Articles Posted in Delay in Paying Claim

Insurance lawyers need to read this 2020, opinion from the United State Fifth Circuit Court of Appeals.  It is a good opinion for attorneys who represent policy holders.  The opinion is styled, Jesus Agredano: Margaret Agredano v. State Farm Lloyds.

The Agredando’s sued State Farm after State Farm denied their claim for windstorm damage to their home.  The District Court granted summary judgment in favor of State Farm on various causes of action but allowed the Agredano’s breach of contract claim to be presented to a jury, which granted a verdict in the Agredano’s favor.  Althoughm the Agredano’s had sought attorney’s fees and statutory interest of 18%, the District Court ruled that the failure to specifically plead relief under Texas Insurance Code, Section 542.060 barred the requested relief and entered judgment only in the amount of the breach of contract damages found by the jury, together with pre-judgment and post judgment interest.  This appeal was filed.  This Court reversed and remanded to the District Court for reconsideration consistent with this opinion.

Two provisions of the Texas Insurance Code are relevant.  Section 542.058 provides a cause of action against insurers who delay paying claims:

Recent Texas Supreme Court opinions have been helpful to Texas insureds.  The help comes in the form of the Court deciding that an insurer by merely paying an appraisal award is no longer able to wash their hands of the case.  The insured can still seek remedy under the Texas Prompt Payment of Claims Act (TPPCA).

The case is from the Texas Supreme Court and is styled, William Marchbanks v. Liberty Insurance Corporation.

At issue in this insurance dispute is whether an insurer’s payment of an appraisal award bars an insured’s claims under the TPPCA, codified as Chapter 542 of the Insurance Code.  The court of appeals concluded it did.  Because the court of appeals’ opinion is inconsistent with recent decisions on this issue, this Court now reverses.

The Texas Prompt Payment of Claims Act (TPPCA) sets forth rules for payment of claims and penalties for violation of those rules.  Here is a case that deals with the TPPCA when there is an appraisal involved.  The case is from the Northern District of Texas, Dallas Division, and is styled, Corinne Pearson v Allstate Fire and Casualty Insurance Co.

In February 2019, Pearson filed suit against Allstate alleging violations of the TPPCA and breach of contract and bad faith.  We will look at the TPPCA claim.  Allstate obtained an abatement of the case pending an appraisal of the damage to Pearson’s property.  In June the parties notified the Court that the appraisal was completed and Allstate filed this summary judgment motion.

The facts in evidence here were that Pearson had a policy with Allstate.  Pearson timely submitted a claim for damages.  After an inspection by Allstate there resulted a repair estimate that was lower than the policy deductible and this lawsuit was filed.

What about those times that an insurance company pays a claim but the payment has been a lot later than it should have been paid?  That is an issue that is partially addressed in a January 2020, opinion from the United States District Court, Southern District of Texas, Houston Division.  The opinion is styled, Zachary Dunne v. Allstate Vehicle And Property Insurance Company.

This part of the ruling is the result of a Motion For Summary Judgment filed by Allstate.

The facts are not in dispute.  Dunne’s home was damaged in a storm that was insured by Allstate on June 20, 2018.  Dunne reported the claim on July 3, 2018.  Allstate’s adjuster determined the damage was below Dunne’s deductible despite increasing its estimate.

As discussed before, litigating cases in Federal Court is what an insurance company prefers to do.  Ans as discussed before, there are ways to keep this from happening in the right circumstances.  The United States 5th Circuit issued an opinion issued an opinion in 1998, that is worth knowing about as it relates to calculating damages and how that calculation effects whether or not a case will be litigated in Federal Court.  The opinion is styled, St. Paul Reinsurance Co., LTD. v. Greenberg.

This declaratory judgment action is a case wherein the insurance company won their fight to have the case litigated in Federal Court because the amount in controversy requirement for diversity jurisdiction under 28 U.S.C., section 1332, was not satisfied.

Greenberg had a homeowners policy with St. Paul.  Greenberg’s home was destroyed by arson.  Greenberg filed a sworn proof of loss for $35,000, which was the policy limits.  St. Paul denied the claim for three reasons.

All insurance lawyers understand that there are time limits within which an insurance company must accept and pay the claim or else deny the claim.  And it is also understood that the insured making the claim has an absolute duty to cooperate with the claims investigation.  But what about a situation where the insurance company needs to be able to get information from a third party, such as medical providers?

What is clear is that if the insurance company reasonably requests information from the claimant, deadlines for payment of the claim are postponed until the insurance company receives that information.

In contrast, the Prompt Pay Statute does not expressly extend any deadlines while the insurance company awaits information from third parties.  However, if the insurance company cannot accept or reject a claim because it is still waiting for such information, Texas Insurance Code, Section 542.056(d) allows the insurance company a one-time 45 day extension.

Here is an insurance case that was appealed to the Fort Worth Court of Appeals.  The case is styled, Joseph Lambert and Susan Lambert v. State Farm Lloyds and Tevin Senne.  The appeal involved a few issues but the one focused on here deals with the Texas Prompt Payment of Claims Act (TPPCA).

The Lamberts are appealing a grant of summary judgment in favor of State Farm.

The Lamberts had their home damaged in a storm in May 2015.  The y made a claim for benefits and after the first inspection, the damages did not not exceed the Lamberts deductible.  A second inspection was requested, after which the Lamberts were issued a check fo $1,700, in October 2015.

Just saying the claim was paid is not enough.  In Court, the insurance company needs to prove the claim was paid and paid timely in order to prevail on a Motion For Summary Judgment.

Here is a case from the Northern District of Texas, Dallas Division.  It is styled, Carolyn Kee v. Safeco Insurance Company of Indiana.

Kee alleges that Safeco, her home insurer, conducted an inspection after she made a claim and that the adjuster reported minimum damage, falling below her policy deductible.  Kee sued for breach of contract and violation of the Texas Prompt Payment of Claims Act.  Safeco then pursued binding arbitration and the resulting award was significantly higher than Safeco’s initial damage assessment.

Insurance lawyers need to know the time lines for an insurance company to pay claims under the Texas Prompt Payment of Claims Act and they need to know the legal reasons for those time lines being extended.

Pursuant to Texas Insurance Code, Section 542.056(d), if the insurance company cannot accept or reject the claim by the initial deadline, the statute lets the insurance company notify the claimant that it cannot accept or reject a claim by the deadline.  This notification has to be sent before the original deadline, and the notice must state the reason why the insurance company needs additional time.  The insurance company then has 45 additional days to accept or reject the claim.

Pursuant to the 1997, 5th Circuit opinion, Higginbotham v. State Farm Mutual Automobile Insurance Co., the insurer’s good faith or its lack of bad faith is no defense.  In reaching this conclusion, the court noted that precedents under the predecessor statute held that an insurance company’s good faith in denying a claim did not relieve the insurer of liability for penalties.  The court concluded that an insurer  that denies a claim takes the risk that it will have to pay the additional damages allowed by the statute.

The next question in this series related to violations of the Texas Prompt Payment of Claims Act is, what are some of the defenses the insurance company has for not making prompt payment on a claim.

The statute contains several provisions by which insurance companies may extend the deadlines.  While, technically, these are not “defenses,” they may help insurance companies avoid liability.  The following events or conditions can extend the deadlines:

a.  Texas Insurance Code, Section 542.055(a) allows eligible surplus lines insurers extra time for acknowledging claims, commencing investigation, and requests for information.

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