Articles Posted in Claims Handling Process

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.

The 2000, Texas Supreme Court opinion styled, Texas Association of Counties v. Matagorda County is a type of case not seen too often, but is worth knowing.

Matagorda County had a liability policy with The Texas Association of Counties (TAC) for its law enforcement activities.  The policy contained a “jail exclusion” which excluded legal action brought by the county’s jail inmates.  Following just such an event, TCA agreed to indemnify and defend Matagorda but twice repeated its right to question coverage and seek reimbursement.  TAC settled the case, and brought suit to obtain reimbursement.  The trial court in the coverage case ultimately ruled that TAC was entitled to reimbursement of defense and indemnity costs because the underlying liability claims were not covered.

TAC claimed that the policy’s “jail exclusion” clause and Matagorda County’s refusal to reply to TCA’s letters reserving reimbursement rights amounted to create a contractual obligation.  The Texas Supreme Court disagreed and held that an insurer’s unilateral reservation of rights letter did  not create rights which are not specifically created by the insurance policy.  TAC’s reservation letter was a unilateral offer to pay a disputed claim in exchange for the right to later seek reimbursement.  The insured’s failure to respond to the insurer’s reservation letter was not construed as an acceptance of the insurer’s reimbursement offer.

The Texas Supreme Court issued an opinion in 2014, in a case styled, In Re National Lloyds Insurance Company.  For insurance lawyers, this case discusses relevant discovery issues.

This case involves allegations of underpaid insurance claims.  In September 2011 and June 2012, storms swept through Cedar Hill and caused damaged to Mary Erving’s home.  Erving filed a claim with Nation Lloyds and an adjuster was sent in response to each claim.  Following the inspections, National Lloyds paid the claims.

Concerned that National Lloyds had undervalued the claims, Erving sued for breach of contract and violations of the Texas Insurance Code and the Texas DTPA.  During the discovery process, Erving requested production of all claim files from the previous six years involving three individual adjusters.  She also requested all claim files from the past year for properties in Dallas and Tarrant Counties involving Team On Adjusting, LLC, and Ideal Adjusting, Inc., the two adjusting firms that handled Erving’s claim.  Erving sought via interrogatory the names, addresses, phone numbers, policy numbers, and claim numbers associated with the requested claim files.

Do you own the property that is insured?  That is a question that matters in an insurance claim.  This is illustrated in a Southern District, Houston Division opinion issued in late 2016.  The opinion is styled, Cynthia Banion V. Geovera Specialty Insurance Company and Rick Calvert.

Cynthia sued Geovera to recover policy proceeds for damage to the insured property on a homeowners policy.  Geovera counterclaimed, alleging that it had paid  Cynthia over $57,000 for the property damage and then discovered that Cynthia never owned the property despite her representation to the contrary on the policy application.

The court dismissed Cynthia’s claim and Geovera filed a motion for summary judgment on its unjust enrichment claim and sought attorney fees and court costs.

Kimble County, Junction Texas – Even a place that is rural and secluded has to deal with insurance issues.  One of those issues at some point on a claim will be – when does coverage begin on the policy at issue.  This is discussed in a 1996, Texarkana Court of Appeals opinion styled, McKillip v. Employers Fire Insurance Company.

In March 1992, Wife who was in the process of obtaining a divorce, was told by her husband that State Farm was cancelling her auto policy.  Wife contacted an Allstate agent to obtain a new policy.  On April 3, 1992, Wife met with agent and completed an auto insurance application. requesting coverage for uninsured/underinsured motorist coverage, bodily injury, and PIP.  Wife testified that when she paid her down payment, Agent told her she was “now insured” and gave her temporary proof of insurance.

Agent submitted Wife’s application and premium to the Texas Auto Insurance Plan (TAIP). On April 9, 1992, TAIP assigned Wife’s application to Employers which issued a policy with an effective date of April 14, 1992.

The Houston Division, Southern District issued an opinion on September 10, 2016, styled AXA Art America’s Corporation V. Public Storage that serves as a good example how a person has to read what they are signing.  AXA’s contract with Public Storage is similar to what happens in many insurance contracts.

AXA had almost $850,000 of art work stolen from a storage unit controlled by Public Storage.  AXA sued Public Storage for the loss and Public Storage moved to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

The lease agreement contains this section – “Use of Premises and Property and Compliance With Law,” which reads:

Insurance attorneys know what the requirements are that are placed on an insurance company when one of their customers make a claim.  These requirements are found in Texas Insurance Code, Section 542.051 thru 542.061.

Section 542.056(a) requires the insurance company to give written notice it is accepting or rejecting the claim.  The Court of Appeals, Houston [14th Dist.] in a 1998 opinion, styled Daugherty v. American Motorists Insurance Company, tells us a telephone call from the insurance company 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.  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 either.  This is pointed out in a 2002, Corpus Christi Court of Appeals opinion styled, Northern County Mutual Insurnace Company v. Davalos.

The statute does nor require that the insurer pay every claim, only that it promptly investigate, and accept or reject the claim.  In Dunn v. Southern Farm Bureau Casualty Insurance Company, a 1999, Tyler Court of Appeals opinion, the court stated:

Mineral Wells insurance lawyers know that when making a pre-suit demand on an insurance company that making an excessive demand can be more harm than good.  This is discussed in a Houston Court of Appeals [1st Dist.] opinion released in August 2016.  The case is styled, United Services Automobile Association v. Hayes.  The opinion is over 50 pages long and discusses various issues on appeal but one of those issues deals with excessive pre-suit demands.

Texas law holds that a creditor who make an excessive demand upon a debtor is not entitled to attorney’s fees for subsequent litigation required to recover the debt, even if it prevails in its suit.  A demand is not excessive simply because it is greater than the amount eventually awarded by the fact finder.  However, a claim for an amount greater than that which a jury later determines is actually due may indeed be some evidence of an excessive demand.  Nevertheless, it cannot be the only criterion for determination, especially where the amount due is un-liquidated.

The dispositive question in determining whether a demand is excessive is whether the claimant acted unreasonably or in bad faith.  Further, application of the excessive demand doctrine is limited to situations in which a creditor has refused a tender of the amount actually due or has clearly indicated to the debtor that such a tender would be refused.