Articles Posted in Claims Denial

Cooperation with the insurance company investigation of a claim is required under the insurance policy.  Failure to cooperate can result in the policy being rescinded and the claim denied.

The 1994, Amarillo Court of Appeals opinion, Andy Costely and Cathy Costley v. State Farm Fire And Casualty Company, illustrates the necessity of cooperation with the insurance company investigation of a claim.

In this case, State Farm was allowed to rescind a policy based on the insured failure to cooperate.  Cathy had her truck, tractor, and other personal property destroyed by a fire while it was parked on Andy’s father’s (Robert) property.  Andy and Cathy sued Andy’s father.  Later Robert sued Andy alleging the damage was due to the negligence of Andy.

Most insurance lawyers know that one way an insurance company tries to get away with refusing to pay on an insurance policy is to rescind the policy.  According to a 1931, Amarillo Court of Appeals opinion styled, Forrester v. Southland Life Ins. Co., the general principle is, prior to a loss an insurance company has the right to rescind the policy procured through mutual mistake or fraud.

As stated by the  Texas Supreme Court in a 1980 opinion styled Mayes v. Massachusetts Mut. Life Ins. Co., an insurance company may rescind a policy based on the insured’s misrepresentation, if the insurance company pleads and proves the following elements:

  1.  the making of the misrepresentation;

A 2017, opinion styled, Carrillo Funeral Directors, Inc. v. Ohio Security Insurance Company, et al, is another example of incorrect pleadings against an adjuster.  The case is from the Northern District, Dallas Division.

Carrillo suffered hail damage and made a claim against its insurer Ohio.  There was an under payment of the claim and Carrillo sued Ohio and the adjuster John Horvath for violations of the Texas Insurance Code, in State District Court.  Ohio timely removed the case to Federal Court asserting that Horvath was improperly joined in the lawsuit in an effort by Carrillo to defeat diversity jurisdiction.

28 U.S.C. section 1441(a) permits the removal of any civil action brought in a State court of which the district courts of the United States have original jurisdiction.  But only if the action could have been originally filed in federal court.  However, the removal statute must be strictly construed because removal jurisdiction raises significant federalism concerns.  As a result, any doubt as to the propriety of removal should be resolved in favor of remand.

What if it can be proved that the insurance company was wrong in denying coverage of a claim when a third party is suing the insured?

A June 2017, Texas Supreme Court opinion addresses this issue in the case styled, Great American Insurance Co. v. Hamel.  The issue in this case was, what constitutes a full adversarial trial.

In Texas, when someone is being sued and the person being sued cannot get their insurance company to provide a defense and pay the claim, and the person being sued believes his insurance company should be providing a defense and paying the claim, then when a judgment is taken against him, he can assign the claim he has against his insurance company to the person who sued him and obtained a judgment.

Here is a summary judgment case from the Eastern District, Sherman Division, where one of the causes of action is, negligent claims handling.  The case is styled, Yoram Avneri v. Hartford Fire Insurance Company.

Here, the Court had previously denied Hartford’s motion for summary judgement but is now reconsidering the ruling.  After the reconsideration the Court withdrew its previous ruling and granted it in part and denied in part.

Avneri suffered hail and wind storm damage at his property in Denton, Texas, that was insured through a Hartford policy.  Avneri submitted the claim which was denied by Hartford based on their assertion that the damage, if any, did not exceed the policy deductible.  Avneri filed suit in State Court and Hartford removed the case to Federal Court where it filed its motion.

Being able to discuss the potential recovery when an insurance company wrongfully denies a claim is a topic any Dallas or Fort Worth insurance lawyer needs to be able to discuss with a client.

Policy benefits are the basic recovery allowed for an insurer’s breach of its contractual obligations.  An insurer’s refusal to pay the insured’s claim causes damages at least in the amount of the policy benefits wrongfully withheld, according to the 1988, Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Company.  The same Court in a 1996, opinion said that breach of contract allows recovery of benefit of the bargain damages, according to the case styled, Transportation Insurance Company v. Moriel.

In addition, an insured should be able to recover consequential damages that are the foreseeable result of the insurer’s breach of contract.  Numerous cases hold that insurance policies are subject to the same rules as other contracts.  This is exemplified in Hernandez v. Gulf Group Lloyds, a 1994 opinion.  It says one of the best established rules is that:

Relevant to Texas Insurance Law is a case reported on by the Cook County Record, an Illinois publication.

A Judge’s ruling in a traffic crash personal injury case could cost the insurance company, Liberty Mutual, $4.5 million, even though the policy at the heart of the case is supposedly capped at $25,000.

The judgement issued in this case is currently stayed pending an appeal at the U.S. Court of Appeals for the Seventh Circuit.

Information for Palo Pinto County Insurance Lawyers –

The Texas Supreme Court, in 1996, issued an opinion in a case styled, Liberty National Fire Insurance Co. v. Akin, that said:  “Insurance coverage claims and bad faith claims are by their nature independent but, in most circumstances, an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract.”

In 1998, the same court, in an opinion styled, Vail v. Texas Farm Bureau Mutual Insurance Co. said that contractual liability is not essential to establish extra-contractual liability, but it helps.  The example in that case is an insurer that owed policy benefits under the contract may also be found to have acted unfairly in refusing to pay those benefits.

Weatherford insurance lawyers who handle insurance related matters need to understand that an anticipatory breach of the insurance contract has remedies under the law.   This is best illustrated in disability policies where the insurance company is obligated to make monthly payments to the insured.

According to the 1937, Texas Supreme Court opinion styled, Universal Life & Accident Insurance Co. v. Sanders, when an insurance company is obligated by contract to make monthly payments of money to another absolutely repudiates the obligation without just excuse, the obligee is “entitled to maintain his action in damages at once for the entire breach, and is entitled in one suit to receive in damages the present value of all that he would have received if the contract had been performed, and he is not compelled to resort to repeated suits to recover the monthly payments.”  Repudiation is conduct that shows a fixed intention to abandon, renounce, and refuse to perform the contract.

Another Texas Supreme Court is opinion is from 1976, and styled, Republic Bankers Life Insurance Company v. B.L. Jaeger.

Here’s something a lot of insurance attorneys may not realize.

An oral contract to insure is valid and enforceable.  This is confirmed in the 1949, Texas Supreme Court opinion styled, Pacific Fire Insurance Company v. Donald.  The oral agreement “is presumed to be made in contemplation of a policy containing the terms and conditions in customary use, and impliedly to adopt the same, and it is on this ground that such agreements are sustained as complete and binding contracts.”

Donald brought this suit against four insurance companies, one of which is Pacific to recover for the loss of 5500 bales of hay which were destroyed by fire while stored in a building.  Donald based his action on an alleged oral contract between himself and Henry Moore, agent of Pacific. Donald prevailed at trial and this appeal followed.