Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

1. Generally speaking, most insurance policies do not require the insurance carrier to make an advance. Rather, the policies provide a timeframe for investigation and the insured’s compliance with conditions precedent to recovery. With only a couple of exceptions, there is no right to payment until the policyholder has complied with policy conditions.

2. Therefore, there is no “right” or “entitlement” to an advance.

3. Advance payments do not constitute an admission of liability. I direct your attention to T.C.A. § 56-7-131, a statute that seems to address both first and third party advance payments. To download a PDF copy, click here.

4. If a verdict results in favor of the insured, the advanced amount should reduce the amount awarded to the plaintiff. T.C.A. § 56-7-131.

5. Subsection (c) of T.C.A. § 56-7-131 specifically provides that any payments made by an insurance company shall be deemed to have been made pursuant to the limits of the policy, and shall be credited against the insurer’s obligation to the insured arising from the policy.

6. If an advance is made, and there is no coverage, the carrier should be entitled to recover that advance.

7. The statute also provides, as does most case law, that an advance does not toll any statute of limitations or contractual suit period.

I am not an expert in Tennessee insurance law-- yet. But if this is the mentality of Chastain’s clients, we should open an office in Memphis or Nashville because Tennessee policyholders need some help.

An insurance company that does not promptly pay undisputed benefits that can be determined under a property insurance policy is not acting in good faith. If any insurance company claims person wants to dispute this, please comment and let’s publish it here. I am not suggesting that insurance companies pay when there is no coverage or no additional amount of benefits that can be determined as owed. But, few states and few courts will let anybody get away with paying nothing by simply relying upon the clause in the standard property policy that says payment is not due until 30 or 60 days after one of three things happen:

1. We reach agreement with you.
2. An appraisal award is entered.
3. A Judgment is entered.

Some of the commercial forms, such as those found in FM Global, specifically refer to payments in advance of final agreement of the loss and when those are due. So, policy language is important.

Most states have regulations, statutes, and case law which make the practice of doing what Chastain suggests illegal and would probably subject any insurer to a market conduct examination with penalties by a Department of Insurance. Could you imagine the onslaught of lawsuits if Chastain’s clients followed his suggestion that it is a myth that they have to pay “advance payment” before making one big final payment that could come months or years after a loss?

I find it curious that in all the years I have been taking depositions, I have heard only a couple of times an adjuster or claims manager testify that they had no obligation to pay undisputed portions of a claim. Most of the time, it comes from attorneys not trained in adjustment practices who are straining reliance upon the aforementioned clause. The cases become humorous as judges start asking, “so Mr. Chastain, you mean to tell me that your client has no legal accountability for not paying for anything on her hundred thousand dollar home because she disputed fifty dollars regarding the price of carpeting in the basement bathroom?”

I will do some more research on this topic. In the interim, insurance companies can help with the poor economic climate for attorneys by following Parks Chastain’s post.