The Southern District of Texas, McAllen Division issued an opinion in August 2018, for insurance lawyers to read that is styled, Alfredo Murillo Jr., et al v. Allstate Vehicle and Property Insurance Company.

The Murillo’s filed a lawsuit in State court against Allstate after Allstate did not handle a storm damage claim to the satisfaction of the Murillo’s.  The Murillos alleged violations of the Texas Insurance Code, the DTPA, and breach of contract.  Allstate removed the case to Federal court and filed a motion with the Court seeking dismissal of the Murillos Insurance Code and DTPA violations pursuant to Federal Rule of Civil Procedure 12(b)(6).

Rule 12(b)(6) requires plaintiff to plead “enough facts to state a claim to relief that is plausible on its face.”  The pleading requires “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.”  Conclusory allegations are disregarded.

Insurance lawyers will tell their clients to read the insurance policy and then the attorney can discuss with the client how courts interpret the language in the policy.  A 2018, opinion from the Southern District of Texas, Corpus Christi Division, styled, Mark Eller V. United Property & Casualty Insurance Company, is a good read for seeing how at least this particular court interprets the policy at issue in this case.

United filed a “Motion to Abate Proceedings to Complete Appraisal Process” and Eller responded.

Eller owns property damaged in Hurricane Harvey on or about August 25, 2017.  United was the insurer and provided an estimate of the loss that was far less than what Eller says.  A pre-suit demand was made under Texas Insurance Code, Chapter 542A on February 1, 2018.

According to the 28 Texas Administrative Code, Section 3.3012(b), in a definition of “total disability” in an individual accident and sickness policy or hospital, medical, and dental service corporation subscriber contract, the inability to perform duties may not be based solely on an individual’s inability to perform “any occupational duty,” but the insurer may specify the requirement of the inability of the insured to perform all of the substantial and material duties pertaining to his or her regular occupation, or words of similar import.

A policy may further provide coverage for “partial disability,” which is typically defined as the insured’s inability to perform one or more but not all of the essential duties of his or her employment or occupation.

Disability policies normally require that any claimed disability occur while the policy is in effect or within a specified time after any claimed accident or injury.

Here are a few examples of cases that have been litigated regarding disability policies and how the courts look at these cases.

In a 2003, Texas Supreme Court opinion, Provident Life and Ac. Ins. Co. v. Knott, the Court read the policies in question defining the term “total disability” to mean that the insured must, in order to be considered totally disabled under the policies, be unable to “perform all of the important daily duties of his occupation.”  The court then held that the trial court’s granting of summary judgment in favor of the insurer was appropriate given that the insured, a gynecologist seeking benefits for total disability under those policies was able to see patients, perform surgery, consult with other physicians and perform administrative duties.

In a 2002, United States 5th Circuit opinion, Lain v. UNUM Life Ins. Co. of America, a long-term disability policy that denied disability in part as the inability to perform “each of the material duties” of the insured’s regular occupation required only that the insured be unable to perform any single material duty of her occupation in order to be considered disabled, not that she be unable to perform all duties of that occupation.  In the case, no concrete evidence disability insurer’s determination of nondisability for insured who suffered recurring severe chest pains, while overwhelming evidence supported disability claim, warranting benefit award under ERISA civil enforcement provision: the insured’s time at home doing research on her medical condition did not equate to ability to practice law, as insurer contended; insurer focused on certain “normal” test results to support its finding, but test results were primarily abnormal and also could not clinically measure insured’s pain; and insurer’s reliance on insured’s failure to seek psychiatric care prior to ceasing employment was misguided since her disability was physical.

Insurance lawyers who handle disability income policies will see two types of policies.

One is the policy purchased through employment of provided by the employer.  The other type is the type purchased independent of employment, usually through an independent agent or in response to advertisements.

Those purchased through employment by the employee will often times be ERISA policies.  ERISA stands for Employee Retirement Income Security Act.  ERISA policies are governed by Federal law.  All other types of disability income policies are governed by State law.  ERISA policies are in a classification all their own.  This blog is not discussing ERISA policies and a person needs to know which type is at issue.

As is normal, an insurance company will remove a case to federal court anytime they can.  When an insured sues parties besides the insurer, the insurance company claims the joinder of the other party is fraudulent.  To often the insurer wins this removal battle.  Here is a case where the insured won the removal battle.

The case is a 2018 case styled, Ramona L. Smith v. Government Employees Insurance Company and R&M Towing and Recovery.  The case is from the Eastern District of Texas.

Smith’s husband was killed in an accident.  R&M towed Smith’ vehicle.  Smith contends R&M agreed to maintain possession of the vehicle while she pursued a civil action against the manufacturer.  R&M subsequently released the vehicle to GEICO.  She then contacted GEICO and reached an agreement for GEICO to ensure the continued storage and preservation of the vehicle.  GEICO then sold the vehicle for salvage without Smith’s permission and allowed it to be destroyed.

Most people would agree that reading legal papers can be confusing.  As it relates to life insurance policies the law in favor of the insured.  This is illustrated in the Houston [14th Dist.] Court of Appeals opinion, Parchman v. United Liberty Life Insurance Co., a 1982 opinion.

The Parchman case stands for the proposition that an incontestability clause cannot be more onerous than the clause that is prescribed by the Insurance Code, Section 1131.104 and 705.104.  These statutes do not specify whether the policy date or the effective date is considered its date; this creates an ambiguity that must be construed against the insurer.  And an insurer may not place a more onerous incontestability clause in the policy than the one prescribed by statute, although in may provide a shorter period than that prescribed.

In the Parchman case, the policy date in question was October 10, 1977, and the effective date was either July 20, 1977, or August 6, 1977, depending on whether a medical examination was required and completed.  Using the policy date of October 10 as the date that the clause began to run provided for a longer period than using the effective date of July 20 or August 6.  Thus, the policy’s incontestability clause was more onerous than the one prescribed by statute, so the statute prevailed, and the policy date in the incontestability clause was construed to mean the effective date.  In the case, the two year period began running on the earlier effective date rather than on the later policy date.

One of the issues confronted by life insurance lawyers deals with situations where the life insurance company is claiming misrepresentation in the policy application and as a result of the misrepresentation, coverage is denied.  A 1972 opinion from the Texas Supreme Court is language and law that life insurance lawyers need to know and understand.  The case is styled, The Minnesota Mutual Life Insurance Company v. Ethel C. Morse, Executrix et al.

This case was tried under an agreed statement of facts by which it was agreed that James K. Morse was neither able to perform, nor expected to resume, the usual duties of his livelihood at any time after October 29, 1962.  However, it has been held that Minnesota Mutual is liable to the extent of the deposits and loans made subsequent to the original issuance of these policies because the incontestability clauses in those policies bar the company from raising the disability defense.

The incontestability clause in policy no. 4666–W states: ‘This policy shall be incontestable two years from its date of issue.’ Policy no. 4666–G provides: ‘The validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue . . ..’ All premiums, computed on the increased balances, have been paid on these policies up to the date of Morse’s death.  Both policies had been in effect for more than two years when he died in 1967.  Petitioner did not contest coverage of the deceased prior to his death.

Attorneys who handle insurance cases in Fort Worth and around Texas will want to read this 2018, opinion from the U.S. District Court, Eastern Texas, Sherman Division.  It is styled, Bradley Sanson v. Allstate Texas Lloyd’s.

This situation deals with property that was substantially destroyed in a storm.  Allstate was the insurer.  The insureds were Bradley and Vicki Sanson.  Bradley submitted a claim and after attempts to settle the claim were unresolved, Bradley filed a suit alleging breach of contract, and violations of the Texas Insurance Code among other causes of action.

Allstate filed a Rule 12(b)(7) motion to dismiss based on Bradley failing to join a party under Rule 19 .  Under a Rule 12(b)(7) motion to dismiss the Court makes two inquiries under Rule 19.  The Court must first determine under Rule 19(a) whether a person should be joined in the lawsuit.  If joinder is warranted, then the person will be brought into the lawsuit.  But if such joinder would destroy the court’s jurisdiction, then the court must determine under Rule 19(b) whether to press forward without the person or to dismiss the litigation.  Allstate has the burden of showing that Vicki Sanson is a necessary and required party as they allege.

Dallas insurance attorneys will want to read this 2018, opinion from the San Antonio Court of Appeals.  It is styled, Avalos v. Loya Insurance Company.

The case discusses in depth the “eight corners rule” and how courts look at this rule in determining whether or not an insurer has a duty to defend a lawsuit.  The rule takes its name from the fact that only two documents – the insurance policy and pleading – are relevant to the determination of the duty to defend.  Under the eight-corners rule, an insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.

When applying the eight-corners rule, the court is tasked with resolving all doubts regarding the duty to defend in favor of the existence of a duty and liberally construe the allegations in the petition in favor of the insured.  Even if the allegations in the petition are groundless, false, or fraudulent, an insurer is obligated to defend.  The duty to defend is not affected by facts that may be ascertained before suit or developed during the course of the litigation.  Thus, according to the 2009, Texas Supreme Court opinion styled, Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., facts outside the pleadings are not material to the determination of the duty to defend even if those facts directly contradict the allegations in the underlying petition.