The U.S. District Court, Eastern District, Sherman Division, issued an opinion in May 2018, styled, James Cunningham and Tabatha Cunningham v. Allstate Vehicle and Property Insurance Company.
The Cunningham’s allegedly suffered damages during a hail and windstorm. The claim was reported to Allstate and five days later Allstate inspected the property. The Cunningham’s requested a re-inspection which was denied. Without providing a proof of loss in accordance with policy provisions, the Cunningham’s filed suit against Allstate.
Allstate responded by filing a motion to dismiss for lack of subject matter jurisdiction due to the Cunningham’s failure to satisfy the policy proof of loss requirement.
Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a case for lack of subject matter jurisdiction. In deciding the motion, the Court may consider 1) the complaint alone; 2) the complaint supplemented by the undisputed facts evidenced in the record; or 3) the complaint supplemented by undisputed facts plus the Court’s resolution of disputed facts.
The policy provides that the insured may not file suit against Allstate earlier than ninety-one days after the insured submits a signed and sworn proof of loss. That did not happen here.
The Court has noted that a sworn proof of loss used to be a condition precedent and insured was required to show either, waiver or substantial compliance with the condition precedent. However, the Texas Supreme Court has recently adopted a broad notice-prejudice rule. Under Texas’s notice-prejudice rule, the insurer must be able to show prejudice caused by the insured’s failure to comply with the contract regardless of whether the terms at issue is a covenant, condition precedent, exclusion or provision.
Conditions are not favored in the law, therefore, courts read provisions to avoid forfeiture. Treating the proof of loss clause to be a covenant as opposed to a condition, requires Allstate to prove that the Cunningham’s noncompliance was a material breach, thus avoiding the harsh consequences of a condition.