Articles Posted in Claims Handling Process

Here are some new laws enacted in the State of Texas that went into effect on September 1, 2019.  There were several transparency and consumer protection bills that were passed in the wake of Hurricane Harvey.  The most significant bills were related to flood, wind, and hail, although significant legislation related to adjusters was also passed.

Senate Bill (SB) 442 requires any insurance company that issues residential property insurance policies without coverage against flood loss to provide written notice to the insured.  This bill gives the Texas Insurance Commissioner rule making authority to issue the form and content of the notice.

House Bill (HB) 1306 provides for additional flood coverage access under insurance policies issued by surplus lines insurance companies.  Surplus lines coverage is only to be used if the full amount of coverage cannot be obtained in the Texas market.

Many people think of insurance for covering something you own when it is damaged, such as your home or auto.  Or, people thing if health insurance and life insurance.  But there is another type of insurance that is important to all of us.  That is liability insurance.  This is the insurance that is suppose to protect you when someone sues you for something they allege you did wrong.

Here is some information from the State Bar of Texas, Insurance Section, Journal.

Under Texas law, the duty to defend depends on the language of the policy setting out the contractual agreement between insurer and insured.  Whether an insurer has a duty to defend its insured is a question of law.  An insurer must defend its insured if a plaintiff ’s factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured.  Thus, an insurer may have a duty to defend but, eventually, no obligation to indemnify.  The initial burden is placed on the insured to demonstrate that coverage exists considering only the policies and the underlying lawsuit papers.  The burden then shifts to the carrier to establish that one or more of the policy exclusions apply to negate any otherwise-applicable duty to defend.  Courts consider the factual allegations without regard to their truth or falsity, and resolve all doubts regarding the duty to defend in favor of the insured.  Further, in making the determination, courts  look to the factual allegations showing the origin of the damages claimed, not the legal theories or conclusions alleged.  If the petition asserts one claim that could potentially be covered by the insurance policy, the insurer must defend the entire suit.  The duty to defend is a sprawling topic on which Texas law and the Restatement of Insurance agree on many issues.  For example, it is well settled that an insurer’s right to conduct the defense includes the authority to select the attorney who will defend the claim and to make other decisions that would normally be vested in the insured as the named party in the case.  Likewise, the Restatement outlines the scope of an insurer’s right to control the defense as follows:

Here is another Federal opinion discussing Texas Insurance Code, Section 542A.  The opinion is from the Eastern District of Texas and is styled, John McAdams v. Palomar Specialty Insurance Company, Wellington Claim Service, Inc. and Nicholas Abdallah.

McAdams had a homeowners insurance policy with Palomar when he suffered damages alleged to have been caused by Hurricane Harvey.  Palomar assigned Wellington to investigate the claim and Wellington assigned adjuster Nicholas to inspect the claim.

The claim was not sufficiently covered according to McAdams and he eventually filed suit against Palomar, an out of state defendant, and against Wellington and Nicholas, both in-state defendants.  McAdams alleged wrongs committed in the claims handling process.

Texas Insurance Code, Section 542A, is being used regularly now by insurance companies to prevent Plaintiffs from defeating diversity jurisdiction.

This Insurance Code Section was discussed by a court in the Southern District of Texas, Houston Division, in a case styled, Robert Ewell v. Centauri Specialty Insurance Company, et al.

Ewell filed a claim with Centauri, who insured Ewell’s home, for property damage alleged to have occurred during a severe storm on August 25, 2017.  Steven Wiley is the adjuster assigned to investigate the claim.  Centauri is alleged to have failed to pay the full amount of the claim.

Like it or not, an insured suing his insurance company has a much better chance of getting a favorable or more favorable result in State Court versus Federal Court.  And, the insurance companies know this.  As a result, an insurance company is always seeking to have a case heard / litigated in the Federal Court.

Here is a case wherein the insured was able to defeat the efforts of the insurance company to have the case heard in Federal Court.  We don’t know whether this was the best way of doing it without knowing more about the Facts in the case but at the least the insured was successful in being able to litigate his case in State Court.

The case is from the Southern District of Texas, Galveston Division, and is styled, Ronald Mason v. Evanston Insurance Company.

Insurance lawyers always want to remove cases filed by insured’s to the Federal Courts.  In most instances they are successful in these efforts.  Here is a situation where the insurance lawyers were too late in getting the case removed to Federal Court.

This case is from the Southern District of Texas, Houston Division.  It is styled, Solaiha Enterprises LLC v. Amguard Insurance Company.

Amguard was the insurer for Solaiha when Solaiha made a claim for property damage.  Amguard refused to pay the claim and Solaiha sued Amguard and Ronnie Patel, the agent who sold the policy.  The lawsuit was filed on May 4, 2017, in State Court.  Solaiha dismissed its claim against Patel in late February of 2019.  Amguard filed a Notice of Removal on March 14, 2019, and Solaiha promptly filed this Motion to Remand arguing that Amguard was untimely in filing its Notice of Removal.

Here is an opinion issued by a Magistrate Judge from the Western District, Austin Division, which says that the insurer was too late in accepting responsibility for the acts of its agent, the adjuster, when the company accepted responsibility the day before removal was filed.  The case is styled, Robbins Place West Campus, LLC v. Mid-Century Ins. Co. and Jillian Meghan Sherman.

In this case, Robbins had commercial insurance coverage with Mid-Century when Robbins suffered wind and hail damage.  Robbins was unhappy with the way the claim was handled by the adjuster, Sherman, and sued Sherman and Mid-Century in State District Court for various violations of the Texas Insurance Code and breach of contract.

Pursuant to Texas Insurance Code, Section 542A.006, Mid-Century made an election to legal responsibility for Sherman.  The next day, Mid-Century removed the case to this Federal Court.

The Texas Insurance Code, Section 542A, became the law in Texas in September 2017.  The cases involving this law are working their way through the Court system.  This law was recently discussed in a U.S. Southern District, Houston Division opinion styled, Greatland Investment, Inc., a/b/a Southwest Plaza v. Mt. Hawley Insurance Company and Kevin Wilson Mayfield.

Greatland had property insurance with Mt. Hawley when it’s property was damaged in a storm.  Greatland assigned Mayfield to inspect and adjust the claim.  Mayfield found the claim did not fall within Greatland’s policy and Mt. Hawley refused to pay the claim.

On December 3, 2018, Greatland sent a demand letter to Mt. Hawley stating its intent to sue Mt. Hawley and Mayfield and others.  On January 15, 2019, Mt. Hawley responded and notified Greatland that Mt. Hawley was electing to accept liability for all its employees and the adjuster pursuant Texas Insurance Code, Section 542A.006.  On March 1, 2019, Greatland sued Mt. Hawley and Mayfield in Texas state court for breach of contract and Texas Insurance Code violations.

For Insurance Attorneys, here is a case that is important to know and understand.  The case is from the Western District of Texas, San Antonio Division.  It deals with segregation of damages when required under an insurance policy.  The case is styled, Mark Sadovsky v. Nationwide Property and Casualty Insurance Company.

Sadovsky had a home owners policy with Nationwide on April 12, 2016, when he suffered alleged hail and wind storm damage to his home.  On April 20, 2016, he submitted a claim and Nationwide eventually paid the claim and closed the claim.

In the spring of 2017, Sadovsky noticed several neighbors having their roofs repaired.  A neighbors contractor inspected the roof and informed Sadovsky of unrepaired hail damage and informed Sadovsky that the costs of repair would be $68,372.89.

Insurance attorneys know that a requirement of most insurance policies is that an insured give prompt notice to their insurance company of any claim.  This is illustrated in a recent Western District of Texas, San Antonio Division opinion styled, Mark Sadovshy v. Nationwide Property and Casualty Insurance Company.

This lawsuit arises out of a hail and wind damage claim filed by Sadovshy against Nationwide.  Sadovsky sued Nationwide for violations of the Texas Insurance Code and Breach of Contract.  This case is being decided now on a Motion For Summary Judgment filed by Nationwide.

Nationwide claims it is entitled to summary judgment because Sadovsky failed to perform under the insurance contract by timely notifying Nationwide of his claim for damages.

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