Delay In Paying Claim

Most Saginaw insurance lawyers have had a client to call and complain about an insurance company to delay in paying a claim. This is often a violation of the Prompt Payment of Claims Act. The U.S. District Court, Northern District of Texas, Dallas Division issued an opinion in August of 2015, that in part, explains how that Act applies. The opinion is styled, Mainali Corporation v. Covington Specialty Insurance Company, et al. This is a case that was filed in State Court and removed to Federal Court by Covington based on diversity jurisdiction. Mainali was attempting to have the case remanded to the State Court.
This lawsuit arises in connection with a fire that damaged Mainali’s property, a Chevron station and convenience store. According to Mainali’s original petition, Covington insured the Property under a policy that covered fire damage and business interruption losses; Covington assigned Engle Martin and Associates, Inc. as the adjustment company to oversee the claims adjustment process; and Engle Martin assigned Summers as the individual field adjuster. Mainali alleges that Summers failed to conduct a reasonable investigation, denied coverage for damage to the Property and business losses, and underestimated the damage; after underestimating the damage, Summers and Engle Martin reduced the amount payable to Mainali under the Policy; relying on Summers’ inadequate investigation and conclusions regarding the damage, Covington agreed to pay only a portion of the amount due on the claim; and because of Covington’s refusal to pay for repairs and business losses, Mainali was unable to reopen the Chevron station and convenience store, causing Mainali to suffer additional damage in the form of lost business income. Mainali also alleges that Covington, Engle Martin, and Summers failed to conduct a reasonable investigation of Mainali’s claim, thereby violating Texas Insurance Code, Section 541.060(a)(1); failed to attempt to settle the claim in a fair manner, even though they were aware of their liability under the Policy, thereby violating Section 541.060(a)(2)(A); failed to provide prompt and reasonable explanation for the denial of the claim, thereby violating Section 541.060(a)(3); refused to pay the claim without conducting a reasonable investigation of the claim, thereby violating Section 541.060(a)(7); misrepresented the Policy to Mainali by making an untrue statement of material fact, thereby violating Section 541.061(1); misrepresented the Policy to Mainali by failing to state a material fact necessary to make other statements not misleading, thereby violating Section 541.061(2); misrepresented the Policy to Mainali by making a statement that would mislead a reasonably prudent person to a false conclusion of material fact, thereby violating Section 541.061(3); failed to acknowledge receipt of the claim, thereby violating Section 542.055(a)(1); failed to timely commence an investigation of the claim thereby violating Section 542.055(a)(2)-(3); failed to notify Mainali in writing of the acceptance or rejection of the claim not later than the 15th business day after receipt of all items, statements, and forms, thereby violating Section 542.056(a); delayed payment of the claim, thereby violating Section 542.058(a). Plus other causes of action.
As it relates to the last four allegation, violations of the Texas Prompt Payment of Claims Act, the Court stated, “Summers cannot be held liable under any section of Chapter 542. Chapter 542 only applies to specifically listed “insurers,” and Summers, an adjuster, is not an insurer.”
This Court upheld all the other complaints by Covington and refused to remand the case to the State Court.