Dallas Fort Worth Insurance Lawyer Blog

Force Placed Insurance Claims

2012-02-05T18:44:31Z

If you are in Grand Prairie, Arlington, Fort Worth, Roanoke, Keller, Colleyville, Saginaw, or some other place in Tarrant County or Texas and find yourself in some financial trouble, it may be that you find yourself letting your homeowners insurance lapse. If that happens the mortgage lender on your home will buy what is called a force-placed insurance policy and charge you with the premium. There are a bunch of problems when this happens. Two of these problems are real important to you.
First, is that force-placed insurance is very expensive and you are responsible for paying it.
Second, is that a force-place policy covers the mortgage holder not you. In other words, none of your personal property or the contents of the house is covered in the event of a fire loss. Further, if you are sued by someone, the insurance does not cover you. If you get burglarized, you are not covered.
The New York Times published an article on January 21, 2011. The author is Gretchen Morgenson. The title of the article is "Hazard Insurance With Its Own Perils."
Here is some of what the article tell us.
One of the richest and most secretive sources of profit in the mortgage business is coming under scrutiny.
Investigators into this industry are looking into these force-placed insurance policies.
Benjamin Lawsky, the superintendent of the New York State Department of Financial Services, is investigating institutions that underwrite and sell force-placed insurance. Last fall, his office began sending subpoenas to insurance agents and brokers. Requests for information also went out to insurance companies that write such policies.
Recently, new subpoenas went out to loan servicers that imposed force-placed insurance on borrowers, as well as to insurers affiliated with those services.
Subpoena receivers included Morgan Stanley Mortgage Capital Holdings and CitiMortgage. Affiliates that received requests for information include BancOne Insurance and Alpine Indemnity.
Force-placed insurance appears to be the dirty little secret of the mortgage industry. It is a silent killer harming both consumers and investors while enriching the banks and their affiliates.
A spokesman for Citigroup said, "CitiMortgage does not sell homeowner's insurance to consumers. If a homeowner does not provide an insurance policy, CitiMortgage secures a policy to protect the interest of the investor. Whenever the homeowner submits proof they have obtained insurance on their own, the lender placed insurance is cancelled."
Force-placed insurance has exploded during the foreclosure crisis. Whereas it use to generate $1 billion a year, it is now a $6 billion a year business. Much of this growth is on the backs of homeowners.
When homeowners run into financial trouble, they often let their hazard insurance lapse. Because lenders require homeowners to be insured against damage or total loss policies are then forced on the borrowers and added to their monthly mortgage payments.
For those selling force-placed insurance, it is a great game. The policies typically cost at least three times as much as ordinary property insurance. Some borrowers have been charged as much as ten times the prevailing rate.
And as stated in the beginning, force-placed policies do not protect homeowners from loss. Only lenders are covered.
Some borrowers have complained of being forced to buy high-priced insurance even when it is unnecessary. Back in 2007, a borrower with a mortgage serviced by Countrywide Financial described how the lender automatically signed her up for flood insurance even though she had proved that such insurance was unnecessary. Not being able to meet the extra payments, she fell behind on her mortgage. Countrywide then began foreclosure proceedings.
All in all, force-placed insurance represents a major profit center for mortgage servicers and the companies that write the policies. In many cases the mortgage service company and the insurer are affiliated. This sets up the potential for conflicts of interest among mortgage service companies that are suppose to represent investors owning mortgage loans bundled into securities.
A more consumer friendly way to deal with insurance lapses would be for service companies to advance money to the borrower's existing carrier to keep the policy current. Then, the service company could bill the borrower for coverage.
There are other gimmicks and / or games that go on with these force-placed policies. The bottom line is - know that these are not worth while for the borrower.

Arson By Spouse

2012-02-04T15:17:07Z

No one in Grand Prairie, Weatherford, Fort Worth, Dallas, or anywhere else in the North Texas area would want to be in a situation where their spouse deliberately sets the house on fire. This is something that might happen in a divorce setting or maybe it is just the result of a really bad fight. So what happens as it relates to insurance?
A San Antonio Court of Appeals opinion issued in 1996, sheds some light on this question. Here is some background. The style of the case is Sanders v. Commonwealth Lloyd's Insurance Company.
Jan and Dan Saunders' house was completely burned down by a fire. The insurance company investigated the claim and concluded that Dan was responsible for setting the fire. Dan was convicted of a felony of conspiring to burn down the house which was later reversed and he was acquitted. In the meantime, the insurance company, Commonwealth Lloyd's, denied the claim.
The innocent spouse, Jan Sanders, filed suit for breach of contract and bad faith against Commonwealth. In the trial of a breach of contract claim brought by Jan, the jury found that Dan was responsible for the arson fire that destroyed the house. Although Commonwealth treated Jan as an innocent spouse, it refused to pay any part of the claim because the house was community property. At the time of the claim denial, current law supported Commonwealth's decision not to pay Jan any proceeds under the insurance policy. Later in 1993, when case law changed, Commonwealth agreed to pay Jan one-half of the available insurance proceeds, plus interest.
In the lawsuit where Jan sued for bad faith, Commonwealth filed a Motion for Summary Judgment which the trial court granted. Jan appealed.
In this case, this appeals court upheld the decision of the trial court rendering summary judgment for Commonwealth. In its holding, this court said that an insurance company that can prove that it possessed a reasonable basis for denying or delaying a claim for payment even if that basis is eventually determined to be erroneous enjoys immunity from statutory bad faith under the Texas Deceptive Trade Practices Act and under the Texas Insurance Code. In this case, Commonwealth had a reasonable basis to deny Jan's claim as a matter of law. At the time of the claim, there was a United States Fifth Circuit case applying Texas law directly on point specifically holding that an innocent spouse could not recover insurance proceeds for her interest in the community property of the house destroyed by a fire that was intentionally set by or at the direction of the culpable spouse. Therefore, the insurance company, Commonwealth, possessed a reasonable basis for denying payment.
There are a couple of things relevant about this case.
One, is that the law changed while this case was pending. The law had been that if the fire was intentionally set by one of the insureds, then neither could recover under the policy of insurance. That law changed. The change allowed an innocent spouse to recover her portion of the proceeds. An example of how this would work is like this; if the house and contents are owned fifty / fifty by the husband and wife, then the innocent spouse would be entitled to the proceeds covering half the property.
Second, is that when the insurance company has a reasonable basis for denying or delaying payment of a claim, then they cannot be successfully sued for acting in bad faith in violation of the DTPA or the Insurance Code.
Last, is that an experienced Insurance Law Attorney needs to be consulted in these matters.

Is Late Payment Of A Claim, Bad Faith Insurance?

2012-02-02T16:06:01Z

Most people in Weatherford, Mineral Wells, Aledo, Azle, Willow Park, Hudson Oaks, and other places in Parker County would have a hard time understanding what constitutes "bad faith" in insurance. But most would believe that being late in paying a claim is bad faith. That does not appear to be the case.
The United States 5th Circuit made a ruling in a case in 1997, that addresses this issue. The style of the case is Higginbotham v. State Farm Mutual Automobile Insurance Company. Here are some of the background facts.
Higgnbotham's Porsche was stolen on June 8, 1993, from an unsecured parking lot next to his residence. The car was later recovered that day but it had been stripped of its top, seats, interior and exterior trim but was not damaged or destroyed with regard to mechanical connections, wiring harnesses or the engine. Higginbotham reported the theft to State Farm on June 9, 1993. State Farm denied his claim five months later on November 19, 1993.
Higginbotham sued for breach of contract, violations of the Texas DTPA, violations of the Texas Insurance Code, negligence, breach of duty of good faith and fair dealing, and violation of Section 542.051 of the Insurance Code which imposes an 18% penalty on the carrier under certain circumstances. At trial, the jury returned a verdict in favor of Higginbotham for $30,000, the amount of his coverage, but the Court directed a verdict in favor of State Farm on the bad faith and extra-contractual claims under the DTPA and Insurance Code. Higginbotham appealed.
This appeals court said the trial court's judgment in favor of State Farm on the bad faith, DTPA and Insurance Code violations are affirmed. But the trial court's judgment with regard to the Prompt Payment of Claims Act for penalty for delay in notification of denial was reversed.
In a bad faith claim, the insured must establish the absence of a reasonable basis for denying or delaying payment of the claim and that the insurer knew or should have known that there was no reasonable basis. A bona fide controversy is sufficient reason for failure of an insurer to make prompt payment of a loss claim. In this case, State Farm's investigation found a number of suspicious circumstances. Higginbotham was associated with Tommy Vander, the owner of Luxury Auto Unlimited. Vander had pled guilty in 1991 to felony theft of a stolen Porsche. Higginbotham began parking the Porsche in the unsecured parking lot two weeks before it was stolen. His girlfriend allegedly reported it stolen to the apartment complex four days before the alleged theft. Higginbotham's Porsche was recovered 25 miles from his residence but only 1.6 miles from Vander's shop. The car was stripped in a manner so as not to destroy mechanical connections, wiring harnesses or the engine. Based on these facts, State Farm had a reasonable basis to dispute the validity of the claim and, as a matter of law, State Farm did not act in bad faith.
Extra-contractual claims under the DTPA and the Insurance Code require the same predicate for recovery of bad faith causes of action. An insurer will not be faced with a tort suit for challenging a claim if there was any reasonable basis for denial of that coverage. The Prompt Payment of Claims Act provides that if an insurer delays payment of a claim for more than sixty days, the insurer shall pay, among other damages, 18% per annum as a penalty. In this case, State Farm delayed rejection of the claim for five months. An insurance company's good faith assertion of a defense does not relieve the insurer of liability for penalties for tardy payment as long as the insurer is finally judged liable. In this case, State Farm was judged liable on the coverage claim. State Farm did not notify Higginbotham of its rejection for five months. Therefore, it must pay the 18% penalty.
The Prompt Payment of Claims Act has to be read carefully to understand when it has been violated. The time period for acceptance or rejection of the claim varies depending on the type of insurance company involved in the claim and on the type of claim being asserted. An experienced Insurance Law Attorney can apply the particular facts of a case to the statute and advise accordingly.

Electronic Signatures And Insurance

2012-01-31T14:25:31Z

Residents of Grand Prairie, Fort Worth, Dallas, Arlington, Haltom City, North Richland Hills, and other places in Texas have all become familiar with the use of computers and the purchasing products and services over the internet. A question that often comes up in the context of insurance, particularly Personal Injury Protection (PIP) benefits and Uninsured / Underinsured (UM) benefits is: How is the requirement of a signed rejection of these benefits viewed when the insurance purchase is made over the internet?
Here is some guidance:
The Texas Department of Insurance issued a bulletin that required compliance with the Texas Uniform Electronic Transaction Act. This act is found in the Texas Business & Commerce Code, Chapter 43.
The bulletin says:
COMMISSIONER'S BULLETIN
No. B-0002-02
January 2, 2002
TO: REGULATED PERSONS AND ENTITIES, INCLUDING ALL INSURANCE COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, RECIPROCALS, ASSOCIATIONS, LLOYD'S, HEALTH MAINTENANCE ORGANIZATIONS, ... AND OTHER ENTITIES REGULATED BY THE TEXAS DEPARTMENT OF INSURANCE AND AUTHORIZED OR ELIGIBLE TO DO BUSINESS IN TEXAS; AND TO THEIR AGENTS AND REPRESENTATIVES AND THE PUBLIC GENERALLY
RE: The use of Electronic Signatures and Records in Connection with Marketing and Selling Insurance and Related Products or Engaging in Other Business Regulated by Texas Department of Insurance.
This Bulletin is intended to provide information to individuals and entities regulated by TDI and too prompt discussions between the regulated community, consumers and TDI about transacting business electronically.
Advances in electronic technology are allowing businesses, including those regulated by TDI, to integrate various elements of electronic commerce into their operations. The Internet and electronic commerce have resulted in increased conveniences and opportunities for consumers and the industry.
Texas UETA
The 77th Texas Legislature passed and Governor Perry signed SB 393 adopting the Uniform Electronic Transactions Act (UETA). UETA became effective January 1, 2002, and is codified in Chapter 43 of the Texas Business & Commerce Code. In accordance with Federal Law, UETA qualifies as a statute that will "modify, limit, or supersede the provisions of section 101" (15 U.S.C. Section 7001) of the Federal Electronic Signatures in Global and National Commerce Act (E-Sign).
The Texas UETA creates a statutory structure in Texas that supports the use of electronic signatures and electronic records in everyday public and business undertakings. Texas UETA addresses the effect of electronic transactions as follows:
a. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
b. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
c. If a law requires a record to be in writing, an electronic record satisfies the law.
d. If a law requires a signature, an electronic signature satisfies the law.
Section 43.007 defines "electronic signature" as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record." Therefore, certain insurance transactions may be conducted through electronic means.
This issue of electronic signature comes up in the context of insurance in two areas. One is the requirement under Texas Insurance Code, Section 1952.101, which discusses UM coverage and the other is Section 1952.152, which discusses PIP coverage.
Texas law makes it clear that electronic signatures are good and valid in Texas.

Title Insurance Case

2012-01-29T18:50:24Z

Grand Prairie and Fort Worth holders of a title insurance policy might find this recent case of interest.
The Court of Appeals, Tyler, issued an opinion recently in the case styled, Howard L Straily and Tommie J. Straily v. Lawyers Title Insurance Corporation. Here is some background information:
The Strailys own a home built on a pier and beam foundation. Upon noticing that water had pooled beneath their home and believing the source of the pooling to be a water leak, they hired a plumber to investigate the problem. The plumber pumped water from beneath the home and conducted a visual inspection of the area and discovered an uncapped sewer line that was depositing a large quantity of sewage and water onto the property.
Thereafter, the City of Van was contacted and the problem reported. The City sent workers to the home and determined the sewer line ran directly beneath the house. The City, thereafter, directed that contractors reroute the main sewer line around the home and cap it.
The City never removed the main sewer line from beneath the house. Nor did it claim that it was entitled to keep the line there. Moreover, the City disclaimed any easement or other interest in the Strailys property. A recorded easement was never found.
Because the City's main sewer line was located under their home, the Strailys presented a claim to LTI under a title insurance policy covering the property. Unable to resolve their claim with LTI, this lawsuit was filed against LTI for breach of contract. LTI filed a no evidence motion for summary judgment it which it claimed that the Strailys have (1) no evidence that they had a covered loss under the title policy, (2) no evidence that LTI breached its duties under the title policy, and (3) no evidence that the alleged breach by LTI caused the Strailys damages. In response, the Strailys argued that they demonstrated that LTI failed to detect an easement existing on their property because the City's main sewer line was located under their house. The Strailys further contended that LTI's failure to detect the easement caused their damages. The trial court ruled in favor of LTI.
In upholding the trial court ruling, this appeals court applied the applicable law to the facts presented in the case and said that the Strailys title insurance policy with LTI protects the Strailys if someone else owns either an interest in their property or an easement on their property. Because the flooding on their property caused by the City's main sewer line is a defect in the condition of the property and not necessarily a defect in the title, the Strailys cannot rely solely on the flooding as evidence that LTI breached the contract.
Even thought the City is not claiming any interest in the Strailys property, the Strailys argued that their title was encumbered. The Strailys had not argued that LTI failed to discover an express easement in favor of the City. And there was no evidence of any writing granting the City an easement to any portion of the property.
The Stailys argue that they presented evidence that the City had a prescriptive easement that encumbered their title to the property. The record reflects that the City laid the main sewer line in the 1950s. Accordingly, the main sewer line had been in place much longer that the necessary ten years to establish a prescriptive easement when the Strailys made their claim to LTI. However, the other elements of a prescriptive easement are not all demonstrated by the record, and the absence of any one element is fatal to the claim of a prescriptive easement. Here, by the Strailys own admission, the sewer line was a hidden easement. To be a prescriptive easement, the easement must have been open and notorious. Accordingly, the court concluded that the Strailys failed to present evidence that the City had a prescriptive easement encumbering the Strailys property.
Cases involving title insurance policies are different than other insurance types of cases. In addition to experienced Insurance Law Attorneys, most real estate attorneys can be helpful in resolving title insurance disputes.

Allstate Insurance And Others Raising Rates

2012-01-28T14:42:07Z

Here is an article for people living in Grand Prairie, Fort Worth, Arlington, Hurst, Euless, Bedford, and other places in Tarrant County. It is from the Washington Post Business Page and authored by Noah Buhayar. The article was published on January 11, 2012, and much of it appears below.
Allstate Insurance Company, Travelers Insurance, and State Farm Automobile Insurance Company are among insurance companies raising homeowners' rates after damage from natural disasters defied industry projections.
Allstate, the #2 United States home insurer, boosted prices for its namesake brand of home policies by 5.6 percent in the nine months through September 30, and has said more increases are coming. Travelers is raising rates after re-evaluating United States storm risk. State Farm, the largest U.S. home insurer, has charged homeowners more nationwide for three straight years.
Near record low interest rates cut insurers' investment income, and tornadoes, wildfires and Hurricane Irene increased claims costs in the U.S. last year. The industry averaged annual underwriting losses on homeowners' policies in the decade ended in 2010, according to data compiled by the National Association of Insurance Commissioners.
Homeowners' coverage "has been really underpriced," said Josh Stirling, an analyst at Sanford C. Bernstein & Co., in a phone interview recently. "If you go back 10 years, these businesses were loss leaders." Personal auto coverage has been profitable for insurers during that period, NAIC data show.
Catastrophes worldwide led to a record $105 billion in insured losses last year, according to a report this month from Munich Re, the world's largest reinsurer. About $25 billion of those losses came from U.S. storms, including the tornado that leveled parts of Joplin, Missouri, in May. Irene, the first hurricane to make landfall in the U.S. since 2008, caused $7 billion in insured losses.
Policyholder owned State Farm raised homeowners' rates 3.6 percent last year, Dick Luedke, a spokesman for the Bloomington, Illinois based insurer said in a phone interview. That follows a 7.3 percent increase in 2010 and a 9.7 percent increase in 2009.
Allstate boosted homeowners' rates in 37 states in the first three quarters of 2011, compared with 32 in all of 2010, according to regulatory filings. Chief Executive Officer Thomas Wilson, 54, has said that the company is acting as if increased weather-related losses are part of a permanent shift in climate patterns.
"Rates are not adequate" for homeowners' insurance, he said at an investor conference in New York in December. "They are not adequate for us and the rest of the industry. We are getting little pushback from regulators or customers, for that matter, on raising pricing in the marketplace. So there are more rate increases to come."
Travelers' CEO, Jay Fishman, 59, has also said he is pushing for rate increases after tornadoes last year fueled a second quarter loss and forced the company to assess whether its models understated storm risk.
"We can either make the decision that we're really smart and we've been unlucky, or we can make the decision that something different is happening," he said on an October conference call with analysts to discuss the New York based insurer's quarterly results.
U.S. state regulators approved about 1,500 requests to raise rates for policies that protect homes last year, according to data compiled by Perr & Knight, a Santa Monica, based consulting firm that tracks the records. That adds to more than 3,700 in the prior two years. Companies must seek approval from states to make most changes on policies sold to consumers.
Allstate has also moved to change terms of some policies. They started a program in Oklahoma that limits payouts for customers' with older roofs, Wilson said at an investor conference in December.
Some carriers in Georgia have refused to cover homes with roofs older than 10 years, said Victor Hamby, a partner in Hamby & Aloisio Inc., an independent insurance agency in Atlanta. His clients faced rate increases averaging about 18 percent last year and he expects them to continue rising this year and next. He attributes the increases to underwriters needing to recoup losses and a new state insurance commissioner who has sped up the process for approving rate changes.
"The underwriting standards have really tightened up," he said in a phone interview last week. "It's not like you can jump from one carrier to another and they've got the sale of the day going on down the street."
Insurers are expanding the area they consider at risk for large tornado and hail losses beyond Texas, Oklahoma and Kansas, said Howard Botts, executive vice president at CorelLogic Inc.'s spatial solutions business, who creates natural hazard databases for the industry. The U.S. Gulf Coast, Minnesota and Wisconsin are among areas now considered at higher risk, he said.
"It often takes catastrophic events, or large loss events, to get the attention of senior management," Botts said in a phone interview. Insurers are "much more sensitive to losses now that they can't offset that with their investments."

Late Payment Of Claims

2012-01-26T19:00:15Z

Insureds in Grand Prairie, Fort Worth, Hurst, Euless, Bedford, Grapevine, Saginaw, Rhome, Lake Worth, Burleson, and other places in Texas have very little knowledge of the remedies available to them when their insurance company refuses to defend them in a law suit. One of those remedies might surprise them.
This surprise can be found in a case styled, Luxury Living, Inc. v. Mid-Continent Casualty Company. This is a 2003, case heard by a Federal Court in the Southern District of Texas. Here are some of the facts:
Luxury Living, Inc., a home builder. was sued by a homeowner alleging defects in construction that resulted in physical injury to the home. Mid-Continent refused to defend Luxury Living on the ground that the claim asserted by the third-party homeowner was not covered by the insured's commercial liability policy. The insured, Luxury Living, filed this action seeking declaratory judgment that the insurer, Mid-Continent, has a duty to defend the insured and for damages, including reimbursement of the insured's defense costs to date, 18% statutory penalty on those costs for wrongful denial of the claim, and attorney fees to date. The insurer responded that because the homeowner's claims were not covered by the policy, the duty to defend was not triggered. Additionally, the insurer asserted policy exclusions that preclude coverage for damages arising out of installation of the Exterior Insulation Finish System ("EIFS"). Finally, the insurer argued that statutory penalties do not apply to third-party claims. Both sides moved for summary judgment.
In it's holding, the district court granted the insured's motion for summary judgment, held that the insured was entitled to reimbursement of its defense costs and attorney fees incurred to date, and awarded the 18% penalty on all defense costs. Applying the "eight corners" rule, the court found that the commercial general liability insurer had a duty to defend a homeowner for claims arising from negligent work which constituted an "occurrence" under the policy, absent an exclusion. The court also found that the EIFS allegations did not implicate the "damage to property" and "damage to work" exclusions in the policy and, therefore, the duty to defend applied. Finally, the court rejected the insurer's argument that statutory penalties provided for late payment of claims under Texas Insurance Code, Section 542.060 do not apply in this instance as involving a third-party claim. The court noted that although the statute does not define "first party," a claim is defined as "a first party claim made by an insured or a policyholder under an insurance policy ... that must be paid by the insurer directly to the insured or beneficiary." Thus, the court found that an insured's claim for reimbursement of defense costs from its liability insurer constitutes a "first party" claim and held that the statutory penalty applied to attorney fees as part of the defense costs incurred to date.
This case might also be confusing. It's value is in understanding a way that the insurance laws of the State of Texas can go a long ways to helping an insured in Texas when the insurance company refuses to assist in a claim. This case is a little more nuanced in the way an attorney can help an insured get what they bargained for in the insurance contract, plus a penalty on the insurer for playing games instead of stepping up and doing what they should have done in the first place. Hopefully, an experienced Insurance Law Attorney is aware of this case and how it can help clients who find themselves in this or a similar situation.

Late Payment Of Claims

2012-01-24T14:52:58Z

When does someone in Grand Prairie, Fort Worth, Burleson, Crowley, Lake Worth, Benbrook, Alvarado, Keene, Joshua, or anywhere else in Texas, know that the insurance company is taking too long to pay the claim?
There is no easy answer to the question. The laws related to the time frame for payment of claims are found in the Texas Prompt Payment of Claims Act. A reading of these laws is confusing. Even an experienced Insurance Law Attorney will have to read the law, look at the facts in the case then reread the law and see how it applies to the facts of the case. A big part of this law is the penalty the insurance company is subject to having to pay for violations of the law. So how is this penalty calculated?
The Fort Worth Court of Appeals decided a case in 2008, that provides some guidance. The case is styled, GuideOne Lloyd's Insurance Company v. First Baptist Church of Bedford. Here are some relevant background facts:
First Baptist Church brought suit against GuideOne for hail damage to the roof of its church building. GuideOne's engineer concluded the roof had to be replaced and could not be repaired. GuideOne solicited an estimate to repair the roof anyway, and the church obtained an estimate for the replacement cost, including a statutorily required insulation upgrade. The jury awarded the church approximately $286,000 for the covered losses, $60,000 in damages on the church's Insurance Code violations, and $30,000 in compensatory and $55,000 in exemplary damages for a knowing violation, along with $100,000 in attorneys' fees, and $188,000 based on the 18% interest penalty under the Prompt Payment of Claims Act for untimely payment of claims. The jury found that GuideOne had made an unconditional tender of $155,000 to the church after the church filed suit. GuideOne argued that the trial court erred in disregarding the jury's finding regarding its unconditional offer and that the interest penalty should have been calculated without subtracting the $155,000 that the jury found it had unconditionally offered after the suit was filed. GuideOne also challenged certain questions on the jury charge as erroneous.
In making its ruling, this court said the trial court erred in disregarding the jury's finding that GuideOne had unconditionally offered $155,000 to settle the claim because there was some evidence to support the jury's finding. In applying the offer to arrive at a new interest calculation, the court applied the $155,000 tender first to the accrued prejudgment interest on the amount of the coverage with the balance applied the principle coverage amount owed, and then use the adjusted principle to calculate the 18% interest penalty for untimely payment. The court rejected GuideOne's argument that the plaintiff had not received a finding on the accrual date for its Prompt Payment claim because the accrual date was undisputed and need not be submitted to the jury.
With regard to the jury charge issues, the court found that submission of multiple alternative definitions of an "unfair or deceptive act or practice" was harmless even if erroneous, and that a question on "false, misleading or deceptive" acts was not duplicative of the question about "unfair or deceptive acts or practices." Other challenges to the jury's finding were not erroneous because the judgment was not based on the challenged findings and otherwise, GuideOne waived its challenges to the jury charges.

Like Kind And Quality

2012-01-22T19:20:23Z

Persons who are insured in Grand Prairie, Arlington, Mansfield, Fort Worth, Dallas, De Soto, Duncanville, Cedar Hill, and other places in Texas are probably unsure what the phrase "like kind and quality" means in an insurance contract. Here is a case that may help to understand.
This is a Texas Supreme Court case that was decided in 2004. The style of the case is, Republic Underwriters Insurance Company v. Mex-Tex, Inc. Here are some relevant background facts in the case:
The roof atop a shopping mall was damaged by a hail storm. Before the insurance company agreed to pay for the replacement, the insured, owner of the mall, retained a roofer on a priority basis to replace the roof in order to avoid further injury to the tenants from future rains at a total cost of $179,000. Republic estimated the cost of replacing the roof with an identical make to be $145,460 and tendered that amount. The new roof was substantially similar in kind and quality to the old one, but the additional cost was due to the method of the roof's attachment to the building and the high priority of the job. Republic refused to pay the balance of the claim and the insured sued. Tex-Mex sought to recover the balance of the amount owed plus a statutory 18% penalty on the entire claim. Republic argued that the penalty, if any, should be assessed only on the disputed amount, rather than on the entire claim. The trial court entered the judgment in favor of Tex-Mex and Republic appealed. The Amarillo Court of Appeals affirmed, holding that the policy did not require the replacement roof to be identical and that an insurer's tender of the amount it believed was owed on a claim did not stop the accrual of Texas Insurance Code 542.060 penalties, or prejudgment interest, on what was later judicially determined to be the full amount of the claim. This Texas Supreme Court granted review of the case.
The Texas Supreme Court reversed and remanded, agreeing that replacement of a damaged roof with one of "like kind and quality" fell within the policy but rejecting the lower court's holding that Insurance Code, Section 542.060 calls for an 18% penalty of the amount of the claim, not just the amount outstanding after partial tender.
The court observed that interpreting "claim" as the amount ultimately determined to be owed net of any partial payments made prior to such determination was consistent with the statutory goal of encouraging prompt payment by insurers of undisputed amounts. The court also found a lack of support for the trial court's conclusion that the insurer's payment was in full satisfaction of the claim. Therefore, the statutory penalty could be imposed on $33,540, the difference between the trial court's determination of the claim amount and the partial payment tendered by the insurance company, from the date of payment until the date of the judgment.
This case helps explain the "like kind and quality" issue but it points out something else in the process. What else it does is point out one of the ways for determining how late payment penalties work.

When Are Family Members Excluded From Insurance Claims?

2012-01-21T15:18:17Z

People with insurance policies in Grand Prairie, Fort Worth, Dallas, Saginaw, Keller, Grapevine, Mesquite, or anywhere else in Texas would be surprised to learn that there are situations where family members are excluded from insurance claims. Here is one example of that.
The case is styled Rumley v. Allstate Indemnity Company. The opinion was issued by the Beaumont Court of Appeals in 1996. Here are some facts:
Joyce Rumley ("Wife") sustained personal injuries in a one car vehicle accident in which her husband, Wilburn Rumley, was the driver. Mrs. Rumley filed a claim for benefits under their insurer, Allstate. Allstate paid Personal Injury Protection (PIP) benefits but refused to pay liability because the policy contained a family member exclusion. At the time, the Texas Supreme Court had granted writ of error but had not yet issued an opinion in National County Mutual Insurance Company v. Johnson. In that decision, the Texas Supreme Court invalidated the family member exclusion. Wife sued Allstate and Ted Pate, a senior staff claims representative for Allstate, for breach of duty of good faith and fair dealing, violations of the Texas Insurance Code and violations of the Texas DTPA.
Allstate filed a Motion for Summary Judgment on the grounds that Wife's claim was a third-party claim for which Defendants owed no duty of good faith and fair dealing; there was a reasonable basis for denying the claim in that the family member exclusion was an unsettled issue of law; and there was no special or contractual privity between Pate and Rumley. The trial court granted summary judgment. Wife appealed.
In upholding the grant of summary of summary judgment in favor of the claim representative the court explained -
A third-party claimant cannot pursue an action against an insurer for unfair claims settlement practices under the Insurance Code.
Although Wife was a named insured on the policy and premiums were paid from community funds thereby establishing Wife's contractual relationship with Allstate, when Wife asserted a liability claim against her spouse, she assumed a posture of a third-party claimant.
In the context of her claim based upon her husband's negligence, Wife was antagonistic to both insurer and spouse. She did not rely upon Allstate's good faith any more than any other injured party would.
As a third-party claimant, Wife had no standing to assert extra-contractual and statutory claims against Allstate or the claims representative for denial or delay in the payment of her claim.
This case is yet another example of a case that should be confusing to most people. And it serves as yet another example why an experienced Insurance Law Attorney needs to be involved in these cases.

Suing On A Life Insurance Policy, Who Can Do It?

2012-01-19T17:29:13Z

A natural question for someone in Grand Prairie, Fort Worth, Dallas, Arlington, or anywhere else in Texas to wonder about. Can the policyholder sue? Can the beneficiary sue? Can an estate administrator sue? The answer is one of those that depends on the facts and circumstances. Here is a case that gives some guidance.
The case is out of the San Antonio Court of Appeals and the opinion was issued in 1996. The style of the case is Mendoza v. American National Life Insurance Company. Here are the facts:
Jerry Mendoza purchased a $25,000 life insurance policy from American National on August 1, 1991. Carrion was a named beneficiary of the policy. The October premium was not paid. The policy provided for a 31 day grace period. On November 1, 1991, the last day of the grace period, American National's district manager, Sitka, verbally agreed to extend the grace period until November 4, 1991. The policy, however, specifically provided that only American National's president, vice-president or secretary had the authority to extend this time period. Jerry Mendoza died in an automobile accident on November 3, 1991. The premium was never paid. In a prior appeal, this court affirmed a summary judgment in favor of American National on Mendoza's breach of contract, negligence and bad faith claims. This appeal concerns the trial court's granting of summary judgment on Mendoza's claims for intentional infliction of emotional distress, Insurance Code and DTPA violations.
In its' opinion the court said that in order to qualify as a consumer under the DTPA, a person must seek to acquire goods or services by purchase or lease and those goods or services must form the basis of the complaint. Lack of privity between a plaintiff and defendant does not preclude a plaintiff from establishing consumer status. Section 541.060 provides standing to "any person" who has been injured by another's engaging in an unfair or deceptive act or practice in the business of insurance. Therefore, a plaintiff may assert causes of action under the DTPA even though the plaintiff is not a consumer. Carrion, a named beneficiary of the policy, would clearly be injured as a result of Sitka's alleged misrepresentations. Therefore, Carrion has standing. Mendoza's mother, in her capacity as representative of his estate, however, does not have standing.
Although the policy provides that Sitka does not have authority to extend its termination date, it is well settled in Texas that such provisions are ineffectual to prevent parol waiver of such provisions and conditions by an authorized agent acting within the scope of his authority. Assuming Sitka exceeded his authority in modifying the agreement, because American National selected Sitka as its agent, American National assumed the risk for Sitka exceeding his instructions. American National cannot escape liability for Sitka's misrepresentation that coverage would be extended until November 4, 1991. The fact that American National conducted an investigation after Mendoza's death to determine if the accident was alcohol related was not conducted in an outrageous manner and could not support an action for intentional infliction of emotional distress.
Only Carrion has standing to assert Insurance Code or DTPA claims. Accordingly, the summary judgment as to Carrion was reversed.
A reading of the above should be confusing to most people. The case serves as yet another illustration for why an experienced Insurance Law Attorney needs to be involved in a claims when an insurance company denies a claim for benefits.

Insurance Agent Representations

2012-01-17T15:28:02Z

Insurance Law Attorneys and Lawyers in Fort Worth, Dallas, Weatherford, and other places in Texas know the claims that can be made against an insurance company that treats one of its insureds in an unlawful manner. These same lawyers should also know the claims to make against insurance agents that make misrepresentations to their insureds when selling a policy of insurance.
The question today is: Can an agent be held liable for something he does not say? The answer is: It depends. Here is a case that gives some guidance.
The San Antonio Court of Appeals issued an opinion in 1998, in the case styled, Moore v. Whitney-Vaky Agency. Here are some facts:
Moore was the owner of an apartment complex. An agent for Whitney-Vaky asked whether he could handle the insurance for the complex. Moore testified in deposition that he did not recall discussing any types of coverage with the agent, that he never asked the agent to tell him what the policy covered, that he did not discuss the contents of the policy with the agent, that he never ask the agent to tell him what the policy covered and that he could not recall any conversations with the agent about the coverages he wanted prior to obtaining the policy. However, Moore stated that he believed that all liabilities were covered under the policy and argued that he should have been informed of the provisions of the policy at the time he purchased it.
Subsequently, Moore was sued for wrongful termination by a former employee. Moore believed the claim was covered under his liability policy and made a claim. The claim was denied. Moore then retained counsel and settled the suit. After settlement, Moore sued the insurer and Whitney-Vaky, the agent. The insurer was non-suited. Whitney-Vaky then moved for summary judgment. The parties agreed that the only issue to be determined by the trial court was whether Whitney-Vaky had a duty to advise Moore of the coverage provided under the policy. The trial court granted the motion for summary judgment and Moore appealed.
This appeals court affirmed the trial court ruling and stated that an insurance agent in Texas owes a common-law duty to a client for whom he 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. Neither of these duties was breached here because Moore admitted that he never requested a specific type of coverage, and Whitney-Vaky did provide a policy of insurance in accordance with its understanding of Moore's expectations. Moore also was never led to wrongly believe that his policy covered risks that were in fact excluded because Moore admitted that he never discussed the contents of the policy with the agent, and that the agent never said anything to give him the impression that the policy would cover all suits against him. There is also no evidence of a special relationship that may give rise to a duty to disclose coverage limitations, even though Moore continued to use Whitney-Vaky to renew his policy every year. Since there is no evidence of some specific misrepresentation by Whitney-Vaky or the agent about the insurance, Moore's mistaken belief about the scope of coverage is not actionable under either the DTPA or the Texas Insurance Code.

Hire An Attorney When The Insurance Company Refuses To Defend

2012-01-15T19:09:43Z

Insureds in Weatherford, Mineral Wells, Aledo, Azle, Willow Park, Hudson Oaks, Springtown, Millsap, Brock, and all other places in Parker County have to protect themselves immediately by seeing an Insurance Law Attorney when their insurance company refuses to defend them in a lawsuit.
A 1998, Dallas Court of Appeals case serves as an example of what happens when someone delays in hiring an attorney. The style of the case is, Greenberg, et al v. Cigna Lloyds Insurance Company. Here are some facts:
Greenburg was the independent executor as well as the trustee for his brother's children. The children eventually brought suit against Greenberg in Probate Court alleging among other things that Greenberg was liable for improper self dealing and breach of fiduciary duty. After receiving notice of the suit, Greenberg contacted two insurance companies that had secured insurance policies, including commercial general liability policies. Greenberg and his sons were told that there was no coverage under the policies. Greenberg hired an attorney to represent him in the probate suit. Judgment was rendered against him. Later, he entered into a compromise settlement agreement under which Greenberg agreed to pay $1.1 million. The trial in the underlying probate case began on September 25, 1989. In September 1994, Greenberg filed suit against Cigna as well as other insurance companies alleging breach of contract, breach of fiduciary duty, breach of duty of good faith and fair dealing, negligence, gross negligence, breach of express and implied warranties, violations of Texas Insurance Code, Section 541.060, and the DTPA, and intentional misrepresentation. Cigna filed a motion for summary judgment which was granted on the basis of a limitations defense. Greenberg then filed this appeal.
In reviewing this case, the Dallas Court of Appeals held that the summary judgment in favor of Cigna was affirmed. The court said that a cause of action for wrongful refusal to defend ordinarily accrues when the refusal to defend occurs. In this case, the underlying trial commenced on September 25, 1989. It is undisputed that the trial preceded in the probate suit without defense being provided by Cigna. Therefore, the refusal to defend occurred at the very latest on the day the trial commenced in September 1989. Greenberg did not file the breach of contract claim until September 1994. Therefore, the breach of contract claim is barred by the four year statute of limitations. All of the extra contractual claims are based on Cigna's failure to provide a defense. Those claims also began to run when Cigna failed to provide the defense in the underlying suit. The claims are subject to two or four year statutes of limitations. Therefore, the extra contractual claims are also barred by limitations.
Without talking to the parties involved there is no sure way of knowing why there was a delay. There are ways to excuse a delay and to get around the statute of limitations defense, but the facts have to be just right to be successful in this effort.
Bottom line - don't delay getting an insurance law attorney involved.

Life Insurance Claims

2012-01-14T14:35:51Z

Residents of Grand Prairie, Arlington, Fort Worth, Dallas, and other areas in the State of Texas would want to understand what happens when a policy payment is missed. The following case is one where the policy ended up lapsing. An experienced Insurance Law Attorney may have been able to get a different result.
The case is State Farm Life Insurance Company v. Beaston. The case decided in 1995, by the Texas Supreme Court. Here is some background.
Beaston purchased a graded premium whole life policy from State Farm. The premium on the policy was due on 12/28/93. The thirty-one day grace period expired on 1/28/94. Three days after the expiration of the grace period, Beaston died in an automobile accident. State Farm refused to pay benefits because coverage had expired. Beaston's wife, the beneficiary, brought suit alleging that the policy remained in force because of its dividend-at-death provision. The trial court found the policy ambiguous and instructed a verdict in favor of Beaston with respect to coverage.
The jury found: (1) the defendants had engaged in unfair or deceptive acts and that such conduct was a producing cause of damages to Beaston; and (2) defendants did not: (a) engage in any false, misleading or deceptive act or practice; (b) engage in any unconscionable action or course of action; (c) commit negligence; or (d) commit gross negligence. The jury awarded no policy benefits but awarded $200,000 for past mental anguish and attorney's fees in the amount of forty percent of her recovery. Based on the court's directed verdict and the jury's findings, the court entered judgment in favor of Beaston in the amount of $598,000. The court refused to award damages for mental anguish or to treble the award pursuant to Texas Insurance Code, Section 541.060, because there was no finding the defendants acted knowingly. The Court of Appeals held that mental anguish damages should have been awarded and actual damages should have been trebled. The Court of Appeals further held that Beaston's contingent attorney's fees should be calculated from the total recovery and not the total damages.
In it's analysis of this case, the court said that the interpretation of an insurance contract is governed by the same rules of construction applicable to other contracts. The policy, viewed in its entirety, unambiguously provides that State Farm would use "any available dividend accumulations" to pay all or part of the unpaid premium. Beaston's policy had not accumulated any dividends on its first anniversary and the policy lapsed before its second anniversary. Therefore, no dividend had accumulated. As a result, there were no dividend accumulations available to cure the lapse. Accordingly, Beaston had no coverage under the policy. On an issue of first impression, the Court held a "knowing" violation is required for an insured to recover mental anguish under Section 541.060. Thus, the judgment of the Court of Appeals was reversed and judgment rendered that Beaston take nothing.
This case has a harsh result.
Referring to the first paragraph above, this author is not saying that an experienced Insurance Law Attorney would have resulted in a favorable outcome. Rather, this author is saying that there are many ways to get around late payments and missed payments and that the odds of knowing about these ways are greatly increased with an attorney who has dealt with the situation in the past.

Insurance Company Refusing Claim

2012-01-12T16:31:00Z

People in Grand Prairie, Fort Worth, Dallas, Arlington, Hurst, Euless, Bedford, Grapevine, and other places in the DFW metroplex would want to know why an insurance company refuses a claim and what the consequences are. The following case may give some insight.
This is a 1999, Fort Worth Court of Appeals case styled, "Mid-Century Insurance Company v. Foreman." Here are some facts:
Joyce Foreman was involved in a car accident with anther driver, Karl Buehner. Foreman's auto policy included $250,000 in underinsured motorist coverage. Foreman settled with Buehner's insurance carrier for approximately $20,000. It is disputed whether or not Mr. Foreman spoke with the Mid-Century agent before the settlement. Because of extensive medical bills, the Foreman's filed an uninsured motorist claim with Mid-Century. Fisher, a Mid-Century adjuster, mailed an acknowledgement and request for information. Fisher spoke with Mr. Foreman who told her that they had hired a lawyer. Fisher stopped all contact with the Foremans.
The Foremans sued Mid-Century to recover extra-contractual and contractual UIM damages. Based on a review of the Foreman's medical records, Mid-Century denied the Foremans' claim for failing to obtain consent before settling with State Farm and Buehner under the policy terms. Later, Mid-Century withdrew its denial based on the Texas Supreme Court opinion in Hernandez v. Gulf Group Lloyds, which held that a settlement without consent exclusion is unenforceable absent a showing that the insurer had been prejudiced by the insured's failure to obtain consent.
The Foremans' claim for UIM benefits was severed and tried separately from all extra-contractual causes of action. In the trial for UM benefits, the jury awarded $112,287.00 to Joyce and $12,500.00 to her husband. That judgment was not appealed.
The Foremans' extra-contractual claims were then tried. The Foremans focused on Mid-Century's denial of the claim. The jury found that Mid-Century caused the Foremans damages by committing deceptive acts, breached its duty of good faith and fair dealing, and knowingly failed to promptly pay the claim. The jury also found that Mid-Century's conduct was knowing and intentional but was not grossly negligent. The jury awarded $150,000 to Foreman and $175,000 to her husband for mental anguish damages. A bifurcated proceeding was then held in which the jury awarded the Foremans an additional $125,000 each because Mid-Century "knowingly violated the DTPA." These additional damages were not awarded to the Foremans because the Insurance Code provided a greater recovery. Mid-Century appealed.
The appeals court held that because there was no evidence that the insurance company acted "knowingly," the judgment is reversed and a take nothing judgment in favor of the insurance company is rendered.
In its holding, the court said a culpable mental state is required to recover mental anguish damages under Section 541.060. "Knowingly" means actual awareness of the falsity, unfairness or deception of the act or practice made the basis for a claim for damages under Section 541.060. "Actual awareness" may be inferred where objective manifestations indicate that a person acted with actual awareness.
The Court stated that "actual awareness" does not mean merely that a person knows what he is doing, but it does mean that a person knows that what he is doing is false, deceptive or unfair. This is a more culpable mental state than gross negligence.
The court then said, in this case, there is no evidence that Mid-Century knew it was acting falsely, deceptively or unfairly towards the Foremans. Therefore, their mental anguish award cannot stand. The Foremans' assertions based on unsupported inferences are no more than a mere scintilla of evidence and cannot support a jury's finding.