Articles Posted in Delay in Paying Claim

The Texas Supreme Court has rendered an opinion which concerns the Texas Prompt Payment of Claims Act (TPPCA).  The opinion issued on June 8, 2019, and is styled, Barbara Technologies Corporation v. State Farm Lloyds.

In this case, the Texas Supreme Court reversed the appeals court judgment, which had granted summary judgment in favor of State Farm, and remanded the case to the trial court for further proceedings.

This case arose out of a wind and hail storm that damaged Barbara Tech’s property on March 31, 2013.  Tech filed a claim with State Farm on October 17, 2013, pursuant to the insurance policy, requesting coverage of the cost of repairs.  State Farm promptly inspected the costs of repair and denied Tech’s claim based on the assertion that the damage totaled $3,153.75, which was less than Tech’s $5,000 deductible.  Tech requested a second inspection and State Farm conducted another inspection finding no additional damage.

The Texas Prompt Payment of Claims Act was interpreted by the United States Fifth Circuit in this 2015 opinion.  The opinion is styled, Cox Operating, L.L.C. v. St. Paul Surplus Lines Insurance Company.

The facts are kinda long ans somewhat confusing, plus there are other issues in the case.  Of relevance here is the Court’s discussing of the Texas Prompt Pay statutes.

Texas Insurance Code, Section 542.054 says in order “to promote the prompt payment of claims,” the act provides for a series of deadlines to which insurers must adhere at each stage of the claim handling process.

The Texas Prompt Payment of Claims Act was not violated in this situation.

The case is from the Southern District of Texas, Laredo Division.  It is styled, Jonnie Byrd v Liberty Insurance Corporation, et al.

Following a hail storm, Byrd made a claim against her homeowner’s policy with Liberty for damage to the roof and interior his home.  Liberty’s adjuster found no hail damage to the roof but did find water damage of a little over $3,000, which was less than the deductible.  Byrd then sent a demand letter seeking $55,731.  Liberty closed the file and Byrd sued for various causes of action including violation of the Prompt Payment of Claims Act.

As was stated in the 1997, Texas Supreme Court opinion, Universe Life Ins. Co. v. Giles, an insurer violates its duty of good faith and fair dealing by denying or delaying payment of a claim if the insurer knew or should have known that its liability was reasonably clear.  However, an insurance company may withhold UIM benefits until the insured’s legal entitlement is established.

Statutory liability may also be imposed on an insurer that delays payment of a claim under Texas Insurance Code, Section 542.051 and those sections following, if the insurer delays payment for more than 60 days from the date it received all the information reasonably requested and required, the insurer must pay the claim along with the statutory penalty.  An insurer’s failure to comply with the requirements of this Prompt Payment of Claims section will result in imposition of statutory penalties, even if the delay in payment is in “good faith.”  If an insurer promptly interpleads policy proceeds, it cannot be subjected to statutory penalties for delayed payment.  However, in the 2007, Texas Supreme Court opinion, State Farm Life Ins. Co. v. Martinez, the court held an insurer may be liable for statutory penalties for interpleader filing after the prompt payment deadlines.

To recover the statutory penalties available under the Prompt Payment of Claims Act, an insured must first prove that the insurer is liable for the underlying claim.  The insured must establish three elements: (1) a claim under an insurance policy; (2) that the insurer is liable for the claim; and (3) that the insurer has failed to follow one or more sections of the Prompt Payment of Claims Act with respect to the claim.

Insurance lawyers will often run across the situation at issue in the 2018, Dallas Court of Appeals opinion, George Bryant v. Progressive County Mutual Insurance Company and Kristen Winkler.

This is a uninsured motorist (UM) case wherein Bryant sued Progressive and the adjuster, Winkler, for the harm caused by the UM driver and numerous insurance code violations.  The trial court severed the auto wreck from the bad faith insurance claims.  In an UM case, Brant first had to prevail at trial, which he did.  Bryant then continued his claims for insurance code violations.  The trial court granted a motion for summary judgment in favor of Progressive and this appeal followed.

Bryant alleged numerous appeal points but the one discussed here is the issue regarding the Texas Prompt Payment of Claims Act (PPCA).

Here is an opinion from the 14th Court of Appeals that concerns the Prompt Payment of Claims Act.  The opinion is styled, William Marchbanks v. Liberty Insurance Corporation.

This is an appeal from the trial court granting summary judgment in favor of Liberty.  This appeals court affirmed the trial court.

Marchbanks reported a hail damage claim to Liberty and the same day Liberty acknowledged the claim and sent an adjuster to the property the next day.  The adjuster determined that any roof damage was not storm related and Liberty sent a denial letter explaining no storm related damaged was found.

Here is a case where the Prompt Payment of Claims Act was not violated, even though at first glance it appears it was violated.  Knowing how the facts and the law square on these issues is important in evaluating a case.  This 2018, case is from the Amarillo Court of Appeals and is styled, Steven Biasatti And Paul Gross D/B/A Topdog Properties v. GuideOne National Insurance Company and John Karl Graves.

TopDog was insured with GuideOne and suffered property damage during a storm.  A claim was made and GuideOne adjusted the loss as being $1,896.88.  TopDog requested an additional inspection.  GuideOne retained an engineer who confirmed the adjuster’s findings.  TopDog wished to proceed with an appraisal and GuideOne responded that only they, GuideOne, could invoke the appraisal process.

TopDog filed this lawsuit and then GuideOne invoked the appraisal clause in the insurance contract.  The trial court ordered appraisal, the parties designated appraisers, and the court appointed an umpire.  The umpire filed the appraisal award, in which the parties’ appraisers and the umpire unanimously set the amount of loss at $168,808.

What is the result oi an insurance company pays a claim after an appraisal even if you don’t agree with the appraisal?  This issue is addressed in a Houston Court of Appeals [14th Dist.] opinion.  It is styled, National Security Fire & Casualty Co. v. Hurst.

This is an appeal from a jury trial in favor of Hurst against National.  This appeals court reversed the jury trial results.

Dissatisfied with the initial estimate and payment, Hurst sued National and others for claims arising out of a wind and hail storm damage to his home.  This lawsuit also claimed violations of the Texas Prompt Payment of Claims Act.  National hired adjusters who assessed the damage and paid Hurst $3,524.56 (accounting for the $1,000 policy deductible), which Hurst accepted.  Hurst proceeded to file suit on September 7, 2010.

Does a violation of the Texas Prompt Payment of Claims Act survive an appraisal that is promptly paid?  This issue is addressed in an opinion from the San Antonio Court of Appeals.  The case is styled, Barbara Technologies Corporation v. State Farm Lloyds.

Barbara Technologies had a policy of insurance with State Farm insuring property that was damaged in a hail storm on March 31, 2013.  A claim was made on October 17, 2013 and on October 31, 2013, State Farm inspected the property.  On November 4, State Farm sent a letter stating the property sustained damage of $3,153.57, but did not issue payment because the amount was less that the $5,000.00 deductible.  On February 21, 2014, Barbara Technologies requested a re-inspection which was done and State Farm did not change it’s earlier statement.

Barbara Technologies filed suit for various violations of the Insurance Code including claims for violation of the Prompt Pay Act pursuant to Sections 542.058(a) and 542.060.

Llano County insurance lawyers need to know how the Prompt Payment of Claims Act works in situations where an appraisal clause is invoked.  An example is found in a Western District, Austin Division opinion styled, Thomas Cheski v. Safeco Insurance Company of Indiana.

On April 10, 2016, Cheski experienced severe weather, which damaged his home.  Cheski submitted a claim to Safeco.  On April 13, 2016, Safeco initially assessed the damage at a value less than the deductible.  Cheski requested a re-inspection and following the re-inspection, Safeco reassessed the claim at a value of $10,363.13 and issued payment of June 9, 2016.  Cheski continued to disagree and Safeco invoked appraisal on June 28, 2016.  On November 11, 2016, through the appraisal process, Cheski’s and Safeco’s appraisers agreed the amount of loss was $11,844.13 and Safeco issued payment for the difference on December 9, 2016.

Cheski sued Safeco alleging various violations of the Texas Insurance Code and Texas DTPA in addition to violation of the Prompt Payment of Claims Act and breach of contract.  Safeco contends its payment following the appraisal process precludes Cheski’s causes of action and moved for summary judgment.