Articles Posted in Claims Denial

How long does an insurance company have to discover and assert the defense of misrepresentation?  This is discussed in a 2008, Amarillo Court of Appeals opinion styled, Myers v. Mega Life and Health Insurance Company.

Myers filed suit based upon an insurance contract issued by Mega Life.  In addition to a declaratory judgment action, Myers sought damages for breach of contract and violations of the Texas Insurance Code.  Mega Life asserted the policy was rescinded due to misrepresentation in the insurance application.

Myers asserted that Texas Insurance Code, Section 705.005 prevents Mega Life from asserting the misrepresentation defense.  This section reads:

An article ran in February 2017, that explains why people need experienced insurance lawyers to help with their insurance claims.  The article is titled, State Can’t Help With Most Unpaid Insurance Claims.

The Texas Department of Insurance claims it can help resolve complaints against insurance companies and boasts of helping Texas consumers get millions of dollars in unpaid claims every year.  However, a KXAN Investigation finds that only happens in certain situations and most of the time the state has no power to do anything at all, leaving you—the consumer—without much recourse.

In the spring of 2013, a storm swept through pummeling hail down on Carol Fredenburg’s house.  A roofing contractor told her the roof needed replacing but when she filed a claim with State Farm, they told her the damage only affected part of her roof and they would not pay for the entire roof to be replaced.  They estimated her repairs at $7,600, with a $2,841 deductible.

To sue an insurance company, a person must have “standing.”

Texas is not a direct action state.  In other words, when Fred and Ted collide in their cars, the resulting lawsuit is styled Fred vs Ted, and their respective liability insurers are not named parties.  Fred can’t sue Ted’s insurer; he has to sue Ted.  Because of the lack of privity between a liability insurer and a third-party claimant, an insurer had no duty to a third party to settle a claim brought against its insured until the insured’s liability has been established.  This was made clear by the Texas Supreme Court in 1997, in a case styled, Farmers Texas County Mutual Insurance Co. v. Griffin.  Indeed, until the liability of the insured is judicially established, a third-party plaintiff does not have standing to bring a direct action against the insurer to recover for the liability of the insured.  For further guidance there is more case law.

This rule of law is so well ingrained in the jurisprudence of the State that it is embodied within the Texas Rules of Civil Procedure.  Rule 51(b) regarding the Joinder of Claims and Remedies provides:

Rock Springs, Texas insurance lawyers would want to know about this Houston Division, Southern District case.  The opinion was issued in January 2017, and is styled, JYC Enterprise Inc. v. Allied Property and Casualty Insurance, et al.

In this case JYC sued Allied, its adjuster (Heller), and Bay Area Fire & Safety, Inc., after a fire destroyed property belonging to JYC.  The suit was filed in state court and removed to federal court by the Defendants.  The Defendants are alleging the suit against Bay Area is a fraudulent and only brought in order to defeat diversity because Bay Area is a Texas corporation.

JYC asserted claims against Allied and Heller as to the sufficiency of the payment under the policy for Business Income losses and as to disputes about the policy’s coverage.  JYC asserted a claim against Bay Area for negligence in its inspection of the fire suppression system.  Allied responded, contending that because the claim against Bay Area was fraudulently misjoined, the Bay Area claim should be severed and remanded.

The reason someone is going to visit with an insurance lawyer is because a claim the person has made is being denied by their insurance company.  One of the most common reasons for denial of insurance policy benefits in life insurance situations is that there has been a misrepresentation in the life insurance policy application.

So what is the law in Texas as it relates to misrepresentations in life insurance policies?

The Texas Insurance Code, Section 705.004 reads as follows:

Parker County insurance attorneys know that it is best for their clients to try and keep their case in State or County Court.  The insurance lawyers know it is best to get their case in Federal Court.  The U.S. McAllen Division had a case where the argument on this issue was a little different from what is usually seen.  The case is styled, Ida Rodriguez v. Allstate Texas Lloyds.

Rodriguez sued Allstate for a property damage claim that allegedly was not properly paid.  Rodriguez sued Allstate in State Court and Allstate removed the case to Federal Court.  Rodriguez filed a Motion to Remand the case back to the State Court.

One argument in this case was that the amount in controversy did not exceed $75,000.

Horror stories abound in the insurance claims arena, but what has happened to one Texas resident is at the top.  The Houston Press reported on a story titled, Eight Years After Ike, Insurance Firm Still Won’t Pay Homeowner.

It has been eight years since Hurricane Ike ripped through the Gulf and Houston’s surrounding areas, but homeowner Gail Menchaca’s insurance company has still not paid her a cent for the damages to her home.

In a case that could have sweeping implications for how thoroughly insurance companies choose to inspect property damage and whether firms have any real motivation to pay you anything, Menchaca’s insurance company, USAA Texas Lloyd’s Company, has fought her all the way to the Texas Supreme Court.  Even after a Montgomery County trial court and appeals court ordered USAA to pay Menchaca not only for the property damages covered under the policy, but also thousands more in court and attorneys fees, USAA has refused.  At the heart of the case is this: If an insurance company fights you in court for eight years, at the end of it all, are you entitled to recover any damages beyond the money you need to fix your house?

Springtown insurance lawyers know about the importance of an insurance policy being correctly filled out.  This was illustrated in a 2016 opinion out of the Southern District, Houston Division, styled, Perfit Vision, et al v. Mount Vernon Fire Insurance Company.

John Luong owed a portion of Eyewear Express and in 2013, Eyewear bought a store and renamed it Perfit Vision.  Mount Vernon issued Loung a one-year casualty policy beginning coverage on Feb. 21, 2014.

Luong reported to Mount Vernon that the store had been burglarized on March 8-9.  Mount Vernon denied the claim.

Insurance lawyers know to tell their clients to cooperate with their insurance company investigation of a claim.  Failure to cooperate can void the coverage.  This issue was litigated in a Southern District, Houston Division case styled, Rosie’s Chicken & Waffles Restaurant, et al v. Acceptance Indemnity Company.

In a jury trial, the jury answered questions 1 and 2 in favor of Rosie’s, finding that the entire fire at their business was not the cause of arson attributable to its owners or employees.  The jury also found by inference that Acceptance failed to establish its defense that the premises did not have a working smoke alarm at the time of the fire.  The jury in questions 4 and 5 went on to find that the owner failed to provide financial information relating to the daily business transacted at Rosie’s business location and that her failure to provide financial documents prejudiced Acceptance.

This Court found that the jury’s answers to questions 4 and 5 are irrelevant in light of their answers to questions 1 and 2.

When an insurance company denies a claim they have certain responsibilities under the Texas Insurance Code.  Insurance lawyers know to immediately check and see if the insurance company has properly performed their responsibility.

Texas Insurance Code, Section 542.056(c) states that if the insurer rejects the claim, the notice required under Subsection (a) or (b) must state the reasons for the rejection.  Arguably, an insurance company that fails to comply with this requirement could be held to have waived additional reasons that were not timely raised.  However, this argument was rejected in a United States, 5th Circuit opinion in 2005, styled Ridgelea Estate Condo. Association v. Lexington Insurance Company.  In the case, the court stated that the insurance company could raise an additional defense, where there was no allegation that the initial reason was unreasonable or made in bad faith.

The phrase “rejects the claim” does not specifically address a situation where an insurer pay part, but not all, of a claim.  It also does not specifically state whether a claim is “rejected” when the insurance company refuses to pay, for a reason not related to coverage — as for example, it the claim is closed without payment because of noncooperation by the insured.  Construing the statute liberally to promote its underlying purposes, it is reasonable to construe the term “reject” to mean any decision by the insurance company not to pay the claim or not to pay a part of the claim.  The insurance company should state in writing the reason for any such decision.  If the insurance company pays part of the claim, the insurance company should state in writing the reason it did not pay the rest.