Most of my blog posts are about hurricanes, roof leaks and fires This week I write about a theft claim submitted under a property insurance policy. American Pepper was a business insured under a policy with Federal Insurance Company. When property was stolen from American Pepper, notice of the loss was given to Federal. After its investigation, Federal sent a letter denying the claim under the concealment and misrepresentation provisions in the policy.
On January 4, 2011, I discussed the case of Nat’l Fire Ins. Co. of Pittsburgh, PA v. Valero Energy Corp., 777 S.W.2d 501 (Tex.App.—Corpus Christi 1989, writ denied). Nat’l Fire taught us that an otherwise excluded peril could be covered under an insurance policy if the policyholder could demonstrate that the excluded peril itself was caused by a covered peril. However, even if the policyholder can demonstrate that an excluded peril was caused by a covered peril, the policyholder still has work to do: s/he must also show the extent of the damage attributable to the covered peril. But what does that mean? The Texas First District Court of Appeals dealt with this very issue in Travelers Personal Sec. Ins. Co. v. McClelland, 189 S.W.3d 846 (Tex.App.—Houston [1st Dist.] 2006, no pet.).
An “all-risk” insurance policy provides coverage for all fortuitous losses, less enumerated exclusions. Imperial Ins. Co. v. Ellington, 498 S.W. 2d 368, 371 (Tex. App.- San Antonio 1973, writ denied). Generally under an all-risk policy, the insured need only prove a fortuitous event resulted in a loss. Id. at 375. If the all-risk policy excludes coverage, the insurer must prove that the loss is excluded. Texas Ins. Code § 554.002.
Continue Reading Texas Judges Need to Recognize That Insurance Companies Have to Prove Exclusions: Dispelling the Myths of Insurance Texas All Risk Coverage Burdens
One strategy insurance companies use to avoid bad faith liability is claiming that they reasonably relied on their experts’ reports to deny a claim. Texas law on bad faith states that an insurer breaches its duty of good faith when: (1) denies or delays payment of a claim for which liability is reasonably clear, and (2) the insurer knew or should have known that liability was reasonably clear. Therefore, insurance companies often argue that because their retained experts concluded that there was no valid insurance claim, liability was not reasonably clear and they should not be found liable for bad faith. Courts typically side with insurance companies on this issue, but sometimes the facts of a case require courts to doubt this argument, just as the Texas Supreme Court did in State Farm Lloyds v. Nicolau, 951 S.W.2d 444 (Tex. 1997).
When a home or business is damaged by a covered peril (windstorm, fire, hail, etc.), the insured typically makes a claim with its insurance carrier. The insurance carrier then sends either an insurance adjuster or an independent adjuster to estimate the damage and issues a check to the insured. From this common scenario, it would be logical to conclude that the insurance carrier has the burden of showing what is and is not covered under the insurance policy. However, this is not the case in Texas.
Continue Reading Who has the Burden of Proof Regarding Damages in Texas?
While writing last week’s post, Texas Windstorm Insurer Settles 2,400 Hurricane Ike Slab Claims, I almost quoted Texas attorney Steve Mostyn, who explained that Texas law really left no other rational choice. Burdens of proof are crucial when it comes to close cases, and Texas places a unique and difficult coverage burden on policyholders. An article in the Houston Chronicle titled Windstorm Insurer to Settle Some Ike Cases quoted Mostyn:
As previously noted in the first four posts of the Hurricane Law series discussing Late Notice of Claims, in Florida, if a policyholder does not timely report an insurance claim to the insurance carrier, prejudice to the insurer will be presumed. This presumption may be rebutted by a showing that the insurer was not prejudiced by the late notice. Bankers Ins. Co. v. Macias, 475 So.2d 1216 (Fla. 1985). If an insurance carrier claims a policyholder breached a cooperation clause however, the insurance carrier “must show a material failure to cooperate which substantially prejudiced the insurer.”
Most homeowner policies in Florida are “all risk” policies, which means the peril that caused the damage is covered unless specifically excluded in the policy….…
Continue Reading All Risk Policies and Burdens of Proof In Sinkhole Cases
The Fire Casualty, & Surety Bulletins (FC&S Bulletins) had a simple vandalism claim that highlights a major difference between all risk coverage versus named peril coverage. Here is the coverage question posted with the significant language of the question bolded:
Last November, I wrote a post, A Chance For Mississippi Courts To Get It Right, about a very important case that will be argued before the Mississippi Supreme Court next Tuesday, June 9, 2009, at 1:30 p.m. I know many must think that justice sometimes moves at a snail’s pace because six months have passed since I first wrote about the case and we are only arguing the appeal. Corban v USAA is important to all Mississippi policyholders, and the arguments can be watched live over the Internet.