Hail Damage Claims And Delay In Payment

Fort Worth insurance lawyers handling hail damage claims as well as any other insurance claims need to read this 2004, Texas Supreme Court opinion. It is styled, Republic Underwriters Insurance Co. v. Mex-Tex, Inc.
This is a first part claim. Following a hail storm Mex-Tex, Inc. notified its property insurer, Republic, of damage to the roof of Signature Mall, a retail shopping center that Mex-Tex owned. Mex-Tex claimed that the roof had been destroyed and should be replaced. Republic immediately investigated the claim but disputed the amount of damage attributable to hail. The roof had leaked for a long time, and months before the storm Mex-Tex had obtained estimates to replace it. While Republic was still investigating the claim, it learned that Mex-Tex had retained a contractor to go ahead, without waiting on Republic, and replace the roof at a cost of $179,000 with one of the same kind, but which would be fixed to the building mechanically rather than by ballast (that is, rocks) as the old roof had been. Republic’s first response was to offer what it believed was the cost to repair the minimal hail damage, $22,000, as what it termed “partial payment” of Mex-Tex’s claim, but when Mex-Tex rejected that offer, Republic sent Mex-Tex a check on August 20, 1999, including $145,460, an amount representing what Republic’s engineer had determined was the cost of replacing the mall’s roof with an identical one, attached by ballast.
Mex-Tex returned the check. Republic re-sent it. Mex-Tex re-returned it. Republic then replied that it would hold the money until Mex-Tex accepted it, which Mex-Tex did on October 12, 2000, as partial payment of its claim. Meanwhile, Mex-Tex had sued Republic for breach of the policy and delay penalties under the Prompt Pay Statute.  After trial the court found that Republic’s failure to pay Mex-Tex the $179,000 was a breach of Republic’s policy obligation to replace the roof with one of “like kind and quality”-despite the fact that Mex-Tex’s cost exceeded the replacement cost of an identical roof by $33,540-and awarded Mex-Tex that difference in damages. The court also awarded Mex-Tex 18% per annum on $179,000 from November 4, 1999, the date the court determined that Republic should have tendered that amount, which was 75 days after it tendered $145,460, to the date Mex-Tex accepted that partial payment almost a year later, and thereafter on the $33,540 difference until judgment.  
Republic argued that the delay penalty imposed by the Prompt Pay Statute should have been calculated only on the $33,540 difference between the payment it tendered Mex-Tex and the full amount Mex-Tex claimed, from the date of the tender until Mex-Tex accepted it.
Mex-Tex argues that the penalty should be assessed if an insurer’s tender of partial payment of a claim is not unconditional. The Court agreed. Otherwise, an insurer’s insistence on a release to which it is not ultimately entitled delays payment, again impairing the statute’s purpose. Here, the trial court found that Republic did not tender $145,460 unconditionally but “tried to enforce a full and final release of [the claim] when only a partial payment had been made.”
In all cases where a claim is made pursuant to a policy of insurance and the insurer liable therefor is not in compliance with the requirements of this article, such insurer shall be liable to pay the holder of the policy, or the beneficiary making a claim under the policy, in addition to the amount of the claim, 18 percent per annum of the amount of such claim as damages, together with reasonable attorney fees. If suit is filed, such attorney fees shall be taxed as part of the costs in the case. The statute defines “claim” as follows: “claim” means a first party claim made by an insured or a policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract that must be paid by the insurer directly to the insured or beneficiary. The emphasized phrase, “that must be paid”, limits “claim” to the amount ultimately determined to be owed, which of course would be net of any partial payments made prior to that determination. This encourages insurers to pay the undisputed portion of a claim early, consistent with the statute’s purpose “to obtain prompt payment of claims made pursuant to policies of insurance.”