Articles Posted in Claims Handling Process

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.

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.

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