Dallas Fort Worth Insurance Lawyer Blog

What if you live in Fort Worth, Arlington, Grand Prairie, Dallas, Weatherford, or any other town in Texas and you are in a wreck with a drunk driver? Can you get punative damages from your ininsured / underinsured (UM) insurance policy because the other person was drunk at the time of the accident?
This is one of the issues in the case, Suzanne Vanderlinden v. United Services Automobile Association Property and Casualty Insurance Company. This case was decided in 1994, by the Texarkana Court of Appeals.
In this case Vanderlinden was injured in a car wreck caused by a drunk driver. At the trial of this matter the trial judge would not let Vanderlindens' attorney submit a jury question to the jury asking for punative damages due to the other driver being drunk. Vanderlinden was sueing her own insurance company, United Services Automobile Association Property and Casualty Insurance Company (USAA) to recover monies by way of the underinsured motorist coverage portion of her insurance policy with USAA. The Texarkana Court cited an 1849, Texas Supreme Court case saying, "Punative damages are typically not to compensate a damaged plaintiff for his injuries; rather, they are to discourage the defendant from continuing his heinous activities and to likewise discourage others from similarly misbehaving." Thus, the issue in this case is whether an injured person may obtain punative damages from the injured persons insurance company through the underinsured motorist clause.
The policy language says the insurer will:
... pay all sums which the insured ... shall be legally entitled to recover as damages from the owner or operator of an automobile ....
The court also noted that the Texas Insurance Code, Section 1952.101, requires this UM coverage to be made available in all automobile insurance policies.
Furthermore, the Texas Insurance Code is to be liberally construed to give full effect to the policy which led to its enactment and the court is to review the statutory definition of exemplary damages as "any damages awarded as an example to others, as a penalty, or by way of punichment," See also the Texas Civil Practices & Remedies Code, Section 41.001(3).
In the courts' ruling they stated; "Most states that have expressly considered this question have held that in this context an insurance company should not be liable for punitive damages because to allow such recovery would be antithetic to the acknowledged purpose to be served by rendition of such damages."
In reaching this conclusion the court cited and took the reasoning from the following"
1) Milligan v. State Farm Mutual Ins. Co. - Houston 14th Court of Appeals - 1997,
2) State Farm Mutual Ins. Co. v. Shaffer - Houston 1st Court of Appeals - 1994
3) Government Employees Ins. Co. v. Lichte - El Paso Court of Appeals - 1991

What does "Stowers" mean to someone in Grand Prairie, Arlington, Fort Worth, Dallas, Weatherford, or anywhere else in Texas? This is something very important to understand.
A Stowers claim is a claim that an insurance company has handled in an improper manner. Most incorrect claims handling by an insurance company can be called "bad faith", and the Stowers claim is just a different and unique version of bad faith. This Stowers doctrine was first articulated in the case, Stowers Furniture Co. v. American Indemnity Co. This is an old case, decided in 1929, but is still good law. This case was decided by what is today, the Texas Supreme Court. In 1929, it was called the Texas Commission of Appeals. When an insurance company violates their duty under the Stowers doctrine, the insurance company can become liable for much more money than the insurance policy provides for in the insurance contract.
A Stowers action arises when the liability carrier fails to make a reasonable settlement within the policy limits, and subsequently, exposes their insured policyholder to a judgment in excess of the policy limits. This Stowers claim belongs to the insured policyholder, not the person sueing the policyholder. What usually happens when the Stowers duty is violated, is that the policyholder assigns the Stowers claim to whoever is sueing the policyholder.
The Stowers duty to an insured policyholder is triggered when the claimant makes a claim against the insurance company that is within the policy limits. There is no responsibility on the insurance company to make the offer of settlement.
The Texas Supreme Court case, Texas Farmers Insurance Co. v. Soriano, states that the Stowers doctrine creates liability only if the insurance carrier negligently rejects a demand from a claimant that is within the policy limits, or the settlement entered into is unreasonable.This Texas Farmers Insurance Co. case, involved multiple claimants with severe damages. The policyholder however, had only a minimum policy to be divided between the seriously injured and multiple claimants.
A person wanting to make a Stowers claim would need the assistance of an experienced Insurance Law Attorney. The reason is, there are legal requirements necessary to be satisfied in order to properly invoke the Stowers liability against the insurance company. One of these requirements is that the settlement offer must offer a full release of all claims in exchange for the payment of the policy limits. This is a requirement per the case, Trinity Universal Insurance Co. v. Bleeker. This is another Texas Supreme Court case, decided in 1998. Here, a release had been offered to Trinity Universal Insurance Co. but a hospital lien had attached to the claim, per Texas Property Code, Section 55.007, thus making the release insufficient to satisfy Stowers.
Another requirement is that the Stowers doctrine only applies to covered claims. An example where this requirement was not satisfied was the case, St. Paul Fire & Marine Insurance Co. v. Convalescent Services, Inc., decided in 1999, by the 5th Federal Circuit Court of Appeals. Here, the Stowers demand made against St. Paul Fire & Marine included a claim for punitive damages. Punitive damages were not covered by the insurance policy, thus Stowers was not properly invoked.
Yet another requirement is that the release being offered in the Stowers demand, be a release of the proper parties. In Home State County Mutual Insurance Co. v. Horn, decided in 2008, the release properly named the insured but not the actual driver of the insured vehicle.
These are just a few examples of where a proper Stowers demand was not made. There are other requirements that must be satisfied. When these requirements are properly satisfied, the claim can be very much larger than what it originally was, due to the insurance company's violation of the Stowers doctrine.

For the Grand Prairie resident or the resident in Arlington, Weatherford, Fort Worth, or Dallas, the concern is - What do I get paid if the insurance company does me wrong.
There are several types of damages to be recovered, depending on the wrong committed by the insurance company. This article will deal with "actual damages" and the recovery of policy benefits.
It makes sense that the most common actual damages are the policy benefits themselves. As a matter of law, at least in certain cases, the amount of policy benefits wrongfully withheld is an element of damages caused by the insurance companies wrongful conduct in the matter. This was stated in the Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Co. This was a 1988 court decision where the Court rejected Texas Farm Bureau's arguement that damages for an unfair settlement practice had to be something more than the amounts due under the policy. The Supreme Court said that damages for a wrongful refusal to pay are at least equal to the policy benefits, as a matter of law. The Court in its reasoning stated:
The fact that the Vails have a breach of contract action against Texas Farm does not preclude a cause of action under the DTPA and Article 21.21 of the Insurance Code. Both the DTPA and the Insurance Code provide that the statutory remedies are cumulative of other remedies ... It is well settled that persons without insurance are allowed to recover based on false representations of coverage, ... and that an insurer may be liable for damages to the insured for its refusal or failure to settle third-party claims ... It would be incongruous to bar an insured who has paid premiums and is entitled to protection under the policy from recovering damages when the insurer wrongfully refuses to pay a valid claim. Such a result would be in contravention of the remedial purposes of the DTPA and the Insurance Code.
One thing to be aware of here is that Courts construing this language from Vail have concluded that policy benefits are not always damages as a matter of law. This highlights a point that anyone finding themselves in the position of having policy benefits or coverages denied should seek the advice of an experienced Insurance Law Attorney.
In another Texas Supreme Court case, decided in 1995, Twin City Fire Insurance Company, v. Davis, the court held that policy benefits could not serve as independent tort damages resulting from the insurance company's breach of its duty of good faith and fair dealing, which were necessary to support exemplary or punitive damages. Other cases have concluded that policy benefits are not necessary damages as a matter of law. This can be seen in several cases. One example is Seneca Resources Corp. v. Marsh & McLennan, Inc., a 1995, Houston 1st District Court of Appeals case. Another case is a 1993, Austin Court of Appeals case, Beaston v. State Farm Life Insurance Company. For an attorney, the advise is, when in doubt, the best approach is to plead, prove, and get a jury finding on policy benefits as damages.

If you get treated wrongly by your insurance company and you live in Grand Prairie, Arlington, Mansfield, Weatherford, Fort Worth, or Dallas, the first thing you should do is find an Insurance Law Attorney. He will tell you some of the following:
A plaintiff who prevails against an insurance company may obtain:
a) actual damages
b) additional damages if the insurance company acted knowingly
c) court costs
d) attorney's fees
e) other monies depending on the wrongful act
This article will deal just with one potential recovery, that being, the actual damages.
In a 1997, Supreme Court case, the court set out the following principles that govern recovery of "actual damages" under the similar language that existed under the Deceptive Trade Practices Act before 1995. This case was, Arthur Andersen & Company v. Perry Equipment Corporation. The same analysis in that case should apply to the Insurance Code, Section 541.152(a)(1).
The amount of actual damages recoverable is "the total loss sustained as a result of the deceptive trade practice."
Actual damages are those damages recoverable under common law. At common law, actual damages are either "direct" or "consequential." Direct damages are the necessary and usual result of the defendant's wrongful act; they flow naturally and necessarily from the wrong. Direct damages compensate the plaintiff for the loss that is conclusively presumed to have been forseeable by the defendant from his wrongful act.
Consequential damages, on the other hand, result naturally, but not necessarily, from the defendant's wrongful acts. Under the common law, consequential damages need not be the usual result of the wrong, but must be foreseeable, and must be directly traceable to the wrongful act and result from it. Of course, foreseeability is not an element of producing cause under the DTPA. Still, if damages are too remote, too uncertain, or purely conjectural, they cannot be recovered.
Under Texas common law, direct damages for misrepresentation are measured in two ways. Out-of-pocket damages measure the difference between the value the buyer has paid and the value of what he has received; benefit-of-the-bargain damages measure the difference between the value represented and the value received. Under the DTPA, a plaintiff may recover under the damage theory that provides the greater recovery. Both measure of damages are determined at the time of sale.
Here is just one example from the 1989 case, Paramount National Life Insurance Company v. Williams. This is a Houston, 14th District, Court of Appeals case.
An insured recovered actual damages for loss of credit or injury to credit reputation based on receiving notice letters from bill collectors arising from medical expenses the insurer misrepresented would be paid.
Each situation has to be looked at on an individual basis.

A lot of homeowners insurance policies in Texas have "appraisal" clauses written into them. So whether you live in Weatherford, Texas, or in Grand Prairie, Arlington, Fort Worth or Dallas, if you have homeowners insurance you need to be aware of these appraisal paragraphs.
An appraisal paragraph is of benefit to the insurance company. That is why they put it into the insurance policy. When the homeowner and the insurance company cannot reach an agreement on the amount of money that should be paid on a claim, the insurance company will try to invoke the appraisal clause in the insurance contract. Appraisal happens when the insurance company knows they owe the homeowner money, but there is a dispute as to how much money is owed.
The United States District Court, Southern Division, recently handled a case where the issue was whether the homeowner properly defeated the insurance company trying to invoke the appraisal process. The style of the case is, Hector Sanchez v. Property and Casualty Insurance Company of Hartford and Irene Bernardo. The courts' opinion was handed down on January 27, 2010.
In this case Sanchez made a claim for benefits on October 26, 2008. This was after Hurricane Ike struck Harris County, Texas, on September 12, 2008. The next day Property and Casualty Insurance Company of Hartford (Hartford) sent adjuster Irene Barnardo out to inspect the Sanchez home. Bernardo concluded that Sanchez had suffered a loss, but that the loss was only $150, an amount below Sanchez's deductible of $5,850.
In a letter dated October 29, 2008, Hartford refused to make a payment on his claim. Sanchez called to complain the next day. Six months later, Sanchez called Hartford complaining about their handling of the claim and then filed a lawsuit on April 29, 2009, which Hartford received on May 12, 2009.
When making a claim for insurance benefits the Texas Insurance Code, Section 541.154 provides that a person must give a 60 day written notice to the insurance company before filing a lawsuit.
Hartford, successfully had the case removed to Federal Court on June 5, 2009 and filed an answer to the lawsuit on June 29, 2009. Two months later, on August 3, 2009, Hartford filed a motion with the Court having the case abated for 60 days so that the time required for notice could be observed. The case was unsuccessfully mediated in September. Then on October 15, 2009, Hartford sent Sanchez correspondence seeking to invoke the appraisal clause in the insurance policy.
The bad thing for policy holders is that most appraisal clauses have requirements in them similar the Sanchez appraisal clause. It required Sanchez to: 1) pay for his own appraiser and, 2) bear the other expenses of the appraisal and umpire equally with the insurance company.
Without getting into more details of this case and the law associated with it, Sanchez prevailed, and did not have to submit to the appraisal process. The bottom line to his victory were the arguements his lawsuit attorney was able to make regarding the time frame that had past without Hartford invoking its right to the appraisal process.
An experienced Insurance Law Attorney would understand how this process works. It is important for a policy holder to get an attorney involved early in this process to more assure the policy holder will not get cheated by having to submit to the appraisal process.

The Texas Windstorm Insurance Association, has found itself in an unfortunate position. The position is a creation of their own actions. Those actions were actions whereby they refused to pay proper claims to policyholders who suffered damages because of the hurricanes, Ike, Dolly, and Rita.

TWIA is crying "help" because they are afraid they are going to be punished for not properly paying claims to their policyholders. They are asking that they be immune from paying penalties, policyholder attorneys' fees, and other expenses coming out of litigation that resulted from their conduct.

The windstorm association is a state-created insurer and is claiming that because they are an instrument of government that they should have immunity. Lawyers for the policyholders say that TWIA is effectively a private company, and that immunity would effect the over 900 lawsuits pending against TWIA.

The Texas Department of Insurance has administrative control of TWIA. Even though TWIA was created by the government, it is privately run.

The full story can be found in the Houston Chronicle. The Houston Chronicle reports that the Texas Attorney General has ruled the association is subject to the Public Information Act because it was created by lawmakers and is accountable to the State Insurance Commissioner.

The importance of this case lies in whether or not the TWIA can get away with just paying what they should have paid in the beginning to policyholders for their claims, or are they subject also having to pay penalties, interest, and attorneys' fees. To only have to pay the original amount of the claim effectively "cheats" the policyholders since the actions of TWIA forced the policyholders to have to live with the loss and occur court costs and attorneys' fees.

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

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

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

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

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

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

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

Pretend for a minute that you are driving your car in the Dallas Fort Worth area going west. You drive through Grand Prairie and Arlington and are on your way to Weatherford to enjoy the "First Monday" market. All of a sudden a dog runs in front of you and you swerve to miss it and hit a telephone pole. You are lucky in that no one is injured, but your car has $3800 worth of property damage. You are lucky again because you have collision coverage on your automobile and they repair your car and you are only out a $500 deductible.

Sounds ok so far, right. Well think about it for a minute. Your car was only a year old because you sell your car every two to three years and buy a new one. When you sell this one you will either have to disclose to the buyer the wreck or they will easily find out. So what does that mean? It means this: Your car is worth less because of the wreck than it would have been had it not been involved in a wreck. This is called the "diminished value".

The nest question is: What can you do about it? This question was answered by the Texas Supreme Court in 2003. In 2003, the Court decided the case, American Manufacturers Mutual Insurance Company v. Schaefer. Maunufacturers was Schaefers insurance company. They fixed Schaefers car. Schaefer did not dispute the quality or adequacy of the repairs. But he did say that Manufacturers owed him an additional $2600 due to market perceptions that a damaged and subsequently repaired vehicle is worth less than one that has never been damaged. Again, this is called the diminished value and he expected Manufacturers to pay the extra money to compensate him for the lose.

In the Schaefer case, the Court got into a discussion about insurance polices and the ways to interpret them. This discussion dealt with the specific language in the policy talking about "repair or replace" and "value". They also looked at the part of the policy dealing with "exclusions" from coverage.

The Court spent a great deal of time discussing what other courts in other States have ruled and about rulings in other Texas courts in the past. They even looked up definitions in Blacks Law Dictionary.

Their final ruling was that the policy did not cover diminished value even though diminished value was an actual loss. You would have to read the case to fully understand this final ruling.

What is important to keep in mind is that this claim was a claim made by Schaefer against his own insurance company under the collision portion of his policy. If this claim were being made against someone else's insurance company, such as would be the case if another car had ran into him causing the damage, then the other person's insurance would have had to pay for the diminished value. This issue was ruled on by the Texas Department of Insurance in its Commisioner's Bulletin, No. B-0027-00 (April 6, 2002).

Diminished value claims are most applicable when you are talking about a newer model car. If you find yourself in a situation where you believe you are entitled to a claim for diminished value it would be prudent to seek the advise of an experienced Insurance Law Attorney to give you guidance. There are independent companies that exist which are able to establish the diminished value on an automobile.

Texas insurance laws often times require that the insurance company issueing a policy, sell certain types of insurance with at least a minimal amount of coverage. The situation most people are familiar with is that related to automobile insurance coverage. In Texas, according to Texas Transportation Code, Section 601.072, a person cannot legally drive a car unless they have at least $25,000 worth of liabilty coverage. Texas Transportation Code, Section 643.101 requires a minimum amount for tow trucks, Section 643.1015 requires a minimum for school buses, and throughout the Texas Insurance Code and the Texas Transportation Code minimal required limits are spelled out depending on the vehicle driven.

Other types of insurance may have minimums or caps that are required. In other situations, there may not be a minimum that is required by law, rather there is a minimum that is purchased by the person seeking the insurance. These other types of insurance could be homeowners policies, commercial policies, medical malpractice policies, and many others.

What happens if a person's losses exceed the minimum the insurance company is required to pay? There are three main options here. The first is to accept the amount the insurance company actually has to pay and walk away. The second is to accept what the insurance company actually has to pay and then pursue the individual or company who is insured for the differerence still owing. This is usually (not always) futile in that the individual or company does not have any assets worth seizing to satisfy a judgment beyond what the insurance company pays. The third is one where you would be required to have an experienced Insurance Law Attorney.

This third option comes into play when presented with a "Stowers" situation. Briefly, a Stowers situation is where the insurance company is given the chance to settle the claim for an amount equal to or less that the policy limits. When the insurance company refuses to pay a reason demand that is equal to or less than the policy limits then the insurance company could be subjected to a situation where they have to pay more than the policy limits.

For a Stowers demand to pay, to be proper and legal, there are certain requirements that must be met. These requirements were discussed in the Texas Supreme Court case, Trinity Universal Insurance Company v. Bleeker. This case requires certain wording regarding releases and certain time frames within which to operate and investigate and accept the claim being made. These requirement have changed over time from that which was required in the original Stowers case. Only an experienced Insurance Law Attorney is going to be aware of these changes. In the proper case, where a Stowers demand was made and rejected, an injured party can recover from the liability insurance company an amount way over the actual amount of insurance coverage.

In 1929, a case was decided that has had deep effects on the claims handling process in Texas. The case was G. A. Stowers Furniture Company vs American Indemnity Company. The case arose out of a situation in Galveston, Texas, but applies to any place in Texas including Dallas, Fort Worth, Arlington, Grand Prairie, Irving, Weatherford, or any other city or town in the State.

In this case, Stowers had a $5,000 insurance policy with American. A claim was made against Stowers wherein the claimant was willing to settle the claim for $4,000. The claim was potentially worth much more. American decided to deny the claim. American's thinking was that the worst that could happen to them was that if the case were tried and lost that American would be out $5,000 which was the top limit on the policy. So instead of settling the case for $4,000 the case went to trial and a judgment was taken against Stowers for over $14,000. American paid the policy limits of $5,000 and walked away leaving Stowers to make up the difference.

Stowers sued American saying American refused to act as a reasonable and prudent insurer would have acted and thus cost Stowers money. Stowers said it was unreasonable for American to have not settled the case for $4,000, when they could have, rather than expose Stowers to a judgment in excess of the policy limits. The court agreed with Stowers.

This law, now known as the "Stowers Doctrine" in Texas says that if an insurance company is given the opportunity to settle a case for an amount less than or equal to the policy limits and refuses to do so, then the insurance company and not its insured is responsible for any judgment in excess of the policy limits. The test is, would a reasonable and prudent insurance company go ahead and settle the case, given the facts of the case, rather than expose its policy holder to the risk of a judgment in excess of the policy limits.

There have been several adjustments to this law over the years that involve issues of liens and subrogation interests. Plus the exact language of any offer to settle for an amount equal to or less than the policy limits is scrutinized closely by the courts to see if the offer properly invokes the "Stowers Doctrine". If this "Stowers Doctrine" is properly taken into account and the claim is not paid by the insurance company then the policy holder has a claim against its insurance company for its conduct in the matter.

Continue reading "Texas Insurance Law On How Claims Are Paid" »