Articles Posted in Interpreting An Insurance Policy

Here is an opinion from the Texas Supreme Court that was issued in April 2020.  This opinion deals with how an appraisal clause is handled when the appraisal clause is unilateral.  The style of the case is Steven Biasatti and Paul Gross D/B/A TopDog Properties v. GuideOne National Insurance Company.

The issue in this case is whether an insurer’s payment of an appraisal award, the award of which was obtained under a unilateral appraisal clause, bars an insured’s claim under the Texas Prompt Payment of Claims Act (TPPCA).

In June 2013, TopDog who was insured by GuideOne, sustained wind and hail damage to its property.  After a first inspection, GuideOne determined the damage fell below the $5,000 deductible and refused to pay.  A second inspection resulted in the same outcome.  TopDog sought to invoke the policy appraisal process and GuideOne refused based on the appraisal clause only allowing GuideOne to invoke the appraisal.

How much should a person be compensated when their vehicle is declared a total loss?   A better question is – what are the elements that make up the total amount to be compensated?

This issue is discussed in a 2020 opinion from the United States Fifth Circuit.  The opinion is styled, Jessica Singleton and Tony Cooper v. Elephant Insurance Company.

When an insured automobile is so damaged that it would cost more to repair than to replace, it is usually deemed a total loss.  The insurance company then reimburses the policyholder for the value of the vehicle, with the expectation that the policyholder will probably use this money to purchase a replacement.  Of course, purchasing and registering the replacement vehicle requires the payment of taxes and fees to the state.

For Insurance Lawyers, Covid-19 has become a hot topic.  Hardly a day goes by that a client is not asking questions regarding their insurance policy and whether or not the policy covers losses stained due to Covid-19.  The National Law Review published an article recently that needs to be read by lawyers handling these Business Interruption cases.

The article tells us that the legal media have been inundated with articles by lawyers who represent policyholders and insurance companies discussing business interruption claims arising from the COVID-19 pandemic.  Some of this discussion has carried over into the mainstream media, including a recent Wall Street Journal article titled, “Restaurants v. Insurers Shapes Up As Main Event In D.C. Lobbying Fight.”  Much of the discussion focuses on two issues.  The First, property insurance policies require “direct physical loss or damage” to property (either to the insured property, or non-insured property within a certain distance of the insured property for a coverage called “civil authority”).  A virus has never been found to cause damage to property.  Second, most, but not all, of these policies have a virus exclusion.  We are not writing here about those issues.  Plenty of barrels of ink has been already spilled on those issues.  But I haven’t seen any authors write about another exclusion that seems likely to apply to these claims if policyholders can somehow convince a court that there was “direct physical loss or damage” to property: it is the the ordinance or law exclusion.

The ordinance or law exclusion typically provides that the insurer “will not pay for loss or damage caused directly or indirectly by . . . the enforcement of or compliance with any ordinance or law . . . regulating the . . . use . . . of any property . . . .”  That seems to be precisely what many of the governmental orders being issued do.  For restaurants, for example, government orders typically regulate the use of the business premises by limiting operations to takeout and delivery, prohibiting dine-in service.  At some point it is expected that dine-in service will be allowed, but limited to tables spaced six feet or more apart, as has begun occurring in some other countries.  With respect to other businesses, governmental orders may limit their operations to curbside delivery of items purchased by phone or online, or require or urge them to have employees work from home except for certain limited operations that can only be conducted in the office.

When it comes to interpreting an insurance policy, the Courts are suppose to read the relevant portions of a policy and see how the policy language tracks with whatever the facts are in a claim.  Many claims are denied due to the insurance company believing the policy says something or is interpreted in such a way as to allow the insurance company to deny the claim.

When an insurance company interprets the policy language in such a way as to allow the insurer to deny the claim and the insured interprets the language in such a way as to believe coverage exists, a lawsuit is going to result.  Insurance companies want these policy interpretations to be litigated in Federal Court because, most of the time, Federal Courts are much stricter in their interpretation than most State or County Courts.

The normal way to get a ruling in these policy interpretation cases is for the insurer or either party to file a motion for summary judgment.  In this motion the party asks the Court to rule as a matter of law what the policy is saying and how that is relevant to the facts of the claim.  This was an issue in a 2020 opinion from the Southern District of Texas, Galveston Division, styled, Louise Odom Hayes v. Blue Cross And Blue Shield Of Texas, Inc. And Health Care Service Corporation.

Insurance lawyers will always ask for a copy of the policy when an insured complains that their claim for benefits has been denied and the reason for denial is based on the language in the policy.  In Texas, insurance companies are required to explain to a policy holder the reason for denial of benefits.  Whether or not the reason for denial is proper is usually based on the language in the policy as applied to the facts of the particular case.

A 2020, opinion from the Southern District of Texas, Galveston Division, provides some insight as to how the Courts interpret policies.  The case is styled, Louise Odom Hayes v. Blue Cross and Blue Shield of Texas, Inc. and Health Care Service Corporation.

Hayes sued Blue Cross for breach of the health insurance policy Hayes had purchased from Blue Cross wherein Blue Cross refused to pay for additional benefits Hayes claims she should have received.  Blue Cross filed a motion for summary judgment based on its contention that its determination of benefits was consistent with its contractual obligations to Hayes.

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; ….

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