Reasons For Insurance Company Denying An Insurance Claim

When an insurance lawyer has someone call about an insurance company denying a claim, an experienced insurance lawyer will always ask if the potential client knows about any other reasons the claim could be denied.  The reason this question is asked is that an insurance company can deny a claim for one reason today and if that reason ends up being faulty, the insurance company can find another reason for denying a claim.  As long as one reason for denying a claim is a proper reason, it does not matter that another reason for denial turns out to be incorrect.

This is partially discussed in a 2021, opinion from Houston First Court of Appeals.  The opinion is styled, Amy Powell v. USAA Casualty Insurance Co.

This Court ruled in favor of USAA after USAA filed a motion for summary judgment.

The facts are lengthy and the opinion discussing these facts in great detail.  Here is the relevant take away as it relates to the title of this article.

Powell argues that language in a provision of the Insurance Code requiring insurers to provide prompt, written rejection of insurance claims binds the insurer to the reasons stated in the rejection letter when later defending itself in a lawsuit.  Insurance Code section 542.056(a) requires an insurer to accept or reject a claim in writing within fifteen business days after the insurer receives all the information the insurer requires to secure the final proof of loss. Subsection (c), on which Powell relies, requires the insurer’s written notification to “state the reasons for the rejection.”

According to Powell, USAA denied her claims based on misrepresentation and concealment of facts, but it moved for summary judgment on the ground that her claimed losses preexisted or were excluded under the policy.  Powell contends this is prohibited by section 542.056(c) and, therefore, summary judgment was improper.  USAA responds that its defense in this lawsuit is consistent with the reasons stated in its rejection letters and that, in any event, summary judgment is appropriate for a reason not stated in the rejection letter if the reason was valid and existed at the time the claim was rejected.

Powell does not cite any cases to support her argument on appeal, although she contends that the issue is one of first impression.  Assuming without deciding that section 542.056(c) binds an insurer defending a lawsuit filed by an insured to the reasons stated in the insurer’s letter rejecting an insurance claim, we disagree with Powell that USAA’s defense in this case is inconsistent with the reasons stated in its rejection letters.

Although all three letters stated the same coverage decisionrejection of Powell’s claims due to misrepresentation and concealment of factsthe letters provided additional detail.  The letter rejecting Powell’s claim for the air conditioner leak stated that Powell could not recall when the damage occurred.  Similarly, the letter rejecting the claim for the overflowed washing machine stated that Powell had admitted the loss occurred in March 2016, prior to the effective date of the policy.  And the letter rejecting the roof leak claim stated that Powell’s roof damage was not caused by wind or hail, but rather by wear and tear or maintenance issues that were not covered under the policy.  The rejection letters for the washing machine overflow and roof leaks further stated that the cause of the damage was from “marred” vent pipes that allowed moisture to penetrate through the roof.

These additional reasons provided in the rejection letters are consistent with USAA’s motion for summary judgment, which argued that Powell had no evidence her claimed losses were covered under the policy or occurred during the policy period.  Accordingly, we conclude that USAA’s defense in this lawsuit is consistent with the reasons stated in its letters rejecting Powell’s insurance claims.

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