Articles Posted in Claims Handling Process

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.

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.