Fort Worth Court Interpreting An Insurance Policy

Venture Encoding Service, Inc. v. Atlantic Mutual Insurance Company is a Texas Appeals Court case wherein the Fort Worth Court of Appeals made a decision in a dispute between a policy holder and its insurance company. The dispute was one of policy interpretation.

The basic facts were that Venture, a printing company, made a printing error in the publication of 328,799 coupon books. The error was the printing of an incorrect lock box payment return address. The cost of re-printing and re-mailing the coupons books was $122,888.

Venture, who had a commercial general liability policy and an errors and omissions policy with Atlantic, made a claim for the $122,888. Atlantic denied the claim stating that the wording of the policy did not cover the type of loss that was incurred by Venture. The wording of the policy used to describe “property damage” was what was at issue. Plus, Atlantic cited an exclusion in the policy as another reason for denying the claim.

When an insurance company denies coverage on a claim and a lawsuit is filed, the insurance company has the burden of proof as to its reasons and defenses for denying the claim. The Texas Insurance Code, Section 554.002, is where the law can be found that puts this burden on the insurance company.

In general, this meant in this case that Venture had the initial burden of showing that there was coverage under the insurance policy and Atlantic had the burden of proving the applicability of the exclusion that it says permitted it to deny coverage. Once Atlantic proved the applicability of the exclusion, the burden of proof shifted back to Venture to demonstrate they had coverage under an exception to the exclusion.

Is the above confusing? Yes, even if you deal with these issues on a regular basis. Here, there was a fight over what “property damage” meant and a fight over whether exclusions written in the policy applied, taking into account the facts of the claim. Venture won this fight and was awarded the money, plus attorneys fees, and court costs.

The main idea for the reader to keep in mind is that when an insurance company denies a claim for “any” reason, they should get an experienced Insurance Law Attorney to review their case. It is routine for an insurance company to deny a claim and in the denial letter highlight a portion of the policy they believe justifies their denial of the claim. This letter is meant to seem to be a final determination and that pursueing the matter further is a waste of time.

It is common for an insurance company to take policy language out of context to justify their denial of a claim. It is also common for an insurance company to cite an exclusion that simply is not applicable to the facts of the claim. Get your own opinion before accepting the reasoning and statements of the insurance company.