An incident happens. Maybe your house in Dallas has someone inside who falls down the stairs. Maybe your car in Arlington is involved in a wreck. Maybe your business in Grand Prairie suffers a loss due to someone falling on the steps. Maybe the life insurance policy you purchased on your Mom in Weatherford is now denying coverage, after the funeral. What if the disability policy you had on your wife’s job in Fort Worth is denied, after she becomes disabled?
If any of the above happens you actually have two main things you can do. The first and most common is to just sue the insurance company for various violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act. You can sue for breach of contract and fraud and misrepresentation and a few other things that are variations of the Insurance Code and DTPA causes of action.
The second thing that can be done is called a Declaratory Judgement cause of action. Attorneys refer to this as a “dec action”. This is where an attorney files papers with a Court saying, “Judge, declare this thing we have before you as (fill in the blank)”. A dec action is used quite often in insurance disputes. It is used both by attorneys for individuals requesting benefits under a policy and by insurance company attorneys asking the Court to declare that certain benefits do not exist within a policy.
A common scenario is where a person or company is sued. The person or company calls their insurance company, expecting the insurance company to take care of the matter. The insurance company investigates the claim, then determines that the claim being made falls outside of coverage provided within the policy for one reason or another and then refuses to do anything else because the claim being made is not of the type for which the policy provides any type of coverage. The result being that the person or company being sued is liable out of their own pockets for whatever the claim is that is being made against them. When an insurance company does this they usually send to the policy holder a letter saying why they are not providing coverage.
Other times they provide a defense, in that they pay for attorneys and court costs, but they mail to the policy holder a “Reservation of Rights” letter. This letter says that they will provide a defense for the time being but they are reserving their right to back out at any time. This may mean that in the event a judgement is taken against the policy holder that the insurance company will not pay the judgement.
When the above happens, either the insurance company or the entity being sued will file papers with the appropritate Court by way of a dec action asking the Court to make a ruling in their favor. So either the insurance company is asking the Court to declare that the policy does not provide the coverage being sought, or the entity is asking the Court to declare that there is coverage under the policy, which makes the insurance company come to the table, so to speak, with money. In other words, to either pay the claim or to defend the claim against the people who are sueing the policy holder.
Anytime, an insurance company tries to say that the insuance policy does not cover the loss that is being complained about, you should seek the advice of an experienced Insurance Law Attorney. An attorney who practices in this area of the law is going to be able to give sound adice as to whether or not to file the dec action or some other cause of action against the insurance company. There may be times when the insurance company takes a position that is sound under the law. If that is the case, you do not want to be wasting your time or money on a losing case. But if, the insurance company is taking a position that is contrary to the law, you need to know to take a stance.