Articles Posted in Interpreting An Insurance Policy

Like other contract rights, the right to insurance proceeds can be assigned, giving the assignee the right to recover under the policy.

This issue is discussed in the 1968, Texas Supreme Court opinion styled, McAllen State Bank v. Texas Bank & Trust Company, Trustee.

Texas Bank claimed proceeds of a life insurance policy as successor to the named beneficiary asserting the policy was pledged as security for a loan made to the deceased.

If a person or entity is not a named beneficiary, can they be an intended beneficiary?

Other persons who may sue for benefits under an insurance contract are “intended beneficiaries” also known as “third party beneficiaries.”

A third party for whose benefit an insurance contract is made may enforce the insurance contract against the promissor.  As discussed in the 1985, opinion from the 14th Court of Appeals, styled, Hermann Hosp. v. Liberty Life Assur. Co., the controlling factor in determining whether a third party may enforce a contract is the intention of the contracting parties.

An additional insured is a party protected under an insurance policy, but who is not named within the policy.  A common example of an additional insured is a person who, although not specifically named, is covered under a liability policy by a definition of “insured” that extends protection to interests, strictly according to a status, such as employees or common members of a household.  This is most commonly seen in personal automobile polices such as when a friend drives a car with the owners permission.  A party typically becomes an additional named insured pursuant to an agreement obligating the named insured to add the additional named insured to the named insured’s pre-existing insurance policy.  This is discussed in the 1997, Austin Court of Appeals opinion styled, Western Indem. Ins. Co. v. American Physicians Ins. Exch.

The Western Indemnity case is a summary judgment ruling.  In the case, the wording of the policy was discussed at length.  In making it’s ruling the court noted that both the terms “additional insured” and “additional named insured” have clear technical meanings.  An additional insured is a party protected under an insurance policy, but who is not named within the policy.  A common example of an additional insured is a person who, although not specifically named, is covered under a liability policy by a definition of “insured” that extends protection to interests, strictly according to a status, such as employees or common members of a household.  On the other hand, an additional named insured is a person or entity specifically named in the policy as an insured subsequent to the issuance of the original policy.  A party typically becomes an additional named insured pursuant to an agreement obligating the named insured to add the additional named insured to the named insured’s pre-existing insurance policy.

As in all situations where an insurance company is not promptly paying a claim for coverage, a person should seek the help of an Experienced Insurance Law Attorney.

Insurance attorneys always have to answer the above question when looking at an insurance policy case.  This issue is discussed in the 1972 case from the Texarkana Court of Appeals styled, Doss v. Roberts.

This suit involves the division of monies received from the sale of land found not to be subject to partition in kind.  Roberts brought suit to partition 22 acres of land jointly owned with James B. Doss.  The jury found that the land was not subject to partition in kind, and the court ordered the land sold and monies divided.  The parties each owned an undivided one-half interest in the property.  The land was subject to a V.A. loan and lien.  Doss purchased insurance on his interest in the dwelling located on the land in the amount of $10,000.00 and named the V.A. as loss payee.  The improvements were destroyed.  Doss paid the remaining balance due the V.A. in the sum of $8,964.87, and thereafter collected the insurance proceeds of $10,000.00.  Roberts contended she was entitled to one-half of the insurance monies because the house was not rebuilt.

The main issue in this case is whether Roberts was entitled to one half of the proceeds from the insurance.

Insurance lawyers will tell their clients to read the insurance policy and then the attorney can discuss with the client how courts interpret the language in the policy.  A 2018, opinion from the Southern District of Texas, Corpus Christi Division, styled, Mark Eller V. United Property & Casualty Insurance Company, is a good read for seeing how at least this particular court interprets the policy at issue in this case.

United filed a “Motion to Abate Proceedings to Complete Appraisal Process” and Eller responded.

Eller owns property damaged in Hurricane Harvey on or about August 25, 2017.  United was the insurer and provided an estimate of the loss that was far less than what Eller says.  A pre-suit demand was made under Texas Insurance Code, Chapter 542A on February 1, 2018.

Most people would agree that reading legal papers can be confusing.  As it relates to life insurance policies the law in favor of the insured.  This is illustrated in the Houston [14th Dist.] Court of Appeals opinion, Parchman v. United Liberty Life Insurance Co., a 1982 opinion.

The Parchman case stands for the proposition that an incontestability clause cannot be more onerous than the clause that is prescribed by the Insurance Code, Section 1131.104 and 705.104.  These statutes do not specify whether the policy date or the effective date is considered its date; this creates an ambiguity that must be construed against the insurer.  And an insurer may not place a more onerous incontestability clause in the policy than the one prescribed by statute, although in may provide a shorter period than that prescribed.

In the Parchman case, the policy date in question was October 10, 1977, and the effective date was either July 20, 1977, or August 6, 1977, depending on whether a medical examination was required and completed.  Using the policy date of October 10 as the date that the clause began to run provided for a longer period than using the effective date of July 20 or August 6.  Thus, the policy’s incontestability clause was more onerous than the one prescribed by statute, so the statute prevailed, and the policy date in the incontestability clause was construed to mean the effective date.  In the case, the two year period began running on the earlier effective date rather than on the later policy date.

Dallas insurance attorneys will want to read this 2018, opinion from the San Antonio Court of Appeals.  It is styled, Avalos v. Loya Insurance Company.

The case discusses in depth the “eight corners rule” and how courts look at this rule in determining whether or not an insurer has a duty to defend a lawsuit.  The rule takes its name from the fact that only two documents – the insurance policy and pleading – are relevant to the determination of the duty to defend.  Under the eight-corners rule, an insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.

When applying the eight-corners rule, the court is tasked with resolving all doubts regarding the duty to defend in favor of the existence of a duty and liberally construe the allegations in the petition in favor of the insured.  Even if the allegations in the petition are groundless, false, or fraudulent, an insurer is obligated to defend.  The duty to defend is not affected by facts that may be ascertained before suit or developed during the course of the litigation.  Thus, according to the 2009, Texas Supreme Court opinion styled, Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., facts outside the pleadings are not material to the determination of the duty to defend even if those facts directly contradict the allegations in the underlying petition.

Coverage for punitive damages are not always covered in an insurance policy.  This issue came up in the 2018, case styled, Richard Brett Frederking v. The Cincinnati Insurance Company, Inc.  The case is from the U.S. District Court, Western District of Texas, San Antonio Division.

This is a summary judgment case if favor of Cincinnati.  The Court held that the insurance policy at issued does not afford coverage for the punitive damages award attributed to the negligence of Carlos Sanchez.

Frederking was injured when his vehicle was struck by an intoxicated driver, Carlos Sanchez.  A trial was held in State Court and the jury found Sanchez was grossly negligent and awarded Frederking $207,550.00 in punitive damages plus interest.  The issue is whether the policy held by Sanchez’s employer covers this punitive damages award.

When an insurance attorney gets a new client on an insurance related claim, one of the first things he wants, is a copy of the policy to read.  And when he reads the policy, he wants to know what the exclusions are that are in the policy.

The basic form and broad form business policy contains exclusions.  In fact, the many pages of an insurance policy are, when read, pages explaining what is excluded or limitations on what will be paid.  Sample exclusions on the broad form are:

  1.  Ordinance or law — When a building is not in compliance or conformity with local building codes or laws and must be rebuilt or replaced, local laws require that the new structure conform to current requirements.  Because ordinance or law exposures are not anticipated by basic premium rates, the cause of loss forms contain an ordinance or law exclusion, which excludes any part of a loss resulting from the enforcement of any ordinance or law regulating the construction or repair of property.  This is discussed in the 1962, Texas Supreme Court opinion styled, Employers Mutual Casualty Co. of Des Moines v. Nelson.

Lawyers who handle commercial insurance claims can tell you that the most common type of commercial property insurance is the Building & Personal Property Coverage Form.

The Building & Personal Property (BPP) coverage form is the most commonly used policy to insure commercial buildings and contents.  Covered perils for the BPP are listed in separate cause-of-loss forms.

The BPP generally covers: