Alleging Insurance Code Violations

Fort Worth insurance lawyers who handle bad faith insurance claims will tell you that the paperwork filed with a court are important to keeping the case in court. This was illustrated by a recent Eastern District case. The style of the case is, Weidner v. Nationwide Property & Casualty Insurance Company. Here is the relevant information.
This is an appeal from a United States Magistrate Judge report. The rulings deals with a Rule 12(c) motion which is a civil procedure judgment on the pleadings. The Magistrate found:
Plaintiffs’ claims arising under the Texas Insurance Code suffer from the same limitations. Plaintiffs assert (merely by stating the statute number) that Nationwide made, issued, or circulated or caused to be made, issued, or circulated an estimate, circular, or statement misrepresenting with respect to a policy issued or to be issued: (A) the terms of the policy; (B) the benefits or advantages promised by the policy; or (C) the dividends or share of the surplus to be received on the policy. TEX. INS. CODE § 541.051(1). There are no facts alleged by the Plaintiffs to plausibly suggest that Nationwide misrepresented the terms of the policy, benefits or advantages of the policy, or dividends to be received under the policy. Plaintiffs also assert that Nationwide used a name or title of a policy or class of policies that misrepresents the true nature of the policy or class of policies. TEX. INS. CODE § 541.051(4). Again, there are no facts alleged to support this assertion. Plaintiffs also contend that Nationwide misrepresented Plaintiffs’ insurance policy by “(i) making an untrue statement of material fact. § 541.060(1); (ii) failing to state a material fact that is necessary to make other statements made not misleading, considering the circumstances under which the statements were made. § 541.060(2); (iii) making a statement in such a manner as to mislead a reasonably prudent person to a false conclusion of a material facts. § 541.060(3)” Plaintiffs fail to allege what misrepresentations or omissions they are referring to, in what manner the statements were made, and in what way Plaintiffs were misled by the statements.
The Magistrate Judge went on to find that in asserting a claim for violation of TEX. INS. CODE § 542.055, “Plaintiffs have not made any allegations to make this claim plausible.” Regarding Plaintiffs’ claim under TEX. INS. CODE § 542.056, the Magistrate Judge found that “Plaintiffs do not state any facts to make this claim plausible.”
The same is true for Plaintiff’s claims for violations of TEX. INS. CODE § 542.057, about which the Magistrate Judge noted that “Plaintiffs do not allege that Nationwide notified them under Section 542.056 that it was going to pay the claim or part of the claim. Plaintiffs allege the exact opposite – that Nationwide denied the claim.” There are simply no material facts in dispute regarding these claims because Plaintiffs failed to allege any. The court finds that it was not procedurally improper to consider the arguments made by Defendant presented in a Rule 12(c) motion.
Plaintiffs next object to the dismissal of their statutory claims due to a lack of evidence. Plaintiffs then recite other possible causes of loss, such as lightning strikes, the CSST gas line that was discovered with holes in it, and the mineral spirits that were found in the home after testing by Defendant’s experts. Plaintiffs contend that these “known facts” did not require Defendant to confer with their retained expert prior to making a determination on coverage.
Plaintiffs’ evidence, even if accepted as true, is not evidence that Defendant’s investigation was unreasonable. This evidence can only show that the experts Defendant relied on in conducting its investigation were wrong about the causation of the fire. Therefore, these facts are inapplicable to the extra-contractual issues that were before the court in Defendant’s Rule 12(c) motion, and are only applicable to the ultimate breach of contract dispute between the parties that will be resolved at a later time.
Plaintiffs next object to the dismissal of their statutory penalty interest claim under Texas Insurance Code § 542.060. Plaintiffs contend that “an insurance company’s good faith assertion of defense does not relieve the insurer of liability for penalties for tardy payment, as long as the insurer is finally judged liable”
The statutory language of Texas Insurance Code § 542.060 states:
If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter, the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney’s fees.
Plaintiffs assert that if Defendant is found to be liable for the claim, even if Defendant denied the claim in good faith, Defendant is still liable for penalties for tardy payment. The problem with this argument is that Plaintiffs ignore the fact that the Magistrate Judge found that Plaintiffs failed to allege sufficient facts to show that Defendant was not in compliance with the insurance code, and recommended dismissal of all of Plaintiffs’ claims. Thus, even if Defendant is found to be liable for the claim at trial, there can be no finding that Defendant was not in compliance with the Texas Insurance Code, because Plaintiffs failed to plead sufficient facts establishing such a claim. That is a requirement of the statute.
After careful consideration, the court concluded Plaintiffs’ objections are without merit and are, therefore, overruled.
This case serves as an excellent example why someone needs to seek the help of an experienced Insurance Law Attorney who also practices in Federal Court.