Articles Posted in Interpreting An Insurance Policy

Here is an opinion from the Fort Worth Division, Northern District of Texas, that discusses insurance policy interpretation.  The opinion is styled, Suzann Ross v. Hartford Lloyd Insurance Company.

Ross had homeowners insurance coverage with Hartford and suffered a windstorm loss.  Ross made a claim for benefits and Hartford adjusted the claim and paid the amounts it believed it owed under the policy.  The main dispute was whether the roof damage needed to be totally replaced or just a portion replaced.  Ross sued Hartford and Hartford filed this Motion For Summary Judgment on her claims.

The relevant policy language reads in pertinent part:

The title of this blog topic should be “Insurance Company Gone Wacko”.

The case at issue here is from the Fifth Circuit Court of Appeals.  It is styled, Frederking v. Cincinnati Insurance Company.

This case involves Frederking being injured by an insured of Cincinnati who was intoxicated at the time of the automobile wreck.  The insured caused a wreck between the vehicle he was driving and the vehicle being driven by Frederking, causing injury to Frederking.  A jury found in favor of Frederking and Cincinnati refused to pay based on their assertion that the wreck was not the result of an accident as that term is used in the policy.

Insurance policies need to be read carefully and complied with.  The reason is that most times the courts are going to enforce the insurance policy provisions.  This is illustrated in a 2019 opinion from the Southern District of Texas, Galveston Division.  The case is styled, Benjamin Ford, et al v. United Property & Casualty Insurance Company, et al.

The Fords had a homeowners policy with United.  The Fords filed a claim with United for damage to their home resulting from a hurricane.  United inspected the claim and offered a cash settlement of $7,105.74.  The Fords rejected the offer and sought another inspection, after which, United made a “supplemental payment of $31,053.89.  This payment was also rejected causing United to invoke the appraisal provision in the homeowner’s policy on January 18, 2018.

Two months later, the Fords sent a pre-suit demand letter to United.  United responded by invoking the appraisal right again.  The Fords then filed this lawsuit.  United filed a motion with the court seeking an Order that appraisal be compelled.

The Fifth Circuit Court of Appeals issued an opinion on November 14, 2018, in a situation which is going to be rarely seen, but is something for insurance lawyers to know exists.  The case is styled, Sentry Select Insurance Company v. Lorena Munoz, Individually and on behalf of the Estate of Lorenzo Munoz, and as Next Friend of L.M. and C.M., Minor Children; Virginia Munoz.

The Munoz’s were defendants in the case.  Sentry had been granted a summary judgment in the District Court.

On August 17, 2010, Lorenzo Munoz, was killed when the semi-truck in which he was traveling veered off the highway and crashed into a concrete drainage channel.  The semi-truck consisted of a tractor owned by Moore Freight Services and a trailer leased by Goal Transport.  Sentry issued a commercial auto insurance policy to Goal.

For Experienced Insurance Lawyers, the question of who has the burden of proof is made clear by Texas case law.  (Not)

Pursuant to the 1994, San Antonio Court of Appeals opinion, Telepak v. United Serv. Auto. Ass’n., the insured has the initial burden of proof as to damages covered by their policy.  However, as pointed out in the 1943, Texas Supreme Court opinion, Trevino v. American Nat. Ins. Co., the burden makes a prima facie case by showing that the policy was in force on the date the loss occurred.

The insurance company has the burden of proving the applicability of an exclusion that permits it to deny coverage.  This is pointed out in the 2003, Fort Worth Court Appeals opinion, Venture Encoding Service, Inc. v. Atlantic Mut. Ins. Co.

Insurance lawyers will often get calls wherein the person on the other end of the line is explaining to the lawyer that his insurance company wants to perform an examination under oath (EUO) of them before going any further with the claim.  And the question is, “Do I have to do that?”  Nine times out of ten, the answer is yes.

If the insurance contract provides for it, the insurer may require an EUO as a condition to a suit on the policy.  The purpose of such clauses has been described thus:

The insured agree, at reasonable times and places, as often as required, to submit to examination by agent of insurer, and to submit all relevant books of account, bills, invoices, vouchers, etc.  It is clear that the chief purpose of this privilege to the insurer is the ascertainment and adjustment of the loss which has already occurred.  The insurance company, in its policy, evidences in many ways its desire to avoid the necessity of litigation in the settlement of losses.  It reserves the right to have the benefit of the examination provided for before suit can be sustained.

Many property insurance policies contain appraisal clauses.  These clauses define a process for appraising the value of the damaged property, if the parties cannot agree.  Common provisions call for each party to choose an appraiser.  Those appraisers then chose a neutral third appraiser, called an umpire.  If the parties or their appraisers cannot agree on an umpire, either party may petition a court to appoint one.  Once the appraisers and umpire are chosen, they value the loss.  If all do not agree on the value, the decision of nay two will control.  The intent is to give the insurer and insured a simple, speedy, and fair means of deciding disputed values.  This was set out in the 1938, Waco Court of Appeals opinion, Fire Ass’n of Philadelphia v. Ballard.

The 1994, San Antonio Court of Appeals case, Provincial Lloyds Ins. Co. v. Crystal City I.S.D., says that when the two appraisers do not agree, the umpire does not simply choose between them, rather, it is the duty of the umpire to ascertain and determine, in the exercise of his own judgment and as the result of his own investigation, the values of the disputed items.

Either party may seek specific enforcement of the appraisal clause, and the court will abate any pending lawsuit and compel the parties to submit to the appraisal process.  In addition, an insured may recover consequential damages sustained as a result of the insurer’s failure to comply with the appraisal clause.  This was made clear in the 1979, 14th Court of Appeals opinion, Standard Fire Ins. Co. v. Fraiman.

Many times a person comes to an Experienced Insurance Law Attorney complaining that their insurance company has not paid anything on their claim.  While most insurance companies take the claims call then go out and evaluate / adjust the claim and then make payment, they are not required to do so.

Almost all policies make it clear that the insured has to file a sworn proof of loss as a condition precedent to enforcement of the policy.  This was recognized in the 1926, Texas Supreme Court opinion, Commercial Union Assur. Co. v. Preston.  It was was restated in the 1954, Fort Worth Court of Appeals opinion, Whitehead v. National Cas. Co.  A “proof of loss” is a statement to the company, stating, among other things, the cash value of each item of property lost or damaged by fire, and the amount of loss.  The insurance company may require that the insured swear to the accuracy of the proof of loss.

The 1960, Fort Worth Court of Appeals opinion, International Service Insurance Co. v. Brodie, says policy provisions requiring a proof of loss are for the insurance company’s benefit and may be waived by the company.  A requirement was waived where the insurance company would only accept proof asking for amount its adjusters agreed to, although the insured wanted more.

When making a claim against an insurance policy, knowing what the policy says is important to an insurance attorney.  Virtually all policies have as a condition to payment, the requirement that you cooperate with their investigation of the claim.

The 1994, Texas Supreme Court opinion styled, Hernandez v. Gulf Group Lloyds, makes clear that an insurance contract may impose conditions on the insured.  Most policies require that notice of the claim be given to the insurance company and that the insured cooperate with the investigation.  Sometimes, just calling and reporting the claim is not enough.  An insured may be required to file a formal proof of loss.  When a party to the insurance contract commits a material breach or the contract, the other party is discharged or excused from any obligation to perform under the contract.  The Court in the Gulf Group opinion explained this way:

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

Insurance policies have to be read carefully by an insured and by the insurance law lawyers who want to help the insured.  This is illustrated in an Austin Court of Appeals case styled, Progressive County Mutual Insurance Company v. Edwin Emenike.

This is a summary judgment case granted in favor of Edwin.  Progressive filed an appeal and this Court then reversed and rendered in favor of Progressive.

The facts are undisputed.