Articles Posted in Bad Faith Insurance

Well, Insurance Lawyers, here it is happening again.  Knowing the little ways to keep a lower dollar case out of Federal Court are just too simple for it to happen again and again.  This 2020, opinion is also from the Southern District, Houston Division, and is styled, Michael Dyll and Remi Dyll v. Palomar Specialty Insurance Company.

The Dylls sued Palomar in State Court and Palomar properly removed the case to Federal Court pursuant to 28 U.S.C., Section 1441(a).  A defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  The operative facts and pleadings are evaluated at the time of removal.

Federal Courts have jurisdiction when the parties are from different states and the amount in controversy exceeds $75,000.  The amount in controversy is ordinarily determined on the basis of the sum demanded in good faith in the initial pleading.  A demand is made in bad faith if its purpose is to defeat Federal jurisdiction.  The removing defendant must show by a preponderance of the evidence that the amount in controversy exceeds $75,000.  A Plaintiff must make a showing that his recovery will not exceed the amount stated in the complaint if the amount is less than $75,000.  To make such a showing of legal certainty, Texas plaintiffs must file a binding stipulation or affidavit with the original state petition.  A stipulation filed after removal is irrelevant to the court’s analysis.

Insurance lawyers should know ways that work to stay out of Federal Court.  Not knowing how to properly plead the case will result in the case being in Federal Court.  This is illustrated in a January 2020 opinion from the Southern District of Texas, Houston Division, styled, Mario Rodriguez v. Ocean Harbor Casualty Insurance Company.

Mario had filed suit in State Court based on a property claim dispute with Ocean Harbor.  Ocean Harbor removed the case to this Federal Court based on diversity jurisdiction.  Mario filed this motion to remand.

When a defendant removes a case to Federal Court the defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  Operative facts and pleadings are evaluated as they exist at the time of removal.

Lawyers who handle insurance claims have to know the pleading requirements for alleging fraud when a lawsuit ends of in Federal Court.  Otherwise, the fraud allegations can be thrown out of Court.  This is illustrated in a February 2020 opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Nancy Roberson v. Allstate Vehicle and Property Insurance Company.

This is a claim for roof damage alleged to have resulted from storms in Houston.  Roberson had filed two previous lawsuits which she had voluntarily dismissed.  In this third lawsuit, Allstate has moved for summary judgment and for a judgment on the pleadings.  This Court granted the motion for summary judgment in favor of Allstate.

Roberson’s common law fraud claim must satisfy Federal Rule of Civil Procedure 9(b).  This Rule requires a plaintiff to state the circumstances of an alleged fraud with particularity.  The elements of Texas common law fraud are (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.  Roberson must state the who, what, when, where, and how of the alleged fraud by pleading the time, place, and contents of the false representation, as well as the identity of the person making the misrepresentations and what that person obtained thereby.

Uninsured motorist protection (UIM) historically has been its on little niche of the law that was not purely tort law or purely contract law.

Creative attorneys have recently been having success seeking UIM claims by way of a Declaratory Judgment Action.  The most recent case is from the Corpus Christi Court of Appeals and is styled, Allstate Fire and Casualty Insurance Company and Allstate Insurance Company v. Jesus Inclan.

Inclan sued Reynaldo Sanchez, the uninsured driver, and Allstate for injuries Inclan sustained in a car wreck with Sanchez.  There were offers made and eventually Inclan sought declaratory relief and attorney fees under the Uniform Declaratory Judgments Act (UDJA) pursuant to the Texas Civil Practices & Remedies Code, Section 37.001 – .011.

Insurance cases in Federal Court require the pleadings to be substantive.  This is seen in a 2019, decision from the Southern District of Texas, Corpus Christi Division.  The decision is styled, Alvira Blue v. Allstate Vehicle and Property Insurance Company.

Allstate filed a motion with the Court requesting that Blue’s claims for misrepresentation under Texas Insurance Code, Section 541.060(a)(1), be dismissed.

This Court granted the motion and discussed.

Insurance lawyers know that if a jury is convinced of the wrong an insurance company has committed that there is a chance to recover a trebling of the actual damages in the case.  So how does that work?  This is discussed in a 2019, opinion from the Texas First Court of Appeals.  The opinion is styled, Certain Underwriters At Lloyd’s, London, Syndicate Numbers 2020, 1084, 2001, 457, 510, 2791, 2987, 3000, 1221, 5000 And Navigators Insurance Company UK v. Prime Natural Resources, Inc.

The facts of this case can be read by reading the opinion.  The case was tried to a jury and the jury found in favor of Prime.  The jury also awarded treble damages based on the conduct of the insurance companies.  The focus here is on how the Court dealt with the issue of treble damages.

As a result, Underwriters argues that even if Prime were entitled to recover additional Policy benefits, it is not entitled to additional damages under Chapter 541 of the Insurance Code.

What is “bad faith” in the context of insurance?  There is a lot of material on this subject.  Here is a little to know about.

In the 1997, Texas Supreme Court opinion styled, Universe Life Ins. Co. v. Giles, adopted the standard that an insurer breaches its duty of good faith and fair dealing by “failing to attempt in good faith to effect a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.”  The current statutory version of this is Texas Insurance Code, Section 541.060(a)(2)(A).

The statutory standard adopted in Giles takes the place of the common-law standard for unreasonably denying a claim or unreasonably delaying payment.  The court’s analysis in Giles also supports adopting the statutory standard for failing to conduct a reasonable investigation.  That standard is found at Texas Insurance Code, Section 541.060(a)(7), which prohibits “refusing to pay a claim without conducting a reasonable investigation with respect to the claim.”

Allegations of fraud against an insurance company must be specific when a case is in Federal Court.  This is illustrated in a recent case from the Western District of Texas, San Antonio Division.  The case is styled, Maria Quintero v. Allstate Vehicle And Property Insurance Company.

The claim against Allstate arises from a hail and windstorm that is alleged to have caused property damage to Maria.  The assertion is that Allstate breached the insurance contract, misrepresentation, and fraud arising under the Texas Insurance Code.

Allstate filed a motion to dismiss based on Maria’s failure to satisfy the heightened pleadings standards under Rule 9(b) and the general pleading standards under Rule 8.

The standard for recovery of bad faith or extra-contractual damages is discussed in this 2019, Northern District of Texas Dallas Division opinion styled, Carolyn Kee v. Safeco Insurance Company of Indiana.

Kee sued her homeowner insurer, Safeco, for improperly adjusting her claim for damages.  Safeco’s adjuster adjusted the claim saying the amount of damages did not exceed the deductible under Kee’s policy.  Kee filed suit against Safeco and then Safeco invoked the appraisal clause in the insurance contract.

After the appraisal came back in favor of Kee, Safeco paid the appraisal amount and filed a motion for summary judgement on Kee’s claims.  The court refused the motion as it relates to the alleged Prompt Payment of Claims cause of action but on the claim for extra-contractual damages, the motion was granted.  In discussing the case the court stated as follows.

Bad Faith insurance claims often involve allegations of some sort of fraud by the insurance company and / or the adjuster handling the claim.  The Southern District of Texas, McAllen Division, issued an opinion recently dealing with allegations of fraud against an insurance company.  The opinion is styled, Cesarea Trevino v. Allstate Vehicle And Property Insurance Company.

After a hail/windstorm event, Trevino filed a claim with Allstate for alleged property damage.  Trevino sued for Texas Insurance Code violations regarding misrepresentation, among other things, and in response, Allstate filed a partial motion to dismiss the misrepresentation claims.

In reviewing Allstate’s motion to dismiss, the Court pointed out that Federal Rule of Civil Procedure, Rule 9(b) imposes a heightened set of pleading requirements when the claim in question is grounded in fraud. The Fifth Circuit Court of Appeals has ruled that Rule 9(b) requires “specificity as to the statements (or omissions) considered to be fraudulent, the speaker, when and why the statements were made, and an explanation why they are fraudulent.”  Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not and therefore applies to statutory claims which are based on allegations of fraud.  Claims alleging violations of the Texas Insurance Code are subject to the requirement of 9(b).