some are not.
A Texas Supreme Court case, decided in 1994, styled, Transportation Insurance Company v. Moriel, states:
Evidence that merely shows a bona fide dispute about the insurer's liability on the contract does not rise to the level of bad faith ... Nor is bad faith established if the evidence shows the insurer was merely incorrect about the factual basis for its denial of the claim, or about the proper construction of the policy.
Here is an example where the Texas Supreme Court, in 1997, in the case styled, U. S. Fire Insurance Company v. Williams, said there was no bad faith. U S Fire Insurance Company was faced with competing claims for life insurance benefits. Nathaniel Williams married Essie Williams in 1957. They separated in 1978 but never divorced. From 1978 until his death in 1992, Nathaniel lived with Lessie, but they never married. When Nathaniel Williams died in a car wreck, the injury report identified his spouse as "Lessie." U S Fire determined that Essie was deemed to have abandoned Nathaniel, under Worker's Compensation laws, so they paid Lessie. When Essie filed a claim for benefits with the Worker's Compensation Commission, she ultimately prevailed. Essie then sued U S Fire for bad faith in denying her claim. The court concluded that there was no evidence of bad faith. U S Fire simply relied on an erroneous interpretation of the rule. U S Fire's interpretation was at least arguable, because they initially prevailed before the Worker's Compensation Commission.
Attorneys who have handled very many of these cases and who keep up with the new cases as they are decided, can discuss a persons specific facts and give a reliable opinion as to the probable outcome of a particular fact situation.

If you live in Grand Prairie, Aledo, Arlington, Mansfield, Fort Worth, Azle, Weatherford, or anywhere else in Texas and you have car insurance, you were given the chance to purchase underinsured motorist coverage on your automobile. So, how does it work?
An example of how some of it works is explained in the case, Lilith Brainard, et al. v. Trinity Universal Insurance Company. This is a 2006, Texas Supreme Court case.
This case had three main issues: (1) whether underinsured motorist (UIM) insurance covers prejudgment interest on monies the wrongdoer owes; (2) if so, how to apply settlement credit to the calculation; and (3) how does the insured recover attorneys fees.
In this case, Edward H. Brainard was killed in a head-on collision with a rig owned by Premier Well Service, Inc. This occurred on July 1, 1999. His widow and children filed suit against Premier and sought UIM benefits against their own insurer, Trinity Universal Insurance Company. Trinity paid $5,000 in PIP benefits under the policy but wanted more information before paying UIM benefits.
On December 7, 2000, Brainard settled with Premier for policy limits of $1,000,000. Brainard then demanded the policy limits under the Trinity policy of $1,000,000, which Trinity refused to pay. The case went to trial and a jury awarded Brainard $1,010,000. The jury also awarded $100,000 for attorney's fees.
The court applied a credit for Trinity for the $1,000,000 Premier had paid, plus a credit of $5,000 paid by Trinity under the PIP benefit. The court also awarded the attorney's fees but no money for prejudgment interest.
As to the prejudgment interest issue -
Texas Insurance Code, Section 1952.106, mandates that Texas motorists be offered UIM coverage to:
provide for payment to the insured of all sums which he shall be legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage in an amount up to the limit specified in the policy, reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle.
Trinity did not dispute that it owed interest on the $5,000 above the credit it received ($1,000,000 on Premier's payment and $5,000 on the PIP payment) but said it did not owe on the entire amount. In stating the law, the court said, prejudgment interest is awarded to fully compensate the injured party, not to punish the defendant. By statute, a judgment in a wrongful death, personal injury, or property damage case earns prejudgment interest. Texas Finance Code, Section 304.102.
After a couple of pages of interesting and informative discussion the court held that UIM insurance covers prejudgment interest that the underinsured motorist would owe the insured.
As to the calculation of prejudgment interest issue -
According to Texas Finance Code, Section 304.104, prejudgment interest began to commence when the lawsuit was filed on January 19, 2000, when Brainard filed suit and continued til the day of judgment, January 15, 2003.
After much discussion the court ruled that Brainard was entitled to prejudgment interest but not for the $5,000 PIP payment previously made. Plus the amount owed is reduced by the interest that would have accrued on the $1,000,000 Premier paid, on the date it was paid. The remaining $5,000 of the judgment would have interest owed on it until paid. The Supreme Court remanded this issue to the trial court to calculate dates to fully determine the amount owed. The explanation is involved but not that complicated.
As to the attorney's fees issue -
Chapter 38 of the Texas Civil Practice & Remedies Code allows for recovery of attorney's fees in breach of contract cases. The court stated that, "an essential element to recovery of attorney's fees under Chapter 38 in a suit based on contract is the existence of a duty or obligation which the opposing party failed to meet." The court went on to say that a UIM insurer is under no contractual duty to pay benefits until the insured obtains a judgment establishing the liability and underinsured status of the other motorist. So, until the UIM insurer refuses to pay after the liabilty and underinsured status has been established, they have not breached their contract and thus do not owe attorney's fees.
This is a case that is a big victory in the courts for insurance companies. What is important to realize is this is only applicable to underinsured and uninsured motorist cases. Almost all other insurance cases where the insurance company does not properly handle the claim, they are going to be liable for the attorney's fees.

How do I know I'll win if I sue? Whether you live in Grand Prairie, Weatherford, Arlington, Mansfield, Newark, Keller, Irving, or any other place in Texas, that would be a good question. The first part of answering that question would be to find out whether your case is in State Court or Federal Court. Whenever an individual is sueing an insurance company, an experienced Insurance Law Attorney will tell you that your best chance for success is to be in State Court.
In the case, Sharman McGilbert v. Safeco Insurance Company of Indiana, Odette Goer, and Gary Waddell, McGilbert sued in State Court and Safeco Insurance Company of Indiana immediately tried to have the case removed to Federal Court. Safeco failed in their effort.
This case was decided on April 22, 2010, in the United States District Court, Southern District Texas, Houston Division, by District Judge Gray H. Miller. The case was originally filed in the 11th Judicial District Court of Harris County, Texas. Judge Miller remanded the case back to the 11th after Safeco's unsuccessful attempt to have it removed.
McGilbert brought suit against Safeco, Goer, and Waddell alleging multiple causes of action, including breach of contract, breach of good faith and fair dealing, common law fraud, violations of Texas Insurance Code Chapters 541 and 542, and violations of the Texas Deceptive Trade Practices Act. This was done after McGilbert's home was damaged in Hurricane Ike and her property damage claim was not properly paid.
For Safeco to be successful in having the case removed to Federal Court, Safeco would have to show that the amount in controversy exceeded $75,000, which it did, and that the people sued were not residents of Texas. Safeco was not a Texas resident, nor was Waddell. But Goer was, so Safeco had to show that Goer was not properly in the lawsuit. That Goer was only in the lawsuit so that McGilbert could keep the case in State Court and that the claims against Goer were improper. This can be done in either of two ways. One, is actual fraud in the pleading of jurisdictional facts which was not in dispute and two, the inability of McGilbert to establish a cause of action against Goer in State Court. This part was at issue in this case.
Here, the factual allegations against Goer must be enough to raise a right to relief above the speculative level.
Safeco argued that McGilbert did not intend to pursue their claim against Goer as evidenced by the fact that Goer had not yet been served with legal papers in this case. The Court pointed out that there had been atleast five attempts to get the legal papers delivered to Goer and the fact that they had been unsuccessful was not proof that McGilbert did not intend to persue her claim against Goer. Thus, Safeco's first arguement was defeated.
Second, Safeco argued that the complaint did not allege specific, individual actions attributable to Goer. The Court pointed out the allegations that Goer and Waddell were the adjusters assigned to adjust the claim. That they conducted an inspection of McGilbert's property. That they were tasked with the responsibility of conducting a thorough and reasonable investigation of McGilbert's claim, including quantifying the damage done to the home and personal property. Subsequent to the inspection, Goer and Waddell issued a damage estimate that failed to fully quantify the damage done to the property, thus demonstrating that they did not conduct a thorough investigation of the claim. That they failed to fairly evaluate and adjust the claim as they are obligated to do under the terms of the policy and Texas law. By failing to properly investigate the claim and by issuing a grossly undervalued damage estimate, they engaged in unfair settlement practices by misrepresenting material facts as to the true value of the covered loss. That Goer and Waddell also failed to provide a reasonable explanation as to why Safeco was not compensating McGilbert for the full value of her covered losses.
All of the preceding paragraph is enough to show that McGilbert has pled sufficient facts against Goer to establish a reasonable possibility of recovery. Thus, Safeco's second arguement was without merit.
This case is a good example of how an attorney can properly defeat an insurance company from successfully removing a case to Federal Court.

Lots of business owners in Grand Prairie, Mesquite, Arlington, Fort Worth, Aledo, or any other town in Texas are going to have insurance coverage for the vehicles they use in their businesses. The question is: Do they have the right coverage for the vehicles?
The United States District Court, Southern District of Texas, issued a judgment on April 21, 2010 that addressed this issue. In this case, United States District Judge, Lynn N. Hughes, ended up telling one business that they did not have the insurance coverage they thought they had. The style of the case is, Canal Indemnity Company v. Williams Logging and Tree Services, Inc. et al.
Willie Williams owns a logging company, Williams Logging and Tree Services, Inc. One morning he was driving his company car, a 2003 GMC Sierra pickup, when he hit a motorcyclist. The injured man sued Williams in the 278th District Court, Walker County, Texas.
The title for the pickup is in Williams and his business name. Williams drove the truck to work and carrried tools and fuel in it for vehicles at work sites. He insured the pickup with a $50,000 per person accident policy. This policy paid in full.
Williams business, Williams Logging and Tree Services, Inc., also had purchased a surplus liability coverage policy with Canal Indemnity Company with a policy limit of $1,000,000. The Canal policy covered vehicles listed in the policy. The pickup was not listed. Logging argued that while the pickup was not listed, the attached MSC-90 endorsement and Form-F endorsement obliged Canal to pay.
The MCS-90 is a public liability endorsement that interstate motor carriers are required to have and proof that the carrier has the required minimum level of insurance.
The pickup, though, does not transport cargo for hire as contemplated in the Motor Carrier Act and regulations of the Federal Motor Carrier Safety Administration. While Logging's hauling trucks may be regulated by the Act, the pickup does not transport items for compensation. It transports Williams as a cost doing business. The fact that Logging has some fuel in cans or even tools to service other vehicles does not transform this "company car" into a motor vehicle.
Form F is the Texas state counterpart to the MCS-90. Texas law requires that motor carriers operating in the state have minimum bodily injury and property damage liability insurance. This law is Texas Transportation Code Annotated, Section 643.101. The law defines a commercial motor vehicle as one that is above 26,000 pounds, transports more than 15 people, or transports hazardous material. See Section 548.001 and 43 Texas Administrative Code, Section 18.2(6). The minimum insurance required is $500,000, per 43 Texas Administrative Code, Section 18.16(a)(8).
Based on the facts in this case that the pickup does not meet the requirements for the Canal policy to provide coverage, the court ruled against Williams.

Who has "standing" to sue an insuance company for bad faith. Does someone living in Grand Prairie, Arlington, Mansfield, Keller, Colleyville, Fort Worth or Dallas?
USLegal defines "standing" this way:
Standing is the ability of a party to bring a lawsuit in court based upon their stake in the outcome. A party seeking to demonstrate standing must be able to show the court sufficient connection to and harm from the law or action challenged. Otherwise, the court will rule that you "lack standing" to bring the suit and dismiss your case.
The common-law duty of good faith and fair dealing extends protection to the insured, whether the insured obtained the coverage directly or coverage was obtained for the insured. The Texas Supreme Court, in Arnold v. National County Mutual Fire Insurance Co., recognized in 1987, a common-law duty of good faith and fair dealing owed to an insured, which arises from the "special relationship" established by the insurance contract. The court expanded this duty of good faith and fair dealing to a worker insured under a workers' compensation policy purchased by his employer in the 1988 case, Aranda v. Insurance Company of North America.
In the case, CNA Insurance Company v. Scheffey, the Texarkana Court of Appeals, in 1992, held that an insurance company does not owe a duty of good faith and fair dealing to third-party beneficiary. In this case, the third-party beneficiary was a treating physician. A similar result was found the same year by the Fort Worth Court of Appeals in, Transportation Insurance Company v. Archer, when they denied mental anguish damages to a spouse as the result of the insurance companies breach of its duty to an employee.
These cases can be contrasted with a decision by the Court of Appeals in El Paso, that in 1992, held that an insurer does owe a duty of good faith and fair dealing to a third-party beneficiary of an insurance policy. This was followed by another 1992 case decided by the Court of Appeals, Houston, 1st District, saying an HMO owes a duty of good faith and fair dealing to health care providers.
As can be seen, these cases can be all over the board on outcomes. An Insurance Law Attorney can usually distinguish the facts in these cases but even for an experienced attorney the reasoning can be confusing at times.

When a house burns in Grand Prairie, Arlington, Colleyville, Keller, Mansfield, Fort Worth, Azle, Aledo, or Weatherford, or anywhere else in Texas; What happens when the house catches on fire? Will the insurance company pay for the damages?
In, State Farm Fire & Casualty Insurance Company v. Simmons, the answer was no until the case went to court. At that point, State Farm Fire & Casualty Company (State Farm) was eventually ordered to pay the damages. This is a 1998, Texas Supreme Court case. In this case, the Simmons had moved into a new home and spent monies improving the property and buying items for the inside of the house. Their house had been burglarized in the middle of the day and later those responsible were located.
Mr. Simmons, a construction supervisor, had experienced down time from work and the Simmons had missed house payments. They later refinanced the house. They continued to experience problems with vandalism and other strange occurrances around the house.
Eventually, one day they left the house for a trip and the house burned down. They made a claim to State Farm for benefits. State Farm denied the claim. State Farm asserted that the Simmons burned down their own home on purpose.
The Simmons sued State Farm for breaching its duty of good faith and fair dealing, violations of the Deceptive Trade Practices Act (DTPA) and punative damages. The jury found in favor of the Simmons and awarded $275,000 in actual damages and $2 million in punative damages. The Supreme Court took away the punative damages.
In supporting the jury finding that State Farm violated its duty of good faith and fair dealing the court pointed out the following;
1) the earlier burglary claim, which State Farm said was suspicious, later the culprits were found and Mr. Simmons returned merchandise to State Farm that State Farm had paid for when the police returned it to Simmons, yet State Farm still considered this "suspicious."
2) State Farm refused to investigate for other suspects in the fire even when there was evidence that others may have been involved;
3) State Farm's claims supervisor conceded that State Farm's investigation was not properly conducted;
4) on expert testimony of eight reasons why people commit arson, six did not apply to the Simmons; the seventh had to do with people removing furniture and personal items from the property and even though they had taken some of the kids summer clothes out of the house, other items, some very personal in nature were not taken, and the eigth reason dealt with financial burdens. Here, the Simmons had always had problems but State Farm relied on the Simmons burden of a $1,343 monthly house payment. The evidence showed they had refinanced and that their actual burden was $540 a month less;
5) the Simmons mortgage obligation exceeded the policy limits on their homeowners insurance by several thousand dollars, thus leaving them still in debt;
6) conflicts in the investigation process which could have been addressed by talking to the Simmons were never resolved because State Farm did not talk with them.
The bad law in this case is the court setting a high standard for punative damages by way of the Texas Civil Practices & Remedies Code, Section 41.001.
The court did allow for the damages under the Texas DTPA, and remanded the case to the trial court for a finding on those damages.

There are homeowners in Grand Prairie, Arlington, Mansfield, Weatherford, Aledo, Fort Worth, and everywhere else in Texas. 95% of those homeowners have insurance. So how do you know if your insurance company is violating the "bad faith" laws in Texas?
Here is a 1997, Texas Supreme Court case to read to give some insight into the above question. The case is, State Farm Lloyd's v. Ioan and Liana Nicolau.
In the insurance claim giving rise to this dispute, the Nicolau sought coverage for extensive foundation damage to their home. The homeowners policy, issued by State Farm Lloyds, (State Farm) generally excludes losses caused by "inherent vice," or by "settling, cracking, bulging, shrinkage, or expansion of foundations." Under an express exception, however, these exclusions do not apply to losses caused by an "accidental discharge, leakage or overflow of water" from within a plumbing system.
The Nicolau suspected damages for an extended period of time and had it investigated before turning to State Farm. They hired a foundation repair contractor and a structural engineer with Maverick Engineering. After much time went by and numerous tests, they finally concluded the problem was the result of a substantial leak in the plumbing system.
State Farm, hired an adjuster with ABJ Adjusters, Inc., who submitted two reports expressing doubt about the foundation problem being the result of the plumbing leak. State Farm then hired Haag Engineering Company who did a report concluding that the leak was not causing the foundation problems. Based on this report State Farm denied the claim made by Nicolau.
The Nicolau then hired Trinity Engineering Testing Corporation (Tetco) who filed a professional and detailed report stating the foundation problem was the result of the leak and detailing why that conclusion was reached.
The Nicolau then sued State Farm, asserting breach of contract and several extracontractual claims based on State Farm's conduct. The jury found for the Nicolau and State Farm filed this appeal.
At the trial of this matter, evidence was introduced that Haag worked almost exclusively for State Farm. That they always found in favor of State Farm in ways to exclude coverage on the policy. That in the two cases where they had made finding against State Farm that the employees responsible for the findings were terminated.
In ruling in favor of the Nicolau the jury also assessed punative damages against State Farm. The Texas Supreme Court took away some of these punative damages but remanded the case to the trial court for findings of damages under the Texas Deceptive Trade Practices Act.
The relevance of this case is seeing how the appeals court looks at these bad faith cases to determine whether or not the insurance company has actually acted in "bad faith." An experienced Insurance Law Attorney is very helpful in understanding how the courts in Texas look at these cases. He can advise as to the best course of action to get a remedy for the wrongs that are committed.

What if a resident of Grand Prairie is involved in a wreck on his motorcycle with an uninsured driver? Any difference if he is a resident of Fort Worth, Arlington, or Dallas? Answer - not for anyone in Texas.
This is what happened in the 1987 case, Glen Arnold v. National County Mutual Fire Insurance Company. This Texas Supreme Court case is an insurance contract dispute. Arnold was severly injured when the motocycle he was operating was struck by an uninsured motorist. Arnold had uninsured motorist benefits protection on the policy he had with National County Mutual Fire Insurance Company (National). Arnold made a demand for payment and the independent adjusting firm hired by National recommended the claim be paid. In spite of this, National refused to pay.
Arnold sued and won a judgment exceeding the policy limits then sued National for breaching its duty of good faith and fair dealing.
National had refused to initially pay benefits because they believed that potential jurors would be prejudiced against Arnold because he was a "motorcyclist."
In this case, Arnold raised the issue of whether there is a duty on the part of insurers to deal fairly and in good faith with their insureds. The court held that such a duty of good faith and fair dealing did exist. The court stated, "While this court has declined to impose an implied covenant of good faith and fair dealing in every contract, we have recognized that a duty of good faith and fair dealing may arise as a result of a special relationship between the parties governed by a contract." This was stated in the 1984, Texas Supreme Court case, Manges v. Guerra.
The court further stated, "In the insurance context a special relationship arises out of the parties' unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds' misfortunes in bargaining for settlement or resolution of claims. In addition, without such a cause of action insurers can arbitrarily deny coverage and delay payment of a claim with no more penalty than interest on the amount owed. An insurance company has exclusive control over the evaluation, processing, and denial of claims. For these reasons a duty is imposed that an indemnity company is held to that degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business." This in part cites the famous Stowers case.
An expereinced Insurance Law Attorney is going to be familiar with this case and others like it. In this regard, he is in position to give advice on the facts he may be presented with by clients having difficulties with their insurance company.

Information residents of Grand Prairie, Keller, Azle, Arlington, Fort Worth, Mansfield, and other cities in Texas should know. Information about "bad faith" insurance.
The Texas Supreme Court, in 1997, adopted as the liability standard, the statutory language in Section 541.060(a)(2)(A), Texas Insurance Code, in the case, Universal Life Insurance Company v. Giles. Under this standard, an insurance company breaches its duty of good faith and fair dealing by "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear."
The standard adopted in Giles takes the place of the common-law standard for unreasonably denying a claim or unreasonably delaying payment. Texas Insurance Code, Section 541.060(a)(7), which prohibits "refusing to pay a claim without conducting a reasonable investigation with respect to the claim," is also supported in the Giles case.
The state of the law now is that an insurance company may be in violation of its duty of good faith and fair dealing by:
1) failing to attempt in good faith to effectuate prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear. See, Universal Life Insurance Company v. Giles;
2) refusing to pay a claim without conducting a reasonable investigation with respect to the claim. Also, see Giles;
3) canceling a policy without a reasonable basis. See Union Bankers Insurance Company v. Shelton, a 1994 Supreme Court case.
For whatever it may be worth, the Court of Appeals, El Paso, has held that an insurer does not owe a duty of good faith and fair dealing to its insured in the calculation and payment of premiums. See Garrison Contractors, Inc. v. Liberty Mutual Insurance Company. This case was affirmed by the Texas Supreme Court in 1998, however, on other grounds.
One thing is certain, each of these cases have to be looked at on an individual basis and apply the current law to the fact situation. An experienced Insurance Law Attorney can look at the case, ask a few questions, and be able to give a reliable opinion as to the probable outcome of a case. The worst thing someone can do is, nothing.

Someone who has insurance in Grand Prairie, Arlington, Keller, Colleyville, or any other town in Texas would be curious to know what can be done when they are treated wrong by their insurance company. This article is largely taken from a legal book for insurance law attorneys and gives some insight into the legal history of the development of the duty of good faith and fair dealing law, in Texas.
Reviewing the theory's history aids in understanding the current law which will be discussed in a follow-up article.
The development of the common-law duty of good faith and fair dealing in Texas began in the Texas Supreme Court case, English v. Fisher, decided in 1983. There, the insureds asked the court to recognize an implied covenant of good faith and fair dealing that would require insurance policy proceeds to be paid contrary to the terms of the contract. The court said no. In its divided opinion the court pointed out that in other circumstances a duty of good faith and fair dealing arises from a special relationship between the parties. Insurance was one area where such a duty had been recognized.
Later, in 1987, some lower courts began to recognize this common-law duty of good faith and fair dealing.
Finally, in 1987, in Arnold v. National County Mutual Fire Insurance Co., the Supreme Court held there is a duty of good faith and fair dealing, which is breached if the insurance company denies or delays payment of a claim with no reasonable basis or fails to determine where there is a reasonable basis. The basis for recognizing this duty was stated:
"In the insurance context a special relationship arises out of the parties' unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds' misfortunes in bargaining for settlement or resolution of claims. In addition, without such a cause of action insurers can arbitrarily deny coverage and delay payment of a claim with no more penalty than interest on the amount owed. An insurance company has exclusive control over the evaluation, processing and denial of claims. For these reasons a duty is imposed that, an indemnity company is held to that degree of care and diligence which a man of ordinary care and diligence would exercise in the management of his own business." ....
In the 1988 Supreme Court case, Aranda V. Insurance Company of North America, the court restated these elements to recognize a cause of action when there is no reasonable basis for denying benefits and the insurer knew or should have known that there was not a reasonable basis for denying or delaying payment of the claim.
The Supreme Court expanded the duty to include liability for canceling a policy without a reasonable basis in the 1994 case, Union Bankers Insurance Company v. Shelton.
In the following years, appeals courts struggled with how to review these cases properly. If the appellate courts found any evidence of a reasonable basis for denying the claim, a jury verdict in favor of the policyholder would be reversed.
This led the court to reevaluate the theory in Universal Life Insurance Company v. Giles, decided in 1997 and discussed in the next article.

The guy in Grand Prairie, Arlington, Weatherford, Fort Worth, Dallas, or any other place in Texas, wonders what he can do when his insurance company does him wrong. Usually when an insurance company does something that is wrong with one of their insured policyholders, that is called "bad faith" insurance.
Changes in insurance laws in recent years have made it more difficult to make bad faith claims against insurance companies. But this concept of bad faith is definitly not dead. The Texas Department of Insurance has a complaint department that does investigate improper conduct by insurance companies. That is the good news. The bad news is that they seldom do anything except in the most extreme cases where the wrongs are big and affecting thousands of people. What they often times end up telling individuals is that they should consult an experienced Insurance Law Attorney to further pursue complaints. It is not that they don't care, it's that they do not have the staff to be pursuing all the wrongs being committed.
A person should never give up when being wronged by one of these companies. The Texas Insurance Code has contained within it, statutes with a lot teeth for attorneys to use in making an insurance company pay for the wrongs it commits. Section 541.060, is titled "Unfair Settlement Practices" and lists several acts, or examples of inaction, that will subject an insurance company to civil liability to the person being wronged.
Section 542.051 thru 542.061, is known as the "Prompt Payment Statute" and also has lots of "teeth" to it.
When talking about bad faith it is sometimes difficult to convey that concept to prospective jurors and when it can be effectively conveyed, the Texas Supreme Court has a history of reversing judgements in favor of policyholders and ruling in favor of the insurance companies. Most cases do not end up going all the way to a trial, but the cases get resolved or settled based on what each side believes would happen if the case did go to trial. In this regard, a jury can appreciate a rule in the law books, the insurance company violated the rule, and the company needs to be held liable for violation of the rule.
Generally, bad faith claims fall intend categories such as:
1) There is a wrongful denial of coverage;
2) A claim where you can show the company intentionally or knowingly or wrongfully denied, delayed, or attempted to under pay the claim. The actual legal standard is, "knew or should have known." This is discussed in the Texas Supreme Court case, The Universal Life Insurance Company v. Giles. Here, it was held that Universal Life breached its duty when they failed to settle a claim when they knew or should have known that the claim was covered.
3) There was a complete failure to conduct an investigation of the claim.
4) The carrier took a crazy position on liability or damages which either denied or delayed payment because you can show that there was no basis in fact for the original position. In the case, State Farm Lloyd's v. Nicolau, the court found bad faith when State Farm Lloyd's relied on an expert's report and found evidence that the report was not objectively prepared and therefore State Farm Lloyd's reliance upon it was unreasonable.
One of the better models to look at is the case, State Farm Fire & Casualty Co. v. Simmons. This 1997, Texas Supreme Court case had the court focused on whether State Farm Fire & Casualty fulfilled its duty to its insured by pursuing a thorough, systematic, objective, fair and honest investigation of the claim prior to denying the claim.
What should be obvious is that an experienced Insurance Law Attorney needs to consulted in cases where an insurance company is denying a claim. Bad faith cases are good cases for attorneys to be able to help their clients. And even where bad faith is hard to prove there are still the other statutory remedies that are available.

What if a policyholder in Grand Prairie, Arlington, Fort Worth, Dallas, Weatherford, or anywhere else in Texas, collects uninsured motorist benefits from their insurance company and then later makes a claim against the at fault driver, do they have to pay back their insurance company? The general answer is yes, but there may be a few exceptions, depending on the circumstances.
This issue came up in the case, State Farm Mutual Automobile Insurance Company v. Shannon Perkins, et al. This case was decided by the Texas Court of Appeals in Eastland, Texas. It was an appeal from the 35th District Court, Brown County, and was decided July 13, 2006.
The background facts are that Shannon Perkins was involved in an automobile accident with Mike Cooper Jr. on May 22, 2003. Perkins was injured in the accident. Cooper was driving a truck owned by Harold Oaks. Cooper did not have insurance. State Farm Mutual Auomobile Insurance Company (State Farm) paid Perkins $25,000 in uninsured motorist benefits. Oaks had an automobile liability policy with State Farm. Perkins sued Oaks for her injuries. State Farm intervened in the lawsuit saying they were entitled to subrogation on the $25,000 they had already paid. At trial the jury awarded Perkins $53,000 for her injuries. State Farm insisted that they were intitled to $25,000 of that amount.
The clear language in the State Farm policy entitled them with contractual rights of subrogation and reimbursement. Also, Texas Insurance Code, Section 1952.108, gives State Farm a right to subrogation.
The court discussed five reasons why subrogation is not allowed in certain situations. This is known as the antisubrogation rule. First, it is based on the premise that an insurer who seeks subrogation stands in the shoes of the insured and can take nothing by subrogation but the rights of the insured. Because a person cannot sue himself for damages, that person's insurer, who stands in the person's shoes for subrogation purposes cannot sue the person either. Second, the insurer that has accepted premiums to cover certain risks should not be allowed to pass the same risks back to its insured in a subrogation action. Otherwise, the insurer would be allowed to avoid the coverage that the insured has purchased. The third reason is the relationship between an insurer and its insured are fraught with conflicting interests. Fourth, if insurers were permitted to sue their insureds for subrogation, the insurers would be able to obtain information from their insureds under the guise of policy provisions for later use in a subrogation action. And fifth, an insurer's right to sue its insured could be interpreted by the insurer as a judicial sanction to breach the insurance policy.
But as the court pointed out, the difference in this case is, State Farm paid uninsured benefits to Perkins under her policy, and State Farm seeks subrogation and reimbursement for those benefits from the proceeds of Oak's policy. To not allow subrogation in this case would be to sanction a double recovery by Perkins. She would have the $25K of underinsured benefits, plus $53k of Perkins policy for a total recovery of $78K. This after a jury had determined her claim was a total of $53K.
In this case there were some other subrogation theory's discussed that are interesting reading. Bottom line is, a person must seek the advice of an experienced Insurance Law Attorney. Handling these subrogation issues in an incorrect manner can result in the policyholder being sued by the insurance company.

What if you are a "good ole boy" in Weatherford, Texas? Or for that matter, in Arlington, Grand Prairie, Fort Worth, or Dallas, and you have a gun rack in your vehicle. In the gun rack you have a loaded firearm. Next, the firearm is accidently discharged. Will your insurance company cover the resulting damages to others? The answer is a lawyerly answer for you: It depends.
Here is an interesting case issued by the Texas Supreme Court. This case discusses how the facts should be analysed to see if coverge will exist. The case, decided in 1999, is styled, Mid-Century Insurance Company of Texas, a division of The Farmers Insurance Group of Companies, v. Richard Tanner. The cite is, 997 S.W.2d 153.
The question for the court to decide in this case was whether the underinsured motorist provision of a standard Texas personal auto policy covers the insured's bodily injuries resulting from the unintentional discharge of a shotgun on a gun rack in a pickup truck parked nearby. The answer, in this case, depended on whether, within the meaning of the policy, the injuries resulted from "an accident" "arising out of" the "use" of the truck.
The facts: Richard Metzer and his wife had been fishing with their nine year old son when the boy returned to their pickup to get his coveralls. The truck was locked and the boy climbed into the bed of the truck and attempted to enter the cab through the truck's sliding rear window. In doing this, he accidentally touched a loaded shotgun in the gun rack, in the rear window, causing the gun to discharge. The buckshot struck Richard Lindsey, who was seated in his mother's car parked next to the pickup. Lindsey sued Metzer and recovered the policy limits, which was far less than the total of his damages. He then claimed the underinsured policy limits from his mothers policy which was issued by Mid-Century. Mid-Century denied the claim. Lindsey sued.
The Mid-Century policy states:
We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured (or underinsured) motor vehicle because of bodily injury sustained by a covered person, ...
The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the uninsured (or underinsured) motor vehicle.
The sole dispute was over whether Lindsey's injuries were caused by, 1) an accident, 2) arising out of the use of Metzer's truck.
The court discussed the definition of an accident then ultimately stated, Metzer's son intended only to gain entry to the truck. He did not intend to cause the shotgun to discharge or Linsey to be injured, nor was it reasonably foreseeable that either consequence would result from the boy's trying to enter the pickup through the rear window. Metzer's son was not playing with the gun or acting recklessly. There is no evidence that he even knew it was loaded. His injuring Lindsey was an accident.
The next issue was whether this accident arose out of the use of the pickup. For liability to "arise out of" the pickup, a casual connection or relation must exist between the accident and the use of the motor vehicle. The court stated; "Whether a person is using a vehicle as a vehicle depends not only on his conduct but on his intent."
The court next got into a discussion using well established legal treatises on insurance law. One was, Couch on Insurance. The other was, Appleman's Insurance Law and Practice. Using these treatises they found numerous cases throughout the country using the following test for determining whether an injury arises out of the use of a motor vehicle for purposes of auto liability insurance coverage:
For an injury to fall within the "use" coverage of an automobile policy (1) the accident must have arisen out of the inherent nature of the automobile, as such, (2) the accident must have arisen within the natural territorial limits of an automobile, and the actual use must not have terminated, (3) the automobile must not merely contribute to cause the condition which produces the injury, but must itself produce the injury.
There was much further discussion on the above and what other courts in other states have decided. Applying all these considerations to the facts in this case the court concluded that Lindsey's injuries arose out of the use of the Metzer truck as a matter of law.
There are actually a lot of cases discussing what is covered and what is not covered. An experienced Insurance Law Attorney is familiar with these cases. He would be able to disuss these cases and give advice on whether the facts in any particular situation would be covered by insurance.

What if you live in Fort Worth, Arlington, Grand Prairie, Dallas, Weatherford, or any other town in Texas and you are in a wreck with a drunk driver? Can you get punative damages from your ininsured / underinsured (UM) insurance policy because the other person was drunk at the time of the accident?
This is one of the issues in the case, Suzanne Vanderlinden v. United Services Automobile Association Property and Casualty Insurance Company. This case was decided in 1994, by the Texarkana Court of Appeals.
In this case Vanderlinden was injured in a car wreck caused by a drunk driver. At the trial of this matter the trial judge would not let Vanderlindens' attorney submit a jury question to the jury asking for punative damages due to the other driver being drunk. Vanderlinden was sueing her own insurance company, United Services Automobile Association Property and Casualty Insurance Company (USAA) to recover monies by way of the underinsured motorist coverage portion of her insurance policy with USAA. The Texarkana Court cited an 1849, Texas Supreme Court case saying, "Punative damages are typically not to compensate a damaged plaintiff for his injuries; rather, they are to discourage the defendant from continuing his heinous activities and to likewise discourage others from similarly misbehaving." Thus, the issue in this case is whether an injured person may obtain punative damages from the injured persons insurance company through the underinsured motorist clause.
The policy language says the insurer will:
... pay all sums which the insured ... shall be legally entitled to recover as damages from the owner or operator of an automobile ....
The court also noted that the Texas Insurance Code, Section 1952.101, requires this UM coverage to be made available in all automobile insurance policies.
Furthermore, the Texas Insurance Code is to be liberally construed to give full effect to the policy which led to its enactment and the court is to review the statutory definition of exemplary damages as "any damages awarded as an example to others, as a penalty, or by way of punichment," See also the Texas Civil Practices & Remedies Code, Section 41.001(3).
In the courts' ruling they stated; "Most states that have expressly considered this question have held that in this context an insurance company should not be liable for punitive damages because to allow such recovery would be antithetic to the acknowledged purpose to be served by rendition of such damages."
In reaching this conclusion the court cited and took the reasoning from the following"
1) Milligan v. State Farm Mutual Ins. Co. - Houston 14th Court of Appeals - 1997,
2) State Farm Mutual Ins. Co. v. Shaffer - Houston 1st Court of Appeals - 1994
3) Government Employees Ins. Co. v. Lichte - El Paso Court of Appeals - 1991

What if you just settled your insurance claim with the person who caused your financial loss. And lets say you live in Grand Prairie, Arlington, Dallas, Fort Worth, Weatherford, or anywhere else in Texas. What happens if your own insurance company sends you a letter asking for a return of money they paid on your behalf?
The case law in Texas is pretty simple sounding. When an insured settles with or releases a wrongdoer from liability for the loss before payment of the loss has been made by the insurance company, the insurer's right to subrogation ends. This was stated in 1991, in the Houston Texas Court of Appeals case, Interstate Fire Insurance Co. v. First Tape, Inc.
In this case, Gary Pentecost (Pentecost) owned a commercial building which was insured by Interstate Fire Insurance Company (Interstate). Pentecost leased the building to First Tape, Inc. (First Tape). The lease between Pentecost and First Tape contained a clause on insurance and liability that read in relevant part that the two mutually agreed to release each other from liability for any acts of negligence that caused harm to the building and further agreed that there would be no rights of subrogation by their respective insurance companies. Further, the lease was transferable.
First Tape later sold its assets to Gundle Lining Systems, Inc., including the lease. A short time later, one of the machines used in the manufacturing process started a fire which consumed the building and contents. Interstate paid the claim and then tried to subrogate against Pentecost. The court ruled that, because Pentecost, in the lease, had released First Tape and therefore Gundle, that Pentecost had no claim against First Tape or Gundle. Since Pentecost had no claim, Interstate had no claim.
This rule derives from the basic principle of subrogation that an insurer acquires no subrogation rights until it pays the loss. The insurer then acquires only such rights against the wrongdoer as the insured had at that time. Thus, when the insured has settled its claim and released its cause of action against the wrongdoer, the insurer can acquire no subrogation right against the wrongdoer when it later pays the claim. This was restated in 1997, by the San Antonio Appeals Court in the case, In re Romero.
These laws and rules are more reasons for one of the residents above to seek the advice of an experienced Insurance Law Attorney when involved in an insurance claim. Otherwise they run the risk of owing money back to the insurance company.
It should be noted that because of this principle, the Texas Auto Policy contains a "settlement without consent" clause designed to prevent an insured from settling with a wrongdoer without first obtaining the consent of their own insurance company. This consent clause prevents the insured from extinguishing the insurance companies subrogation right without the companies knowledge. If they do, then the insured could become personally liable for the costs.

What if a resident of Grand Prairie, Weatherford, Dallas, Arlington, Fort Worth, or some other Texas city, suffers a loss because of some other persons negligence. Their own insurance company pays for the loss. Then the other persons insurance company pays for the same loss. What happens next?
This is where "contractual subrogation" rears its head. Contractual subrogation arises by virtue of an agreement between the parties and is awarded under that agreement, usually but not always, subject to the dictates of equity.
The Texas Supreme Court case dealing with this is, Fortis Benefits v. Cantu. This was a case decided in 2007. Here the Texas Supreme Court held that an insurance company, here Fortis Benefits, could recover benefits from the insured's (Cantu) settlement even if the insured is not made whole. In this case, Cantu was severly injured in an automobile accident, and later sued several defendants. The health insurer, Fortis, intervened in the case, asserting a right of subrogation on its prior payments to Cantu. Cantu settled with the various defendants, and Fortis sought to recover solely from Cantu. Cantu, who had not recovered enough from the settlement and from Fortis to cover her actual damages, argued the "made whole" doctrine. In other words, she argued that she should not have to repay Fortis until all her damages had been paid and she was "made whole." The court disagreed with Cantu, saying the "made whole" doctrine did not apply because in the Fortis insurance contract there was language saying that Fortis was entitled to recover for all the benefits it had paid if and when the insured made a recovery against a third party.
In this Fortis case, the Texas Supreme Court found that equitable principles do not govern in contractual subrogation cases. The court reasoned as follows:
We do not disagree that equitable and contractual subrogation rest upon common principles, but contract rights generally arise from contract language; they do not derive their validity from principles of equity but directly from the parties agreement. The policy declares the parties' rights and obligations, which are not generally supplanted by court fashioned equitable rules that might apply, as a default gap-filler, in the absence of a valid contract. If subrogation arises independent of any contract, then an express subrogation agreement would be superfluous and serve only to acknowledge this preexisting right, a position we reject. Contractual subrogation clauses express the parties' intent that reimbursement should be controlled by agreed contract terms rather than external rules imposed by the courts.
Furthermore, the court noted that "where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy."
This case further illustrates the absolute must that a person seek the help of an experienced Insurance Law Attorney when they find themselves in these types of situations.
The court noted that, if the insurer in Fortis Benefits had claimed an equitable right of subrogation, then the "made whole" doctrine would have applied, per Ortiz v. Great Southern Fire & Casualty Ins. Co.

A Weatherford man suffers a property damage loss. Or maybe he is from Grand Prairie, Dallas, Arlington, or Fort Worth. His own insurance pays his losses then he makes a claim against the insurance company of the person who caused the loss. How does that work?
The doctrine of equitable subrogation is applied liberally and is broad enough to include every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which in equity and good conscience should have been discharged by the latter. This was stated in the case, Matagorda County v. Texas Association of Counties Government Risk Management Pool, a 1998, Corpus Christi Court of Appeals case.
The purpose of equitable subrogation is to allow the insurance company to recover the monies it has paid out, only after the insured injured person is fully compensated. The Texas Supreme Court explains how this works in, Ortiz v. Great Southern Fire & Casualty Ins. Co. This is a 1980 case, wherein the Ortiz home and contents were damaged in a fire caused by the negligence of a third party. The home was insured, but the contents were not. The money damages recovered from a settlement with the third party (a carpet cleaner) were less than the amount of damages that Ortiz suffered. The insurance company, Great Southern Fire & Casualty Ins. Co., was only entitiled to subrogate to the extent that the sum of the insurance collected, plus the amount allocated in the settlement agreement to real property damage, exceeded Ortiz real property loss. Because Great Southern could not show at trial what amount, if any, of the settlement agreement was allocated to Ortizs' real property loss, it was not entitled to seek the amount it paid to Ortiz from Ortiz settlement.
The court noted in this case that one reason the right of equitable subrogation is granted is to prevent the insured person from receiving a double recovery.
Lots of people do not like to get attorneys involved. Some reasons are they believe attorneys are too expensive. Others don't feel their case is important enough or big enough, and others just don't like to be thought of as "sue happy." But without an experienced Insurance Law Attorney, this person will find themselves being sued by their own insurance company under this equitable subrogation theory unless they get an attorney involved to help them. Often times an attorney can lawfully prevent any money having to be paid back to the insurance company, like in the Ortiz case.
The court in Ortiz did not hold that the amount recovered by Ortiz from Great Southern and the third party must exceed the damages to both insured and uninsured property before Great Southern is entitled to subrogation. Rather, the court said, if any portion of the $10,000 settlement was intended as compensation for damage to the insured property. then Great Southern, after a deduction of its share of the cost of collection, would be entitled to subrogation to the extent that the sum of insurance collected plus the amount allocated in the settlement agreement to real property damage exceeded the Ortizs' loss to their home. The court pointed out, in this case the record did not reflect how much of the $10,000 settlement was intended for damages to the insured real property. If a portion of the setttlement was intended to be compensation for real property damages, Great Southern should have made sure the settlement agreement so specified.