Dallas Fort Worth Insurance Lawyer Blog

A house fire in Grand Prairie, Arlington, Garland, Mesquite, Richardson, Carrolton, Farmers Branch, Irving, or anywhere else in the North Texas area is a real nightmare for those involved. It is even worse when the insurance company accuses you of arson and denies the claim.
There are many things an experienced Insurance Law Attorney can do to help someone who is accused by the insurance company of having committed arson own their own house in order to recover the insurance proceeds.
One first needs to understand that arson is a criminal offense. The crime of arson is defined in the Texas Penal Code, Section 28.02. According to this section of the Penal Code:
(a) A person commits an offense if the person starts a fire, regardless of whether the fire continues after ignition, or causes an explosion with intent to destroy or damage:
(1) any vegetation, fence, or structure on open-space land; or
(2) any building, habitation, or vehicle:
...
(B) knowing that it is insured against damage or destruction;
...
(d) An offense under Subsection (a) is a felony of the second degree, ....
Next, one needs to understand that the Texas Code of Criminal Procedure outlines part of the procedure for handling a suspected arson case.
Article 50.01 states: When an affidavit is made by a credible person before any justice of the peace that there is ground to believe that any building has been unlawfully set or attempted to be set on fire, such justice shall cause the truth of such complaint to be investigated.
Article 50.02 states: The proceedings in such cases shall be governed by the laws relating to inquests upon dead bodies. The officer conducting such investigations shall have the same powers as are conferred upon justices of the peace ....
Article 50.03 states: The jury after inspecting the place in question and after hearing the testimony, shall deliver to the justice holding such inquest its written signed verdict in which it shall find and certify how and in what manner such fire happened or was attempted, and all the circumstances attending the same, and who are guilty thereof, and in what manner. If such a jury is unable to so ascertain, it shall find and certify accordingly.
Article 50.04 states: If the jury finds that any building has been unlawfully set on fire or has been attempted to do be, the justice holding such inquest shall bind over the witnesses to appear and testify before the next grand jury of the county in which such offense was committed.
Article 50.05 states: If the person charged with the offense, if any, be not in custody, the justice of the peace shall issue a warrant for his arrest, and when arrested, such person shall be dealt with as in other like cases.
Article 50.06 states: In all such investigations, the testimony of all witnesses examined before the jury shall be reduced to writing by or under the direction of the justice and signed by each witness. Such testimony together with the verdict ... shall be certified to ....
Going further here, the Texas Government Code, Section 417 defines the duties of the State Fire Marshall as it relates to arson cases.
Section 417.004(b), puts the State Fire Marshall in charge of all arson and suspected arson cases in the state and makes him responsible for investigations.
Section 417.0052, says the State Fire Marshall is responsible for investigating even incidences of suspected arson.
Section 417.006, gives him authority to appoint local peace officers to investigate arson cases.
Section 417.007, states that the State Fire Marshall "shall immediately investigate a fire" ... if requested by:
(1) the mayor, fire chief, fire marshall, or police chief of a municipality in which a fire occurs;
(2) a county or district judge, sheriff, county fire marshal, chief or fire marshal of a fire department in an unincorporated area, or county attorney of a county in which a fire occurs;
(3) a fire insurance company interested in a loss or the company's general, state, or special agent;
...
(5) a justice of the peace or constable of a precinct in which a fire occurs; or
(6) officials of a state or federal law enforcement agency or local or special governmental district involved or interested in a fire loss ...
This same section allows the fire marshall to enter the building or premises at any time, to "conduct the investigation at the place of the fire and before an insured loss may be paid. The fire marshall shall ascertain, if possible, whether the fire was caused intentionally, carelessly, or accidentally. The state fire marshall shall make a written report of the investigation to the commissioner." This section also allows further investigations as it deems necessary. It allows for the marshall to give its investigative results to a prosecuting attorney if there is reason to believe there is an arson.
What is relevant about all the above information is that seldom does the insurance company, who denies a claim based on a suspected arson, ever follow through with these steps which would obviously be helpful to their position. Which of course calls into doubt the validity and sustainability of their position.

Arson happens in places like Fort Worth, Dallas, Garland, Irving, Mesquite, Richardson, Plano, Duncanville, De Soto, and all other places in Texas at one time or another. But to be accused of arson and have your insurance claim denied because you are suspected by the insurance company is something else. Is there a typical case or situation where this comes about? The answer is no. Every situation has to be scrutinized based on the facts of that particular situation.
The Texarkana Court of Appeals issued an opinion in a 1990 case that discusses the way these arson cases are evaluated. The style of the case is, The St. Paul Guardian Insurance Company v. Teri Lynn Luker and Paul Kimbel Luker. In the case, a jury found in favor of the Lukers and compensated the Lukers for contractual damages of $27,000 and tort damages of $50,000 and mental anguish of $15,000. The court reversed all but the contractual damages of $27,000.
Here are some of the facts of this case.
At approximately 12:15 a.m. on the morning of June 12, 1985, a fire caused structural damages to the house in which Teri and Paul were residing and damaged or destroyed their household belongings. Emmitt Luker owned the home but did not occupy it. The house was the source of litigation proceeding between Paul and his previous wife, the result of which Paul owed Emmitt $17,000 on the house. As a result of these actions, Paul obtained a new mortgage and his house payments increased from $650 per month to $900 per month.
After Paul had obtained the new mortgage, he got a new policy which reduced his contents coverage from $40,000 to $27,000. The policy was actually in the name of Emmitt. Emmitt was paid for the damage to the house but St. Paul denied Teri and Paul's claim for the contents. St. Paul denied based on three grounds. That the fire was caused by arson by Paul and Teri or by someone instructed by them; that Paul and Teri misrepresented their losses by concealing their person involvement in the fire and by failing to report truthfully the extent and valuation of the destroyed personal property; and that the policy issued to Emmitt insured only Emmitt's interest in any personal property on the premises and not that of Paul and Teri.
The tort damages against St. Paul were for St. Paul violating the insurer's duty to deal fairly and in good faith with their insureds. This claim arises when there is no reasonable basis for denial of the claim or for delay in payment, or for a failure on the part of the insurer to determine whether there was any reasonable basis for the denial or delay. This was the standard set out by the Texas Supreme Court.
One argument by St. Paul was that the policy was issued to Emmitt, not Paul and Teri and thus the duty was owed to Emmitt, not Paul and Teri. This court, citing the Texas Supreme Court case, stated, "When a person contracts with an insurer for the benefit of another, both the person contracting and the third party have the right to expect that the insurer would owe the same duty to the designated third party as it would to the person making the contract. We hold that when an insurer agrees to insure a third party beneficiary under the terms of an insurance contract, it owes the same duty of good faith and fair dealing to the third party as it does to the purchaser of the insurance."
So, the preceding paragraph means that Paul and Teri won on the argument regarding whether or not they had a right to sue for a violation of the duty of good faith and fair dealing. Next, they had to prove the duty had been violated.
To establish a bad faith claim, the Lukers had to prove (1) the absence of a reasonable basis for denying or delaying payment of the benefits of the policy, and (2) that the St. Paul knew or should have known that there was not a reasonable basis for denying the claim or delaying payments of the claim. St. Paul retained the right to deny invalid or questionable claims.
This court then spent several pages of their opinion going over the many facts in this case. In its' conclusion this court stated, "We find that the Lukers produced insufficient evidence to show that there was no reasonable basis for St. Paul's denial of the claim, nor did the Lukers present sufficient evidence to show that St. Paul knew or should have known that there was no reasonable basis for denying or delaying the payment of the claim.
This case, like most arson cases, had a lot of interesting facts. Both the insureds and the insurance companies always seem to have evidence in their favor. Then it boils down to which side you believe the most. One thing for certain is that an experienced Insurance Law Attorney needs to be involved early on in these cases. Otherwise, it is the insurance company gathering all the evidence to win the case.

If you live in Grand Prairie, Arlington, Fort Worth, Saginaw, Haslet, Newark, Rhome, Benbrook, Lake Worth, Crowley, Mansfield, or anywhere else in North Texas, there is a chance you have a life insurance policy. Naturally you would expect that the policy would pay the intended beneficary. Well, that is not always the case, particularly if the insurance company can show misrepresentations in the policy application. Whenever they try to do this, it is vital that an experienced Insurance Law Attorney be contacted.
The Texas Supreme Court took on this issue in a case decided in 1980, styled, Mattie Emmaline Mayes v. Massachusetts Mutual Life Insurance Company. Here are some of the facts in the case.
On May 6, 1976, Albert Mayes signed and delivered to an agent, Part 1 of two applications for life insurance. Mays had not disclosed to Mutual Life that certain answers in his application which were correct when made had become false by the time the policies were delivered. The two policies were identical except for the amount of coverage.
Page three of each of the applications contained a paragraph stating that "To the best of my (our) knowledge and belief, all answers and statements contained herein are full, complete and true and were correctly recorded before this application was signed; ...
Both applications required a physical examination of this forty year old prospect and the information relative to this examination is contained in Part 2 of the applications. Part 2 was filled out by Dr. Rattan, Mutual Life's medical examiner and it contained a number of answers to medial history questions as the result of a May 27, 1976, examination. Question 4 inquired as to whether Mayes within the past five years: (A) had been treated by a physician; (B) had been treated or observed in a hospital; or (C) had undergone an electrocardiogram. Only question 4A was answered yes and the explanation given related to a 1974 physical examination in connection with a previous policy. Questions 5A and 6A inquired if he had been treated for or had any known indication of any disorder of the heart or if he had experienced any pain, pressure or discomfort in the chest. Both were answered no.
The home office of Mutual Life required a reexamine based on elevated blood pressure which was conducted on July 14, 1976. This was cleared and the policies were issued to Mayes but at a higher premium due to the elevated blood pressure.
On June 29, 1976, Mayes felt a chest paid and went to the hospital and was checked out and sent home with the explanation that the pain was probably the result of esophagitis. He had been kept overnight and a number of tests were conducted but the doctor did not believe Mayes had suffered a heart attack.
On July 28, 1976, Mayes saw his doctor and complained of two more episodes of chest pain. Again, the doctor was unable to determine the cause of the pain nor did he diagnose heart disease. On July 25, 1977, Mayes died suddenly of a heart attack.
Here is the question in the case:
Since Mayes heath had changed between May 27, 1976 and the date the policies were delivered, August 17, 1976, did the extent to which his answers to the questions were now changed, was it a misrepresentation by him to Mutual Life thus making the policies void?
The statutes that address this are found in the Texas Insurance Code, Section 705.003 and Section 705.004.
Case law says that an insurance company cannot avoid liability on the ground of misrepresentation by the insured unless there is a finding that the insured intended to procure issuance of the policy by representations known to be false.
These policies did not contain a "good health" contractual provision which would have required that Mayes disclose the medical conditions that changed before the policy was delivered on August 17, 1976.
It is settled law that if the answers to the questions in the application were untrue at the time they were given, the untrue answers constituted misrepresentations, but that is not the case here.
There are five elements that must be pled and proved by an insurance company wishing to void a policy based on the misrepresentation of an insured:
1) the making of the representation;
2) the falsity of the representation;
3) reliance thereon by the insurer;
4) the intent to deceive on the part of the insured in making same; and
5) the materiality of the representation.
In discussing this case the court stated "Insurance policies are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer's option ..."
The problem for Mutual Life in this case was that even though Mayes had some problems after signing the application, his doctors led him to believe that it was probably nothing serious.
This case was remanded to the first level appeals court for further consideration so it is not known exactly what happened. But this case is a good read for understanding how misrepresentations in an application for insurance are examined by the courts,

Life insurance policy holders in Weatherford, Mineral Wells, Aledo, Azle, Peaster, Brock, Millsap, Hudson Oaks, Willow Park, Springtown, and other places in Parker County would be interested in this case.
The case was decided by the Texas Supreme Court in 1978. The case is styled, James D. Robinson v. The Reliable Life Insurance Company. The insured beneficiary in this case lost at the trial court level and the first appeals court level and in the Supreme Court.
The question on appeal was whether an insurance company, in order to avoid liability of a policy of life insurance for the reason of false representations in the insurance application, must establish both that (1) the misrepresentation was material to the risk and that (2) the condition about which the misrepresentation was made contributed to the death of the insured.
The lawsuit was filed by the beneficiary to recover on a $2,000 life after insurance policy after the death of his son. The insurance company denied liability and counterclaimed for cancellation of the policy because of false representations in the application for the policy. The application contained questions inquiring whether the son had been treated by a doctor within the past five years, whether the son had any injury, illness or operation in the past five years, and whether the son had ever been confined to a hospital or sanitorium. It was found that the answers to each of the questions was false. That each of the questions was material to the risk assumed by the insurance company and each was relied on by the insurance company in issuing the policy. And that the policy would not have been issued but for the false statements. This false information was not discovered until shortly after the death of the insured. The evidence showed that the son had been afflicted with cickle cell anemia for several years prior to his death. He was under treatment by a doctor and hospitalized for about two weeks for intestinal hemorrhaging and sickle cell anemia less than two years before the application was submitted. However, the only evidence as to the cause of death of the son is the following statement on the death certificate: "There were no marks on body that indicate violence, apparently died from natural causes." The uncontroverted evidence at trial in this matter was that a prudent insurer would not have issued a policy on the life of a young boy afflicted with sickle cell anemia.
The Texas Insurance Code, Section 705.004, allows a policy to be void if it is shown at trial that the matter misrepresented in the application (1) was material to the risk; or (2) contributed to the contingency or event on which the policy became due and payable.
In the appeal of this case, Robinson urged the court to read the word "or" in the statute to mean "and."
Here, due to the statement in the death certificate, Robinson argued there was no proof that the matters concealed in the application contributed to his son's death. Thus a reading of the statute wherein the word "or" is construed as the same as the word "and" would cause him to prevail in the lawsuit.
This court responded to Robinson's argument by pointing out that there is a long line of cases supporting Reliable's argument that the statute wording is correct as it is. Which is, that the materiality of the risk must be viewed as of the time of the issuance of the policy, rather than at the time the loss occurred, and that the principle inquiry in determining materiality is whether the insurance company would have accepted the risk if the true facts had been disclosed. The cases recognize the concept that a condition material to the risk assumed by the insurance company is quite distinct from the cause of the loss.
Portions of Section 705.004 and Section 705.003 are stated and interpreted in such ways as to help insureds who have errors or misrepresentations in their applications and statements of loss. It is important to seek the advice of an experienced Insurance Law Attorney whenever an insurance company denies a claim based on misrepresentations by the insured in the policy application of in any claim for loss.

For someone in Grand Prairie, Arlington, Fort Worth, Dallas, Hurst, Euless, Bedford, North Richland Hills, Roanoke, Keller, and other places in North Texas, it is likely to happen. A spouse intentionally burns the house down. Well, what happens to the insurance money? Here is a case that provides some guidance.
The case was decided in 1999, by the Texas Supreme Court. It is styled, Texas Farmers Insurance Company v. Daisy Murphy. The question posed to the court was whether an innocent spouse can recover insurance proceeds when the other co-insured spouse has intentionally destroyed the covered community property.
Here is some background.
On September 23, 1993, Robert Murphy obtained a binder on a homeowners policy covering his and his wife Daisy Murphy's home and contents. On September 30, 1993, the home burned down. Robert sought reimbursement and Farmers investigated the claim. Farmers concluded Robert intentionally caused the fire and denied the claim.
On February 19, 1994, Farmers filed a declaratory judgment action asking the court to declare they had no liability under the policy.
Meanwhile, Daisy filed for divorce, and on March 8, 1996, she and Robert executed a partition agreement to divide their community interests in any proceeds from the policy. The divorce was final on October 11, 1996.
In Texas, until 1986, the deliberate destruction of jointly owned property by one co-insured barred recovery by other co-insureds, even when they were innocent and the policy did not expressly bar such recovery. In 1986, this changed and thus an innocent spouse is not now barred from recovery.
Farmers argued that "public policy" should not allow this recovery. To prevent an arsonist from having a community interest in any recovery, Texas courts have generally conditioned an innocent spouse's recovery on whether and when the community interests in the insurance policy were severed.
Farmers argued that innocent spouses should not recover even if there is an after-the-fact partition. It contends that such a rule would encourage spouses to enter into sham partition agreements, after which the wrongdoing spouse might still benefit from the insurance proceeds.
Daisy responded that it would be arbitrary to deny recovery even when the culpable spouse would receive no benefit. It would also be unfair to require an innocent spouse to obtain a divorce or partition before the claim was filed or denied. First, it assumes the innocent spouse knows that the other spouse committed arson and can obtain an equitable partition before the insurance company denies the claim. Second, it encourages an innocent spouse whose home burns down to hastily partition or divorce, even though a jury may later acquit the suspected spouse of any alleged wrongdoing. Daisy contended that if recovery must be conditioned on partition or divorce, she would have until time of judgment to obtain a severance of the community estate.
This court said that neither a rule conditioning an innocent spouse's recovery on partition or divorce is neither practical or satisfactory. Partition agreements require the consent of both spouses. The culpable spouse could still benefit by demanding, in exchange for his or her consent, a greater share of the remaining community estate. Or he or she could refuse to partition at all, leaving the innocent spouse with a choice between divorce or forfeiture. And an innocent spouse who wants a divorce might not be able to obtain it in time to protect her or his interest in any recovery. On the other hand, an innocent spouse who is committed to the marriage might enter into a partition agreement as a mere formality, fully intending to share any recovery with the culpable spouse. In short, a rule requiring partition may not effectively protect the innocent spouse's share or prevent the culpable spouse from benefitting. Additionally, it may have the unintended consequence of encouraging divorce.
In making the ruling the court stated, "It is not the courts' business to superintend what innocent co-insureds may do with any insurance proceeds they are contractually entitled to recover." They said that the preferable rule is to allow innocent spouses to recover according to their contracts, regardless of partition or divorce.
One thing for certain is that an experienced Insurance Law Attorney should be consulted in these situations. The facts of the case and the wording of the policy may make a big difference in the outcome of the claim.

Here is something that insured people in Grand Prairie, Weatherford, Arlington, Fort Worth, Dallas, Mansfield, and other places in Texas might be curious about. What happens if you have an insurance policy on your house. Next, the house burns down and a claim is made and denied. Next, the homeowner dies! Can the heirs pursue a claim against the insurance company for violations of the Texas Deceptive Trade Practices Act or violations of the Texas Insurance Code?
The Fourth Court of Appeals District of Texas issued an opinion on July 27, 2011, that addressed this question. The style of the case is, Texas Farm Bureau Mutual Insurance Co. v. Shannan Rogers and Cristen Bazan, as legal heirs of Cynthia Bazan, deceased. This case was tried to a jury in the 198th Judicial District Court, Kerr County, Texas, which returned a verdict favorable to the heirs. This appeals court reversed. Here is some background.
In 2008, Cynthia Bazan purchased a house and was required to purchase insurance by the mortgage company. She applied for a policy with Farm Bureau. Farm Bureau initially refused coverage based on a wood-burning stove having inadequate protection. This was remedied and a policy was issued. Later, a fire completely destroyed Bazan's house and all the contents. Bazan made a claim and Farm Bureau began an investigation which included a background check of Bazan and a "cause and origin" investigation of the fire. Farm Bureau obtained Bazan's criminal record. Farm Bureau's fire investigator listed the cause of the fire as "undetermined."
Later, Bazan admitted in an interview with a Farm Bureau investigator that she had a criminal record, although she expressly denied in both of her insurance applications that she had ever been convicted of a criminal offense. In fact, her record was lengthy. When Farm Bureau's underwriting manager became aware of the criminal record he made the decision to rescind the policy. Farm Bureau sent notice to Bazan rescinding the policy and returning Bazan's premium payment based on the concealment of her criminal record on the policy application. The policy contained the following provision:
2. Concealment or Fraud. This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance, made false statements or committed fraud relating to this insurance, whether before or after a loss.
Bazan's attorney sent a notice letter to Farm Bureau demanding payment and other damages. Farm Bureau still refused to pay and Bazan subsequently sued Farm Bureau.
Bazan later died, a few weeks before the trial. Her children filed a "suggestion of death" with the court asking to proceed as their mother's legal heirs. Farm Bureau objected but the court allowed the heirs to proceed.
After the trial in which Bazan's heirs prevailed, Farm Bureau filed this appeal. In the appeal Farm Bureau challenged the Bazan heirs right to pursue the DTPA claim.
This court cited Texas law that says a DTPA claim does not survive the death of the original consumer. The court held that a deceased consumer's estate cannot pursue a cause of action under the DTPA because the statute does not expressly provide for survival and because the right to recovery under the DTPA is punitive in nature --- "a purely personal right."
As to Farm Bureau's claim of misrepresentation being grounds to rescind the policy the court said that to void an insurance policy based on the insured's misrepresentations in the policy application, the insurer has the burden of proving the following: (1) the insured made a representation, (2) the representation was false, (3) the insurer relied upon the false representation, (4) the insured made the false representation with the intent to deceive the insurer, and (5) the false representation was material.
As to this part dealing with misrepresentation the jury found in favor of Farm Bureau and this court upheld that finding.

Anyone in Grand Prairie, Weatherford, Fort Worth, Dallas, Arlington, Aledo, or anywhere else in Texas may ask the question which is the title of this post. The answer is not as easy as one would hope it to be.
The Texas Insurance Code has a subchapter titled "Prompt Payment of Claims." This subchapter consists of eleven sections. To answer the question of how long an insurance company has to pay a claim, the section has to be read with the applicable policy and then apply both to the facts of the case.
A 1998, Fourteenth District Court of Appeals case styled, John A Daugherty, Jr. v. American Motorists Insurance Company, deals with the question. The case was decided by the trial judge in favor of the insurance company and then the decision was upheld by this appeals court. Here is the story.
Daugherty purchased a 1994 BMW 740IL on January 12, 1994. The price, including taxes and fees totaled $64,678.97. The car was stolen on February 15, 1994. Daugherty promptly reported the theft to American Motorists. On February 25, 1994, he submitted an affidavit of vehicle theft to American in which he claimed a loss of $68,895.42.
After an investigation, the adjuster called Daugherty's bookkeeper on March 16, 1994, and informed her that American had determined the cash value of the stolen vehicle to be $62,931.14, less a $500 deductible. Daugherty was out of town and was not communicated the offer. The next day, the BMW was recovered in Florida and the adjuster called the bookkeeper and rescinded the offer. Daugherty did not learn of the offer until after it had been withdrawn.
The recovered BMW was returned to Houston on April 4, 1994. An inspection found several problems which were estimated to be worth $1,901.50, and tendered this amount to Daugherty.
Daugherty refused the payment. He then bought another BMW that was identical to the stolen one for $62,355.34. He took delivery on May 30 and continued to make payments on both vehicles all the way to time of trial.
Daugherty filed a lawsuit seeking the $62, 431.14, initially offered by American, as well as additional damages for violations of the Prompt Payment of Claims chapter of the Texas Insurance Code.
Daugherty's contention was that American effectively notified him it would pay his claim when, on March 16, 1994, it informed his bookkeeper it had determined the value of his stolen BMW. He further argued American was bound by the terms of the auto policy to pay him within 5 days after notification. American contended the communication of March 16 was merely an "offer" to pay. Because the offer was rescinded before it could be accepted, American claims it was not obligated to pay the sum.
The policy contained an amendatory endorsement which provided, in pertinent part:
1) If we notify you that we will pay your claim, or part of your claim, we must pay within 5 "business days" after we notify you.
2) If payment of your claim or part of your claim requires the performance of an act by you, we must pay with 5 "business days" after the date you perform the act.
The policy amendment tracks, and effectively incorporates, the mandatory provisions of the Insurance Code, Section 542.057.
Both the policy and the Insurance Code, Section 542.055, provide that within 15 days after a claim has been filed, the insurer is obliged to begin an investigation of the claim and to request all items, statements, and forms the insurer reasonably believes will be required from the insured.
In this case, American, within 15 business days of receiving all the necessary information and forms from Daugherty, to accept or reject his claim in writing, told Daugherty's bookkeeper it had calculated the losses. The court said that, "Whatever can be said of this communication, it does not appear to be a 'notice of payment of claim.'"
First, both the policy and the Insurance Code indicate that a "notice of payment of claim" must be in writing. The policy states:
After we receive the information we request, we must notify you in writing whether the claim will be paid or has been denied ...
If we notify you that we will pay your claim, or part of your claim, we must pay within 5 "business days" after we notify you.
Since there was a discrepancy between what Daugherty was seeking and what American estimated, the call from the adjustor to Daugherty's bookkeeper appeared to be more in the nature of an offer than a notification that American was going to pay the claim.
In conclusion the court said, even if we were to find that the communication of March 16, 1994, was a "notice of payment of claim," such notice was grounded upon the fact that Daugherty's car had not been recovered. The court pointed out that nothing in the Insurance Code or the policy prevented American from withdrawing its notice of payment if the facts and circumstances changed significantly. In this case, the the change of circumstances, i.e., the recovery of Daugherty's BMW, favored the insurance company because the loss was not as great as had been previously calculated. However, the court stated, it is just as conceivable that changing circumstances could have favored the insured.
This writer does not agree with the conclusion reached by the court in this case. One thing that is certain is that an experienced Insurance Law Attorney should be consulted in these types of situations.

If you have insurance in Grand Prairie, Arlington, Fort Worth, Mansfield, Dallas, Irving, Mesquite, Garland, or anywhere else in Texas, you would like to think that when you make a claim against your insurance company, that they are going to pay your claim and they are going to pay it promptly. The following is a case where they, first refused to pay then later decided to pay, but by that time it was a late payment.
This is a 1996, Texarkana Court of Appeals case styled, Southland Lloyd's Insurance Co. and James D. Webb, III v. Charles W. Tomberlain, individually and d/b/a Charles Tomberlain Insurance Agency and Charles M. Tomberlain. The case is somewhat complicated and deals with other issues besides the prompt payment of the claim but the facts are kinda interesting to follow and the law regarding prompt payment is discussed enough to educate.
Southland and Webb were appealing a judgment entered in a lawsuit by Charles M. Tomberlain for delayed payment of an insurance claim. The court reversed the judgment and remanded for a new trial due to errors regarding the jury charge, exclusion of expert testimony, and the granting of a directed verdict.
Here is the background:
Charles W. Tomberlain was an independent insurance agent who owned Charles Tomberlain Insurance Agency. His son, Chuck, was an agent with the agency. Chuck also owned and managed numerous properties. In 1988, Chuck purchased a small house, on Myrle Street, in Longview, Texas, from the United States Department of Housing and Urban Development in a discount auction for $13,200. Chuck then spent about $500 - $1,000 improving the house. On september 9, 1988, Chuck executed a contract for sale of the house to Trennis Willis for $20,000, to be paid in monthly installments over ten years at twelve percent interest. Willis immediately occupied the house. Chuck, acting as agent for the agency, issued a policy on the house with Republic Insurance Company in August 1988. On August 15, 1991, the Republic insurance policy on the house expired. Chuck did not renew the policy at that time because his father's agency had stopped writing policies with Republic.
On October 11, 1991, again acting as his own agent, Chuck completed, signed, and submitted an application for a $25,000 fire insurance policy on the house with Southland. Southland thereafter approved the policy, but reduced the coverage amount to $20,000. Sometime before October 16, Willis vacated the house without notifying Chuck. Chuck immediately began cleaning and repairing the house, and arranged for a new tenant to move in December 1.
In the early morning hours of November 20, 1991, a fire started and burned substantial portions of the house's interior before being extinguished. Damage was estimated by the fire department at $20,000. A fire department investigation concluded that the fire was of suspicious origin and was started with the aid of accelerants.
Chuck telephoned Southland on November 20, the day of the fire, to notify them of the loss and on November 21, faxed them a completed claim form, along with a copy of the fire marshal's report. Over the next two months, Chuck called Southland periodically to check on the status of the claim. He was told that an investigation was being conducted. The first written response that he received in regard to his claim was a letter from Webb dated January 24, 1992. The letter stated that Southland had determined that the fire was the result of arson and that the company had requested further investigation. Chuck's attorney sent a demand letter to Southland on February 4, requesting that it pay in full.
Southland responded by way of two letters dated February 7, 1992. One letter, addressed to Charles W. Tomberlain, announced that Southland was immediately canceling its agency agreement with the Tomberlain Agency and notified the agency that Southland intended to seek damages against it for its misrepresentations on the Myrtle Street property application. The other letter was written to Chuck's attorney. In the letter, Webb stated that Southland was investigating Chuck's claim as a potential arson incident and that Southland felt it had been "duped" by misrepresentations on the insurance application. The letter demanded that Chuck produce all records and documents of any kind pertaining to the property and to his employment history with the Tomberlain Insurance Agency.
On February 7, 1992, the same date as the two letters, Chuck sued Southland and Webb. Southland ended up paying Chuck $20,900 to settle the claim, with the intention of pursuing its third-party action against the agency for indemnification. Chuck refused to drop his suit, opting instead to seek additional damages against Southland.
One cause of action that Chuck sued on was for breach of the duty of good faith and fair dealing based on Southland's delay or denial of a claim payment. For an insured to prevail, or for Chuck to prevail, he must proved two independent facts: (1) that the insurer (Southland) had no reasonable basis for denying or delaying payment of the claim, and (2) that the insurer (Southland) knew, or should have known, that it had no such basis. The is the statutory law and the standard set out by the Texas Supreme Court in a case in 1994.
One thing interesting in this case is that Southland did pay the original claim for the $20,000, but instead of Chuck taking that money and going on, he continued his claim against Southland for bad faith and the additional damages available to him including court costs, attorney fees, and exemplary damages. Many times a person gets paid the amount they should have been paid in the beginning and make a choice to drop the rest of the matter. Chuck did not.

Arsons happen in Weatherford, Mineral Wells, Aledo, Azle, Millsap, Hudson Oaks, Willow Park, Brock, Peaster, Springtown, and all over Parker County and Texas. But that does not mean the person who owned the property committed the arson. And when the insurance company does an investigation and finds the property owner is having financial problems that does not mean the property owner burned the property either. After all the vast majority of people have financial problems.
Here is a case that deals with arson and the insurance company attempt to blame the arson on the homeowners. The case opinion was issued in 2000, by the Dallas Court of Appeals. The case is styled, Texas Farmers Insurance Company v. Cloteal L. Cameron, et al.
The jury found against Farmers for violations of the Texas Insurance Code, bad faith, violation of the Prompt Payment of Claims Act, mental anguish, violations of the Texas Deceptive Trade Practices Act, knowing and intentional conduct, and attorney fees. This appeals court reversed the finding regarding the mental anguish claim and part of the attorney fees claim and the calculation of interest on the claim.
Set out here, is only the factual aspect of the claim. This is to give an ideal of the way some claims are denied. Hopefully it is obvious that an experienced Insurance Law Attorney should be involved in the cases early.
On Sunday, March 19, 1995, around 4:00 a.m., a fire destroyed the Camerons' residence and most of its contents. Neither Alfred Cameron nor his wife Cloteal was present at the time. Farmers was the insurer, and the Camerons' insurance policy had limits of $60,000 for the residential structure and $36,000 for the contents. The evidence is overwhelming that the setting of the fire was arson, and even Paul Sanders, an expert witness who testified on the Camerons' behalf, agreed the fire was incendiary.
After the Camerons reported the fire to Farmers, Wendy High, a claims adjuster, drove past the remains of the house. Concluding that the Camerons would need temporary living expenses, High authorized a $500 advance for the Camerons. On Tuesday, March 22, High met with the Camerons, public adjuster Curtis Hordge, and two contractors. She gave the Camerons the $500 check. She did a walk through of the residence and a basic inventory, noting items that would have been worth more than $100. She also gave the Camerons the appropriate claim forms to fill out and explained the forms to them. On May 1, 1995, the Camerons executed a sworn proof of claim, which reflected that the actual cash value of the structure was $60,000, with a replacement value of $75,000. The Camerons claimed $60,000 for the loss or damage of the structure and $36,000 for the loss or damage to the contents, the full limits of the policy.
Hordge assisted the Camerons in compiling an itemized inventory of their losses. Hordge took about six weeks before submitting anything to High. High noticed some discrepancies between her own rough inventory and Hordge's. When High did her walkthrough, for example, she noticed two sofas; at the time, Cloteal told her that one sofa was worth about $1,000 and the other was worth between $1,500 and $1,800. Hordge's inventory, however, valued the sofas at more than twice those amounts.
Both Camerons had alibis for the time of the fire. Alfred had left Dallas around 7:00 p.m. on Saturday, March 18, to go to the Horseshoe Casino in Shreveport, Louisiana. A friend, John McCrumbly, accompanied him. The two men left the casino around 4:00 a.m. on Sunday, March 19, and arrived back home in Dallas around 7:00 a.m. Cloteal was at her daughter's apartment assisting her packing for an anticipated move. Cloteal arrived at her daughter's apartment around 6:00 p.m. on Saturday, March 18. The two women got take-out food from Colter's Barbecue and returned to the apartment. Because her daughter had only one bed, the two slept together. Between 7:00 and 8:00 a.m. the next morning, Alfred telephoned to tell Cloteal about the fire. McCrumbly vouched for Alfred's whereabouts, and Cloteal's daughter, Sheritrice Spencer, vouched for Cloteal's.
On August 3, 1995, McCrumbly executed an affidavit confirming Alfred's alibi. On August 11, Spencer executed an affidavit confirming Cloteal's alibi. The affidavits were forwarded to Farmers. Tony Poncio, the branch manager for Farmers, reviewed the affidavits. Without interviewing either McCrumbly or Spencer personally, he rejected the Camerons' claim. Poncio took the position that "their testimony was already in front of us signed and notarized. There was nothing else to look into about it."
On September 18, 1995, Poncio wrote the Camerons a letter informing them that Farmers was denying the claim. The reason given was that Farmers had "a good faith belief that the fire in question was caused intentionally by you or by persons instructed by you to set the fire." The letter went on to accuse the Camerons of making material misrepresentations when Farmers' representatives investigated the claim. Poncio quoted in full the policy provision concerning concealment or fraud, which stated that, in the event of an insured's intentional concealment or fraud relating to a material fact, "this policy is void." The text of Poncio's letter, however, did not actually declare the policy void; it simply stated that the Camerons' alleged misrepresentations were an additional reason for denial of the claim.
All this time, however, Farmers had been paying the Camerons temporary living expenses. Because High wanted to give the Camerons "enough time to figure out where they needed to go," checks for these expenses continued throughout the month of September, despite the rejection in mid-September of the Camerons' claim. From the days immediately after the fire through September, Farmers made nine payments for a total of $10,044.62. At the same time, High did not investigate further the discrepancies she noticed between her contents work sheet and the itemized list provided by Hordge. Although she normally would reinvestigate if there were discrepancies between her contents work sheet and a proof of claim submitted by an insured, she did not do so in the Camerons' case: by the time she "got her contents work sheet and investigation through management," Poncio had already denied the claim.
The Camerons then sued for all the reasons stated earlier.
In upholding the findings of violations of the Texas Insurance Code and bad faith, this court reviewed the evidence of lack of follow-up by Farmers on investigating the inventory discrepancies. The lack of interviewing alibi witnesses. The lack of any proof the Camerons were involved in the fire. Allegations of past financial problems the Camerons had but no mention that they were current on all obligations at the time of the fire. The fact that if Farmers had actually cancelled the policy, that a pro rate share of the premiums should have been refunded.
The case lists several other things Farmers did or failed to do to properly investigate this claim before denying coverage to the Camerons. It is good reading to understand how some of these arson cases are investigated and evaluated.

Insured's in Weatherford, Mineral Wells, Aledo, Azle, Hudson Oaks, Springtown, Willow Park, Brock, Millsap, Peaster, and other places in Parker County might wonder, what does "insurable interest" mean. Here is a case that talks about it.
The opinion in this case was issued in 2000, by the Corpus Christi Court of Appeals. The style of the case is, Colonial County Mutual Insurance Company v. Hector Valdez. Here is some background.
Colonial County Mutual Insurance Company (Colonial) appealed a judgment against them by Valdez, wherein Valdez was awarded damages. This court affirmed the judgment with some reformation. Early on, Colonial had filed a declaratory judgment action asking the court to rule there was no coverage in the case due to Valdez not having an "insurable interest." Factually here is what happened.
Hector Valdez bought a 1992 Plymouth Acclaim in November 1994, and arranged insurance for the car with Colonial through Diego Luna Insurance Agency. An employee of the insurance agency told Hector that the car was insured "against theft, against accidents, against medical expenses, everything concerning the insurance." A few months after obtaining this insurance, Hector sold the car to his son, Rene Valdez, for $7,000. Rene obtained a loan form Mercantile Bank in order to make the purchase. Hector called the Diego agency and told them Mercantile Bank would be calling them to make "changes" and "arrangements" on the insurance. Diego Luna testified that an employee of Mercantile Bank did call, and asked to verify insurance on the car for "a Mr. Valdez." The bank was told that "Mr. Valdez" had insurance. Hector continued to pay insurance premiums on the car while Rene owned it. It is undisputed that Hector never told Colonial or Diego that he had sold the car to Rene. It is also undisputed that Hector was never informed, orally or in writing, that he could only insure the car if he owned it.
In November 1995, Hector's policy was automatically renewed. On January 14, 1996, the car was stolen. Hector reported the theft and Colonial proceeded to investigate. During this investigation, Colonial discovered that Rene was the owner of the car. On March 19, 1996, Colonial sent Hector a letter informing him that "the handling of this claim is being conducted under a "Reservation of Rights" because Colonial was investigating whether Hector had an "insurable interest" in the car. On April 5, 1996, Colonial filed the declaratory judgment action for a determination of the insurable interest.
This court ruled that the Texas Insurance Code, Section 541.061, prohibits the making of any misrepresentations relating to an insurance policy by:
Failing to state a material fact that is necessary to make other statements not misleading, considering the circumstances under which the statements are made; or
Making any statement in such a manner as to mislead a reasonably prudent person to a false conclusion of a material fact; or
Failing to disclose the full terms of the policy.
The court held that Colonial's failure to disclose to Valdez the fact that his car would not be insured if he transferred the title to his son is actionable under these sections.
Colonial made statements in the policy itself that indicated that the vehicle was covered. Nothing in the policy indicated that the vehicle would not be covered because of the transfer. Also, while Valdez did not know for certain whether the insurance company had been advised of the transfer to his son, he instructed the bank to contact the insurance company to verify coverage on the car at the time of the transfer. He was reasonable in assuming that the bank's representative advised the insurance company of the transfer, that being the fundamental reason that the bank was verifying coverage. Under the circumstances, Colonial's actions violated the insurance code sections above.
In explaining the ruling this court said that first, Colonial failed to state the material fact that transfer of title would void the insurance coverage. Statement of that material fact was necessary to make not misleading the terms in the policy showing the coverage to be effective. Thus liability under the Insurance Code is appropriate. Colonial's failure to state, either orally or in writing, that transfer of title would void the coverage would have misled a reasonably prudent person to the false conclusion that the car was covered after the transfer. The fact that the policy itself indicated that the vehicle was still covered, and the fact that the insurance company apparently verified to the bank that the car was covered after the transfer makes this argument even more compelling. This gives rise to liability. Also, it is a violation to fail to disclose the full terms of the policy. Colonial's conduct violated the plain meaning of this provision. Thus the court held that the evidence in the case was legally sufficient to support findings of insurance code violations based on Colonial's failure to disclose information.
It appears that the wording in the insurance policy went a long way to helping Valdez prevail in this case. Plus he simply had a lot of other facts on his side. Often when the issue of insurability is contested by the insurance company the insurance company is going to have wording in the policy or facts in their favor. One thing that is certain. These types of cases necessitate the involvement of an experienced Insurance Law Attorney.

No one in Grand Prairie, Weatherford, Arlington, Aledo, Fort Worth, Mansfield, Dallas, Irving, Garland, Mesquite, or any other place in Texas likes the though that they will be involved in a fire claim. But for some people it happens. So, what should you expect from the insurance company if it does happen? Here is one example of what can happen when a fire claim is made.
This case was decided in 1991, by the Corpus Christ Court of Appeals. The style of the case is, Automobile Insurance Company of Hartford Connecticut v. David Davila and Donna Davila. David and Donna sued Automobile Insurance Company of Hartford Connecticut (Hartford) for bad faith after a denial of insurance benefits following a fire loss. A jury found in David and Donna's favor and Hartford appealed. This court modified the judgment in favor of David and Donna. Here is some background.
The Davilla's house burned in November, 1985. The police were at the house at the time the fire was discovered. Hartford conducted an investigation and denied the claim.
As part of reviewing the bad faith claim, the court discussed this area of the law in its opinion. The Texas Supreme Court in other cases, has said that the existence of a duty on the part of insurance companies to deal fairly and in good faith with their insureds is based on a special relationship which exists between the insurance company and its insured pursuant to a contract for insurance. This "special relationship" between the insured and the insurer imposes a duty to investigate claims thoroughly and in good faith, and to deny those claims only after an investigation reveals there is a reasonable basis to do so. In this special relationship, an insurance carrier 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.
From a legal sense, a claim for breach 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 failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay. Whether there is a reasonable basis for denial must be judged by the facts before the insurance company at the time the claim was denied.
The Texas Supreme Court has set forth a two part test for the violation of the duty of good faith and fair dealing. An insured who asserts that his insurer has breached the duty of good faith and fair dealing must establish (1) the absence of a reasonable basis for denying or delaying of payment of policy benefits and (2) that the insurer knew or should have known that there was no reasonable basis for denying the claim or delaying payment. This test requires both an objective determination of whether a reasonable insurer under similar circumstances would have denied the claimant's benefits and whether the carrier knew or should have known that there was no reasonable basis to deny the claim. In explaining the second element, the Texas Supreme Court has stated, "This element will be met by establishing that the carrier actually knew there was no reasonable basis to deny the claim or delay payment, or by establishing that the carrier, based on its duty to investigate, should have known that there was no reasonable basis for denial or delay."
The evidence in this case showed that the fire originated in the upstairs master bedroom in a closet with a common wall with the bathroom, there was wiring in that wall associated with a whirlpool motor in the bathroom, and the most intense charring from the fire was in that wall in the area of the wiring. The evidence also showed David arrived at the house five to ten minutes before Donna arrived with her son John and his friend Joe. Immediately before the discovery of the fire, Donna, David, and John were in the master bedroom and Donna alone was removing clothes from the closet. During this time, David and Donna were fighting and David called the police to remove John and Joe, who was upstairs. Once Officer Rios arrived, David went downstairs to let him in, leaving Donna and John alone upstairs. David and Officer Rios went upstairs, and then back downstairs to escort Joe out of the house. While David and Officer Rios were downstairs and after they had let Joe out of the house, Donna and John discovered the fire and started yelling.
David and Officer Rios ran upstairs. They saw a fire, which John was attempting to extinguish, in the closet, and heard Donna yelling that David was burning her clothes. David called out the window to another police officer to call the fire department. From the initial attempts to extinguish the fire until the fire department arrived, Donna and David accused each other of setting the fire. No one knew how the fire started and no one admitted to starting the fire or seeing anyone else start it. From these facts, a trier of fact could reasonably find that it would have been virtually impossible for David to set the fire.
Further, in order to infer that David set the fire, one would have to go against common sense and believe that David called the police to witness the fire and that he somehow managed to set the fire while the police were there without anyone seeing him do it. Also, one would have to believe that John stood by while David set fire to Donna's clothes and that David burned Donna's clothes, probably knowing that his own clothes and the house would be burnt in the process.
There was likewise, evidence tending to show that Hartford failed to determine whether it had a reasonable basis for denying the Davila's claim. Although the whirlpool motor adjacent to the closet wall with the most charring and the breaker box for the motor was on the closet wall with the most charring, none of the investigators asked whether the whirlpool had been used on the night of the fire. The investigator ruled out the whirlpool motor and wiring because David never told him that it had been used. The adjuster acknowledged that David did tell him that he had used the motor, but it was well after the investigation and Hartford did not do anything with the information. Also, despite the fact that the wiring was exposed in the closet and David repeatedly asked that the motor and the wiring be investigated, neither was ever investigated by an electrician.
Further, the evidence indicated that when Hartford began investigating the claim, they proceeded with the assumption that someone, probably David, set the fire. One investigator said "you always suspect arson." The investigator also told Officer Rios that he just knew that someone set the fire but he did not know who and that he could see that no one else did. The basis of the assumption was the counter-accusations of Donna and David regarding starting the fire. Hartford seized on the substance of the accusations and failed to look beyond them into the circumstances of the situation and recognize that the accusations could have been retaliatory or made in anger.
Additionally, Hartford admitted that it was inconclusive regarding the cause of the fire and could not say what caused the fire to start. Nevertheless, the fire was reported as "intentionally set by the application of open flame to contained clothing." Such is the evidence that Hartford proceeded with a mind set that arson had occurred and, without thorough investigating other possible fire sources, concluded that David had set the closet on fire.
These cases involving fires and the investigation afterward are very fact specific. It is important to get an experienced Insurance Law Attorney involved in any fire case where the insurance company is not accepting responsibility right away.

Residents of Grand Prairie, Arlington, Fort Worth, Dallas, Irving, Richardson, Hurst, Euless, Bedford, Grapevine, Mansfield, and other places all over the metroplex area of North Texas may wonder if the insurance coverage they have bought for themselves is good. Or is the insurance company going to find a reason to not honor their end of the bargain. The following case is an example of how these cases get examined.
The case is styled, Provident American Insurance Company v. Denise Castaneda. The opinion was issued in 1998, by the Texas Supreme Court. Here is some background information.
Denise Castaneda's father, Guillermo, applied for medical insurance with Provident American Insurance Company in May 1991. He sought a policy that would cover the entire family including Denise., who was twenty-one at the time, her sister, and their brother Guillermo, Jr. During the application process, Guillermo failed to disclose that just two days before he applied for the policy, Jr. had received medical attention from a physician for jaundice, anemia, and suspected hepatitis. Denise had received treatment for jaundice and hepatitis several years prior to the date the insurance was applied for.
Provident issued a policy effective June 17, 1991. The policy contained two limitations that are relevant to the case. (1) it did not cover expenses resulting from a sickness that "manifests" within thirty days of the policy's effective date; and (2) it excluded diseases or disorders of certain internal organs, including the gallbladder, unless the loss occurred more than six months after the policy's effective date.
Less than thirty days after the policy issued, the family learned that Denise's uncle had been diagnosed with hemolytic spherocytosis (HS). The treatment for this condition is to remove the spleen and, if gallstones are present, the gallbladder. The Castanedas were tested for HS at the request of their doctor. Denise and Jr. had exhibited conditions of this disease all of their lives, and on July 20, 1991, the third day after the thirty day period expired, they were taken to a physician who diagnosed them that same day with HS. Two weeks later, Denise and Jr. each had their spleen and gallbladder surgically removed.
The Castanedas submitted claims to Provident, which were denied. Provident first asserted the six-month policy exclusion for disorders of the gallbladder but later denied the claims on the basis that HS had manifested within thirty days of the policy's effective date.
The Castaneda's sued Provident and a jury found in their favor. This appeal followed.
This court began its analysis of the case by seeing (1) whether Provident denied the claim without a reasonable basis or after its liability had become reasonably clear, (2) whether there was a misrepresentation about the policy, and (3) whether Provident had engaged in unfair claims settlement practices.
In reviewing the case, the court said that at varying times, Provident gave varying reasons for denying the claim, but all were grounded in a common nucleus of facts. Provident cited a policy provision that excluded coverage for a sickness or disorder involving the gallbladder unless the loss occurred more than six months after the date the policy went into effect. Provident also relied on policy provisions that limited coverage to an illness or disease that first manifested more than sixty days after the policy went into effect. At least one Provident employee thought that the claim could have been denied based on the pre-existing condition provision of the policy, although that clause was never invoked. Based on all of this the Court concluded that there was plenty of evidence for Providence to deny the claim, thus there was no basis for the jury to find that Provident was being unreasonable.
In its opinion the court used several pages in a discussion of the claims and the insurance policy and ultimately decided the Provident did nothing wrong and thus reversed the jury's verdict and rendered judgment that Castaneda take nothing.
The facts in this case when compared to the policy were strong against Castaneda. But the case is a good example for showing how the court looked at and reviewed this case and how they would look at other, similar types of cases.

Arson cases are the same in Grand Prairie, Arlington, Irving, Fort Worth, Dallas, Mesquite, Garland, Mansfield, Duncanville, Lancaster, De Soto, or anywhere else in Texas. Fires happen by accident and by arson. When a fire occurs the insurance company is going to investigate for reasons of denying coverage for the claim or to find reasons to lower the amount of money they may have to pay on the claim.
In 1992, the San Antonio Court of Appeals, issued an opinion in a case styled, State Farm Lloyds, Inc. v. Robert Polasek and Shirley Polasek.
In this case, arson and bad faith were asserted against State Farm. The Polasek's prevailed at trial and State Farm appealed. The jury had awarded $40,000 in property damage and $500,000 as exemplary damages against State Farm. The court sustained the verdict for the property damage but overruled the finding of bad faith that allowed the award of exemplary damages. Here is some background.
In 1990, fire destroyed the Polasek's video rental business, which State Farm insured. State Farm denied the claim based on the affirmative defense of arson.
The liability issues in this case fell into two categories: (1) whether State Farm established arson and misrepresentation and (2) whether the Polasek's established that State Farm denied their insurance claim in bad faith.
In discussing the case, the court stated that to establish arson as a defense to a civil suit for insurance proceeds, State Farm had to prove by a preponderance of the evidence that the Polasek's set the fire or caused it to be set. Because arson is usually planned and committed in secrecy to avoid detection, these elements may be proved by circumstantial evidence. Ordinarily the circumstantial proof that the Polasek's committed arson here, would consist of evidence that the fire had an incendiary origin and that the Polaseks had an opportunity and a motive to set the fire.
There was considerable evidence that the fire had an incendiary origin. Burn patterns showed the presence of accelerants in two places. Laboratory tests found traces of kerosene. No accidental cause was apparent; electricity and heaters were not present in the areas where the fire started. There was no evidence of forced entry into the building; this indicated that someone with a key might have been involved.
The evidence on this issue - whether the Polasek's set the fire or caused it to be set - was conflicting, and the jury's finding was within their providence. There was evidence that the Polaseks had the opportunity to set the fire. Mrs. Polasek was the last person on the premises that night, no one else had a key, and the lights were not turned on, as they had been before. There was also evidence that the Polasek's had a motive for destroying the store for the insurance proceeds. The business had not been profitable; it owed a $6500 note, which fell due several days after the fire. The company had only $365 in the bank. The Polaseks had been paying operating expenses from their personal funds. They had borrowed money and had been late paying the rent.
All this was evidence that a jury could have used in deciding against the Polaseks but the jury refused to do so.
The Polaseks' bad faith cause of action was not satisfied by proof that they did not commit arson. It is not satisfied by proof that State Farm should have paid their claim, or that State Farm acted unreasonably in denying their claim. Instead, their bad faith claim required proof of a negative: that no reasonable basis existed for denying, or delaying payment of the claim. It is at this point that an experienced Insurance Lawyer is required for any hope in being successful on the claim because to be successful he must establish "the absence of a reasonable basis for denying or delaying payment of the benefits of the policy" and that the carrier knew or should have known that there was no reasonable basis for denying or delaying payment.
Courts have found that where there is undisputed evidence that a reasonable basis existed for denying an insurance claim, the bad faith cause of action is defeated as a matter of law. In deciding whether a reasonable basis exists for denying an insurance claim, the trier of fact does not weigh conflicting evidence; it decides whether the evidence existed and whether, standing alone, it constituted a reasonable ground for denying the claim.
In making its final decision the court stated, "State Farm did not simply deny the claim without investigating; it investigated the circumstances surrounding the fire." "We hold that as a matter of law State Farm had a reasonable basis for denying the claim even though the jury later decided that State Farm should have believed contrary evidence and paid the claim."
The case itself goes into more detail about the efforts made by State Farm to investigate. Part of this included getting into the financial records of the Polaseks. Anytime an insurance company requests financial records you can just about guarantee they are going to deny a claim.

Anyone living in Weatherford, Mineral Wells, Aledo, Azle, Hudson Oaks, Willow Park, Millsap, Brock, Cool, Springtown, or other areas in Parker County, or the State of Texas know what arson means. The question to be wondered about is, what happens if your home burns as the result of an arson fire?
The Waco Court of Appeals issued an opinion in 1998, in the case styled, State Farm Fire and Casualty Insurance Company v. Sandra Sue Vandiver.
In this case Vandiver had sued State Farm seeking to recover damages which resulted from the destruction of her home by a fire. The trial court made many ruling in favor of Vandiver, the result of which, she won her case. One of these ruling was a directed verdict against State Farm on its arson defense. State Farm appealed and this court reversed the verdict and set the case for a new trial. Here is some relevant information.
To establish the affirmative defense of arson, State Farm had the burden of proving by a preponderance of the evidence that Vandiver set the fire or caused it to be set. Generally, an insurer must rely on circumstantial evidence in arson cases.
The crime of arson, being in defiance of law, is ordinarily conceived in secrecy and executed in such a manner as to avoid detection and exposure; and proof of such an unlawful enterprise must, in the very nature of things, be made by circumstances, and every circumstance which tends to cast light upon the incident is legitimate and proper.
Citing another court this court said as follows:
In order to establish the affirmative defense, the insurer must offer evidence:
1) the fire had an incendiary origin;
2) the insured had a motive to set the fire or cause it to be set; and
3) the insured had an opportunity to set the fire or other circumstances linking the insured to the fire.
This courts' job was to review the trial court record for probative circumstantial evidence of the elements above rather than viewing each piece of evidence in isolation. That so long as the inferences arising from the circumstantial evidence are not equally consistent with the nonexistence of the ultimate fact, some probative evidence exists in the record to support the ultimate fact. To sustain a finding of fact based upon circumstantial evidence, it is not necessary to exclude beyond suspicion every other possible inference that could be drawn from the facts shown. It is necessary to show only that one conclusion or inference is more probable than any other.
The court had these facts to look at in making its decision.
The parties did not dispute that the fire which consumed Vandiver's home had an incendiary origin. As a result the court looked to only the latter two elements that are listed above.
Motive - The record revealed that Vandiver was experiencing financial stress at the time of the fire. She had a horse-raising business which was not making a profit. She had used this business to write off expenses from her IRS taxes for a number of years and the year of the fire loss was the last year she would have been able to deduct her expenses due to business losses. (26 U.S.C.A., Section 183(d)).
The record contained evidence that her monthly expenses exceeded her income. State Farm's analysis of her bank records revealed that she had a negative cash flow of almost $3,000 in the eight months prior to the fire with additional bank charges assessed for checks which were returned because of insufficient funds. He account contained less than $500 at the time of the fire.
She lived with a man that the records revealed she was supporting.
Vandiver's sister had almost $5,000 in unauthorized charges on one of Vandiver's credit cards.
The court said that the above constituted some evidence of motive thus satisfying the second prong set out above.
Opportunity or Other Connecting Circumstances - One of Vandiver's neighbors reported the fire around 10 P.M. Vandiver testified she was at her sister's condo, about forty-five minutes away until 10:30 or 11:00 that night. Her sister testified she though Vandiver left about 10:00. There were other discrepancies between the times Vandiver testified to and the times to which her sister testified.
Vandiver and her sister and the man she lived with had the only keys to the house. The man was out of town the day of the fire. Vandiver testified that she locked the house and had seven dogs on her property. Two neighbors testified that the dogs typically barked at strangers who came around but neither of the neighbors heard dogs barking the night of the fire, although both were outside that evening. One neighbor found the house secure when he came over to investigate the fire.
State Farm had paid a previous claim for a fire loss on Vandiver's property, the cause of which remained undetermined. Vandiver also had a pending theft loss of $1,500.
Neighbors and fire officials testified that there had been no other incidences of vandalism, burglary or arson in the area.
Vandiver admitted that she was on the premises a few hours before the fire. The house was locked at the time of the fire, and Vandiver and her sister were the only persons in the area with keys. The failure of the dogs to bark creates a reasonable inference that no one else came on Vandiver's property that evening. The other circumstances all combined to justify a conclusion that Vandiver was possibly the person who set the fire.
Based on this evidence the court concluded there was some evidence of the third element set out above.
The reasons the court reversed the ruling against State Farm are hard to argue with. One thing that is certain is that a person who has suffered an arson fire loss is going to be investigated by the insurance company for the possibility of being the person who set the fire. For that reason, an experienced Insurance Law Attorney should be consulted immediately.

This will happen to insureds in Grand Prairie, Arlington, Irving, Fort Worth, Dallas, and other places through out Texas. You have a piece of property, such as a home, commercial building, a car, or something else of value. The entity that holds a lien on that piece of property will insist that there be insurance covering that piece of property. If you do not provide coverage, the lien holder will buy "force place insurance." In other words, they will buy coverage for the property in order to protect their own financial interest in the property then they will usually charge back the costs of this insurance to the person who is financing the property.
So the question becomes - What kind of protection does this "forced placed insurance" provide?
The United States District Court, Southern District, McAllen Division, issued an opinion on a case recently that dealt with this issue. The style of the case is, Antonio Trevino v. Evanston Insurance Company, et al. Here is some background and facts.
Trevino filed suit in State District Court alleging that Evanston Insurance Company issued a policy insuring property owned by Trevino and that Trevino sought coverage benefits under the policy. Evanston denied benefits to Trevino. Trevino's property had suffered damage to the roof and water damage. Trevino sued for breach of the insurance contract and violations of sections 541 and 542 of the Texas insurance Code, and The Texas Deceptive Trade Practices Act (DTPA). Evanston removed the case to Federal Court and sought dismissal of the claim, asserting that Trevino had no standing to bring suit under the policy because he was not a beneficiary of the policy.
Evanston had issued the policy, a "Standard Fire Insurance Policy" with a "Mortgage Guard Policy" endorsement, to Carrington, the lien holder, as the only named insured. The policy language reflects and Trevino does not dispute that Carrington is the servicer of Trevino's mortgage and obtained the policy to protect its interest in the event Trevino failed to maintain windstorm coverage on the mortgaged property, which in fact occurred. The policy covered the type of losses incurred. Under the policy "loss shall be adjusted with and made payable to the named insured unless another payee is specifically named."
Trevino concedes he is neither a named insured or additional insured under the policy. Therefore, he recognizes that whether he has standing to bring any of the asserted causes of action turns on whether he is a third-party beneficiary of the contract between Evanston and Carrington. In recent cases dealing with this issue, Texas courts have been looking to Louisiana law as guidance in this area and in that regard, Louisiana law comes down against coverage in these situations.
In making a ruling in favor of Evanston, the court looked at Fifth Circuit cases and concluded that the forced based insurance at issue did not manifest a clear intent to benefit the borrowers, something which is required under Louisiana law.
The court went on to say, "In Texas, much like in Louisiana, 'a presumption exists that parties contracted for themselves unless it clearly appears that they intended a third party to benefit from the contract.'" They cited other cases that held, "Incidental benefits that may flow from a contract to a third party do not confer the right to enforce the contract." Here, the policy language unambiguously manifests the intent to provide hazard coverage to Carrington to the extent of its interest in the property, and any benefit conferred to Trevino as a result, is incidental.
Therefore, Trevino did not have standing to bring the lawsuit against Evanston, and the case was dismissed.
So, anyone who finds themselves in a position where they have "forced placed' insurance needs to know what that policy says before they rely on that policy providing coverage for any loss they may sustain themselves.

A 1989 case decided by the Court of Appeals, El Paso, would be of interest to those in Grand Prairie, Fort Worth, Arlington, Mansfield, Crowley, Grapevine, Duncanville, Lake Worth, and other places in Texas who have a claim for exemplary damages.
The style of the case is, Emigdia C. Manriquez, Individually and on Behalf of all Statutory Wrongful Death Beneficiaries of Jorge Ramon Manriquez, Deceased v. Mid-Century Insurance Company of Texas. Here is some background.
Manriquez and her group, are the widow and surviving parents of a pedestrian killed when struck by an unlicensed minor, Gregory Daniel Alkofer. A lawsuit resulted from this event.
Mid-Century the insurance company for Alkofer, intervened in the lawsuit and successfully moved for a declaratory judgment limiting its liability to $50,000.
The relevant parts of the insurance policy provide:
PART A -- LIABILITY COVERAGE
Insuring Agreement
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.
....
Limit of Liability
If separate limits of liability for bodily injury and property damage liability are shown in the Declarations for this coverage the limit of liability for "each person" for bodily injury liability is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one auto accident. Subject to this limit for "each person," the limit of liability shown in the Declarations for "each accident" for bodily injury liability is our maximum limit of liability for all damages for bodily injury resulting from any one auto accident. The limit of liability shown in the Declarations for "each accident" for property damage liability is our maximum limit of liability for all damages to all property resulting from any one auto accident.
If the limit of liability shown in the Declarations for this coverage is for combined bodily injury and property damage liability, it is our maximum limit of liability for all damages resulting from any one auto accident.
This is the most we will pay regardless of the number of:
(1) Covered persons;
(2) Claims made;
(3) Vehicles or premiums shown in the Declarations; or
(4) Vehicles involved in the auto accident.
In this case the policy provided for separate limits of $50,000 for each person / $100,000 for each accident.
Attorneys for Manriquez contend any $50,000 limitation would not include an award for exemplary damages. In support of this position, they cited other Texas cases that essentially said, where insuring agreements provide for the payment of ... all sums which the insured shall become legally obligated to pay as damages because of ... bodily injury will include payment for punitive damages for gross negligence. These cases emphasize the words "all sums" as being the important inclusive language. In determining whether these words include coverage for punitive damages, most courts have used the following rationale: (1) the average insured, in the absence of an express policy exclusion from liability from punitive damages, would assume that the term "damages" would include punitive damages, since they would become by judgment a "sum" that the insured would be legally obligated to pay: (2) because the insurer drafted the policy and could have made clear its intention to exclude coverage for punitive damages, the rules of construction require it to bear the burden of ambiguity; and (3) punitive damages are covered because they always "arise" out of the underlying action for injury.
In this case, there is an absence of the words "all sums." The insurance agreement expressly excludes coverage for any person who intentionally causes bodily injury. Nonetheless, an average insured would assume the term damages would include all damages except those intentionally caused. The insurer drafted the policy and could have made it clear that no punitive damages would be covered. Punitive damages arise out of or are due to the legal responsibility created because of the auto accident.
Manriquez sued for exemplary damages because of heedless and reckless conduct on the part of the insured. Gross negligence, to be the ground for exemplary damages, should be that entire want of care which would raise the belief that the act or omission complained of was the result of a conscious indifference to the right or welfare of the person or persons to be affected by it.
The court stated that the term "accident" as used in the insurance policy was construed to include negligent acts of the insured causing damage which is undesigned and unexpected. It could be argued that one who acts with conscious indifference and causes an accident, dos so with some expectation. "We reject this, however, and conclude that punitive damages, excepting those for any intentional conduct, were within the coverage and the coverage limitation.
In cases where exemplary damages or punitive damages are being sought it is vital that an experienced Insurance Law Attorney be consulted. This attorney would know the proper way of drafting a lawsuit to maximize a recovery for his client without jeopardizing coverage.

Homeowners in Grand Prairie, Arlington, Fort Worth, Dallas, Mesquite, Garland, Irving, and other places all through Texas scored a minor victory recently. This according to a Houston Chronicle article published this July. Much of the article is included here.
It appears homeowners insured by the two insurer's of last resort will receive additional payments for their Hurricane Ike claims.
The two insurer's are The Texas Windstorm Insurance Association and Texas Fair Access to Insurance Requirements Plan. These two insurers sell insurance coverage to those who can't find it in the private market. They have agreed to settle cases brought by state regulators over delayed payments and disputes over damaged roofs and other claims that resulted after the 2008 Hurricane Ike storm hit the Texas Gulf Coast.
As is normal in these situation, the companies are settling without admitting they violated any insurance regulations.
Under the settlement with the Texas Department of Insurance, both companies agree to provide more training for adjusters and claims examiners, to upgrade their technology to improve tracking of claims and comply with prompt payment deadlines.
This has come about after hundreds of policyholders sued, following Hurricane Ike, and their claims handling practices led to state investigations.
The Texas Insurance Code, Section 542.056, requires that written acceptance or rejection of claims be sent after the insurer has received the information they need to assess a claim. This requirement was not being met.
TWIA was found by the Texas Department of Insurance to have had 600 complaints by August of 2010 and Fair had 100 complaints by April that were justified complaints.
Both insurers agreed to give premium credits of 18 per cent as interest on the claims that were not paid within the deadlines imposed by Texas Insurance Code, Section 542.060.
The two insurers also agreed to treat roof shingles unsealed by hurricane winds as damages. Policyholders had complained that Ike winds blew their shingles back, breaking the seals that keep them adhered to each other and prevent water from leaking through. TWIA and FAIR had not considered loose shingles damaged in assessing claims.
This settlement requires the insurers to give homeowners premium credits for roof claims that were denied when they should have been paid.
The also agreed to pay "overhead and profit" to policyholders unfairly denied the payments. Such payments are made for damage that would likely require the use of a general contractor, even when the homeowners oversee the work themselves.
These two insurers are also required to file reports with the Texas Department of Insurance noting which customers receive the additional benefits so that these can be audited to confirm the agreement is being fulfilled.
For the policyholders who are owed more than their premiums, they will get credits in the amount of the premium and checks for any surplus.
This settlement does not apply to policyholders claims that have already been settled or to the ones that remain in litigation. Neither TWIA, FAIR, or the department of insurance would say how many policyholders would be affected.
TWIA had been placed under more direct oversight earlier this year by state regulators, after a fraud inquiry by the Travis County district attorney.
This oversight will still continue, according to a spokesman for the Texas Department of Insurance, saying this was a separate issue.
As the result of private insurers reducing or eliminating coverage in the Gulf Coast area, TWIA has grown to insure almost 244,000 homes and businesses.
An attorney for many policyholders who has litigated many of these cases welcomes the involvement of the Texas Department of Insurance. He is quoted as saying, "I am concerned about the search criteria for identifying lifted shingles and hope the follow-through will be diligent. These violations were uncovered after thousands of hours of private-attorney time. TDI simply does not have the budget to do this type of discovery."
Of relevant note here is that private insurers could also have implications resulting from this action.