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Attorneys handling auto insurance problems will see situations where a person has their insurance raised after a claim.  This is sometimes done in violation of Texas laws.  The Washington Post published an article in February 2018, that deals with auto insurance rates.  It is titled, Auto Insurance Rates Have Skyrocketed – And In Ways That Are Wildly Unfair.  Here is what the article tells us.

Auto insurance rates have increased at more than twice the rate of inflation recently.  Nationally, the rates are $1,427.  Catastrophic weather caused some of the increase in 2017.  Ineffective state regulators also contribute by not holding auto insurance companies in check.

Consumer advocates say insurers have become adept at using Big Data to set rates for drivers using formulas that are complex and sometimes hidden from view.  In the crazy, mixed-up world of car insurance, credit ratings and college diplomas can have a bigger bearing on car insurance premiums than someone’s driving record.  The people most often hurt are low-income drivers who can least afford to buy state-mandated insurance, they say.

All parts of an insurance policy are important.  An insured needs to understand what is contained in any policy he has.  Texas laws assumes a person has read and understands the contents of his insurance policy.

The insuring clause of a policy in the insurance company’s agreement to provide coverage to the insured.  A policy may include several insuring clauses.

The 1997, Houston Court of Appeals [1st Dist.] stated in State Farm Lloyds v. Marchetti, that the insuring clause is the foundation of the agreement and forms the basis for all obligations owed to the insured.  Unless this clause provides coverage for a claim, it is unlikely that any other term of the policy will do so.

Insurance policies are normally going to have a declarations page.  This page will identify the insured, the policy limits, and times of coverage.  The declarations page is to show the insured what the insurance policy covers.

In determining the coverage provided by an insurance policy, always review the declarations page.  The declarations page will list the various forms and endorsements that make up the policy.  There are situations where the insurance company attaches the wrong forms to the policy.  That is why it is important to compare what is on the declarations page to what is actually attached to the policy.

The declarations page should include the following information:

According to the Fort Worth Court of Appeals opinion from 1995, styled, Truck Insurance Exchange v. Musick, insurance policies are normally issued on standard forms containing terms drafted by the insurance company.

Keep in mind that Texas has standard automobile policy forms approved by the Texas Department of Insurance.  For homeowners insurance there are three standard policies — the HO-A, HO-B, and HO-C.  In addition insurers may offer alternative policies, if approved by the Texas Department of Insurance.

As stated by the 1999, Texarkana Court of Appeals opinion, Tri-State Pipe & Equipment, Inc. v. Southern County Mutual Insurance Co., because the insurance company prepares the standard forms of its insurance policies, it controls what clauses are contained in the policies, and the insured has little or no bargaining power over the nature and extent of those clauses.  Therefore, the law places on the insurance company the burden to include in its policies the various provisions relating to the kind and extent of coverage that the law requires.

Without an insurable interest, an insurance contract is a gambling contract, and gambling contracts cannot legally be enforced.  For example, David cannot insure Paul’s house in which David has no insurable interest, betting (gambling) the house will suffer a loss.  If David could win this bet, he would receive a return far in excess of the premium he otherwise would pay, but would face no risk other than the cost of the premium.

Insurance provides well recognized opportunities for profit to an insured who deliberately causes an insured event to occur.  For example, after purchasing property insurance on Paul’s house, David might deliberately start a fire to collect the insurance.  The insurable interest requirement therefore reduces intentional losses created by one party having a disproportionate financial interest in causing a loss.  The temptation to cause loss will be reduced when an insurable interest exists.  For example, although Paul might destroy the property of an unrelated person like David for his own financial gain, he will be less willing to set fire to his own house, because of the inevitable loss of his own possessions.

The principle of indemnity means a person should not profit from an insured loss.  Most property and casualty insurance contracts are contracts of indemnity.  In contrast to a valued contract, which provides for the payment of some pre-established dollar amount, a contract of indemnity provides for payment of the sum directly related to the amount lost, subject to the limitations of the policy.  The insurer therefore indemnifies the insured for pecuniary loss to that property or activity in which the insured has a personal interest.  This is discussed in the 1963, Texas Supreme Court opinion styled, Smith v. Eagle Star Insurance Co.

Does my potential new client have an insurable interest?  That is a question insurance lawyers have to answer first when talking to someone who believes they are owed money on an insurance claim.

As stated by the Dallas Court of Appeals in 1993, in the opinion styled, Jones v. Texas Pacific Indemnity Co., “A party must have an insurable interest in the insured property to recover under an insurance policy.”  It is  not necessary that the party own the property to have an insurable interest.  An insurable interest is an exposure to financial loss possessed by a person giving rise to a legal interest that the insured possesses a right to protect.  An insured who owns a house or auto therefore has an insurable interest in the house or auto because the insured would be hurt financially if the house or auto were damaged or destroyed.  This is also discussed by the Texas Supreme Court in the 1963, opinion styled, Smith v. Eagle Star Insurance Co.  An insurable interest does not constitute an entitlement to insurance because the insurer is permitted to underwrite and price the risk sought to be insured.  Even if an insurance policy is issued, it cannot be enforced by a party who has no insurable interest — even if that party is a named insured.  This was discussed in the 1972, Amarillo Court of Appeals opinion styled, North River Insurance Co. v. Fisher.

An insurable interest is necessary for the following reasons:

Weatherford insurance lawyers need to recognize “first party” policies when they see them.  Here are some examples:

  1.  The standard Texas Auto Policy covers accidental loss or damage to the covered auto.  If an insured is involved in a single car accident resulting in property damage to the insured vehicle, the insured possessing this type of coverage may submit a claim directly to their insurer and receive compensation for the damage to their vehicle in accordance with the terms of the Texas Auto Policy.
  2.  Health insurance refers to coverage for medical and hospital expenses and may be issued on an individual or group basis.  An insured who requires health care due to an illness or injury may submit a claim directly to their own insurer for the reasonable and necessary costs of the health care received.  If the insured has paid for their health care, the insurer will reimburse the insured.  It is also common practice for the health care provider to take an assignment of the insured’s interest in insurance benefits enabling the insurer to pay the care provider directly.

A question typically asked of Fort Worth Insurance Lawyers is, – What is the difference between a third party claim and a first party claim.

A “first party” claim is usually a policy that  typically involves insurance that provides policy benefits directly to the insured or beneficiary in the event of a loss.  The Texas Insurance Code, section 541.051(2) defines “first party claim” as a claim “by an insured or a policyholder under an insurance policy or contract or a beneficiary named in the policy or contract that must be paid by the insurance company directly to the insured or beneficiary.  These types of policies generally include health insurance, life insurance, disability insurance, workers’ compensation insurance, auto property insurance, homeowner’s property insurance, and commercial property insurance.  These examples are found in the 1997, Texas Supreme Court opinion styled, Universe Life Insurance Company v. Giles, wherein the court is describing differences between first party and third party insurance.

In contrast, “third party coverage” is generally considered to include forms of liability insurance.  This type of insurance is designed to insure against a loss to third parties caused by the insured or another covered person for whom the covered person may be legally responsible.  These types of policies include commercial general liability, auto liability, homeowner’s liability, professional liability, and directors and officers liability policies.  This is also discussed in the Giles opinion wherein the court is describing differences between first party and third party insurance.

Insurance transactions tend to resemble one another, so disputes arising from them tend to resemble one another.  There are only so many ways that an insurance company and an insured can get crossways.  Most cases present recurring problems that can be grouped into several categories.  Insurance law is even more precedent driven than other areas, as courts try to construe similar policy language consistently.  It is not surprising that cases start to look alike.

The key is find good authorities that match your facts, or to emphasize the facts that match good authorities.

Of course, the starting point is the contract itself.  The initial inquiry almost always begins with the language of the contract to determine what is covered and what is not.  Other tort and statutory theories may logically depend on the existence of coverage, or may exist independent of coverage.  The interplay between recovery for breach of contract and recovery under other theories is discussed in numerous areas in this blog.  Beyond suit for breach of contract, most insurance cases can be grouped into these categories – misrepresentations – non-disclosures – unfair settlement practices  – and other misconduct.

Here is some very basic information that every insurance lawyer should be aware of.  It is also information that every insurance consumer should know.

To understand the different ways disputes can arise, it is helpful to consider the sequence of events that is likely to occur involving an insurance issue.  At its very simplest, the insurance transaction can be divided into the initial sale of the policy, and subsequent handling of claims.  These can be broken down further to include:

(1)  The sale of the policy:  Initially, the consumer and insurance company  or insurance company’s agent must communicate to establish a contractual relationship.  Disputes may arise over what was asked for by the applicant, what was represented by the insurance company or agent, or the timeliness of the insurance company or agent in providing coverage.  Issues may also arise about the truthfulness of the applicant or agent in disclosing information requested by the insurer;