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.