False Statements By Insurance Company

A Houston Division opinion discusses how to properly plead a lawsuit when an insurance company makes false statements.  The opinion is styled, Mt. Olive Missionary Baptist Church v. Underwriters at Lloyds.

Mt. Olive alleges a storm caused damage to the Church including damage to the roof, HVAC, windows, exterior, interior, ceilings, furnishings, and more.  After the storm a claim was filed under its insurance policy.  A third party adjuster, Herring, was assigned to investigate and adjust the claim.  Mt. Olive alleges that Herring failed to perform a thorough investigation of the claim, failed to prepare any estimates reflecting wind damage, and misrepresented that there was no damage to the Church.  The claim was denied.

Mt. Olive sued in state court and the case was removed to federal court.

Underwriters moved for dismissal of Mt. Olive’s fraud, DTPA, and Insurance claims.  Mt. Olive’s claims alleging misrepresentation and fraud in violation of the Texas Insurance Code and DTPA are subjected to the heightened pleading requirements of Rule 9(b).  Therefore, with respect to the claims alleging misrepresentation or fraud in violation of the Texas Insurance Code and DTPA, Mt. Olive was required to plead the “who, what, when, where, and how of the events at issue.”  Although scienter may be alleged generally, simple allegations that defendants possess fraudulent intent will not satisfy Rule 9(b).

Mt.  Olive’s claims based on fraud and misrepresentation fall short of this standard.  Mt. Olive merely alleges that Underwriters through Herring “misrepresented the insurance policy and represented that there was no damage to the Church.  Mt. Olive fails to allege why these statements are false, who exactly made them, when and where the statements were made, or how Mt. Olive relied upon the allegedly false statements.  Therefore, as currently pled, Mt. Olive fails to allege sufficient facts to support its misrepresentation claims under the Insurance Code and DTPA.

Further, Mt. Olive’s misrepresentation claims under the DTPA and Insurance Code fail because Mt. Olive’s alleged damages arise solely from the insurance contract.  Mt. Olive argues that, because of Defendants’ misrepresentations and improper handling of the insurance claim, “Mt. Olive has not been fully paid under the policies provided by Underwriters since the event.  However, Texas law is clear that a tort claim requires conduct that would give rise to liability independent from the contract.  Here, Mt. Olive does not plead any damages independent of Underwriters’s alleged failure to pay for the claimed damages.  Accordingly, as currently pled, Mt. Olive’s claims for fraud and misrepresentation under the Insurance Code and DTPA were dismissed.

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