Claims Refusal And Notice

Insurance claims attorneys know that the insurance statutes require that a notice letter be sent to an insurance company before filing suit.  The notice letter is to be sent 60 days before filing the lawsuit.  The purpose is to allow a settlement or resolution of the case before either side incurs legal costs and fees.

Failure to provide the notice letter can result in not being able to make a claim for attorney fees among other claims.  This notice letter requirement is the subject of a 2020, opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Paradise Fruits And Vegetables, L.P. v. National Fire & Marine Mutual Insurance, et al.

The case is an insurance despite between Paradise and two of its previous property insurers.  First, Paradise seeks payment from a company referred to as “National Fire” for its refusal to cover damage to Paradise sustained in two storms in 2019.  Second, Paradise asserts its sustained storm damage in 2020 while insured by its new insurer, State Auto.  State Auto denied the claim made related to the damage in the 2020 storm.

Paradise sued both companies in a single state court action, which was removed to this Federal Court.

Paradise seeks to avail itself of certain rights created by the Texas Insurance Code, including the right to reimbursement of reasonable attorney’s fees pursuant to
Section 542A.007.  A defendant may avoid the obligation to pay a plaintiff’s attorney’s fees if he “pleads and proves” (1) an entitlement to presuit notice under the statute and (2) the plaintiff’s failure to provide the notice.  This provision applies only to attorney’s fees incurred after the defendant has taken the steps necessary to plead and prove the deficiency.  A plaintiff must provide sixty days’ notice before filing a suit under section 542A, Section 542A.003(a), which applies to, with limited exceptions, actions against insurers or their agents for damage to covered property caused by rain, hail, wind, or lightning  This is found in Section 542A.002(a); and Section 542A.001(2)(C).  Paradise has sued its insurers to obtain payment on claims made for damage caused by these phenomena.  The
Texas Insurance Code, including the notice provision, therefore applies. Paradise does not dispute that it failed to provide the requisite notice nor that State Auto timely pled and proved this deficiency.

Nevertheless, Paradise contends that the Court should not strike its claim
for attorney’s fees.  The notice provision of this chapter of the Insurance Code, section 542A.003(d), excuses a plaintiff’s failure to provide notice where it “is impracticable because the plaintiff has a reasonable basis for believing there is insufficient time to give . . . notice before the limitations period will expire.”  Paradise argues that providing the required notice was impracticable because its
claims against National Fire were about to become time barred.  The necessity of bringing suit against National Fire prevented Paradise from providing State Auto presuit notice because, according to Paradise, State Auto and National Fire are both necessary and indispensable parties to this action.
The Court disagreed.

Pursuant to Federal Rule, 19(a)(1) “A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if in that person’s absence, the court cannot accord complete relief among existing parties.”  Paradise asserts that both National Fire and State Auto “are necessary parties to this litigation as they both insured Paradise’s premises and both have denied . . . claims” for covered losses.

The Court agrees that both defendants previously insured the property and have
denied Paradise insurance claims, but the necessity of joining State Auto in a suit
against National Fire (or vice versa) does not follow.  Under Texas law, Paradise bears the burden of establishing that damage to its property occurred during the coverage period and resulted from a covered event.  National Fire’s allegedly wrongful failure to compensate Paradise stems from storms that purportedly occurred in March and May 2019.  By contrast, the storm giving rise to Paradise’s claims against State Auto allegedly occurred in August 2020.  Paradise conceivably could have sued National Fire before August 2020, and this hypothetical litigation would have been identical to the instant action.  It would bear the same burden of proof, and the universe of available evidence would be the same.  The later-occurring storm and denial of a later claim by a different
insurer bears no direct connection to Paradise’s claims against National Fire.  In
other words, to prevail against National Fire, Paradise must show that covered loss occurred in 2019; State Auto and the August 2020 storm have nothing to do with the damage which allegedly occurred a year prior.

Accordingly, the Court granted State Auto’s motion to strike Paradise’s claim for attorney’s fees.

Contact Information