Dallas Fort Worth Insurance Lawyer Blog

Someone in Dallas, Fort Worth, Grand Prairie, Mesquite, Arlington, Cleburne, Aledo, Weatherford, or anywhere else in Texas, purchases a life insurance policy. They expect the policy benefits to be paid when the insured passes away. But that does not always happen.
The Los Angeles Times ran an article on November 21, 2010, titled "Flaws Can Cancel Life Insurance - After Death." The article is written by Lisa Girion and Sandra Poindexter.
This article has tells of three examples where someone takes out a life insurance policy and then when a claim for benefits is turned in to the insurance company the company cancels the policy without paying the benefits.
In one case, American General Life Insurance Company sold a policy to Ian Weissberger. The policy was sold to Ian with the marketing theme that its policies are protection for "the hopes and dreams of American families." Ian took this promise to heart during his losing battle with Lou Gehrig's desease.
When Ian died in 2005, American General cancelled the policy. His premiums were paid up. There was no foul play suspected. The beneficiary, his wife Sheila, was the uncontested beneficiary and Ians' illness had not been diagnosed til months after the policy was taken out.
American General's reason for cancelling the policy was that Ian's application for coverage was incomplete because he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.
Sheila lost her house and many other things before reaching a settlement with American General.
What happened to Sheila was not unusual. The claims of thousands of beneficiaries are denied or disputed every year. There were more than 5,000 last year alone and many were for allegedly flawed applications.
According to the National Association of Insurance Commissioners, the amount of money life insurers withheld from beneficiaries has more than doubled over the last decade even as policy sales went down.
Insurance companies can dispute claims for a number of legitimate reasons. These reasons include unpaid premiums, suicide, foul play by the beneficiary, and the number one reason - "material misrepresentation." That's failing to disclose information that insurers deen important in assessing risk, and allows insurers to rescind coverage altogether.
Most states are limited by state law on the time frame for an insurer to rescind a policy. In Texas the governing law is found in the Texas Insurance Code, Section 1101.006. This section says that a life insurance policy in force for two years during the lifetime of the insured is incontestable, except for nonpayment of premiums. Texas has other relevant laws governing the cancellation of insurance policies plus "common law" provisions that come into play.
One thing for certain is that any beneficiary who is having their claim for life insurance benefits denied should seek the advice of an experienced Insurance Law Attorney. The Los Angeles Times article is a good article for reading and gives atleast two other examples of claims being denied that should not have been denied based on the facts presented in the article.

Most people living in Arlington, Grand Prairie, Dallas, Fort Worth, Mansfield, Irving, DeSoto, Cleburne, Weatherford, and all the other places in Texas, will have some form of life insurance on their lives. It may be a policy from work, or a policy thru their bank, or a policy they have purchased through their insurance agent. The question becomes; Who can you take a life insurance policy out on and who can be named as a beneficiary in the policy? When a spouse is the person who is insured or the person who is the beneficiary under the life insurance policy there is not usually a problem. But what if it is someone else?
An insurable interest is what is required. Or an expectation of a pecuniary benefit. So, who has an insurable interest or an expectation of a pecuniary benefit?
The Texas Supreme Court in 1942, in the case, Drane v. Jefferson Standard Life Insurance Company, stated; "A person that has a reasonable expectation of pecuniary benefit or advantage from the insured's continued life has an insurable interest."
Here are a couple of examples to explain.
In 1998, the Houston Court of Appeals [14th Dist.] discussed in Tamez v. Certain Underwriters at Lloyds, London Int'l Acc. Facilities, that the mere existence of an employer/employee relationship is never enough to give the employer an insurable interest in the employee's life. Employers who bought life insurance policies on their regular employees did not have insurable interests based on an expectation of revenue or business generated by the employees, unless the employees were crucial to the business. The employers' financial interest in having money to defend any wrongful death suit by the employee's families was not sufficient to show an insurable interest.
This same principle was discussed by the Tyler Court of Appeals in, Stillwagoner v. Travelers Insurance Co., in 1998. In Stillwagoner, the policy the employer stood to gain a great deal from its wager on its employee's life. So viewed, the policy was a wagering contract on the lives of the insured, one of the evils the insurable interest rule aims to discourage. Therefore, the employer had no insurable interest in the employee's life.
The second example comes from the 1942 Texas Supreme Court case, Drane v. Jefferson Standard Life Insurance Company.
In the Drane case, although not related by blood or marriage to Harry Ezell, Jr., nor indebted to him in any way, his godmother Dorothy Drane named him as beneficiary in two policies. Upon her death, the executor of her estate, her brother, asserted that Ezell had no insurable interest. The facts showed that Miss Dane had bought clothes for the boy for fifteen years, had paid for his medical care, had cared for him while his mother was ill, had taken him on vacations, and sadly was killed in a wreck as she drove to visit him his freshman year in college, "taking him a radio, a cap and an apple pie." The court concluded that Ezell did have an insurable interest based on a reasonable expectation of pecuniary benefit and advantage from Miss Drane's continued life. "We think that when Dorothy Drane was killed 'his temporal affairs, his just hopes and well-grounded expectations of support, of patronage, and advantage in life' were impaired ... It is inconceivable, under the facts of this record, that he would ever have been tempted to destroy her life in order to collect the proceeds of the two policies in suit."
The Drane case is an unusual case but is a good example of "expectation of pecuniary benefit." Anyone finding themselves in the position of being challenged as a beneficiary of an insurance policy should immediately consult with an experienced Insurance Law Attorney to protect their rights. And keep in mind that you may find yourself in a position where you need to challenge the right of someone else being improperly named as a beneficiary in an insurance policy.

People living in Grand Prairie, Dallas, Fort Worth, Arlington, Carrolton, Burleson, Aledo, or anywhere else in Texas who have life insurance are usually going to have a place in the life insurance policy where they name a beneficiary. Things will happen after naming the beneficiary to make the insured want to change the beneficiary.
The person named as a beneficiary in a life insurance policy is the person who receives the benefits of the policy upon the death of the person insured by the policy. The named beneficiary is often times a spouse of the named insured or the children of the named insured. Other times it is a creditor or an estate. Sometimes it is a business partner.
It is well settled law that a life insurance beneficiary must have an insurable interest in the insured's life. This was stated as early as 1894 by the Texas Supreme Court in the case, Cheeves v. Anders. It was restated in 1998 by the Houston Court of Appeals [14th Dist.] in Tamez v. Certain Underwriters at Lloyd's, London International Acc. Facilities, and again in 1998 by the Tyler Court of Appeals in Stillwagoner v. Travelers Insurance Co.
The basis for the rule is two fold: no one should have a financial inducement to take the life of another; and a life insurance policy for the benefit of one without an insurable interest is a wagering contract.
Here is an example: In Tamez an employer bought a life insurance policy on the life of its employee. The employer argued that the Texas Insurance Code does not require an insurable interest. The court held that the statute does not eliminate the judicial requirement of a beneficiary's insurable interest in the insured's life.
The courts have allowed three categories of insurable interests. As stated by the Texas Supreme Court, Federal Courts, and other lower courts, those who have an insurable interest in the life of another fall into three general classes:
1) one so closely related by blood or affinity that he or she wants the other to continue to live, irrespective of monetary considerations,
2) a creditor; and
3) one having a reasonable expectation of pecuniary benefit or advantage from the continued life of another.
The third category has been explained this way:
Bluntly expressed, insurable under (the third) classification, is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would he regard himself as better off from the standpoint of money, would he enjoy more substantial economic returns should the insured continue to live; or would he have more, in the form of the proceeds of the policy, should she die.
As should be clear from the above, you or I cannot take a policy of insurance on a stranger or someone who is merely a friend. However a creditor may designate itself the beneficiary of a policy purchased by it on the life of its debtor, but its insurable interest is limited to the loan balance at the insured's death; the rest of the policy proceeds belong to the insured's estate. This was stated in the Texas Supreme Court case, McAllen State Bank v. Texas Bank & Trust Co., in 1968.
When an insurance company is not sure if the named beneficiary is entitled to the life insurance proceeds or if there are competing claims for the life insurance proceeds the insurance company will become concerned about its contractual liabilities and whether or not they are violating relevant sections of the Texas Insurance Code. When this happens they will interpread the proceeds of the life insurance policy into the registry of the court and thus allow the courts to judicially resolve the matter. The problem with doing it this way is that it forces the potential beneficiaries to incur legal expenses in the hiring of attorneys to protect their financial interests in the proceeds. Of course, if they do not hire an attorney they might end up with nothing.

An insured in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, Garland, Richardson, Weatherford, or anywhere else in Texas may not know if they are being treated in bad faith by their insurance company when it is happening. Here is something to think about - if it doesn't seem right it probably isn't. To be sure, the best thing to do is to consult with an experienced Insurance Law Attorney.
One of the first cases from the Texas Supreme Court making clear that an insured has a cause of action against his insurance company for bad faith insurance was decided in 1987. The style of the case is, Glen Arnold v. National County Mutual Fire Insurance Company.
Here are some of the facts in this case:
In June 1974, Arnold was severely injured when the motorcycle he was operating was struck by a car driven by an uninsured motorist. Arnold was insured by National County Mutual Fire Insurance Company (NCM) under a policy that included "uninsured motorist" protection with a limit of $10,000. Arnold made timely demand for payments up to the limit and an independent insurance adjusting firm recommended, within six months following the date of the accident, that NCM pay the entire policy to Arnold. NCM refused to pay although it is not clear when it specifically denied the claim.
Arnold sued both the uninsured driver and the NCM in late June 1974. In December 1977, Arnold obtained a judgment against both defendants for approximately $17,975. NCM then paid Arnold the $10,000 policy limit. Arnold filed suit on December 27, 1978, alleging various causes of action and a common law cause of action for NCM's breach of its duty of good faith and fair dealing in its handling of his claim.
NCM based its decision to deny the claim on the advice of its agent, who was the attorney handling the file. Even though the uninsured motorist admitted that the collision was his fault, NCM refused to negotiate a settlement. In his deposition the attorney handling the file admitted he was inexperienced in insurance matters and based his recommendation on his perception that a jury would be prejudiced against motorcyclists, that Arnold was driving too fast under the existing conditions and that Arnold was intoxicated. Arnold showed that the defenses of speed and intoxication proferred by the attorney were very weak at best and ultimately intoxication was not pleaded. NCM failed to investigate the facts supporting the attorney's contentions. An issue was raised as to NCM's reasonableness in failing to settle the claim and forcing Arnold to trial.
The Texas Supreme Court here stated: "Arnold raises the issue of whether there is a duty on the part of insurers to deal fairly and in good faith with their insureds. We hold that such a duty of good faith and fair dealing exists."
While this court has declined to impose an implied covenant of good faith and fair dealing in every contract, they have recognized that a duty of good faith and fair dealing may arise as a result of a special relatinship between the parties governed or created by a contract.
"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 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 courts ruling was that, "A cause of action for breach of the duty of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay. Arnold pleaded and produced sufficient ... proof to raise an issue of material fact that NCM has no reasonable basis for its refusal to pay his uninsured motorist claim and with actual knowledge of that, forced him to a trial on the accident before it would pay the claim.
Since this case has been decided the courts have written opinions essentially removing bad faith from the context of uninsured mototists claim - but bad faith still remains for all the other situations in insurance.
There are now many areas of the Texas Insurance Code that cover areas of bad faith. Two notable areas are Section 541.060 and Section 541.061.

What if someone in Dallas, Fort Worth, Grand Prairie, Arlington, Irving, Richardson, Hurst, Euless, Bedford, or somewhere else in Texas, thinks the insurance company is denying their claim for insurance benefits for the wrong reason? Can anything be done? As with so many legal answers - it depends.
The Texas Supreme Court issued an opinion in 1993, in the case styled, Golda A. Lyons v. The Millers Casualty Insurance Company of Texas, that helps with the above question. As the court stated, "This case presents us with the opportunity to clarify the method by which Texas courts should conduct legal sufficiency review of factfindings of bad faith against an insurer."
Here are the facts:
After a windstorm, Golda Lyons submitted a claim to Millers Casualty Insurance Company of Texas (Millers), her homeowners insurance carrier, for damage to the brick veneer and outside back staircase of her house. Following an investigation, Millers denied Lyons' claim. Lyons sued for breach of contract and breach of the duty of good faith and fair dealing. The essence of this controversy is that while Lyons claims the damage to her house was caused by the windstorm, a covered peril, Millers claims that it was caused by settling of the foundation, an excluded peril.
Lyons testified at trial that during the storm, she heard something banging on the outside of the house. She later discovered that bricks within the external veneer were cracked and loose and that the back staircase was standing "out of kilter." According to Lyons and two of her neighbors, this damage did not exist before the storm. The storm also knocked over a tree in Lyons' yard, which had fallen away from the residence. Another tree located inches from the damaged staircase remained standing.
Millers hired a reconstruction expert who inspected the house. He concluded the damage was not caused by the storm, rather by settling and shifting of the foundation. He based his conclusion on several cracks he found in the foundation and the absence of any indication of impact between a tree and the house. He also noted the staircase was rotted. Millers denied the claim after receiving the written report.
When Lyons protested the denial of her claim, Millers hired a registered professional engineer specializing in damage and failure analysis to reinspect the property. His conclusion was identical to the original conclusion.
Lyons hired an expert who theorized that the damage was caused by the storm. She then sued Millers for various violations of the Texas Deceptive Trade Practices Act and for breach of the duty of good faith and fair dealing. A jury found in favor of Lyons on the breach of the duty of good faith and fair dealing issue.
In its analysis of this case the court stated that "A cause of action for breach of the duty of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay."
In this case Lyons must prove:
(1) the absence of a reasonable basis for denying or delaying payment of the benefits of the policy and (2) that the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim.
This court reversed the jury's finding that Millers had violated its duty of good faith and fair dealing. The court pointed out that in determining this issue the question is not whether or not the insurance company was wrong in denying the claim, but on the reasonableness of the insurer's conduct in rejecting the claim. The court stated, "... Lyons offered no evidence that the reports of Millers' experts were not objectively prepared, or that Millers' reliance on them was unreasonable, or any other evidence from which a factfinder could infer that Millers acted without a reasonable basis and that it knew or should have known that it lacked a reasonable basis for its action."
An experienced Insurance Law Attorney is needed in these types of cases. It is necessary to look into the actions of the insurance company in its investigation of the claim and compare these actions to what courts have ruled in other similar situations.

How long can an insurance company take to pay a claim to an insured in Dallas, Fort Worth, Arlington, Grand Prairie, Mesquite, Richardson, or anywhere else in Texas. The answer is - as long as they want - and even if they have good reason for the delay - it is going to cost them.
A 1997 case decided by the United States Court of Appeals, Fifth Circuit, is a good example of what can happen when an insurance company doesn't pay a claim in a prompt manner. The style of the case is, John Higginbotham v. State Farm Mutual Automobile Insurance Company.
Here are some facts in the case:
John Higginbotham (JH) owned a used 1988 Porsche 911 for which he had purchased insurance from State Farm Mutual Automobile Insurance Company. The car was stolen on June 8, 1993, from an unsecured parking lot next to his residence. The Porsche was ultimately recovered later that day, but it had been severely damaged by whomever had taken the vehicle. I was discovered approximately 25 miles away from JH's apartment complex and it was stripped of its top, seats, interior and exterior trim, and any untraceable parts of value. The stripping operation was conducted in a manner so as not to damage or destroy mechanical connections, wiring harnesses, or the engine.
JH reported the theft to State Farm on June 9, 1993, and made a claim for proceeds. Upon conclusion of its investigation, State Farm determined JH's "loss was not accidental and therefore not a covered loss under his policy." JH was informed of this decision on November 19, 1993, five months after his initial claim.
JH filed suit and eventually prevailed. One of his claims against State Farm was for violation of the Prompt Payment of Claims Act and imposition of an 18% penalty against State Farm for violation of the statute. State Farm appealed.
In State Farm's appeal they argued that the delay was due to the claim being denied and it was denied in good faith based on other facts in the case. Specifically:
JH was associated with Tommy Vander, the owner of Luxury Auto Unlimited (LAU). LAU was a luxury car repair shop which specialized in Porsches and other luxury cars. JH was listed as a purchaser with buyer's priviledges extended to LAU for car auctions. In fact, Vander and JH regularly attended automobile auctions to purchase damaged automobiles for repair and resale. Vander pled guilty in 1991 to felony theft when he was arrested for driving a stolen Porsche with a completely different vehicle identification number from a Porsche which had been completely burned.
When JH began parking the Porsche at his complex, he would normally leave the car in a parking lot surrounded by a fence and secured access gate. However, approximately two weeks before the theft, he began parking it in an unsecured lot near the complex, even though both he and his girlfriend claimed to have had prior break-ins from the unsecured lots at the apartment complex. The manager and assistant manager of JH's complex stated that JH's girlfriend complained that on June 4, 1993 (four days before the theft) JH's car had been stolen and that this was justification for a late move-out notice.
JH's Porsche was recovered 25 miles from JH's apartment complex, but only 1.6 miles away from Vander's shop. The car was stripped in a manner so as not to damage or destroy mechanical connections, wiring harnesses, or the engine. Pro Technik, Porsche specialists hired by State Farm to investigate JH's claim, concluded that approximately two auto technicians with proper tools would require at least eight hours to strip the Porsche in the manner that it had been left. JH's car was discovered approximately six hours after it had last been seen by JH.
In ruling for JH in awarding the 18% penalty against State Farm the court stated, "... an insurance company's good faith assertion of defense does not relieve the insurer of liability for penalties for tardy payment, as long as the insurer is finally judged liable." The court further said, "A wrongful rejection of a claim may be considered in 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% statutory fee and reasonable attorney's fees. In sum, State Farm took a risk when it chose to reject JH"s claim. State Farm lost when it was found liable for breach of contract. Therefore, it must pay this 18% per annum interest and reasonable attorney's fees."

If someone in Dallas, Fort Worth, Grand Prairie, Arlington, Carrolton, Garland, Mesquite, Grapevine, Duncanville, Burleson, or anywhere else in Texas, has a life insurance policy, how long does the life insurance company have before it has to pay the benefits to the beneficiary? The answer is, it depends. But the Texas Prompt Payment of Claims Act still applies.
There is a Waco Court of Appeals case decided in August of 2005, that explains how the Prompt Payment of Claims Act can apply in a life insurance situation. The style of the case is, State Farm Life Insurance Company and Lisa Martinez Paul v. Toni Wasson.
This is a case where the insurance company, State Farm Life Insurance Company, confused itself about who it was suppose to pay policy proceeds to. It is not that unusual for an insurance company to have some doubt about who the rightful beneficiary is under a policy of life insurance. When there is confusion the life insurance company will usually file an "interpleader action" in a local court and then let the court decide who should receive the proceeds of the life insurance policy.
The facts are confusing and the case should be read to get a good understanding of what happened but here is a brief description of the chain of events:
Ed and Linda Martinez married on June 15, 1981. In November, Ed obtained a large life insurance policy naming Linda as the beneficiary. Ed and Linda divorced on September 15, 1994 and entered into an agreed divorce agreement whereby Ed made monthly contractual alimony payments of $5,000 to Linda beginning in Septermber of 1994 and continuing until August 2004. The agreement provided that if Ed died before fulfilling his contractual obligations, that the agreement was binding on his estate.
The agreement provided that as long as Ed owed monies that Linda would be an irrevocable beneficiary to a portion of the proceeds of the life insurance policy. The agreement also provided that as long as he maintained Linda as a beneficiary in an amount to pay his obligation, that he could change beneficiaries for the remainder of the policy.
For changing beneficiaries, the State Farm policy provides:
Change of Beneficiary Designation.
You may make a change while the Insured is alive by sending us a request. The change will take effect the date the request is signed, but the change will not effect any action we have taken before we receive the request. We have the right to request your policy to make the change on it.
The policy defines "request" as follows:
Request
A written request signed by the person making the request. Such request must be sent to us and be in a form acceptable to us.
On September 28, 1994, Ed signed a State Farm "Change of Beneficiary" form that named as primary beneficary "Linda ...," and as successor beneficiary "the estate of J.E. Martinez." State Farm recorded the change.
Ed then changed the successory beneficiary to Linda on May 16, 1996 by signing another State Farm "Change of Beneficiary" form, which continued to name "Linda ..." This change was also recorded by State Farm.
On June 30, 1996, Ed and Toni married. On August 1, 2002, Ed signed a State Farm "Change of Beneficiary" form that named Toni as primary beneficiary and did not name a successor beneficiary. State Farm refused to honor this request.
Ed died on August 25, 2002. Ed still owed Linda twenty-four months alimony or $120,000.
Toni made a claim for the life insurance proceeds as did Linda and his estate. State Farm claimed to be unsure who they should pay. As a result they filed the interpleader action in court and attempted to wash their hands of the matter and let the court decide who should get the life insurance proceeds. As a result they were sued.
The court held for Toni and also assessed against State Farm the 18% penalty called for by its violation of the Texas Prompt Payment of Claims Act.
This court wrote a well reasoned opinion as to why it ruled the way it did and because of the confusing nature of this case, it is necessary to read it to fully understand. What is important here is the realization that only an experienced Insurance Law Attorney can help someone navigate the law and facts of a case to a successful outcome.
Also it is important to realize the Prompt Payment of Claims Act can apply to life insurance policies even when the money is interplead to the court. This is important because a lot of life insurance policies involve large sums of money and the 18% penalty is significant and especially so if the case drags out for a couple of years.

Someone in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, Mesquite, Garland, Plano, Weatherford, or anywhere else in Texas, may experience a delay in being paid when making a claim against their insurance company. Is that ok? The answer is no, according to the Texas Prompt Payment of Claims Act.
The Texas Supreme Court decided a case in 2004, wherein the topic had to do with how the Texas Prompt Payment of Claims Act impacted the decision in the case. The style of the case is, Republic Underwriters Insurance Company v. Mex-Tex, Inc. The court phrased the issue this way: We must decide whether the commercial property insurer in this case breached its policy obligation to replace a damaged roof with one of "like kind and quality", and if so, whether the insurer's tender of partial payment of the claim avoided, on that amount, the 18% per annum delay penalty imposed by the Prompt Payment of Claims Act of the Texas Insurance Code.
Following a May 25, 1999 hail storm in Amarillo declared by the Texas Department of Insurance to be a weather-related "catastrophe for the purposes of claims processing", Mex-Tex, Inc. notified its property insurer, Republic Underwriters Insurance Co., of damage to the roof of Signature Mall, a retail shopping center that Mex-Tex owned. Mex-Tex claimed that the roof had been destroyed and should be replaced. Republic immediately investigated the claim but disputed the amount of damage attibutable to hail.
While Republic was investigating the claim, Mex-Tex retained a contractor and replaced the roof at a cost of $179,000 with one of the same kind, but which would be fixed to the building mechanically rather than by ballast as the old roof had been. Republic's first response was to offer what it believed was the cost to repair the minimal hail damage, $22,000, as what it termed "partial payment" of Mex-Tex's claim, but when Mex-Tex rejected that offer, Republic sent Mex-Tex a check on August 20, 1999, including $145,460, an amount representing what Republic's engineer had determined was the cost of replacing the mall's roof with an identical one, attached by ballast.
Offers and checks went back and forth with the case ultimately being decided by a Judge who awarded Mex-Tex the $179,000 plus 18% per annum from November 4, 1999, the date the court determined that Republic should have tendered that amount, which was 75 days after it tendered $145,460, to the date Mex-Tex accepted that partial payment almost a year later, and thereafter on the $33,540 difference until judgment.
The Texas Supreme Court then discussed it's analysis of the correct dollar amount at issue, and after having decided that and the appropriate date those dollar amounts were applicable, then set out to determine when the 18% penalty applied and on what amount of money it applied.
Under the Texas Prompt Payment of Claims Act, Texas Insurance Code, Section 542.058 states:
(a) Except as otherwise provided, if an insurer, after receiving all items, statements, and forms reasonable requested and required under Section 542.055, delays payment of the claim for a period exceeding the period specified by other applicable statutes or, if other statutes do not specify a period, for more than 60 days, the insurer shall pay damages and other items as provided by Section 542.060.
Section 542.060 says:
(a) If an insurer that is liable for a claim under an insurance policy is not in compliance with this sub-chapter, the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney's fees.
A reading of this case gives some insight into how the Texas Supreme Court looks at these cases involving interpretation of the Prompt Payment of Claims Act. However, the best thing to do is to consult with an experienced Insurance Law Attorney.

If you have an insurance policy in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, or anywhere else in Texas, you should look at it closely. It probably has an "appraisal clause" in it.
The United States Western District of Texas, Austin Division, decided a case on October 27, 2010. The style of the case is Orleans Harbor Homeowners Association, Inc. v. Public Service Mutual Insurance Company. The main issue in the case dealt with the appraisal clause in the insurance policy between Orleans Harbor Homeowners Association, Inc. (Orleans) and Public Service Mutual Insurance Company (Public).
Here is some background:
This is an insurance dispute based on a May, 2008 hailstorm that allegedly damaged condominiums owned by Orleans. Public was the insurer at that time. Public agreed they owned for damages and made settlement offers that were refused by Orleans and a lawsuit was filed. Public then asked the court to order Orleans to participate in the appraisal process described in the insurance policy. Orleans argued that the appraisal clause was illegal.
The court analysis was as follows:
Insurance appraisal clauses have been judicially enforced in Texas since 1888. Although a court has some discretion regarding the timing of an appraisal, a court may not simply ignore a valid appraisal clause. The Texas Supreme Court said as early as the 1888 case that "In the absence of fraud, accident, or mistake, the parties having agreed that the amount of loss shall be determined in a particular way, we are constrained to hold that such stipulation is valid ..." The same court as recently as 2009, in the case State Farm Lloyds v Johnson, stated, "Like any other contractual provision, appraisal clauses should be enforced."
The court next discussed whether or not the clause could be "waived" and said:
"Also like other contractual provisions, appraisal clauses may be waived." Waiver in Texas is the "intentional relinquishment of a known right or intentional conduct inconsistent with claiming it. Waiver is largely a matter of intent, and for implied waiver to be bound through a party's actions, intent much be clearly demonstrated by the surrounding facts and circumstances. A right cannot be waived if the person holding the right does not say or do something inconsistent with an intent to assert or rely upon the right. Although waiver is typically a question of fact, where, as here, the surrounding facts are undisputed, it is a question of law for the court to decide.
Next, the court, having decided the clause could be waived, got into an analysis of whether or not it had been waived in this case.
One way of waiver is delay. However, in this case, because the policy did not specify a time by which the appraisal clause must be asserted, Public could assert it within any reasonable time.
The court then analyzed what is reasonable time and analyzed whether or not the rights of the parties are affected by any delay.
A reading of this case should make it clear that an experienced Insurance Law Attorney should be involved early in one of these types of cases. The case analysed the existing law and then applied the law to the facts of this case. The court ultimately upheld the validity of the appraisal clause in the insurance policy and ruled that the appriasal clause had not been waived by delay or any other reason.

If you live in Grand Prairie, Dallas, Fort Worth, Arlington, Grapevine, Crowley, Cleburne, Granbury, Weatherford, Mesquite, or anywhere else in Texas, and you have a life insurance policy the following case should be interesting to you.
On August 31, 2010, the Court of Appeals, Fort Worth, issued an opinion in a case regarding a live insurance policy. The style of the case is, Glenda and Larry Rice v. Metropolitan Life Insurance Company.
Here are some underlying facts of the case:
Glenda purchased group universal life (GUL) insurance for herself and a life insurance rider for her husband Larry, from Metropolitan Life Insurance Company (Metlife) through a plan offered by her employer, Avon Products, Inc. Larry's rider provided $50,000 in coverage. Glenda retired from Avon in March 2003.
Metlife sent a letter dated May 10, 2003 that was addressed to Glenda and described her insurance options upon retirement. The letter contained information in its upper right corner, under the title of "Coverge Information as of 5/10/2003," about the amount of Glenda's own coverage and of Larry's coverage (described specifically in the letter at $50,000). It then stated in part,
You've worked for many years to ensure a solid financial future. Now it's time to relax and let us keep a promise that we made to you when you enrolled for Group Universal Life insurance. You trusted MetLife to provide a flexible life insurance benefit that would meet a lifetime of protection needs. Now, at this very important stage of your life, we'd like to continue to offer you a menu of coverage options. Most likely, your coverage needs have changed since you first enrolled in GUL. The enclosed brochure and options sheet explains the options now available to you.
Please review these options carefully. Please note that your current coverage will remain effective while you assess your choices ... To choose an option, simply complete the attached election form, sign where indicated, and return to MetLife in the envelope provided ...
We look forward to continuing to serve your needs and help you keep your promises. Again, congradulations and our best wishes during your retirement!
The election form explained Glenda's group life insurance options: (1) "CONTINUE MY GUL COVERAGE," (2) "ELECT A PAID-UP BENEFIT," (3) "ELECT A METLIFE ANNUITY," or (4) "SURRENDER YOUR COVERAGE & RECEIVE YOUR CASH FUND BALANCE." Glenda initially sent MetLife a fax in which she chose the fourth option, but later on the same day she sent the first fax, after speaking with MetLife employee named Summer, Glenda sent another fax stating that she wanted to continue her coverage under the first option. The second fax that Glenda sent stated in part, "I just discussed my decision to retain my coverage with Summer, your customer service associate. She has assured me my coverage will neither lapse not be cancelled."
The certificate of insurance for Glenda's group life insurance plan states that term life insurance for dependents ends on the date of the employee's retirement. However, for about two and a half years after Glenda's retirement, MetLife continued to bill and accept quarterly premium payments for both Glenda's coverage and Larry's rider coverage. Glenda received a "Group Universal Life Report" for the period of January to December 2005 that mentioned Larry's $50,000 in coverage.
In July 2005, MetLife discovered that it had billed the Rices for Larry's coverage since Glenda's retirement in 2003, so in the latter part of 2005, MetLife stopped billing the Rices for that coverage without notice to Glenda. When Glenda received the bill for the final quarter of 2005, she saw for the first time that MetLife had stopped billing for Larry's coverage. When she called MetLife in December 2005, MetLife's employee, Angelica Ridge, explained to her that MetLife did not cover term life insurance for dependants under the Avon group policy upon an employee's retirement and that Larry's coverage had been cancelled "effective July 2005." Glenda told Angelica that no one notified her of Larry's coverage cancellation. Despite this, according to Glenda, Angelica told her that the premiums that Glenda had paid for Larry's coverage would not be refunded and that Larry's coverage was in place through July 2005.
The above shows relevant facts.
Procedurally, the Rice's sued MetLife under numerous theories of law including violations of the Texas Deceptive Trade Practices Act, violation of the Texas Insurance Code, breach of contract, promissory estoppel, and various other related causes of action. The trial judge dismissed the case in a Summary Judgment hearing and this appeal followed.
On appeal, this court re-instated the case, allowing it to go forward on all but a few of the original causes of action. Only an experience Insurance Law Attorney would have been able to save this case. The opinion is lengthy and goes into good detail on each of the causes of action and why they were still good and that the trial judge made a mistake by having the case dismissed.

A business man in Dallas, Fort Worth, Grand Praire, Arlington, Mansfield, Duncanville, Mesquite, Garland, or anywhere else is Texas, will usually have a hard time understanding exclusions in their commercial insurance policies. Here is a case where policy interpretation and exclusions were the issue.
On October 8, 2020, the United States District Court, S. D. Texas, Houston Division, issued an opinion in the case styled, Associated Marine & Industrial Staffing, Inc. v. Liberty Surplus Insurance Corporation. In the case the court ruled in favor of the insurance company.
Here are some facts:
Liberty Surplus Insurance Corporation (Liberty) issued a general liability policy to Associated Marine & Industrial Staffing, Inc. (AMI) for the period of October 10, 2008 to October 10, 2009. On November 4, 2008, an auto accident involving AMI's employee and a third party gave rise to a lawsuit. AMI was sued and sought a denfense from Liberty. Liberty denied defense of the lawsuit, citing the policy's Aircraft, Auto and Watercraft exclusion ("auto exclusion"). This declaratory judgment action was filed to determine what the responsibilities were under the policy.Liberty argued that it is not required to defend or indemnify AMI because the claim is excluded by the policy's auto exclusion. At this point the court got into a lengthy discussion about how courts read and interpret policies and the exclusions contained within the policies.
AMI argued that the policy was ambiguous and thus should be read in favor of AMI. The court disagreed saying the policy language was clear. In doing so, the court turned to the relevant policy language. The policy's auto exclusion excludes coverage for "bodily injury ... arising out of the ownership, maintenance, use or entrustment to others of any ... auto ... owned or operated by or rented to any insured."
Citing the 2001, Texas Appeals - Houston [14th District], case, Lyons v. State Farm Lloyds, the court stated, "Texas courts and federal courts applying Texas law have consistently determined that standard auto exclusions in commercial general liability insurance policies and substantially similar exclusions are unambiguous and exclude coverage for injuries resulting from an auto accident." In stating this the court said, "Accordingly, the Court determines that the terms of the auto exclusion are unambiguous on their face and should thus be given their plain meaning, in accordance with the general rules of contract interpretation."
Here, AMI was sued for the negligent acts of its employee and for its own negligence in the way it trained its employee and supervised the situation. In this regard the claim against them included acts other than the actual operation of the auto. In reponse, the court stated that the policy included coverage of the employees for acts within the scope of their employment or while performing duties related to the conduct of its business but this was not sufficient to bring the incident within the scope of coverage under the insurance policy. In this regard the court stated, "Under Texas precedent, an auto exclusion provision can also exclude coverage for allegations of antecedent negligence, such as negligent entrustment or negligent hiring, training, and supervision."
This is another good case for getting an understanding how the courts interpret exclusions in insurance policies.

Someone in Dallas, Fort Worth, Grand Prairie, Keller, Colleyville, Roanoke, Springtown, Azle, Weatherford, or anywhere else in Texas who has a commercial liability policy would assume they have coverge if someone gets hurt. Well, depending on the policy and the exclusions contained in the policy, there may not be any coverage.
On October 5, 2010, the United States District Court, Northern District of Texas, Dallas Division, decided a case styled, Essex Insurance Company v. Michael Clark, d/b/a Ace Construction Company and Augustin Delrazo.
Here is some background: Essex Insurance Company (Essex) had issued a policy of insurance to Michael Clark (Clark), d/b/a Ace Construction Company (ACC). While the policy of insurance was in force, Delrazo cut his left hand on a table saw while doing work for ACC. Delrazo's lawsuit alleged atleast eleven things ACC did to cause or contribute to his injuries.
The Essex policy states that Essex "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' ... to which this insurance applies." The policy is subject to several exclusionary endorsements and exclusions.
Relevant portions of the policy read:
This insurance does not apply to liability for "Bodily Injury" to:
(A) an "employee" of any insured arising out of and in the course of employment or while performing duties related to the conduct of an insured's business ... Wherever the word "employee" appears above, it shall also mean any member, associate, co-employee, leased worker, temporary worker, union worker, volunteer, or any person or persons loaned to or volunteering services to you."
It also said:
This insurance does not apply to "bodily injury", "property damage", "personal injury", "advertising injury" or any injury, loss, or damages, arising out of, caused by or contributed to: as a result of alleged negligence or other wrongdoing in the hiring, training, placement, supervision, or monitoring of others by insured.
And it said:
Further, there is no coverage under this policy for "bodily injury", "personal injury", or "property damage" sustained by any contractor, selfemployed contractor, and/or sub-contractor, or any employee, leased worker, temporary worker, or volunteer help of same.
Of the eleven allegations in the lawsuit, none are pointed to saying which trigger coverge under the policy at issue. Instead, it is Essex saying that the lawsuit triggers the exclusions posted above. Per the United States 5th Circuit opinion in Guaranty National Insurance Company v. Vic Manufacturing Co., the burden is on Essex to prove that a policy exclusion applies. If Essex successfully proves a policy exclusion applies, the burden then shifts to Delrazo to establish an exception to the exclusion in the case.
Essex merely points to the language in the policy cited above.
In this case Delrazo was left with argueing that the policy was confusing. They also said that when parts of the policy were read separately that they were confusing and thus coverge must be extended. The court pointed out that there is no language in the policy suggesting its parts ought to be read separately from one another. Reading one paragraph to the exclusion of others will sometimes render them meaningless and runs contrary to contract interpretation principles under Texas law.
This was a case where the insurance company prevailed in the way it wanted the policy of insurance to be interpreted. However, anytime the interpretation of an insurance contract can be interpreted in more than one way, the insurance company usually loses. And of course this is when an experienced Insurance Law Attorney should be consulted.

Homeowners in Grand Prairie, Dallas, Fort Worth, Arlington, Mansfield, Irving, De Soto, Duncanville, Carrolton, Coppell, and other cities throughout Texas, probably have very little understanding about their homeowners insurance policy except that it is suppose to help them rebuild their house if it burns down. In addition to that, it is also suppose to provide coverage for you as a homeowner if someone is injured on your property and then sues you for their injuries.
The United States District Court for the Western District of Texas, Austin Division, issued an opinion on September 7, 2010. The style of the case is, Liberty Mutual Fire Insurance Company v. John Trovato and O'Delle Annette Hall. This case deals with the duty of an insurance company to protect its insured under a homeowners policy when they are sued and the interpretation of the insurance contract in that regard.
Here are some facts. On August 2, 2007, Hall came from a home she owned to help Trovato clean boxes out of Trovato's attic. While moving boxes from the attic, Hall fell through the ceiling. The fall resulted in serious injuries to Hall. Hall sued Trovato. Trovato asked Liberty Mutual Fire Insurance Company to protect him in the lawsuit filed by Trovato. Liberty refused and this lawsuit resulted when Liberty filed this declaratory judgment action to have the court determine whether or not Liberty had any duties under the homeowners policy.
This court said Liberty did not have any duties under the facts of this case and part of their reasoning was: The policy issued to Trovato provides,
Section II - Liability Coverage
Coverage C (Personal Liability)
If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:
1. pay up to our limit of liability for the damages for which the insured is legally liable. Damages include prejudgment interest awarded against the insured; and
2. provide a defense at our expense by counsel of our choice even if the suit is groundless, false, or fraudulent.
The policy also provides the following exclusions:
Section II - Exclusions
2. Coverage C (Personal Liability) does not apply to:
e. bodily injury to you or an insured within the meaning of part a. or part b. of insured as defined.
The policy's "Definitions" section provides:
4. "Insured" means you and residents of your household who are:
a. your relatives.
As amended by Endorsement 2934 (the "Endorsement"), to the policy "you" and "your" refer to the "named insured" shown in the Declarations and
(1) the spouse of the "named insured" shown on the Declarations, if a resident of the same household; or
(2) the partner in a civil union, registered domestic partnership, or similar union or partnership, with the "named insured" shown on the Declarations, if a resident of the same household.
The most relevant factor coming down in favor of Liberty in this case was that on September 6, 2006, Trovato and Hall executed and filed with the county clerk of Williamson County, Texas a "Declaration and Registration of Informal Marriage" by which Hall and Trovato swore and affirmed that they agreed to be married since March 1, 2006. Liberty maintains that based on the Marriage Declaration, and other evidence including that Hall received mail, had a car registered to and stayed at least part time at Trovato's home, Hall was an "Insured" under the Policy as she was a spouse, partner, or relative of Trovato at the time of the accident and a resident of Trovato's household. Therefore, Liberty contends the policy expressly excludes coverage for Hall's damages suffered in the August 7, 2007 accident, Liberty has no duty to defend or indemnify Trovato in the lawsuit, and has no duty to pay Hall any amount she might recover against Trovato in the lawsuit against Trovato.
The court discussed the relevant areas of law and how to interpret insurance contracts and how other courts rule in these interpretations. The court dwelt on the relationship between Hall and Trovato and cited Texas Family Code, Sections 2.401 - .404, addressing proof of informal marriage.
In this case there was evidence that Hall also had another residence and the court stated, "In Texas, the controlling test of whether persons are residents of the same household at a particular time, within the meaning of the policy in question, is not solely whether they are residing together under one roof. Instead, the real test is whether the absence of the party of interest from the household of the alleged insured is intended to be permanent or only temporary, i.e., whether there is a physical absence coupled with an intent to return." The court further stated, "The test focuses on intent of the non-insured person for whom coverage is sought: whether or not that individual intended her departure from the residence of the insured to be permanent or only temporary. If the non-insured person intends to return, such that the departure is only temporary, the person remains a covered person. Indeed a person may, and many do, have more than one residence." In stating the above the court was citing cases from the Waco Court of Appeals and the Texarkana Court of Appeals.
This case gives a perspective on how courts will look at these types of cases.

If you live in Grand Prairie, Arlington, Irving, Dallas, Fort Worth, Burleson, Keller, or anywhere else in the state of Texas and you have a homeowners insurance policy the policy is likely to contain an "appraisal" provision. So what does that mean?
The Texas Court of Appeals, Houston 14th District, issued an opinion on a case
September, 23, 2010, wherein the main issue dealt with an appraisal clause in an insurance policy. The policy at issue was a commercial policy but is essentially the same as those found in homeowners policies. The style of the case is, In re Continental Casualty Company.
Here is some background.
This was a legal proceeding against Judge Thomas R. Culver, presiding Judge of the 249th District Court in Fort Bend County. The proceeding was brought in a successful attempt to force the Judge to abate the underlying lawsuit against Continental Casualty Company, until such time as the appraisal process had been completed.
Continental's insured was a company called Zoya Enterprises, Ltd., who owned several properties that were damaged after Hurricane Ike struck the area.
Here is the relevant clause:
"If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser and notify the other of the appraiser selected within 20 days of such demand. The two appraiers select an umpire. If they cannot agree within 15 days upon such umpire, either may request that selection be made by a judge of a court having jurisdiction: Each appraiser will state the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal,
a. You will still retain your right to bring a legal action against us, subject to the provisions of the Legal Action Against Us Commercial Property Condition; and
b. We will still retain our right to deny the claim."
As stated by the Texas Supreme Court in 2009, in the case, State Farm Lloyds v Johnson, "Almost all insurance policies contain provisions specifying appraisal as a means of resolving disputes regarding the 'amount of loss' for a covered claim."
Appraisal provisions generally provide that either the insured or the insurer may demand an appraisal pursuant to the terms of the policy. As stated in other cases: Where an insurance contract mandates appraisal to resolve the parties disputes regarding the value of a loss, and the appraisal provision has not been waived, it must be enforced. Further, the Texas Supreme Court has expressed strong policy in enforcing appraisal clauses in insurance contracts.
The Texas Insurance Code, Sections 542.051 - .061, mandates prompt payment of claims. An insurer is required to acknowledge receipt of the claim, begin an investigation, and request documentation from the insured within 15 days of notification of the claim. The insurance company is to notify the claimant in writing of the acceptance or rejection of the claim within 15 days after its receives the required documentation for proof of loss. If the insurance company notifies the claimant it requires more time, the acceptance or rejection must be made within 45 days of the notice.
The above paragraph is law the court noted and then took this law into consideration as it discussed the facts in the case and some relevant timelines about the numerous claims Zoya was making. Some of these claims had been approved and some had not been paid. The exact facts in this case make for some interesting reading in trying to understand how the court looked at whether or not the appraisal clause had been timely and properly invoked.
One thing for sure - it can get complicated and confusing. The result of which is an experienced Insurance Law Attorney must be consulted to protect rights under an insurance policy.

Grand Prairie, Dallas, Fort Worth, Arlington, Mansfield, Grapevine, Crowley, Weatherford, and all other places in Texas will find someone driving a rental car. So, what happens if the person driving the rental car causes a wreck with someone else and they do not have enough insurance to cover the damages they cause? That was the issue in the case discussed below.
On October 7, 2010, the United States Court of Appeals for the Fifth Circuit, issued an opinion in the case styled, Kenneth McQuinnie v. American Home Assurance Company.
Here are the underlying facts:
In August 2007, McQuinnie sustained damages in an accident between his vehicle and a rental car driven by Anand Sapkota. Enterprise Leasing (Enterprise) owned the car Sapkota drove. At the time of the accident, McQuinnie was covered by a policy with American Home Assurance Company (American). McQuinnie and Sapkota's insurance company reached a settlement of $50,000, the limit of Sapkota's personal insurance policy.
Alleging that his damages exceeded $50,000, McQuinnie filed a claim with Ameican, seeking benefits under the "uninsured/underinsured" provisions of the American policy. In relevant part, American's policy provides they "will pay damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured, ..." The policy also provides definitions specific to uninsured/underinsured coverge:
F. ADDITIONAL DEFINITIONS
The following are added to the DEFINITIONS section and have special meaning for UNINSURED/UNDERINSURED MOTORISTS INSURANCE ...
6. "Uninsured motor vehicle" means a land motor vehicle or trailer of any type: ...
d. Which is an underinsured motor vehicle. An underinsured motor vehicle is one to which a liability bond or policy applies at the time of the accident but its limit of liability either:
(1) is not enough to pay the full amount the covered is legally entitled to recover; or
(2) has been reduced by payment of claims to an amount which is not enough to pay the full amount the covered insured is legally entitled to recover as damages.
Finally, the policy provides a list of exceptions, including the following: "uninsured motor vehicle' does not include any vehicle ...owned or operated by a self-insurer under any applicable motor vehicle law."
American denied the claim because Enterprise is a self-insurer under the Texas Motor Vehicle Safety Responsibility Act and therefore falls within the policy exception for self-insured owners and operators.
A federal law, 49 U.S.C., Section 30106, provides that:
(a) In general. -- An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if --
(1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and
(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).
Lawyers for McQuinnie used Section 30106 to bolster his arguement that the self-insurer exception only applies when the insured is legally entitled to recover from the self-insurer, and because federal law prevented any recovery from Enterprise, he should be permitted to recover from American, dispite the self-insurer exception.
After a complete review the court ruled in favor of American, stating that the application of American's self-insurer exception does not violate Texas law, and it therefore bars McQuinnie from recovery under the policy.

Can someone in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, Granbury, or anywhere else in Texas sue their insurance company when their insurance company is cheating them by charging excessive fees?
According to an article written by Tiffany Hsu and Marc Lifsher, reporters for the Los Angeles Times, that is exactly what some customers of Farmers Group did. The article is titled, "Farmers Group agrees to pay $455 million to settle policyholder suit."
This article tells us about a class action lawsuit which accused a Los Angeles based insurance management firm of charging excessive fees to customers. Farmers insist the lawsuit is without merit but they agreed to settle the lawsuit anyway.
The October 8, 2010, article tells us that Farmers Group, Inc., and its Swiss parent agreed to pay $455 million to 13 million current and former policyholders to settle a 2003 lawsuit that accused them of charging excessive fees to customers.
If the settlement is approved by the Los Angeles County Superior Court judge, it would resolve all claims dating back to 1999. Payments to people who purchased Farmers home, automobile, personal liability amd commercial property coverage are expected to average $35, but individual settlements could vary considerably, according to representatives of Farmers Group.
Don't jump on the plaintiffs lawyers too much but it appears they will be paid as much as $90 million dollars. Keep in mind that they are representing 13 million clients. This is a about $7 per client.
Farmers and Zurich Financial Services Group continue to assert that there is no basis for "the plaintiffs' claims regarding the management services fees Farmers charged." However according to Farmers chief executive, the company is choosing to settle rather than prolong the uncertainty and cost of a legal battle that has already lasted seven years.
Farmers is the third largest personal lines insurance company in the United States.
Another interesting figure at issue in this case is the number $1.5 billion. In the year 2000 alone, that is the amount of money Farmers collected as a percentage of premiums paid to the exchanges and passed along to Farmers Group.
In the lawsuit Farmers is also accused of breaching its legal duty as well as committing fraud and engaging in unfair business practices.
According to the article, it appears the agreement between Farmers and Zurich "is a sweetheart deal where they pass big amounts of money around in the form of management fees paid by the consumer."
The article tells us that the lawyers for the policyholders say the settlement is "very good for policyholders," and will help Farmers give fair premiums.
Zurich is reported to say it will cut their third-quarter earnings by $295 million.
The advantage of class action lawsuits is it allows a situation where someone is cheated out of an amount of money that is relatively small (in this case $35) to get justice. Otherwise the costs and time involved in pursueing the claim would not be justified. In a class action lawuit the individual participants are not required to actually participate in any way other than signing some papers and maybe providing some records.