Articles Posted in Claims Handling Process

How long does someone have to invoke the appraisal process in an insurance contract?  This was addressed in a 2012, opinion from the Beaumont Court of Appeals.  The opinion is styled, In Re: Cypress Texas Lloyds.
Cypress Texas Lloyds seeks mandamus relief from an order that denies a motion to compel appraisal.  The insureds sued Cypress.  Their homeowner’s insurance policy issued by Cypress includes an appraisal clause.  Cypress pleaded the failure to submit to the appraisal process and requested abatement in its original answer and in a series of amended answers.  Cypress subsequently moved to compel appraisal.
To establish waiver of appraisal, a party must show that the failure to invoke the policy’s appraisal provision within a reasonable time after an impasse was reached caused prejudice.  Cypress argues that its first notice of impasse occurred when the Newmans filed suit, and that Cypress invoked the appraisal provision in its pleadings by specifically pleading the failure to submit to the appraisal process by requesting an abatement until that condition was satisfied.  Notwithstanding the notice provided by Cypress’s pleadings, the Newmans proceeded with discovery without seeking appraisal under the policy.  Cypress argues it did not unreasonably delay before invoking appraisal and any harm suffered by the Newmans stems from their failure to comply with the policy and undergo appraisal before filing suit.

The Texas Insurance Code provides for penalties to insurance companies who pay a claim late.  This is illustrated in a 2022, opinion from Texarkana Court of Appeals.  The opinion is styled, State Farm Mutual Automobile Ins. Co. & State Farm County Mutual Ins. Co. Of Texas v. Greg Rumbaugh.

Greg Raumbaugh sued State Farm after State Farm failed to pay personal injury protection (PIP) benefits “not later than the 30th day after the date the insurer received satisfactory proof of a claim,” as required by Texas Insurance Code, Section 1952.156.  Cross motion for summary judgement were filed and the trial court ruled in favor of Rumbaugh.  This appeal followed.  The sole question raised in this appeal is whether the trial court erred by resolving crossmotions for summary judgment in Rumbaughs favor, thereby determining that he was entitled to statutory penalties under Section 1952.157 of the Texas Insurance Code even though PIP benefits were paid before the lawsuit was filed.

PIP coverage is a form of nofault insurance.  PIP’s limitation to medical expenses and lost wages, along with its collateral-source and no-fault features, are designed to simplify and hasten claim resolution and payment.  Because Section 1952.157 provides for “a penalty of 12 percent,” among other things, if an insurer fails to pay PIP benefits “when due,” the trial court properly ruled that Rumbaugh was entitled to statutory penalties when PIP benefits were paid past Section 1952.156’s statutory deadline, even though they were paid before the lawsuit was filed.

When an insurance lawyer has someone call about an insurance company denying a claim, an experienced insurance lawyer will always ask if the potential client knows about any other reasons the claim could be denied.  The reason this question is asked is that an insurance company can deny a claim for one reason today and if that reason ends up being faulty, the insurance company can find another reason for denying a claim.  As long as one reason for denying a claim is a proper reason, it does not matter that another reason for denial turns out to be incorrect.

This is partially discussed in a 2021, opinion from Houston First Court of Appeals.  The opinion is styled, Amy Powell v. USAA Casualty Insurance Co.

This Court ruled in favor of USAA after USAA filed a motion for summary judgment.

Many times an insurance lawyer is approached by someone who has a claim denied due to the insurance company assertion that the policy has been cancelled.  In this regard, understanding the reasons for cancellation are important.

“Cancellation” refers to the insurance company’s termination of coverage before the end of the policy period.  A cancellation is in contrast to a non-renewal, which involves an insurer’s unwillingness to reissue the policy following the completion of the policy term of coverage.

As seen in the 1994, opinion from the Waco Court of Appeals opinion, Truck Ins. Exch. v. E.H. Martin, Inc., insurance policies often contain provisions regarding cancellation.  In E. H. Martin, the insurer complied with its own policy provision regarding cancellation when it cancelled the  policy for nonpayment of premiums.  Specific provisions for cancellation of coverage must be precisely followed by the insurer and will be strictly construed by courts.  This is seen in numerous cases, including, the 1993, Texarkana Court of Appeals opinion, Cruz v. Liberty Mut. Ins. Co. and the 2001, Corpus Christi Court of Appeals opinion, Jones v. Ray Ins. Agency.

First Party Property Insurance Cases are handled by insurance defense firms in certain ways.  Here is a look at how most are handled, starting with answering the lawsuit.

If the attorney for the plaintiff/insured has not sent a proper notice, the insurance lawyer may want to file a verified answer seeking an abatement until such notice has been properly 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 defense firm is armed with a specific number that the claimant is seeking, the defense attorney can better evaluate the potential range of damages the insurance company is having to deal with.

Because insurance carriers are among the least popular defendants in courts across the country, it is important to take advantage of any rules to ensure a favorable forum.  Cases that are originally filed in state court may be removed to federal court where there is diversity of citizenship and an amount in controversy of more than $75,000.  In Texas, where state trial court judges are selected through partisan elections, federal forums will often be more favorable.  Federal judges with lifetime appointments often have more time and staff available to consider dispositive motions.  In addition, jurors are drawn from a broader area, which generally results in more rural, conservative jurors.  For these reasons, attorneys for plaintiffs may include a Texas-resident adjuster as a defendant to defeat diversity.  It is important to consider whether the case can still be removed by arguing that the adjuster was improperly joined and her citizenship should be disregarded.  For cases governed by Section 542A of the Texas Insurance Code (which applies to weather-related claims), the carrier has the option to elect to assume the liability for acts of its individual adjusters.  Such an election may or may not mean that the individual adjuster is not properly named as a defendant.  This election must occur prior to suit being filed to render the lawsuit removable, so the window to elect liability is short.

Here is a strange case from the Southern District of Texas, Houston Division.  It is a 2020 opinion styled, Pruco Life Insurance Company v. Blanca Monica Villarreal, Transamerica Life Insurance Company v. Blanca Monica Villarreal.

This is a hard fought dispute over a large life insurance policy and discovery being conducted in two countries.  Many accusations of misconduct are being hurled by both sides.

The two life insurance companies were trying to depose Villarreal’s investigator.  Villarreal’s attorney objected to the questions based on it protected by attorney work-product rules.

It is easy to get focused on the factual parts of a lawsuit.  In other words, what happened, who did what, who said what, etc.  As insurance lawyers, the legal aspects of the lawsuit need to be watched carefully.  This is illustrated in the November 2020, opinion styled, Tim Long Plumbing, Inc. v. Kinsale Insurance Company.  The opinion is from the Eastern District of Texas, Sherman Division.

This is an insurance claim denial lawsuit.  Plaintiff Tim Long Plumbing had a commercial general liability policy with Kinsale.  This facts of this case can be read in the opinion.  The focus of this article is on the lawsuit discovery process of this case.

Under Federal Rule of Civil Procedure 26(b)(1), parties “may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense . . . .” Relevance, for the purposes of Rule 26(b)(1), is when the request is reasonably calculated to lead to the discovery of admissible evidence.  It is well-established that control of discovery is committed to the sound discretion of the trial court.

The doctrine of concurrent causes is discussed in a 2020, opinion from the Southern District of Texas, Corpus Christi Division.  The opinion is styled, Claude Hooker v. United Property & Casualty Insurance Company.

Hooker sued his insurance company, United Property & Casualty Insurance Company (UPC) for windstorm benefits after Hurricane Harvey cause damage to his home.

UPC counters Hooker by claiming that the damages to Hooker’s home are the result of wear and tear.  As a result of this defense, UPC filed a motion for summary judgment based on the concurrent cause doctrine.

There is a part of the claims handling process that insureds need to be wary about.  That part is when an insurance company asks the person making a claim to submit to an Examination Under Oath (EUO).

If the insurance contract provides for it, the insurance company may require an EUO as a condition to a suit on the policy.  The purpose of such EUO clauses has been described this way:

The insured agrees agrees, at reasonable ties and places, as often as required , to submit to examination by an agent of the insurance company, and to submit all relevant books of account, invoices, vouchers, etc.  If is clear that the chief purpose of this privilege to the insurance company is the ascertainment and adjustment of the loss which has already occurred.  The insurance company, in its policy, evidences in many ways its desire to avoid the necessity of litigation in the settlement of its losses.  It reserves the right to have the benefit of the examination provided for before suit can be sustained.

Insurance policies require that the insured cooperate with the insurance company investigation of a claim.  Part of that cooperation includes filing a written proof of loss.  This filing of a proof of loss is a precedent to enforcement of the policy as explained in the 1926, Texas Supreme Court opinion styled, Commercial Union Assurance Co. v. Preston.  The Fort Worth Court of Appeals restated the Texas Supreme Court opinion in the 1954, 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.  The insurance company may require that the insured swear to the accuracy of the proof of loss.

Another Fort Worth Court of Appeals in 1960, told us that policy provisions requiring a proof of loss are for the insurer’s benefit and may be waived by the insurance company.  That case is styled, International Service Insurance Co. v. Brodie.  The Court said the requirement was waived where the insurer would only accept proof asking for an amount its adjusters agreed to, although the insurer wanted more.

Compliance with the proof of loss requirement may be excused, for example when the failure to file a proof of loss does not affect the insurer’s exposure, or when the lack of a proof of loss is due to the beneficiary’s non-negligent ignorance of the requirement.  This was explained in the Whitehead opinion.

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