Articles Posted in Interpreting An Insurance Policy

An insurance contract will impose conditions on the insured person or entity.  For example, most policies require that the insured give notice of the claim and cooperate with the insurance company.  Policies may require that the insured file a formal proof of loss, if the insurer requests one.  When one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligations to perform.  In the 1994, Texas Supreme Court opinion, Hernandez v. Gulf Group Lloyds, the court said that the breach be “material.”  The court explained stating:

In determining the materiality of a breach, courts will consider, among other things, the extent to which the non-breaching party will be deprived of the benefit that it could have reasonably anticipated from full performance … The less the non-breaching party is deprived of the expected benefit, the less material the breach ….

The other factors courts consider in determining the materiality of a breach are: (1) the extent to which the injured party can be adequately compensated for the part of that breach of which he will be deprived; (2) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (3) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (4) the extent to whic the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

Lawyers handling car wreck cases would be especially interested in this 2017 opinion from the Texas Supreme Court.  It is styled, Farmers Texas County Mutual Insurance Company v. Jennifer L. Zuniga et al.

This is an appeal from the granting of a summary judgment in favor of Zuniga wherein Farmers had asked the court to rule that there is no coverage under the policy at issue for punitive damages.  This Court reversed that summary judgment.

Determining whether exemplary damages for gross negligence are insurable requires a two-step analysis.  First, the Court decides whether the plain language of the policy covers exemplary damages sought in the underlying suit against the insured.  Second, if the Court concludes that the policy provides coverage, it determines whether the public policy of Texas allows or prohibits coverage in the circumstances of the underlying suit.

The San Antonio Division, Western District, issued an opinion dealing with rebuild costs under a homeowners policy that insurance attorneys need to read.  It is styled, Kirk McClelland and Tamre McClelland v. Chubb Lloyd’s Insurance Company of Texas, and Robert Lynn Pritchard.

This is a dispute over coverage and the conduct of Chubb in its payments totaling $145,290.72 to the McClellands.  The McClellands assert they are entitled to greater amounts and sued Chubb and its adjuster for breach of contract and various violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act.  The Court granted summary judgment in favor of Chubb and the McClellands seek to alter that judgment.  The course refused to alter the judgment.

The background facts are summarized as follows.  The McClellands garage apartment was destroyed by fire.  Chubb insured the property under a “Texas Standard Homeowners Endorsement” as well as a “Texas Platinum Homeowner’s Endorsement.”  Their extended policy limits allowed for “reconstruction cost even if this amount exceeds the limit of liability for your dwelling or other structures as shown on the declarations page.”  The Platinum Endorsement defined “reconstruction cost”:

As in all insurance policies, the language used in the policy will be used in enforcing and interpreting the policy.

In the 2003, Texas Supreme Court opinion, Provident Life and Accident Insurance Co. v. Knott, the court read the policies in question  defining the term “total disability” to mean that the insured must, in order to be considered totally disabled under the policies, be unable to “perform all of the important daily duties of his occupation.”   The then held that the trial court’s granting of summary judgment in favor of the insurance company was appropriate given that the insured, a gynecologist seeking benefits for total disability under those policies was able to see patients, perform surgery, consult with other physicians and perform administrative duties.

A long term disability policy that defined disability in part as the inability to perform “each of the material duties” of the insured’s regular occupation required only that the insured be unable to perform any single material duty of her occupation in order to be considered disabled, not that she be unable to perform all duties of that occupation.  This was in the 2002, U.S. 5th Circuit opinion, Lain v. UNUM Life Insurance Co. of America.  No concrete evidence disability insurer’s determination of non-disability for insured who suffered recurring severe chest pains, while overwhelming evidence supported disability claim, warranting benefit award under ERISA civil enforcement provision:  the insured’s time at home doing research on her medical condition did not equate to ability to practice law, as insurer contended; insurer focused on certain “normal” test results to support its finding, but test results were primarily abnormal and also could not clinically measure insured’s pain; and insurer’s reliance on insured’s failure to seek psychiatric care prior to ceasing employment was misguided since her disability was physical.

Insurance attorneys need to read an August 2017, opinion from the 14th Court of Appeals.  It is styled, Tiffany Falkenhagen Thompson v. Geico Insurance Agency, Inc.

Texas Personal Automobile Policy’s require the policyholder to notify the insurer of the policyholder’s acquisition of a replacement vehicle for the coverage to extend to damage to the newly acquired vehicle.  This case is presented on cross motions for summary judgment regarding the notification requirement in the policy.  Tiffany says the policy provision does not apply to leased vehicles or alternatively, the policy language is ambiguous.  Geico says they were not timely notified of the replacement vehicle and thus, there is no coverage.  The trial court ruled in favor of Geico and this appeals court upholds that ruling.

Tiffany owned a 201  Infiniti G37 auto and secured insurance from Geico.  She traded in the G37 and leased a 2015 Infiniti Q50 auto.  A few months later while driving the Q50, Tiffany was involved in an accident.

Insurance lawyers who handle home owners claims need to read this opinion from the 14th Court of Appeals.  It is styled, Ron Pounds v. Liberty Lloyds of Texas Insurance Company.

This case concerns whether an insurer waived appraisal of a homeowner’s insurance claim by denying it.  A summary judgment in favor of Liberty was granted by the trial court.

The facts in this case are undisputed.  Pounds purchased a home insurance policy from Liberty.  The policy covered damage caused by wind and or hail.

When two events combine to cause damage, one being covered and the other not covered, issues arise regarding whether the loss is covered, and who bears the burden of proof to allocate causation between the covered cause and the excluded cause.  In the San Antonio Court of Appeals case, Wallis v. United Serv. Auto. Assoc., the court held that the insurance company will only be liable for that portion of the damage that was caused by a covered event.

When the covered and excluded perils combine to cause injury, the Texas Supreme Court has held that the insured must present some evidence affording the jury a reasonable basis on which to allocate the damages.

Generally, courts have held that if a loss occurs as a result of two concurring perils, one insured and one not, then the loss is covered only to the extent that it can be traced to the covered peril.  Expert testimony allocating damage between covered and excluded causes may satisfy this burden of proof, according the United States 5th Circuit, in Fiess v. State Farm Lloyds.

The San Antonio Court of Appeals issued an opinion in USAA Texas Lloyd’s Company v. John Doe and Jane Doe, and as next friends of XXX, a Minor.  The case is an appeal from a motion for summary judgment in a declaratory judgment action filed by USAA seeking a declaration that it had no duties under a renters policy insuring the Doe’s.

The Doe’s thirteen year old son had sexually assaulted a five year old and the Doe’s were sued by the parents of the five year old and the Doe’s sought to have USAA defend them under the renters policy.

USAA claimed there was no coverage for the incident, pointing to the liability section of the policy which read:

Insurance lawyers often will hear a story that goes like this.  – I was involved in an accident last year.  The other guy was at fault.  I let my insurance company know about the wreck and then I found out that my insurance company paid the other guy.  Can I sue them for doing that?

This issue is addressed in a 2000, Dallas Court of Appeals opinion styled, Stevens Transport, Inc. v. National Continental Insurance Company, et al.

Here are the facts of the case:  National Continental Insurance Company, Progressive County Mutual Insurance Company, and Progressive Casualty Insurance Company provided a truckers insurance policy to Stevens Transport, Inc.  The policy included a right to defend and settle any suit involving damages resulting from an accident caused by the use of a covered automobile.  The policy had a $250,000 deductible.

Either the insurance company or the insured has a right to demand an appraisal in lots of property insurance contracts.  The Waco Court of Appeals issued an opinion recently that discusses these appraisal clauses.  The case is styled, In Re GuideOne Mutual Insurance Company.

This case is a writ of mandamus complaining of the trial court’s refusal order appraisal to proceed as allowed in the insurance contract.

Appraisal clauses, commonly found in homeowners, automobile, and property policies in Texas, provide a means to resolve disputes about the amount of loss for a covered claim.  These clause are generally enforceable, absent illegality or waiver.