Insurance policies are of two types of it relates to the coverage of a claim. One is called an “occurrence” policy.  An occurrence policy covers losses that occur during the policy period.  The other type of coverage is a “claims made” policy.  A claims made policy covers claims that are made only while the policy is effective irregardless of when the event/claim actually occurred.

This distinction was discussed in 2019, Amarillo Court of Appeals opinion styled, In Re Landmark American Insurance Company.  This is a mandamus case.

Landmark, the insurer, petitioned the appeals courts seeking an Order for the Judge in the underlying case to vacate his Order allowing a deposition of a Landmark representative.  This appeals courts conditionally granted the writ.

In an ERISA case, the plan administrator, upon request, is required to give a copy of the claims file to the insured.  The most common way this occurs is when a claim is denied, the plan administrator informs the insured of the denial in a written letter and in the letter the insured is informed of their right to an appeal and a copy of the claims file.  The insured should then request a copy of that file.

In a recent case out of the Southern District of Texas, Houston Division, the insured claimed they did not timely receive a copy of the claims file and thus, argued that the statute of limitations on their claim was tolled until such time that she received the claims file.  This case is styled, Cynthia Sternberg v. Metlife Insurance Company.

In this case, the insured has clearly let the statute of limitations pass for her appeal.  These limitations were made clear in the policy.  So, the insured made arguments regarding the tolling of the limitations period.

Statute of Limitations issues are not usually seen in ERISA cases, but here is one.  This is a 2019, opinion from the Southern District of Texas, Houston Division.  It is styled, Cynthia Sternberg v. Metlife Insurance Company.

This case is currently before the Court on a Rule 12(b)(6) Motion to Dismiss filed by Metlife.  The Court granted the motion.

Sternberg filed for short term disability (STD) benefits from her employers claims administrator.  The STD benefits were granted.  Metlife is the claim administrator and it issued the group policy that funds the benefits under the Plan.  Sternberg later, filed for long term disability (LTD) benefits.  The claim for LTD was denied.

How do you calculate the beginning date and end date for violation of the Texas Prompt Payment of Claims Act?  The start date was calculated in the previous post.  Here is a discussion on the end date for calculation.

The statute does not say when the penalty stops accruing.  No court has addressed this specific issue.  Several courts have simply held that the penalty accrues from the date of the violation up to the date of judgement, without any analysis for choosing that date.  This was done in the 2010, 5th Circuit opinion, Great American Insurance Co. v. AFS/IBEX Financial Services, Inc.  Also in the 2004, Texas Supreme Court opinion, Texas Farmers Insurance Co. v. Cameron.  Other courts have held that the penalty accrues until the insurer settled.  This was seen in the 2000, San Antonio Court of Appeals opinion, Cater v. United Services Automobile Ass’n and in the 1196, Texarkana Court of Appeals opinion, Southland Lloyd’s Insurance Co. v. Tomberlain.  One approach is to end the accrual of the 18% damages on the day of the judgment.  This is the approach taken in Mid-Century Insurance Co. v. Barclay, which is from the 1994, opinion of the Austin Court of Appeals.  The statute itself, neither embraces nor rejects this approach.

Another approach would be to continue accruing the 18% damages until the insurer fully discharges its liability, including payment of the 18% damages and attorney’s fees.  An argument for this approach is that, presumably, the Legislature intended the 18% damages partially to compensate claimants for the delay and partially to punish insurers for violations.  If the 18% damages accrue only up to the time of judgment, this would mean that while the insurer is contesting liability, perhaps even in good faith and reasonably, these extra damages would accrue, but once the claim is finally established, the incentive to pay would be removed.  Arguably, it makes no sense to compensate the claimant when his claim is disputed, but once it is certain to no longer compensate him.  Likewise, it makes no sense to punish the insurer for withholding a disputed claim, but to no longer punish it for withholding an established claim.  Case law makes clear the statute recognizes that the insurer denies the claim at its risk.  If the insurer gambles and loses, it pays these additional damages.  Similarly, if the insurer wants to gamble on continuing to contest the claim once judgment has been rendered, that choice may bear financial consequences.  Interestingly, in the Cater case above, the court ended the penalty on the date the claim was paid, to shorten the time period, presumably as a reward or encouragement for the insurer to pay the claim.  Conversely, the penalty should be extended when the insurer continues to refuse to pay, especially after the judgment is rendered.

When does the time to start calculating the time a payment is due under an insurance policy claim?  Good question but not an easy answer.

The penalty for violation of the Texas Prompt Payment of Claims Act is an 18% penalty on the amount due and owing on the claim according to Insurance Code, Section 542.060.  However, the date that amount accrues is not so easy.

The statute does not say when the penalty accrues.  On approach would be to begin accruing the 18% damages from the date the claim was received.  This focuses on the length of time the claimant has been without his or her money, instead of focusing on the length of time the insurer has been in error.  This approach encourages prompt payment of claims.  As the claim proceeds towards payment, the insurer’s incentive to pay the claim would increase.  Any error, even at the last stage, would accrue damages at 18%, retroactive to the date the claim was filed.  This approach has the benefit of making payment of the claim more important to the insurer, even as the passage of time makes payment of the claim more important to the insured.

Uninsured motorist (UM) claims are in a category unto themselves.  This is illustrated in a 2019, opinion styled, Ali Duhaly v. The Cincinnati Insurance Company.  The opinion is from the Southern District of Texas, Houston Division.

Duhaly sued Cincinnati alleging breach of contract, among various other causes of action.  Duhaly worked for an employer who was insured by Cincinnati for (UM) coverage.  Duhaly was injured when a passenger in a vehicle owned by the employer.  The policy states that Cincinnati will “pay all sums the insured is legally entitled to recover as compensatory damages from the owner or operator of … an uninsured motor vehicle” to which ” no liability bond or policy applies at the time of the accident” or an underinsured motor vehicle to which the insurance coverage is insufficient to cover the damages.

Duhaly sued Cincinnati in State Court and Cincinnati timely removed the case to Federal Court.  Cincinnati filed a motion for summary judgment as to Duhaly’s breach of contract claim.

Here is a situation where a lawsuit to which Texas Insurance Code, Section 542.006 applies.  The remedy this Court applied to the case appears to be a distinction without a difference.

The case is a 2019, Southern District of Texas, Laredo Division, opinion.  The case is styled, Axel Brokers, Inc. v. United Fire & Casualty Company and David S. Walton.

This case concerns alleged liability for storm damage to a commercial building insured by United Fire.  Axel sued United Fire, the insurer, and Walton, the adjuster, for various violations of the Texas Insurance Code.

Here are some new laws enacted in the State of Texas that went into effect on September 1, 2019.  There were several transparency and consumer protection bills that were passed in the wake of Hurricane Harvey.  The most significant bills were related to flood, wind, and hail, although significant legislation related to adjusters was also passed.

Senate Bill (SB) 442 requires any insurance company that issues residential property insurance policies without coverage against flood loss to provide written notice to the insured.  This bill gives the Texas Insurance Commissioner rule making authority to issue the form and content of the notice.

House Bill (HB) 1306 provides for additional flood coverage access under insurance policies issued by surplus lines insurance companies.  Surplus lines coverage is only to be used if the full amount of coverage cannot be obtained in the Texas market.

Bad Faith insurance claims often involve allegations of some sort of fraud by the insurance company and / or the adjuster handling the claim.  The Southern District of Texas, McAllen Division, issued an opinion recently dealing with allegations of fraud against an insurance company.  The opinion is styled, Cesarea Trevino v. Allstate Vehicle And Property Insurance Company.

After a hail/windstorm event, Trevino filed a claim with Allstate for alleged property damage.  Trevino sued for Texas Insurance Code violations regarding misrepresentation, among other things, and in response, Allstate filed a partial motion to dismiss the misrepresentation claims.

In reviewing Allstate’s motion to dismiss, the Court pointed out that Federal Rule of Civil Procedure, Rule 9(b) imposes a heightened set of pleading requirements when the claim in question is grounded in fraud. The Fifth Circuit Court of Appeals has ruled that Rule 9(b) requires “specificity as to the statements (or omissions) considered to be fraudulent, the speaker, when and why the statements were made, and an explanation why they are fraudulent.”  Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not and therefore applies to statutory claims which are based on allegations of fraud.  Claims alleging violations of the Texas Insurance Code are subject to the requirement of 9(b).

ERISA has it’s own set of rules and regulations and is unlike normal insurance that is governed by State laws and the Texas Department of Insurance.

Here is a 2019, opinion from the Eastern District of Texas, Sherman Division, that deals with ERISA and a claim for Long Term Disability (LTD) benefits.  The opinion is styled, Xien Huang Napodano v. Ericsson Inc. Short Term Disability Plan.

On August 22, 2017, Napodano resigned from his job by leaving a note on the desk of his boss and a few days later applied for LTD benefits.  He was informed that he had to first apply for Short Term Disability (STD) benefits first, before being eligible for LTD benefits.  He then filed for STD benefits.