Articles Posted in Claims Handling Process

Attorneys who handle insurance claims know that almost all insurance policies have a cooperation clause in them.  This means that the insured has a duty under the policy to cooperate with the insurance company in its investigation of the claim.  One of these duties is to file a proof of loss.

As discussed as early as the 1926, Texas Supreme Court opinion styled, Commercial Union Assurance Company v. Preston, policies sometimes require that the insured file a proof of loss, as a condition precedent to enforcement of the policy.  This was restated in the 1954, Fort Worth Court of Appeals opinion styled, Whitehead v. National Casualty Company.  A “proof of loss” is a statement to the company, stating, among other things, the cash value of each item of property lost or damaged by fire, and the amount of loss.  Further, the company may require that the insured swear to the accuracy of the proof of loss.

A 1960, Fort Worth Court of Appeals opinion styled, International Service Insurance Company v. Brodie, says the policy provision requiring a proof of loss is for the insurer’s benefit and may be waived by the company.  In the Brodie case, the insurance company was found to have waived the proof of loss requirement where it would only accept proof asking for amount its adjusters agreed to, although the insurer wanted more.

Texas Insurance Code, Section 542A.006(c), is being a source of frequent litigation in Texas since it was en-acted.  The various Federal Courts are treating it differently.  Here is a case from the Western District of Texas, Austin Division, dealing with this issue.  The case is styled, Shiv Partners LTD and Shiv Host, LLC D/B/A La Quinta Inn & Suites v. The Ohio Casualty Insurance Company and Kevin M. Witt.

La Quinta had suffered a loss as the result of storm damage.  The insurer, Ohio, assigned the claim to Witt.  Ohio is not a Texas resident but Witt is.  La Quinta was displeased with the way the claim was handled and sued Ohio and Witt in State Court.  La Quinta removed the case to Federal Court asserting that Witt had been improperly joined in the lawsuit thus, diversity existed between the parties giving the Federal Court jurisdiction of the lawsuit.

La Quinta failed to provide Ohio or Witt with pre-suit notification of 61 days prior to filing as required by Texas Insurance Code, Section 541.154 and 542A.003.  The first notice of the lawsuit was when it was received by Ohio and Witt.  Ohio then made immediate election of responsibility for Witt as allowed by Section 542A.006(c).

Most insurance cases settle.  This sums up insurance lawsuits.  The State Bar of Texas has a section called the Insurance Law Section.  The Insurance Law Section puts out a quarterly journal called “Journal of Texas Insurance Law.”  A recent article discusses having an insurance company as a client and how insurance company attorneys look at lawsuit against the insurance company.  The article tells us some information about trying the case.

While most insurance cases settle.  Some are resolved at the summary judgment stage of the lawsuit.  Rarely, a case gets all the way to the courthouse.  One tested approach to trying a case where an insurance carrier is a defendant is “less is more.”  In other words, the goal is to be the voice of reason and redirect the jury away from the emotional appeals that the plaintiff can be expected to make.  The insurance company client may represent itself on TV with a duck, a lizard, an emu, or a Flo, but the cuteness of those mascots is not generally translated to a feeling of warmth toward insurance carrier defendants.

It is advised that the attorney keep a running list of potential motions in limine during the discovery phase of the case.  Discovery requests, motions to compel, and lines of deposition questions will reveal the types of evidence that a plaintiff may seek to introduce in order to color the jury’s view of your client.  Although being thorough is always a positive attribute for an attorney, be careful when relying on form motions in limine.  Courts may have standing orders governing the points raised, and judges do not appreciate rehashing issues that have already been addressed.  Similarly, it is important to narrow areas of contention in motions to avoid wasting the court’s time during pretrial hearings.  Coming to pretrial hearings prepared to argue only those points that are truly in contention will start the insurance lawyer off on the right foot with the court.

Knowing how an insurance company looks at lawsuits that result after a claim is denied is valuable.  The State Bar of Texas, Insurance Law Section, publishes a journal called Journal of Insurance Law.  This Journal recently published an article discussing how lawyers who have insurance companies as clients, look at lawsuits that result from a claim being denied.

This third part of the article discusses the depositions of a corporate representative, the adjuster, and looks at experts.

Corporate representative depositions are make-or-break propositions.  Sometimes, that choice is out of the hands of the insurance lawyer and many insurance carriers have identified particular employees for whom giving testimony on behalf of the company is part of their job description.  He or she should also have an unflappable demeanor.  In addition to selecting the right witness, it is important to ensure that the deposition topics are narrowly tailored and stated with “reasonable particularity.”  It is useful to have a conversation with opposing counsel to clarify vague topics and to limit overly broad ones, as both parties have an interest in a shared understanding of the topics at issue and bringing a knowledgeable and well-prepared representative to the deposition.  When deciding whether to involve the court, it is important to familiarize yourself with the case law on both federal and state requirements to protect your client from improper corporate representative deposition notices.  For instance, depending on the jurisdiction, it may be prudent to move for a protective order instead of simply objecting to proposed topics.  Once the deponent is selected, preparation is paramount.  It is prudent to first have fact-gathering meetings.  Since a corporate representative is obligated to present the information that is available to the company, it is useful to outline what information needs to be gathered and by whom.  After those meetings are accomplished, it is then prudent to schedule at least two face-to-face meetings with the deponent.  These sessions should allow for time to practice with mock cross-examination.  This is important for experienced deponents as well as rookies.

Knowing how insurance companies and their attorneys look at denied claims that result in a lawsuit is valuable to the attorney and his client who is suing the insurance company for the denied claim.  The State Bar of Texas is a source for some helpful information.  In particular the Insurance Law Section is a good source because it publishes articles in a publication called Journal of Insurance Law.

A recent article title “A Practical Guide To Defending A First-Party Property Insurance Claim” has good information contained within it.  Part of what it tells us is as follows:

If the plaintiff hasn’t sent a proper notice, an insurance company attorney may want to file a verified answer seeking an abatement until the demand is received.  Although proper notices do not have to be detailed, they do need to comply with all the elements set forth in Chapter 542 of the Texas Insurance Code.  Once the insurance company lawyer is armed with a specific number that the claimant will be seeking, he can better evaluate the potential range of damages the client is facing.

The State Bar of Texas, Insurance Law Section, published an article in a Journal it publishes which gives a perspective from the eyes of an insurance company lawyer defending lawsuits filed against the insurance company for denying claims.  It is good to know how they look at these matters.  Here is part of what the article tells us about what the insurance lawyer does or should do when he first receives a file.

When the insurance lawyer first gets the file his first job is to make sure you have all of the relevant documents. He should carefully review the policy to confirm he has the complete copy, including all endorsements, in effect on the date of loss.  He should also have a complete copy of the insurance carrier’s claims file, which generally consists of some sort of claims diary or journal documenting the actions taken during the claim as well as claims correspondence, estimates, evaluations, and the like.  It should be a comprehensive guide to the “who, what, when, where, and how” over the life of the claim.  He will want to determine whether the files of any independent adjusters who evaluated the claim have been incorporated into the client’s file or if he will need to get them separately.  He should also ask the client how they retain communications like emails and text messages between adjusters and insureds or vendors; he doesn’t want to see that rude or inappropriate text message for the first time at the deposition of the adjuster.

Now he needs to evaluate the case.  Insurance litigation often turns on what happened when, so a timeline can be extremely helpful in answering some important questions.  How much time transpired between the date of the claimed loss and the report to the client?  When were acknowledgements and requests for information sent to the insured?  What payments were made and when?  Since the adjuster usually has little or no independent memory of the claim, you are starting behind, while the claimant likely remembers much of the claim in great detail.  Having a clear timeline of events early on will help to figure out potential weaknesses in the case.  For instance, were there large gaps in time when the insured was waiting on a response to start repairs?  Did the insured get a timely denial letter?  Did the denial go out before the claim was even investigated?  Are there inconsistencies in dates of inspections or documents that are apparent from the claim file that would undermine the adjuster’s credibility?  Remember, it is easy for jurors to become angry at adjusters they perceive as overly bureaucratic or rude, even if they complied with the legal requirements for claims handling.  The attorney needs to be on the lookout for any behavior that will make it easier for jurors to side with the claimant if there is a question about credibility or damages.  Next, he needs to make sure that he doesn’t inadvertently produce privileged documents in the claim file.  Flag and remove those documents up front, so he is prepared when discovery starts and he can avoid drafting a privilege log at the last minute.  The same reasoning applies to documents that he might have received that are not related to the claim file.  Underwriting documents, including documents regarding reserves, may or may not be relevant in the case, but odds are they won’t be responsive to the same kind of discovery requests as claim file documents.  After the attorney is sure he has all the needed documents from the claim file, it is time to have a discussion with the client about the case.  The attorney needs to diplomatically point out any legal and factual weaknesses or potential issues before they arise during litigation.  The attorney may also be requested or required to prepare a litigation budget at this point.  Many carriers have templates the attorney is required to use, but it is often difficult to foresee the various litigation tasks and expenses that may arrive in even the most garden-variety case.  The best advice on this task—and throughout the handling of the case—is to maintain good client communication throughout the process.  Insurance carriers, like any other client, don’t like surprises.

Does an insurance company making a partial payment of a claim mean that they are responsible for the claim.  The answer to this question and a couple of other questions was answered by the United States 5th Circuit in the April 2020, opinion styled, Sandford T. Pulley v. Safeco Insurance Company of America.

Safeco was the insurer for Pulley on some property he owed.  The District Court granted summary judgment in favor of Safeco and this appeal followed.

Pulley argues that summary judgment for Safeco was improper because, in Pulley’s view, by initially sending him a check in response to his insurance claim, Safeco conceded liability.  Since the check was insufficient to offset his repair costs, Pulley argues that the only remaining issue in the case is the amount of damages.  Pulley cites neither the terms of the policy nor any legal authority for the proposition that Safeco’s partial payment of his claim is an admission of liability.  As a result, and because Pulley fails to address the District Court’s basis for dismissing his claims, the summary judgment was affirmed.

Providing an insurance company with a “Sworn Proof Of Loss” is a requirement under most insurance policies.  This is illustrated in the 2020, Amarillo Court of Appeals opinion styled, City of Spearman, Texas v. Texas Municipal League Intergovernmental Risk Pool.

This case is an appeal from a summary judgment granted in favor or Texas Municipal League (TML).

TML insures Spearman with property insurance and on September 16, 2016, Spearman submitted a “Claims Notice” reporting “hail damage to buildings” from a hailstorm occurring on May 16, 2016.  TML sent an adjuster who inspected five building and estimated the damage at $5,437.66.

Almost all insurance policies contain a requirement that the insured submit to an examination under oath (EUO) as often as is necessary for the insurance company to complete its investigation of the claim.

EUO”S were the topic in a Western District of Texas, Austin Division, opinion recently.  The opinion is styled, AXO Staff Leasing, LLC v. Zurich American Insurance Company, McCreadie & McCreadie, Inc., and Lassiter Ware Insurance.

The lawsuit is an insurance coverage dispute between Zurich and AXO.  Briefly, AXO contends that its former Chief Financial Officer (CFO), John Herzer, embezzled $4.7 million, and that the loss is covered by the Zurich policy.

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