Articles Posted in Interpreting An Insurance Policy

Insurance lawyers know that a party must have an insurable interest in the insured property to recover under an insurance policy.  This is made clear in the 1993, Dallas Court of Appeals opinion styled, Jones v. Texas Pac. Indem. Co.  It is not necessary that the party owns 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 was discussed in the 1963, Texas Supreme Court opinion styled, Smith v. Eagle Star Ins. 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 Ins. Co. v. Fisher.

Understanding how insurance policies are interpreted by the courts is one of the more important aims of an insurance law attorney.

Here is some more information to be kept in mind.

An insurance policy is a contract, generally governed by the same rules of construction as all other contracts. This is told to us by the Texas Supreme Court in the 2010, opinion styled, Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London. When construing a contract, our primary concern is to ascertain the intentions of the parties as expressed in the document according to the Texas Supreme Court 2014, opinion styled, Amedisys, Inc. v. Kingwood Home Health Care, LLC.  In the Gilbert opinion the court stated that, we begin our analysis with the language of the contract because it is the best representation of what the parties mutually intended.  Unless the policy dictates otherwise, we give words and phrases their ordinary and generally accepted meaning, reading them in context and in light of the rules of grammar and common usage.  We strive to give effect to all of the words and provisions so that none is rendered meaningless.  In quoting from a 1938, opinion, the court said, “No one phrase, sentence, or section [of a contract] should be isolated from its setting and considered apart from the other provisions.”

Knowing how to interpret an insurance policy is vital for insurance attorneys attempting to help clients with insurance disputes.  Knowing how to do this, is to know how courts interpret insurance policies.

One issue frequently faced by courts is the source of meaning to be given to words.  At least two different rules have evolved in order to identify the definitions to be given to words as used in insurance contracts.

The first rule is the “definition” rule.  Where the policy, by its own terms, defines a term, those definitions control.  This was made clear in the 2003, Texas Supreme Court opinion styled, Provident Life & Accident Ins. Co. v. Knott, and the 1997, opinion styled, Trinity Universal Ins. Co. v. Cowan.

Here is a 1974, opinion from the 14th Court of Appeals that is still good law today.  The opinion is styled, Janice Sue Milton v. Preferred Risk Insurance Company et al.

This is a lawsuit to recover benefits under the uninsured motorist provisions of an automobile policy.  The question for the Court is, at what point in time must the insured forward suit papers concerning a claim against an uninsured motorist, if the negligent party was insured at the time of the accident, but later became “uninsured” as that term is legally defined.

The Facts of this case are a little confusing and will not be discussed here.  The relevant Fact is that the insured, Milton, sued Preferred seeking benefits under her uninsured motorist provisions of her insurance policy with Preferred.

When it comes to claims dealing with automobile policies, here is a case that needs to be read.  It is a 2019, opinion from the Texarkana Court of Appeals and is styled, Alan Kiely v. Texas Farm Bureau Casualty Insurance Company.

Kiely sued Farm Bureau in an effort to recover Personal Injury Protection (PIP) benefits that had been denied.  Summary Judgement was granted in favor of Farm Bureau and this is Kiely’s appeal from that ruling.  This Court sustained the ruling in favor of Farm Bureau.

The PIP policy at issue provided coverage up to $10,000 per person for each accident.  Texas Insurance Code, Section 1952.151, states PIP requires payment of all reasonable expenses that: (1) arise from an accident; ….

Insurance lawyers know that almost all insurance policies require that an insured provide to the insurance company, prompt notice of a claim.  The purpose of this prompt notice requirement is to allow the insurance company to investigate the claim while the facts of the claim are fresh.  However, if the insured fails to provide this prompt notice, the insurer is required to show that it was prejudiced or harmed by the insured’s failure to provide the prompt notice.  Here is a case discussing that issue.

The case is from the Fifth Circuit Court of Appeals and is styled, Blanco Properties, L.L.C. v. Arch Specialty Insurance Company.

Blanco owed commercial property insured by Arch.  Blanco’s owner did not discover April 2016, hail damage until October 2017 and did not file a claim until November 2017.  The claim was denied due to the policy containing a specific endorsement that explicitly required hail related claims to be brought within one year.  The District Court granted summary judgement in favor of Arch and this Court affirmed that judgment.

Interpreting the number of accidents or occurrences that are covered by a policy can be confusing.  The State Bar of Texas, Insurance Law Section, Insurance Journal, published an article titled, Texas Law And The Restatement Of The Law Of Liability Insurance: An Initial Comparison Of Blackletter Principles.  This article dedicates about a page discussing the issue.

The article tells us that for liability policies, the number of occurrences is determined by finding the number of events or incidents for which the insured is liable.  This is discussed in quite a number of Texas cases starting with the 1971, 5th Circuit opinion styled, Maurice Pincoffs Co. v. St. Paul Fire & Marine Ins. Co.

The Restatement of Law essentially mirrors Texas law in adopting a “cause” standard:

Insurance lawyers understand that an insured has an obligation to cooperate with the insurance company investigation of a claim.  This topic is briefly discussed in an article published by the State Bar of Texas, Insurance Section Journal.  The article is titled, Texas Law And The Restatement Of The Law Of Liability Insurance: An Initial Comparison Of Blackletter Principles.

In most situations when an insured has a claim, he calls the insurance company, the insurance comes out, takes a statement, and a few days later the claim is resolved.  But, that is not how it always occurs.

The law in Texas, is that an insured has a duty to cooperate with its insurance company in the defense of claims for which the insurer has a duty to defend.  This was made clear in the 1993, opinion from the Texas Supreme Court styled, State Farm Fire & Cas. Co. V. S.S.  These clauses, called cooperation clauses, are intended to guarantee to the insurance companies the right to prepare adequately their defense on questions of substantive liability.  This was stated in the 1971, 5th Circuit opinion styled, Martin v. Travelers Indem. Co.  The Restatement essentially recognizes this same duty and says:

The subject of anti-assignment clauses was discussed in an article published in the State Bar of Texas, Insurance Section, Journal.  The article is titled “Texas Law And The Restatement Of The Law Of Liability Insurance: An Initial Comparison Of Blackletter Principles.”

The article is lengthy and a good read for lawyers dealing with this area of the law.  One page of the article deals with anti-assignment clauses.  It tells us this.

A 1994, Fort Worth Court of Appeals opinion styled, Tex. Farmers Ins. Co. v. Gerdes, says that anti-assignment clauses have been consistently enforced by Texas courts.  Texas courts enforce anti-assignment clauses post-loss ad without requiring the insurer to show prejudice and this is reinforced by the 2010, U.S. 5th Circuit opinion styled, Keller Foundations, Inc. v. Wausau Underwriters Ins. Co.  Thus, Texas courts will uphold anti-assignment provisions so long as they do not interfere with the operation of a statute.

The issue of whether or not punitive damages are covered under a liability policy is very important in a case where punitive damages are being sought by an injured party.

The State Bar of Texas, Insurance Section, published an article discussing this issue.  The article is titled, Texas Law And The Restatement Of The Law Of Liability Insurance: An Initial Comparison Of Blackletter Principles.

Here is what it tells us.