Dallas Fort Worth Insurance Lawyer Blog

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

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

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

Customers in Grand Prairie, Arlington, Mansfield, Fort Worth, Hurst, Euless, Bedford, Saginaw, Haslet, Rhome, and other places in Texas would have a hard time trying to read and interpret an insurance policy. This is when the advice of an experienced Insurance Law Attorney is most helpful.
The United States District Court, Southern District of Texas, Houston Division, issued an opinion on October 5, 2011. This opinion deals with policy interpretation. The case arises from a declaratory judgement lawsuit filed by the insurance company, RLI Insurance Company, and the partial motion for summary judgment filed by the insured, Willbros Construction (U.S.) LLC, et al.
The court ruled in favor of the insureds. Her is some factual background.
This case concerns whether a particular exclusion in an insurance policy precludes coverage of the value of line pipe that the insureds attempted to install under a river. RLI issued a policy to the insured that was in effect during all relevant times. The insureds had been retained to construct a natural gas pipeline ("the project"). The insureds subcontracted with Southeast Directional Drilling, LLC (SEDD) to drill the pipeline hole. While SEDD was installing the line pipe by pulling it through a hole drilled underneath a river, the line pipe became lost and damaged. A replacement hole was drilled, and the insureds purchased replacement line pipe. They submitted a claim under the policy for $1,567,530.09, to recover the cost of the replacement line pipe, which RLI denied. This lawsuit resulted.
RLI contends that the insureds' loss was caused by faulty construction or workmanship excluded from coverage by the "Defects, Errors, and Omissions" exclusion to the policy, because the hole through which the pipe line was to be installed was defectively drilled. It maintains that the "ensuing loss" provision does not extend coverage to the insureds' claim because there was no separate and independent "covered peril" beyond the faulty construction that caused the loss.
The insureds contend that the policy covers the pipe's value, and that even if the hole was defectively drilled, the resulting damage to the line pipe is a covered loss that is not otherwise excluded.
The issue is whether the line pipe constitutes "construction," as used in the polemical policy provision. Because "construction" is an ambiguous term that could have multiple meanings in the policy, The Court held in the insureds' favor.
The policy extended coverage to "direct physical loss caused by a covered peril to materials, supplies, machinery, fixtures, and equipment that the insureds were installing, constructing, or rigging as part of their installation or construction project." However, exclusions in the policy act to deny coverage of certain claims, including "Defects, Errors, and Omissions" exclusion, which provides:
"We" do not pay for loss caused by:
1) an act, defect, error, or omission (negligent or not) relating to:
a) design or specifications:
b) workmanship or construction; or
c) repair, renovation, or remodeling; or
2) a defect, weakness, inadequacy, fault, or unsoundness in materials.
But if a defect, error, or omission described above results in a covered peril, "we" do cover the loss or damage caused by that covered peril.
In effect, the exclusion eliminates coverage for the repair or replacement of defective workmanship while preserving coverage for damage that results from that defective workmanship. The exclusion protects RLI from becoming the guarantor of the insureds' work, but it does not eliminate coverage for ensuing losses caused by defective workmanship -- here, the damages line pipe.
The parties dispute whether the lost or damaged line pipe is property covered by the policy, or "construction" excluded from coverage. In cases involving ambiguous contract terms, the Court must "adopt the [interpretation] of an exclusionary clause urged by the insured as long as that [interpretation] is not unreasonable, even if the [interpretation] urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent."
Accordingly, the Court found that the line pipe was covered property. Consequently, even if the hole was defectively drilled, the resulting damage to the line pipe is a covered loss of property separate and distinct form the allegedly defective hole.

A lot of people in Grand Prairie, Arlington, Irving, Fort worth, Dallas, and other areas in Texas will have a disability policy. Sometimes these policies are from work and other times a person will purchase one for themselves. But what happens if the insurance company refuses to pay benefits under one of these policies when a person becomes eligible for benefits.
What happened in one case is discussed by the Houston Court of Appeals, in a 1976 case styled, Republic Bankers Life Insurance Company v. B.L. Jaeger.
This lawsuit concerned a disability insurance contract. B.L. Jaeger sued Republic Bankers Life Insurance Company to recover accrued and unaccrued disability benefits for an accidental injury.
In the lawsuit, Jaeger testified that he was injured on September 10, 1974, and that Republic refused to pay benefits due him on his disability insurance policy issued March 20, 1973. At the trial a letter was introduced from Republic to Jaeger's attorney stating:
As the policy contract is still within the contestable period, we feel it to be in the best interests of all concerned to rescind the policy and refund all the premiums paid by Mr. Jaeger since the contract's inception. Enclosed find our check in the amount of $429.75 which represents a refund of all premiums paid ....
Jaeger initially brought suit only for accrued benefits under the policy, however, before judgment a trial amendment was allowed whereby Jaeger pled anticipatory breach and sought recovery of all benefits under the policy accrued and unaccrued. The trial judge permitted the trial amendment.
At this point the appeals court began a discussion as to whether or not the trial judge should have allowed the trial amendment and got into a discussion of the ways this can be allowed or disallowed, depending on the circumstances of the case. The statute that deals with this issue is found in the Texas Rules of Civil Procedure, Rule 66.
For there to be recovery of unaccrued benefits, there must have been a renunciation of the contract.
In order to justify the adverse party in treating the renunciation as a breach, the refusal to perform must be of the whole contract or of a covenant going to the whole consideration, and must be distinct, unequivocal and absolute.
The letter introduced in this case showed Republic's distinct, unequivocal and absolute intent to refuse to perform its obligation under the insurance contract.
As the court pointed out, "This is not a case where the insurance company did nothing and was sued on the theory of repudiation, .... In this case, Republic took action by writing a letter repudiating their contract with Jaeger. Jaeger is justified in treating the renunciation as a breach enabling him to sue for accrued and unaccrued benefits under the policy."
One thing relevant here, to Insurance Law Attorneys, is the measure of damages in an action for breach of contract by repudiation is the present value at the time of trial of all that the plaintiff would have received if the contract had been performed. This involves a calculation of all that would have been received under the insurance contract, then reducing that amount to its present value. This calculation is a calculation that involves interest rates, but is not something that is usually very hard to figure.

Most insureds in Grand Prairie, Fort Worth, Dallas, Mansfield, Arlington, and other areas in the Dallas - Fort Worth metroplex have no idea how the uninsured motorist protection coverage on their automobile policies works. All they know is that their insurance agent told them that they should have it in case they have a wreck with someone who does not have insurance.
The Texas Insurance Code, Section 1952.101 requires that all automobile policies issued in the State of Texas contain uninsured motorist UM protection unless the UM protection is rejected in writing. Section 1952.108, allows for the insurance carrier to pursue the uninsured driver for any amounts paid out by the insurance company. As a result of Section 1952.108, allowing the insurance company to pursue the uninsured driver, almost all insurance policies require that their insured obtain written permission from their insurance company before reaching a settlement with the uninsured driver. Most people do not realize this. As a result, what happens if permission to settle is not obtained before settlement with the uninsured driver?
The answer to the above question is partially answered in the 1977, Texas Supreme Court case, Robert William Ford, Jr., et al. v State Farm Mutual Automobile Insurance Company. The principle question in this case was whether State Farm's unconditional denial of liability constituted a waiver of its right to consent before its insured subsequently settled with another insurance carrier.
Here are some of the facts.
On October 18, 1969, Mrs. Ford was a passenger in an automobile driven by Mrs. Harvey when the Harvey auto was in a collision with a vehicle driven by Jeffrey Whittten. The collision resulted in Ford's death and damages in excess of $20,000. Ford was survived by her husband and children. Whitten, whose negligence caused the collision, was an uninsured motorist.
On July 21, 1970, suit was filed by Mr. Ford, for recovery under the UM of a State Farm policy and a Gulf Insurance Company policy. On October 23, 1970, State Farm filed an answer denying any liability. On April 20, 1971, State Farm filed its first amended answer with pleas in bar "to Plaintiff's action in its entirety." Later, Ford settled with Gulf. One of these pleas by State Farm, alleged that plaintiff's action was barred and that State Farm was in no event liable to pay anything under its policy.
State Farm later filed a second amended answer in which it set up the defense that plaintiff's claim was barred because a settlement reached with another insurance carrier had not received the written consent of State Farm. This written consent was a requirement of the policy Ford had with State Farm.
In discussing this case, the court pointed out that this was a case of first impression for Texas courts.
In deciding for plaintiffs the court stated, "State Farm neither paid not pursued any of its affirmative steps for determination of what, if anything, it was due to pay plaintiff. Instead, it unconditionally denied all liability under the policy. This intentional conduct was inconsistent with claiming the right under the policy to consent before its insured settled with a third party. Such conduct constituted a waiver of that right. Waiver has been frequently defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming it."
The court further said, "If State Farm had been correct in unconditionally denying coverage and liability, it would have lost nothing by plaintiff's settlement with Gulf. Since State Farm was incorrect it its denial, it has lost only the inconsistent right to assert the exclusionary clause as a grounds for forfeiture of plaintiff's entire coverage. It has not lost its right of subrogation. When it pays the amount adjudged to plaintiff by the trial court, State Farm will still have its right to institute proceedings in the name of plaintiff against the uninsured motorist or any other person responsible for the accident. It is true that State Farm will have to share subrogation rights with Gulf Insurance which may, by reason of earlier settlement, have a call on the first $10,000 recovered by plaintiff from any person responsible for the accident. The relative status of the subrogation rights of the two companies, as between themselves, is a question which is not before us, and we express no opinion thereon."
If you are not confused by the above, then you must be pretty experienced with these types of situations. But, it is still confusing and serves as an example why an experienced Insurance Law Attorney needs to be involved.

People in Grand Prairie, Fort Worth, Arlington, Irving, Dallas, and other places in Texas, who have underinsured motorist (UIM) coverage will hope they never have to use that coverage. But what if they do have to use it? What are the rules?
One rule focused on here, is that in order to make the UIM claim, the claimant must first get written permission from their UIM insurance carrier to settle the case with the underinsured driver who caused injuries. If there is a settlement with the underinsured driver without getting written permission from the UIM carrier, the UIM carrier can refuse benefits. Here is a case where this played out.
The case is a Texas Supreme Court case decided in 1994. The style of the case is Ruben and Anita Hernandez v. Gulf Group Lloyd's.
In this case, the court had to consider whether an insurer may deny a UIM claim on the basis of a "settlement without consent" exclusion clause absent any showing that the settlement prejudiced the insurer. The court held that an insurer may escape liability on the basis of a settlement-without-consent exclusion only when the insurer is actually prejudiced by the insured's settlement with the tortfeasor.
This case was tried on the following stipulated facts. On November 21, 1987, Elizabeth Hernandez was killed when the car in which she was a passenger flipped over. The driver of the car, Charles McCullough, Jr., was the sole cause of the accident. McCullough was nineteen years old and his only asset was a $25,000 liability policy with State Farm. Elizabeth was covered by her parents' insurance policy with Gulf Group and that policy provided UIM benefits of $100,000. The damages suffered by Elizabeth and her parents exceeded $125,000.
Six weeks after the accident, the Hernandezes, without the consent of Gulf, entered into a settlement with McCullough for the limits of the State Farm policy. The Hernandezes then sought UIM coverage from Gulf. Gulf denied the claim based on the Hernandezes' failure to obtain its consent in writing before settling with McCullough.
In its appeal of the Gulf decision, the Hernandezes did not dispute the validity of the settlement-without-consent exclusion in the Gulf policy. They argued, however, that such an exclusion is unenforceable absent a showing by Gulf that it has been prejudiced by Hernandezes' failure to obtain consent before settling with an underinsured motorist.
In discussing this case, the court said, "Insurance policies are contracts, and as such are subject to rules applicable to contracts generally." "A fundamental principle of contract law is that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligation to perform." Citing from the RESTATEMENT (SECOND) OF CONTRACTS, Section 241(a), the court said, "In determining the materiality of a breach, courts will consider, among other things, the extent to which the nonbreaching party will be deprived of the benefit that it could have reasonably anticipated from full performance." The less the non-breaching party is deprived of the expected benefit, the less the material the breach.
In the context of an UIM claim, there may be instances when an insured's settlement without the insurer's consent prevents the insurer from receiving the anticipated benefit from the insurance contract; specifically, the settlement may extinguish a valuable subrogation right. In other instances, however, the insurer may not be deprived of the contract's expected benefit, because any extinguished subrogation right has no value. In the latter situation -- where the insurer is not prejudiced by the settlement -- the insured's breach is not material. The court concluded, therefore, "that an insurer who is not prejudiced by an insured's settlement may not deny coverage under an uninsured/underinsured motorist policy that contains a settlement-without-consent clause.
In the case, the parties stipulated that McCullough had no assets other than the $25,000 State Farm policy, and that he did not believe his financial situation would change in the foreseeable future; and Gulf further stipulated that it "has not incurred any financial losses ... with regard to its subrogation rights by the failure of the [Hernandezes] to obtain [its] consent before settling with McCullough and releasing him from all liability." Gulf, therefore, remained in the same position it would have occupied had the Hernandezes complied with the settlement-without-consent clause. Since Gulf had not been prejudiced by the Hernandezes' breach, the breach was not material, and Gulf therefore is not excused from its obligation to perform under the contract.

People in Grand Prairie, Arlington, Mansfield, Fort Worth, Dallas, or anywhere else in Texas will often times try to settle a claim they have without the assistance of an experienced Insurance Law Attorney. The problem with doing this is that there are multiple ways a person can be making a big mistake. Here is just one of them.
The Dallas Court of Appeals, decided a case in 1992, styled, "Rochelle Traylor v. Cascade Insurance Company, Formerly Known as Bonneville Texas Insurance Company, Successor in Interest to Victoria Lloyds Insurance Company."
Here is some factual background:
Traylor was riding in a car driven by Glynnis Penny when they were involved in an accident caused by Khoron Page. Traylor was seriously injured in the accident. Page's liability insurance was limited to $25,000 per person. Traylor settled with Page for the full policy amount of $25,000 and released Page from further liability without the consent of Cascade Insurance Company, Penny's insurer. Because Traylor's damages exceeded $25,000, she sued Cascade for its underinsured motorist (UM) protection of $20,000 per person. Cascade denied coverage and moved for summary judgment contending that coverage was excluded under Section A.2 of the policy's exclusions, which provides:
A. We do not provide Uninsured/Underinsured Motorists Coverage for any person:
***
2. If that person or the legal representative settles the claim without our consent.
Traylor argued in response that the exclusion violates Texas Insurance Code, Section 1952.108. The trial court disagreed and granted Cascade's motion.
Traylor argued that the consent-to-settlement clause in the insurance policy violated the statutory purposes of underinsured motorist coverage expressed in the Texas Insurance Code. Pointed out was that the Texas Supreme Court has stated that the purpose of underinsured motorist coverage is "the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles ...." Thus, the purpose of this court is to determine whether the consent-to-settlement clause is inconsistent with and fails to further the purpose of the Texas Insurance Code UM statutes.
This court then discussed the results of other cases dealing with this subject. After that discussion this court said that the consent-to-settlement clauses are a valid way for an insurance company to protect its right to subrogation against the UM motorist or any other person legally responsible for the insured's injuries. The court said that by permitting the insurance company to recover from the at-fault party some or all of the insurance proceeds paid to the insured, the right of subrogation defrays the cost and expands the availability of underinsured motorist coverage. When the insured settles with the at-fault party and releases that party from all future liability, even when the release is in exchange for the entire sum for which that party is insured, the insured cuts off the insurance company's right to recover its liability from the at-fault party. The consent-to-settlement clause preserves that right. Because the consent-to-settlement clause furthers the insurance company's right to subrogation under the Texas Insurance Code, the clause furthers the purpose of the Insurance Code. Accordingly, the exclusion under the policy for failure to obtain the insurer's consent to settlement is valid.
Traylor further argued that the enforcement of consent-to-settlement clause would encourage insurance companies to deny consent to an injured claimant to settle with a negligent motorist, thereby frustrating the attempts of the claimant to recover any insurance proceeds. In response, this court pointed out that the law provides heavy penalties against insurance companies that delay or refuse settlement of claims in bad faith.
There are exceptions to the law expressed in this opinion.

Appraisal - People in Grand Prairie, Arlington, Fort Worth, Dallas, Keller, Coppell, Farmers Branch, Hurst, Euless, Bedford, and other places in the DFW area are probably not familiar with the way appraisal works in an insurance policy.
The Texas Supreme Court issued an opinion in 2009 that deals with appraisals. The style of the case is State Farm Lloyds v. Becky Ann Johnson. Here is some background.
A hailstorm moved through Plano, Texas in 2003, damaging the roof of Becky Ann Johnson's home. She filed a claim under her homeowners insurance policy with State Farm. The inspector concluded that hail had damaged only the ridgeline of her roof, and estimated repair costs at $499.50, which was less than her deductible. Johnson's roofing contractor concluded the entire roof needed to be repaired at a cost of more than $13,000.
To settle this difference, Johnson demanded appraisal of the "amount of loss" under the following provision in her standard-form policy:
Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire .... The appraisers shall then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss.
State Farm refused to participate, asserting that the parties' dispute concerned causation and not "amount of loss." Johnson then filed this suit seeking a declaratory judgment compelling appraisal. Johnson and State Farm filed motions for summary judgment.
In this case, the Court attempted to clarify the division between issues that are subject to appraisal and those that are not. At one end, questions on liability are not proper for appraisal and must be decided in court. At the other end, the amount of damage is subject to appraisal. In between, questions on causation may be decided by appraisers in determining the amount of loss. This Court rejected State Farms' argument that every issue of causation is beyond the scope of appraisal.
The court reasoned that "any appraisal necessarily includes some causation element, because setting the 'amount of loss' requires appraisers to decide between damages for which coverage is claimed from damages caused by everything else." The following causation questions would be within the scope of appraisal:
- Appraisers may properly allocate damages between covered and excluded perils;
- Appraisers may determine whether a loss is due to a covered event, as distinguished from the property's preexisting condition.
By contrast, causation issues are improper for appraisal, "when different causes are alleged for a single injury to the property." In those instances, causation issues are to be decided by the courts.
In sum, whether the appraisal goes "beyond the damage questions" and impermissibly answers liability questions "will depend on the nature of the damage, the possible causes, the parties' dispute, and the structure of the appraisal award."

If someone in Grand Prairie, Fort Worth, Saginaw, Roanoke, North Richland Hills, Lake Worth, Colleyville, or anywhere else in Tarrant County uses someone else's car when their own car is unavailable, does the insurance on that other car protect them?
This issue was discussed in a 2003, Texas Supreme Court case styled, Progressive County Mutual Insurance Company v. Paul Sink. The case concerned coverage for a "temporary substitute" vehicle under the standard Texas Personal Auto Policy.
The issue was whether the policy provided liability coverage when the insured, whose own vehicle was disabled, takes and drives an automobile owned by someone who is not a family member without permission or the reasonable belief that he has permission and is involved in an auto accident with a third party. The trial court ruled as a matter of law that there was no coverage. The appeals court reversed the trial court. This Supreme Court reversed the appeals courts. Here is some background.
Joshua McCauley's pickup truck became disabled. He was at that time employed by Alamo Rent-A-Car, and while on the job, he took one of its rental cars to drive to a location that was not disclosed in the court's record to get his tools so that he could attempt to repair his truck. It was uncontested that McCauley did not obtain permission from Alamo to use any of its vehicles and did not believe that he had permission to use the car in question. While returning to work in Alamo's car, McCauley was involved in an accident with Paul Sink.
Sink sued McCauley and obtained a favorable judgment that was subsequently discharged in bankruptcy. Sink then commenced this action against McCauley's auto insurance carrier, Progressive County Mutual Insurance Company, under its policy insuring McCauley's truck. Sink claimed that he was a third-party beneficiary of McCauley's policy and sought benefits under that policy's liability coverage.
When the trial began, the Judge determined that the vehicle owned by McCauley's employer was not covered by the insurance policy issued for McCauley's truck. That is when this appeal began.
The only issue for the Supreme Court was the proper interpretation of the policy.
The liability coverage section of the policy provided that Progressive "will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident." The policy contained a broad exclusion that precluded coverage for any person who uses a vehicle without a reasonable belief that he or she is entitled to do so, but the policy also stated that the exclusion does not apply to an insured or an insured's family member who uses "your covered auto":
EXCLUSIONS
A. We do not provide Liability Coverage for any person:
8. Using a vehicle without a reasonable belief that that person is entitled to do so. This exclusion (8) does not apply to you or any family member while using your covered auto.
The policy's definition of "your covered auto" contains, among other things, the reference to a "temporary substitute" vehicle:
G. "Your covered auto" means:
4. Any auto or trailer you do not own while used as a temporary substitute for any other vehicle described in this definition [e.g., a vehicle identified in the policy Declarations or a vehicle acquired by the insured during the policy period] which is out of normal use because of its:
a. breakdown;
b. repair;
c. servicing;
d. loss; or
e. destruction.
Progressive argued in the court of appeals and maintained before the Supreme Court that although there is no definition of its policy of what constitutes a "temporary substitute" vehicle, courts should look to the definition of "temporary substitute automobile" used in the Texas standard policy form that preceded the current one. Alternatively, Progressive contended that the term "temporary substitute" should be given its commonly understood meaning, which, it argued, is that a substitute vehicle must be used with the permission of its owner or at least a reasonable belief that the owner consented.
In justifying its ruling the court said that because the term "temporary substitute" is not defined in the policy, they considered the ordinary, everyday meaning of the words used. It is common to rent a car, use a loaner car, or borrow a car from a friend or family member while one's primary vehicle is undergoing service or repair. The generally accepted meaning of "temporary substitute" vehicle does not, include taking a vehicle without at least a reasonable belief of entitlement to its use.
Paragraph 8 says that a person using a vehicle without a reasonable belief that he or she is entitled to do so is not covered. "The general public understands that if a vehicle driven by a teenager and expressly covered by the policy breaks down and the teenager steals a neighbors car, the stolen vehicle would not be regarded as a 'temporary substitute' vehicle. Nothing in the use of the term 'temporary substitute' vehicle suggests otherwise. The analysis would not change if the teenager 'borrowed' the neighbor's car without the neighbor's knowledge or permission. The same can be said of an adult insured who 'borrows' his or her employer's car without permission. The ordinary connotation of a 'temporary substitute' vehicle is that it is a vehicle used with the owner's permission, or at least a reasonable belief that the owner consented."

Here is a situation for someone in Grand Prairie, Arlington, Fort Worth, Dallas, Irving, or anywhere else in the DFW area to think about. If a car has insurance and it gets sold, is the insurance on the car still valid?
This case was decided by the Houston Court of Appeals, First District, in 1986. The style of the case is Douglas W. Black v. BLC Insurance Company.
Black was appealing from a summary judgment that BLC had no duty to defend against his claim because BLC had no liability to him under its insurance policy.
On May 6, 1983, BLC issued an auto policy to Thomas Webster covering his 1972 Dodge. Webster sold the car to Robert Linville on September 9, 1983. A week later, Linville sold the car to Warren Sanchez. Sanchez took possession on September 17, 1983, paying $270 and promising to pay the balance by September 30, 1983. Linville gave Sanchez a bill of sale to evidence the transaction. On October 23, 1983, Sanchez, while driving the 1972 Dodge, was killed in a collision with a car driven by Black. Black, who was injured, sued Sanchez' estate for damages.
BLC sought a declaratory judgment that it had no duty to defend or indemnify Sanchez' estate under its insurance policy issued to Webster, because Webster had sold the insured auto before the accident. The court ruled in favor of BLC.
Black contended that the court erred because Webster's policy was not cancelled and still covered the 1972 Dodge on October 23, the date of the accident.
The pertinent portions of the policy provide:
DEFINITIONS
Throughout this policy, "you" and "your" refer to:
1. The "named insured" shown in the Declarations, and
2. The spouse if a resident of the same household.
***
"Your covered auto" means:
1. Any vehicle shown in the Declarations;
2. Any of the following types of vehicles on the date you became the owner:
a. a private passenger auto; or
b. a pickup, panel truck or van, not customarily used in any business or occupation other than farming or ranching.
This provision applies only if you:
a. acquire the vehicle during the policy period; and
b. notify us within 30 days after you become the owner.
If the vehicle you acquire replaces one shown in the Declarations, it will have the same coverage as the vehicle it replaced. You must notify us of a replacement vehicle within 30 days only if you wish to add or continue Coverage for Damage to Your Auto.
If the vehicle you acquire is in addition to any shown in the Declarations, it will have the broadest coverage we now provide for any vehicle shown in the Declarations.
***
PART A -- LIABILITY COVERAGE
INSURING AGREEMENT
We will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident.
"Covered person" as used in this Part means:
1. You or any family member for the ownership, maintenance or use of any auto or trailer.
2. Any person using your covered auto.
3. For your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.
4. For any auto or trailer, other than your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this Part. This provision applies only if the person or organization does not own or hire the auto or trailer.
Black contended that "your covered auto" in the policy means "any vehicle shown in the Declaration," and the declaration named the 1972 Dodge; therefore, the car remained insured under Webster's policy, despite the two changes of ownership. Black charges that the trial court's judgment has improperly added to the policy a requirement that the named insured, Webster, own the "covered auto."
In explaining its ruling, this court said that Webster's ownership of the car was a prerequisite to coverage under this policy. The policy language is clear. A "covered person" is any person using "your covered auto." "Your covered auto" is defined in the policy as "any vehicle shown in the declarations. The word "your" is defined as referring to:
the "named insured" shown in the declarations ....
The use of the word "your" in this policy means that Webster had to own, possess, or at least control the use of the car in order for coverage to exist.
Other courts have reached the same result even though, as in the present case, the named insured remained the record owner on the certificate of title and despite laws providing that unrecorded sales are void.
In a concluding paragraph the court said:
"A finding of coverage under these facts would deprive an insurance company of the right to choose its customers and delegate that power to the insured when choosing a buyer. It would expose the insurer to a greater risk than it assumed by covering permissive users. This is because the insured will generally loan his car cautiously, in order to get it back whole. The insured will not be so careful, however, when selling. Then he will likely sell to the highest bidder, no matter how unskilled or uninsurable the person may be. That is a risk that neither party bargained for, and it is not one plainly included within the policy's language. The trial judge's decision was supported both by the policy language and by sound public policy.

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.

Policy purchasers in Grand Prairie, Arlington, Irving, Fort Worth, Crowley, Hurst, Euless, Bedford, Mansfield, Dallas, and other places in Texas would like to think they know who is covered under a policy they purchase. What is surprising is the difference between what the policy purchaser thinks and what the insurance company thinks.
A 1972, Texas Supreme Court case styled, Robert Snyder, et al. v. Allstate Insurance Company, is an interesting case. Here is a little bit about it.
The controversy is between Allstate, which issued an auto policy to J.B. Rhodes about whether or not they should pay damages arising out of a claim in the possession of and used by Darla Rhodes (minor daughter of J.B.) while being driven by Robert Snyder with Darla Rhodes as a passenger.
Allstate brought this declaratory judgment action seeking an affirmative determination that it had no obligation under its policy.
On June 1, 1968, J.B. purchased a 1962 Mercury auto and delivered it to his daughter Darla, a minor, who did not live in the same household with her father. Both the legal and equitable title to the car are disputed by the parties, but it is undisputed that J.B. purchased an automobile liability policy from Allstate and that the Mercury was specifically described in the policy and a premium was paid for that car. On January 18, 1969, Darla and Snyder were involved in a collision while Snyder was driving the Auto at Darla's request. Both suffered personal injuries, as did occupants of the other car.
Snyder and his father, John Snyder, and Darla and her father J.B., had requested Allstate to defend Snyder up to the limits of the Allstate policy.
At a trial in this matter, the trial court withdrew the case from the jury and entered a judgment that Allstate had an obligation to defend Snyder in all actions and to pay all claims up to its policy limits arising out of the collision.
Allstate appealed claiming that by its policy of liability insurance, Allstate contracted with J.B., the named insured, to pay all sums he should become legally obligated to pay as damages because of bodily injury or property damage "arising out of the ownership, maintenance or use of the owned automobile." The policy defines "insured," with respect to the owned automobile, as:
"(1) the named insured and any resident of the same household."
"(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission, and"
"(3) any other person or organization but only with respect to his or its liability because of acts or omissions of an insured under (a)(1) or (2) above,"
"Owned automobile" is defined in the policy as:
"(a) a private passenger, a farm or utility automobile described in this policy for which a specific premium charge indicated that coverage is afforded, ..."
It was undisputed that a specific premium charge was paid on the specific automobile in question; therefore, the automobile was an "owned automobile." Allstate argued that in addition to the definition of "owned automobile" the policy required that actual ownership of the automobile be in the insureds' name. As the court pointed out, the policy did not so provide, and the court refused to compel such a requirement.
J.B. testified that he gave Darla the car for her general use and "left it up to her for her own judgment" as to how she used the car, warning not to let "every Tom, Dick, and Harry" to use it. Darla testified that she asked Robert to drive her from Stratford to Fritch because she did not have a jack in her car and did not want to drive alone in the dark. Allstate did not dispute these facts but relied on them in this appeal in making its argument that J.B. had no authority to give his permission as the named insured because he did not own the auto.
This appeals court recognized two fact questions; (1) authority for the permittee (Darla) to allow a third person (Robert) to drive or use the car, and (2) the original permittee's consent to such use by a third person. As indicated above, these facts were undisputed and thus the court ruled against Allstate.
The cases are often times difficult. Each depends on the facts of exactly what happened and the language in the policy at issue. This is why an experienced Insurance Law Attorney needs to be sought out early in a case where the insurance company denies coverage.

Insured's in Weatherford, Mineral Wells, Aledo, Willow Park, Hudson Oaks, Azle, Brock, Millsap, Springtown, Cool, Peaster, and other places in Parker County would be confused when trying to figure out some aspects of coverage as it relates to auto insurance policy's. The meaning of "Family Member" in a policy might sound pretty easy at first glance, but looking at individual situations makes it not so easy. What about when people just filed for divorce, are separated, not married but living together, away at college or trade school? Are they a "Family Member?" Here is a different look:
The Houston Court of Appeals, First District, issued an opinion in 1996, that is interesting. The style of the case is, State Farm Mutual Automobile Ins. Co. v. Ms. Hanh Thi Dinh Nguyen, and Dr. Bay Van Nguyen, Individually and as Next Friend of His Deceased Infant Daughter.
This appeal is from a summary judgment hearing wherein the court had to decide whether the child in the case, whose entire six-day life was spent in a hospital, was a "resident" of the insured's household.
State Farm had issued an auto liability policy to the Nguyen's with policy limits of $100,000. In 1992, Mrs. Nguyen, who was pregnant, was in a car accident. She sustained injuries that resulted in an emergency cesarean section. A daughter was born. She lived for six days but then died from her injuries in the accident. It is undisputed that the child spent her life in the hospital and never went home to her parents' house.
Dr. Nguyen sued his wife for the child's wrongful death caused by her negligent driving. State Farm defended the lawsuit. The trial court rendered a $100,000 judgment against Mrs. Nguyen. Dr. Nguyen, as third party beneficiary, and Mrs. Nguyen, as insured, sought insurance coverage from State Farm for the amount of judgment. State Farm denied coverage under the family member exclusion in the policy and filed a declaratory judgment action.
At a resulting summary judgment hearing, the Nguyens asserted that the family member exclusion in the policy did not apply to the facts of this case because their child never resided in Mrs. Nguyen's household. There were other legal issues asserted.
State Farm contended that, to the extent it is valid, the family member exclusion applies and precludes coverage because the infant was a resident of Mrs. Nguyen's household.
The policy excluded liability coverage "for [the insured] or any family member for bodily injury to [the insured] or any family member." "Family member" is defined as:
[A] person related to you [the insured] by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child who is a resident of your household, and also includes your spouse even when not a resident of your household during a period of separation in contemplation of divorce.
The court said there were three possibilities here: 1) the child was a resident of the Nguyens' household; 2) the child was a resident of the hospital; or 3) the child established no residence before she died.
The controlling test of whether persons are residents of the same household at a particular time, within the meaning of the policy in question, is not solely whether they are then residing together under one roof. The real test is whether the absence of the party of interest from the household of the alleged insured is intended to be permanent or only temporary -- i.e., whether there is physical absence coupled with an intent not to return.
The case then discussed other cases and other cases from other states.
The court then said they agreed with a ruling which stated, "'resident' is an elastic and amorphous word having different shades of meaning depending upon the context in which it is employed." Moreover, the court considered two factors to be especially significant to the present case, the age and self-sufficiency of the injured person and the absence of another lodging. Both favor a finding that the child was a resident of Mrs. Nguyen's household.
"If we were to hold that the child was not a resident of the Nguyens' household, we would have to conclude that she had no residence. Clearly, she was not a resident of the hospital. While she was there for all six days of her short life, there was no intention that she remain there upon recovery; the intention was that she would reside with the Nguyens. Here, the child could have but one residence, that of her parents, the insureds, for the purpose of determining the application of the family member exclusion."
In this case, the court ruled that the family member exclusion applied. As a result, the Nguyen's were not able to recover the full $100,000 under the policy. Instead, they were limited to the state minimum at that time, of $20,000. To understand this part of the ruling, someone would need to consult with an experienced Insurance Law Attorney.

Insured's in Grand Prairie, Irving, Garland, Mesquite, Dallas, Carrolton, Richardson, Duncanville, De Soto, and other places in Dallas County might have a hard time believing some of the reasons an insurance company will use for denying a claim. Here is one they tried but it did not work regarding the child of divorced parents.
The case was decided by the Texarkana Court of Appeals in 1978. The style of the case is, Hartford Casualty Insurance Company v. Barbara Smith Phillips, Individually and as Personal Representative of the Estate of Jerry Glenn Phillips.
This case involves the question of coverage under the uninsured motorist provisions of a policy of automobile liability insurance. Barbara Phillips was the named insured and sought recovery of damages for bodily injuries sustained by her son, Jerry Glenn Phillips, as a result of an accident caused by an uninsured motorist. At trial, the jury found that Jerry was a "resident of the same household" as Barbara. Hartford contended that Jerry was not such a resident as a matter of law; that there is no evidence to support the jury finding; that there was insufficient evidence to support such finding; and that such finding was so against the great weight and preponderance of the evidence as to be manifestly wrong and unjust.
It should be noted that at the time of his death, Jerry Glenn Phillips was only fourteen years old.
Barbara was Jerry's mother. His father was Jerry Leon Phillips. The parents had divorced in 1964 and custody was placed with Barbara. However, in 1965, without a change in the custody order, Jerry Glenn, through an agreement by his parents, went to live with his father. It appears that Barbara had only a one bedroom apartment and the father had a two story home with ample space for a separate bedroom for Jerry Glenn, such home being located within twelve blocks of the school that Jerry Glenn attended. Barbara's apartment was not within the school district and the home address of Jerry Glenn for school purposes was that of his father. He had his meals and kept his clothes at his father's house except when visiting his mother. He also kept extra clothes at his mother's apartment. The father claimed Jerry Glenn as a dependent on his income tax returns. The school directory listed his address as that of his father. The medical, hospital, physician records and police report reflected that he resided with his father. His mother bought all of his clothing and provided his food when he was at her apartment. His father testified that he stayed with both him and his mother. The jury found as a fact that Jerry Glenn was a resident of his mother's household and the court entered a judgment reflecting that finding.
From a legal stand point, it should be noted that Barbara was the legal custodian of the child, that the child was only fourteen years of age and that a person, particularly a child, can have more than one "residence" as distinguished from a "domicile." A person may, and many do, have more than one residence. This is particularly true of a minor child of divorced or estranged parents.
In ruling for Barbara the court stated:
"It is quite evident that a finding by the court or jury that Jerry Glenn was a "resident" of his father's household would be adequately supported by the evidence. However, such a finding would not necessarily foreclose and prevent a finding that he was also a "resident" of his mother's household. The mother remained his legal custodian, contributed to his support, he regularly spent time with her in her apartment and kept some clothes there. Barbara as his legal custodian, had she so desired, could legally have required him to remain under her roof full time. The fact that for what apparently she and his father jointly felt would be for his best interest, would not within itself as a matter of law prevent him from being a "resident" of her household."