Dallas Fort Worth Insurance Lawyer Blog

Insurance policy holders in Arlington, Grand Praire, Fort Worth, Weatherford, or Dallas, will all notice something called "Exclusions" in their policies. Maybe most people don't look at their insurance policy's until they have a reason to make a claim, but when they do they may read something they do not like. This something will usually be in the section of the policy titled "Exclusions."
When Courts in Texas are called upon to read and interpret an insurance policy, the rule is, they are going to look at and interpret exclusions very narrowly. Their construction of the policy provisions are going to be very liberal with the aim being to favor coverage for the insured policy holder.
The Texas Supreme Court case, Puckett v. United States Fire Insurance Company, was decided in 1984, and states that insurance policies are strictly construed in favor of the insured to avoid excluding coverage. A historically long line of cases says that exceptions or limitations (exclusions) on liability are strictly construed against the insurer and liberally in favor of the insured. Here are a few of those Texas Supreme Court cases, National Union Fire Insurance Company v. Hudson Energy Company, decided in 1991. Barnett v. Aetna Life Insurance Company, decided in 1987. A 1982 case, Blaylock v. American Guarantee Bank Liability Insurance Company. Glover v. National Insurance Underwriter, was decided in 1977. And here is one, Brown v. Palatine Insurance Company, decided in 1896.
When it comes to exclusions in an insurance policy, the Texas Supreme Court, in the case, State Farm Fire & Casualty Company v. Reed, said, "An intent to exclude coverage must be expressed in clear and unambiguous language."
An experienced Insurance Law Attorney can give good advice to a client on how a Court would potentially read the interpretation of an "exclusion" in an insurance policy and how the rule of interpretation would apply. This rule of interpretation does not apply when the term in question is susceptible of only one reasonable construction.
Here is an example taken from the above case, National Union Fire Insurance Company v. Hudson Energy Company. In this case, an airplane crashed. It was unclear who was piloting -- the instructor, the student, or both. The policy excluded the student, covered the instructor, and was unclear if they were both piloting. The Court found the policy was ambiguous and covered the loss if they were simultaneously piloting. The court reasoned that an intent to exclude joint piloting must be expressed in clear and unambiguous language. The insurer knew the plane had dual controls. If the insurer wanted to exclude simultaneous piloting, it was incumbent on the insurer to state the exclusion expressly and clearly.

There are lots of people in the Fort Worth, Dallas, Grand Prairie, Arlington, and Weatherford, areas of Texas who have problems getting affordable insurance. The reasons can be many, examples are, they are young, too many tickets, too many wrecks, a DWI conviction, license suspension issues, and medical conditions.
What happens if you have insurance on your car but when you bought the insurance you signed a document called a "named driver exclusion" on your spouse because the insurance company would not cover her because she suffered from epileptic seizures. That is what happened in the case, Janie Zamora, Pete Zamora, Jesus Toe, and Gracie Vela v. Dairyland County Mutual Insurance Company. This case was decided by the Court of Appeals in Corpus Christi, Texas.
The facts are, on December 2, 1993, Gracie Vela (wife of Jesus Toe) was operating Jesus' automobile when she was involved in an accident with Pete and Janie Zamora. At the time of the accident, Gracie was named as an excluded driver in Toe's policy with Dairyland County Mutual Insurance Company. The Zamora's sued Gracie for her negligence and Jesus for negligently entrusting his car to Gracie. Dairyland denied coverage to Gracie and Jesus based on the named driver exclusion in the policy.
The arguement was that the named driver exclusion should be be held invalid by the Court as being against public policy and in violation of the Texas Motor Safety -- Responsibility Act (the Act). Previous Courts have held a family member exclusion to be invalid.
Here though, the Court drew a distinction between the invalid, "family member exclusion," and the present "named driver exclusion." The Court said there is no analogy between the two.
In a named driver exclusion the policy holder is given an option to exclude from coverage drivers who, by virtue of their driving history or other factors, are deemed high risk drivers. The Court said, by focusing on the risk involved, the named driver exclusion does not contradict the public policy underlying the Act, but instead furthers Texas public policy on two levels.
First, this exclusion furthers public policy by enabling drivers with family members having poor driving records to get insurance they can afford. Second, this exclusion deters insured drivers from entrusting their automobiles to unsafe excluded drivers, thus keeping those unfit drivers off the road.
The Court looked at the policy which read in pertinent part, "You agree that none of the insurance coverage afforded in this policy shall apply while Gracie Toe ... [The Excluded Driver] is operating your covered auto or any other motor vehicle." The Court then said, "The exclusion's purpose is to suspend coverage when a specific person, considered or known to be an unsafe driver, is operating a covered vehicle." Gracie was in fact operating the vehicle covered by the policy of insurance and the Court ruled in favor of Dairyland.

Most people think that the idea of life insurance is good. It shows you are thinking of the people in your life who are left behind. Sometimes, life insurance is purchased for business reasons. People who live in Arlington, Grand Prairie, Weatherford, or a big metropolitan area such as Dallas and Fort Worth are all going to consider life insurance at some point in their lives.
What happens when the idea of purchasing life insurance becomes a reality and after having bought the coverage, payments are missed? The Texas Court of Civil Appeals in San Antonio, decided this issue in 1962, and their decision is still good law for this question.
Merced Cantu et ux., v. Southern Life & Health Insurance Company, is a case that says, "It is not necessary for the insurance company to advise policy holders that their policy has lapsed". In this case, the Cantu's had a life insurance policy on their son. The son died and the Cantu's made a claim for benefits from Southern Life & Heath Insurance Company. Southern denied the claim stating that the policy had lapsed for non-payment of premiums.
The policy at issue provided a date that payments were due and that if the payments were not made on a timely basis that there was a four week grace period to make the payments but at the end of the four week grace period, the policy lapsed and was no longer in force and effect, unless of course the late payments were made during the four week grace period. In this case Cantu made late payments but only not enough to catch the policy all the way current.
The Court ruled that the policy had lapsed according to the wording in the policy and once it had lapsed, the policy was no longer in force and effect and thus there was no coverage when the death of the Cantu's son occurred.
It is important to realize that the policy itself and the wording within it, was notice to the policy holder of when and how the policy would terminate and the insurance company was not required to mail any sort of termination notice. It is also important to realize that sometimes there are ways of getting around the ruling made by this Court. In these situations it is necessary to seek the counsel of an experienced Insurance Law Attorney to make sure your rights under a policy of insurance are protected.

Here is a situaton where a Dallas resident had a wreck in Mesquite, but it could have been Fort Worth, Arlington, Grand Prairie, or out in Weatherford. The injured persons had two insurance policies with the same insurance company.
This happened in a 1984 case, The Travelers Indemnity Company of Rhode Island, v. Lenny and Terri Lucas. Mr. Lucas was accompanied by his wife, Ms. Lucas, in an ambulance. A drunk driver ran head-on into the ambulance causing injuries to the Lucas'. They had two separate insurance policies with Travelers Indemnity, for Personal Injury Protection benefits and underinsured motorists benefits. Travelers paid the full amount under one policy to each of the Lucas' but refused to pay under the second policy. The damages to the Lucas' exceeded the limit of both the policies combined.
The ambulance also had underinsured benefits with a policy through Aetna. Travelers tried to limit what it had to pay by citing an "Other Insurance" clause within the Travelers policy.
The court ruled that an insurance company may not reduce its underinsured liability to an amount less than the policy limit by crediting itself an amount paid under another policy. The same ruling was made regarding payments made for Personal Injury Protection benefits.
A case decided in 2007, was essentially the same. The 2007 case was Kelley v. Progressive County Mutual Insurance Company.
Here, Kelley was injured by a motorist while riding her horse and her claim exceeded $1,000,000. She received the policy limit of $100,000 from the at fault driver and then received the limit of $500,000 under a policy issued to her by Progressive. However, on a policy issued to her father by Progressive, which also named her, Progressive refused to pay. Progressive asserted a policy provision that prohibited "stacking" the policies and argued that her recovery was limited to just one of the polices.
The court noted that the policies were separate policies, with separate policy numbers and separate vehicles listed. Just because Progressive issued both policies to members of the same family did not allow Progressive to prevent a "stacking" of these policies.
There are situations where an insurance company may not have to pay where there is duplicate coverage. When there is more than one policy that may cover a claim it is important to seek the advice of an Experienced Insurance Law Attorney to insure your rights are properly protected.

Almost all insurance disputes are going to have situations where an attorney is involved. Too many times these disputes end up in lawsuits. Prior posts on this blog have shown how most situations are going to require the insurance company to pay or reimburse attorneys fees where the policy holder prevails in their claim.
In 2007 a case, Lamar Homes, Inc. v. Mid-Continent Casualty Company, the Texas Supreme Court ruled that Section 542.060, Texas Insurance Code, applied to not just the underlying claim at issue in a lawsuit but to also attorneys fees in situations where the insurance company did not pay for attorneys on behalf of the insured persons or business.
Section 542.060 assesses an 18% annual penalty on the attorneys fees that the insurance company did not pay for.
This issue on the unpaid attorney's fees was fought again and re-stated in a case decided in December 2009. This case, Nautilus Insurance Company v. International House of Pancakes, Inc., was mainly a dispute as to how much the attorney's fees were and how much of the time, and thus, the fees were attributable to the case at issue, rather than another case.
International House of Pancakes argued that the fees of $14,973.55 were 95% related to the case and based on that number, the 18% penalty to be paid by Nautilus totaled $15,804.49. Furthermore, there was an additional $119,674.34 in attorney's fees for the present litigation. Nautilus Insurance Company did not agree with the time and money that was claimed to have been spent of the case and the lawsuit ensued.
The important thing for policy holders to take from this is that the insurance companies do get punished for their wrongful handling of claims and that with the assistance of an experienced Insurance Law Attorney, the insurance company can be forced to pay on claims they are suppose to pay and be forced to re-imburse the policy holder for attorneys fees plus penalties for their wrongful conduct.

Here is a case that was originally filed in a State District Court in Dallas, Texas. The case was removed to Federal Court and promptly dismissed.
The style of the case is "Kenneth McQuinne v. American Home Assurance Company". The only important issue in the case was whether or not a self insured vehicle was "uninsured" for purposes of the American Home Assurance Company policy argued about in this case.
The facts in this case are that McQuinne was involved in a wreck with a person named Sapkota. Sapkota was driving a vehicle owned by Enterprise Leasing. McQuinne reached a settlement with Sapkota's insurance company for the policy limit of $50,000. McQuinne alleged that his damages exceeded that amount and consequently filed a claim with American seeking additional benefits under the policy American had issued on his employer, Turfgrass.
The American policy excluded uninsured motorist coverage for vehicles that were self-insured. The Enterprise vehicle was self-insured. McQuinne argued that since the Enterprise was self-insured that it was uninsured and thus American should be made to pay benefits under the uninsured portion of the policy.
American argued that the Enterprise was a self-insurer under the Texas Motor Vehicle Safety Responsibility Act. As such the car is expressly excluded from coverage under the policy.
The court got into an analysis of contracts, insurance policies, and the words used in the context of both. They decided that as a matter of law that American won the case.
This case points out the creative efforts of the attorney for McQuinne to try and obtain relief for his client. It also restated contract and insurance policy language that the courts are not going to change.

The United States Court of Appeals for the Fifth Circuit is a federal court located outside of Texas. Cases that originate in Texas, including the Dallas, Fort Worth, Arlington, and Grand Prairie areas will end up in this Fifth Circuit Court when it is on an appeal.
A case decided in late December of 2009 discusses "notice" provisions in insurance policies. These provisions are important for the people or businesses who have these policies to understand.
The case is styled, "East Texas Medical Center Regional Healthcare System v. Lexington Insurance Co".
East Texas Medical Center Regional Healthcare System had various policies of insurance to provide coverage in the event they had claims or lawsuits made against them.
Lexington Insurance Company provided to East Texas a "claims-made" policy. A claims-made policy is a policy of insurance that provides coverage only for claims made during the term of the policy regardless of when the actual claim arose.
In this case, East Texas received notice from an attorney for one of its patients that they may be sued for wrongs they may have committed. East Texas sent to Lexington a "loss run" document before the Lexington policy had expired which was suppose to be notice to Lexington of the potential claim. About 11 days before the policy expired, East Texas was sued by its patient. It was 7 months later before East Texas notified Lexington of the lawsuit. Lexington denied coverage to East Texas.
There were several issues argued to the court. One of these was whether or not the loss run document was sufficient notice to Lexington of the claim. The court decided in East Texas favor on this issue. The next was whether or not East Texas had immediately or "as soon as practicable", notified Lexington of the lawsuit. This was a requirement under the policy of insurance. On this issue the court decided against East Texas.
Once the court had decided that East Texas had violated the policy provision related to notifying Lexington about the lawsuit then the burden to prove that the East Texas failure to promptly notify them of the lawsuit, hurt Lexington, or as the court put it; that Lexington was prejudiced by East Texas not notifying Lexington as soon as practicable. On this issue the court remanded the case to the trial court.
The lesson learned on this case is really pretty simple. Whenever a claim or even a potential claim is being made against a person or business that has insurance coverage, it is vital that the insurance company is notified. And just a phone call is not sufficient. The notice needs to be in writing and the notice needs to be immediate. And lastly, there needs to be constant and immediate follow-up of all further communications related to the claim.

Most people do not understand that there are two main kinds of law. The first, most people are familiar with, and we will call statutory law. This is the law that is written down by the legislative branch of government. For purposes of Insurance Law, it is the Sections, Chapters, and Subchapters of the Insurance Code.

The other kind of law, which most people are not aware of, is called the "common law". The common law is the law that applies to situations even though the law is not specifically written down in a book somewhere.

Under Texas law, there is a "common law" duty for an insurance company to deal with one of its insureds in certain ways. This is called the the duty of good faith and fair dealing. When an insurance company does not honor its common law duty of dealing with one of its insureds in good faith, it is called "bad faith". This concept was discussed by the Texas Supreme Court in 1987, in the case Arnold v. Nat. County Mut. Fire Ins. Co.

In July 1997, the Texas Supreme Court, more or less redefined bad faith in a trio of cases; The Universal Life Ins. Co. v. Giles, United States Fire Ins. Co. v. Williams, and State Farm Lloyds v. Nicolau. After these cases the new standard said the insured must show that the insurance company denied the claim after liability became reasonable clear. For an insured to show that liability had become reasonably clear he must show the insurance company had no reasonable basis for denial of the claim. Taking this a step further, the insured must also show the insurance company knew or should have known there was no reasonable basis for denial of the claim.

The bottom line is an experienced Insurance Law Attorney will tell you that the end result of these cases is that there is a lot of litigation over clarifying what "lack of reasonable basis" means. One thing it means is that just looking in hindsight is not good enough. The Courts will look at, what were the facts existing at the time the claim was denied.

A resident of Grand Prairie, Arlington, Fort Worth, Weatherford, or any other area in Texas can sue an insurance company for violations of the Texas Insurance Code under the Texas Deceptive Trade Practices Act. This is important because both of these areas of the law allow for favorable theories of recovery to the consumer who is wronged when dealing with an insurance company.

Texas Insurance Code, Section 541.151, specifically says that a person who sustains actual damages may bring an action against another for damages caused by the other person engaging in an act or practice, "specificaly enumerated in Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice ..." The Business & Commerce Code is where the Texas Deceptive Trade Practices Act is located. The whole purpose of the DTPA is to prevent companies from doing wrongs to consumers.

In business and legal circles, Section 17.46(b) is referred to as the "laundry list" of things companies are prohibited from doing. Violations of this laundry list can result in actions by the States Attorney General plus numerous private causes of action by the consumer.

The Texas Insurance Code has its' own laundry list of a prohibitions directed to the insurance companies. The biggest list is found in Section 541.051, which is in Subchapter B of the Texas Insurance Code. This Subchapter B has ten other Sections which define prohibited acts or practices by insurance companies. These are Sections 541.052 thru 541.061.

The laws spelled out in the Insurance Code and the DTPA are very similar to each other and the remedies available to an aggrieved consumer are also similar. What is important to an experienced Insurance Law Attorney is being able to use both these lists of laws to add more bite to any claim being pursued against the insurance company. And more importantly, atleast to this writer, is it allows for a claim to be made against the individual agent or adjuster involved in any claim being made. This is important because by being able to make a claim against an individual agent or adjuster, rather than only the insurance company allows the case to be in State Court where recovery is usually better for the consumer, rather than the case being held in Federal Court, where results are usually better for the insurance companies.

The previous post to this blog talked about penalties Texas insurance companies face when they do not properly handle a claim that is presented to them by one of their insureds. Recently an insurance case was tried in Federal Court in Mississippi. The case arose out of a lose suffered by Reginald Bossier for damages resulting from Hurricane Katrina. In the case, the jury declined to award any amount of monies for punitive damages.

The insurance company being sued was State Farm. Notice also, that this case was in Federal Court. Earlier posts on this blog have pointed out that the insurance company would always prefer to be in Federal Court, rather than State Court. In this case, the jury compensated Bossier $52,300 for damages to an outbuilding destroyed by Hurricane Katrina. However, the jury refused to punish State Farm for any amount of punitive damages. State Farm had paid for some home damage resulting from the high winds but was refusing to pay for damages caused by water.

The attorney for Bossier had asked the jury to award Bossier $2 million to punish State Farm. That anything less than $2 million would not get State Farm's attention. The attorney also pointed out that "State Farm would rather pay its lawyers than its insureds." She also told the jury that if State Farm were not punished then they would continue to deny claims.

The facts of each case are unique and each case has to be carefully looked at to determine its merits. There is no real way of knowing whether another jury would have punished State Farm. It would be interesting to know if this same jury sitting in a State Court would have done anything different.

The Texas Department of Insurance maintains a web-site that highlights recent cases relevant to Texas insurance companies and Texas insureds.

Let's say your house in Dallas burns down and the insurance company wrongfully denies your claim. Or your boat in Weatherford sinks in the lake and your insurance company tries to tell you they are not going to pay because of a late payment on your insurance policy. How about you are driving your car in Fort Worth and are involved in a wreck and your insurance company denies coverage due to the car not being properly listed on the policy. Another example, your neighbors wife, in Grand Prairie, dies of an illness she has had and when the husband makes a claim for life insurance benefits he is denied because the insurance company says they committed a fraud in the application for coverage.

Okay, now lets say you can prove the insurance company was wrong in each of the above situations. What next? Do they just pay the benefits and go away? What about the extra heart ache you went through? What about the ten month delay in paying you the benefits you were entitled to? What about legal expenses? Can the insurance company just intentionally do you wrong and get away with it, by just paying what they should have paid in the first place?

Here are some answers. First, get to an experienced Insurance Law Attorney to help you. Then if you are so inclined, go to the Texas Department of Insurance web-site and read a few of the rules the insurance companies have to follow.

Here are some applicable laws that the Insurance Law Attorney will tell you about. Texas Insurance Code, Section 541.152, says when an insurance company is found to have violated or committed an unfair or deceptive act, that the prevailing party is entitled to recover from the insurance company, 1) the amount of actual damages, 2) court costs, 3) attorney's fees, and 4) "any other relief the court determines is proper".

On a finding by a Judge or Jury that the wrong was committed knowingly, there may be an award of an amount not to exceed three times the amount of actual damages. Knowingly is defined in Section 541.002, as "actual awareness of the falsity, unfairness, or deceptiveness of the act or practice.

Texas Insurance Code, Section 542.060, applies when an insurance company is late or slow in paying a claim. What is late or slow is determined by the facts in a particular situation. Section 542.060 allows recovery for attorneys fees plus interest at 18% a year as additional damages. A pretty good rate of return.

Additional damages, or punishment for the insurance company caught doing wrong can be found outside of the Insurance Code. The Texas Civil Practice & Remedies Code, Section 41.003, says an award of "exemplary damages" may be had where there is clear and convincing evidence that the harm a person suffers is the result of, 1) fraud, 2) malice, or 3) gross negligence. Texas Civil Practices & Remedies Code, Section 41.008, allows recovery but not to exceed, "two times the amount of economic damages: plus an amount equal to any noneconomic damages, not to exceed $750,000: or $200,000. These limitations do not apply in certain instances where certain defines criminal offenses were committed.

As can be seen, there are big penalties for insurance companies that do their policy holders wrong. What is important, is getting an attorney involved early when the insurance company is committing wrongs.

A person who buys a life insurance policy in Dallas, Texas, or in Arlington, Grand Prairie, Fort Worth or out in Weatherford in Parker County should have the same concern as everyone else when they purchase the policy. Is this policy going to pay benefits to the benficiary named in the policy? After all, that is the only reason it is being purchased.

A Federal Court case decided in 2007, gives good reason for looking over the policy and reading it well before purchasing it. The case, Assurity Life Insurance Company v. Grogan, was presented with the following policy condition: The policy coverage did not go into effect until the "first full premium was paid during the Proposed Insured's lifetime and continued good health."

Soon after purchashing the policy, the insured had a biopsy performed on a lump on his neck and was diagnosed with Hodgkin's disease. He died a few months later from complications.

Assurity Life filed a lawsuit saying the policy never took effect due to a failure of a condition precedent. Assurity subpoenaed the insured's medical records, which showed he had issues relating to the lump on his neck for several years.

The Court ruled in favor of Assurity Life. They held that the "good health" condition precedent for coverage had not been met because although the Hodgkin's disease had not been fully diagnosed before the policy took effect, it had manifested itself earlier through the ongoing neck problems.

The Court held that the "good health" condition precedent was well established in Texas law. The policy clearly stated that in order for it to take effect, the proposed insured must make the first premium payment while in good health.

This is a case where the insurance company won. What we do not know without talking to the people involved is whether or not there were other policies that could have been purchase had only the purchaser been aware of the limitations in this policy. Another issue is whether or not there is a potential claim against the agent who sold the policy. It would also be important to know how this policy was marketed or advertised.

The facts in each case will vary, just as the wording in each insurance policy will vary. It is important to have an experienced Insurance Law Attorney review the facts and the policy in each case where the claim for benefits is denied in order to insure that the insurance company is not treating someone wrong.

Can it be a surprise? Insurance companies appear to be getting caught in under paying on claims. The Texas Windstorm Insurance Association (TWIA) seems to be caught in some controversy regarding its claims handling along the Texas Gulf Coast. Keep in mind the problems being experienced could just as easily be happening in Fort Worth, Dallas, Grand Prairie, Arlington, or even a small town like Weatherford out in Parker County.

This problem is written about in an article in the Houston Chronicle titled "Lawsuit Says Windstorm Insurer Rigged Process". The article discusses TWIA using prices lower than market rates to estimate materials and repair costs. TWIA is said to also be unfairly limiting costs on roof repairs and discouraging the reopening of closed claims.

In a lawsuit resulting from some of the abuses by TWIA, documents and software is said to have been discovered that supports the claims that the abuses are being committed. One example of the abuse was discovered when one adjusting firm reported the market rate for roof repairs to be $230 to $255 per 100 square feet, but TWIA's price was $182. In another situation it is said that they suggested using shingles off one house that were not in too bad shape, to put on another house. This does not sound right to most people but may actually be allowed depending on the language in the insurance policy.

On the issue of reopening closed claims, it is claimed that adjusters were getting bonus pay for denying a claim. Furthermore, if it was determined the adjuster did something wrong on a visit they risked not getting paid anything. The result of this being that the adjuster would not reopen a claim to see if anything actually was done wrong.

When any of the above happens to a home owner and the home owner is forced to file a lawsuit Texas Insurance Law has a statute to help. Section 542.003 Texas Insurance Code, says it is illegal to compel a policyholder to file a lawsuit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder.

Insurance companies make money when they get away with denying claims or paying less than the full value of the claim. The making money part is okay, as long as they are not breaking the Insurance Laws and cheating policyholders by their actions.

Whenever you have an insurance claim, you need to make sure you are getting what you bargained for when you purchased the insurance policy. Don't be afraid to talk with an experienced Insurance Law Attorney to make sure you are not being underpaid on your claim.

An incident happens. Maybe your house in Dallas has someone inside who falls down the stairs. Maybe your car in Arlington is involved in a wreck. Maybe your business in Grand Prairie suffers a loss due to someone falling on the steps. Maybe the life insurance policy you purchased on your Mom in Weatherford is now denying coverage, after the funeral. What if the disability policy you had on your wife's job in Fort Worth is denied, after she becomes disabled?

If any of the above happens you actually have two main things you can do. The first and most common is to just sue the insurance company for various violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act. You can sue for breach of contract and fraud and misrepresentation and a few other things that are variations of the Insurance Code and DTPA causes of action.

The second thing that can be done is called a Declaratory Judgement cause of action. Attorneys refer to this as a "dec action". This is where an attorney files papers with a Court saying, "Judge, declare this thing we have before you as (fill in the blank)". A dec action is used quite often in insurance disputes. It is used both by attorneys for individuals requesting benefits under a policy and by insurance company attorneys asking the Court to declare that certain benefits do not exist within a policy.

A common scenario is where a person or company is sued. The person or company calls their insurance company, expecting the insurance company to take care of the matter. The insurance company investigates the claim, then determines that the claim being made falls outside of coverage provided within the policy for one reason or another and then refuses to do anything else because the claim being made is not of the type for which the policy provides any type of coverage. The result being that the person or company being sued is liable out of their own pockets for whatever the claim is that is being made against them. When an insurance company does this they usually send to the policy holder a letter saying why they are not providing coverage.

Other times they provide a defense, in that they pay for attorneys and court costs, but they mail to the policy holder a "Reservation of Rights" letter. This letter says that they will provide a defense for the time being but they are reserving their right to back out at any time. This may mean that in the event a judgement is taken against the policy holder that the insurance company will not pay the judgement.

When the above happens, either the insurance company or the entity being sued will file papers with the appropritate Court by way of a dec action asking the Court to make a ruling in their favor. So either the insurance company is asking the Court to declare that the policy does not provide the coverage being sought, or the entity is asking the Court to declare that there is coverage under the policy, which makes the insurance company come to the table, so to speak, with money. In other words, to either pay the claim or to defend the claim against the people who are sueing the policy holder.

Anytime, an insurance company tries to say that the insuance policy does not cover the loss that is being complained about, you should seek the advice of an experienced Insurance Law Attorney. An attorney who practices in this area of the law is going to be able to give sound adice as to whether or not to file the dec action or some other cause of action against the insurance company. There may be times when the insurance company takes a position that is sound under the law. If that is the case, you do not want to be wasting your time or money on a losing case. But if, the insurance company is taking a position that is contrary to the law, you need to know to take a stance.

The Supreme Court of Texas decided a case this year wherein the distinction between "claims made" policies and "occurrence" policies was discussed. This case is, Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Company.

As discussed in an earlier case on this blog, the PAJ case, the main issue was whether or not the inusrance company was still responsible under the terms of the insurance policy even though the insured person or entity did not timely notify the insurance company of the claim. As in PAJ, the court ruled that because the insurance company could not show it was harmed by the delay in being informed of the claim, the court ruled that the insurance company must provide coverage.

The difference in this case, Prodigy, as compared with PAJ, was the different types of policies at issue. When dealing with insurance policies it is important to understand the distinctions between these two types of policies.

Policies written on a "claims made" basis, means that the policy only covers those claims first asserted against the insured during the policy period. In other words, the event used as the basis for the claim could have arisen in, let's say January of 2001, the policy was purchased in April 2001 and covered til October of 2001. Now, the claim that had its basis arise in January, is asserted against the insured in June of 2001. Under a "claims made" policy the claim should be a covered claim.

Policies written as "occurrence" policies, which is the type for most policies, covers only claims arising out of occurrences happening within the policy period, regardless of when the claim is made. Using the prior paragraph example, there would not be any coverage because the event occurred prior to the policy period. Using this same policy period, purchased in April 2001 and providing coverage til October 2001, lets say the event happened in July 2001. The claim would be covered even it the claim was not asserted until December of 2001, a time after the policy had expired.

All the above can be confusing and illustrates why a person needs to seek the advice of an experienced Insurance Law Attorney when confronted with a claim being denied. Most people will not understand the differences between these two types of policies and the different rules that apply to them. Further, just because the words in a policy say something, that does not mean those words legally mean what they say. Too often, insurance companys put language in their policies that are not legally enforceable and rely on your lack of legal knowledge to get away with denying benefits wrongfully.