DAMAGES UNDER THE INSURANCE CODE

Transcription

1 DAMAGES UNDER THE INSURANCE CODE HENRY MOORE 316 W. 12 th Street, Suite 318 Austin, TX State Bar of Texas 5 TH ANNUAL DAMAGES IN CIVIL LITIGATION March 7-8, 2013 Houston CHAPTER 4

2

3 Henry Moore 316 W. 12 th St., Suite 318, Austin, TX PROFESSIONAL EXPERIENCE Attorney, 1977 present practices in Austin and surrounding areas. Practice limited to the area of civil litigation with primary emphasis in personal injury and insurance disputes. B.A. in Psychology with honors from University of Texas in 1974 and JD from University of Texas School of Law in Board Certified in Personal Injury Trial Law since 1991 and is admitted to practice law before the Fifth Circuit Court of Appeals, the Western & Eastern Federal District Courts of Texas. PROFESSIONAL ASSOCIATIONS AND AWARDS State Bar of Texas, Austin Bar Association, Capital Area Trial Lawyers Association, Texas Trial Lawyers Association, sustaining member and director, American Association for Justice, American Board of Trial Advocates, associate member, Texas Super Lawyers 2011, 2012, John Howie Award for mentorship-texas Trial Lawyers Association 2011, Scott Ozmun Trial Lawyer of the Year-Capital Area Trial Lawyers Association 2012 SEMINARS AND PUBLICATIONS Texas Auto Policies, University of Texas School of Law, Car Wreck Seminar-June, 2007, August, 2008, & August, 2009 Interpreting Auto Policies, Texas Trial Lawyers Association, Car Wreck Seminar-November, 2007 Recent Developments in Insurance Law, Capital Area Trial Lawyers Association Luncheon- March, 2008 Pleading Damages Within Insurance Coverage, State Bar of Texas, Strategies for Damages and Attorney s Fees Seminar- February, 2010; Damages in Civil Litigation-February, 2011 & February, 2012 Summary of UM Benefits and Actions, Texas Trial Lawyers Association, Car Wrecks Seminar, June, 2010 Auto Insurance Coverage and Summary of UM Benefits and Actions, University of Texas School of Law, The Car Crash Seminar- August 2010, August 2012 Texas Auto Policies, Texas Trial Lawyers Association, Car Wrecks Seminar- September, 2010 Helping Clients with their Expectations, University of Texas School of Law, 2011 Car Crash Seminar-August, 2011 Texas Auto Coverage in a Nutshell, 11:2 J. Tex. Ins. L. 20 (Summer 2011) Stowers-A Modest Proposal, 11:3 J. Tex. Ins. L. 8 (Winter 2011) Deposing the Insurance Adjuster, State Bar of Texas, Advanced Insurance Law Course, April 2012; and University of Texas School of Law, 2012 Insurance Law Conference- October, 2012 Auto Coverage for the Paralegal, Texas Trial Lawyers Assn., TTLA Annual Conference, June 2012 Uninsured Motorist Coverage, Texas Trial Lawyers Association, Road Rules Dallas: A Crash Course-October, 2012

4

5 TABLE OF CONTENTS I. CONTRACT CONSIDERATIONS WITH INSURANCE POLICIES A. Special Rules of Construction for Insurance Policies Conditions Precedent to Coverage Coverage Interpretation Exclusions to Coverage Exception to Exclusions... 4 II. CLAIMS HANDLING UNDER THE INS. CODE... 4 A. Chapter What actions violate 541? Who has standing under 541? Who is liable under 541? Damages under Survivability Limitations Notice Practical Considerations in bringing actions under B. Prompt Payment under Time table for claims under 542: Form of the claim Penalties for noncompliance Hidden gift to the auto carriers... 8 III. AUTO COVERAGE... 8 A. Personal Injury Protection Tex. Ins. Code Waiver of PIP Accident triggers obligation to pay PIP PIP limits Benefits payable... 9 B. Uninsured/underinsured coverage Vehicles covered by UM Persons covered under UM Benefits payable under UM Policy limits under UM UM and Subrogation Liability/UM offsets Hit and run Bad faith? Ins. Code Penalties? In UM coverage C. Property Damage Common law damages (third party) First Party property damage claims Insurance Code provisions that apply to both First and Third Party Property Damage Claims IV. AGENTS, UNAUTHORIZED INSURANCE AND SURPLUS LINES V. SUMMARY TABLE OF AUTHORITIES APPENDIX i

6

7 DAMAGES UNDER THE INSURANCE CODE If you have a dispute with an insurance company, the Insurance Code is not the place to start. The policy is. More and more, Texas courts are approaching these cases as pure contract disputes. Layered on top of these disputes, however, are the Texas Insurance Code provisions that often add duties, remedies and damage models. Most of these remedies are limited to first party claims. Insurance companies are not supposed to lie, steal or cheat. They are supposed to keep their agreements. Often, though, proof of a breach of contract (claim owed under the policy) is a threshold question no claim owed, no Insurance Code violation. Start with the policy. Since this paper covers the Insurance Code, we ll keep our contract discussion brief, but it is essential. I. CONTRACT CONSIDERATIONS WITH INSURANCE POLICIES. A. Special Rules of Construction for Insurance Policies As mentioned earlier, insurance policies are contracts and subject to general contract law. However, certain special rules apply to their interpretation. If the insurance contract is ambiguous (a legal determination), then it is construed in favor of coverage. If it is not ambiguous it will be enforced as written. Generally, the insured bears the burden of proving a loss is within the coverage of the policy, but if there is an exclusion that removes the claim from coverage, the insurer bears the burden of proving that exclusion. To complicate things further, if there is an exception within the exclusion (and there often is), the burden shifts back to the insured to prove the claim falls under the exception to the exclusion. Got it? This is another view: Conditions precedent - these are the starting gate. Insured must pass through before arriving at coverage Coverage - this is the heart of the insuring agreement Exclusions (sometimes called exceptions) - these take away what the coverage gives Exceptions to exclusions - these give back what the exclusion took away Like other areas of the law, the person that benefits has the burden of proof. 1. Conditions Precedent to Coverage a. Conditions Precedent are acts or occurrences that must take place before coverage begins. Love of God Holiness Temple Church v. Union Standard Ins. Co., 860 S.W.2d 179 (Tex. App. - Texarkana 1993, writ denied). (case offers an overall discussion of conditions precedent, coverage and pleadings.) i. Conditions precedent are stipulations that call for the performance of some act or the occurrence of some event before an agreement is enforceable. Examples of conditions precedent in insurance contracts are the giving of notice of claim or loss, the timely filing of proof of loss, reporting the loss to proper authorities, filing suit within a specified time, timely forwarding suit papers to liability insurer... Id. at 180. ii. Plaintiff may plead that all conditions precedent have occurred and then must only prove those conditions which the carrier specifically denies. However, the insured must still prove loss is within the coverage. b. The insurance company must prove prejudice before it can rely on certain conditions precedent. Struna v. Concord Insurance Services, Inc., 11 S.W.3d 355 (Tex. App.- Houston, 1 st Dist., 2000, no writ) Lack of notice is a condition precedent, but insurer must still show prejudice to escape judgment. Prejudice is a fact issue. The same rule applies to an insured s failure to cooperate. If the failure to cooperate does not prejudice the carrier, they don t benefit from this defense. i. Lack of notice, voluntary payment, and failure to cooperate are not defenses unless the carrier is prejudiced. Discusses Board rules and evolution of law on this issue. Even when termed a condition precedent courts require prejudice. Coastal Refining & Marketing, Inc. v. United States Fidelity and Guarantee, 218 S.W.3d 279 (Tex. App. - Houston, 14 th Dist. 2007, rev. den d). ii. If no notice of suit is given and carrier has no actual notice until after judgment became final, carrier is 1

8 prejudiced as a matter of law. Liberty Mutual Insurance Co. v. Cruz, 883 S.W.2d 164 (Tex. 1993) iii. No prejudice if carrier had actual notice of suit. Allstate Insurance Co. v. Pare, 688 S.W.2d 680 (Tex. App. - Beaumont 1985, writ ref d n.r.e.) iv. Third party beneficiary under liability policy had the burden of pleading and proving coverage for injury. If carrier had actual notice of suit, lack of notice by insured was not a defense. Ohio Casualty Group v. Risinger, 960 S.W.2d 708 (Tex. App. - Tyler 1997, writ denied) c. When in doubt, the presumption is against construing a clause as a condition precedent. Nutt v. Members Ins. Co., 474 S.W.2d 575 (Tex. App.- Dallas 1971, writ ref d n.r.e.) Whether mutual promises are independent or dependent must be determined by the parties intent as evidenced by the language of the contract. In case of doubt the court will presume that such promises are dependent rather than independent, since such a construction ordinarily prevents one party from having the benefits of the contract without performing his own obligation. Id. at d. Finally, this is an expanding area of the law. More recent cases, discussing commercial general liability policies, have almost obliterated the distinction between conditions precedent and general policy covenants. The analysis has focused on the materiality of the breach. If the risk the carrier bargained to cover is not materially affected by the insured s breach, there is no policy defense. In other words, no harm no foul. PAJ v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008) 2. Coverage Interpretation a. The parts of a policy are construed together and the policy is ambiguous only if it is reasonably susceptible to more than one meaning. Simpson v. Geico General Insurance Co., 907 S.W.2d 942 (Tex. App. - Houston, 1 st Dist., 1995, no writ) 2 i. In interpreting an insurance policy, we construe all parts of the document together giving effect to the intent of the parties. Id. at 945 citing Gaulden v. Johnson, 801 S.W.2d 561, 563 (Tex.App.-Dallas 1990, no writ) ii. A contract is ambiguous only when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Id. at 945 citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) iii. The determination of whether terms are ambiguous is a question of law. Id. at 945 citing Gaulden, at 564 iv. Once the document is found to be ambiguous, the interpretation of the document is a question of fact. Id. at 945 citing Coker at v. Multiple policies. Where it is ambiguous whether two documents amount to two separate policies or one, extrinsic evidence should be considered. Court draws a different rule than ambiguity favors insured when the question is not over the interpretation of a particular phrase in a single policy. Progressive County Mutual v. Kelley,284S.W.3d805(Tex.2009). b. Estoppel and waiver cannot create coverage. i. Estoppel cannot create coverage where none exists. Texas Farmers County Mutual Insurance Company v. Wilkinson, 601 S.W.2d 520 (Tex. App. - Austin 1980, writ ref d n.r.e.) Insured in employer s truck. Carrier denied coverage after two interviews with insured and a reservation of rights letter. Insured complained on appeal that carrier was estopped from denying coverage because he was misled. Court held that estoppel cannot create coverage where none exists. Paradoxically, the court also held that defending without a reservation of rights letter to the prejudice of the insured could waive all policy defenses including the defense of non-coverage. at 522. ii. Historically, when a carrier proceeded to defend a case without a reservation of rights letter, and with knowledge of facts indicating noncoverage, the carrier might be

9 estopped from asserting any policy defenses, including the defense of noncoverage. Texas Farmers Ins. Co. v. McGuire, 744 S.W.2d 601 (Tex. 1988) citing Texas Farmers County Mutual Ins. Co. v. Wilkinson, 601 S.W.2d 550 (Tex. App. - Austin, 1980, writ ref d n.r.e.) However, the Wilkinson exception was recently examined in the case of Ulico Casualty Co. v. Allied Pilots Ass., 262 S.W.3d 773(Tex 2008) not much of it is left. We do not agree with Wilkinson's statement to the effect that noncoverage of a risk is the type of right an insurer can waive and thereby effect coverage for a risk not contractually assumed. Id. at 781. Still, the opinion ends its discussion with this quote. In sum, if an insurer defends its insured when no coverage for the risk exists, the insurer's policy is not expanded to cover the risk simply because the insurer assumes control of the lawsuit defense. But, if the insurer's actions prejudice the insured, the lack of coverage does not preclude the insured from asserting an estoppel theory to recover for any damages it sustains because of the insurer's actions. Id. at 787. iii. Defense without a reservation of rights must prejudice the insured before estoppel applies. State Farm Lloyds Inc. v. Williams, 960 S.W.2d 781 (Tex. App. - Dallas, 1997, review dismissed by agreement) Here, defendant was subject to execution of the judgment for a two month period before an agreement was reached with the plaintiff to not execute the judgment. Court held that the two months the insured was subject to execution was sufficient harm. iv. Looking at the aftermath of Ulico Casualty Co. v. Allied Pilots Ass., if an insured can show separate damages (prejudice?) because the carrier defended without a reservation of rights, those separate damages can likely be recovered, but an uncovered claim will not now become a covered claim. c. The carrier s duty to defend is based solely on the allegations in the petition (regardless of their truth) and the language of the policy. GuideOne Elite Ins. 3 Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305 (Tex. 2006) Eight corners rule. To determine the duty to defend, the court will look only at the allegations in the latest petition and the insurance policy. No extrinsic evidence is considered. For the purposes of making the determination, all facts alleged in the petition are taken as true. 3. Exclusions to Coverage a. Exclusions to coverage are strictly construed against the insurer. National Union v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991) Exclusionary clauses or limitations on liability in insurance policies are strictly construed in favor of the insured and against the insurer. Court must adopt the insured s construction of an exclusionary clause as long as that construction is not unreasonable, even if the construction urged by the insurance company appears more reasonable or a more accurate reflection of the parties intent. b. In general, policies are construed liberally in favor of coverage, especially when interpreting exclusions to the coverage. Ramsay v. Maryland American General Ins. Co., 533 W.W.2d 344 (Tex. 1976) i. Issue over whether Navy vehicle was a commercial automobile which would be excluded from coverage. The court stated [w]hen terms of an insurance policy are unambiguous, they are to be given their plain, ordinary and generally accepted meaning unless the instrument itself shows that the terms have been used in a technical or different sense. Id. at 346. ii. In holding for the insured, the Court states: It is a settled rule that policies of insurance will be interpreted and construed liberally in favor of the insured and strictly against the insurer, and especially so when dealing with exceptions and words of limitation. Id. at 349. c. Tex. R. Civ. Proc. 94 Affirmative Defenses...Where the suit is on an insurance contract which insures against certain general hazards, but contains other provisions limiting such general

10 liability, the party suing on such contract shall never be required to allege that the loss was not due to a risk or cause coming within any of the exceptions specified in the contract, nor shall the insurer be allowed to raise such issue unless it shall specifically allege that the loss was due to a risk or cause coming within a particular exception to the general liability... d. Tex. Ins. Code In a suit to recover under an insurance or health maintenance organization contract, the insurer or health maintenance organization has the burden of proof as to any avoidance or affirmative defense that the Texas Rules of Civil Procedure require to be affirmatively pleaded. Language of exclusion in the contract or an exception to coverage claimed by the insurer or health maintenance organization constitutes an avoidance or an affirmative defense. 4. Exception to Exclusions The insured has the burden of proof on a policy claim to show coverage. If there is an exclusion to coverage, the insurance company must prove it. If there is an exception within the exclusion, the burden shifts back to the insured. Venture Encoding Services, Inc. v. Atlantic Mutual Insurance Co., 107 S.W.3d 729 (Tex. App. - Fort Worth 2003, pet. denied) In general, an insured bears the initial burden of showing that there is coverage under an insurance policy and the insurance carrier bears the burden of proving the applicability of an exclusion that permits it to deny coverage. Once the insurer proves the applicability of an exclusion, the burden then shifts back to the insured to demonstrate that he or she has coverage under an exception to the exclusion. Id. at 733. II. CLAIMS HANDLING UNDER THE INS. CODE A. Chapter 541 Let s start with the elephant. Chapter 541 of the Code is the heart of the consumer protection portion of the code. Like the DTPA (Tex. Bus. & Com Code 17.41, et. seq.), there is a laundry list of prohibited conduct. Also, there is a tie in with the DTPA. Violate one, you may have violated both. Since each statute provides different remedies and defenses, it is good to know the details of each act. While there are similarities in notice requirements and settlement offers, there are important differences as well. Historically, these two acts came into being with the 1973 legislature. They were passed as tandem acts to address broad consumer issues. Over the years both acts have changed with each passing legislative session, usually taking away from consumers and insureds a little bit more from the original gift. Further confusing things, whole subsections have been added to this portion of the Insurance Code through the years. Finally, the whole section was re-codified in 2003 (effective 2005) became Texas Ins. Code Chapter 541. The reason this history is important is that the cases that deal with the statute reference the law as it existed at the time of the dispute, and the statute seems to change with the weather. Originally, the Code incorporated Board Rules by reference, and then the act was amended to incorporate much of the Board Rule language directly into the Code itself. (see, Kincaid, Texas Litigation Guide: Insurance Litigation, 16:5, Thomson West, 2012). In its current incarnation, the statute stands alone and is narrower than the rules promulgated by the Texas Department of Insurance. (see: Texas Annotated Insurance Code, Vol. 1, Sec , commentary by R. Brent Cooper). Finally, the tort of bad faith is blended into the Insurance Code by judicial fiat. In Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 55 (Tex.,1997) the Texas Supreme Court adopted the language in Tex. Ins. Code (a)(2)(A) as the standard for bad faith. If the carrier refuses to pay a claim once liability for the claim becomes reasonably clear, they have committed the tort of bad faith. (They have also violated the Ins. Code). Consequently, much of the case summaries cited below are referenced as bad faith cases. Interpret this description broadly. After Giles, the term bad faith is virtually synonymous with Insurance Code violation. 1. What actions violate 541? a. There is a laundry list of nine acts which are deemed unfair or deceptive acts. Tex. Ins. Code misrepresenting a material fact or policy provision - failing to settle once liability becomes reasonably clear - failing to provide a reasonable explanation for denying or compromising a claim 4

11 - failing to timely affirm or deny coverage, or to submit a reservation of rights - holding up a first party claim, because of a potential third party claim - insisting on a full release based on a partial payment - refusing a claim without making a reasonable investigation - refusing an auto claim because of other available coverage - requiring a claimant to provide federal income tax records, unless court ordered. (arson claims and claims for lost income are exempted from this provision) b. There is also a separate section on misrepresentation of policy provisions. Tex. Ins. Code This section is violated if a carrier s representative: - makes an untrue statement of material fact - fails to state a material fact necessary to make other statements made not misleading, considering the circumstances - makes a statement that would mislead a reasonably prudent person into making a wrong conclusion, - makes a material misstatement of the law - fails to disclose a matter required by law to be disclosed c. Generally, breach of the insurance contract is a threshold requirement before Ins. Code violations can be considered. As a rule, if there is no breach of contract, there is no Code violation. Courts have reasoned that if the claim was not owed under the policy, then there was a reasonable basis for denying the claim. Tivoli Corp. v. Jewelers Mut. Ins. Co., 932 S.W.2d 704, 712 (Tex.App.-San Antonio 1996, writ denied). Still, even if the underlying claim is not owed, the door is open to pursue Code violations if the carrier s actions are so extreme that it s conduct creates an independent injury. Betco Scaffolds Co. v. Houston United Cas. Ins. Co., 29 S.W.3d 341, 348 (Tex.App.- Houston [14th Dist.] 2000, no pet.) Conversely, failure to pay a claim that is owed is not, in and of itself, sufficient to 5 establish bad faith. The carrier is entitled to make a good faith dispute over a claim without incurring additional liability. Transportation Insurance Company v. Moriel, 879 S.W.2d 10, (Tex.1994). The bona fide dispute may also extend to coverage issues. Lyons v. Millers Cas. Ins. Co., 866 S.W.2d 597, 601 (Tex.1993). d. Investigation An impartial investigation into a claim that concludes the claim is not fully owed provides something of a shield to the carrier. Spicewood Summit Office Condominiums Ass'n, Inc. v. America First Lloyd's Ins. Co. 287 S.W.3d 461 (Tex.App. Austin,2009, pet. denied). However, if there is evidence that the expert relied upon by the carrier was biased or otherwise unreliable, the shield evaporates. State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex.1997). 2. Who has standing under 541? Third party claimants generally do not. The Texas Supreme Court has held that a third party claimant under a liability policy is not a person that the statute intends to protect. (over J. Doggett s vigorous dissent). Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 150 (Tex.,1994). Further, the plain language of the statute exempts third party claims under a liability policy. Tex. Ins. Code (b). There are exceptions. If a third party claimant relies to their detriment on a misrepresentation by the liability carrier during the claims handling process, the carrier may have exposure. Webb v. International Trucking Co., Inc. 909 S.W.2d 220, 230 (Tex.App. San Antonio,1995, no writ history). This is especially true if there is a special, direct relationship between the carrier and the third party claimant. Hermann Hosp. v. National Standard Ins. Co. 776 S.W.2d 249, 252 (Tex.App. Hous. [1 Dist.],1989, writ denied). A claimant or beneficiary under the policy does have standing even though there is no privity between them and the carrier. Maccabees Mut. Life Ins. Co. v. McNiel, 836 S.W.2d 229 (Tex.App. Dallas,1992). A claimant or beneficiary may not have standing under of the DTPA, however, if they are not in privy with the policy. Most, but not all, of the DTPA laundry list requires consumer status. Consumer status requires that the claimant sought goods or services from the defendant. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 386 (Tex.,2000). Since 541 incorporates by reference violation of the

12 DTPA, lack of privity simply reduces the size of the menu. 3. Who is liable under 541? Persons engaged in the business of insurance are liable under 541. This includes individuals, companies, agents, brokers and adjusters. The statutory definition of person is broad and inclusive. Tex. Ins. Code (2). Not everyone who works for an insurance company is a person engaged in the business of insurance..an employee who has no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor, does not engage in the insurance business. Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex.,1998). For an individual to have liability under the Code there must be discrete allegations of Code violations against that individual. It is not enough to simply mirror the allegations against the carrier. Hornbuckle v. State Farm Lloyds, 385 F.3d 538 (5 th Cir.,2004). 4. Damages under 541 It sounds pretty simple. Actual damages and attorney s fees are recoverable for any violation of 541(including DTPA violations by reference). Tex. Ins. Code In addition, up to three times actual damages are permitted for a knowing violation. What are actual damages? The policy benefits? Mental anguish? The simplicity begins to unravel with these questions. Policy benefits v. independent injury. If a carrier refuses to pay a claim, are the policy benefits part of the damages, or does the claimant have to prove some other harm? We hold that an insurer's unfair refusal to pay the insured's claim causes damages as a matter of law in at least the amount of the policy benefits wrongfully withheld. Vail v. Texas Farm Bureau Mutual Ins. Co., 754 S.W.2d 129, 136 (Tex. 1988) said in very plain terms that the policy benefits constituted actual damages. Since Vail considerable confusion has ensued on this issue. Most of the cases that appear to diverge from Vail are coverage cases. When the plaintiff loses on coverage, there are no policy benefits. Still, the Fifth Circuit has interpreted the independent injury rule as having broader application than the Texas Supreme Court opinions would support. See, Great American Ins. Co. v. AFS/IBEX Financial Services, Inc. 612 F.3d 800 (5 th Cir.,2010) and Provident American Ins. Co. v. Castandeda, 988 S.W.2d 189 (Tex. 1998). An insured can now sue under this act for its carrier s mishandling of a defense or indemnity under a liability claim. The plurality of the Supreme Court superimposed Stowers requirements onto the act, though. To recover, the insured must show that in the face of a valid Stowers demand, the carrier refused to make a reasonable settlement offer once liability became reasonably clear. Rocor International Inc. v. National Union Fire Ins. Co., 77 S.W.3d 253 (Tex. 2002). 5. Survivability The Texas Supreme Court has declined to rule on this issue. The intermediate courts are split. The federal district court cases tend to hold that the cause of action does not survive. Launius v. Allstate Ins. Co. Not Reported in F.Supp.2d, 2007 WL (N.D.Tex.,2007) for a discussion. 6. Limitations Two years. The discovery rule applies. Tex. Ins. Code The cause of action accrues when the violation of the code occurs either the denial or the misrepresentation. This same limitation period applies to the common law bad faith cause of action as well as claims under the DTPA. Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.1990). A misrepresentation triggers the limitation period even if it predates the loss. Rangel v. Progressive County Mut. Ins. Co., 333 S.W.3d 265 (Tex.App. El Paso,2010, pet.denied). Disability such as minority, tolls the limitations period. Burton v. State Farm Mutual Auto Ins. Co., 869 F. Supp. 480, 484 (S.D. Tex. 1994). If allegations of a continuing pattern of violations are made, then some specific act within the limitation period must be shown. Duzich v. Marine Office of America Corp. 980 S.W.2d 857, 869 (Tex.App. Corpus Christi,1998, pet denied). 7. Notice The Insurance Code mirrors the DTPA on notice requirements, bad faith actions and settlement offers. 60 days pretrial notice is required. If it s not given, abatement is the remedy. The carrier can make a settlement offer during this time and limit damages if the judgment does not exceed the offer. Tex. Ins. Code Practical Considerations in bringing actions under 541. Both the DTPA and the common law duty of good faith and fair dealing still survive after Giles but in most cases the plaintiff is better off focusing on the Insurance Code. Here s why: 6

13 1) The duty of good faith and fair dealing extends only to the insurance company. It is not available against individuals such as agents and adjusters. Violations of the Ins. Code apply to persons, including adjusters, agents, investigators, etc. 2) Many of the DTPA violations require consumer status to pursue. One only needs to be a person to come under the Ins. Code. 3) Comparative fault is a defense under the DTPA while it is not under 541 of the Ins. Code. (Tex. Civ. Prac. & Rem. Code (a)(2)). 4) Finally, as noted above, the Texas Supreme Court has essentially equated bad faith to a violation of the insurance code, specifically, Tex. Ins. Code (a)(2)(A). Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 55 (Tex.,1997). So if you have bad faith you also have an Insurance Code violation with statutory penalties and attorney s fees. B. Prompt Payment under 542 Much of Chapter 542 is between the insurance industry and the Texas Department of Insurance. It is regulatory and enforcement is left to TDI. Like its predecessor, , much of this section does not create a private cause of action. Prompt payment of claims is the exception. Beginning with Tex. Ins. Code , there are a series of deadlines imposed on first party claims that start with the receipt of a written claim. Once the written claim is received, the clock starts. The insurance company can act with the best of intentions, in complete good faith, but if they miss the deadline they are liable. If they act unreasonably or knowingly violate this section, they may also run afoul of the previous chapter, Time table for claims under 542: a. A written claim is received. (Tex. Ins. Code (4)). b. Within 15 days (30 for a surplus lines carrier), the carrier must acknowledge the claim, begin an investigation, and notify the claimant of any information or documents that the carrier will need from the claimant. c. Within 15 days of the receipt of the information requested, the carrier shall accept or reject the claim. (If the carrier has a reasonable belief the loss resulted from arson, the time is 30 days). If the claim is rejected, the carrier must state the reasons. d. The carrier can extend the above time limits to 45 days if it notifies the claimant 7 (within the original time limit) that it needs more time. e. If the carrier accepts the claim, it has 5 business days to pay the claim. (20 days for a surplus lines carrier). f. If the carrier sits on the case (neither accepts nor denies the claim), it violates the statute if it does not pay within 60 days of receiving all of the information requested from the claimant. If the carrier is later exonerated in litigation or arbitration, there is no violation of this section. 2. Form of the claim a. The claim must be in writing. Written notes in the adjuster s file do not qualify. McMillin v. State Farm Lloyds, 180 S.W.3d 183, 208 (Tex.App. Austin, 2005, rev. denied). b. The claim may be presented by the claimant s attorney. Dunn v. Southern Farm Bureau Casualty Co., 991 S.W.2d 467 (Tex. App. Tyler 1999, pet. denied). c. Notice that complies with the statute and notice that complies with policy conditions are two distinct issues. Notice under the statute starts a clock that may lead to penalties and interest. Compliance with the statute is necessary to start this clock. Notice under the policy is subject to waiver and a requirement that the carrier show prejudice before it can rely on a lack of compliance. One may be able to pursue a policy claim without proper notice. Not so for a delay in payment claim under 542. See PAJ v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008) and Prodigy Communications Corp. v. Agricultural Excess & Surplus Ins. Co.,288 S.W.3d 374 (Tex.2009). 3. Penalties for noncompliance Tex. Ins. Code Liability for Violation of Subchapter (a) If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter, the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney s fees.

14 (b) If a suit is filed, the attorney s fees shall be taxed as part of the costs in the case. a. Interest is calculated simply and per annum. The formula is I (interest) = P (principal) x R (rate) x T (time). In other words, multiply the amount owed on the claim (P) times the rate (R which is 18%) times the amount of time (T) since the claim should have been paid. Texas Farmers Ins. Co. v. Cameron, 24 S.W.3d 386, 400 (Tex.App. Dallas,2000, rev. denied). b. Interest begins to accrue 60 days after the carrier receives the information necessary to evaluate the claim, or the date of denial. Cater v. United Services Automobile Ass'n, 27 S.W.3d 81, 83 (Tex. App. San Antonio,2000, rev. denied). c. Tendering the policy benefits into the registry of the court tolls the interest. State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799 (Tex., 2007). d. There is no good faith exception to penalties under this statute. Cater, supra, at 84. e. The interest and penalties under 542 are cumulative remedies and may be applied with other contract or statutory remedies. Tex. Ins. Code , Bekins Moving & Storage Co. v. Williams, 947 S.W.2d 568, 585 Tex.App. Texarkana,1997, no writ hist). 4. Hidden gift to the auto carriers Chapter 542 has an interesting close to it. Most of us who sue for common law torts do not get attorney s fees. Take a look at this statute. Tex. Ins. Code An insurer that brings suit or takes other action described by Tex. Ins. Code against a responsible third party relating to a loss that is covered under a private passenger automobile insurance policy issued by the insurer and for which the responsible third party is uninsured is entitled to recover, in addition to payments made by the insurer or insured, the costs of bringing the suit or taking the action, including reasonable attorney s fees and court costs. This is the scenario. You are in a car wreck with an uninsured motorist. You sue your carrier to collect 8 your UM benefits. Brainard says you cannot collect attorney s fees from your own carrier. After paying you, your carrier sues the uninsured driver to collect back the money they paid you and adds attorney s fees to their claim under 542. So it goes. III. AUTO COVERAGE The insurance code mandates Personal Injury Protection coverage in the personal auto policies. (The Texas Department of Insurance takes the position that it is also required in commercial auto policies which provide primary coverage for the vehicle this position is consistent with the plain wording of the statute. Tex. Ins. Code ). The PIP statute carries its own damage and penalty provisions. Here is a summary of the required coverage. A. Personal Injury Protection TEX. INS. CODE PIP is required by statute to be part of any auto policy written in this State, unless it is waived in writing. Normally, a client goes to his insurance agent, tells him what he wants, and the agent hands him a form. Sign here, initial here, here and here. One of the boxes the client often initials is a waiver of PIP. Still, if your client s policy doesn t show PIP coverage it is worth looking at the application to make sure PIP has been waived. If it has not been waived, the carrier has to provide the coverage (the statutory minimum of $2,500.00). Finally, the waiver extends to any renewal of the policy. PIP covers everyone in the insured vehicle up to the PIP limits. PIP also covers every insured no matter what vehicle they are in. The triggering event for PIP coverage is a motor vehicle accident under the standard policy. The statute says that when a passenger sues the driver for liability and recovers PIP from the driver s policy, the PIP is a credit on the liability claim. However, if the person s damages exceed both the PIP and the liability limits, there is a strong argument that the offset would reduce the liability limits (assuming a minimum limits policy) beyond that authorized by the Safety Responsibility Act, and should not be allowed. This rationale has been accepted when considering the PIP offset for UM benefits. Mid-Century Insurance Company of Texas v. Kidd, 997 S.W.2d 265 (Tex. 1999) at 271. The court in Kidd, held that the offset provisions of the policy and the Code were simply a prohibition on double recovery. The payments under a PIP policy are applicable to any covered losses that are incurred within three years of the date of the accident. Tex. Ins. Code (2). The benefits must be paid within 30 days of the receipt of the claim. Tex. Ins. Code

15 1. Waiver of PIP a. Tex. Ins. Code (a) An insurer may not deliver or issue for delivery in this state an automobile liability insurance policy, including a policy provided through the Texas Automobile Insurance Plan Association under Tex. Ins. Code 2151 (high risk), that covers liability arising out of the ownership, maintenance, or use of any motor vehicle unless the insurer provides personal injury protection coverage in the policy or supplemental policy. (b) The coverage required by this subchapter does not apply if any insured named in the insurance policy rejects the coverage in writing. Unless the named insured requests in writing the coverage required by this subchapter, the insurer is not required to provide that coverage in or supplemental to a renewal insurance policy if the named insured rejected the coverage in connection with an insurance policy previously issued to the insured by the same insurer or by an affiliated insurer. (emphasis added) b. Spouse s waiver extends to the spouse that did not sign the waiver. Old American Mutual Fire Ins. Co. v. Sanchez, 149 S.W.3d 111 (Tex. 2004). This opinion reaches its conclusion by determining that a spouse, not named in the policy, is a named insured, at least for the purposes of waiving coverage. c. Excluded driver endorsement is not sufficient to reject PIP coverage. Unigard Sec. Ins. Co. v. Shaefer, 572 S.W.2d 303 (Tex. 1978). d. Electronic waivers may be affective if they meet the requirements of the Uniform Electronics Transactions Act. The Texas Department of Insurance issued a bulletin in 2002 (B ) on this subject, but as of yet, there is no case law on the issue. Note the bulletin refers to Tex. Bus. & Com. Act , but this section has been re-codified as See also, Cunningham v. Zurich American Ins. Co. 352 S.W.3d 519 (Tex.App. Fort Worth 2011, pet. filed) for a discussion of electronic signatures. 2. Accident triggers obligation to pay PIP The statute states that PIP benefits are due if they arise from an accident. Tex. Ins. Code (the standard policy duplicates this language). The statutory wording is different from the language in the Transportation Code that mandates liability coverage if the damage arises from ownership, maintenance, or use of the motor vehicle. A motor vehicle accident occurs when (1) one or more vehicles are involved with another vehicle, an object or a person, (2) the vehicle is being used, including exit or entry, as a motor vehicle, and (3) a casual connection exists between the motor vehicle s use and the injury-producing event. Texas Farm Bureau Mutual Ins. Co. v. Sturrock, 146 S.W.3d 123 at 134 (Tex. 2004). Sturrock involved a man injured when his foot caught on the door of the truck he was exiting. The majority (5-4) of the court held that he was entitled to PIP benefits. This case rejects the holdings in several earlier Courts of Appeal decisions. 3. PIP limits a. Two separate PIP policies can be stacked to fully compensate damages. Travelers Indemnity Co. of Rhode Island v. Lucas, 678 S.W (Tex. App. - Texarkana 1984, no writ). b. Within one policy PIP limits cannot be stacked (multiple vehicles on one policy). Guerrerro v. Aetna Casualty and Surety Co., 575 S.W.2d 323 (Tex. App. - San Antonio 1978, no writ) c. Even if multiple policies are available, PIP payments cannot exceed actual damages. United States Automobile Association v. DiCarlo, 670 S.W.2d 756 (Tex. App. -El Paso 1984, writ ref d n.r.e.). 4. Benefits payable a. Tex. Ins. Code Personal Injury Protection...provides payment for...(a) necessary medical, surgical, x-ray, or dental services... (B)...replacement of lost income... (C)..in the case of a person who is not a wage producer... reimbursement of necessary and reasonable expenses incurred for essential services ordinarily performed by the injured person for care and maintenance of the family or family household. b. Tex. Ins. Code Payment is required regardless of fault or other available benefits (except for an offset 9

16 against a liability claim made on the same policy Tex. Ins. Code ). c. Tex. Ins. Code Provides attorney s fees, 12% penalty and interest if benefits are not timely paid (30 days allowed for payment Tex. Ins. Code ) d. Loss of a prospective job may qualify for PIP benefits. Slocum v. United Pac. Ins. Co., 577 S.W.2d 805 (Tex. App. -Houston [14 th dist.] 1979, appeal after remand, 615 S.W.2d 807 (Tex. App. - Houston [1 st dist.] 1981). Fact issue. First opinion reversed summary judgment in favor of insurer on this issue. Second opinion affirmed a jury verdict against the insured. e. PIP payments must be made to the beneficiary, not to the healthcare provider, absent a valid assignment signed by the insured. Texas Farmers Insurance Co. v. Fruge, 13 S.W.3d 509 (Tex. App. - Beaumont 2000, rev. denied). Medicare/Medicaid is the exception to this rule, but the amounts due Medicare/Medicaid must be specific. The PIP carrier cannot simply add Medicare/Medicaid to every payment check. f. Can the PIP carrier pretend that they are a health insurance company and discount their payments? The statute says the carrier must pay reasonable expenses that are for necessary medical services. Tex. Ins. Code We now have a case on this issue and it favors the carrier. Allstate Indem. Co. v. Forth, 204 S.W.3d 795 (Tex. 2006). Here the court held that the insured did not have standing to challenge the discounted payment when the insured s healthcare providers accepted the discounted payment in full satisfaction of the debt. Setting aside the question of how a party to a contract does not have standing to challenge the other parties performance under that contract, the case provides a road map to fight these, all too common, discounts. Make sure the healthcare providers realize that they have a right to full payment of their reasonable and necessary charges when they are looking to a PIP policy for payment. Most of them are used to having their bills cut, so they don t know they can protest the discounted PIP payments. If you represent the claimant, you may want to inform them. 10 B. Uninsured/underinsured coverage Like PIP, UM coverage is mandated by statute. ( old code, Tex. Ins. Code new code). Still, like PIP, it can be waived. Generally, the rules governing waiver of PIP apply to UM coverage. Mid- Century Insurance Company of Texas v. Kidd, supra. Uninsured motorist coverage is also underinsured motorist coverage. If the at-fault third party driver has either no insurance, or insufficient insurance, the UM carrier steps in and acts as that third party s carrier. Most of the defenses available to the third party are available to the UM carrier. Valentine v. Safeco Lloyds Ins. Co., 928 S.W.2d 639 (Tex. App. - Houston [1 st Dist] 1996, writ den d). One important difference, however, is that a UM claim is a first party claim and is subject to the Ins. Code, DTPA and common law duties that apply to all first party claims. In light of recent Supreme Court opinions, these rights may be more theoretical than real at the moment. Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 50 Tex. Sup. Ct. J. 271, Tex, 2006), State Farm Mutual Auto Ins. v Nickerson, 216 S.W.3d 823 (Tex. 2006) and State Farm Mutual Auto Ins. v Norris, 216 S.W.3d 819 (Tex. 2006). Like PIP, UM benefits everyone in the insured vehicle up to the amount of the limits. Also, like PIP, UM coverage generally extends to all of the insureds under the policy, no matter which vehicle they are in, or if they are in any vehicle at all. Exceptions to the general rule are exceptions that generally apply throughout the policy, i.e., using the vehicle without permission, use of an owned, but unscheduled vehicle, intentional conduct, commission of a felony, etc. 1. Vehicles covered by UM a. Exclusion for vehicles available for regular use does not apply to UM because applying it would defeat the purpose of the UM statute. Briones v. State Farm Mutual Auto Ins. Co. 790 S.W.2d 70 (Tex. App. - San Antonio 1990, writ denied). Insured was injured in a vehicle that was available for his regular use at work. Neither it nor the driver had liability coverage. Relying on Stracener, the Court held that to enforce the vehicles available for regular use exclusion in this instance would defeat the purpose of the UM statute. Court expressed disagreement with earlier pre- Stracener opinions such as Hall v. Southern Farm Bureau Casualty Ins. Co. 670 S.W.2d 775 (Tex. App. - Fort Worth 1984, no writ) b. Exclusion of a non-listed vehicle owned by or furnished or available for the regular use of you or any family member approved when applied to an owned

17 vehicle driven by a family member. Bergensen v. Hartford Insurance Company, 845 S.W.2d 374 (Tex. App. - Houston, 1 st Dist., 1993, writ ref d). Such exclusion does not violate the Ins. Code or the rationale of Stracener. This case does not mention Briones, but applies a different rationale to different facts. The claim by Ms. Bergensen was against her husband, involving the family vehicle in which she was a passenger. The Court s finding essentially mirrors that of Rosales v. State Farm Mutual Auto. Ins. Co., 835 S.W.2d 804 (Tex. App. - Austin 1992, writ denied). Note, this holding is questioned and modified somewhat by Verhoev v. Progressive County Mut. Ins. Co., 300 S.W.3d 803 (Tex.App. Fort Worth,2009, no pet.) This case involves a divorced couple. Ex-husband was driving, ex-wife was injured because of driver s negligence. Both were named insureds under the same policy with two different vehicles. The court held that plaintiff could recover UIM benefits as an insured under the same policy, not as an occupant of the vehicle, but under her own coverage. This case presents rather unique facts and turns on the ambiguity of the word you in policy. at 815 c. Definition of uninsured vehicle does not include government vehicles. Francis v. International Service Insurance Co., 546 S.W.2d 57 (Tex. 1976). Approves exclusion of government vehicles from definition of uninsured vehicle. Three judges dissent, arguing it is beyond the authority of the State Board of Insurance to approve such an exclusion. 2. Persons covered under UM a. Everyone in the insured vehicle is covered if they are occupying the covered vehicle when the accident occurs. This language is in the policies, but not mandated by statute. A question often arises if the occupants of the car were occupying the vehicle at the time of their injury. The Texas courts traditionally considered 1) the physical proximity between the injured person and the insured vehicle, 2) the amount of time the person was outside the vehicle, 3) whether the purpose for being outside of the vehicle related to the use of the vehicle, and 4) whether an impact with the covered vehicle caused the injury. McDonald v. Southern County Mutual Ins. Co., S.W.3d 464 (Tex. App. Houston [1 st Dist.] 2004, no pet.). However, in reversing the Court of Appeals decision, the Texas Supreme Court limited the definition of occupying considerably in Goudeau v. United States Fidelity and Guaranty Co., 272 S.W.3d 603 (Tex. 2008). Without articulating a bright line, the court simply held that the passenger who was struck while outside of the vehicle was not occupying the vehicle, and consequently, not covered. (though Justice Brister did express sympathy for his plight). b. However, the named insured (including family members) under a UM policy is covered regardless of the circumstances as long as an uninsured motor vehicle caused the injury. Coverage is unaffected by where the insured was when the uninsured motor vehicle struck him. There is no requirement that the insured have any relation, at the time of the accident, with any vehicle he owns and that is insured with the insurer. The uninsured motorists protection covers the insured and the family members while riding in uninsured vehicles, while riding in commercial vehicles, while pedestrians, or while rocking on the front porch. The only relation that the insured must have to automobiles at the time of the accident is that he be injured by an automobile driven by an uninsured motorist. Greene v. Great American Ins. Co., 516 S.W.2d 739, dissenting on other issues (Tex. App. Beaumont 1974, writ ref d n.r.e.). 3. Benefits payable under UM a. Passenger who had collected the full liability limits against the driver, could not also collect UIM benefits against the driver on the same policy. Rosales v. State Farm Mutual Auto. Ins. Co, supra. Court reasoned that such would add an additional layer of liability coverage that the parties did not contemplate. In other words, the insured vehicle cannot be underinsured under the same policy. b. Some third party defenses are not available to the UM carrier. Franco v. Allstate Ins. Co., 505 S.W.2d 789 (Tex. 1974). Case holds that a four year statute of limitations applies to UM claims, even if the two year statute of limitations would bar an action against the uninsured motorist. Court holds that the phrase legally entitled to

18 recover simply requires that the uninsured motorist was at fault and the extent of the plaintiff s damages. c. Punitive damages are likely not recoverable under UM policy. Vanderlinden v. United States Automobile Association, 885 S.W.2d 239 (Tex. App. - Texarkana 1994, writ denied) This case notes the split in Texas, as well as U.S. authority on the ssue, recognizing a different holding in Home Indemnity Co. v. Tyler, 522 S.W.2d 594 (Tex. App. - Houston [14 th dist.] 1975, writ ref d n.r.e.). Case notes the change in policy language from all sums which nsured...shall be legally entitled to recover to legally entitled to recover...because of bodily injury. Id. at 241. Note the Texas Supreme Court has expressly reserved this question. Government Employees Ins. Co. v. Lichte, 792 S.W.2d 546 (Tex. App. - El Paso 1990, writ denied per curium 825 S.W.2d 431 (Tex. 1991). Finally, at least one court has held that it is against public policy to allow UM coverage for punitive damages. Laine v. Farmers Ins. Exchange, 325 S.W.3d 661, 666 (Tex. App. Houston [1 st Dist] 2010, rev. denied). d. Burden is on the insured to show the uninsured driver was negligent. Burden shifts to the insurance company to show contributory negligence. Continental Casualty Co. v. Thomas, 463 S.W.2d 501, (Tex. Civ. App. Beaumont 1971, no writ). e. The paid/incurred limitations on medical expenses are applicable to UM claims. Progressive v. Delgado, 335 S.W.3d 689 (Tex. App. Amarillo, 2011, rev. denied). 4. Policy limits under UM a. Cannot stack UM limits within one policy, even for separately listed vehicles. Monroe v. Government Employees Ins. Co., 845 S.W.2d 394 (Tex. App. - Houston, 1 st Dist., 1993, writ denied). Insureds daughter was killed as a pedestrian. Insureds argued that since they had two vehicles listed in the policy, they had two separate limits for their UM coverage. Note that the definition of uninsured vehicle was not an issue as it was in Bergensen, since none of the insured vehicles were involved. Still, the court held 12 that there was only one limit under the policy. Having two vehicles listed widened the coverage but did not deepen it. b. Cannot stack UM limits within multivehicle policy when one vehicle is involved in a collision. Upshaw v. Trinity Companies, 842 S.W.2d 631 (Tex. 1992); see also Westchester Fire Ins. Co. v. Tucker, 512 S.W.2d 679 (Tex. 1974). Same holding as Monroe, only one of the cars in a multi-vehicle policy was involved in the collision. Insureds made the same argument for stacking UM coverage within the policy. Argument was rejected. Court construed Limit of Liability language in the UM coverage to dictate result. Maximum limit of liability for all damages for bodily injury sustained by any one person in any one accident. Mauzy and Gammage dissenting. c. Only one per person limit available even with loss of consortium claim in UM policy. Miller v. Windsor Insurance Co., 923 S.W.2d 91 (Tex. App. - Fort Worth, 1996, writ denied) (follows McGovern v. Williams, 741 S.W.2d 373 (Tex. 1988)). d. Plaintiff s claim for mental anguish for the death of her husband was not covered under UM policy because she had not been injured in the accident. (policy did pay one limit for husband s injuries and death ) Eshtary v. Allstate Insurance Co., 767 S.W.2d 291 (Tex. App. - Fort Worth, Writ denied) cites McGovern v. Williams. Note, however, the cases that have suggested such damages may be collected if there is a physical manifestation of the mental anguish. State Farm Lloyds v. C.M.W., 53 S.W.3d 877, (Tex. App. Dallas 2001, no pet.) e. Single per person limit cannot be expanded by bystander claim after wrongful death payment under the UM portion of the policy. Wrongful death payment included mental anguish also asserted in bystander claim. Christian v. Charter Oak Fire Ins. Co., 847 S.W.2d 458 (Tex. App. - Tyler, 1993, writ denied) f. Naturally, if more than one policy covers the accident, the UM policy limits can be stacked to the extent of damages. American Motorists Insurance Co. v. Briggs, 514 S.W.2d 233 (Tex. 1974). g. With multiple claimants and low policy limits, the Soriano standard applies to UM. In other words, if there is not enough money to go around, the carrier has wide

19 latitude on who to pay and how much. Carter v. State Farm Mutual Auto. Ass., 33 S.W.3d 369 (Tex. App. Fort Worth 2000, no pet.) h. Finally, it should be noted Texas is an excess state verses a reduction state with UIM coverage. In other words, UIM limits are in addition to the available liability limits. Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989). 5. UM and Subrogation If the UM carrier pays a claim, it has a right to get paid back from the at-fault entity that caused the loss for which payment is made. Tex. Ins. Code Since a settlement with an underinsured driver s liability carrier will release the driver, and consequently destroy the UM carrier s subrogation rights, the UM carrier must give the claimant permission to settle with the liable driver or the insured risks losing their UM benefits. UM carriers routinely give this consent and it is a simple step to include. If the insured inadvertently skips this step, however, most carriers would have trouble showing the prejudice they must show. Since Texas was founded by folks running from sheriffs and creditors, we have generous homestead laws, and most of us are judgment proof. Finally, the courts have held that this right of subrogation extends only to an uninsured/underinsured vehicle - not a non-vehicular tortfeasor. a. Neither the statute nor the policy gave the carrier any subrogation rights against a non-motorist defendant. Simpson v. GEICO Gen. Ins. Co., 907 S.W.2d 942 (Tex. App. -- Houston [1 st Dist.] 1995, no writ). In this case the carrier denied UM payments because the insured had settled with the 3 rd party defendant (a construction and barricade company). UM carrier wanted to subrogate against the 3 rd party defendant. The court held that there was no subrogation right against a non-motorist defendant. The court also held that the broader, general, catch all right of recovery language at end of the policy (General Provisions- Part F) did not apply since GEICO had made no payments to the insured. b. Carrier must give permission before insured can settle with underinsured defendant because settlement destroys their subrogation right. Traylor v. Cascade Ins. Co., 828 S.W.2d 292 (Tex. App. - Dallas 1992, no writ). 13 Since the carrier has a subrogation right against an underinsured motorist, the policy requires that the carrier give permission before the insured can settle with the underinsured defendant. The rationale for this provision is that the liability carrier for the undersinsured motorist is going to require a release before they pay. This release will also destroy the UM carrier s subrogation claim. But, the carrier must show it is prejudiced before it can enforce this provision of the policy. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994). c. Carrier may also waive the permission requirement by its actions. Ford v. State Farm Mutual Auto. Ins. Co., 550 S.W.2d 663 (Tex. 1977). In this case State Farm denied liability under the UM coverage prior to settlement. The court held that the denial of coverage constituted a waiver of the permission requirement. 6. Liability/UM offsets There are several offset (other insurance) clauses that relate to the payments within policies and between policies. If you read the standard policy, it is replete with such clauses. For example, both the liability (part A) and the UM (part C) state that if a claimant collects under one coverage, it will reduce the amount available under the other. Also, both coverages state they are excess over any collectable insurance from a nonowned vehicle. In general, the courts have not shown favor to these clauses. a. UM policy cannot take a policy limit credit for liability payment if damages exceed both. Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989) b. UM carrier does get full credit for the liability limits, even if insured settled for less than the limits. Olivas v. State Farm Mutual Automobile Ins. Co., 850 S.W.2d 564 (Tex. App. - El Paso, 1993, writ denied) c. A liability carrier does not get credit for earlier payments by a UM carrier. Bartley v. Guillot, 990 S.W.2d 481 (Tex. App. - Houston, 1 st Dist., 1999, rev. denied) Plaintiff settled with her UM carrier prior to trial and dismissed the uninsured driver from the case. Case proceeded to trial against insured driver and was awarded $30,000 (UM settlement was 20K). Defendant asked for a credit under Tex. Civ. Prac. & Rem. Code Court held not

20 entitled to credit. Code addresses negligence. UM payment was made under contract. Court also rejected common law argument of double recovery. UM carriers right of subrogation was against uninsured driver, not insured defendant. however, a UM carrier can claim reimbursement from a subsequent liability settlement, even if it s the same carrier. State Farm Mut. Auto. Ins. Co. v. Perkins, 216 S.W.3d 396, (Tex.App.-Eastland,2006, no pet.) d. For UM carrier to receive credit for liability payment it must plead and prove liability payment as an offset. Hampton v. State Farm Mutual Insurance Co., 778 S.W.2d 476 (Tex. App. - Corpus Christi, 1989, no writ) [Case recognizes bystander damages under UM coverage]. e. Hanson v. Jankowiak This is not really the style of a case. It is two separate cases that came up with opposite conclusions on an important issue. Hanson v. Republic Ins. Co., 5 S.W.3d 324 (Tex. App. - Houston [1 st dist.] 1999, pet. denied), Jankowiak v. Allstate, 201 S.W.3d 200 (Tex. App. - Houston [14 th dist] 2006, no pet.) This is the scenario. A person is a passenger injured in an accident in which the driver of his car and the other driver are both at fault. He collects against his driver s liability policy and the other driver s. But there is not enough coverage to take care of his damages. Can he also collect against his driver s UIM policy? After all he is a covered person under that policy. He clearly cannot collect against this UIM policy for his own driver s underinsured condition. Rosales v. State Farm Mutual Auto. Ins. Co. But can he collect for the other driver s underinsured status? Jankowiak says yes, Hanson says no. Just in case anyone doubts that these opinions are not reconcilable look what the 14 th Court says in Jankowiak, In short, we find the Hanson opinion wrongly decided, and we decline to follow it. Id. at 209. Jankowiak is the more recent opinion. It seems that most Texas trial courts are following it on summary judgment. One final note, in Hanson the carrier paid the UIM benefits and refused to pay the liability limits. In Jankowiak, it was the other way around. That distinction does not reconcile the opinions as noted by the language quoted above. 14 f. In the standard policy, there is also a credit or offset for worker s compensation benefits. As with other other insurance clauses this offset has been held invalid by the courts. Hamaker v. American State Ins. Co., 493 S.W.2d 893, 898 (Tex. Civ. App. Houston [1 st dist.] 1973, writ ref d n.r.e.), Fidelity and Casualty Co. v. McMahon, 487 S.W.2d 371, 372 (Tex. Civ. App. Beaumont. 1972, writ ref d n.r.e.). Also, it works the other way as well. Worker s comp does not have a subrogation claim against UM benefits paid under the injured worker s policy, though it does against the employer s UM coverage. For a discussion see, Erivas v. State Farm Mut. Auto. Ins. Co., 141 S.W.3d 671, (Tex. App.-El Paso, 2004). g. The UM carrier receives credit for all of the liability settlements, even if, in a subsequent trial, one of the settling defendants is exonerated from liability. Melencon v. State Farm Mut. Auto Ins. Co., 343 S.W.3d 567, 570 (Tex. App. Houston [14 th dist.] 2011, no pet.). The plaintiff settled with two defendants and went to trial against the UM carrier. As part of the UM case, the jury decided liability against the underinsured defendants. They found only one of the defendants liable. The plaintiff argued that the UM carrier received no credit from the defendant who was exonerated because they were not legally responsible for the plaintiff s damages. The court rejected that argument, holding that the UM carrier received full credit for all of the settlements. 7. Hit and run UM policies have special provisions for hit and run collisions. The general rule is that there must be contact between the insured vehicle and the disappearing vehicle. This rule is in the statute (Tex. Ins. Code ) and in the policy. The first inquiry though, is whether the miscreant driver or vehicle can be identified? If a vehicle license number is obtained and the owner can be identified, it is not a hit and run under the policy and the contact rule does not apply. If contact is required, sometimes indirect contact will suffice. If car A hits car B which hits the insured, and car A takes off, the contact rule is satisfied. Latham v. Mountain States Mutual Cas. Co., 482 S.W.2d 655 (Tex. App. - Hous. [1 st dist.] 1972, writ ref d n.r.e.). This rule was reaffirmed by the Texas Supreme Court in Old American Mutual Fire Ins. Co. v. Sanchez, 149 S.W.3d 111 (Tex. 2004).

21 Blinding lights that run the insured off the road or loads falling off a vehicle have been held to be insufficient contact to satisfy the requirement. Goen v. Trinity Universal Ins. Co., 715 S.W.2d 124 (Tex. App. - Texarkana 1986, no writ), Williams v. Allstate Ins. Co., 849 S.W.2d 859 (Tex. App. - Beaumont 1993, no writ), Texas Farmers Ins. Co. v. Deville, 988 S.W.2d 331 (Tex. App. - Houston [1 st Dist.] 1999, no pet.). In a recent Supreme Court opinion, even part of the vehicle (axle) falling off and striking the insured vehicle was held to not satisfy the contact requirement. Nationwide Ins. Co. v. Elchehimi, 249 S.W. 3d. 430 (Tex., 2008). Finally, ice falling off a passing tractor trailer did not satisfy the contact requirement. Hernandez v. Allstate County Mut. Ins. Co., Not Reported in S.W.3d, 2010 WL (Tex.App.-San Antonio, 2010). 8. Bad faith? Ins. Code Penalties? In UM coverage In Lloyd Doggett s words, this majority [of the Supreme Court] never met an insurance company it didn t like. Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 33 (Tex. 1994). Justice Doggett s observation was given emphasis in the Brainard, Norris, and Nickerson opinions cited above. The Court, in these three Christmas gifts to the insurance industry, held that before an uninsured/underinsured claim is ripe, there must be a judicial determination that the uninsured/underinsured driver was at fault and the extent of the damages. In other words, ue us. We don t have to pay until you win. There is considerable debate over whether bad faith, insurance code violations and DTPA claims survive after Brainard. The Northern District Court in Schober v. State Farm Mutual Automobile Ins. Co., 2007 W.L (N.D. Texas, July 18, 2007) reserved judgment on the plaintiff s extra contractual claims, pending the outcome of the underlying liability and damage issues. Two other Northern District opinions have followed Schober, Owen v. Employers Mutual Casualty Co., 2008 W.L (N.D. Tex. March 28, 2008) and Stoyer v. State Farm Mutual Automobile Ins. Co., 2009 W.L (N.D. Tex. 2009). One decision from the Southern District has disagreed with these holdings. Weir v. Twin City Fire Ins. Co., 622 F. Supp. 2d 483 (S.D. Tex. March 31, 2009). The clear implication in the Northern District opinions is that these actions survive Brainard. The Amarillo Court of Appeals has held, however, that the delay in payment penalties under the Tex. Ins. Code 542 do not come into play until the underlying judgment against the uninsured tortfeasor is final. Mid-Century Ins. Co. of Texas v. Daniel, 223 S.W.3d 586 (Tex. App. Amarillo 2007, pet. denied). The issue in Brainard, Norris, and Nickerson was attorney s fees under Tex. Civ. Prac. & Rem. Code If these opinions are read more broadly, as to 15 eliminate penalties under the Ins. Code, then the high Court has essentially gutted a statute by judicial fiat. The Court has repeatedly declared that they will not engage in such judicial activism. Further, such a reading of these opinions would dictate a trial in every UM case, thereby encouraging litigation and discouraging settlement. Again, this result would be contrary to the Court s stated public policy. C. Property Damage Third party liability for property damage is determined by the common law. The liability carrier owes what the common law says their insured owes. First party payment is determined exclusively by the terms of the policy. In other words, we will pay what we say we will pay, not necessarily what you re owed. 1. Common law damages (third party) a. When a vehicle is repairable, the at fault driver (and his carrier) owes the cost of repairs and the loss of use of the repaired vehicle while it is disabled. Mondragon v. Austin, 954 S.W.2d 191 (Tex. App. - Austin 1997, pet. denied) Case affirms this measure of damages, even if the total exceeds the value of the car. Case discusses duty to mitigate and the limitations of that duty. Rejects an absolute time limit on loss of use. b. It is not a prerequisite that the plaintiff actually rent a substitute vehicle in order to recover for loss of use. Chemical Express Carriers, Inc. v. French, 759 S.W.2d 683 (Tex. App. - Corpus Christi 1988, writ denied). c. Even in a third party claim, if carrier authorizes repairs, it may incur extra contractual liability. See Webb v. International Trucking Co., Inc., 909 S.W.2d 220 (Tex. App. - San Antonio 1995, no writ). d. Diminished value after repair is recoverable against the third party under the tort measure of damages. Higgins v. Standard Lloyds, 149 S.W.2d 143 (Tex. App. Galveston 1941, writ dism d). 2. First Party property damage claims a. Carrier is not required to use OME parts, but must use those of like kind and quality. Berry v. State Farm Mutual Automobile Ins. Co., 9 S.W.3d 884 (Tex. App. - Austin 2000, no pet.) (citing Tex. Ins. Code (now 1952). b. If vehicle is repairable, it must be repaired to it s useful pre-accident condition. Carrier cannot simply depreciate the value

22 of the parts replaced based on the age of the vehicle. Great Texas County Mutual Ins. Co. v. Lewis, 979 S.W.2d 72 (Tex. App. - Austin 1998, no pet.). c. Diminished value after repair is not recoverable under first party property damage claims. American Manufacturers Mutual Ins. Co. v. Schafer, 124 S.W.3d 154 (Tex. 2003) Case emphasizes requirement of competent repairs and cites Lewis with approval. d. Property is a total loss if a reasonably prudent uninsured owner, desiring to restore the property, would not do so considering the post accident condition of the property. Canal Ins. Co. v. Hopkins Towing, No (Tex. App. - Tyler, 2007) citing State Farm Fire and Cas. v. Mower, 917 S.W.2d 2, 4 (Tex. 1995) Whether property is a total loss or not, is a fact question. e. An insurance company that pays a total loss on a vehicle which is in a storage facility is also liable to the owner of the facility for towing and storage cost. Tex. Occ. Code (b). 3. Insurance Code provisions that apply to both First and Third Party Property Damage Claims a. Tex. Ins. Code The insurer cannot specify the brand, type, kind, age, vendor, supplier, or condition of parts or products that may be used to repair the vehicle or limit the selection of the repair person or facility b. Tex. Ins. Code The insurer cannot solicit or accept a referral fee from a repair facility c. Tex. Ins. Code No agreement between an insurer and a repair shop may result in a reduction of coverage d. Tex. Ins. Code The carrier must provide the beneficiary or third party claimant with notice of their rights under this section. IV. AGENTS, UNAUTHORIZED INSURANCE AND SURPLUS LINES An insurance company must be authorized by the Texas Department of Insurance to conduct business in this state. Tex. Ins. Code Chapter 801. This authority is granted through a certificate to act as an insurer. Tex. Ins. Code Surplus lines are the stepchildren of the insurance world. These policies are not as strictly regulated and are not to be used as the first line of insurance if there are alternatives. These policies are issued by carriers that do not have the certificate of authority but are nevertheless permitted to write coverage that authorized carriers do not offer. Tex. Ins. Code An unauthorized policy is unenforceable by the carrier. In other words, the insured can claim the coverage, but the carrier cannot rely on any policy exclusions or conditions. Tex. Ins. Code , Wheelways Ins. Co. v. Hodges, 872 S.W.2d 776, 784 (Tex. App. Texarkana 1994, no writ hist.) An agent who procures coverage from an unauthorized insurance company is also liable for the claim if the claim is not paid by the insurer. Tex. Ins. Code (a). Attorney s fees are available in the action if the insurer or the agent fails to make the payment within thirty days of the demand and the failure was vexatious and without reasonable cause. If they fail to defend the lawsuit, it is prima facie evidence that the failure to make payment was vexatious and without reasonable cause. Tex. Ins. Code An agent that places coverage with a surplus lines carrier without a diligent effort to procure the coverage through an authorized carrier violates the statute. Tex. Ins. Code If the violation is material and intentional, then the surplus policy is unenforceable by the carrier. Tex. Ins. Code The agent will also be exposed under Tex. Ins. Code (a). Coverage through a surplus carrier must be procured through an authorized surplus lines agent. Tex. Ins. Code The surplus carrier must also be approved by the Texas Department of Insurance, meet certain requirements, and pay certain fees. These requirements are strictly enforced. Any breach will result in an unauthorized policy and all the consequences that follow. Yorkshire Ins. Co., Ltd. v. Seger, 279 S.W.3d 755 (Tex.App. Amarillo,2007, rev. denied). V. SUMMARY Volumes could be written on the ends and outs of the Insurance Code. The insurance industry in Texas is large and growing. Much of the Code is regulatory and does not implicate private causes of action. Still, if you have a dispute with an insurance company, it is good to know the details of the Code. There are a great many secondary sources that summarize and annotate the Insurance Code, and these sources are often invaluable. First, the Lexis/Nexis Texas Annotated Insurance Code, vol. 1 and 2 is a great resource as is Mark Kincaid s, Texas Practice Guide, Insurance 16

23 Litigation from West Publishing. In auto insurance disputes, refer to Janet Colaneri s work, Texas Personal Automobile Insurance Policy published by Texas Lawyer. Several practitioners in this area such as Mark Ticer also maintain websites with published articles. Finally, this area of the law is ever changing. It is a rare legislative session that does not amend the Insurance Code in some fashion, and case law ebbs and flows constantly. 17

24

25 CASES TABLE OF AUTHORITIES Allstate Indem. Co. v. Forth, 204 S.W.3d 795 (Tex. 2006) Allstate Ins. Co. v. Watson, 876 S.W.2d 145, 150 (Tex.,1994)... 5 Allstate Insurance Co. v. Pare, 688 S.W.2d 680 (Tex. App. - Beaumont 1985, writ ref d n.r.e.)... 2 American Manufacturers Mutual Ins. Co. v. Schafer, 124 S.W.3d 154 (Tex. 2003) American Motorists Insurance Co. v. Briggs, 514 S.W.2d 233 (Tex. 1974) Bartley v. Guillot, 990 S.W.2d 481 (Tex. App. - Houston, 1 st Dist., 1999, rev. denied) Bekins Moving & Storage Co. v. Williams, 947 S.W.2d 568, 585 Tex.App. Texarkana,1997, no writ hist)... 8 Bergensen v. Hartford Insurance Company, 845 S.W.2d 374 (Tex. App. - Houston, 1 st Dist., 1993, writ ref d)... 11, 12 Berry v. State Farm Mutual Automobile Ins. Co., 9 S.W.3d 884 (Tex. App. - Austin 2000, no pet.) Betco Scaffolds Co. v. Houston United Cas. Ins. Co., 29 S.W.3d 341, 348 (Tex.App.- Houston [14th Dist.] 2000, no pet.)... 5 Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 50 Tex. Sup. Ct. J. 271, Tex, 2006)... 8, 10, 15 Briones v. State Farm Mutual Auto Ins. Co. 790 S.W.2d 70 (Tex. App. - San Antonio 1990, writ denied)... 10, 11 Burton v. State Farm Mutual Auto Ins. Co., 869 F. Supp. 480, 484 (S.D. Tex. 1994)... 6 Canal Ins. Co. v. Hopkins Towing, No (Tex. App. - Tyler, 2007) Carter v. State Farm Mutual Auto. Ass., 33 S.W.3d 369 (Tex. App. Fort Worth 2000, no pet.) Cater v. United Services Automobile Ass'n, 27 S.W.3d 81, 83 (Tex. App. San Antonio,2000, rev. denied)... 8 Chemical Express Carriers, Inc. v. French, 759 S.W.2d 683 (Tex. App. - Corpus Christi 1988, writ denied) Christian v. Charter Oak Fire Ins. Co., 847 S.W.2d 458 (Tex. App. - Tyler, 1993, writ denied) Coastal Refining & Marketing, Inc. v. United States Fidelity and Guarantee, 218 S.W.3d 279 (Tex. App. - Houston, 14 th Dist., 2007, rev. den d)... 1 Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)... 2 Continental Casualty Co. v. Thomas, 463 S.W.2d 501, (Tex. Civ. App. Beaumont 1971, no writ) Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 386 (Tex.,2000)... 5 Cunningham v. Zurich American Ins. Co. 352 S.W.3d 519 (Tex.App. Fort Worth 2011, pet. filed)... 9 Dunn v. Southern Farm Bureau Casualty Co., 991 S.W.2d 467 (Tex. App. Tyler 1999, pet. denied)... 7 Duzich v. Marine Office of America Corp. 980 S.W.2d 857, 869 (Tex.App. Corpus Christi,1998, pet denied)... 6 Erivas v. State Farm Mut. Auto. Ins. Co., 141 S.W.3d 671, (Tex. App.-El Paso, 2004) Eshtary v. Allstate Insurance Co., 767 S.W.2d 291 (Tex. App. - Fort Worth, Writ denied) Fidelity and Casualty Co. v. McMahon, 487 S.W.2d 371, 372 (Tex. Civ. App. Beaumont. 1972, writ ref d n.r.e.) Ford v. State Farm Mutual Auto. Ins. Co., 550 S.W.2d 663 (Tex. 1977) Francis v. International Service Insurance Co., 546 S.W.2d 57 (Tex. 1976) Franco v. Allstate Ins. Co., 505 S.W.2d 789 (Tex. 1974) Gaulden v. Johnson, 801 S.W.2d 561, 563 (Tex.App.-Dallas 1990, no writ)... 2 Goen v. Trinity Universal Ins. Co., 715 S.W.2d 124 (Tex. App. - Texarkana 1986, no writ) Goudeau v. United States Fidelity and Guaranty Co., 272 S.W.3d 603 (Tex. 2008) Great American Ins. Co. v. AFS/IBEX Financial Services, Inc. 612 F.3d 800 (5 th Cir.,2010)... 6 Great Texas County Mutual Ins. Co. v. Lewis, 979 S.W.2d 72 (Tex. App. - Austin 1998, no pet.) Guerrerro v. Aetna Casualty and Surety Co., 575 S.W.2d 323 (Tex. App. - San Antonio 1978, no writ)... 9 GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305 (Tex. 2006)... 3 Hall v. Southern Farm Bureau Casualty Ins. Co. 670 S.W.2d 775 (Tex. App. - Fort Worth 1984, no writ) Hamaker v. American State Ins. Co., 493 S.W.2d 893, 898 (Tex. Civ. App. Houston [1 st dist.] 1973, writ ref d n.r.e.) Hampton v. State Farm Mutual Insurance Co., 778 S.W.2d 476 (Tex. App. - Corpus Christi, 1989, no writ) Hanson v. Republic Ins. Co., 5 S.W.3d 324 (Tex. App. - Houston [1 st dist.] 1999, pet. denied) Hermann Hosp. v. National Standard Ins. Co. 776 S.W.2d 249, 252 (Tex.App. Hous. [1 Dist.],1989, writ denied)... 5 Hernandez v. Allstate County Mut. Ins. Co., Not Reported in S.W.3d, 2010 WL (Tex.App.-San Antonio, 2010) Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) Higgins v. Standard Lloyds, 149 S.W.2d 143 (Tex. App. Galveston 1941, writ dism d) Home Indemnity Co. v. Tyler, 522 S.W.2d 594 (Tex. App. - Houston [14 th dist.] 1975, writ ref d n.r.e.)

26 Hornbuckle v. State Farm Lloyds, 385 F.3d 538 (5 th Cir.,2004)... 6 Jankowiak v. Allstate, 201 S.W.3d 200 (Tex. App. - Houston [14 th dist] 2006, no pet.) Laine v. Farmers Ins. Exchange, 325 S.W.3d 661, 666 (Tex. App. Houston [1 st Dist] 2010, rev. denied) Latham v. Mountain States Mutual Cas. Co., 482 S.W.2d 655 (Tex. App. - Hous. [1 st dist.] 1972, writ ref d n.r.e.) Launius v. Allstate Ins. Co. Not Reported in F.Supp.2d, 2007 WL (N.D.Tex.,2007)... 6 Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex.,1998)... 6 Liberty Mutual Insurance Co. v. Cruz, 883 S.W.2d 164 (Tex. 1993)... 2 Love of God Holiness Temple Church v. Union Standard Ins. Co., 860 S.W.2d 179 (Tex. App. - Texarkana 1993, writ denied)... 1 Lyons v. Millers Cas. Ins. Co., 866 S.W.2d 597, 601 (Tex.1993)... 5 Maccabees Mut. Life Ins. Co. v. McNiel, 836 S.W.2d 229 (Tex.App. Dallas,1992)... 5 McDonald v. Southern County Mutual Ins. Co., 176 S.W.3d 464 (Tex. App. Houston [1 st Dist.] 2004, no pet.) McMillin v. State Farm Lloyds, 180 S.W.3d 183, 208 (Tex.App. Austin, 2005, rev. denied)... 7 Melencon v. State Farm Mut. Auto Ins. Co., 343 S.W.3d 567, 570 (Tex. App. Houston [14 th dist.] 2011, no pet.) Mid-Century Ins. Co. of Texas v. Daniel, 223 S.W.3d 586 (Tex. App. Amarillo 2007, pet. denied) Mid-Century Insurance Company of Texas v. Kidd, 997 S.W.2d 265 (Tex. 1999)... 8, 10 Miller v. Windsor Insurance Co., 923 S.W.2d 91 (Tex. App. - Fort Worth, 1996, writ denied) Mondragon v. Austin, 954 S.W.2d 191 (Tex. App. - Austin 1997, pet. denied) Monroe v. Government Employees Ins. Co., 845 S.W.2d 394 (Tex. App. - Houston, 1 st Dist., 1993, writ denied) Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.1990)... 6 National Union v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991)... 3 Nationwide Ins. Co. v. Elchehimi, 249 S.W. 3d. 430 (Tex., 2008) Nutt v. Members Ins. Co., 474 S.W.2d 575 (Tex. App.- Dallas 1971, writ ref d n.r.e.)... 2 Ohio Casualty Group v. Risinger, 960 S.W.2d 708 (Tex. App. - Tyler, 1997, writ denied)... 2 Old American Mutual Fire Ins. Co. v. Sanchez, 149 S.W.3d 111 (Tex. 2004)... 9, 14 Olivas v. State Farm Mutual Automobile Ins. Co., 850 S.W.2d 564 (Tex. App. - El Paso, 1993, writ denied) Owen v. Employers Mutual Casualty Co., 2008 W.L (N.D. Tex. March 28, 2008) PAJ v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008)... 2, 7 Prodigy Communications Corp. v. Agricultural Excess & Surplus Ins. Co.,288 S.W.3d 374 (Tex.2009)... 7 Progressive County Mutual v. Kelley, 284 S.W.3d 805 (Tex. 2009)... 2 Provident American Ins. Co. v. Castandeda, 988 S.W.2d 189 (Tex. 1998)... 6 Ramsay v. Maryland American General Ins. Co., 533 W.W.2d 344 (Tex. 1976)... 3 Rangel v. Progressive County Mut. Ins. Co., 333 S.W.3d 265 (Tex.App. El Paso,2010, pet.denied)... 6 Rocor International Inc. v. National Union Fire Ins. Co., 77 S.W.3d 253 (Tex. 2002)... 6 Rosales v. State Farm Mutual Auto. Ins. Co Rosales v. State Farm Mutual Auto. Ins. Co., 835 S.W.2d 804 (Tex. App. - Austin 1992, writ denied)... 11, 14 Schober v. State Farm Mutual Automobile Ins. Co., 2007 W.L (N.D. Texas, July 18, 2007) Simpson v. GEICO Gen. Ins. Co., 907 S.W.2d 942 (Tex. App. -- Houston [1 st Dist.] 1995, no writ) Slocum v. United Pac. Ins. Co., 577 S.W.2d 805 (Tex. App. -Houston [14 th dist.] 1979, appeal after remand, 615 S.W.2d 807 (Tex. App. - Houston [1 st dist.], 1981) Spicewood Summit Office Condominiums Ass'n, Inc. v. America First Lloyd's Ins. Co. 287 S.W.3d 461 (Tex.App. Austin,2009, pet. denied)... 5 State Farm Fire and Cas. v. Mower, 917 S.W.2d 2, 4 (Tex. 1995) State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799 (Tex., 2007)... 8 State Farm Lloyds Inc. v. Williams, 960 S.W.2d 781 (Tex. App. - Dallas, 1997, review dismissed by agreement)... 3 State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex.1997)... 5 State Farm Mut. Auto. Ins. Co. v. Perkins, 216 S.W.3d 396, (Tex.App.-Eastland,2006, no pet.) State Farm Mutual Auto Ins. v Nickerson, 216 S.W.3d 823 (Tex. 2006)... 10, 15 State Farm Mutual Auto Ins. v Norris, 216 S.W.3d 819 (Tex. 2006)... 10, 15 Stoyer v. State Farm Mutual Automobile Ins. Co., 2009 W.L (N.D. Tex. 2009) Stracener v. United Services Automobile Association, 777 S.W.2d 378 (Tex. 1989)... 10, 11, 13 Struna v. Concord Insurance Services, Inc., 11 S.W.3d 355 (Tex. App.- Houston, 1 st Dist., 2000, no writ)

27 Texas Farmers County Mutual Insurance Company v. Wilkinson, 601 S.W.2d 520 (Tex. App. - Austin 1980, writ ref d n.r.e.)... 2 Texas Farm Bureau Mutual Ins. Co. v. Sturrock, 146 S.W.3d 123 at 134 (Tex. 2004)... 9 Texas Farmers County Mutual Ins. Co. v. Wilkinson, 601 S.W.2d 550 (Tex. App. - Austin, 1980, writ ref d n.r.e.)... 3 Texas Farmers Ins. Co. v. Cameron, 24 S.W.3d 386, 400 (Tex.App. Dallas,2000, rev. denied)... 8 Texas Farmers Ins. Co. v. Deville, 988 S.W.2d 331 (Tex. App. - Houston [1 st Dist.] 1999, no pet.) Texas Farmers Ins. Co. v. McGuire, 744 S.W.2d 601 (Tex. 1988)... 3 Texas Farmers Insurance Co. v. Fruge, 13 S.W.3d 509 (Tex. App. - Beaumont, 2000, rev. denied) Tivoli Corp. v. Jewelers Mut. Ins. Co., 932 S.W.2d 704, 712 (Tex.App.-San Antonio 1996, writ denied)... 5 Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 33 (Tex. 1994) Transportation Insurance Company v. Moriel, 879 S.W.2d 10, (Tex.1994)... 5 Travelers Indemnity Co. of Rhode Island v. Lucas, 678 S.W (Tex. App. - Texarkana 1984, no writ)... 9 Traylor v. Cascade Ins. Co., 828 S.W.2d 292 (Tex. App. - Dallas 1992, no writ) Ulico Casualty Co. v. Allied Pilots Ass., 262 S.W.3d 773(Tex 2008)... 3 Unigard Sec. Ins. Co. v. Shaefer, 572 S.W.2d 303 (Tex. 1978)... 9 United States Automobile Association v. DiCarlo, 670 S.W.2d 756 (Tex. App. -El Paso 1984, writ ref d n.r.e.)... 9 Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 55 (Tex.,1997)... 4, 7 Upshaw v. Trinity Companies, 842 S.W.2d 631 (Tex. 1992) Vail v. Texas Farm Bureau Mutual Ins. Co., 754 S.W.2d 129, 136 (Tex. 1988)... 6 Valentine v. Safeco Lloyds Ins. Co., 928 S.W.2d 639 (Tex. App. - Houston [1 st Dist] 1996, writ den d) Vanderlinden v. United States Automobile Association, 885 S.W.2d 239 (Tex. App. - Texarkana 1994, writ denied) Venture Encoding Services, Inc. v. Atlantic Mutual Insurance Co., 107 S.W.3d 729 (Tex. App. - Fort Worth, 2003, pet. denied). 4 Verhoev v. Progressive County Mut. Ins. Co., 300 S.W.3d 803 (Tex.App. Fort Worth,2009, no pet.) Webb v. International Trucking Co., Inc. 909 S.W.2d 220, 230 (Tex.App. San Antonio,1995, no writ history)... 5 Webb v. International Trucking Co., Inc., 909 S.W.2d 220 (Tex. App. - San Antonio 1995, no writ) Weir v. Twin City Fire Ins. Co., 622 F. Supp. 2d 483 (S.D. Tex. March 31, 2009) Wheelways Ins. Co. v. Hodges, 872 S.W.2d 776, 784 (Tex. App. Texarkana 1994, no writ hist.) Williams v. Allstate Ins. Co., 849 S.W.2d 859 (Tex. App. - Beaumont 1993, no writ) Yorkshire Ins. Co., Ltd. v. Seger, 279 S.W.3d 755 (Tex.App. Amarillo,2007, rev. denied) STATUTES Tex. Civ. Prac. & Rem. Code (a)(2)... 7 Tex. Civ. Prac. & Rem. Code Tex. Civ. Prac. & Rem. Code Tex. Ins. Code Tex. Ins. Code (a) Tex. Ins. Code Tex. Ins. Code TEX. INS. CODE Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code (2)... 6 Tex. Ins. Code Tex. Ins. Code (a)(2)(A)... 4, 7 Tex. Ins. Code (b)... 5 Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code

28 Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code (4)... 7 Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Chapter Tex. Occ. Code (b) Texas Ins. Code Chapter RULES Tex. R. Civ. Proc. 94 Affirmative Defenses

29 I. Ins. Code , , II. Ins. Code III. Sample Demand letter IV. Sample petition V. Sample interrogatories VI. Sample request for production APPENDIX 23

30 APPENDIX I Texas Insurance Code Title 5. Protection of Consumer Interests Subtitle C. Deceptive, Unfair, and Prohibited Practices Chapter 541. Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Subchapter B. Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined Unfair Settlement Practices (a) It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to engage in the following unfair settlement practices with respect to a claim by an insured or beneficiary: (1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue; (2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of: (A) a claim with respect to which the insurer's liability has become reasonably clear; or (B) a claim under one portion of a policy with respect to which the insurer's liability has become reasonably clear to influence the claimant to settle another claim under another portion of the coverage unless payment under one portion of the coverage constitutes evidence of liability under another portion; (3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer's denial of a claim or offer of a compromise settlement of a claim; (4) failing within a reasonable time to: (A) affirm or deny coverage of a claim to a policyholder; or (B) submit a reservation of rights to a policyholder; (5) refusing, failing, or unreasonably delaying a settlement offer under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as may be specifically provided in the policy; (6) undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim; (7) refusing to pay a claim without conducting a reasonable investigation with respect to the claim; (8) with respect to a Texas personal automobile insurance policy, delaying or refusing settlement of a claim solely because there is other insurance of a different kind available to satisfy all or part of the loss forming the basis of that claim; or (9) requiring a claimant as a condition of settling a claim to produce the claimant's federal income tax returns for examination or investigation by the person unless: (A) a court orders the claimant to produce those tax returns; (B) the claim involves a fire loss; or (C) the claim involves lost profits or income. (b) Subsection (a) does not provide a cause of action to a third party asserting one or more claims against an insured covered under a liability insurance policy Private Action for Damages Authorized A person who sustains actual damages may bring an action against another person for those damages caused by the other person engaging in an act or practice: (1) defined by Subchapter B to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance; or (2) specifically enumerated in Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice if the person bringing the action shows that the person relied on the act or practice to the person's detriment. 24

31 Private Action for Damages Authorized A person who sustains actual damages may bring an action against another person for those damages caused by the other person engaging in an act or practice: (1) defined by Subchapter B to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance; or (2) specifically enumerated in Section 17.46(b), Business & Commerce Code, as an unlawful deceptive trade practice if the person bringing the action shows that the person relied on the act or practice to the person's detriment Damages, Attorney's Fees, and Other Relief (a) A plaintiff who prevails in an action under this subchapter may obtain: (1) the amount of actual damages, plus court costs and reasonable and necessary attorney's fees; (2) an order enjoining the act or failure to act complained of; or (3) any other relief the court determines is proper. (b) Except as provided by Subsection (c), on a finding by the trier of fact that the defendant knowingly committed the act complained of, the trier of fact may award an amount not to exceed three times the amount of actual damages. (c) Subsection (b) does not apply to an action under this subchapter brought against the Texas Windstorm Insurance Association Frivolous Action A court shall award to the defendant court costs and reasonable and necessary attorney's fees if the court finds that an action under this subchapter is groundless and brought in bad faith or brought for the purpose of harassment Prior Notice of Action (a) A person seeking damages in an action against another person under this subchapter must provide written notice to the other person not later than the 61st day before the date the action is filed. (b) The notice must advise the other person of: (1) the specific complaint; and (2) the amount of actual damages and expenses, including attorney's fees reasonably incurred in asserting the claim against the other person. (c) The notice is not required if giving notice is impracticable because the action: (1) must be filed to prevent the statute of limitations from expiring; or (2) is asserted as a counterclaim Abatement (a) A person against whom an action under this subchapter is pending who does not receive the notice as required by Section may file a plea in abatement not later than the 30th day after the date the person files an original answer in the court in which the action is pending. (b) The court shall abate the action if, after a hearing, the court finds that the person is entitled to an abatement because the claimant did not provide the notice as required by Section (c) An action is automatically abated without a court order beginning on the 11th day after the date a plea in abatement is filed if the plea: (1) is verified and alleges that the person against whom the action is pending did not receive the notice as required by 25

32 Section ; and filed. (2) is not controverted by an affidavit filed by the claimant before the 11th day after the date the plea in abatement is (d) An abatement under this section continues until the 60th day after the date notice is provided in compliance with Section (e) This section does not apply if Section (c) applies Settlement Offer (a) A person who receives notice provided under Section may make a settlement offer during a period be-ginning on the date notice under Section is received and ending on the 60th day after that date. (b) In addition to the period described by Subsection (a), the person may make a settlement offer during a period: (1) if mediation is not conducted under Section , beginning on the date an original answer is filed in the action and ending on the 90th day after that date; or (2) if mediation is conducted under Section , beginning on the day after the date the mediation ends and ending on the 20th day after that date Contents of Settlement Offer A settlement offer made by a person against whom a claim under this subchapter is pending must include an offer to pay the following amounts, separately stated: (1) an amount of money or other consideration, reduced to its cash value, as settlement of the claim for damages; and (2) an amount of money to compensate the claimant for the claimant's reasonable and necessary attorney's fees incurred as of the date of the offer Rejection of Settlement Offer (a) A settlement offer is rejected unless both parts of the offer required under Section are accepted by the claimant not later than the 30th day after the date the offer is made. (b) A settlement offer made by a person against whom a claim under this subchapter is pending that complies with this subchapter and is rejected by the claimant may be filed with the court accompanied by an affidavit certifying the offer's rejection Limit on Recovery after Settlement Offer (a) If the court finds that the amount stated in the settlement offer for damages under Section (1) is the same as, substantially the same as, or more than the amount of damages found by the trier of fact, the claimant may not recover as damages any amount in excess of the lesser of: (1) the amount of damages stated in the offer; or (2) the amount of damages found by the trier of fact. (b) If the court makes the finding described by Subsection (a), the court shall determine reasonable and necessary attorney's fees to compensate the claimant for attorney's fees incurred before the date and time the rejected settlement offer was made. If the court finds that the amount stated in the offer for attorney's fees under Section (2) is the same as, substantially the same as, or more than the amount of reasonable and necessary attorney's fees incurred by the claimant as of the date of the offer, the claimant may not recover any amount of attorney's fees in excess of the amount of fees stated in the offer. (c) This section does not apply if the court finds that the offering party: (1) could not perform the offer at the time the offer was made; or (2) substantially misrepresented the cash value of the offer. (d) The court shall award: 26

33 (1) damages as required by Section if Subsection (a) does not apply; and (2) attorney's fees as required by Section if Subsection (b) does not apply Effect of Settlement Offer A settlement offer is not an admission of engaging in an act or practice defined by Subchapter B to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance Mediation (a) A party may, not later than the 90th day after the date a pleading seeking relief under this subchapter is served, file a motion to compel mediation of the dispute in the manner provided by this section. (b) The court shall, not later than the 30th day after the date a motion under this section is filed, sign an order setting the time and place of the mediation. (c) The court shall appoint a mediator if the parties do not agree on a mediator. (d) The mediation must be held not later than the 30th day after the date the order is signed, unless: (1) the parties agree otherwise; or (2) the court determines that additional time not to exceed 30 days is warranted. (e) Each party who has appeared in the action, except as agreed to by all parties who have appeared, shall: (1) participate in the mediation; and (2) except as provided by Subsection (f), share the mediation fee. (f) A party may not compel mediation under this section if the amount of actual damages claimed is less than $15,000 unless the party seeking to compel mediation agrees to pay the costs of the mediation. (g) Except as provided by this section, the following apply to the appointment of a mediator and the mediation process provided by this section: (1) Section , Civil Practice and Remedies Code; and (2) Subchapters C and D, Chapter 154, Civil Practice and Remedies Code Limitations Period (a) A person must bring an action under this chapter before the second anniversary of the following: (1) the date the unfair method of competition or unfair or deceptive act or practice occurred; or (2) the date the person discovered or, by the exercise of reasonable diligence, should have discovered that the unfair method of competition or unfair or deceptive act or practice occurred. (b) The limitations period provided by Subsection (a) may be extended for 180 days if the person bringing the action proves that the person's failure to bring the action within that period was caused by the defendant's engaging in conduct solely calculated to induce the person to refrain from or postpone bringing the action. 27

34 APPENDIX II Texas Insurance Code Title 5. Protection of Consumer Interests Subtitle C. Deceptive, Unfair, and Prohibited Practices Chapter 542 Processing and Settlement of Claims Subchapter B.Prompt Payment of Claims In this subchapter: Definitions (1) Business day means a day other than a Saturday, Sunday, or holiday recognized by this state. (2) Claim means a first-party claim that: (A) is made by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract; and (B) must be paid by the insurer directly to the insured or beneficiary. (3) Claimant means a person making a claim. (4) Notice of claim means any written notification provided by a claimant to an insurer that reasonably apprises the insurer of the facts relating to the claim Applicability of subchapter This subchapter applies to any insurer authorized to engage in business as an insurance company or to provide insurance in this state, including: (1) a stock life, health, or accident insurance company; (2) a mutual life, health, or accident insurance company; (3) a stock fire or casualty insurance company; (4) a mutual fire or casualty insurance company; (5) a Mexican casualty insurance company; (6) a Lloyd's plan; (7) a reciprocal or interinsurance exchange; (8) a fraternal benefit society; (9) a stipulated premium company; (10) a nonprofit legal services corporation; (11) a statewide mutual assessment company; (12) a local mutual aid association; (13) a local mutual burial association; (14) an association exempt under Section ; (15) a nonprofit hospital, medical, or dental service corporation, including a corporation subject to Chapter 842; (16) a county mutual insurance company; 28

35 (17) a farm mutual insurance company; (18) a risk retention group; (19) a purchasing group; (20) an eligible surplus lines insurer; and (21) except as provided by Section (b), a guaranty association operating under Chapter 462 or Exception (a) This subchapter does not apply to: (1) workers' compensation insurance; (2) mortgage guaranty insurance; (3) title insurance; (4) fidelity, surety, or guaranty bonds; (5) marine insurance as defined by Section ; or (6) a guaranty association created and operating under Chapter (b) A guaranty association operating under Chapter 462 or 463 is not subject to the damage provisions of Section (c) This subchapter does not apply to a health maintenance organization except as provided by Section (c). (d) This subchapter does not apply to a claim governed by Subchapter C, Chapter Liberal Construction This subchapter shall be liberally construed to promote the prompt payment of insurance claims Receipt of Notice of Claim (a) Not later than the 15th day or, if the insurer is an eligible surplus lines insurer, the 30th business day after the date an insurer receives notice of a claim, the insurer shall: (1) acknowledge receipt of the claim; (2) commence any investigation of the claim; and (3) request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant. (b) An insurer may make additional requests for information if during the investigation of the claim the additional requests are necessary. (c) If the acknowledgment of receipt of a claim is not made in writing, the insurer shall make a record of the date, manner, and content of the acknowledgment Notice of Acceptance or Rejection of Claim (a) Except as provided by Subsection (b) or (d), an insurer shall notify a claimant in writing of the acceptance or rejection of a claim not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer to secure final proof of loss. 29

36 (b) If an insurer has a reasonable basis to believe that a loss resulted from arson, the insurer shall notify the claimant in writing of the acceptance or rejection of the claim not later than the 30th day after the date the insurer receives all items, statements, and forms required by the insurer. (c) If the insurer rejects the claim, the notice required by Subsection (a) or (b) must state the reasons for the rejection. (d) If the insurer is unable to accept or reject the claim within the period specified by Subsection (a) or (b), the insurer, within that same period, shall notify the claimant of the reasons that the insurer needs additional time. The insurer shall accept or reject the claim not later than the 45th day after the date the insurer notifies a claimant under this subsection Payment of Claim (a) Except as otherwise provided by this section, if an insurer notifies a claimant under Section that the insurer will pay a claim or part of a claim, the insurer shall pay the claim not later than the fifth business day after the date notice is made. (b) If payment of the claim or part of the claim is conditioned on the performance of an act by the claimant, the insurer shall pay the claim not later than the fifth business day after the date the act is performed. (c) If the insurer is an eligible surplus lines insurer, the insurer shall pay the claim not later than the 20th business day after the notice or the date the act is performed, as applicable Delay in Payment of Claim (a) Except as otherwise provided, if an insurer, after receiving all items, statements, and forms reasonably requested and required under Section , delays payment of the claim for a period exceeding the period specified by other applicable statutes or, if other statutes do not specify a period, for more than 60 days, the insurer shall pay damages and other items as provided by Section (b) Subsection (a) does not apply in a case in which it is found as a result of arbitration or litigation that a claim received by an insurer is invalid and should not be paid by the insurer. (c) A life insurer that receives notice of an adverse, bona fide claim to all or part of the proceeds of the policy before the applicable payment deadline under Subsection (a) shall pay the claim or properly file an interpleader action and tender the benefits into the registry of the court not later than the 90th day after the date the insurer receives all items, statements, and forms reasonably requested and required under Section A life insurer that delays payment of the claim or the filing of an interpleader and tender of policy proceeds for more than 90 days shall pay damages and other items as provided by Section until the claim is paid or an interpleader is properly filed Extension of Deadlines (a) A court may grant a request by a guaranty association for an extension of the periods under this subchapter on a showing of good cause and after reasonable notice to policyholders. (b) In the event of a weather-related catastrophe or major natural disaster, as defined by the commissioner, the claim-handling deadlines imposed under this subchapter are extended for an additional 15 days Liability for Violation of Subchapter (a) If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter, the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney's fees. (b) If a suit is filed, the attorney's fees shall be taxed as part of the costs in the case Remedies Not Exclusive The remedies provided by this subchapter are in addition to any other remedy or procedure provided by law or at common law. 30

37 APPENDIX III LAW OFFICES OF HENRY MOORE 316 West 12 th Street, Suite 318 Austin, TX * Board Certified - Personal Injury Trial Law Texas Board of Legal Specialization HENRY MOORE * PHONE (512) JAYME BOMBEN FAX (512) Date Attorney for Evil Insurance Company Dallas, Texas Re: Plaintiff v. Evil Insurance Company Dear Attorney: I represent Plaintiff in her fire loss claim against Evil Insurance Co. I understand that you represent Evil in this dispute so I am addressing this letter to you in that capacity. If you are not authorized to receive this notice on behalf of Evil, please let me know and I will re-direct this correspondence. Plaintiff is an independent business woman who has successfully built her business over the last 20 years. She has worked hard all of her life, supporting two daughters, serving in the military and completing an impressive education. Unfortunately, on the night of November 29, 2009, Plaintiff s place of business was completely destroyed by fire. At the time, Plaintiff had a commercial general liability policy with Evil which covered the loss of the building, its contents and the interruption of Plaintiff s business. Rather than pay the loss they contracted to cover, Evil instead chose to delay payment, conduct a sham investigation and even institute a lawsuit against Plaintiff in federal court i. Evil has no reasonable basis to deny this claim and never has. Evil s decisions in this claim have almost ruined Plaintiff financially and emotionally. She is a tough woman, but her business loss has been uncompensated and her integrity has been questioned. She has been forced into bankruptcy, questioned by Evil s attorney for hours and been asked to produce voluminous records which have little or nothing to do with this loss. ii Evil has acted with a callous disregard for its own policy holder. 31

38 Evil has acted not only unfairly, but in violation of the policy terms and Texas law. Specifically, Evil has violated the unfair practices provisions of Chapter 541 and 542 of the Texas Insurance Code. These provisions are written into the law to protect people like Plaintiff who must deal with their insurance companies which, but for these protections, have every economic and structural advantage in these disputes. Evil is required by these provisions in the law to fairly evaluate claims and promptly pay them if they owe them. Evil is also required to conduct a reasonable investigation of the claim. The law also requires Evil to act in good faith when dealing with Plaintiff. This Evil has failed utterly to do. iii Evil should immediately pay Plaintiff for the loss of her building. She has provided estimates to Evil of $635, which is well within her policy limit for this loss. Additionally, she has provided proof of content loss in excess of her $500, policy limit. She is still calculating her business interruption loss as well as miscellaneous losses covered under the policy. These claims should be promptly honored as soon as they are presented. Finally, she has been forced to hire an attorney, not only to pursue her claim against Evil, but to defend herself in the federal lawsuit which Evil has filed against her. Reasonable attorney s fees at this point are $3, Unfortunately, I have to charge Plaintiff for my time so the longer this dispute remains unresolved the higher this cost will become. iv My hope is that Evil re-evaluates their decisions in this claim and decides to honor the promises they made in issuing this policy to Plaintiff. My hope is also that Evil decides to treat their insured with the fairness and good faith she is entitled to. v Thank you for your attention. Sincerely, HM:pr Henry Moore [email protected] i Insurance companies will often file a declaratory judgment in action in federal court once they receive a demand letter. To avoid this, file suit first and then send the demand. Federal courts are much more tolerant of this tactic than state courts. ii This is a reference to the EUO iii The code requires only that the specific complaint and the amount of damages be specified. No particular reference to the laundry list is needed. iv Attorney s fees should be part of the demand. If the case goes to a jury later, it will help to see that you were willing to take a much lower fee earlier in the dispute than the one you are asking for in trial. v The tone of this letter is pleading and conciliatory rather than threatening. We always imagine an exhibit sticker on the letter and a jury reading it. We want to make sure the jury knows we did not want the fight and tried to avoid it. 32

39 APPENDIX IV CAUSE NO. PLAINTIFF IN THE DISTRICT COURT V. COUNTY, TEXAS EVIL INSURANCE COMPANY And ADJUSTER JUDICIAL DISTRICT TO THE HONORABLE JUDGE OF SAID COURT: PLAINTIFF S ORIGINAL PETITION Comes now Plaintiff, complaining of Evil Insurance Company and Adjuster, defendants herein. For cause of action, plaintiff would show as follows: 1) Plaintiff is an individual residing in County, Texas and may be served with notice through the undersigned attorney. For discovery purposes, this is a Level II case, but it is anticipated that it will become a Level III case. 2) Defendant Evil Insurance Company (Evil) is a domestic insurance carrier authorized to conduct the business of insurance in Texas and may be served through its attorney for service,. 3) Defendant Adjuster is an individual residing in County, Texas and may be served with process at. Jurisdiction 4) The State district court has exclusive jurisdiction of this case in that the amount in controversy exceeds the minimum jurisdictional amount of this court, the claim involves only matters of State law, and the plaintiff and one of the defendants are residents of Texas. Plaintiff s Original Petition Page 1 33

40 Venue 5) Venue is proper in County in that the insured loss on which this case is based occurred in County. Facts 6) Plaintiff purchased from Evil a General Commercial Liability policy for her business located in County, Texas known as Acme Products. Plaintiff operated this business at, Texas as a sole proprietor. As part of her coverage with Evil, plaintiff s building and contents were insured against fire loss. In addition, the policy provided coverage for business interruption and various collateral expenses in the case of fire damage. 7) On or about November 29, 2009, Plaintiff s business premise was destroyed by fire. Plaintiff made a claim under her policy for this loss and was met with denial, unreasonable delays, and unreasonable demands for information and documents by all of the defendants in this lawsuit. In particular, defendant Adjuster, acting as an investigator and agent for defendant Evil, rather than simply gathering facts to evaluate plaintiff s claim, set about to unfairly justify Evil s denial of the claim. This unfair process culminated in Evil, with the help of Adjuster, filing a declaratory judgment lawsuit in federal court against plaintiff, forcing plaintiff to hire an attorney to defend herself. Breach of Contract 8) Defendant Evil breached its contract with plaintiff in that plaintiff paid her premiums to Evil, and fully complied with all conditions precedent under the policy, yet Evil failed to Plaintiff s Original Petition Page 2 34

41 comply with its obligations under the contract by honoring plaintiff s claim. Plaintiff has suffered damages as a result of this breach. Insurance Code Violations 9) Defendant Evil violated Tex. Ins. Code in that it failed to attempt in good faith to effect a prompt, fair and equitable settlement of plaintiff s claim after its liability for this claim became reasonably clear. Further, Evil compelled litigation of this claim by not only its refusal to reasonably honor the claim, but by initiating the federal litigation on its own accord. 10) Defendant Evil also violated Tex. Ins. Code in that it delayed payment of this claim for longer than the law allows. Evil also attempted to justify its delay by making numerous unrelated and unreasonable requests for information and documents from plaintiff. 11) Defendant Adjuster also violated Tex. Ins. Code in that he refused to pay a claim without conducting a reasonable investigation. In fact, the heart of Evil s malfeasance towards plaintiff was this unfair investigation. Adjuster, rather than investigating plaintiff s claim in an even handed manner, set about to fish for information that might justify denial of her claim. This defendant first told plaintiff that the fire which destroyed her business was intentionally set, although there was scant evidence on which to base that accusation. Adjuster then, through Evil s counsel, demanded that plaintiff produce her tax returns, bank statements, credit card statements, and appear for an examination under oath. Plaintiff produced all of the requested documents which she had access to and appeared for an examination under Plaintiff s Original Petition Page 3 35

42 oath. Adjuster then sat through this examination while Evil s attorney questioned plaintiff for over three hours on such matters as her boyfriends, past relationships, children and other matters unrelated to this loss. In addition, defendant Adjuster obtained plaintiff s credit report, criminal history, and questioned neighbors, friends and acquaintances about plaintiff. After all of this, Adjuster, again acting through Evil s attorney, demanded that plaintiff produce: - Her 2009 employment records for all employees of her business - A copy of her credit report credit card statements for Bank statements for all other credit cards active on the date of loss - March, October, and November bank statements - Divorce decree from her ex husband - Estimates and invoices from a cleaning service - Bank records from a Hong Kong bank account and 2009 tax returns - A copy of $15,000 returned check given to plaintiff by her sister s ex-husband - Copies of visas for trips plaintiff made to China in A copy of plaintiff s passport - A detailed list of plaintiff s merchandise providers - AT&T phone records showing the content of text messages sent and received on the date of loss - AT&T mobile phone bills for November 2009 Plaintiff s Original Petition Page 4 36

43 - ADT security records for plaintiff s daughter s residence for November and December Plaintiff s computer that was destroyed in the fire - Documentation of all of plaintiff s personal and business losses in the last five years 12) The investigation described above was and is unreasonable under the circumstances. While plaintiff acknowledges that defendants have a right to conduct a reasonable investigation, there is now no credible evidence that plaintiff in any way instigated or has any knowledge of the origin of her fire loss which is the subject of this lawsuit. Yet, defendants through their unfair and unreasonable investigative process continue to deny and/or delay the payment of plaintiff s claim. Damages 13) Under the terms of plaintiff s insurance policy, she is entitled to the loss of her building which is estimated at over $600, She is also entitled to the loss of her business contents, which exceed the policy limit of $500, Plaintiff bought and paid for business interruption coverage as well as miscellaneous coverage for clean up and related business losses. She is entitled to payment on these collateral claims. 14) Further, because of defendants Insurance Code violations, plaintiff has suffered emotional harm, likely bankruptcy and substantial harm to her business and personal relationships. Her damages are ongoing. 15) Plaintiff is entitled to statutory damages and attorney s fees as provided for in Tex. Ins. Code Plaintiff s Original Petition Page 5 37

44 Prayer Wherefore, Plaintiff prays that defendants be cited to appear and answer herein, and that upon final hearing, she be awarded her just damages, attorneys fees, statutory penalties, interest and such other relief as she may show herself entitled. Respectfully submitted, Law Offices of Henry Moore By: Henry Moore Texas State Bar No Jayme Bomben Texas State Bar No W. 12 th St., Suite 318 Austin, Texas (512) Telephone (512) Fax ATTORNEY FOR PLAINTIFF Plaintiff s Original Petition Page 6 38

45 APPENDIX V CAUSE NO. PLAINTIFF IN THE DISTRICT COURT V. COUNTY, TEXAS EVIL INSURANCE COMPANY And ADJUSTER th JUDICIAL DISTRICT PLAINTIFF S INTERROGATORIES TO DEFENDANT EVIL INSURANCE COMPANY To: Defendant, Evil Insurance Company, by and through their attorney of record, Plaintiff serves these interrogatories on Defendant Evil Insurance Company, as allowed by Texas Rule of Civil Procedure 197. Defendant Evil Insurance Company must answer each interrogatory separately, fully, in writing, and under oath, within 30 days after service. A. Instructions For any requested information about a document that no longer exists or cannot be located, identify the document, state how and when it passed out of existence or when it could no longer be located, and give the reasons for the disappearance. Also, identify each person having knowledge about the disposition or loss, and identify each document evidencing the existence or nonexistence of each document that cannot be located. B. Definitions The following definitions shall have the following meanings, unless the context requires otherwise: 1. Plaintiff or defendant, as well as a party s full or abbreviated name or a pronoun referring to a party, means the party, and when applicable, the party s agents, representatives, officers, directors, employees, partners, corporate agents, subsidiaries, affiliates, or any other person acting in concert with the party or under the party s control, whether directly or indirectly, including any attorney. 2. You or your means Defendant Evil Insurance Company, its successors, predecessors, divisions, subsidiaries, present and former officers, agents, employees, and all other persons acting on behalf of Defendant Evil Insurance Company or its successors, predecessors, divisions, and subsidiaries. 3. Document means all written, typed, or printed matter and all magnetic, electronic, or other records or documentation of any kind or description in your actual possession, custody, or control, including those in the possession, custody, or control of any and all present 39

46 or former directors, officers, employees, consultants, accountants, attorneys, or other agents, whether or not prepared by you, that constitute or contain matters relevant to the subject matter of the action. Document includes, but is not limited to, the following: letters, reports, charts, diagrams, correspondence, telegrams, memoranda, notes, records, minutes, contracts, agreements, records or notations of telephone or personal conversations or conferences, interoffice communications, , microfilm, bulletins, circulars, pamphlets, photographs, faxes, invoices, tape recordings, computer printouts, drafts, résumés, logs, and worksheets. 4. Electronic or magnetic data means electronic information that is stored in a medium from which it can be retrieved and examined. The term refers to the original (or identical duplicate when the original is not available) and any other copies of the data that may have attached comments, notes, marks, or highlighting of any kind. Electronic or magnetic data includes, but is not limited to, the following: computer programs; operating systems; computer activity logs; programming notes or instructions; receipts, messages, or transmissions; output resulting from the use of any software program, including word-processing documents, spreadsheets, database files, charts, graphs, and outlines; metadata; PIF and PDF files; batch files; deleted files; temporary files; Internet- or web-browser-generated information stored in textual, graphical, or audio format, including history files, caches, cookies, and any miscellaneous files or file fragments. Electronic or magnetic data includes any items stored on magnetic, optical, digital, or other electronic-storage media, such as hard drives, floppy disks, CD-ROMs, DVDs, tapes, smart cards, integrated-circuit cards (e.g., SIM cards), removable media (e.g., Zip drives, Jaz cartridges), microfiche, and punched cards. Electronic or magnetic data also includes the file, folder, tabs, containers, and labels attached to or associated with any physical storage device with each original or copy. 5. Possession, custody, or control of an item means that the person either has physical possession of the item or has a right to possession equal or superior to that of the person who has physical possession of the item. 6. Person means any natural person, corporation, firm, association, partnership, joint venture, proprietorship, governmental body, or any other organization, business, or legal entity, and all predecessors or successors in interest. 7. Mobile device means any cellular telephone, satellite telephone, pager, personal digital assistant, handheld computer, electronic rolodex, walkie-talkie, or any combination of these devices. 8. Contract means the insurance agreement that is the subject of this lawsuit. 9. Identify or describe, when referring to a person, means you must state the following: a. The full name. 40

47 b. The present or last known residential address and residential telephone number. c. The present or last known office address and office telephone number. d. The occupation, job title, employer, and employer s address at the time of the event or period referred to in each particular interrogatory. e. In the case of any entity, identify the officer, employee, or agent most closely connected with the subject matter of the interrogatory and the officer who is responsible for supervising that officer or employee. 10. Identify or describe, when referring to a document, means you must state the following: a. The nature of the document (e.g., letter, handwritten note). b. The title or heading that appears on the document. c. The date of the document and the date of each addendum, supplement, or other addition or change. d. The identities of the author, signer of the document, and person on whose behalf or at whose request or direction the document was prepared or delivered. e. The present location of the document and the name, address, position or title, and telephone number of the person or persons having custody of the document. 41

48 Respectfully submitted, LAW OFFICES OF HENRY MOORE Henry Moore Texas State Bar No Jayme Bomben Texas State Bar No W. 12 th St., Suite 318 Austin, Texas (512) Telephone (512) Fax ATTORNEY FOR PLAINTIFF CERTIFICATE OF SERVICE This is to certify that a true and correct copy of the above and foregoing legal instrument has been forwarded, via facsimile, to the office of opposing counsel, this day of, 201_. Henry Moore 42

49 INTERROGATORIES INTERROGATORY 1: Identify each person answering these interrogatories, supplying information, or assisting in any way with the preparation of the answers to these interrogatories. INTERROGATORY 2: Identify every person who is expected to be called to testify at trial, including your experts. See Tex. R. Civ. P (d). INTERROGATORY 3: Identify all discoverable, consulting experts, that is, consulting experts whose work has been reviewed by the testifying expert. See Tex. R. Civ. P (e). For each expert named, provide the following information: a. The expert s name, address, and telephone number. b. The expert s current résumé and bibliography. c. The facts known to the expert that relate to or form the basis of the expert s mental impressions and opinions formed or made in connection with the case, regardless of when and how the factual information was acquired. d. The mental impressions or opinions of the expert formed or made in connection with the case and any methods used to derive them. e. Any bias of the expert. f. Identify all documents and tangible things, including reports, models, or data compilations, that have been provided to, reviewed by, or prepared by or for the expert, so the documents or tangible things may properly be sought by a request for production. INTERROGATORY 4: Identify every person who has impeachment or rebuttal evidence and describe the evidence each person has. If you have enough information to anticipate the use of impeachment or rebuttal evidence or witnesses, you must provide that information. INTERROGATORY 5: Please state the name and present address and the official capacity or title of each and every person who assisted, or with whom you consulted, in answering these interrogatories. INTERROGATORY 6: Please state in detail each and every action taken by you to investigate the claim made the basis of this suit, including identifying all persons contacted and the dates and results of all tests or inspections performed. INTERROGATORY 7: Please identify each person and/or persons employed by you that participated in reviewing the claim made a basis of this suit. For each person, please state their name, address, telephone number, position or title, and whether they are still employed by you. 43

50 INTERROGATORY 8: State the date which you contend you first received notice of the fire that forms a basis of this suit, the manner in which you were notified, and identify any documents that provided such notice. INTERROGATORY 9: Please state the date you first received written notification of the claim that forms a basis of this lawsuit and identify all documents that provided this notice. INTERROGATORY 10: Please state the date you contend you first notified Plaintiff in writing of the acceptance or rejection of the claim and identify all documents which provided this notice. INTERROGATORY 11: If the date listed in your answer to Interrogatory No. 11 was not within fifteen business days from the date listed in your answer to Interrogatory No. 10, please state the reasons you contend you were not able to accept or reject the claim with fifteen business days and identify all documents evidencing such facts. INTERROGATORY 12: If the date listed in your answer to Interrogatory No. 11 was not within fifteen business days from the date listed in your answer to Interrogatory No. 10, state the date, if any, you contend you first notified the Plaintiff of your inability to accept or reject his claim within fifteen business days, the manner in which he was notified, and identify all documents evidencing such facts. INTERROGATORY 13: For the insurance policy that forms a basis of this lawsuit, state: a. The name, principal place of business and telephone number of the insurer; b. The name, address and telephone number of the named insured(s); c. The policy number; d. The effective dates of coverage; e. The types of coverage included (e.g., property damage); f. The amount of coverage; g. The dates of premium payment; and h. The amount of the premium payment on each date INTERROGATORY 14: State the total amount of all payments, if any, you contend were made by you to the Plaintiff as a result of the claim that forms a basis of this suit. INTERROGATORY 15: If you contend that the Plaintiff has failed to comply with any condition precedent to the contract of insurance that forms a basis of this suit, please identify the condition precedent and state the basis for your contention. INTERROGATORY 16: If you contend that the claim in question is excluded from coverage for any reason under the contract of insurance that forms a basis of this suit, please state the basis for this exclusion. 44

51 INTERROGATORY 17: With regard to the insurance claims which form a basis of this suit, state the date you contend you first anticipated that litigation would be commenced against you by Plaintiff and the facts supporting such contention. INTERROGATORY 18: Please detail the evaluation process of each of the Plaintiffs claims, including the name(s), address(es), telephone number(s), employer, job title, and job description of each and every single person that has any dealing with the Plaintiffs claims in this case during the evaluation process. INTERROGATORY 19: Please identify the agent or employee of Defendant with the most knowledge of the analysis and valuation of Plaintiffs claims in this case. INTERROGATORY 20: If you contend Plaintiff s fire loss in this case resulted from arson, please detail the evidence which supports this contention. INTERROGATORY 21: If you contend that Plaintiff had anything to do with starting the fire made the basis of this lawsuit, please detail the evidence which supports this contention. INTERROGATORY 22: Please state in full detail each and every contention or denial of liability on Plaintiffs claims made the basis of this suit. Include in your answer: a. all facts known to you which you contend support or corroborate each such denial; b. the name, business and residence address, and telephone number of each person known to you who claims to have any knowledge relating to each such denial of Plaintiffs claims; and c. the name, business and residence address, and telephone number of the present custodian of any writings in support of each such denial. 45

52 APPENDIX VI CAUSE NO. PLAINTIFF IN THE DISTRICT COURT V. COUNTY, TEXAS EVIL INSURANCE COMPANY And ADJUSTER th JUDICIAL DISTRICT PLAINTIFF S FIRST REQUEST FOR PRODUCTION TO DEFENDANT EVIL INSURANCE COMPANY To: Defendant, Evil Insurance Company, by and through their attorney of record, Plaintiff serves this request for production on Defendant Evil Insurance Company, as allowed by Texas Rule of Civil Procedure 196. Defendant Evil Insurance Company must produce copies of all requested documents (as they are kept in the ordinary course of business or organized and labeled to correspond with categories in each request) contemporaneous with the written responses, not more than 30 days after service, at the office of Henry Moore, 316 W. 12 th Street, Suite 318, Austin, TX A. Instructions 1. Answer each request for documents separately by listing the documents and by describing them as defined below. If documents produced in response to this request are numbered for production, in each response provide both the information that identifies the document and the document s number. 2. For a document that no longer exists or that cannot be located, identify the document, state how and when it passed out of existence or could no longer be located, and the reasons for the disappearance. Also, identify each person having knowledge about the disposition or loss of the document, and identify any other document evidencing the lost document s existence or any facts about the lost document. a. When identifying the document, you must state the following: (1) The nature of the document (e.g., letter, handwritten note). (2) The title or heading that appears on the document. (3) The date of the document and the date of each addendum, supplement, or other addition or change. (4) The identities of the author, signer of the document, and person on whose behalf or at whose request or direction the document was prepared or delivered. b. When identifying the person, you must state the following: (1) The full name. 46

53 (2) The present or last known residential address and residential telephone number. (3) The present or last known office address and office telephone number. (4) The present occupation, job title, employer, and employer s address. B. Definitions The following definitions shall have the following meanings, unless the context requires otherwise: 1. Plaintiff or defendant, as well as a party s full or abbreviated name or a pronoun referring to a party, means the party, and when applicable, the party s agents, representatives, officers, directors, employees, partners, corporate agents, subsidiaries, affiliates, or any other person acting in concert with the party or under the party s control, whether directly or indirectly, including any attorney. 2. You or your means Defendant Evil Insurance Company, its successors, predecessors, divisions, subsidiaries, present and former officers, agents, employees, and all other persons acting on behalf of Defendant Evil Insurance Company or its successors, predecessors, divisions, and subsidiaries. 3. Document means all written, typed, or printed matter and all magnetic, electronic, or other records or documentation of any kind or description in your actual possession, custody, or control, including those in the possession, custody, or control of any and all present or former directors, officers, employees, consultants, accountants, attorneys, or other agents, whether or not prepared by you, that constitute or contain matters relevant to the subject matter of the action. Document includes, but is not limited to, the following: letters, reports, charts, diagrams, correspondence, telegrams, memoranda, notes, records, minutes, contracts, agreements, records or notations of telephone or personal conversations or conferences, interoffice communications, , microfilm, bulletins, circulars, pamphlets, photographs, faxes, invoices, tape recordings, computer printouts, drafts, résumés, logs, and worksheets. 4. Electronic or magnetic data means electronic information that is stored in a medium from which it can be retrieved and examined. The term refers to the original (or identical duplicate when the original is not available) and any other copies of the data that may have attached comments, notes, marks, or highlighting of any kind. Electronic or magnetic data includes, but is not limited to, the following: computer programs; operating systems; computer activity logs; programming notes or instructions; receipts, messages, or transmissions; output resulting from the use of any software program, including wordprocessing documents, spreadsheets, database files, charts, graphs, and outlines; metadata; PIF and PDF files; batch files; deleted files; temporary files; Internet- or web-browsergenerated information stored in textual, graphical, or audio format, including history files, caches, cookies, and any miscellaneous files or file fragments. Electronic or magnetic data 47

54 includes any items stored on magnetic, optical, digital, or other electronic-storage media, such as hard drives, floppy disks, CD-ROMs, DVDs, tapes, smart cards, integrated-circuit cards (e.g., SIM cards), removable media (e.g., Zip drives, Jaz cartridges), microfiche, and punched cards. Electronic or magnetic data also includes the file, folder, tabs, containers, and labels attached to or associated with any physical storage device with each original or copy. 5. Possession, custody, or control of an item means that the person either has physical possession of the item or has a right to possession equal or superior to that of the person who has physical possession of the item. 6. Person means any natural person, corporation, firm, association, partnership, joint venture, proprietorship, governmental body, or any other organization, business, or legal entity, and all predecessors or successors in interest. 7. Mobile device means any cellular telephone, satellite telephone, pager, personal digital assistant, handheld computer, electronic rolodex, walkie-talkie, or any combination of these devices. Respectfully submitted, LAW OFFICES OF HENRY MOORE CERTIFICATE OF SERVICE Henry Moore Texas State Bar No Jayme Bomben Texas State Bar No W. 12 th St., Suite 318 Austin, Texas (512) Telephone (512) Fax [email protected] [email protected] ATTORNEY FOR PLAINTIFF This is to certify that a true and correct copy of the above and foregoing legal instrument has been forwarded, via certified mail, return receipt requested, to the office of opposing counsel, this day of February, Henry Moore 48

55 DOCUMENTS TO BE PRODUCED 1. All recordings, record transcripts, and written statements made by the Plaintiff in the possession, constructive possession, custody or control of the Defendant, Defendant s attorney, or anyone acting on Defendant s behalf. 2. All oral statements made by the Plaintiffs which were either recorded or taped on an electronic device or recorder which are in the possession, constructive possession, custody or control of the Defendant, Defendant s attorney, or anyone acting on Defendant s behalf. 3. All written statements made by any participants and/or witnesses to the transactions and occurrences which form the basis for this suit that are in the possession, constructive possession, custody or control of the Defendant, Defendant's attorney, or anyone acting on Defendant's behalf. 4. All oral, taped, or recorded statements made by any participants and/or witnesses to the transactions and occurrences which form the basis of Plaintiff s lawsuit which are in the possession, constructive possession, custody or control of the Defendant, Defendant s attorney, or anyone acting on Defendant s behalf. 5. A full and complete copy of the policy or policies of insurance providing potential coverage to the Plaintiff for the claim made the basis of this action. 6. All written reports of document review, inspection, tests, writings, drawings, graphs, charts, recordings or opinions of (1) any expert who will or may be called by the Defendant as a witness during the trial of Defendant's case; (2) who has been used for consultation and whose work product forms a basis either in whole or in part of the opinions of an expert who is to be called as a witness. (If the discoverable factual materials has not been received or reduced to a tangible form, request is hereby made that the Defendant advise the Plaintiff accordingly and reduce such material to a tangible form). 7. A curriculum vitae or resume, written report, bibliography, fee agreement and list of cases each expert has testified in over the past ten years, whether live or by deposition, for any individual whom you may call as an expert witness in the trial of this matter. 8. Any and all non-privileged investigation documentation, reports and/or memoranda made by or submitted to Defendant, as a result of the claims asserted by Plaintiff which have been made the basis of Plaintiff s lawsuit (whether written, electronic, or otherwise). If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 9. Copies of any and all relevant documents, reports, and/or memorandum in Defendant's possession which have resulted from the transactions and occurrences made the 49

56 basis of Plaintiff s lawsuit. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 10. Copies of all contracts and agreements between Defendant and Plaintiffs. 11. Copies of all correspondence and written communications by and between Defendant and/or any employee, agent, or independent contractor of Defendant and Plaintiffs. 12. Copies of any and all manuals, instructions (whether written, electronic, or otherwise), and documents providing guidance for all computer program(s) utilized by Defendant to evaluate Plaintiff s claim(s). If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 13. Copies of any and all communications (whether written, electronic, or otherwise) by and between Defendant and any person, company, or entity Defendant has had evaluate the financial records of Plaintiff stemming from the claims asserted by Plaintiff in this cause. This request encompasses all communications, whether via letter, memo, facsimile, , or any other communication of any kind. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 14. A full and complete copy of Plaintiff s claims files with Defendant. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 15. Copies of the results of any and all computer analysis (whether written, electronic, or otherwise) of Plaintiff s claims in this cause, as well as all documents and communications (whether written, electronic, or otherwise) disseminated by and/or between agents and/or employees of Defendant regarding such results. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 16. Copies of the job descriptions of all persons that have evaluated and/or assisted in the evaluation of Plaintiff s claims in this cause. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 17. Copies of all documents that Defendant contends support denial of Plaintiff s claims and/or tender of less than policy limits for Plaintiff s claims. 50

57 18. Copies of all documents that detail the steps of the claims process. 19. Copies of the employment files for all employees of Defendant who are listed as persons with knowledge in response to Plaintiff s request for disclosure, as well as the person with the most knowledge of Plaintiff s account and the handling of same in this case. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 20. Copies of all manuals, videotapes, computer based learning modules, pamphlets, packets, memoranda, s, and any and all other documents and/or media that detail the training and/or education provided to Defendant s employees regarding evaluation of fire claims, use of any computer programs used to assist in evaluating and valuing fire claims, data utilized by computer program(s) in evaluating fire claims, and dissemination of the results of such analysis. 21. Any and all documents described or utilized in responding to Plaintiff s Interrogatories and Request For Disclosure to Defendant. If you contend such documents are privileged, Plaintiff requests a privilege log be prepared which details all such documents so Plaintiff may determine whether privilege applies and seek a judicial determination of privilege. 22. A copy of all correspondence or s between the Defendant and the any public official involving the investigation of the fire loss made the basis of this action. 23. A copy of all correspondence, s and reports between the Defendant and any outside consultants or investigators involving the fire loss made the basis of this action. 24. Documents or other written evidence of any criminal activity in which you allege the Plaintiff participated. 25. Surveillance movies, photographs, video tapes, films or the like of any parties to this suit, property owned by plaintiff, or scene of the fire. 26. Expert reports which are reviewed, in whole or in part, by any such expert you expect to call or may call to testify at the trial of this case. 27. Any agreements for settlement, indemnification, compromise, guarantee, or any other kind of agreement which you have entered into with any party, non-party, as a result of or relating to the fire and subsequent insurance claim made the basis of this lawsuit. 28. Drawings, maps, sketches, charts or diagrams of the location or scene where the fire occurred made the basis of this lawsuit. 29. Formal and informal reports and document prepared by an officer or employee of any 51

58 governmental agency relating to the collision. 30. Copies of documents obtained through any source which relate to previous claims made by Plaintiff. 31. Copies of all documents provided by Plaintiff to Defendant prior to this lawsuit being filed. 52