Dallas Fort Worth Insurance Lawyer Blog

Insurance agents in Weatherford, Mineral Wells, Aledo, Willow Park, Hudson Oaks, Azle, Millsap, Brock, Cool, Springtown, or anywhere else in Parker County will make mistakes. The question becomes: What can be done about it?
A 1979, Texas Supreme Court case is still good law for that question. The style of the case is, "Royal Globe Insurance Company v. Bar Consultants, Inc."
The principle question in this case was whether or not a misrepresentation about coverage afforded by a policy of insurance, made by the insurance company's local recording agent, was a deceptive trade practice under Texas statutes for which the insurance company as principle is liable. This court said yes. Further, the Texas Insurance Code now makes the company liable for the acts of the agent.
Texas Insurance Code, Section 4001.051, makes the insurance company liable for the acts of its' agent.
Here are some of the facts in the Royal Globe case.
Bar Consultants, Inc. operated a bar near the campus of The University of Texas known as "The Bucket." The president of Bar Consultants, Inc. John Barber, testified in the trial that he purchased a policy of insurance from Tully Embrey, an agent of Royal Globe, sometime prior to September 1975. Barber testified that he had a lengthy discussion with Embrey about the problem of vandalism at which time Embrey assured him that he was "totally covered" from losses caused by vandalism. This was uncontradicted.
The policy in question was a Texas Standard Policy covering fire and extended coverage. An endorsement attached included coverage for vandalism and malicious mischief. The insurance memorandum said that the property covered is "on the contents in the ... building," giving the address of "The Bucket." The term "contents" was defined in the policy.
On January 31, 1974, Royal globe paid a vandalism claim filed by Bar Consultants. The description of the damage on the proof of loss form was "Vandals inflicted damage in the bathroom area for which insured is liable under lease contract."
On March 5, 1976, the men's restroom at The Bucket sustained extensive damage. The following day Barber called Embrey's office and was assured the damage was covered. Subsequently, Royal Globe denied coverage.
The argument by Royal Globe was that Embrey did not have authority to make such representations to Barber.
The court then pointed out the law wherein an agent who solicits insurance on behalf of any insurance company, shall be be the agent of the company for which the act is done, or the risk is taken, as far as relates to all the liabilities, duties, requirements, and penalties set out in the Insurance Code.
As a result of the then existing law, which is still the current law, Royal Globe was liable for the misrepresentations of Embrey.
This is an area of the law that is very much in favor of the customers of insurance agents. Whenever there is a dispute between an agent and his customer, it is important for the customer to seek the advice of an experienced Insurance Law Attorney. There are lots of legal remedies available for the customer.

An insurance agent in Weatherford, Mineral Wells, Aledo, Hudson Oaks, Willow Park, Pool, Millsap, Brock, Azle, Peaster, and other places Parker County and Texas can be liable for failing to provide you with the insurance you have requested, plus the insurance company can be liable for the agent.
The Texas Supreme Court issued an opinion in 1994, in the case, Celtic Life Insurance Company v. John D. Coats. This case serves as an example how an insurance company can be found liable for the actions of the agent when the agent commits something wrong in selling an insurance policy. Here is some legal and factual background.
The case presented two relevant issues relating to an insurance company's liability for its agent's representations. First, whether the company's liability depends on its authorization of misrepresentations; second, whether reliance on the representations is an element of recovery.
Kenneth Harrell, a duly-appointed agent for Celtic Life Insurance Company, visited Aloha Pools in September 1984 and met with its owner, John Coats, to discuss health insurance for Aloha's employees and their families. Coats stated that he wanted a policy providing benefits for psychiatric care that would be equal to or better than the $20,000 coverage provided by his current policy. Coats explained that he needed such coverage because his oldest son had previously required psychiatric care, and he was concerned that his younger son might require similar care. Harrell responded that he understood Coats' needs fully, having experienced similar financial difficulties in providing psychiatric care for his own son.
Harrell subsequently proposed that Coats purchase a specific policy written by Celtic -- a policy that provided a maximum lifetime hospitalization benefit of $1 million. Harrell did not point out that psychiatric benefits under the policy were limited to $10,000.
Harrell later assured a business manager for Coats, that the $10,000 limit applied only to out-patient psychiatric care. Based on these representations, the policy was purchased.
During the following August, Coats' son was admitted to Shoal Creek Hospital for psychiatric care. Coats filed a claim for his son's treatment; despite Harrell's continued assurances that the in-hospital psychiatric treatment was covered by the $1 million hospitalization limit, Celtic paid only $10,000 of the $27,000 in medical expenses.
The jury found in favor of Coats for $17,000.
On appeal, Celtic argues that it should not be responsible for Harrell's representations for two reasons: first, Harrell was a mere soliciting agent, and as such lacked authority to bind Celtic; and second, the jury's answer to the third jury question established that Harrell was acting outside his authority as Celtic's agent.
In the contexts of life, health, and accident insurance, the Texas Insurance Code makes no distinction between recording agents and soliciting agents. Rather, agents are defined generally and the code states that any person who performs these acts "shall be held to be the agent of the company for which the act is done, or the risk is taken, as far as relates to all liabilities, duties, requirements and penalties of the code.
The court pointed out that there was no dispute that Harrell performed, on Celtic's behalf, at least some of the acts listed in the Insurance Code.
Texas law says that an insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent's authority. This rule is based on notions of fairness: "since the principle has selected the agent to act in a venture in which the principle is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions."
Going further, the court said, "In determining a principle's vicarious liability, the proper question is not whether the principle authorized the specific wrongful act; if that were the case, principals would seldom be liable for their agents' misconduct. Rather, the proper inquiry is whether the agent was acting within the scope of the agency relationship at the time of committing the act." The misrepresentation in this case was made in the course of explaining the terms of the policy -- a task the jury specifically found to be within the scope of Harrell's authority. Thus, Celtic cannot escape liability on the basis that it did not authorize particular representations concerning the policy.
Disputes about what the agent told his customer and what the customer requested from the agent are common. When a dispute arises, it is important to consult with an experienced Insurance Law Attorney.

For someone in Grand Prairie, Arlington, Fort Worth, Hurst, Euless, Bedford, Grapevine, Colleyville, Keller, Roanoke, Saginaw, or anywhere else in Tarrant County or Texas, knowing and understanding the deductibles in an insurance policy is important.
The Washington Post ran an article on September 8, 2011, titled "Irene Storm Damage Led Insurers To Apply Prohibited Deductible Charges."
The article, written by Joe Stephens, tells about some insurers incorrectly applying deductibles to claims resulting from Irene damages in Maryland. The person in the story, Judi Nowottnick, a school teacher, lost electrical power for eight days She had two refrigerators containing four dozen crabs and $1,000 of other food which spoiled. On top of that, she spent an additional $400 on fast food while the electricity was out.
After submitting a claim for the $1,400, her insurance company, with which she had taken out a deluxe policy to cover such losses, invoked a "tropical cyclone" clause and increased her out-of-pocket deductible from $500 to $10,530.
Guess what? That's a 2,000 percent increase!
After doing this to Nowottnick and other Maryland homeowners who submitted similar claims, the Maryland Insurance Administration, informed the insurers that this was improper.
While the clause itself is proper, the application of the clause was illegal because Nowottnick was living in a county to which the clause did not apply.
For the clause to apply, a county had to be located in a part of the State that was subject to a hurricane warning and the county Nowottnick lived was not subject to the hurricane warning.
Policy's in different states will have different clauses that apply depending on the circumstances. For example, in Virginia, companies may issue policies that increase deductibles for any "named storm," even for general wind damage. Insurance companies in Washington, D.C. also have a variety of options. Of course, this points out why homeowners need to make sure they understand what their policies cover and what they do not cover. Depending on the coverage, some homeowners may want to purchase other types of policies or have additional endorsements to existing policies.
Insurance companies first widely introduced percentage deductibles after earthquakes struck the western United States in the early 1990's. After Hurricane Isabel in 2003, companies began expanding their use to limit payouts for hurricanes in the South and East and for tornadoes and hail in the Midwest.
In the United States today, more than a dozen states on the East and Gulf coasts allow hurricane deductibles. They typically range from 1 percent to 5 percent of the insured value of a home. In Nottwick's case, her home was insured for $351,000, so her 3 percent deductible would be more than $10,000. That meant Nowottnick would have been required to pay that amount before insurance kicked in to cover the remainder of the damages.
In this case, a Maryland law that was passed in 2008 requires insurers to provide their customers with an annual notice about the deductibles. Virginia introduced a notification requirement in 2004.
Neither Nowottnick nor other homeowners interviewed for the article said they recalled being warned.
What happens is that homeowners get all these papers explaining the deductibles and changes in the mail but are unable to understand what they mean.
Each state has its own laws regulating how changes are made in policies and how notice of these changes are to be communicated to policyholders. In Texas, the Texas Department of Insurance regulates this issue.
One thing to keep in mind. Whenever you run into a situation where it does not seem that you are being treated properly by your insurance company, you should consult with an experienced Insurance Law Attorney.

An insurance agent in Grand Prairie, Arlington, Hurst, Euless, Bedford, Fort Worth, Dalworthington Gardens, Mansfield, Crowley, or anywhere else in Tarrant County or Texas is capable of making a mistake. But what if the mistake results in one of his customers not having the coverage they need when a claim occurs?
This situation came up in the Fourteenth Court of Appeals case styled, West Houston Airport, Inc. v. Millennium Insurance Agency, Inc. The opinion in this case was issued on in 2010 and the opinion was essentially upheld by the Texas Supreme Court in August 2011.
The facts in this case are not in dispute. However, they are pretty involved and are hard to follow. Rather than spending several pages trying to make the facts understandable, what needs to be learned or realized from the case is the duty an insurance agent owes to one of his customers when it comes to procuring insurance for that customer.
The thing to know factually about this case is that an agent sold a policy of insurance that contained coverages less than the amount that was requested. So that brings up the question: What duties does an insurance agent / broker owe to one of his insureds when it comes to his obtaining insurance for the customer?
Texas courts have long recognized that an insurance broker owes the following duties to a client for whom the broker undertakes to procure insurance: (1) to use reasonable diligence in attempting to place the requested insurance; and (2) to inform the client promptly if unable to do so. This standard was set out in the Texas Supreme Court case, May v. United Service Association of America, in 1992. This standard was used again in the Fourteenth Court of Appeals in the case, Sonic Systems International, Inc. v. Croix, in 2008. An appeal from the Croix case was denied by the Texas Supreme Court.
In this case involving West Houston Airport, the customer had asked for a $1,000,000 in coverage and the agent wrote coverage for only $50,000. A lawsuit against the customer resulted in a judgment substantially above the $50,000.
Other than the common law duty set out above, the insurance agent can be liable for breach of contract and for violations of the Texas Deceptive Trade Practices Act (DTPA).
Under the DTPA, the agent could be held liable under the Section 17.46(b)(5) for representing that the policy had benefits it did not have. Also, under Section 17.46(b)(7) for representing that the policy was of a particular standard when it was of another. Also, under Section 17.46(b)(12) for representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve.
Under the Texas Insurance Code, the agent could be sued for violation of Section 541.061, for misrepresentation of the insurance policy.
Violations of the DTPA and the Texas Insurance Code and breach of contract allow recovery of attorney fees and court costs. In the appropriate situation, there is the potential for recovery of punitive damages.
Seeking the advice of an experienced Insurance Law Attorney is necessary to prove one of these types of cases. They are usually swearing matches as to what was asked by the customer and what was said by the agent. However, many times there are ways of using evidence to get beyond the "he said, I said" argument.

On occasion someone in Grand Prairie, Arlington, Fort Worth, Dallas, Mansfield, De Soto, Duncanville, Cedar Hill, Irving, or some where else in North Texas will find themselves in a situation where they have lender-placed insurance on their property. This is also sometimes called forced-placed insurance.
These types of insurance usually are the result of a borrower, who has a contractual obligation to keep certain property insured, fails to do so. When this happens the lender purchases insurance and applies the cost of the insurance to the loan. The big problem for these types of insurance is that the insurance is for the benefit of the lender, not the borrower.
The United States District Court, Southern District of Texas, Houston Division issued an opinion on August 16, 2011, in a case dealing with lender-placed insurance. The Judge was Judge Kenneth M. Hoyt. The style of the case is, Horacio Barrios, et al. v. Great American Assurance Company, et al.
Great American and the other defendants filed motions for summary judgment which the court granted.
The case concerned a dispute over who is insured by a lender-placed insurance policy covering a commercial property damaged during Hurricane Ike. While Barrios and the other plaintiffs claimed co-ownership of the property, Barrios was listed as the mortgagor under a mortgage loan with Bayview, a loan servicing company. Bayview, in turn, required the plaintiffs to maintain an insurance policy covering potential wind, hail and hurricane damage. When the plaintiffs filed to do so, Bayview arranged for Great American to issue it a lender-placed insurance policy, which covered the property during all relevant times to protect Bayview's mortgagee interest in the property. Bayview required the plaintiffs to make the monthly payments on this policy. The notice of insurance reflects Batres and Barrios as the mortgagors and Bayview as the insured mortgagee.
In September 2008, Hurricane Ike damaged the property. In March 2009, an insurance adjuster inspected the property, and Great American ultimately paid $40,999.63 towards repairing the property. Plaintiffs then sued for breach of contract and violations of the Texas Insurance Code contending the monies paid were not sufficient to cover all the damages incurred.
The plaintiffs contended that the amount of money that Great American paid towards repairing the property was insufficient to complete the repairs. They argued that Bayview failed to compel Great American to expend enough money to complete the repairs. They maintained that, although they were not in privity with and lacked standing against General American, equitable concerns should allow them to force Great American to perform the duties that it allegedly owes the plaintiffs under the policy.
Great American's position was that the plaintiffs did lack standing to assert any claims and that the causes of action are barred because the plaintiffs are not named insureds, additional insureds or third-party beneficiaries under the policy.
In discussing this case, the court said, "Regarding Great American, its contractual obligations are limited to its named insured: Bayview. The plaintiffs are not listed as insureds or additional insureds in the policy between Great American and Bayview. Without a valid contract between Great American and the plaintiffs, the plaintiffs' cannot establish any element of this claim against it. Regarding Bayview, the only known contract between it and the plaintiffs is the underlying promissory note secured by a deed of trust on the property."
The plaintiffs were not third-party beneficiaries of the policy. To qualify as a third-party beneficiary of an insurance contract, a plaintiff must prove that: (1) it was privy to the contract; (2) the contract was made at least in part for its benefit; and (3) the contracting parties intended to benefit the plaintiff by their contract. Furthermore, Texas law has a presumption against third-party beneficiaries.
The court pointed out that the plaintiffs cannot establish themselves as third-party beneficiaries because they cannot show that either defendant intended to secure a benefit for the plaintiffs and that the defendants contracted directly for that benefit. To the contrary, the policy expressly states that the plaintiffs are not intended third-party beneficiaries because it specifies that "unless specifically added by endorsement, the mortgagor is not an Insured under the policy."
As for the Texas Insurance Code, the plaintiffs could not establish either element of a bad faith claim against either defendant. The plaintiffs are not parties to the policy and are thus legally incapable of proving that either defendant had a clear liability regarding nonexistent duties owed to the plaintiffs.
It is rare that someone who has a lender-placed or force-placed policy on their property is going to directly benefit from that policy. The policy is for the protection of the lender, not the borrower. For a borrower to have one of these polices and rely on the policy helping them, is a case of misplaced reliance.

A lot of people in Grand Prairie, Arlington, Mansfield, Irving, Fort Worth, Dallas, Hurst, Euless, Bedford, and other places in Texas will have a disability policy. What they need to understand is the conditions under which the policy pays benefits.
The Texas, 14th Court of Appeals, issued an opinion recently styled, "Chester Humphrey v. AIG Life Insurance Company, in which a disability policy was at issue. Here is some background.
Chester Humphrey, sought total disability benefits from his employer's insurance company, AIG, following an on-the-job injury. Because AIG denied Humphrey's claim, he sued.
AIG moved for summary judgment, asserting there was no evidence that AIG breached the terms of the policy because Humphrey could not establish any coverage obligation under the terms of the policy. The trial court granted the summary judgment to AIG, specifically holding that Humphrey failed to present legally sufficient evidence to controvert AIG's motion.
Humphrey was employed as a truck driver in 2001. In June 2001, he injured his back while attempting to lift a tarp to cover a load on his truck. He sought medical attention a few days after the incident; a physician examined him and prescribed medication and physical therapy. His pain did not resolve and he later received an MRI, which showed he had "multiple herniated disks" in his back.
At the time of his injury, the AIG policy provided a "weekly accident indemnity" when a covered employee, such as Humphrey, suffered an injury that totally and continuously disabled and prevented him from performing his job duties. After the injury, Humphrey sought and received weekly accident disability payments through the AIG policy.
Pursuant to the policy terms, these benefits expired in June 2003. AIG informed Humphrey he could seek "continuous total disability benefits" if he could provide "due proof" that, inter alia, he was totally disabled and that such total disability "resulted solely and directly" from the June 2001, on-the-job injury.
In response to the motion for summary judgment, Humphrey filed affidavits from himself and his wife which stated he was fine before the on-the-job injury and had no prior problems.
The trial court, in its summary judgment order, specifically ruled Humphrey failed to present at least "a scintilla of evidence that Plaintiff's total disability resulted solely and directly from the injury." The court refused to consider the unqualified lay opinions of Humphrey and his wife.
In Humphrey's response, he asserted that the trial court should not have granted AIG summary judgment because he did not need to provide expert testimony to establish that his total disability resulted "solely and directly" from his injury.
In discussing the case, the court pointed out that according to the Texas Supreme Court, "Generally, expert testimony is necessary to establish causation of medical conditions that are 'outside the common knowledge and experience of jurors.'" However, under limited circumstances, non-expert evidence may sufficiently support a causation finding that links an event with one's physical condition. This exception applies only in certain cases in which general experience and common sense enable a layman to determine the causal relationship with reasonable probability. In such cases, "lay testimony establishing a sequence of events which provides a strong, logically traceable condition between the event and the condition is sufficient proof of causation."
Here, however, Humphrey's medical issues are neither common nor basic. The record reflected that Humphrey suffered from multilevel disc herniation at the L1-L2 and L2-L3 levels, with additional non-contiguous "posterocentral spondylitic subligamentous herniation" at the L5-S1 level, and additional disc bulges at several other levels. According to one of Humphrey's treating physicians, these disc herniations have resulted in lumbar radiculopathy.
Further, although some of Humphrey's disc complaints are located in the lumbar region, they are not readily traceable to the lifting injury alone because Humphrey has had previous spinal fusion surgery. The record also reflects that Humphrey is morbidly obese and suffers from edema and cellulitis of the lower extremities, which renders him unable to walk without assistance. He produced a letter from another physician who opined Humphrey is totally and permanently disabled. But the physician linked that condition to a "combination" of several medical ailments unrelated to his 2001 back injury: "Because [Humphrey] suffers from Congestive Heart Failure, Hypertension, Morbid Obesity, Lumbar Radiculopathy and Diabetes Mellitus, I feel that he is totally and permanently disabled and cannot return to any type of gainful employment."
In sum, given (1) the complex nature of Humphrey's purported back injury; (2) the combination of medical ailments unrelated to his 2001 back injury that were identified by his doctor as contributing to Humphrey's permanent disability; and (3) his prior spinal fusion surgery, the court concluded that the task of evaluating whether his "total disability" was caused "solely and directly" by his 2001 back injury - as required by the terms of the policy at issue here - is not within the general experience and common sense of a layman.
This court concluded that expert testimony was necessary in this summary judgment proceeding and such expert testimony was not provided, thus AIG prevailed.

An insured in Grand Prairie, Arlington, Fort Worth, Dallas, or anywhere else in North Texas might wonder how an under-insured motorist claim works. That is a long answer, but here is how some of it worked in this situation.
The Dallas Court of Appeals issued an opinion on August 12, 2011, in the case styled In Re State Auto Property & Casualty Insurance Company and Hotchkiss Family Holdings, Inc D/B/A Hotchkiss Insurance Agency. This is a mandamus proceeding complaining of two orders of the trial court. Here is some background information.
Graeber and Kori Anderson were involved in an auto accident in which liability was disputed. After Graeber settled his lawsuit against Kori Anderson within Anderson's policy limits, he sued State Auto, two of its adjusters, and his local insurance agent, Hotchkiss, seeking underinsured (UIM) benefits and extra-contractual damages for bad faith and other claims. State Auto asked the court to sever and abate the UIM claims from the extra-contractual claims. This was denied, but separate trials with separate juries was ordered, as well as a stay of discovery and proceedings on the extra-contractual claims until the disposition of the UIM claim.
Thereafter, Graeber was served with a notice of deposition. His attorneys attempted to stop this, claiming he had already been deposed in the underlying lawsuit and it was duplicative to take his deposition again. State Auto claimed this was wrong, stating that they had not participated in the previous deposition. The Judge allowed State Auto to proceed with the deposition but signed an order to depose Graeber only as to (1) any diagnosis or treatment he "has had since he gave his prior deposition" in the Anderson lawsuit, (2) "any additional damages he claims to have incurred since the prior deposition, and (3) anything that has happened since the date of the prior deposition." The trial court further ordered that State Auto "shall pay $100 for any questions asked of Graeber that were covered in his prior deposition.
State Auto's writ of mandamus complained of these two rulings.
In discussing this case, this appeals court pointed out that according to the Texas Supreme Court, Graeber was entitled to settle, rather than proceed to judgment against Anderson, but neither that settlement nor any admission of liability from Anderson established UIM coverage. A jury could find that Anderson was not at fault or award damages that do not exceed Anderson's liability insurance.
While State Auto consented to Graeber's settlement with Anderson, such consent did not constitute a judgment on the merits of that action. Further, Graeber had presented no evidence or case law to show State Auto was bound, or to what extent it may be bound, to what occurred in the prior lawsuit. The consent to settlement was to protect the insurer's subrogation rights against the uninsured motorist or any other person legally responsible for Graeber's injuries.
This court went on to say, it was a clear abuse of the trial court's discretion to order that Graeber could be questioned only about (1) any diagnosis or treatment he "has had since he gave his prior deposition" in the Anderson lawsuit, (2) "any additional damages he claims to have incurred since the prior deposition; and (3) anything that has happened since the date of the prior deposition." Additionally, Graeber offered no authority allowing the trial court to order an advance sanction of $100 against State Auto for any question asked in violation of the trial court's order. This court pointed out, "... sanctions are available for actual abuse of the discovery process after notice and a hearing. The award of preemptive sanctions here was an abuse of the trial court's discretion."
The trial court's order here not only prevents discovery that on its face goes to the heart of Graeber's UIM case, but awards sanctions for any attempt to develop a record supporting the need for such discovery. This appeals court ordered the trial court to vacate its order.

People who buy insurance in Grand Prairie, Arlington, Fort Worth, Mansfield, Hurst, Euless, Bedford, Grapevine, Mesquite, Richardson, and other places in the DFW metroplex area need to make sure the named insured on an insurance policy is the person or business who needs to be covered by the policy.
A 1991, case decided by the Houston 14th, Court of Appeals, serves as an example of making sure the correct person or entity is named on the insurance policy. The style of the case is, St. Paul Lloyd's Insurance Company v. Fong Chun Huang, Individually and as Trustee for Teppan Yaki Management. Here is some background information to know on the case.
St Paul's denied coverage under its insurance policy claiming Fong Chun Huang was responsible for the burning of the Happy Buddha Restaurant. Fong sued St. Paul's for failure to pay on the policy and for breach of the duty of good faith and fair dealing. The trial court awarded damages to Fong for the cash value under the insurance policy. The trial court further reformed the insurance policy to change the named insured from Fong Chun Huang, individually, to Teppan Yaki Management, Inc., which was the apparent true owner of the restaurant.
On this appeal, the appeals court reversed the trial court on its decision to reform the names on the insurance policy. Fong's argument was that the wrong name on the insurance policy was the result of mutual mistake and thus was reformable.
St. Paul argued that when Fong applied for insurance on the Happy Buddha restaurant, he represented to St. Paul's that he was the owner of the restaurant. The policy was issued in Fong's name, doing business as the Happy Buddha restaurant. Teppan Yaki Management, however, owned the Happy Buddha. Fong is a thirty percent shareholder in Teppan Yaki Management. The jury found a mutual mistake and the trial court reformed the insurance policy to reflect Teppan Yaki Management as the insured.
In discussing this case this court stated the law as it relates to this issue. Citing the Texas Supreme Court, "The underlying objective of reformation is to correct a mutual mistake made in preparing a written instrument, so that the instrument truly reflects the original agreement of the parties. Reformation requires two elements: (1) an original agreement and (2) a mutual mistake, made after the original agreement, in reducing the original agreement to writing."
In making this ruling the court stated it could "find no evidence of a mutual mistake." The record supports a finding of a unilateral mistake on Fong's part. The application submitted to St. Paul's, and the insurance policy, listed the insured as "Fong Chun Huang, an individual, dba The Happy Buddha. Fong admits he made a mistake in not telling the insurance agent that Teppan Yaki Management owned the Happy Buddha. There was no evidence that Fong and the agent intended to name Teppan Yaki Management as the insured. Therefore, there can be no mutual mistake and the reformation of the insurance policy is against the law.
As further information, because reformation is improper, Fong can only recover his insurable interest: thirty percent of the loss. The court went on to say, "A fire insurance policy is a personal contract between the insurer and the insured named on the policy, and a stranger to the policy may not ordinarily maintain a suit on it." It was undisputed that Fong owned only thirty percent of the stock in Teppan Yaki Management. Thus Fong is limited to recovery of only thirty percent of the loss.
The value in this case is understanding that only the person or entity or intended beneficiary named on an insurance policy is entitled to recover proceeds from that policy in the event of a loss. For those who act in various capacities, such as individually, as a trustee, a business, or corporation or whatever, need to make sure the insurance policy reflects the correct person or business to be insured.

An insured in Weatherford, Mineral Wells, Aledo, Hudson Oaks, Willow Park, Peaster, Azle, Springtown, Millsap, Brock, Cool, Poolville, or anywhere else in Parker County would expect any claim they make to be paid in a timely manner. So what happens if it is not paid in time?
A 1995, Amarillo Court of Appeals case styled, Doris Rusk, Roger Lusk, and Russell D. Daves v. Honorable Cecil G. Puryear, addressed this issue.
Keep in mind that first, an experienced Insurance Law Attorney should be consulted to help in these situations. Next, here is what happened in this case.
This case is a writ of mandamus, seeking to compel Judge Puryear, to vacate his order of severance and abatement. This severance and abatement caused the contract claim for benefits to be separated from the extra-contractual claim due to late payment. The writ was filed by the insurance company in this case, Mid-Century Insurance Company of Texas.
Factually, the Lusks were insured under a policy of insurance issued by Mid-Century, a provision of which contained personal injury protection (PIP) in the amount of $2,500 per person. Doris sustained injuries in an automobile accident and, resultingly, incurred medical expenses through assorted health care providers. Thereafter, she made a claim for PIP benefits, and assigned her right to receive the benefits to health care providers who had treated her. Mid-Century received notice of Doris intention to revoke the assignments. To prevent being subject to adverse and conflicting claims, Mid-Century interpleaded the PIP money into the registry of the court.
The Lusk's and Daves (their attorney) sued Mid-Century for breach of contract and for violations of the Prompt Payment of Claims Act of the Texas Insurance Code.
In reviewing this case, this appeals court cited Texas Rule of Civil Procedure, Rule 41, which grants a trial court broad discretion to order or not order separate trials when judicial convenience is served and prejudice avoided. But as stated by the Texas Supreme Court, the rule does not contemplate the severance of one cause of action into two or more parts. The Texas Supreme Court said, "A claim is properly severable if (1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues." But when all the facts and circumstances of the case unquestionably require claims to be tried together, there is no fact or circumstance supporting or tending to support a contrary conclusion, and the legal rights of the parties will not be prejudiced thereby, there is no room for the exercise of discretion and the trial court has a duty to deny a motion to sever.
This court reversed the trial court and ordered that the contractual claim and the extra-contractual claim be tried together.
In justifying its ruling this court pointed out that the Lusks claim was for breach of contract for not paying their claim within 30 days of its being presented. This failure to pay within 30 days was a breach of their insurance contract and a violation of the Prompt Payment of Claims Act thereby entitling her to "the additional sum of 12% of the amount due" and reasonable attorney's fees.
Mid-Century argued that until they were found to have violated the insurance contract, that it was not proper, in the same proceeding, to be claiming the penalties because the penalties are the result of statute, not the insurance contract.
In making its ruling the court stated, "Although the damages and attorney's fees provided by the [Prompt Payment of Claims Act] do not arise from the insurance contract, they are recoverable for the insurer's failure to timely pay any loss for which it may be liable under the contract. Thus, when ... Lusk alleged Mid-Century failed to timely pay her claim and pleaded for damages and attorney's fees provided by [Prompt Payment of Claims Act], the entire liability of Mid-Century, both on the insurance policy and under [Prompt Payment of Claims Act], was put in issue as one cause of action."
This can be a bit confusing, especially considering other court rulings in these types of cases. What is relevant is realizing that there are various ways of enforcing a person's rights under a policy of insurance.

A resident in Grand Prairie, Weatherford, Arlington, Fort Worth, Dallas, Mineral Wells, Mansfield, Crowley, Benbrook, Aledo, or anywhere else in Texas may wonder how long an insurance company has to pay a claim after the claim is made. The answer is not always easy. Worse though, is how to bring a lawsuit to enforce this statutory right against a company who violates the law.
The Prompt Payment of Claims Act is in the Texas Insurance Code, Sections 542.051 thru 542.061. These sections set out in pretty good detail how long an insurance company has to pay a claim. The length of time varies with the circumstances and facts of each claim and the needs of any investigation. Plus the type of insurance company makes a difference in how long the company has to pay the claim.
But stepping beyond how long a company has to pay a claim is, how does someone enforce their rights to timely payment. An experienced Insurance Law Attorney needs to be consulted to get a good answer.
The Court of Appeals, Dallas issued an opinion in the case styled, In Re Loya Insurance Company, wherein the proper way for enforcing the Prompt Payment of Claims Act was at issue. The opinion was issued on August 11, 2011.Here is some background.
In this insurance coverage dispute, Loya Insurance Company sought mandamus relief from the trial court's order partially severing the homeowners breach of insurance contract claim from the extra-contractual claims, but refusing to sever the prompt payment claim. Loya had offered to pay some of the claim.
Fabian and Marth Jagrup sued Loya for breach of their homeowner's insurance policy, violations of the Texas Insurance Code and its chapter 542 prompt payment provisions, violations of the common-law duty of good faith and fair dealing, and fraud.
In discussing this case, the court pointed out that Texas insurance law requires the courts to look at the severance and abatement of a breach of contract claim from extra-contractual claims in the insurance context, in an abuse of discretion standard. Courts have stated that "When an insurer offers to settle a breach of contract claim, the trial court must sever the insured's extra-contractual claims from the contractual claims to avoid prejudice to the insurer in its defense of the coverage dispute." This is because, ordinarily, an offer to settle a coverage dispute is inadmissible to prove the merit of a coverage claim, but such evidence nevertheless may be admissible on the extra-contractual claims to rebut evidence that the insurer acted in bad faith. Under such circumstances, the trial court can reach only one decision that will protect all interests involved, and that is to order severance of the two types of claims.
Loya asserted that the trial court's order severing only some of the Jagrups' extra-contractual claims while maintaining their prompt payment claim in the lawsuit with their coverage claim is contrary to the principles of law set forth. Loya observed that the Jagrups could seek to admit Loya's settlement offer as evidence of Loya's belated attempts to resolve the disputed insurance claim to support Loya's prompt payment liability, but the admission of such evidence would undermine Loya's coverage defense of the underlying insurance claim.
This Court of Appeals held that the trial court abused its discretion by not severing and abating the prompt payment claim from the contract claim.
All this can be confusing to someone who does not have a fair understanding of insurance law. What is important to know is that there are legal ways for punishing the insurance company for its violation of the Prompt Payment of Claims Act. Some of these ways are pretty straight forward and others, like this one, are not so easy, and end up requiring a lot of time and work. The good thing is that Section 542.060 says, ... the insurer is liable to pay the holder of the policy or 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.

Grand Prairie, Weatherford, Fort Worth, Dallas, Arlington, and other business people in Texas need to understand what the insurance policy they have purchased covers, and what it does not cover.
The United States District Court, Northern District, Dallas Division, issued an opinion on July 27, 2011, in the case styled, Great American Insurance Company v. AFS/IBEX Financial Services, Inc., that would be interesting for these business people. The Judge in this case is Reed O'Conner. Here is some background.
This case arises out of a dispute over insurance coverage. AFS entered into an agreement with McMahon Sr., the owner of Charles McMahon Insurance Agency, authorizing McMahon Sr. to originate, create, and sign premium fiance agreements on behalf of insureds. AFS sought insurance coverage from Great American Insurance Company (GAIC) to protect it from crime risks. GAIC sold AFS two applicable policies.
McMahon Sr.'s son, Jr., submitted applications to AFS for financing when no insurance was meant to be obtained. AFS approved the financing requests and issued at least 120 checks payable to "Charles McMahon Insurance Agency." Those checks were deposited into Jr's own accounts. AFS submitted a claim to GAIC's claim department and filed a lawsuit against the McMahon's and the bank. GAIC denied AFS's claim and filed suit seeking a declaratory judgment that the crime insurance policies issued to AFS did not provide coverage for losses stemming from checks issued by AFS payable to Charles McMahon Insurance Agency. This court eventually ruled in favor of GAIC.
This case ends up getting very complicated. This case was appealed, sent back to this court, had claims, cross claims, and appeals to various ruling by the court all through the legal process. There were assertions for breach of contract, violations of the Texas Insurance Code, common law bad faith, unfair claims settlement practices, claims for statutory 18% penalty and attorney's fees.
The court got into a good analysis of the legal standards involved. It also studied where there was a bona fide dispute and how it should be looked at. What the damages were and what actually caused them. Lawsuit fees incurred by Chase. Calculations regarding lost profits, lost opportunities, and ruling regarding counterclaims in the lawsuit.
Even experienced Insurance Law Attorneys will disagree on the eventual outcome. Plus, it can be a certainty that this case will continue in the appeals process and stay in the court system for some time into the future.
What the case is noteworthy for, is that a reading of it gives the reader insight and understanding into how the courts look at and analyze these types of claim. The difficult facts of the case and the parties involved go to making it a difficult case.

The above is a reasonable question for someone in Grand Prairie, Weatherford, Arlington, Fort Worth, Dallas, or anywhere else in Texas to ask. When does a policy go into effect? Sometimes a claim arises immediately.
The Corpus Christi Court of Appeals had this issue come up in the case styled, Mark A. Becerra v. Maria Elena Ball A/K/A Nena Ball D/B/A Ball Insurance Agency, National Lloyds Insurance Company, and Ruth Cantu. This opinion was issued in August 2011.
This appeal involves National Lloyds denial of Becerra's insurance claim. Becerra asserted that Rudy Cantu , an employee of Ball Insurance Agency was allegedly negligent in obtaining an insurance policy on Becerra's behalf. The trial court granted summary judgment on National Lloyds behalf as it relates to the breach of contract claim and negligence claim. We will discuss the breach of contract claim only.
Here is some background.
Becerra is a contractor who builds homes. On July 19, 2007, Becerra met with Cantu about obtaining insurance for a home Becerra was planning to build. Cantu gave Becerra a binder, on behalf of National Lloyds, that provided coverage up to $79,000, had an effective date of July 20, 2007, and had an expiration date of January 19, 2008. The insurance binder also stated that it was subject to the conditions of the actual insurance policy that would later replace the binder. Becerra never paid the premium.
On October 17, 2007, a fire damaged the home, Becerra made a claim, the claim was denied, this lawsuit was filed.
Becerra argued on appeal that the trial court erred in granting the summary judgment because a fact issue existed as to when the payment was due under the terms of the insurance binder. Becerra argued that the contract was ambiguous.
In citing Texas law, part of which is from the Texas Supreme Court, this court stated "In an insurance breach of contract claim, the claimant must establish that the insurance contract was in full force at the time it suffered the loss. The payment of the premium in accordance with provisions of the insurance policy is a condition precedent to establishment of liability against the insurer." Therefore, the claimant must show that the premium was paid in accordance with the terms of the policy in order to show that the contract was in force at the time the claimant suffered a loss.
Here, Becerra did not challenge the fact that he did not pay the premium. Instead, Becerrra argued that the insurance binder he was given was ambiguous about when the payment of the premium was due. The court stated, a contract is ambiguous when the meaning is subject to "two or more reasonable interpretations after applying the pertinent rules of construction."
Becerra contended that because the binder did not provide a payment date, the binder became effective as soon as it was handed to him. He pointed to the following language from the binder: "If this binder is not replaced by a policy, the Company is entitled to charge a premium for the binder according to the Rules and Rates in use by the Company." Becerra argued that the only way to interpret this statement was that the payment was due after the new policy was issued.
The court pointed out that the complained of language was not relevant to the challenged ambiguity regarding payment. Rather, the following are the relevant provisions of the policy, and they are not ambiguous. The binder clearly states that "the Insurance is subject to the terms, conditions, and limitations of the policies in current use by the Company." Furthermore, the policy indicated that "in return for the payment of the premium ... we agree with you to provide the Insurance as stated in this policy." So, contrary to Becerra's assertions, the terms of the binder were clear, and under those terms, payment was necessary for the binder to go into effect.
This case dealt with making the primary target of the insurance dispute, the agent, rather than the insurance company. The claim against the agent is often times a hard one to make successfully and is why someone wants to make sure they have an experienced Insurance Law Attorney involved in helping with the claim.

Even in Grand Prairie, Arlington, Fort Worth, Dallas, Euless, Bedford, Hurst, Saginaw, Roanoke, Keller, Grapevine, and other locations in the Metroplex area, arson fires occur. One of the first things an insurance company is always going to do when there is a fire claim is investigate for the possibility of arson. If the insurance company determines a fire is arson, the next thing they will do is see if the insureds' under the insurance policy are responsible or have a motive to set the fire. Of course by this time, the insured needs to be consulting with an experienced Insurance Law Attorney.
A 1987, case from the Dallas Court of Appeals styled, Texas General Indemnity Company v. Jerry L. Speakman and Donald E. Coffman, is interesting based on the facts in the case. There are a lot of legal procedures in the case, which will not be discussed because they are unusual and hard to follow without a lot of legal knowledge. But briefly on the legal aspects, the trial was to the Judge instead of a jury and the Judge ruled in favor of the insurance company. Coffman and Speakman filed a "motion to correct judgment or for new trial" and a "first amended motion to correct judgment or for a new trial." Surprisingly the Judge reversed his earlier decision and ruled against the Texas General Indemnity Company. He awarded close to $200,000 to the insureds. This appeals court upheld the trial court decision with some modification to the money.
Here are some of the facts in this case.
Speakman and Coffman jointly owned a house in Tool, Texas, which was destroyed by fire on December 31, 1983. They had left the house about three months earlier to live at a townhouse in Dallas which they purchased together. On the morning of December 31, 1983, they returned to the house and visited Coffman's mother who lived across the street from the house. They also visited two neighbors before returning to the house about 4:30 - 5:00 p.m. While visiting the neighbors, they made a decision to stay the night in the house and the neighbors gave them two five gallon jugs of water because the pipes were frozen and none of the homes in the area had running water. Speakman borrowed the neighbors van and left for Dallas at about 5:30 or 5:45, in order to get his dog that was in the Dallas townhouse. Coffman took his mother out to eat and to buy groceries and got back to her house about 9:15 or 9:30 p.m. He helped his mother unload groceries then went across the street at approximately 9:30 p.m. He testified that he was going to get one of the five gallon jugs of water for his mother because he and Speakman would not use two five-gallon jugs in just one night. He testified that he opened his front door and "smoke just boiled out of the entry hall of the house." He did not recall if the door was locked but that he normally kept it locked. He returned to his mother's and called the fire department who arrived about ten to twelve minutes later. The firemen entered the house with masks and equipment and put out the fire in about 30 to 35 minutes. The firemen determined the fire had originated in a back bedroom which is where the fire was confined. But there was smoke damage throughout the house. The firemen had opened all 32 windows in the house and chopped up a portion of the bedroom floor to ascertain whether the fire had spread below the floor. The firemen told Coffman to check the house every hour to see if the fire rekindled during the night.
Speakman arrived about twenty minutes later and they and the dog returned to Coffman's mother's house. As they were discussing the nights events, the mother noticed the house was on fire again. The fire department arrived at about 11:15 and finally extinguished the second fire. The entire house and contents were destroyed except for a painting that hung near the doorway.
Coffman and Speakman testified that they did not keep anything unusually dangerous or inflammatory in their home. They also testified they had lit four or five candles earlier to remove the dank smell from the house being "tied up." Plus, the house contained a wet bar that was well stocked. The garage was used for storage and was full enough that a car would not fit into it, unless things were removed.
The house was worth about $90,000 more than it was insured for and the content loss exceeded the insurance value by about $7,000.
Neither Coffman nor Speakman appeared to have any financial problems.
The chief of the Tool Volunteer Fire Department was Bill Forrester who was also a Dallas Fire Department employee of twenty-seven years. Forrester had assisted with both fires and after the first fire had sent someone to the attic to make certain the fire had not spread to the attic but could not recall who he sent. He was not able to determine how the first fire originated. He did recall seeing flames shooting out of the roof upon arrival to the second fire. During the course of the fire, he went to the rear of the house where the garage door was down and locked. When it was opened, he recalled seeing a "pretty blue flame" that would not extinguish. He opined that the second fire was incendiary. He said the blue flame he saw was caused by petro-chemicals. On cross examination he admitted the second fire could have been a rekindle of the first fire and that the garage was not filled with smoke in an amount disproportionate to the flame involved as is common with petrochemical induced flame.
Travis Roberts, Fire Marshall for the City of Athens, testified that Forester called him to assist in an investigation regarding the Tool fire. Roberts testified that he had been involved in fire fighting for seventeen years and that he had considerable training and experience in arson investigations. He took three samples from different areas in the house that appeared to have strange "burn patterns" but lab results reported no traces of any flammable liquid . Roberts stilled testified that evidence regarding "burn patterns" suggested the presence of an accelerant. He also testified that "rekindles" sometimes occur despite the best efforts of firefighters.
Donald Owen testified that he was a member of the Tool Volunteer Fire Department and that he helped fight both fires in question. Owen testified that he never observed anyone check the attic after the first fire. Owen testified that he was the firefighter who chopped out the panels in the garage door during the second fire and that he did not notice a blue flame on the garage floor. Owen testified that if there had been a blue flame he would have noticed. Owen testified that he wasn't particularly looking for types of flames but was instead concentrating on fire fighting and that if, in fact, Forrester was near the garage and observed a blue flame, he, Owen, would have no reason to doubt Forester. Owen testified that it was his experience that rekindles sometimes do occur.
Also testifying was an expert in origins of fires, Kal Britt McManus, who was the president of Loss Research and Analysis, Inc. (LRA), and that LRA was employed by Texas General Indemnity Insurance Company. He testified that both fires were arsons.
McManus testified on cross examination that he did not know of the well stocked bar at the time of his investigations. Nor did he know of the candles burning in the house prior to the first fire. He also testified about "spalling marks" being common in arson fires but there were no "spalling marks" in this fire. He did not indicate in his report anything about wind conditions but did know that thirty two windows had been left open after the first fire. McManus did not investigate who set the fires.
Coffman's mother testified and backed-up Coffman's version of events. She also testified that she never noticed the smell of any accelerant.
All the above gives one a small insight into what testimony can be in a suspected arson fire. The insurance company will hire fire origin experts. Residue of the fire will be sent to the lab for analysis. Fire fighters will be interviewed. Neighbors will be interviewed. The financial position of the insured will be investigated.
None of this is a pleasant experience.

People in Grand Prairie, Dallas, Fort Worth, Arlington, Richardson, Garland, Duncanville, De Soto, Irving, Mesquite, and other places in Texas, who have a homeowners insurance policy, probably know they are suppose to pay their premiums. Beyond paying those premiums, most people do not understand what other obligations they have as part of the policy.
One of the obligations most insureds have under a homeowners policy is to submit to an examination under oath (EUO) if requested by the insurance company. A 2005, case out of the Beaumont Court of Appeals discusses this obligation. The style of the case is, In re Foremost County Mutual Insurance Company and Jim Doland. Here is some information on the case.
It is a mandamus proceeding arising out of Foremost's denial of a fire loss claim. The claim was denied after the insured, Kenneth Whitney, refused to submit to an EUO. Foremost sought an abatement of the lawsuit filed by Whitney until he had complied with the policy requirement of submitting to an EUO. The trial court refused Foremost's request and the mandamus proceeding resulted.
After Whitney suffered the fire loss and he made a claim to Foremost, Foremost began an investigation of the claim. It's investigator, Doland, suspected arson and asked much information from Whitney. Every time Whitney provided information, Doland would ask for more information. Eventually, lawyers for Foremost became involved and reaffirmed the request for Whitney to submit to an EUO. Whitney hired a lawyer and claimed that Foremost had waived its right to obtain the EUO.
The policy included the following paragraphs:
"PART IV - CONDITIONS
All obligations of the Company under this policy are subject to the performance by the insured of the following conditions:
A. General Conditions Applicable to Both Parts of the Policy
...
4. Assistance and Cooperation
The insured and any person interested in or claiming any benefit under this policy shall cooperate with the Company and, upon the Company's request, assist in making settlements, in the conduct of suits, and in enforcing any right of contribution, indemnity or recovery against any person or organization who may be liable for any injury, damage or loss with respect to which insurance is afforded under this poilcy.
5. Proof of Loss
The Insured or someone in his behalf shall file proof of loss with the Company within 91 days after the occurrence of the loss, unless such time is extended in writing by the Company, and submit to and subscribe examinations under oath conducted by anyone designated by the Company, produce for the Company's examination all pertinent papers, documents and records (or certified copies thereof, if originals be lost), permitting copies thereof to be made by or on behalf of the Company all at such reasonable times and places as the Company from time to time may designate ....
8. Action Against the Company
No payment shall be due by the Company under this policy and no action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this policy, nor until 30 days after proof of loss is filed and that amount of loss is determined as provided in this policy ...."
In discussing this case the court stated as follows:
"If policy language is worded so that it can be given a definite or certain legal meaning, it is not ambiguous and we construe it as a matter of law .... For an event to constitute a 'condition precedent' under a contract, the contract must provide that the event shall happen or be performed before a right can accrue to enforce an obligation."
The court then pointed out that Paragraph IV A. 5. of Whitney's policy provided that a claimant, upon the company's request, shall "submit to and subscribe examinations under oath conducted by anyone designated by the Company ..." Paragraph IV A. 8. provides that "no action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this policy ..." These policy provisions clearly required Whitney to provide an EUO upon Foremost's request before filing suit.
Whitney's argument that Foremost waived it right to obtain his EUO relied on Whitney's assertion that Foremost was required, pursuant to the Texas Insurance Code Prompt Payment of Claims Act, to request the EUO within 15 days of Foremost receiving notice of the claim.
The court here pointed out the misreading of the statute by Whitney. The statute requires Foremost to begin its investigation and request documents and information it needs within 15 days, but also states that additional requests may be made during the investigation of the claim if such additional requests are necessary.
In conclusion, this court ordered that the case by abated until such time as the condition precedent, the EUO, had been completed.

Someone in Grand Prairie, Arlington, Hurst, Euless, Bedford, Grapevine, Keller, Saginaw, Roanoke, Fort Worth, or anywhere else in Tarrant County might ask, "Why do I have to submit to an examination under oath?" Here is a case that might shed some light to that question.
The case is styled, Shannon Trahan and Joleen Trahan Woods v. Fire Insurance Exchange and Texas Farmers Insurance. The opinion in this case was issued in 2005, by the Beaumont Court of Appeals. This case is an appeal from a summary judgment rendered in favor of Fire Insurance Exchange (FIE) and Texas Farmers Insurance (TFI). This court upheld the summary judgment.
As some background, on December 31, 2000, the Trahan's home and automobile were destroyed in a fire. The Trahans filed a fire loss claim. On February 8, 2001, they signed a Proof of Loss form. On February 14, 2001, FIE requested the Trahans submit to examinations under oath (EUOs). Finally, on August 29, 2001, the Trahans submitted to the EUOs, and they were signed and sworn to on September 20, 2001. On October 8, 2001, FIE accepted the Trahans fire loss claim and issued checks.
The Trahans sued for various violations of the Texas Insurance Code alleging they were wrongly subjected to the EUO since there was no evidence they had committed an arson. In examining this case, the court reviewed the policy which read:
Agreement
We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy.
SECTION I -- CONDITIONS
3. Duties After Loss.
a. Your Duties After Loss. In case of a loss to covered property caused by a peril insured against, you must:
(5) as often as we reasonably require:
(b) provide us with pertinent records and documents we request and permit us to make copies.
(c) submit to examination under oath and sign and swear to it.
The policy language after the above stated the responsibilities of the insurance company and their time for payment.
The Trahans asserted that FIE was delaying payment based on suspicion of arson. Since there was not any proof of arson, the Trahans asserted the EUO's were not necessary or justified.
The law in this area is clear. The conditions under which an insurance company may conduct an EUO are governed by the insurance contract. As the Texas Supreme Court has stated, "For an event to constitute a 'condition precedent' under a contract, the contract must provide that the event 'must happen or be performed before a right can accrue to enforce an obligation.'"
In discussion the court pointed out that the policy imposed on the Trahans a duty to "submit to an examination under oath and sign and swear to it" upon request. Insurance policy provisions requiring an insured to submit to an EUO as a condition precedent are valid. Thus, FIE's request that the Trahans submit to EUOs invoked the conditions of the policy and were a valid request.
The demand by an insurance company for an insured to submit to an EUO is a red flag that should cause an insured to immediately seek the advice of an experienced Insurance Law Attorney. This is not something that is normally called for on all cases and when they are asking for an EUO it is normally the first step towards denying the claim. In the case written about here, the insurance company paid the claim after the EUO, but this is not the norm.
There are lots of things someone can say without realizing that they are hurting their case. Most people thing they can "just be honest" and everything will be okay. That sounds good but unfortunately is not always the case. Plus, even though the insurance company has a right to ask for the EUO, that does not mean they can ask anything they want to ask. This of course is where an attorney comes in to help.

Lots of people in Weatherford, Mineral Wells, Aledo, Springtown, Millsap, Brock, Hudson Oaks, Willow Park, Cool, Peaster, Poolville, and other towns in Parker County own rental property. There will be times when that property is vacant. What if a fire occurs when the property is vacant?
The Fort Worth Court of Appeals issued an opinion in 2002, that dealt with the above scenario. The style of the case is, Charles J. Walch v. United Services Automobile Association Property and Casualty Insurance Co. The trial court had granted a summary judgement in favor of United and Walch appealed. There were several issues in this case but the relevant part to this writing, is where the appeals court overruled the trial court as it relates to the question as to whether the property was "vacant" at the time the fire loss occurred.
Here are relevant facts to know. Walch owed a small rental house that was insured by United under a policy of insurance. The tenants of the house moved out on May 15, 1999, and left it in a damaged condition. About ten days later, Walch began renovations. On September 2, 1999, Walch discovered the house had been damaged by fire and in October filed a claim for the fire losses.
The policy with United contained a vacancy clause which read:
17. Vacancy. During the policy term, if an insured building is vacant for more than 60 consecutive days immediately before a loss, we will not be liable for a loss by the perils of fire and lightning or vandalism or malicious mischief. Coverage may be provided by endorsement to this policy.
United contended that as a matter of law, there was no coverage due to the house being vacant more than 60 days before the fire loss.
Walch contended that the interpretation of the vacancy clause was that it should be read to mean entire abandonment, deprived of contents, empty, that is, deprived of contents of substantial utility. United on the other hand urged that vacant meant whether the character of the building's contents, if any, is such that a person could find it being used as a residence or dwelling.
The insurance policy did not define the term "vacant."
In examining the law in Texas as it relates to the definition of the term "vacant" in case law, this court looked at other cases and prior holding by the Texas Supreme Court. A 1940, case held the definition of "vacant" in a fire insurance policy to mean "entire abandonment, deprived of contents, empty." A 1992, Houston Court of Appeals [1st Dist.] case, stated, "The term 'vacant' means an entire abandonment, deprived of contents, empty, that is, without contents of substantial utility." The same Houston court in citing other courts also has said, "The term vacant means 'entire abandonment, deprived of contents, empty ...' that is, without contents of substantial value."
United's argument went more to whether or not the property was unoccupied.
The court in making it ruling in favor of Walch, said that the argument did not turn on whether the contents of the dwelling demonstrated that a person either resided or intended to return and reside in the dwelling, rather, whether the term vacant was satisfied when the term is interpreted by Texas courts to mean, entire abandonment, deprived of contents, empty, that is, without contents of substantial utility.
Fire claims that are denied by the insurance company based on the reason that vacant property is excluded under the policy are exactly the type of cases in which an experienced Insurance Law Attorney needs to be involved. Early involvement is needed to lend greater assurance to a favorable outcome.

It will happen to someone in Grand Prairie, Weatherford, Fort Worth, Arlington, Lake Worth, Benbrook, Crowley, North Richland Hills, or somewhere else in Tarrant County or a surrounding area. A spouse will be upset or depressed or temporarily out of control and while in one of these mindsets, burn the house down on purpose.
The San Antonio Court of Appeals issued an opinion in 1996, in a case where it appears a spouse burned down the house. Of course the insurance company denied the claim based on the policy defense of arson. The style of the case is, Jan Saunders v. Commonwealth Lloyd's Insurance Company.
This was an appeal from a summary judgment in an insurance bad faith case. Here is some background.
Jan and Dan Saunders' house was completely burned down by a fire. Commonwealth's investigation concluded that Dan Saunders was responsible for setting the fire and he was later convicted of arson, but this conviction was overturned and he was later acquitted of the crime.
Commonwealth continued with its denial of the claim.
Although Commonwealth treated Jan as an innocent spouse, it refused to pay any part of the claim because the house was community property. Later the company agreed to pay her half of the claim, plus interest, based on Texas common law. This put an end to her contract claim but she continued with the bad faith claim.
Under Texas law, an insurer who can prove that it possessed a reasonable basis for denying or delaying payment of a claim, even if that basis is eventually determined by the fact finder to be erroneous, enjoys immunity from statutory bad faith claims under the Texas Deceptive Trade Practices Act and the Texas Insurance Code.
So the issue here was whether Commonwealth proved it had a reasonable basis to deny the claim. Commonwealth argued that its reasonable basis for denying the claim of Jan was that Texas law did not allow the innocent spouse to recover insurance proceeds when community property was destroyed by the arson acts of the culpable spouse.
An examination of past Texas law on this issue showed that historically, Texas law did not allow either an innocent spouse or an innocent co-insured to recover insurance proceeds when community property was destroyed by the arson acts of her culpable spouse. At the time of this case, the Texas Supreme Court had not decided whether an innocent spouse could recover under the same circumstances if the property destroyed was community property.
This court examined how this issue regarding arson and community property was being handled by the Texas courts and by the Federal courts. Based on the analysis and the state of the law at that time, the insurance company was not acting in bad faith in denying the claim. Thus there was no claim left for Jan to pursue since her contractual claim had already been paid. Thus, this court upheld the summary judgment ruling of the trial court.
When someone loses property in an arson fire and the claim for the loss is denied, it is important to seek the counsel of an experienced Insurance Law Attorney. The facts of the case and the relationships of the parties involved all calculate into determining whether there is any coverage for the innocent party.