Dallas Fort Worth Insurance Lawyer Blog

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.

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.

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.

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.

Few people in Weatherford, Mineral Wells, Aledo, Willow Park, Hudson Oaks, Azle, Springtown, Millsap, Cool, Brock, or anywhere else in Parker County wants to be forced to hire an attorney to submit an insurance claim. But, like it or not, that is what most people have to do to get fair treatment.
A recent article on insurance singles out Allstate Insurance Company, but this same story could be told about many of the insurance companies. Here is what some of the article said:
Unlike may other businesses, the insurance industry is bound by law to act in good faith with its customers. Because of their protective role in the lives of ordinary citizens, insurance companies have long operated as semi-public trusts. But since the mid 1990's, a new profit hungry model, combined with weak regulation, has upended that ancient contract. In Texas, the Texas Department of Insurance is the agency that is suppose to be providing oversight on the insurance industry.
Claims has been converted into a money making process, is the report from consultants and people who study the industry.
The change started when consulting giant McKinsey & Company sold Allstate and other leading insurance companies on a new system to boost the bottom line. Rather than adjusting claims the traditional way, which gave claims managers wide latitude to serve customers, insurance companies embraced a computer driven method that produced purposefully low offers to claimants.
Those who took the low ball offers received prompt service, while those who did not had their claims delayed and potentially were reduced to bringing expensive lawsuits to fight for their benefits. An ex Allstate agent told the American Association for Justice, a trial lawyers lobby, the strategy was to make claims "so expensive and so time consuming that lawyers would start refusing to help clients." The strategy was dubbed "Good Hands or Boxing Gloves" by consultants.
McKinsey, which was reportedly hired by Allstate in 1992, prepared about 12,500 PowerPoint slides to present its plan. The slides were introduced in litigation in 2005, when Allstate turned them over under a temporary protective order. This information was detained in a book titled, "From Good Hands to Boxing Gloves: The Dark Side of Insurance."
McKinsey's strategy put profits above all. One slide in the McKinsey presentation illustrated this philosophy by painting the insurance business as a zero sum game: "Improving Allstate's casualty economics will have a negative economic impact on some medical providers, plaintiff attorneys, and claimants. ... Allstate gains -- others must lose."
Allstate has certainly gained: It made $4.6 billion in profits in 2007, double its earnings in the 1990's. The stunning increase, came through "driving down loss values to an average of 30 percent below the actual marker cost" -- that is, paying dramatically less on claims.
An insurance company can make a lot of money on the small claims because if you save a few dollars on a huge number of claims, it's worth more than saving a lot of dollars on a very small number of claims.
Allstate is the best known user of the McKinsey model, topping the list of the "Ten Worst Insurance Companies in America" published by the American Association for Justice. But Allstate's rise in profits has led most of the industry to adopt the same approach. McKinsey has worked with State Farm and other companies in redesigning their claims systems. Another book written on the subject is "Delay, Deny, Defend."
Statistics show that the companies that take in 70 percent of total insurance profits in the United States now abuse their obligations to their policyholders. When Allstate CEO Tom Wilson earned $9.3 million last year, he was not even on the top 10 list of best paid insurance executives according to New York Law School's Center for Justice and Democracy.