Prompt Payment Of Claim – Proof

Just saying the claim was paid is not enough.  In Court, the insurance company needs to prove the claim was paid and paid timely in order to prevail on a Motion For Summary Judgment.

Here is a case from the Northern District of Texas, Dallas Division.  It is styled, Carolyn Kee v. Safeco Insurance Company of Indiana.

Kee alleges that Safeco, her home insurer, conducted an inspection after she made a claim and that the adjuster reported minimum damage, falling below her policy deductible.  Kee sued for breach of contract and violation of the Texas Prompt Payment of Claims Act.  Safeco then pursued binding arbitration and the resulting award was significantly higher than Safeco’s initial damage assessment.

Safeco asserts the defense of estoppel on the contract claim and filed a motion for summary judgment.

Under Texas law, estoppel is an affirmative defense to a breach of contract claim.  A party asserting estoppel must show that (1) a binding and enforceable appraisal award exists; (2) the insurer paid the award; and (3) the insured accepted the payment.  Timeliness of payment, for purposes of an estoppel defense, is determined by the parties’ contract.  When a party moves for summary judgment  on a breach of contract claim, raising estoppel, that party bears the burden of proof.

Kee argues that Safeco has not met its burden of proof on its estoppel defense because it has not provided evidence establishing timeliness of payment.  The Court agrees.  While Safeco asserts it timely paid the entirety of the appraisal award in compliance with Texas Insurance Code provisions, these requirements govern timeliness for TPPCA claims and are insufficient to establish timeliness of payment for purposes of estoppel.

Safeco has not produced the parties’ insurance contract or any other evidence of appraisal requirements set forth in the contract that would show timeliness.  Because there is a genuine dispute of material fact regarding whether payment of the appraisal award was timely under the insurance contract, the Court denies summary judgment on the breach of contract claim and grants Safeco leave to refile.

Pursuant to TPPCA, section 542.058, a party can bring claims for improperly delayed payment of benefits.  Payment of an appraisal award alone does not as a matter of law bar a TPPCA claim and neither establishes nor forecloses liability for the underlying claim.  Further, TPPCA claims are not derivative claims, and a TPPCA claim may survive summary judgment even if a breach of contract or extra-contractual claim does not.

In addressing Kee’s TPPCA claim, Safeco argues only that it timely paid the appraisal award “in accordance with the prompt payment provisions” and that there is no breach of contract.  Pursuant to recent Texas Supreme Court case law, this is insufficient to show it is entitled to judgment against Kee’s TPPCA claim as a matter of law.  As a result, the Safeco’s motion is denied.

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