This 2018, Fort Worth Court of Appeals opinion is unique and involves a situation most life insurance lawyers will not ever see, however, it is worth knowing about due to some of the ruling by the appeals court.  The case is styled, Old American Insurance Company v. Lincoln Factoring, LLC.

Lincoln is an assignee of a portion of benefits under a life insurance policy.  Lincoln was assigned a portion of the benefits by the life insurance beneficiary for advancing costs of the burial of the insured.  The insured had a life insurance policy with Old American.

When the insured died, the beneficiary made a claim for benefits.  Instead of paying the benefits, Old American insisted they needed a copy of the death certificate.  When a copy of the death certificate was provided, Old American withheld payment because the death certificate stated that the manner of death of the insured was pending investigation.

Any Insurance Law Attorney knows the heart of the law regarding bad faith insurance is found in the Texas Insurance Code.  Other sources include the Texas Department of Insurance and the Texas Administrative Code, among other sources.

The Texas Insurance Code, Chapter 541, defines and prohibits unfair and deceptive insurance practices.

The statutes allow a private cause of action by any person who has sustained actual damages caused by another’s engaging in any act or practice that is defined as an unfair method of competition or unfair or deceptive act or practice in the business of insurance, or defined as an unlawful deceptive trade practice.  This is found in Section 541.151.  The definitions of unfair and deceptive practices are found in two places: (1) Texas Insurance Code, Sections 541.051 to 541.061; and (2) Section 17.46(b) of the Business & Commerce Code, the Texas Deceptive Trade Practices — Consumer Protection Act (DTPA).

As has been discussed before, insurance companies would rather litigate cases in Federal Court instead of State Court.  The reasons are numerous.

One way to stay out of Federal Court is to defeat diversity jurisdiction under 28 U.S.C. Section 1332(a).  This is most commonly done by suing a local adjuster for the wrongs the adjuster has committed when the insurance company is an insurance company that maintains its main head-quarters out of state.

The Southern District of Texas, Houston Division, issued an opinion on October 30, 2018, wherein the Court sue sponte remanded a case back to the State Court after the insurer had removed it to Federal Court.  The case is styled, Joan Elaine Murray v. Allstate Vehicle and Property Insurance Company and Brandon Joseph Chisolm.

Here is a situation almost never seen.  It involves a case out of the Northern District of Texas, Dallas Division.  It is styled, William M Arrington, Individually, as Beneficiary, and as Representative of the Estate of William L. Arrington v. Jackson National Life Insurance Company, Danny C. Burba, and Gordon B. Richardson.

William applied for a life insurance policy and Burba and he signed the application.  Southwestern accepted the application and issued William a life insurance policy with a face value of $976,500.  The policy was a flexible premium adjustable life insurance policy.  Burba advised William as to the annual premium amount he had to pay to keep the policy in effect.  Burba allegedly told William to make a down payment of $1,100 per month for the life of the policy.  From 1998 to 2015, William paid more than $200,000 toward the policy.

In February 2007, William received notice that Southwestern merged with Valley Forge Live Insurance Company.  In September 2007, Bill received notice that Valley had changed its name to Reassure America Life Insurance Company.  On July 31, 2008, Margarita Arrington requested that Gordon Richardson replace Burba as the agent of record.  However, Burba continued to be copied on correspondence regarding the policy, and internal records referred to Burba as the “active agent.”

Many times an insurance agent makes mistakes and those mistakes cost his customer, the insured.  An experienced Insurance Law Attorney should be able to recognize when an agent violates a duty he owes to his customer.

There are arguably several duties that exist for insurance agents in Texas, among them:

(1)  Duty to Procure, which requires an agent to actually obtain the coverage entrusted to his care, or failing to do so, to immediately notified the insured of this fact.  This includes leading a client to believe he has coverage for a particular peril which he in fact does not have.  This is discussed in the 1948, El Paso Court o f Appeals opinion, Burroughs v. Bunch.  More recently, one Texas appeals court articulated this as two distinct duties: (i) the duty to use reasonable diligence in attempting to place the requested insurance, and (ii) the duty to inform the client promptly if unable to do so.  This is from the 2004, Tyler Court of Appeals opinion, Critchfield v. Smith.

What is the value of a claim?  That is always the question.  Just how much can be recovered depends on lots of factors.

The Southern District of Texas, Houston Division, had a case recently wherein the insurance company filed suit in the Federal Court and the defendant tried to have the case dismissed due to the amount in controversy not being the minimum required under Federal law.

The case style is, Palomar Specialty Insurance Company v. Maria Penaloza M. Beltran.

A Fort Worth Federal Judge dismissed a lawsuit on October 11, 2018, wherein the claimant was suing his insurance company for it’s denial of a hail and windstorm damage claim.  The case is out of the Northern District of Texas, Fort Worth Division.  The style of the case is, University Baptist Church of Fort Worth v. Lexington Insurance Company.

The facts of the case are extensive and will not be discussed at length here except the claim centered around the cost of labor and material that would be required to do the extra work during the roof repair needed to satisfy law and ordinance requirements.

The case was dismissed after Lexington filed a motion for summary judgment.  The parties are in agreement, and the record establishes that Lexington paid Church the policy limit of $250,000 for the code upgrade work, and that Lexington complied with all of its policy obligations.  Lexington paid Church a total of $852,149.52 for repair of the church buildings in satisfaction of its insurance policy payment obligations.

For Experienced Insurance Lawyers, the question of who has the burden of proof is made clear by Texas case law.  (Not)

Pursuant to the 1994, San Antonio Court of Appeals opinion, Telepak v. United Serv. Auto. Ass’n., the insured has the initial burden of proof as to damages covered by their policy.  However, as pointed out in the 1943, Texas Supreme Court opinion, Trevino v. American Nat. Ins. Co., the burden makes a prima facie case by showing that the policy was in force on the date the loss occurred.

The insurance company has the burden of proving the applicability of an exclusion that permits it to deny coverage.  This is pointed out in the 2003, Fort Worth Court Appeals opinion, Venture Encoding Service, Inc. v. Atlantic Mut. Ins. Co.

Insurance lawyers will often get calls wherein the person on the other end of the line is explaining to the lawyer that his insurance company wants to perform an examination under oath (EUO) of them before going any further with the claim.  And the question is, “Do I have to do that?”  Nine times out of ten, the answer is yes.

If the insurance contract provides for it, the insurer may require an EUO as a condition to a suit on the policy.  The purpose of such clauses has been described thus:

The insured agree, at reasonable times and places, as often as required, to submit to examination by agent of insurer, and to submit all relevant books of account, bills, invoices, vouchers, etc.  It is clear that the chief purpose of this privilege to the insurer is the ascertainment and adjustment of the loss which has already occurred.  The insurance company, in its policy, evidences in many ways its desire to avoid the necessity of litigation in the settlement of losses.  It reserves the right to have the benefit of the examination provided for before suit can be sustained.

Many property insurance policies contain appraisal clauses.  These clauses define a process for appraising the value of the damaged property, if the parties cannot agree.  Common provisions call for each party to choose an appraiser.  Those appraisers then chose a neutral third appraiser, called an umpire.  If the parties or their appraisers cannot agree on an umpire, either party may petition a court to appoint one.  Once the appraisers and umpire are chosen, they value the loss.  If all do not agree on the value, the decision of nay two will control.  The intent is to give the insurer and insured a simple, speedy, and fair means of deciding disputed values.  This was set out in the 1938, Waco Court of Appeals opinion, Fire Ass’n of Philadelphia v. Ballard.

The 1994, San Antonio Court of Appeals case, Provincial Lloyds Ins. Co. v. Crystal City I.S.D., says that when the two appraisers do not agree, the umpire does not simply choose between them, rather, it is the duty of the umpire to ascertain and determine, in the exercise of his own judgment and as the result of his own investigation, the values of the disputed items.

Either party may seek specific enforcement of the appraisal clause, and the court will abate any pending lawsuit and compel the parties to submit to the appraisal process.  In addition, an insured may recover consequential damages sustained as a result of the insurer’s failure to comply with the appraisal clause.  This was made clear in the 1979, 14th Court of Appeals opinion, Standard Fire Ins. Co. v. Fraiman.