Articles Posted in Claims Handling Process

Insurance attorneys know about the statutory requirements of making a claim.  These rules can be looked up in the Texas Insurance Code.  The problem arises when the insurance companies do not comply with these rules.  So, what are some of these rules.

Start with Texas Insurance Code, Section 542.056(a).  This statute requires an insurance company to give written notice it is accepting or rejecting a claim.  A telephone call from the insurance company adjuster notifying the insured of the amount of the loss will not constitute “notice of payment of claim, because the statute requires that the acceptance or rejection be in writing.  This writing requirement is discussed in the Houston Court of Appeals [14th Dist.] opinion styled Daugherty v. American Motorists Insurance Company.

However, an insurance company’s written response acknowledging only that a claim has been received does not constitute an acceptance or rejection under the statute according to a Corpus Christi Court of Appeals opinion styled, Northern County Mutual Insurance Company v. Davalos.

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  Failure to cooperate can result in the policy being rescinded and the claim denied.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.

The United States 5th Circuit Court issued an opinion in October 2017, that is basic to insurance law.  The opinion is styled, Nautilus Insurance Company v. Irma Miranda-Mondragon.

This is a declaratory judgment action filed by Nautilus against its insured Houston Star Security Patrol and Mondragon.  Nautilus argued it had no duty to indemnify Houston Star regarding a claim brought by Mondragon.  Summary Judgement was granted in favor of Nautilus.

Mondragon worked as a waitress at a nightclub when armed gunmen entered and began shooting customers and employees.  Mondragon was shot and required significant treatment.

Probably all homeowner policies require a “Proof Of Loss” (POL) be filed before a lawsuit be filed against the insurance company.  This issue is addressed in the Northern District, Dallas Division opinion, Gwendolyn Pamphile v. Allstate Texas Lloyds.

Before the Court was a motion to dismiss filed by Allstate.  This arose out of an insurance dispute wherein Pamphile suffered hail damage during a storm and made a claim to Allstate for benefits.  Allstate assigned an adjuster who evaluated the claim and Allstate made payment based on the adjusters evaluation.  Unsatisfied with the payment Pamphile submitted a POL form with her own repair estimate and one day later, filed suit against Allstate.  Allstate removed the case to federal court and filed their motion to dismiss.

Federal courts can adjudicate claims only when subject matter jurisdiction is expressly conferred and must otherwise dismiss for lack of subject matter jurisdiction.

Insurance lawyers learn real fast to know who are the persons who can recover / benefit under an insurance policy.

Other persons who may sue for benefits under the insurance contract are “intended beneficiaries,” also known as “third party beneficiaries.”

A third person for whose benefit a contract is made may enforce the contract against the promissor.  The controlling factor in determining whether a third party may enforce a contract is the intention of the contracting parties.  This is illustrated in the 1985, 14th Court of Appeals opinion, Hermann Hospital v. Liberty Life Assurance Co.

What all insurance lawyers know:  Insurance policies are contracts, and as such are subject to rules applicable to contracts generally.  This was stated in the 1994, Texas Supreme Court case, Hernandez v. Gulf Group Lloyds, and is still good law.

A party seeking to recover on an insurance contract must prove that the contract was in force at the time of the loss.  Also, a party who claims under a policy is required to produce the insurance contract upon which he sues or to prove its terms.  This was stated in the 1975, Tyler Court of Appeals opinion, Hartford Accident & Indemnity Co. v. Spain.  This also, is still good law.  To prove a breach off contract, the insured has to establish:

  1.  the existence of the contract sued upon;

Insurance attorneys understand the importance of proper communications with an insurance company.

The Claims Journal, which is a publication for the insurance industry, published an article in September 2017, suggesting ways for a company to properly communicate with their insured.  The article is titled, 10 Tips On Responding To Claimant Complaints.

The substance of the article is below but before discussing it, keep this is mind.  Not every claim is going to be denied or need attorney assistance.  However, any communications the insured has with the insurance company needs to follow the suggestions the companies make for communicating with their insured.

As strange as this one may seem, it is actually fairly common.  This is a Southern District, Houston Division opinion styled, Gavion et al v. ACE American Insurance Company.

In 2009, Gavion swerved into the path of a train.  He was driving under the policy of his mother’s employer.  A passenger in the vehicle, Jackson, sued Gavion and ACE.  ACE was later dismissed from the lawsuit and Gavion never appeared in the lawsuit to fight the claim of negligence against him.  ACE was Gavion’s insurance company.  Gavion never asked for ACE to defend him in the lawsuit.  Jackson then took a default judgment against Gavion and Gavion assigned to Jackson the rights Gavion may have against ACE for not defending him in the lawsuit and then Jackson filed suit against ACE for not defending Gavion.

ACE filed a motion for summary judgment stating they had no duty to defend Gavion because Gavion never asked for help.

Does a violation of the Texas Prompt Payment of Claims Act survive an appraisal that is promptly paid?  This issue is addressed in an opinion from the San Antonio Court of Appeals.  The case is styled, Barbara Technologies Corporation v. State Farm Lloyds.

Barbara Technologies had a policy of insurance with State Farm insuring property that was damaged in a hail storm on March 31, 2013.  A claim was made on October 17, 2013 and on October 31, 2013, State Farm inspected the property.  On November 4, State Farm sent a letter stating the property sustained damage of $3,153.57, but did not issue payment because the amount was less that the $5,000.00 deductible.  On February 21, 2014, Barbara Technologies requested a re-inspection which was done and State Farm did not change it’s earlier statement.

Barbara Technologies filed suit for various violations of the Insurance Code including claims for violation of the Prompt Pay Act pursuant to Sections 542.058(a) and 542.060.

Experienced insurance law lawyers in Hamilton, Texas, know the above is true.  This obligation is illustrated in a 2017, hail damage claim opinion out of the Southern District, Houston Division.  The opinion is styled, Metro Hospitality Partners, Ltd., d/b/a Crowne Plaza Hotel v. Lexington Insurance Company.

When a business sues its property insurer and the type of damage is clearly covered, the usual pattern is that the insurance company has failed to pay anything, has failed to pay anything close to what the insured claimed, or has taken too long to pay.  This case is different.  Here, the property insurer promptly adjusted the claim the insured presented and paid a large sum within the month after the hailstorm that damaged the insured’s hotel.  The insurer identified and paid what it concluded were the remaining amounts owed about two months after that.  The insured claimed that more money was owed.  The insurer asked for documents and information substantiating the demand for additional payment.  The insured refused.  The policy required the insured to “cooperate” with the insurer.  What we have here, says the insurer, is a failure to cooperate.  What we have here, says the insured, is a breach of the insurance contract and of the duty of good faith and fair dealing.

After a hail storm, the insured, Metro, promptly notified its Lexington.  Lexington quickly responded, inspected, and identified the amount of covered damage and the amount it owed.  The parties disputed whether the hailstorm damage justified an insurer-paid new roof, or whether normal wear and tear made a new roof Metro’s responsibility.