State Bar of Texas
Texas Trial Lawyers Association
College of the State Bar of Texas

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Insurance lawyers know that suing an adjuster when it can be done, is preferable to not suing the adjuster.  There are reasons for this that have been discussed in previous blogs.  The Southern District of Texas, Brownsville Division, had a case dealing with this issue in February 2020.  The style of the case is, Faith Pleases God Church Corporation v. Philadelphia Indemnity Insurance Company, et al.

Church sued Philadelphia and VeriClaim, Inc. and adjuster John Adame stemming from underpayment of the Church’s claim for property damage resulting form a storm.  Church filed a claim with Philadelphia who assigned VeriClaim to the claim and Adame is their employee who investigated the claim.

Church alleges VeriClaim and Adame prepared an undervalued damages report allowing Philadelphia to underpay the claim.

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Insurance lawyers know that a party must have an insurable interest in the insured property to recover under an insurance policy.  This is made clear in the 1993, Dallas Court of Appeals opinion styled, Jones v. Texas Pac. Indem. Co.  It is not necessary that the party owns the property to have an insurable interest.  An insurable interest is an exposure to financial loss possessed by a person giving rise to a legal interest that the insured possesses a right to protect.  An insured who owns a house or auto therefore has an insurable interest in the house or auto because the insured would be hurt financially if the house or auto were damaged or destroyed.  This was discussed in the 1963, Texas Supreme Court opinion styled, Smith v. Eagle Star Ins. Co.  An insurable interest does not constitute an entitlement to insurance because the insurer is permitted to underwrite and price the risk sought to be insured.  Even if an insurance policy is issued, it cannot be enforced by a party who has no insurable interest, even if that party is a named insured.  This was discussed in the 1972, Amarillo Court of Appeals opinion styled, North River Ins. Co. v. Fisher.

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Well, Insurance Lawyers, here it is happening again.  Knowing the little ways to keep a lower dollar case out of Federal Court are just too simple for it to happen again and again.  This 2020, opinion is also from the Southern District, Houston Division, and is styled, Michael Dyll and Remi Dyll v. Palomar Specialty Insurance Company.

The Dylls sued Palomar in State Court and Palomar properly removed the case to Federal Court pursuant to 28 U.S.C., Section 1441(a).  A defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  The operative facts and pleadings are evaluated at the time of removal.

Federal Courts have jurisdiction when the parties are from different states and the amount in controversy exceeds $75,000.  The amount in controversy is ordinarily determined on the basis of the sum demanded in good faith in the initial pleading.  A demand is made in bad faith if its purpose is to defeat Federal jurisdiction.  The removing defendant must show by a preponderance of the evidence that the amount in controversy exceeds $75,000.  A Plaintiff must make a showing that his recovery will not exceed the amount stated in the complaint if the amount is less than $75,000.  To make such a showing of legal certainty, Texas plaintiffs must file a binding stipulation or affidavit with the original state petition.  A stipulation filed after removal is irrelevant to the court’s analysis.

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Insurance lawyers should know ways that work to stay out of Federal Court.  Not knowing how to properly plead the case will result in the case being in Federal Court.  This is illustrated in a January 2020 opinion from the Southern District of Texas, Houston Division, styled, Mario Rodriguez v. Ocean Harbor Casualty Insurance Company.

Mario had filed suit in State Court based on a property claim dispute with Ocean Harbor.  Ocean Harbor removed the case to this Federal Court based on diversity jurisdiction.  Mario filed this motion to remand.

When a defendant removes a case to Federal Court the defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  Operative facts and pleadings are evaluated as they exist at the time of removal.

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Lawyers who handle insurance claims have to know the pleading requirements for alleging fraud when a lawsuit ends of in Federal Court.  Otherwise, the fraud allegations can be thrown out of Court.  This is illustrated in a February 2020 opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Nancy Roberson v. Allstate Vehicle and Property Insurance Company.

This is a claim for roof damage alleged to have resulted from storms in Houston.  Roberson had filed two previous lawsuits which she had voluntarily dismissed.  In this third lawsuit, Allstate has moved for summary judgment and for a judgment on the pleadings.  This Court granted the motion for summary judgment in favor of Allstate.

Roberson’s common law fraud claim must satisfy Federal Rule of Civil Procedure 9(b).  This Rule requires a plaintiff to state the circumstances of an alleged fraud with particularity.  The elements of Texas common law fraud are (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.  Roberson must state the who, what, when, where, and how of the alleged fraud by pleading the time, place, and contents of the false representation, as well as the identity of the person making the misrepresentations and what that person obtained thereby.

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ERISA stands for Employee Retirement Income Security Act.  When making an insurance claim related to employment, it is important to know it the claim is subject to ERISA, which is governed by Federal Law, or not ERISA, in which case the claim is governed by State Law.

Plus, there are employee benefit plans that would be governed by ERISA however, elements of the employee benefit plan may fall outside of ERISA.  This is discussed in a 2020 opinion from the Western District of Texas, Austin Division.  The opinion is styled, Stephen Burrell v. Metropolitan Life Insurance Company and Deloitte LLP.

Burrell’s lawsuit was for short term disability (STD) benefits that had been denied and for long term benefits (LTD) that had been denied.  This discussion will focus on the STD benefits claim.

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Almost all insurance policies contain a requirement that the insured submit to an examination under oath (EUO) as often as is necessary for the insurance company to complete its investigation of the claim.

EUO”S were the topic in a Western District of Texas, Austin Division, opinion recently.  The opinion is styled, AXO Staff Leasing, LLC v. Zurich American Insurance Company, McCreadie & McCreadie, Inc., and Lassiter Ware Insurance.

The lawsuit is an insurance coverage dispute between Zurich and AXO.  Briefly, AXO contends that its former Chief Financial Officer (CFO), John Herzer, embezzled $4.7 million, and that the loss is covered by the Zurich policy.

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Almost all insurance contracts contain appraisal clauses.  These clauses are discussed in a January 2020 opinion from the Southern District of Texas, McAllen Division.  It is styled, Erasmo Gonzalez v. Allstate Texas Lloyds.

In this case, the Court had urged the parties to discuss appraisal early in the case and both parties assured the Court that appraisal would not be necessary.  Months later, Erasmo invoked the appraisal provision in the insurance contract.  This Court Ordered the appraisal and discussed it’s reasoning.

The appraisal process determines the value of damages, and courts decide liability.  Absent illegality or waiver, the Texas Supreme Court has generally held in favor of enforcing appraisal clauses because denying the appraisal would vitiate the insurer’s right to defend its breach of contract claim.  An insured waives its right to appraisal where (1) the parties reached an impasse; (2) there was unreasonable delay between the point of impasse and the insured’s demand for appraisal; and (3) the insurer shows it has been prejudiced by such delay.  Waiver requires intent, either the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.

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Here is another one of those removal cases wherein the situation is a situation that will not occur very often.  This case is from the Northern District of Texas, Dallas Division, and is styled, Jeff Conkey and Shannon Mitchell v. Monica Corker, IAT Insurance Group Specialty, and Acceptance Indemnity Insurance Company.

In this case the Mitchell’s (Plaintiffs) filed a State Court lawsuit alleging violations of the Texas Insurance Code and the DTPA against IAT and Acceptance and conversion and trespass claims against Corker.  This Court sue sponte determined that it lacked subject matter jurisdiction and remanded to the State Court.

Plaintiffs owned property insured by IAT and Acceptance.  Allegedly, Corker entered the property and stole equipment belonging to the Plaintiffs.  The insurers denied the claim.

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