What Is A Defense For The Insurance Company In Paying A Claim Promptly

A Grand Prairie insurance attorney needs to be able to distinguish between legitimate requests for information by an insurance company and requests that are not so necessary for their investigation of a claim.
The Prompt Payment of Claims Act allows the insurance company to request information it reasonably believes will be required. Deadlines are then postponed while they wait for this information from the claimant. An unreasonable request by an insurance company will not postpone any deadlines and thus lead the insurance company to violate the statute regarding deadlines.
The Corpus Christi Court of Appeals issued an opinion in 2000, that provides so pretty good guidance on this issue. The style of the case is, Colonial County Mutual Insurance Company v. Valdez. Here is some relevant information.
Hector Valdez bought a car in November 1994, and arranged insurance for the car with Colonial. An employee of the insurance agency told Hector that the car was insured “against theft, against accidents, against medical expenses, everything concerning the insurance.” A few months after obtaining this insurance, Hector sold the car to his son, Rene Valdez. Rene obtained a loan from Mercantile Bank in order to make the purchase. Hector called the agency and told them Mercantile Bank would be calling them to make “changes” and “arrangements” on the insurance. Diego Luna testified that an employee of Mercantile Bank did call, and asked to verify insurance on the car for “a Mr. Valdez.” The bank was told that “Mr. Valdez” had insurance. Hector continued to pay insurance premiums on the car while Rene owned it. It is undisputed that Hector never told Colonial or the agency that he had sold the car to Rene. It is also undisputed that Hector was never informed, orally or in writing, that he could only insure the car if he owned it.
In November 1995 Hector’s policy was automatically renewed. On January 14, 1996 the car was stolen. Hector reported the theft and Colonial proceeded to investigate. During this investigation, Colonial discovered that Rene was the owner of the car. On March 19, 1996 Colonial sent Hector a letter informing him that “the handling of this claim is being conducted under a Reservation of Rights” because Colonial was investigating whether Hector had an “insurable interest” in the car. On April 5, 1996 Colonial filed a declaratory judgment action to determine whether Hector had an insurable interest in the car. In a summary judgment the trial court ruled that Hector did not have an insurable interest.
There was ultimately a judgment in favor of Valdez and Colonial appealed on many grounds. Only the “reasonable requests” are discussed here.
Colonial argued that it did not timely notify Valdez of acceptance, rejection, or the inability to accept or reject his claim because Valdez did not send to it all items, statements and forms that Colonial required in order to do so. Valdez argued that the terms “promptly” and “within a reasonable time” should be interpreted in light of the deadlines set out in the Texas Insurance Code. During the presentation of his case, Valdez presented evidence of the deadlines to the jury. If these deadlines apply, it is undisputed that Colonial failed to satisfy them. However, Colonial contends that these deadlines were never triggered because Valdez failed to provide all the materials and information requested in a letter sent to him by Colonial on January 17, 1996. The January 17 letter asked Valdez to provide:
(1) A completed Theft Statement form;
(2) A Power of Attorney Document;
(3) A completed Proof of Loss form;
(4) Copies of Vehicle Service Records;
(5) Recent Photographs of the vehicle;
(6) A copy of the Bill of Sale or a Licence Registration Receipt;
(7) Negotiable Title or a copy of the title;
(8) All sets of keys to the vehicle.
Valdez provided the Theft Statement form, the Power of Attorney, and the Proof of Loss form. He did not provide items 4-8.
Colonial argues that, because Valdez failed to supply these documents, it never received “all items, statements, and forms required by the insurer to secure final proof of loss.” The Court held that items 4-8 demanded by Colonial were not required to secure final proof of loss. Colonial presented no evidence and has offered no argument explaining why it required these materials. Common sense indicates that materials such as service records, sets of keys, and photographs of the vehicle are irrelevant to proving the loss of the vehicle. Therefore, Valdez’s failure to provide these materials did not excuse Colonial from complying with the deadlines. The jury could have rightfully concluded that Colonial’s failure to comply with these deadlines constituted failing to affirm or deny coverage within a reasonable time and failing to promptly provide the insured with an explanation for the denial of his claim. Thus, Colonials point of error was overruled.