Home Owners Claims For Insurance Code Violations

The Southern District of Texas, McAllen Division issued an opinion in August 2018, for insurance lawyers to read that is styled, Alfredo Murillo Jr., et al v. Allstate Vehicle and Property Insurance Company.

The Murillo’s filed a lawsuit in State court against Allstate after Allstate did not handle a storm damage claim to the satisfaction of the Murillo’s.  The Murillos alleged violations of the Texas Insurance Code, the DTPA, and breach of contract.  Allstate removed the case to Federal court and filed a motion with the Court seeking dismissal of the Murillos Insurance Code and DTPA violations pursuant to Federal Rule of Civil Procedure 12(b)(6).

Rule 12(b)(6) requires plaintiff to plead “enough facts to state a claim to relief that is plausible on its face.”  The pleading requires “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.”  Conclusory allegations are disregarded.

Rule 9(b) imposes a heightened set of pleading requirements when the claim in question is grounded in fraud.  The 5th Circuit has held that Rule 9(b) requires specificity as to the statements or omissions considered to be fraudulent, the speaker, when and why the statements were made, and an explanation why they are fraudulent.  Claims alleging violations of the Texas Insurance Code (TIC) and the DTPA are subject to the requirements of Rule 9(b).

The only factual allegations in the Murillos complaint identify the policy and claim number, the date of alleged lose, and the relationship of the parties.  The Murillos make the following allegations regarding the TIC section 541.060(a):

Defendant…misrepresented to Plaintiffs that the damage to the property was not in excess to the amount paid, even though the damage was caused by a covered occurrence. 
Defendant…refused to fully compensate Plaintiffs, under the terms of the policy, even though Defendant failed to conduct a reasonable investigation. Specifically, Defendant performed an outcome- oriented of Plaintiffs’ claim, which resulted in a biased, unfair, and inequitable evaluation of Plaintiffs’ losses on the property.
Defendant…knowingly or recklessly made false representations, as described above, as to material  facts and/or knowingly concealed all or some material information from Plaintiffs.
The Murillos alleges the following DTPA violations:
a. Causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services;
b. Representing the goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or qualities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not;
c. Disparaging the goods, services, or business of another by false or misleading
representation of facts;
d. Advertising goods or services with intent not to sell them as advertised;
e. Making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions;
f. Representing that an agreement confers or involves rights, remedies, or obligations, which it does not have or involve, or which are prohibited by law;
g. Misrepresenting the authority of a salesman, representative or agent to negotiate the final terms- of a consumer-transaction; and
h. Failing to disclose information concerning goods or services which was known at the time of the transaction and such failure to disclose such information was
intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.
None of these allegations contain specific factual content.  This proves fatal to the claims in light of the heightened pleading requirements.
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