Dallas Fort Worth Insurance Lawyer Blog

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.

Bad Faith attorneys in Grand Prairie, Grapevine, Colleyville, Keller, Saginaw, Newark, Southlake, Roanoke, and other places in the DFW metroplex might find this case worth knowing.
The United States District Court, Southern District of Texas, Houston Division, issued an opinion in November 2011, in the case styled "839 East 19th Street, LP v. Lexington Insurance Company, et al." This is a case wherein a motion for summary judgment filed by one of the defendants, Unified Building Sciences, Inc. (UBS), was granted.
Here is some background:
839 East 19th Street, LP (839) owned the Mesa Ridge Apartments which suffered damages in Hurricane Ike. 839 submitted a claim for damages to Lexington Insurance Company. Lexington hired the adjusting firm Cunningham Lindsey, which in turn hired UBS as an expert consultant. Also assisting in adjusting the claim were: a public adjustor, Gary Krone; an inspector hired by Krone to give a second opinion, Storm Management, Inc.; a roofing company hired by Needham Roofing; and an inspection company hired directly by Lexington, Grayco. Grayco opined that the Mesa Ridge roofs were in bad condition prior to Hurricane Ike and attributed only minor damage to the storm. Krone disagreed with the report. Ultimately, in its 15th report to Lexington, Cunningham Lindsey lowered the repair estimate from $1,016,016.43 to $422,559.61.
839 asserted multiple claims against multiple defendants in this lawsuit, but its only claim against UBS is under the theory of "participatory liability" for aiding and abetting Lexington's bad faith handling of the insurance claim.
In its analysis of this case, the court pointed out that the parties are disputing whether Texas law recognizes the theory of participatory liability as set forth in THE RESTATEMENT [SECOND] OF TORTS Section 876(b) (1977).
Section 876(b) provides:
For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he
***
(b)knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, ....
UBS said that its conduct in this matter was not the type of highly dangerous, deviant, or antisocial activity for which a Texas court would impose liability under 876(b), and that it did not provide substantial assistance or encouragement to Lexington, the primary alleged wrongdoer. The court agreed with the argument.
This court considered the following five factors listed in comment d of 876 in determining that the defendants did not provide substantial assistance necessary for liability:
(1) the nature of the wrongful act;
(2) the kind and amount of the assistance;
(3) the relation of the defendant and the actor;
(4) the presence or absence of the defendant at the occurrence of the wrongful act; and
(5) the defendant's state of mind.
Here, UBS merely provided an opinion on the cost of repairing or replacing the Mesa Ridge roofs. UBS was a consultant, it did not work as an adjustor on the claim. Lexington was not obligated to accept UBS's opinion. In fact, Lexington apparently did not accept UBS's initial estimate and sought a second opinion. There is no evidence that UBS encouraged Lexington to deny the claim of 839.
In it's "Conclusion and Recommendation" this court said:
"Because the record establishes as a matter of law that UBS did not provide substantial assistance to Lexington of a nature that would trigger imposition of participatory liability, assuming such a claim exists in Texas, the court recommends that UBS's motion for summary judgment be granted and plaintiff's claim against it be dismissed with prejudice."
One thing to be considered when filing a lawsuit is who are all the proper parties to sue and which of these parties do you want in the lawsuit. Here, 839 appears to be suing numerous parties. Attorneys for 839 may have good reason for doing this. However, other attorneys may take the position that suing just the insurance company is good enough. An experienced Insurance Law Attorney is able to discuss the options with their client. After a thorough discussion the attorney and client can then decide what is the best course of action.

Attorneys in Weatherford, Grand Prairie, Fort Worth, Mineral Wells, or anywhere else in Texas have to have an understanding of insurance law to handle insurance disputes effectively for clients.
There are different ways of recovering when insurance disputes arise. Many of these theories of recovery have common elements.
Insurance transactions tend to resemble one another, so disputes arising from them tend to resemble one another. There are only so many ways that an insurance company and their customer can get crossways. Most situations present recurring problems that can be grouped into categories. Insurance law is even more precedent-driven than other areas of law, as courts try to construe similar policy language consistently. It is not surprising that many cases start to look alike.
The key is to find good authorities that match your facts, or to emphasize the facts that match good authorities. These authorities are found in several places:
1. The Texas Department of Insurance;
2. The Texas Insurance Code;
3. The Texas Administrative Code;
4. Texas Courts such as the Texas Supreme Court, interpreting the laws.
The starting point though is the insurance contract itself. The initial inquiry almost always begins with the language of the contract to determine what is covered and what is not. Other tort and statutory theories may logically depend on the existence of coverage, or may exist independent of coverage. The interplay between recovery for breach of contract and recovery under theories is a broad discussion. Beyond a lawsuit for breach of contract, most insurance cases can be grouped into these categories:
(1) misrepresentations
(2) nondisclosures
(3) unfair settlement practices; and
(4) other misconduct
MISREPRESENTATIONS
One of the most common bases for an insurance dispute is the complaint that someone misrepresented something. After a claim arises, the customer may feel that the coverage accepted by the insurer is less than the coverage promised at the time of sale. Depending on the facts of the case, a representation by the insurance company or its agent may lead to liability for breach of contract, unfair insurance practices, deceptive trade practices, negligence, or fraud.
NONDISCLOSURES
Closely related to misrepresentation is the theory that the insurance company, agent, or insured failed to adequately disclose information. For example, if an exclusion is not adequately disclosed, the insurance company may be liable for breach of contract by relying on the exclusion to deny a claim. Failing to adequately disclose limitations or exceptions to coverage may also make the insurance company or agent liable for unfair insurance practices or deceptive trade practices.
UNFAIR SETTLEMENT PRACTICES
Several statutory prohibitions are specifically aimed at settlement practices. Liability may arise from failing to pay benefits that are owed under the policy, for failing to pay benefits that were promised by the agent, for failing to act promptly to settle once liability is reasonably clear, for paying too little, or for paying too slowly. Liability may also arise from the insurance company's failure to adequately investigate the claim.
OTHER MISCONDUCT
Other disputes may arise that do not fit neatly within the above categories, such as unreasonable cancellation of a policy, unconscionable conduct, or unfair discrimination.
Advice from an experienced Insurance Law Attorney is what is most important when confronted with a situation where an insurance company is not living up to its responsibilities to one of its customers.

People needing an attorney in Grand Prairie, Arlington, Mansfield, Irving, Fort Worth, Dallas, and other places in Texas will probably get confused on this case and realize the necessity of hiring an experienced Insurance Law Attorney.
The Amarillo, Court of Appeals, issued an opinion on October 17, 2011, styled, In Re Farmers Texas County Mutual Insurance Company. This is a case where Farmers was seeking the issuance of a writ of mandamus from this appeals court. Farmers was asking this court to issue an order to Judge Carter Schildknecht of the 106th Judicial District Court of Garza County, Texas, to abate trial on extra-contractual claims asserted by real-party-in-interest, Terry Henrie. This court denied Farmers request.
Here is some background.
In September 2008, Henrie was involved in an auto accident when William Rainey collided with Henrie's parked vehicle. Henrie sued Rainey and, later sued Farmers, his personal auto carrier. The suit against Farmers was for failure to pay uninsured motorist (UIM) benefits, and extra-contractual claims for breach of the duty of good faith and fair dealing and for violations of the Texas Insurance Code.
In July 2011, Farmers filed a plea in abatement requesting the Judge to abate all extra-contractual claims until after resolution of the UIM claim. The court denied the plea on August 30, 2011. In a letter, dated September 30, Farmers informed the Judge that it "made a settlement offer to conclude the entire contract claim" of Henrie. Trial was scheduled for October 14, 2011.
Farmers contended that Texas law established that, when an auto insurance carrier makes a settlement offer for a UIM claim, a trial court is without discretion and must abate extra-contractual claims until the contractual UIM claim is resolved. Because the Judge did not abate the extra-contractual claims, Farmers contended it is entitled to mandamus relief.
In its analysis of this case, this court recognized that "mandamus" relief will issue only to correct a clear abuse of discretion for which the relator has no adequate remedy at law. The court agreed with Farmers that Texas case law establishes that abatement of extra-contractual claims is required in most instances in which an insured asserts a claim to UIM benefits. However, in a mandamus context, for a party to preserve its complaint that the trial judge failed to abate extra-contractual claims, that party must have brought the issue to the trial judge's attention by seeking the issuance of an abatement order from the trial judge.
This court notes that nothing in Farmer's petition for mandamus established that it sought an abatement order from the trial judge on the grounds upon which it now seeks mandamus relief. In July, Farmers filed a plea in abatement in which it raised the issue of abating Henrie's extra-contractual claims until his contractual UIM claim could be resolved. The trial judge held a hearing on this plea on August 30, at which the trial judge denied Farmer's abatement plea. In a letter to the Judge, Farmers informed the court that, at a September 29 mediation, it made Henrie a settlement offer to conclude his entire contract claim. The remainder of the letter read as follows:
"We appeared before you on August 30. On the record, you denied and overruled defendant's Plea in Abatement. I am enclosing a copy of the order to memorialize your ruling which was prepared by plaintiff's counsel and I have approved as to form only.
Unless you have reconsidered your ruling, we would ask that you now sign and enter the enclosed order to facilitate appellate review of the same."
Notably, this letter does not request the trial court reconsider its denial of Farmer's plea in abatement in light of its settlement offer to Henrie. However, Farmer's mandamus petition alleges that the Judge clearly abused her discretion by failing to abate Henrie's extra-contractual claims after Farmers made a settlement offer on Henrie's entire contract claim. As such, Farmers has failed to to preserve its complaint by failing to seek an abatement order from the trial judge on the grounds upon which it now seeks mandamus relief.
In making its ruling, this court stated, "Consequently, we cannot conclude that the trial court clearly abused its discretion or that Farmers does not have an adequate remedy available at law. Having failed to establish its entitlement to mandamus relief, we deny Farmers's petition."

If someone in Grand Prairie, Arlington, Crowley, Mansfield, Benbrook, Burleson, Keene, or anywhere else the metroplex area reads their homeowners insurance policy, they will probably find an appraisal clause. This clause usually, is for the benefit of the insurance company. As a result, getting around that clause is a good thing.
The United States District Court for the Southern District of Texas, Houston Division, issued an opinion on October 13, 2011, that is insightful for understanding at least one way of beating the appraisal clause. The style of the case is, Sidney Sam, et al. v. National Lloyds Insurance Company.
Sam and others (Plaintiffs) were insured under a Standard Flood Insurance Policy (SFIP) issued by Lloyds pursuant to the National Flood Insurance Program (NFIP). Plaintiffs' apartment building was damaged by flood waters following Hurricane Ike. Plaintiffs submitted their claim to Lloyds, which determined that the flood damage to the building and its contents would require repairs in the amount of $100,622.67. Plaintiffs submitted a request for supplemental payment in the total amount of $249,000, or an additional amount of $148,377.33 beyond the amount offered by Lloyds. The additional payment included $39,000 for the presence of a "Commercial Superintendent on the site for 3 months for commercial restoration." On April 21, 2010, Plaintiffs demanded an appraisal. On May 3, 2010, Lloyds denied the request. Plaintiffs filed a Motion to Compel Appraisal on September 15, 2011.
As analysis, this court cited a 5th Circuit ruling in the case, Dwyer v. Fidelity Nat. Prop. and Cas. Ins. Co. saying, "Congress created the NFIP to offer flood insurance at rates that were uneconomical for private companies." The Federal Emergency Management Agency (FEMA), which administers the program, has established the SFIP.
The SFIP includes an appraisal provision, allowing either party to demand an appraisal "of the loss" if they cannot agree "on the actual cash value or, if applicable, replacement cost of the damaged property to settle upon the amount of loss." This appraisal clause can be invoked only to resolve disagreements between the parties regarding the actual cash value or, if applicable, replacement cost of the damaged property. "Congress expressly limited the application of the appraisal clause to matters where coverage is not at issue and the only dispute remaining between the parties is the quantum of loss ...." Where the insured requests compensation for items that the insurer asserts are not covered by the SFIP, the dispute is outside the ambit of the appraisal clause.
In a Florida case cited by the plaintiffs, the Florida court noted that the insured both challenged the extent of damage to items which were admittedly covered and requested compensation for additional items. As a result the Court in that case held that the dispute was "outside the ambit of the appraisal clause." Similarly, in this case, there are disputes regarding how badly a covered item was damaged and whether it needed to be repaired or replaced, as well as disputes regarding whether other items - such as the presence of the commercial superintendent - are covered at all. This inclusion of a coverage dispute places the case outside the appraisal clause of the SFIP.
In another case, virtually indistinguishable from the present case, the insureds sought supplemental payment for several items, including reimbursement for packing and storing the contents of their residence. The insurer argued that packing and storing the contents of the residence were items not covered by the SFIP. The Court noted that the dispute regarding the packing and storing charges was a dispute over coverage for those charges and, as a result, held that the appraisal clause was not implicated.
This court then said that the request for packing and storing charges in that case is similar to this case. This case seeks reimbursement for the cost of having a commercial superintendent on the property for three months. As a result, Lloyds asserted that the SFIP does not cover this expense. The dispute is whether this expense is covered, not whether $39,000 is a reasonable cost for the superintendent. Because the parties do not agree about whether this item is covered, the dispute does not relate exclusively to the actual cash value of the loss or its replacement value and does not implicate the appraisal clause.
End result - the court refused to order appraisal.

Insureds in Weatherford, Mineral Wells, Aledo, Azle, Hudson Oaks, Willow Park, Brock, Millsap, Cool, Springtown, and other places in Parker County and Texas do not always understand what is covered by their policy and what is not. Here is a case that helps understand a little bit about coverage as it relates to auto policies.
In 2003, the Houston Court of Appeals, 14th Dist. issued an opinion in the case, Alejandro Armendariz and Alma Armendairz v. Progressive County Mutual Insurance Company. This case is an appeal from a Declaratory Judgment lawsuit where in Progressive won after filing a motion for Summary Judgment. Here is some background.
The Progressive automobile insurance policy in the case covered two cars, one owed by Alejandro and the other owned by his sister, Alma. Alejandro was the named insured on the policy. Additionally, Alejandro's parents, who lived with him, and Alma were named as "listed drivers" on the policy. When Alejandro first purchased insurance from Progressive, the policy covered his parents' van. However, Alejandro deleted the van from the policy because his parents wanted to sell it. Four months later, while driving her parents' then uninsured van, Alma, by accident, backed over and killed her father. Alma's mother then sued Alma for the father's wrongful death.
Contending that the van was not a covered auto and Alma was not an insured, Progressive denied the claim and filed this lawsuit. The language in the policy that Progressive relied upon said: "We do not provide liability coverage for the ownership, maintenance, or use of any vehicle other than your covered auto which is owned by a family member or furnished or available for the regular use of any family member."
The Armendarizes contended that the exclusion at issue violated public policy and the Texas Motor Vehicle Safety Responsibility Act. There were two pertinent portions of the Progressive policy in the case. The first was the exclusion:
"B. We do not provide Liability Coverage for the ownership, maintenance or use of:
...
3. I. Any vehicle, other than your covered auto, which is:
a. owned by any family member, or
b. furnished or available for the regular use of any family member.
II. However, this exclusion (B.3) does not apply to [the insured's] maintenance or use of any vehicle which is:
a. owned by a family member ...."
The second pertinent portion of the policy was the definition of "family member": "a person who is a resident of [the insured's] household and related to [the insured] by blood, marriage, or adoption." In this case, Alejandro's parents, who lived with him, owned the van. Further, the van was no longer a covered auto under the policy. Lastly, Alma was not an insured under the Progressive policy, but merely a listed driver for the two covered autos. Because Alma caused the accident while driving her father's uninsured van, the exclusion, if valid, precluded liability coverage.
The Armendarizes argued that the exclusion in the case was akin to the invalid "family member exclusion." The family member exclusion, also called Endorsement 575, reads, "We do not provide Liability Coverage for you or any family member for bodily injury to you or any family member."
In its analysis of this case the court looked at the above and stated, "However, there was no liability coverage here because the family member's vehicle was uninsured, not because a family member was the injured claimant. Even if an unrelated third party had been struck by the van, the exclusion would still apply because the van was owned by a family member but was not insured."
The decision in this case was consistent with the interpretation of owned-but-uninsured exclusionary language in other states. As this court noted, without the exclusion, an insurance company would be "required to insure against risks of which it is unaware, unable to underwrite and for which it is unable to charge a premium.
These cases are tough. An experienced Insurance Law Attorney needs to be involved early in these claims to establish facts that might be helpful to a recovery.

What if someone in Weatherford, Mineral Wells, Aledo, Willow Park, Azle, Hudson Oaks, Millsap, Brock, Springtown, Cool, or anywhere else in Parker County has insurance on a house and the house burns down - do they automatically get paid the insurance on the house? The answer is - It depends.
To be able to recover on an insurance policy, the person suffering the loss must have an insurable interest in the property that is insured. The Dallas Court of Appeals issued an opinion in 1993, that is still good law. The style of the case is, William T. & Elaine Jones v. Texas Pacific Indemnity Company.
It is a summary judgment case. The Jones sued Texas Pacific on an insurance policy. The summary judgment was granted in favor of Texas Pacific because the court said the Joneses could not recover insurance proceeds on property which they did not have an insurable interest to.
As background, the Joneses owned their home subject to Henry and Diana Martin's mortgage interest. They insured their home with Texas Pacific. The policy listed the Joneses as the "Named Insureds" and the Martins as "Mortgagee[s]." When the Joneses defaulted on their mortgage payments, the mortgagees foreclosed. The Joneses remained in the home as tenants at sufferance. Eleven days after foreclosure, the home burned.
Texas Pacific paid the Joneses for content loss and additional living expenses. It reimbursed the Martins for the dwelling damage. The Joneses sued on the policy to collect on the dwelling damage.
Texas Pacific claimed the Joneses were not owners, thus could not collect.
The Joneses contended that although they no longer owned the property, they still had an insurable interest and were entitled to the insurance proceeds. Because the foreclosure divested the Joneses of right, title, and interest in the property, the Joneses could not show any loss.
In discussing this case, the court stated the law as it relates to this situation:
A party must have an insurable interest in the insured property to recover under an insurance policy. It is not necessary that the party own the property to have an insurable interest. An insurable interest exists when the insured derives pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain pecuniary loss from its destruction. If a claimant cannot suffer any pecuniary loss or derive any benefit from the property, he has no insurable interest.
The claimant has the burden of proving an insurable interest.
Applying the law to the facts of the case, the court stated that, under the Jones-Martin deed of trust, the Joneses became tenants at sufferance after the foreclosure. As tenants at sufferance, the Joneses were subject to immediate eviction. They had no future legal interest in the dwelling, and diminished motive and opportunity to protect the property. The Joneses did not suffer any pecuniary loss in the dwelling from the fire or receive any benefit from the dwelling. They had no insurable interest in the dwelling.
This case is pretty clear cut. But that is not always the case. Whenever there is any doubt about the right to insurance proceeds, an experienced Insurance Law Attorney should be consulted.

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

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

Arson happens in places like Fort Worth, Dallas, Garland, Irving, Mesquite, Richardson, Plano, Duncanville, De Soto, and all other places in Texas at one time or another. But to be accused of arson and have your insurance claim denied because you are suspected by the insurance company is something else. Is there a typical case or situation where this comes about? The answer is no. Every situation has to be scrutinized based on the facts of that particular situation.
The Texarkana Court of Appeals issued an opinion in a 1990 case that discusses the way these arson cases are evaluated. The style of the case is, The St. Paul Guardian Insurance Company v. Teri Lynn Luker and Paul Kimbel Luker. In the case, a jury found in favor of the Lukers and compensated the Lukers for contractual damages of $27,000 and tort damages of $50,000 and mental anguish of $15,000. The court reversed all but the contractual damages of $27,000.
Here are some of the facts of this case.
At approximately 12:15 a.m. on the morning of June 12, 1985, a fire caused structural damages to the house in which Teri and Paul were residing and damaged or destroyed their household belongings. Emmitt Luker owned the home but did not occupy it. The house was the source of litigation proceeding between Paul and his previous wife, the result of which Paul owed Emmitt $17,000 on the house. As a result of these actions, Paul obtained a new mortgage and his house payments increased from $650 per month to $900 per month.
After Paul had obtained the new mortgage, he got a new policy which reduced his contents coverage from $40,000 to $27,000. The policy was actually in the name of Emmitt. Emmitt was paid for the damage to the house but St. Paul denied Teri and Paul's claim for the contents. St. Paul denied based on three grounds. That the fire was caused by arson by Paul and Teri or by someone instructed by them; that Paul and Teri misrepresented their losses by concealing their person involvement in the fire and by failing to report truthfully the extent and valuation of the destroyed personal property; and that the policy issued to Emmitt insured only Emmitt's interest in any personal property on the premises and not that of Paul and Teri.
The tort damages against St. Paul were for St. Paul violating the insurer's duty to deal fairly and in good faith with their insureds. This claim arises when there is no reasonable basis for denial of the claim or for delay in payment, or for a failure on the part of the insurer to determine whether there was any reasonable basis for the denial or delay. This was the standard set out by the Texas Supreme Court.
One argument by St. Paul was that the policy was issued to Emmitt, not Paul and Teri and thus the duty was owed to Emmitt, not Paul and Teri. This court, citing the Texas Supreme Court case, stated, "When a person contracts with an insurer for the benefit of another, both the person contracting and the third party have the right to expect that the insurer would owe the same duty to the designated third party as it would to the person making the contract. We hold that when an insurer agrees to insure a third party beneficiary under the terms of an insurance contract, it owes the same duty of good faith and fair dealing to the third party as it does to the purchaser of the insurance."
So, the preceding paragraph means that Paul and Teri won on the argument regarding whether or not they had a right to sue for a violation of the duty of good faith and fair dealing. Next, they had to prove the duty had been violated.
To establish a bad faith claim, the Lukers had to prove (1) the absence of a reasonable basis for denying or delaying payment of the benefits of the policy, and (2) that the St. Paul knew or should have known that there was not a reasonable basis for denying the claim or delaying payments of the claim. St. Paul retained the right to deny invalid or questionable claims.
This court then spent several pages of their opinion going over the many facts in this case. In its' conclusion this court stated, "We find that the Lukers produced insufficient evidence to show that there was no reasonable basis for St. Paul's denial of the claim, nor did the Lukers present sufficient evidence to show that St. Paul knew or should have known that there was no reasonable basis for denying or delaying the payment of the claim.
This case, like most arson cases, had a lot of interesting facts. Both the insureds and the insurance companies always seem to have evidence in their favor. Then it boils down to which side you believe the most. One thing for certain is that an experienced Insurance Law Attorney needs to be involved early on in these cases. Otherwise, it is the insurance company gathering all the evidence to win the case.

No one in Grand Prairie, Weatherford, Arlington, Aledo, Fort Worth, Mansfield, Dallas, Irving, Garland, Mesquite, or any other place in Texas likes the though that they will be involved in a fire claim. But for some people it happens. So, what should you expect from the insurance company if it does happen? Here is one example of what can happen when a fire claim is made.
This case was decided in 1991, by the Corpus Christ Court of Appeals. The style of the case is, Automobile Insurance Company of Hartford Connecticut v. David Davila and Donna Davila. David and Donna sued Automobile Insurance Company of Hartford Connecticut (Hartford) for bad faith after a denial of insurance benefits following a fire loss. A jury found in David and Donna's favor and Hartford appealed. This court modified the judgment in favor of David and Donna. Here is some background.
The Davilla's house burned in November, 1985. The police were at the house at the time the fire was discovered. Hartford conducted an investigation and denied the claim.
As part of reviewing the bad faith claim, the court discussed this area of the law in its opinion. The Texas Supreme Court in other cases, has said that the existence of a duty on the part of insurance companies to deal fairly and in good faith with their insureds is based on a special relationship which exists between the insurance company and its insured pursuant to a contract for insurance. This "special relationship" between the insured and the insurer imposes a duty to investigate claims thoroughly and in good faith, and to deny those claims only after an investigation reveals there is a reasonable basis to do so. In this special relationship, an insurance carrier is held to that degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business.
From a legal sense, a claim for breach of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay. Whether there is a reasonable basis for denial must be judged by the facts before the insurance company at the time the claim was denied.
The Texas Supreme Court has set forth a two part test for the violation of the duty of good faith and fair dealing. An insured who asserts that his insurer has breached the duty of good faith and fair dealing must establish (1) the absence of a reasonable basis for denying or delaying of payment of policy benefits and (2) that the insurer knew or should have known that there was no reasonable basis for denying the claim or delaying payment. This test requires both an objective determination of whether a reasonable insurer under similar circumstances would have denied the claimant's benefits and whether the carrier knew or should have known that there was no reasonable basis to deny the claim. In explaining the second element, the Texas Supreme Court has stated, "This element will be met by establishing that the carrier actually knew there was no reasonable basis to deny the claim or delay payment, or by establishing that the carrier, based on its duty to investigate, should have known that there was no reasonable basis for denial or delay."
The evidence in this case showed that the fire originated in the upstairs master bedroom in a closet with a common wall with the bathroom, there was wiring in that wall associated with a whirlpool motor in the bathroom, and the most intense charring from the fire was in that wall in the area of the wiring. The evidence also showed David arrived at the house five to ten minutes before Donna arrived with her son John and his friend Joe. Immediately before the discovery of the fire, Donna, David, and John were in the master bedroom and Donna alone was removing clothes from the closet. During this time, David and Donna were fighting and David called the police to remove John and Joe, who was upstairs. Once Officer Rios arrived, David went downstairs to let him in, leaving Donna and John alone upstairs. David and Officer Rios went upstairs, and then back downstairs to escort Joe out of the house. While David and Officer Rios were downstairs and after they had let Joe out of the house, Donna and John discovered the fire and started yelling.
David and Officer Rios ran upstairs. They saw a fire, which John was attempting to extinguish, in the closet, and heard Donna yelling that David was burning her clothes. David called out the window to another police officer to call the fire department. From the initial attempts to extinguish the fire until the fire department arrived, Donna and David accused each other of setting the fire. No one knew how the fire started and no one admitted to starting the fire or seeing anyone else start it. From these facts, a trier of fact could reasonably find that it would have been virtually impossible for David to set the fire.
Further, in order to infer that David set the fire, one would have to go against common sense and believe that David called the police to witness the fire and that he somehow managed to set the fire while the police were there without anyone seeing him do it. Also, one would have to believe that John stood by while David set fire to Donna's clothes and that David burned Donna's clothes, probably knowing that his own clothes and the house would be burnt in the process.
There was likewise, evidence tending to show that Hartford failed to determine whether it had a reasonable basis for denying the Davila's claim. Although the whirlpool motor adjacent to the closet wall with the most charring and the breaker box for the motor was on the closet wall with the most charring, none of the investigators asked whether the whirlpool had been used on the night of the fire. The investigator ruled out the whirlpool motor and wiring because David never told him that it had been used. The adjuster acknowledged that David did tell him that he had used the motor, but it was well after the investigation and Hartford did not do anything with the information. Also, despite the fact that the wiring was exposed in the closet and David repeatedly asked that the motor and the wiring be investigated, neither was ever investigated by an electrician.
Further, the evidence indicated that when Hartford began investigating the claim, they proceeded with the assumption that someone, probably David, set the fire. One investigator said "you always suspect arson." The investigator also told Officer Rios that he just knew that someone set the fire but he did not know who and that he could see that no one else did. The basis of the assumption was the counter-accusations of Donna and David regarding starting the fire. Hartford seized on the substance of the accusations and failed to look beyond them into the circumstances of the situation and recognize that the accusations could have been retaliatory or made in anger.
Additionally, Hartford admitted that it was inconclusive regarding the cause of the fire and could not say what caused the fire to start. Nevertheless, the fire was reported as "intentionally set by the application of open flame to contained clothing." Such is the evidence that Hartford proceeded with a mind set that arson had occurred and, without thorough investigating other possible fire sources, concluded that David had set the closet on fire.
These cases involving fires and the investigation afterward are very fact specific. It is important to get an experienced Insurance Law Attorney involved in any fire case where the insurance company is not accepting responsibility right away.

Anyone living in Weatherford, Mineral Wells, Aledo, Azle, Hudson Oaks, Willow Park, Millsap, Brock, Cool, Springtown, or other areas in Parker County, or the State of Texas know what arson means. The question to be wondered about is, what happens if your home burns as the result of an arson fire?
The Waco Court of Appeals issued an opinion in 1998, in the case styled, State Farm Fire and Casualty Insurance Company v. Sandra Sue Vandiver.
In this case Vandiver had sued State Farm seeking to recover damages which resulted from the destruction of her home by a fire. The trial court made many ruling in favor of Vandiver, the result of which, she won her case. One of these ruling was a directed verdict against State Farm on its arson defense. State Farm appealed and this court reversed the verdict and set the case for a new trial. Here is some relevant information.
To establish the affirmative defense of arson, State Farm had the burden of proving by a preponderance of the evidence that Vandiver set the fire or caused it to be set. Generally, an insurer must rely on circumstantial evidence in arson cases.
The crime of arson, being in defiance of law, is ordinarily conceived in secrecy and executed in such a manner as to avoid detection and exposure; and proof of such an unlawful enterprise must, in the very nature of things, be made by circumstances, and every circumstance which tends to cast light upon the incident is legitimate and proper.
Citing another court this court said as follows:
In order to establish the affirmative defense, the insurer must offer evidence:
1) the fire had an incendiary origin;
2) the insured had a motive to set the fire or cause it to be set; and
3) the insured had an opportunity to set the fire or other circumstances linking the insured to the fire.
This courts' job was to review the trial court record for probative circumstantial evidence of the elements above rather than viewing each piece of evidence in isolation. That so long as the inferences arising from the circumstantial evidence are not equally consistent with the nonexistence of the ultimate fact, some probative evidence exists in the record to support the ultimate fact. To sustain a finding of fact based upon circumstantial evidence, it is not necessary to exclude beyond suspicion every other possible inference that could be drawn from the facts shown. It is necessary to show only that one conclusion or inference is more probable than any other.
The court had these facts to look at in making its decision.
The parties did not dispute that the fire which consumed Vandiver's home had an incendiary origin. As a result the court looked to only the latter two elements that are listed above.
Motive - The record revealed that Vandiver was experiencing financial stress at the time of the fire. She had a horse-raising business which was not making a profit. She had used this business to write off expenses from her IRS taxes for a number of years and the year of the fire loss was the last year she would have been able to deduct her expenses due to business losses. (26 U.S.C.A., Section 183(d)).
The record contained evidence that her monthly expenses exceeded her income. State Farm's analysis of her bank records revealed that she had a negative cash flow of almost $3,000 in the eight months prior to the fire with additional bank charges assessed for checks which were returned because of insufficient funds. He account contained less than $500 at the time of the fire.
She lived with a man that the records revealed she was supporting.
Vandiver's sister had almost $5,000 in unauthorized charges on one of Vandiver's credit cards.
The court said that the above constituted some evidence of motive thus satisfying the second prong set out above.
Opportunity or Other Connecting Circumstances - One of Vandiver's neighbors reported the fire around 10 P.M. Vandiver testified she was at her sister's condo, about forty-five minutes away until 10:30 or 11:00 that night. Her sister testified she though Vandiver left about 10:00. There were other discrepancies between the times Vandiver testified to and the times to which her sister testified.
Vandiver and her sister and the man she lived with had the only keys to the house. The man was out of town the day of the fire. Vandiver testified that she locked the house and had seven dogs on her property. Two neighbors testified that the dogs typically barked at strangers who came around but neither of the neighbors heard dogs barking the night of the fire, although both were outside that evening. One neighbor found the house secure when he came over to investigate the fire.
State Farm had paid a previous claim for a fire loss on Vandiver's property, the cause of which remained undetermined. Vandiver also had a pending theft loss of $1,500.
Neighbors and fire officials testified that there had been no other incidences of vandalism, burglary or arson in the area.
Vandiver admitted that she was on the premises a few hours before the fire. The house was locked at the time of the fire, and Vandiver and her sister were the only persons in the area with keys. The failure of the dogs to bark creates a reasonable inference that no one else came on Vandiver's property that evening. The other circumstances all combined to justify a conclusion that Vandiver was possibly the person who set the fire.
Based on this evidence the court concluded there was some evidence of the third element set out above.
The reasons the court reversed the ruling against State Farm are hard to argue with. One thing that is certain is that a person who has suffered an arson fire loss is going to be investigated by the insurance company for the possibility of being the person who set the fire. For that reason, an experienced Insurance Law Attorney should be consulted immediately.

Someone in Grand Prairie, Arlington, Grapevine, Colleyville, Hurst, Euless, Bedford, Keller, Flower Mound, Roanoke, Haslet, Saginaw, and other places in the state of Texas would naturally be upset if their claim were denied. But next, they would want to hire an experienced Insurance Law Attorney and pursue a lawsuit against their insurance company to make them pay.
Here is a case where an attorney tried to get the insurance company to pay but most of the lawsuit was almost thrown out of court. The style of the case is, Rosa Garcia and Augustin Garcia v. Nationwide Property and Casualty Insurance Company. The opinion in this case was issued on May 16, 2011, by the United States District Court, S. D. Texas, Houston Division.
Here is what is going on in this situation:
The Garcia's are owners of a Texas Homeowners Insurance Policy issued by Nationwide and sold to the Garcia's, covering their home.
The lawsuit papers submitted by their attorneys, is similar to many by the same attorneys. The petition, recites that during Hurricane Ike, water intruded through the roof, significantly damaging the entire house and garage, including ceilings, walls, insulation, and flooring. The storm caused substantial structural and exterior damage to the building and damaged the Garcia's personal belongings, and as a result they also incurred additional living expenses. They submitted a claim to Nationwide for these expenses, but Nationwide denied the claim for repairs even though the policy provided coverage for such losses, and it underpaid their other claims for damages. Nationwide continued to delay payment owed under the policy for their damages.
In the lawsuit, the Garcia's asserted that Nationwide failed to perform its contractual duties to adequately compensate them under the terms of the policy, refusing to pay the full proceeds of the policy despite demands. This being in breach of the insurance contract.
As to specific statutory violations, the Garcia's alleged that Nationwide misrepresented that the damage to their property was not covered, in violation of Texas Insurance Code, Section 541.060(a)(1). They also asserted that, in violation of Section 541.060(a)(2)(A) Nationwide failed to make an attempt to settle the claim in a fair manner even though it was aware of its liability under the policy. In addition, that Nationwide failed to explain to them the reasons for its offer of an inadequate settlement. Nationwide also did not communicate any future settlements or payments that they would pay for the entire losses covered under the policy not explain why they failed to adequately settle the claims, in violation of Section 541.060(a)(3). They also accused Nationwide of failing to affirm or deny coverage of their claims within a reasonable time, in violation of Section 541.060(a)(4). Moreover Nationwide's refusal to fully compensate under the terms of the policy and failure to conduct a reasonable investigation of their claims, indeed its performance of an outcome-oriented investigation that resulted in a biased, unfair, and inequitable evaluation of their losses on the property, violated Section 541.060(a)(7). And, in violation of Section 542.055, the Garcia's contended that Nationwide failed to timely acknowledge the claim and to request all information reasonably necessary to investigate their claim within the statutorily mandated time of receiving notice of the claim. In violation of Section 542.056, Nationwide additionally failed to accept or deny the full claim within the statutorily mandated time of receiving all necessary information. Nationwide further delayed full payment of the claim longer than allowed in violation of Section 542.058.
Going on, the Garcia's alleged Nationwide breached their common law duty of good faith and fair dealing by refusing to pay them in full even though a reasonable insurance company would know there is no basis on which to deny them full payment.
Finally, the Garcia's claim that Nationwide knowingly or recklessly made false representations of material facts and or knowingly concealed all or some material information from them.
This court then cited well established Federal law found in Federal Rule of Civil Procedure 9(b) which says: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally. The Fifth Circuit Court of Appeals strictly construes this rule and requires that plaintiffs pleading fraud in federal court "to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent."
The bottom line in this case is that the court ordered the Garcia's to amend their lawsuit papers within 20 days, and to be specific according to the requirements of Rule 9(b) or almost all of the lawsuit would be dismissed except the portions dealing with breach of contract.
What is to be learned from this case is one of the distinctions between Federal Court and State Court. That being that their are different rules and that the differences must have attention paid to them or the case could be dismissed.

Most insureds living in Grand Prairie, Fort Worth, Dallas, Arlington, Pantego, Hurst, Euless, Bedford, Keller, Colleyville, Saginaw, and other places in Texas would not be sure what it means to submit to an "examination under oath" (EUO).
An EUO is where a person is asked questions, usually by an attorney or insurance investigator, after the person has taken an oath to tell the truth, and the testimony is taken by a certified court reporter.
The United States District Court, Southern District, Houston Division, issued an opinion on April 11, 2011, where part of the case dealt with the requirements of an EUO. The style of the case is, Rossco Holdings, Inc. v. Lexington Insurance Company.
Here is some background. The case involves a claim for storm damage to real property located in College Station owned by Rossco and insured by Lexington. One of the issues in the case appears to center around when the policy was taken out, when premiums were paid and an issue about some attempts at cancellation of the policy by Rossco.
On or about July 20, 2009, a rain storm damaged Rossco's property. On August 17, 2009, Rossco filed a claim with Lexington notifying it of its loss and seeking damages. Upon investigating the claim, Lexington informed Rossco of its concerns regarding coverage and made the following request for information:
In order to assist us with the investigation, we ask that you provide us copies of all documents, including emails and correspondence, pertaining to your request that Lexington cancel the policy, and your subsequent request to extend the termination date of the policy to July 28, 2009. We also ask that you provide us with a copy of all documents that reflect, relate or pertain to the date of loss, the payment of the premium, and the submission of the notice of loss to Lexington.
On October 23, 2009, Lexington made a second request for the aforementioned information. On October 29, 2009, Rossco provided Lexington with a Sworn Statement of Loss dated October 28, 2009, which listed "TBD" for the values of both the property and claimed loss. On November 11, 2009, Lexington sent another request for information to support Rossco's claimed loss and advising him of its intent to conduct an EUO of Rossco's corporate representative. Rossco then filed this lawsuit alleging breach of contract as well as violations of the unfair settlement practices and prompt payment provisions of the Texas Insurance Code.
Lexington submitted a motion for summary judgment to the court requesting a ruling in its favor due to Rossco not complying with the policy's terms. Rossco's arguement was that it had "substantially complied" with the requests of Lexington and that Lexington had waived its right to conduct an EUO.
Lexington, in particular argued, that Rossco, in an effort to obscure Lexington's investigation into its loss, repeatedly refused to comply with conditions precedent to coverage under the policy by refusing to furnish documents to support its claim of coverage and refusing to participate in an EUO. It alleges that because Rossco failed to furnish documents pertinent to its claimed loss and failed to submit to an EUO, it failed to comply with conditions precedent to coverage and is not entitled to benefits under the policy. Consequently, Lexington maintained that absent Rossco's compliance with the aforementioned conditions precedent, it has no duty to provide benefits under the policy and Rossco's claim for breach of contract fails. Likewise, Lexington argued that Rossco's claims for extra-contractual damages under the Texas Insurance Code also fail because Lexington cannot be in violation of the Insurance Code if its duties and obligations have yet to be triggered due to Rossco's non-compliance with the policy's terms and conditions governing coverage.
In discussing this case, the court cited well settled law that "Insurance policy provisions requiring the insured's submission to examination under oath as a condition precedent to sustaining a suit on the policy are valid." First, it is well settled law in Texas that abatement rather than exclusion or barring of a claim is the insurer's appropriate remedy for enforcement of an insured's conditions precedent to coverage. Second, without commenting on the strength or credibility of the evidence presented, the Court determined that the parties had raised genuine issues of material fact concerning whether all necessary and reasonably comprehensive information in support of Rosco's proof of loss had been provided to Lexington in compliance with the policy's terms and whether Lexington has handled, processed and or investigated Rossco's claim in good faith.
This court then denied the request for summary judgment and abated the case until 30 days after Rossco provides Lexington with all documents previously requested and submited to an EUO.
An experienced Insurance Law Attorney should be consulted anytime an insurance company is asking for an examination under oath. There are a couple of reasons for this. One is that the insurance company oftens asks for items or ask questions that they do not have a right to be asking. Second, when a claims investigation has reached a point where the insurance company is requesting an EUO, that is usually a sign they are going to deny the claim and they are only seeking further information to justify their denial.

Here is a case for insureds in Grand Prairie, Weatherford, Mineral Wells, Arlington, Dallas, Fort Worth, and other places in Texas to think about.
This case was decided by the United States Court of Appeals for the Fifth Circuit, on April 13, 2011. The style of the case is, Araceli Medina Garcia v. American United Life Insurance Company. Here is some background.
In January 2006, Salvador DeReza Garcia died in a car accident. At the time of this death, Salvador was covered under a group life and accidental death insurance policy issued by American United Life Insurance Company (AUL) and subject to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sections 1001-46. Salvador's wife, Araceli Medina Garcia, submitted a claim under this policy following his death. AUL denied her claim because Salvador was living illegally in the United States and made material misrepresentations regarding his identity during the application process. A lawsuit was filed, the district court ruled in AUL's favor. This appeal followed. This appeals court affirmed the ruling of the trial court.
Salvador's employer, Tatum Excavating, Inc. and Tatum Excavating, Inc. Employee Benefit Plan (collectively, Tatum) signed a contract for a group policy for several of its employees with AUL. The policy offered life insurance coverage in the amount of $20,000 per eligible employee. A few months after Tatum entered into this agreement, Salvador signed a group enrollment form to apply for the policy (hereinafter the enrollment form). The enrollment form reflected Salvador's alleged date of birth as August 19, 1966, and purported Social Security Number as 623-90-3634. Later, Araceli was designated as the sole beneficiary.
After Salvador's death, Tatum sent AUL a proof of death form, notifying AUL of Salvador's death, Araceli's Mexican identification card, and Salvador's death certificate, identifying his date of birth as August, 19, 1966, place of birth as Mexico City, and SSN as 623-90-3634. In order to verify eligibility, AUL requested additional documentation because, based on Salvador's place of birth, there was no indication from the documents that Tatum sent that Salvador was a US citizen. Tatum then sent AUL another copy of Araceli's alien registration card and a copy of Salvador's I-9 form, which reflected a SSN for Salvador of 623-90-3634 and Alien Resident Card number 048-931-385 with an expiration date of May 26, 2009.
AUL immediately began an eligibility investigation, seeking verification of Salvador's alien status and the SSN. The investigation reflected that the SSN did not belong to Salvador, AUL sent Araceli a letter rescinding Salvador's policy and denying Araceli's claim. Upon Araceli's appeal, a reinvestigation was initiated that confirmed the prior results. Specifically, the SSN belonged to a woman who died in 1966 and there was not a number matching Salvador's name. Further the Department of Homeland Security (DHS) had no information in their system that matched the information provided by Salvador.
One thing relevant here is that as with all ERISA claims, federal law applies rather than state law. This is relevant because in this case the ruling was against coverage whereas under state law the result would have probably been the opposite.
Under federal standards in this case, the appeals court reviewed the trial court's ruling based on an "abuse of discretion" standard.
The writing related to the enrollment form states, "the undersigned understands and agrees ... benefits under any policy will be paid only if AUL decides in its discretion the applicant is entitled to them." This gives AUL discretion to make claims determinations. According to this court, "... arguements to the contrary are unavailing."
In determining whether the claim denial was proper, the court considered three factors in its review: 1) whether the administrator gave the policy a uniform construction; 2) whether the administrator's interpretation is consistent with a fair reading of the policy; and 3) whether different interpretations of the policy will result in unanticipated costs. The court then said "An administrator's decision is 'fair and reasonable,' if the decision is supported by substantial evidence."
So, in this case, AUL had to show that the misrepresentation in Salvador's application for coverage was material. It is undisputed that the SSN was false and that Salvador was not legally in the US to work or even be present. Araceli's arguement was that this was not a material misrepresentation.
This court said Salvador's misrepresentations were clearly material and of the type that would have presented AUL from issuing the policy. A SSN is an integral part of the process by which a party's identity can be verified. Because Salvador provided a false SSN and inhibited AUL's ability to verify his identity, he not only placed AUL at risk of severe penalties, but also inhibited AUL's ability to assess the underwriting risk involved in issuing him the policy.
They then said the Department of the Treasury's Office of Foreign Assets Control (OFAC) maintains the Specially Designated Nationals List (the List), which includes the names of individuals designated, for example, as terrorists, drug dealers, and money launderers. Insurance companies are prohibited from engaging in transactions that in any way involve individuals on the List. Punishments for violations of this law can be substantial. As AUL explained in its denial letter to Araceli, "the misrepresentaion respecting Salvador's identity and his ability to work and reside in the U.S. would not permit AUL's compliance with" federal regulations, regarding the List. Thus, Salvador's misrepresentation made AUL vulnerable to substantial civil and criminal penalties, such as those enumerated in, 50 U.S.C., Section 1750.
There are a large number of people residing and working in the Texas who are here illegally. For the most part these people obey the laws, both criminal and civil. They do things like, buy life insurance. This case is relevant in understanding the laws that may affect whether a life insurance company is going to have to pay a claim. An experienced Insurance Law Attorney must be consulted in these situations. There are often times things that can be done to make sure the coverage purchased is provided when a claim is made for benefits.