Proof_of_LossMost commercial insurance policies require a proof of loss when there is a disagreement over the amount of the loss. The Policy usually reads:

Action Against Us

No one may bring an action against us in any way related to the existence or amount of coverage , or the amount of loss for which coverage is sought unless:

wrong-nameOne issue I frequently encounter is a commercial property insurance policy that has the wrong named insured. This usually causes a few minutes of sheer panic followed by the relief that Texas jurisprudence does allow for common sense remedies. That’s because even when the “wrong party” is listed as the insured the courts will look beyond that designation if the party listed has an “insurable interest” in the insured property.

An ownership interest is different from an “insurable interest.” Texas courts have long recognized this important distinction and given wide latitude to the term “insurable interest.” The seminal case in this area is Jones v Tex. Pac. Indem. Co., 853 S.W.2d 791 (Tex. App. – Dallas, no writ).

But the most interesting and expansive opinion on the matter is Dana O’Quinn v. General Star Indemnity Co., a case out of the United States District Court for the Eastern District of Texas. That case was about a fire loss which occurred at a nightclub called Alibi’s, the most perfectly named property for an overly suspicious insurance carrier.  Alibi’s  was founded by Brian O’Quinn, who was also President and Director of Cahoots Entertainment, Inc., which owned the business and entered into a lease with the owner of the premises.

hailIt is important for claimants to use the utmost honesty when making a property damage claim. Fulgham v. Allied Property and Casualty Insurance Company illustrates the dangers of lying to an insurance company about a property damage claim. The plaintiff appealed an award of damages to his insurer as well as a finding of fraud and unjust enrichment. In the summer of 2009, he’d made a claim for damage to his roof, asserting that the damage was caused by a hail storm.

The insurer’s claims specialist inspected the building and estimated the cost of removing and replacing the roof. After payment was issued, he contacted the claims specialist to assert that repairs would be more than what had been estimated. The claims specialist got a comparison estimate to repair the roof the way the claimant wanted and then paid the added amount.

That winter, the claimant added a claim for interior damage to the building. The claims specialist took a look and realized that the claimant had misrepresented the purpose of the building in the declarations form. He’d stated it was a commercial real estate office. A few months later, the insurer asked the claimant to complete a Sworn Statement in Proof of Loss and paid him for claimed damages. Months later, it paid more money related to the roof.

Continue reading

tilesIn State Farm Lloyds v. Hanson, a Texas appellate court considered State Farm Lloyds’ appeal from a judgment in favor of its insured. The case arose when a woman closed on a house that had a 15-year-old roof. The roof shingles were 30 years old and fastened with staples. During the building inspection, there were no concerns stated about the roof. The woman requested coverage through her State Farm agent, who prepared an underwriting report. In the report, there was nothing reflected about rotting, hail damage, or interior leaks. Nothing was stated as a point of concern.

The homeowners’ policy that was issued by the defendant provided coverage for accidental physical losses to the property. It excluded certain losses arising out of weaknesses in workmanship. In June 2012, there was a huge storm. The next day, a roofing company salesman made adjustor appointments for houses in the woman’s neighborhood. In October, he inspected the woman’s roof, found areas where shingles were not sealed to lower layers, and suggested she file an insurance claim.

She and the salesman both called in a claim for wind damage to the roof. The claims representative came with the roofing salesman to check out the roof. He found there wasn’t enough damage, and no covered loss had been sustained. The woman was unsatisfied and asked for another inspection. This inspector also found no covered loss, and the claim for wind damage was denied.

Continue reading

towersIn Coreslab Structures (Texas), Inc. v. Scottsdale Insurance Company, the plaintiff appealed after an insurer’s summary judgment motion was granted. His lawsuit had made claims for bad faith, breach of contract, and violations of the Prompt Payment of Claims Act. The case arose when a tower in Houston suffered water damage in two rain events. Two lawsuits were brought, and the claims for damages were more than $38 million. Claims were made by Memorial Hermann Hospital System, which owned the tower, against Coreslab Structures and its subcontractor. The lawsuits were consolidated.

Coreslab asked the subcontractor to defend it in connection with the lawsuits, demanding a defense as an additional insured under the subcontractor’s insurance policy. Scottsdale Insurance Company was the insurer that had issued the subcontractor’s commercial general liability policy. It notified Coreslab there was no additional insured coverage for Coreslab on the subcontractor’s policy.

Once Scottsdale refused to pay for Coreslab’s defense, Coreslab’s own insurer, Lexington, paid Coreslab’s defense attorney. Coreslab sued Scottsdale, claiming that it was an additional insured under the subcontractor’s policy. It asked the court for a declaratory judgment that Scottsdale owed it a duty to pay off the defense costs in the lawsuits, and it claimed statutory bad faith, breach of contract, and a Prompt Payment of Claims Act violation. The two lawsuits settled, and the trial court severed Coreslab’s claims so that they proceeded in a separate lawsuit.

Continue reading

hail metal roofThe hail storms last spring in Dallas, Fort Worth, Wylie, Richardson, Plano, Rockwall, Garland, Rowlett, Allen, Mesquite and Lewisville have brought to light a little known endorsement in many Texas property insurance policies – the cosmetic endorsement.

The endorsement usually reads:

COSMETIC ROOF DAMAGE.

churchIn Richardson East Baptist Church v. Philadelphia Indemnity Insurance Company, a Texas appellate court considered a church’s claims for breach of the duty of good faith and fair dealing, breach of contract, conspiracy, and violations of the Texas Insurance Code. The case arose because the church owned several buildings, all of which were insured by Philadelphia Indemnity.

In 2013, the church notified its insurer that a hailstorm had damaged the roofs of two buildings. It submitted a roofer’s estimate of $32,713.13 to replace the roofs. The insurer assigned an independent adjusting company to investigate. The company assigned an adjustor, who inspected the property and told the insurer his findings. He’d concluded that the hail damage necessitated the replacement of certain slopes and spot repairs. His estimate was that the repairs totaled $10,441.55, minus the $2,500 deductible.

The pastor disagreed with the estimate, claiming that an expert had found more damage. The insurer told the adjustor to hire an engineer to evaluate the damage, and the engineer found only limited hail damage to one slope—even less than what the adjustor had found. Nonetheless, the insurer offered to pay the church based on the adjustor’s initial estimate. The pastor still disagreed and told the adjustor he would take the option for the appraisal provision in the policy.

Continue reading