Dallas Fort Worth Insurance Lawyer Blog

What if someone in Fort Worth, Arlington, Mansfield, Mesquite, Garland, Irving, Grand Prairie, Dallas, or anywhere else in Texas, is involved in an accident and goes to the hospital for treatment? Are there any special laws that apply?
The answer is yes. It depends on the circumstances, but often times, what is called a "hospital lien" comes into play. If this hospital lien is not properly dealt with it could cost a lot of money and heartache.
Texas public policy strongly supports hospital liens, and it is important to understand that these liens are not just applicable to hospitals; they may also operate for the benefit of EMS providers and doctors at teaching hospitals whose bills are not already included in the bill. The rights of hospitals and certain other medical providers to be paid from settlement proceeds or a judgment begins with the Hospital Lien Statute. This is found in the Texas Property Code, Chapter 55. It says, in relevent part, that a lien attaches to "any cause of action, judgment, or settlement" received as a result of an accident for which the person was admitted to a hospital within 72 hours of the injury, as well as any hospital to which the injured person is subsequently transferred for the same injuries. This is found in Texas Property Code, Section 55.002. These hopital liens must be filed prior to settlement in order to be valid, and hospital liens are limited to "reasonable and regular" charges within the first 100 days following the injury. Even the attorney representing the injured person may have to wrestle with the hospital for first priority, as seen in the Texas Supreme Court case styled, Bashara v. Baptist Memorial Hospital System, decided in 1985.
The Dallas Court of Appeals in 1979, in the case styled, Baylor University Medical Center v. Travelers, said that the intent of the Hospital Lien statute was to save lives, by "...inducing hospitals to receive a patient, injured by the negligence of others, by giving the hospital a lien on the claims, suit or settlement of the patient."
An important exception to the hospital lien statute is stated in the case, Members Mutual Insurance Company v. Hermann Hospital, decided in 1984, by the Texas Supreme Court. It says that a hospital lien does not attach to uninsured/underinsured motorists benefits. The reasoning is that the statute is to apply to settlements recovered from third parties and not to underinsured/uninsured benefits.
Another situation that the hospital lien statute does not apply to is a wrongful death case. Atleast that was the decision by the Fort Worth Court of Appeals in the case styled, Tarrant County Hospital District v. Jones, decided in 1984.
Rather than getting some relief by settling a case with the person who caused injuries in an accident, the end result could find the injured person being sued by the hospital if the hospital lien statute applies and is not properly handled.

Lightning strikes a home in Grand Prairie, or Arlington, Fort Worth, Dallas, or out in Weatherford. The lightning damages electronic equipment. The homeowner calls his insurance company to make a claim. Then the insurance company invokes an appraisal clause in the insurance contract. What does this mean?
This is what happened in the case, Steven Woodward, et al, v. Liberty Mutual Insurance Company. This case was decided by the United States District Court, N.D. Texas, Dallas Division on March 26, 2010. The Judge was the Honorable, A. Joe Fish. In this lawsuit, Liberty Mutual Insurance Company (Liberty) filed papers with the Court for an order to be issued to compel appraisal and to stay the Court actions in this matter pending the completion of appraisal. Judge Fish granted the motion and ordered the parties to complete the appraisal process.
In this case, the appraisal clause required each side to select a competent, independent appraiser, notify the other side who had been chosen and if the appraisers did not agree to choose an umpire to settle the matter.
The time sequence here was that Liberty notified the Woodwards that they were invoking the appraisal process and named an appraiser. The Woodwards then asked for the appraisers qualifications. Liberty then named a different appraiser and sent his resume. The Woodwards told Liberty that they did not believe that Liberty's appraiser was qualified and the Woodwards named their own appraiser. Liberty then withdrew the named second appraiser and attempted to name a third.
The Woodwards then had their own appraiser estimate the loss and submitted the estimate to Liberty, along with a demand for payment. Liberty refused payment and the Woodwards filed the lawsuit.
The Woodwards arguement was that Liberty had waived their right to appraisal when they withdrew the names of the appraisers they had originally named. Liberty said they had good reasons for their actions and that the appraisal process had not been completed and also pointed out that the process had not been completed yet because they had not been to the umpire.
In ruling for Liberty the Court pointed out that the Texas Supreme Court had as recently as last year, enunciated a strong policy in favor of enforcing appraisal clauses in insurance contracts. This was stated in the case, State Farm Lloyd's v. Johnson. They also stated law that said, "A completed appraisal that complies with the terms of an appraisal clause in an insurance contract is a condition precedent to bringing a suit on that contract." Citing the ruling in another case the Court said, "Indeed, if an appraisal clause is properly invoked and one party to the contract refuses to participate in the appraisal process, a court lacks discretion not to issue an order compelling that party to participate."
The Court went on to discuss issues concerning "waiver" and another legal pleading of "estoppel" and why these theories did not apply in this case. An experienced Insurance Law Attorney knows about these appaisal clauses in insurance contracts and where applicable, knows ways of defeating them. For the most part these appraisal clauses are more favorable to insurance companies and have lots more legal advantages for the insurance company than the persons insured, which is why the insurance companies put them in the insurance contracts and why they try to invoke these clauses.

A Grand Prairie resident makes a claim to his insurance company for benefits. This could be a resident of Arlington, Dallas, Fort Worth, Weatherford, or any other city in Texas.
A question often comes up that goes like this, "How long does the insurance company have before they have to pay me?" The answer is "It depends." Sounds lawyerly, right. Well it does depend. It depends on a number of factors, including the type of claim, the circumstances surrounding the claim, the type of insurance and the type of insurance company. However, guidelines to go by, are laid out in the Texas Insurance Code, Section 542.051 thru 542.061.
This area of the Texas Insurance Code is know as the "Prompt Payment of Claims statute". It imposes certain deadlines for an insurance company to acknowledge, investigate, and accept or reject a claim. In situations where the insurance company violates the statute, they are punished by being liable for attorney's fees and an additional 18% per annum penalty on the amount of the claim. These penalties are set out in Section 542.060.
The 18% penalty described above along with responsibility for attorney's fees is substantial in and of itself but the next section, Section 542.061, says that other remedies are also available and that these other penalties are in addition to the penalty and attorney's fees. These penalties are found in the section of the Business & Commerce Code, dealing with violations of the Texas Deceptive Trade Practices Act and in the Texas Insurance Code, for violations by the insurance company related to unfair methods of competition and unfair or deceptive acts or practices found in Section 541.051 thru 541.061.
The Prompt Payment of Claims statute sets out the steps an insurance company must follow when presented with a claim by one of its policy holders. To recover a penalty under this statute, the insured person must establish that: (1) the insured had a claim under an insurance policy; (2) the insurance company is liable for the claim; and (3) the insurance company has failed to comply with a requirment of the Prompt Payment of Claims Act. This has been spelled out in the Texas Supreme Court case, Allstate Insurance Company v. Rhonda Bonner, decided in 2001.
If someone feels they are being violated by the insurance company as it relates to having their claim handled promptly, they should do two things. First, get in touch with an experienced Insurance Law Attorney. Do not be concerned with costs at this point. Most attorneys will talk to you at an initial conseltation at no charge and then, if further action is needed, the insurance company is going to have to pay for the attorney's fees, if they are at fault. And second, contact the Texas Department of Insurance and file a complaint. Most companies consider these very serious. They do not want to be investigated by the Texas Department of Insurance. Plus, this helps set up some relevant issues for a lawsuit if the matter is not resolved properly.

An important issue for any resident of Grand Prairie, Arlington, Dallas, Fort Worth, or even a resident of a smaller community such as Weatherford is: What happens if I get into an insurance dispute with my insurance company? What laws apply in fighting with the insurance company?
This question is atleast partially answered by a section of the Texas Insurance Code. Article 21.42 of the Texas Insurance Code is titled, Texas Laws Govern Policies. It says, "Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance, and governed therby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy (in case it becomes a demand) should be payable without this State, or at the home office of the company or corporation issuing the same".
Wow, no wonder attorneys are needed to decipher the law!
What this insurance law says is that policies of insurance issued by insurance companies doing business in Texas, to Texas citizens, are governed by Texas laws. This is important because different states will have different laws governing insurance policies.
There are exceptions to the law. One exception is a federal case decided in 1979. The style of the case is Butler v. Mutual Life Assurance Company of Canada. Another exception is found in an old case decided in 1896. This is also a federal case styled, Manhatten Life Insurance Company v. Fields. These cases with exceptions to the above law have to be scrutinized carefully to make sure they are still good law today. Most of the cases finding exception to the Texas law are older cases.
It is important to realize that insurance companies fight over which laws apply because they are trying to get the laws of the state most favorable to them to be the laws that are applied to a lawsuit. Any person sueing an insurance company has to seek the advice of an experienced Insurance Law Attorney to make sure their rights are properly protected. Sometimes the laws the laws of another state may actually be more favorable to the insured.

A case decided in Fort Worth, Texas on June 11, 2009, is important to understand. The result of this case is the same in Weatherford, Grand Prairie, Arlington, or Dallas.
The style of this case is Garry Jenkins v. State and County Mutual Fire Insurance Company. The facts in this case are undisputed. Garry Jenkins foot was crushed when a tank skid fell off a truck driven by Mark Lemmon. The accident happened when Mark applied the brakes too quickly, causing the skid to break free and fall on Garry's foot. Both Garry and Mark were working as independent contractors for L & G Pipe. L & G Pipe was owned by two people, Deborah Grisamer and Richard Lemmon.
At the time of the accident, State and County Mutual Fire Insurance Company had a policy of insurance with Deborah as the named insured. The policy was in effect on the date of the accident and the policy listed the truck as a "covered auto." The wording in the policy is important in this case and provided as follows:
2. DUTIES IN THE EVENT OF ACCIDENT, CLAIM, SUIT OR LOSS
...
b. ... you and any other involved insured must ... immediately send us copies of any demand, notice, summons or legal paper received concerning the claim or suit and cooperate with us in the investigation, settlement or defense of the claim or suit.
3. LEGAL ACTION AGAINST US
No one may bring a legal action against us under this Coverage Form until:
a. There has been full compliance with all the terms of this Coverage Form; and
b. Under Liability Coverage, we agree in writing that the insured has an obligation to pay or until the amount of that obligation has been fully determined by judgment after trial.
Mark was also listed as a "driver" on the policy.
Garry sued Mark, Deborah, Richard, and L & G Pipe for negligence. Garry obtained service of legal process on Deborah, Richard, and L & G Pipe, but not Mark. State and County obviously knew that Mark had been sued and in fact defended Deborah, Richard, and L & G Pipe. The case went to trial and the jury placed 100% responsibility for Garry's injury on Mark.
Garry then sued State and County, seeking to collect the judgment he had obtained against Mark. It is clear that Mark had not fulfilled the policy requirements set out above. Garry argued that State and County had actual knowledge of what was happening and the fact that Mark had not handed any legal papers to State and County did not make a difference in this situation.
The Court ruled in favor of State and County. The Court's reasoning was the policy language was clear and that prior Court rulings in the State of Texas, supported the wording of the policy. The policy makes clear what is required for an insured to do before the insurance company has to defend or pay claims made. One sentence the Court said was: "Put simply, there is no duty to provide a defense absent a request for coverage."
The Court explained that notice and delivery of suit papers provisions in insurance policies serve two essential purposes: (1) they facilitate a timely and effective defense of a claim against the insured and, more fundamentally, (2) they trigger the insurer's duty to defend by notifying the insurer that a defense is expected. The Court went on to say that mere awareness of a claim or suit does not impose a duty on the insurer to defend under the policy; there is no unilateral duty to act unless and until the insured first requests a defense - a threshold duty that the insured fulfills under the policy by notifying the insurer that the insured has been served with process and the insurer is expected to answer the lawsuit on its insured's behalf. The insurer does not have to assume such.
This case is important in making one realize the duties under an insurance policy. It is vital for a party involved in issues concerning insurance policies contact an experienced Insurance Law Attorney. The attorney will understand what needs to be done to get protection under the policy at issue. And the attorney will understand other constraints that might become relevant in these situations.

A lot of insurance contracts have written into them an appraisal clause or paragraph. Whether you bought the policy in Grand Prairie, Arlington, Dallas, Fort Worth, or out in Weatherford, Texas, you could be forced to submit to an appraisal process if the insurance company insists on enforcing that portion of the insurance contract.
A recent case, JM Walker, LLC v. Acadia Insurance Company, is an example of how these situations are sometimes handle. Each case would be different depending on the wording of the appraisal provision in the contract and the facts of the case.
In this case, Walker was the owner of five building in North Richland Hills, Texas. The roofs of the building suffered damage from a hailstorm. Walker submitted a claim to Acadia, but Acadia denied coverage after its adjuster determined that the roofs did not need to be replaced and that the damage that did exist, was less than the $5,000 deductible that applied in the case.
Walker contested the adjusters findings and Acadia invoked its contractual right to appraisal. Walker then filed a lawsuit, but the Judge compelled the parties to submit to the appraisal process.
The umpire in the appraisal process found on behalf of Walker and found the cost of repair to be $423,053.96. Acadia paid the amount.
Walker filed an appeal in the United States Fifth Circuit, which is the case written about here. Walker wanted more money for his damages, plus was seeking monies for the "bad faith" conduct of Acadia and their handling of the claim.
The Court in its decision stated that under Texas law, "appaisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award." The Court wrote that an otherwise binding appraisal may be disregarded in three situations: "(1) when the award was made without authority; (2) when the award was made as a result of fraud, accident, or mistake; or (3) when the award was not in compliance with the requirements of the policy."
Walker argued all three points and was shot down on all three points. The case is a good place to look to get an idea of how the courts look at these appraisal processes and how they are handled.

Let's pretend your sister in Dallas, is driving her brothers car, who lives in Fort Worth. The car is insured on hthe parents Safeco auto policy that was bought in Grand Prairie. Your sister has a wreck in Weatherford, Texas. Your sister also had insurance with Allstate on her own car she had purchased in Arlington. Your sister is at fault and the other driver suffers personal injury and property damage. Both Allstate and Safeco refuse to settle the claim being asserted against you and your sister because they believe the other company should be paying the claim or paying the claim on a pro-rata basis.
This can be a very frustrating position for someone to find themselves involved and is referred to as an "other insurance" issue. The above is roughly what happened in the case, Safeco Lloyds Insurance Company v. Allstate Insurance Company. This case was tried and then appealed to the Court of Appeals of Texas, San Antonio.
The general rule in the past has been that auto insurance coverage goes with the vehicle. If the coverage on the vehicle is not sufficient to pay all the lose incurred then, the driver of the vehicle who has separate coverage has this separate coverage kick in as secondary coverage. However, the laws have changed and each insurance policy has to be looked at and compared with the other policy that may provide coverage to see what the result may be in any particular situation.
There are three types of "other insurance" clauses in an auto insurance contract. (1) a pro-rata clause, which restricts liability upon concurring insurers to an apportionment basis, (2) an excess clause, which restricts liability upon an insurer to excess coverage after another insurer has paid its policy limits, and (3) an escape clause, which avoids all liability if other insurance exists. The court went into detail in the opinion of this case explaining the different "other insurance" clauses and how they worked with each other, depending on the facts of each situation.
When it was argued by Allstate that the law in Texas is the insurer of a car provides primary insurance and the insurer of the driver provides excess insurance, it was argued by Safeco that nowhere in Texas law does a court espouse a black-letter rule that insurance follows the vehicle.
In this case it was decided by the court that the costs of the wreck should be shared on a pro-rata basis. The bigger lesson is that these situations can be complicated and when a person finds themselves in a situation where the insurance companies are argueing among themselves about who should be paying the claim, then its time to find an experienced Insurance Law Attorney.

The general rule in Texas is that a policy holder has a duty to cooperate with his insurance company when the insurance company is investigating a claim.

Whether your house in Arlington burns down or you have a vehicle wreck in Grand Prairie the answer is about the same. Ditto for a life insurance claim made in Weatherford or a health insurance claim made in Fort Worth. Every insurance policy is going to place upon you a duty to cooperate with the insurance companies investigation of the claim.

Generally speaking you would have a duty to report the claim as soon as is possible. You would be asked and expected to make a statement to the insurance company. Often times you are going to be asked to fill out reports and other paperwork. You may have to get estimates or appraisals. If the loss being claimed is for physical injury, then an independent medical exam performed by a Doctor of the insurance companies choosing may be necessary.

There are limits on what can be asked or required from you when making a claim for benefits. For example, it is against the law for the insurance company to require you to produce a copy of your federal income tax returns for examination or investigation. This law is found in the Texas Insurance Code, Section 541.060, subpart (9). There are three exceptions to this law. One, is when a court orders the tax returns to be produced. Two, is when the claim involves a fire loss. Three, is when the claim involves lost profits or income.

An experienced Insurance Law Attorney will tell that when the insurance company is requesting from you an examination under oath, that the insurance company is probably going to deny your claim. The EUO is almost always going to be conducted by an attorney hired by the insurance company. The EUO is usually the last thing that is requested. By this time, the insurance company has already taken a recorded statement from you and maybe others who may be involved in the claim. They have also requested and received most documents that are relevant to the claim.

In spite of having all the information they have reasonably requested, the insurance company is still uncertain about their obligations on the claim when they are requesting an EUO. The insurance company is now setting the claimant up for criminal prosecution and why the claimant must seek the assistance of an attorney familiar with the implications of an EUO.

The Texas Criminal Code, Section 37.02 describes the crime of perjury. A person commits the crime of perjury if, with the intent to deceive, he makes a false statement under oath. So you can see that when the insurance company is asking for an EUO, that the matter is getting very serious. This is not to say you are doing anything wrong, but do you really want to get into an arguement about whether something you said was misunderstood or taken out of context?

With regard to a policy holders' duty to cooperate with their insurance company when making a claim, the failure to cooperate is not necessarily an automatic breach of that duty. It is a fact specific issue that must be looked at on a case by case basis.

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 appeal from a Dallas, Texas Court decision was decided by the Texas Supreme Court, in the case PAJ, Inc., d/b/a/ Prime Art & Jewel, v. The Hanover Insurance Company. This case was decided in January, 2008. It discussed the responsibilities of holders of an insurance policy as it relates to their duties after an accident or loss and how the failure of fulfilling those duties affects coverage under an insurance policy.

As a general rule almost all insurance policies require the policy holder to do the following: 1) promptly notify the insurance company of any loss or claim, 2) cooperate with the insurance company investigation of the claim or loss, 3) take reasonable actions to protect against further loss.

When a claim is denied due to a policy holder not promptly notifying the company of the claim or loss the insurance company has the burden of proving that this failure to promptly notify caused harm to the insurance company. This was the issue in PAJ.

PAJ was sued for copyright infringement. PAJ was unaware that the policy of insurance they had with Hanover would cover a copyright infringement lawsuit. It was about four to six months into litigation before PAJ discovered that the Hanover policy would cover this type of claim. Hanover refused to assist in the claim stating that PAJ violated the policy by not timely notifying Hanover of the claim.

The courts' decision was stated as follows: "We hold that an insured's failure to timely notify its insurer of a claim or suit does not defeat coverage if the insurer was not prejudiced by the delay". In this case Hanover could have easily taken over the lawsuit and handled this claim like any other. The burden was on Hanover to show that the failure to be timely notified caused them harm.

A policy holder also has a duty to cooperate with their own insurance company when a claim is made. This will usually include filling out forms, making a statement, and in the case of bodily injury, may include an independent medical exam. Sometimes after giving a statement the policy holder may be required to give an examination under oath (EUO).

An EUO is a formal proceeding whereby an insured, under oath, and in the presence of a court reporter, is questioned regarding the specifics of the claim. Although the policy holders failure to give an EUO when properly requested may technically be construed as a breach of the insurance contract, it does not permit an insurance company to refuse a claim. This was decided in State Farm General Insurance Company v. Lawlis. Nor can an insurance company delay payment solely upon failure to give an EUO. This was decided in Aetna Casualty & Surety Company v. Garza. However, other courts have held the opposite of both the above cited cases. Bottom line - a wise policy holder seeks the advice of an experienced Insurance Law Attorney whenever they are being requested to give an EUO..

As for taking reasonable actions to protect against further loss, each case would be handled on a fact specific basis. Essentially, if a policy holder can take reasonable steps to protect against further loss or an increased loss, then they should take those steps. If they fail to do so and that failure causes further loss, then they run the risk that the additional loss may not be covered.

Anytime an insurance company denies or refuses a claim for any of the above reasons, seek legal advice. Do not do anything further until you have received that advice.

The Texas Department of Insurance has a web site that provides some useful information when an insurance company goes into receivership. An earlier blog at this site discusses the financial situation that will result in an insurance company being placed in receivership.

Other than the claims handling process, there are two main questions most people will have concerning their insurance policies when their insurance company is taken over by a receiver. The first is, "What happens to my unearned premium?", and the second is "What happens to my coverage and benefits?".

Unearned premium is the amount you paid to the company in advance that did not actually buy coverage. For instance, if you bought a six-month policy and paid all the premiums in advance, but the company failed two months later, you would be due a refund for four months of premiums.

If a property and casualty company fails, the receiver will refund any unearned premium to you, minus any applicable fees, up to a maximum of $25,000. To get a refund, you must ask for it in writing or on a proof-of-claim form. You can request this form from the receiver if he does not send one to you automatically.

Life and health coverage will normally continue after a company fails, so there is usually no unearned premium to refund

If your insurance company is placed in receivership, the outcome of your coverage and benefits will vary depending on the type of policy you have. Here are a few examples:

Life, health, and annuity policies: The life and health guaranty association must keep paid-up life policies and annuities in force. The association must also keep guaranteed renewable life and health policies in force as long as you pay your premiums. The association may nonrenew other policies at the end of the policy period.

Health care coverage: Health insurance that cannot be canceled by the insurance company will continue if you pay your premiums. Medical providers may not demand payment from you, other than your usual copayments.

If you have an HMO - you are not protected. You need to find new health care coverage as soon as possible.

Property and casualty policies: The court will cancel your policy. If you pay your premium, the policy will stay in effect for at least 30 days to allow you to find new coverage. The guaranty association will pay valid claims incurred during this period.

Workers' compensation benefits: The association will continue paying your benefits.

Pension plan benefits: The rules will vary here.

Bottom line is that if your insurance company is placed in receivership and taken over by a guarantee company, you need to consult with an experienced Insurance Law Attorney in order to make sure your rights and assets are properly protected.

Let's say you buy an insurance policy in Dallas or Grand Prairie. You drive over to Fort Worth or Arlington. You actually live in Weatherford or somewhere else in Parker County. Next, you incur a loss that you believe is suppose to be covered under the insurance policy you bought. Okay so far, but you call the insurance company to file a claim and you get told that the company has been having financial problems and is possibly going out of business. What happens now? The result will be the same no mattter where you are in Texas.

Most businesses that need protection because of financial problems they are experiencing file for some form of bankruptcy protection. When an insurance company has severe financial problems they are placed in receivorship.

There are two main classifications for a financially troubled insurance company in Texas. The first is called, "impaired", meaning that the insurer does not have admitted assets at least equal to all its liabilities together with the minimum surplus required to be maintained under the insurance code. The second is, "insolvency" or "insolvent", which means an insurer: (A) is unable to pay its obligations when they are due; (B) does not have admitted assets at least equal to all its liabilities; or (C) has total adjusted capital that is less than that required under various chapters of the insurance code.

The current claims and new claims received when a company is having financial problems are handled by a "Special Deputy Receiver". The failed insurance company transfers all of its outstanding claims to this "receiver". The receiver mails out information about filing claims, including deadlines.

The receiver has the same investgative and payment guidelines and requirments as the failed insurance company. However, Court-ordered deadlines, company restructuring, or poor company records could delay payments.

The biggest negative is that the payments from the receiver have limits that would not apply if the company were not in receivership. On the other hand, these limits are not going to apply to the majority of claims.

No matter how much you try, it is unlikely that you would understand the claims process when a company goes into receivership. It not that it is that difficult, it is just that it is something different. Only an experienced Insurance Law Attorney is going to be able to help you navigate through the claims process when an insurance company goes into receivership. Without the assistance of an attorney, you are going to feel like you got taken advantage of. Furthermore, this is a time when lots of mistakes will probably be made by the receiver, which entitles you to more compensation as penalties, for the wrongs that are committed.

More information about what happens when your insurance company fails can be found at the Texas Department of Insurance web site.

The Texas Supreme Court stated in 2008 that insurance policies are contracts. This was stated in the case Ulico Casualty Company v. Allied Pilots Association. This is not new in Texas. In the Ulico case the court cited earlier Texas case law. The earlier case law was a Texas Supreme Court case styled Barnett v. Aetna Life Insurance Company and was decided in 1987.

What this means is that rights and obligations arising from an insurance policy, and the rules used to construe them, are those rules generally pertaining to contracts. One relevant concept here is that when a court construes or tries to interpret a contract and that contract can be read to mean more than one thing, then the interpretation is suppose to be in favor of the party who did not draft the contract. The burden is on the party drafting the contract to make it clear. Since an insurance company is always the party who drafts the insurance policy, the result is that if the reading of the policy can be interpreted in more than one way, the court is supppose to interpret it in such a way as to find coverage under the policy.

When an insurance contract covers certain risks, such as liability, but the policy contains exclusions or limitations of coverage, then when the insured customer makes a claim for coverage benefits, the insurance company must assert any applicable exclusion or limitation to avoid liability. This would be called an avoidance or in the Texas Rules of Civil Procedure it is called an affirmative defense. The burden of proof here then falls on the insurance company. This law is found in the Texas Insurance Code, Section 554.002.

The insurance company has neither a "right" nor a burden to assert noncoverage of a claim until the insured policy holder shows that the claim is covered by the terms of the policy. Once the insured policy holder does so, then it becomes incumbent on the insurance company to assert any limitations or exclusions as an affirmative defense. This is done using rules pertaining to contract interpretation.

All of this can be confusing and convoluted even if it is something you are used to dealing with on a regular basis. An experienced Insurance Law Attorney knows how to read an insurance policy and apply that policy to the other issues in the claim and then provide proper advice on the best way to proceed with a case.

Texas insurance companies are regulated by the Texas Department of Insurance. The written laws for most insurance companies are found in the Texas Insurance Code. These laws and regulations apply to all insurance companies in Texas. So whether the company is located or does business in Dallas, Fort Worth, Arlington, Irving, Grand Prairie, Carrolton, Mesquite, Weatherford, Granbury, or anywhere else in the State of Texas the same laws and regulations apply to the insurance company.

The worst acts of insurance companies may be criminal in nature, but the majority are violations of civil laws and statutes, and what are being addressed in this writing. Violations of these civil laws and statutes may result in fines to the companies and issuance of cease and desist orders, and revocation of licenses or suspensions of insurance licenses. Most of the penalties just mentioned are enforced through the Texas Department of Insurance or the Texas Attorney Generals Office.

The recourse for insureds against their own insurance companies for violations to them personally, are addressed in different parts of the Insurance Code and depend on exactly which statute the insurance company violated. Punishment for violations of Insurance Code, Chapter 541 are found in Section 541.152. Here, the plaintiff who prevails in their cause of action may obtain: 1) the amount of actual damages to the plaintiff, plus court costs and reasonable and necessary attorney's fees, and 2) any other relief the court determines is proper. What is important here and in other statutes that allow for the recovery of attorneys fees, is that if your cause is just and right, that at the end of your case, you can recover your court costs and attorneys fees. This is also why it is important to seek an experienced Insurance Law Attorney so that they can inform you whether you have a case worth pursueing.

If you are like most people, you might say "is that all, the insurance company cheats me, and all they have to do is pay what they should have paid in the first place plus my attorney and they just walk away". The answer to that is - it depends. If your case is the type that a Judge or Jury would find that the insurance company acted "knowingly". Then you could be entitled to an amount up to three times your actual damages. "Knowlingly" is defined in Section 541.002 as having an actual awareness of the falsity, unfairness, or deceptiveness of the act or practice on which the claim is based. This on its face seems fairly simple but the courts of this State make it much more difficult than it seems. This is another example or reason why an experienced Insurance Law Attorney is needed to look over a case.

Violations by the insurance companies of Subchapter B, Prompt Payment of Claims Act, are found in Section 542.060 of the Texas Insurance Code. In this section, an insurance company is liable for the amount of the claim, plus interest on the amount of the claim at a rate of 18% a year as damages, together with reasonable attorneys fees and court costs.

Depending on the nature of the wrong by the insurance company, the insurance company may also be subjected to liability for causes of action outside of the Insurance Code. Some of these other causes of action would be: 1) Breach of Contract, 2) Fraud, 3) Negligence, and 4) Misrepresentation, to name just a few. Plus, depending on the severity of their conduct the insurance companies could be subjected to punitive damages.

When it comes to holding an insurance company accountable for its actions, the law has a lot of "teeth" to it. However, a person is well advised to seek an attorney who regularly deals with Insurance Law to make sure their rights are fully protected and the insurance company is not getting away with doing wrong.

The recourse that a Texas insurance policy holder has against their insurance company depends on exactly what it is that the insurance company does that is wrong or illegal. The types of wrong that can be committed by insurance companies are too numerous to mention all of them here. However, there are a few wrongs committed by insurance companies that policy holders should be aware of when dealing with their insurance agent or the insurance company.

Again, keep in mind that there are many wrongs that can be committed by an insurance company. The most wrongs that can be found without reading all the laws related to insurance can be found in the Texas Insurance Code Section 541.051, Section 541.060 and Section 542.003.

These Sections are appropriately found in Subtitle C of the Texas Insurance Code which is titled "Deceptive, Unfair, And Prohibited Practices". Section 541.051 is in Chapter 541 and titled "Unfair Methods Of Competition And Unfair Or Deceptive Acts or Practices".
Under this section is the law saying an insurance company cannot misrepresent to you the terms of a policy, the benefits or advantages promised by a policy, or make any misrepresentations regarding dividends or sharing of other monies on the policy. This section makes it illegal for an insurance company to make a misleading representation or misleading statement regarding the financial condition of an insurance company. It also makes it illegal for an insurance company to use a name or title of a policy that misrepresents the true nature of the policy.

Section 541.060 is titled "Unfair Settlement Practices". This section is a common area of litigation and there are volumns of information that can be written about this section and will be the subject or future articles. Here, is where the insurance laws of Texas make it clear that an insurance company cannot; 1) misrepresent policy provisions relating to the coverage at issue, 2) fail to attempt in good faith to accomplish a prompt and fair settlement when the insurance companies liability has become reasonably clear, 3) fail to make clear to the policy holder a reasonable explanation of the reason within the policy itself why the insurance company is denying the claim, 4) fail to within a reasonable time affirm or deny coverage of a claim. The insurance company also cannot: 5) refuse of delay payment of a claim under the policy based on the belief there may be coverage under another policy, 6) refuse to pay a claim without conducting a reasonable investigation, 7) require a policy holder to produce a copy of their tax returns unless the claim involves a fire loss or the claim involves lost profits or income. This is just a portion of relevant law under Section 541.060.

Texas Insurance Code, Section 542.003 is found in Chapter 542, Subchapter A. Chapter 542 is titled "Processing And Settlement Of Claims". Subchapter A is titled "Unfair Claim Settlement Practices". Section 542.003 is titled "Unfair Claim Settlement Practices Prohibited". The titles speak for themselves.

Under 542.003 it is made illegal for an insurance company to engage in an unfair claim settlement practice. The following are acts constituting unfair claim settlement practices; 1) knowingly misrepresenting pertinent facts or policy provisions relating to coverage, 2) failing to acknowledge with promptness communications relating to a claim under an insureds policy, 3) failing to have and implement reasonable standards for the prompt investigation of claims, 4) failing to effect a prompt and fair settlement when liability has become reasonably clear and, 5) causing a policy holder to file a lawsuit to recover monies due under a policy because the insurance company was offering substantially less than what was ultimately recovered in the lawsuit.

The above is just a sample of some of the laws insurance companies must follow. These were chosen as an example because of their central location. There are many other located throughout the Insurance Code plus there are many more in other law books. All serve as reasons why anyone having problems with an insurance company should seek an experienced Insurance Law Attorney to make sure their rights are protected. Whether you are in Dallas, Fort Worth, Arlington, Grand Prairie, Weatherford, or anywhere else in Texas, only an experienced Insurance Law Attorney is going to fully understand and know about all the laws that may apply to any given situation.