Auto Insurance Coverage What to look for in your client s policy and the other coverage

Transcription

1 The University of Texas School of Law Presented: 2014 Car Crashes Seminar July 31-August 1, 2014 Austin, Texas AT&T Conference Center Hotel at UT Auto Insurance Coverage What to look for in your client s policy and the other coverage By: Henry Moore Henry Moore Law Offices of Henry Moore 316 W. 12th Street, Suite 318 Austin, TX [email protected]

2 Introduction This paper is a revised version of previous papers presented at this seminar. Since the law is constantly evolving in this area, some of the updates are significant. If you have earlier versions of the paper, it might be best to discard them. The paper is written in outline form and is designed to get the practitioner started on their research when an auto insurance issue arises. It is not an exhaustive list of authority, but a starting point. One important caveat much of the case law that has developed in the last few years has been based on the standard contract. That contract was written by the Texas Department of Insurance, and it is still in wide use, but now there are others. It is more important than ever to read the actual policy in play. Many people have contributed to this effort. My daughter and colleague, Jayme Bomben, has done exhaustive work, both on the original paper and the power point presentations that have accompanied this topic. My long time legal assistant, Peggy Rothenberg, has helped a great deal over time. More recently, Brian Orta has taken over the editing and revisions. I find myself frequently referring to the written works of Mark Ticer, Mark Kincaid, Tom Herald, and Janet Colaneri for reference. Finally, my colleagues from around the State have contributed immeasurably by their questions and comments, especially on the TTLA list serve. I appreciate all of the help.

3 I. General Insurance Law and Terms TABLE OF CONTENTS A. STATUTORY REQUIREMENTS FOR AUTO INSURANCE 1. Transportation Code Insurance Code Legislative Changes... 6 B. AGENCY APPROVAL OF AUTO INSURANCE POLICIES (TEXAS DEPT. OF INSURANCE) 1. The Texas Department of Insurance (State Board of Ins.) can only act consistent with the statutes A policy that is not approved by the Texas Department of Insurance is voidable by the insured until benefits are accepted under the policy Reliance on an opinion from the State Board of Insurance regarding policy interpretation may negate a finding of bad faith or tort damages The policy has to be written in plain English... 7 C. SPECIAL RULES OF CONSTRUCTION FOR AUTO INSURANCE 1. Conditions Precedent to Coverage Coverage Interpretation Exclusions to Coverage Exception to Exclusions II. Content of Texas Auto Policies A. LIABILITY COVERAGE 1. Who is covered? What is covered? Policy Limits First party rights under liability policy Additional third party rights under liability coverage Out of State Policies B. PERSONAL INJURY PROTECTION (PIP) 1. Waiver of PIP Accident triggers obligation to pay PIP PIP limits Benefits payable... 29

4 C. MEDICAL PAYMENTS COVERAGE 1. Med-Pay Benefits Reimbursement/Offset Settlement with Third Party Common fund and attorney s fees D. UNINSURED/UNDERINSURED COVERAGE 1. Vehicles covered by UM Persons covered under UM Accident under the UM policy 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 Trying the UM Case E. PROPERTY DAMAGE 1. Common law damages (third party) First Party property damage claims Insurance Code provisions that apply to both First and Third Party Claims F. COMMERCIAL COVERAGE 1. Basic auto coverage under the commercial policy Trucking coverage III. Miscellaneous Coverage Issues A. MISREPRESENTATION ON THE POLICY APPLICATION 1. Material misrepresentations that effect risk may void policy However, note Chapter 705 of the Texas Insurance Code Misrepresentation must be material to the risk and contribute to the loss.50 B. PRIMARY/EXCESS 1. Vehicle coverage is primary, the driver s is excess A policy that claims to be excess under an other insurance clause may be jointly and severally liable Where both policies claim to be excess they will be held jointly and severally liable 51

5 4. With the variation in policy language, the language of each policy is critical...51 C. CANCELLATION 1. Tex. Ins. Code , et seq., governs cancellation of auto policies Texas Transp. Code prohibits a carrier from cancelling a policy retroactive to an existing claim A carrier may be estopped from cancelling a policy if they continue coverage with full knowledge of grounds to cancel If the coverage is not timely renewed, however, a late payment will not necessarily reinstate the policy back to its expiration date IV. General Practice Tips A. DISCOVERY OF THE POLICY 1. Get the policy from the defendant. You are entitled to it But maybe not all of it B. BALANCING COVERAGE BETWEEN THE VARIOUS TYPES OF INSURANCE 1. Healthcare providers-get them to take the health insurance Property damage If the third party defendant ignores your lawsuit C. INSURANCE COVERAGE AS EVIDENCE 1. Missing wreckage Evidence of insurance certificate Informing jury of insurance status Insurance carrier s attorney (in UM case) cannot hide behind a pro se defendant D. RECOMMENDATIONS TO CLIENTS ON AUTO COVERAGE 1. Shop price through an independent agent We are better off with the standard policy To save money, get high deductibles Buy UM coverage in an amount equal to the liability coverage Buy PIP instead of Med Pay Buy high limits on everything E. THE HUMAN CONDITION 1. Keep your client s expectations in line with reality Try to get along with everyone Try to know the other carrier and adjuster as well as you can... 56

6 V. Appendix... 57

7 TEXAS AUTO POLICIES Insurance is a great concept. It spreads the risk. For a certain price (premium) another accepts the risk of certain losses (coverage), for a certain amount of time (policy period) with certain limits (policy limits). Another way of looking at insurance is as a legal betting scheme. Bet I m going to have a wreck, says the policy holder. Bet you re not, says the insurance company. Of course, in the auto context this wager is required in Texas. It s codified in the Transportation Code, as the Safety Responsibility Act. Problems arise when a great concept is put into practice. Enormous amounts of money are at stake, so fights abound over when and how much of the risk is covered. In the legal context, insurance policies are contracts, and that s the way courts approach them. All of the contract elements apply. Consideration, waiver, breach, ambiguity, parole evidence - all of the terms that we see in other contract disputes, arise in the insurance context. But there are some differences. First, there are some base line statutory requirements that are unique to auto policies. Second, the auto policy is approved by a state agency, the Texas Department of Insurance. Consequently, that agency s interpretations of the provisions are sometimes considered in the dispute. Finally, there are some special rules of construction that apply to all insurance contracts, including auto. Most of this paper discusses the personal auto policy, but some car wrecks are covered by commercial policies. Different rules apply to these policies. The basic commercial general liability (CGL) excludes auto wrecks, but a separate endorsement often adds it back. We have added a section to this paper on commercial coverage. I. General Insurance Law and Terms A. STATUTORY REQUIREMENTS FOR AUTO INSURANCE The Safety Responsibility Act (found in the Transportation Code) and the Texas Insurance Code mandate certain coverage in the auto policy and prohibit some provisions. These statutes form the bedrock of auto coverage in Texas. The Texas Department of Insurance has no authority to act outside the perimeters that the Insurance Code, however it can, and at times seemingly does, ignore the Safety Responsibility Act. The Safety Responsibility Act only governs those policies that certify that they comply with the Act. As a practical matter that is nearly every personal auto policy, but this distinction can be important. When trying to decipher whether a particular policy can get by with certain exclusions, it s important to know how these statutes interplay. This is a brief summary: 1. Tex. Transportation Code (Safety Responsibility Act) Tex. Transp. Code minimum limits $30, after January 1, 2011 $60, for injuries per accident, if more than one person injured, for 1

8 policies written after January 1, $25, property damage per accident for policies written after April 1, Allows deductibles of $250 per person injured or for property damage and $500 per accident under the liability coverage Tex. Transp. Code policy must contain Name and address of the insured; Coverage provided by the policy; Premium charged; Limits of policy; Policy must state that it provides the coverage required by this section and that it is subject to this law; Policy cannot be cancelled after a collision as to that collision; Policy cannot require that the insured first pay the liability damages before the policy pays; The policy, the application for the policy and any riders or endorsements consistent with this law constitute the entire policy. Tex. Transp. Code allowable terms May contain a provision that allows the insurance company to be reimbursed by the insured for payments that are required by this law, but not required by the policy, Allows prorating of insurance provided with other collectable insurance. Tex. Transp. Code prohibited terms Policy may not insure against liability that worker s compensation is designed to cover. Excludes domestic employees from exclusion unless covered, or could be covered, under worker s compensation. Excludes liability for injury to or destruction of, insured s own property 2

9 Tex. Transp. Code permissive users Owner s policy must provide coverage for permissive users in the United States and Canada. Tex. Transp. Code additional coverage 2. Tex. Insurance Code Excess coverage beyond the statutory minimum is not regulated by this act. Tex. Ins. Code policy forms Policy forms for auto insurance are now regulated by Tex. Ins. Code 2301 (which permits insurers to draft their own forms, subject to the approval of the Texas Department of Insurance.) Tex. Ins. Code standard policy The older standard form is still approved. Insurance company must notify TDI that it intends to continue its use. Tex. Ins. Code short term coverage Prohibits the use of policies with less than 30 day coverage to renew driver s licenses or vehicle inspections. Policy must disclose this restriction. Tex. Ins. Code effect of divorce If a spouse is covered under the policy, the policy must continue coverage for that spouse during a period of separation in contemplation of divorce. Tex. Ins. Code drug forfeiture Prohibits coverage for vehicles lost through forfeiture for a drug conviction. Tex. Ins. Code Uninsured Motorist Coverage Re-codification of uninsured motorist coverage Requires uninsured/underinsured motorist coverage on any policy, but allows coverage to be waived. Tex. Ins. Code definition of uninsured Allows the TDI to define uninsured motor vehicle to exclude certain 3

10 vehicles which are, in fact, uninsured. Tex. Ins. Code underinsured Defines underinsured vehicle. Tex. Ins. Code UM limits Requires 1) UM limits may not exceed liability limits, 2) UM coverage cannot cover intentional acts, and 3) if the owner or operator of the vehicle is unknown, then actual contact between the vehicles is required. Tex. Ins. Code UM limits and deductible 1) UM limits, including property damage, must be offered up to the amount of the liability limits 2) specifies a $ deductible for property damage 3) UM limits must at least equal Safety Responsibility limit Tex. Ins. Code defines UM coverage UM coverage must provide payment for all amounts the insured is legally entitled to recover as damages from the uninsured vehicle up to the limits of the policy because of bodily injury or property damage Tex. Ins. Code may stack UM and collision coverage For property damage, insured can elect to claim under his collision coverage or his UM coverage and choose the lesser deductible. May also stack collision and UM property damage coverage and pay only the lesser deductible. Cannot recover more than actual damages. Tex. Ins. Code UM subrogation Grants subrogation rights to the UM carrier against any person or organization legally responsible for the loss, subject to the terms of the policy. Tex. Ins. Code burden of proof, UM Places the burden of proof on the UM carrier if there is a dispute over the insured status of the other vehicle. Tex. Ins. Code UM venue Mandates venue in either the county of the collision or the insured s county 4

11 of residence at the time of the collision. There is room to argue whether this is actually a mandatory venue statute or not. Tex. Ins. Code personal injury protection Defines personal injury protection coverage as providing payment to the named insured, members of the insured s household, and any authorized operator or passenger of the named insured s motor vehicle: (1) arising from an accident, (2) incurred within three years of accident (3) for necessary medical or funeral expenses, as well as income or household services lost. Tex. Ins. Code PIP required unless waived Rejection must be in writing and continues through renewals of the policy Tex. Ins. Code PIP minimum coverage $2500 per person Tex. Ins. Code lost income under PIP Insurer may require medical proof before paying lost income Tex. Ins. Code collateral source irrelevant to PIP Benefits are paid regardless of fault, or other coverage. PIP carrier has no right of subrogation. Tex. Ins. Code payments under PIP Carrier must pay within 30 days of proof of claim. Policy may require original proof of loss within six months of accident and reasonable medical proof of an alleged recurrence of injury if there is a lapse in treatment. Tex. Ins. Code Penalty for failure to pay PIP Provides 12% penalty, attorney s fees, and interest at the legal rate if payments are not made when due. Tex. Ins. Code Exclusions Intentional injuries or those received while committing a felony are not covered 5

12 Tex. Ins. Code Offset against liability claim Provides for an offset in the amount of PIP benefits paid, if a liability claim is made against the driver/operator covered by the policy. (Note case law modifications of this rule) legislative changes: SB 1567 Senator Davis sponsored this bill which is now law. It requires disclosure of junk policy exclusions both in the application and in the SRA proof of insurance card. What, if any, affect this change in the law will have is purely speculative at this point. One concern is that by amending the Transportation Code, it may take away some of the arguments that these policies violate the SRA and are therefore unenforceable. This is the required disclosure language: WARNING: A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED'S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY. B. AGENCY APPROVAL OF AUTO INSURANCE POLICIES (TEXAS DEPT. OF INSURANCE) No personal auto insurance form may be used in this State unless it has been approved by the Texas Department of Insurance. In days gone by, with rare exception, there was only one form. The Insurance Code now allows for carriers to submit their own forms for approval, and many are doing so. The carrier submits the proposed form and the Texas Department of Insurance then has 60 days to approve or disapprove the form. If no action is taken within 60 days, the form is deemed approved. The only baseline is the statutory requirements found in Tex. Ins. Code 1952 and, in most cases, the Safety Responsibility Act. There are now numerous and significant variations within policies - all of which are on file with the Texas Department of Insurance. 1. The Texas Department of Insurance (State Board of Ins.) can only act consistent with the statutes. American Liberty Ins. Co. v. Ranzaus, 481 S.W.2d 793 (Tex. 1972) State Board of Insurance s (now Texas Department of Insurance) regulatory authority does not allow it to act contrary to but only consistent with, and in furtherance of, the expressed statutory purposes. Id. at This is the sentinel case on this issue 2. A policy that is not approved by the Texas Department of Insurance is 6

13 voidable by the insured until benefits are accepted under the policy. Urrutia v. Decker, 992 S.W.2d 440 (Tex. 1999) Policy that is not approved by the State Board of Insurance is voidable, not void, once the insured learns that it is not approved. Insurer may then be unable to enforce particular exclusions in the unapproved policy. But once benefits are accepted under the policy, the policy terms will be enforced against the beneficiary. 3. Reliance on an opinion from the State Board of Insurance regarding policy interpretation may negate a finding of bad faith or tort damages. Emert v. Progressive County Mutual Insurance Co., 882 S.W.2d 32 (Tex.App.-Tyler, 1996, writ den d) Summary judgment case. company on contract claim. However, St. Bd. opinion did not absolve 4. The policy has to be written in plain English. Tex. Ins. Code policy must be in plain English; Commissioner Order The policy has to have a Flesch score of no less than 40. The Flesch scale is determined by a ratio of the number of words in the sentence and the number of syllables in the words. The higher the number, the easier it is to read is comprehensible to an average Fifth Grader. Reader s Digest averages about 65. C. SPECIAL RULES OF CONSTRUCTION FOR AUTO INSURANCE 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 7

14 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, 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 prejudiced as a matter 8

15 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) 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. 9

16 Id. at 945 citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) iii. iv. The determination of whether terms are ambiguous is a question of law. Id. at 945 citing Gaulden, at 564 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, 284 S.W.3d 805 (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 non-coverage, the carrier might be 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 10

17 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. 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. d. Not every policy that covers autos is an auto policy. Taylor v. State Farm Lloyds, Inc.,124 S.W.3d 665 (Tex. App. - Austin 2003, rev. denied) Hired and non-owned endorsement added to a commercial policy was not governed by the same statutes as a personal auto policy and was not required to provide PIP or UM coverage. e. An umbrella policy, even if it is excess for a personal auto policy, is not governed by the same statutes, and does not have to provide UM coverage. Sidelnik v. American States Ins. Co. 914 S.W.2d 689 (Tex. App, - Austin 1996, writ denied). Likewise, a non-owned, hired vehicle provision in a commercial policy has been held to not require UM or PIP coverage. Taylor v. State Farm Lloyds, Inc., 124 S.W.3d

18 (Tex.App. Austin 2003, rev. denied). However, if the policy is a primary policy, then the UM and PIP requirements are likely there, even if it is a commercial policy under the analysis of the above two opinions. See Safeco Lloyds Ins. Co. v. Allstate Ins. Co. 308 S.W.3d 49 (Tex.App. San Antonio 2009, no pet.). 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 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... 12

19 d. Tex. Ins. Code Exception to Exclusions 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. 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. Content of Texas Auto Policies Until recently, most policies in Texas were one standard form that was promulgated by the Texas Department of Insurance. While the standard form is still broadly used, there are now many approved forms, most of which still follow the general outline of the standard form. All of the nonstandard forms must still be approved by the Texas Department of Insurance, but there is a default approval if actual approval is not given within 60 days of submission. Some of the forms are copyrighted and copies of these forms cannot be obtained from TDI. These policies can, however, still be viewed there. There are significant variations among the forms. For example, one of the Safeco policies excludes punitive damages from liability coverage. This same policy though, includes domestic partners as family members. All of the approved forms are subject to the statutory minimums required by the Insurance Code (Tex. Ins. Code 1952), and arguably, the Safety Responsibility Act if the policy certifies compliance with that Act. The lesson here is to always look at the policy. The standard form is divided into parts A (liability), part B1 and 2 (med pay and PIP), part C (uninsured motorist), part D (property damage), part E (duties after loss), and part F (general provisions). Most of the nonstandard forms follow this outline as well. 13

20 A. LIABILITY COVERAGE The liability portion of the policy begins with who and what is covered by the policy. All policies will list a covered vehicle or vehicles, and an insured person or persons. The Safety Responsibility Act is focused on the vehicle. A person may not operate a motor vehicle in this State unless financial responsibility is established for that vehicle. Tex. Transp. Code The Code further requires coverage for permissive users of the vehicle as well as the insured. Tex. Transp. Code Still, Texas courts have allowed insurers to exclude certain, named drivers from liability coverage despite the statutory mandate. In recent times, the Texas Department of Insurance has approved policies that do not come close to complying with the coverage mandated by the Safety Responsibility Act. It remains to be seen what the courts will do with coverage issues on these unique policies. 1. Who is covered? a. Under the standard liability policy the insured is you (which includes your spouse), any family member, and anyone using the covered vehicle with permission. i. Family member is one who resides in the household and is related by blood, marriage or adoption. Read the policy though, because the definition varies with non-standard policies. ii. iii. iv. Temporary absence with intention to return qualifies as family member. Southern Farm Bureau Casualty Ins. Co. v. Kimball, 552 S.W.2d 207 (Tex. App. - Waco 1977, writ ref d n.r.e.) A person, especially a minor, can have more than one residence. Hartford Casualty Ins. Co. v. Phillips, 575 S.W.2d 62 (Tex. App. - Texarkana 1978, no writ) Three factors as relevant in determining residence: 1) living under the same roof, 2) close, intimate and informal relationship, 3) when the intended duration is likely to be substantial. No one element controls, but all must be considered. State Farm Mutual Auto Ins. Co. v. Nguyen, 920 S.W.2d 409 (Tex. App. - Houston [1 st dist.] 1996, no pet.) v. Burden is on the insured to show residency. Arellano v. Maryland Casualty Co. 31 S.W.2d 701 (Tex. App. - El Paso 1958, no writ) vi. If spouse is covered, the policy must provide coverage to the other spouse during a period of separation in contemplation of divorce. (effectively overrules several older Texas cases holding otherwise). Tex. Ins. Code b. The policy may exclude specific drivers from liability coverage. Zamora 14

21 v. Dairyland County Mutual Ins. Co., 930 S.W.2d 739 (Tex. App. - Corpus Christi 1996, writ denied). Named driver exclusions are valid against arguments that Safety Responsibility Act prevents exclusion. Court distinguished National County Mutual Fire Ins. Co. v. Johnson, 879 S.W.2d 1 (Tex. 1993) rationale in approving exclusion. Exclusion extends to negligent entrustment cause of action against named insured if excluded driver was the tortfeasor. Id. Note however that there are some cases that reject excluded driver endorsements as sufficient to reject PIP coverage. Unigard Sec. Ins. Co. v. Shaefer, 572 S.W.2d 303 (Tex. 1978). c. The Safety Responsibility Act does not regulate insurance. Western Alliance Ins. Co. v. Alberez, 380 S.W.2d 710 (Tex. App. Austin 1964, writ ref d n.r.e.) The primary purpose of the Act is the regulation of owners and operators of motor vehicles for the protection of the public, not the regulation of insurance companies. at 715. d. Anyone using the insured vehicle is covered. (Assuming they haven t stolen it). This is a requirement mandated by the Safety Responsibility Act. As noted above, TDI can approve a policy that does not comply with the SRA, but most certify that they do. Also, the TDI policy guidelines include a reference to the SRA. Things are not crystal clear at the moment. Here are the SRA requirements: i. An owner s motor vehicle liability insurance policy must: (1) cover each motor vehicle for which coverage is to be granted under the policy; and (2) pay, on behalf of the named insured or another person who, as insured, uses a covered motor vehicle with the express or implied permission of the named insured, amounts the insured becomes obligated to pay as damages arising out of the ownership, maintenance, or use of the motor vehicle in the United States or Canada, subject to the amounts, excluding interest and costs, and exclusions of Tex. Transp. Code Tex. Transp. Code (Emphasis added). ii. Permissive use is determined from the point of view of the user, not the owner or named insured. If the user reasonably believed they had permission to use the vehicle, they are covered. United States Fire Ins. Co. v. United Service Automobile Assn., 772 S.W.2d

22 (Tex. App. - Dallas 1989, writ denied). In this case the passenger grabbed the wheel of the car and caused a collision. The Court held that if passenger believed she had permission to do so, she was a covered person. iii. iv. Finally, the permissive use provision is written into the standard policy as an exclusion which does not apply to you or any family member while using your covered auto (So if your 16 year old sneaks out of the house, takes the car and has a wreck, he s covered) Under some of the newer policies that certify they comply with SRA yet exclude whole classes of people, or which restrict coverage to only the named insured, it is possible that the carrier may still have to provide coverage to permissive users, then go after their insureds for reimbursement. The Transportation Code seems to contemplate this scenario under Tex. Transp. Code To date, there is no case law on this issue. 2. What is covered? An insured vehicle that is involved in an accident is covered for certain damages. Obviously, the listed vehicles are covered, as well as any temporary substitute vehicles. Vehicles that are owned by the insured or other family members, but not listed, are not covered. Vehicles that are available for the regular use of the insured are not covered. Finally, the insured must have an insurable interest in the vehicle for there to be coverage. a. Insured Vehicle i. Father bought car for minor daughter who did not live with father. Father retained legal title and listed car on insurance policy, but car was considered daughter s. After collision, carrier denied coverage. Court held that paying a premium and listing vehicle on policy met definition of owned automobile. Snyder v. Allstate Insurance Co., 485 S.W.2d 769 (Tex. 1972). ii. iii. Van dropped from policy, then involved in accident while being driven by a listed driver. Court upholds the owned but not listed exclusion from coverage in spite of Safety Responsibility Act. Armendariz v. Progressive County Mutual Insurance Company, 112 S.W.3d 736 (Tex. App. - Houston [14 th Dist.] 2003, no pet.). Insured sold car to another who in turn, sold it to a third person. Third person wrecked car. Car was still listed on insured s policy. No coverage. No relationship between insured and owner. No right of possession or control. Black v. BLC, Ins. Co., 725 S.W2d 286 (Tex. App. - Houston [1 st Dist.] 1986, writ ref d n.r.e.) 16

23 iv. Insured sold car to adult son who left for Mexico, but left car with insured. Car was listed on policy. Carrier had notice of new lien holder, but not change of title. Insured wrecked car, and carrier denied claim based on no ownership. Court found for insured. Listing the car on the policy satisfied Snyder and retaining exclusive possession and control of car satisfied Black. Valdez v. Colonial County Mutual Ins. Co., 994 S.W.2d 910 (Tex. App. - Austin, 1999, rev. denied). Carrier also argued that insured had no insurable interest in car. Court rejected that argument. Holding that an insurable interest is all that is required to collect under an auto policy and that an insurable interest exists when the insured derives pecuniary benefit or advantage by the preservation and continued existence of the property or would sustain pecuniary loss from its destruction. Id. at 914 citing Smith v. Eagle Star Insurance Co., 370 S.W.2d 448, 450 (Tex. 1963) v. Court reads into the definition of temporary substitute vehicle a requirement that the insured believe that he had permission to use the vehicle. Dissent points out that the majority is adding language to the policy that is not there. Majority relies in part, on statement from the State Board of Insurance that the new policy should be interpreted similarly to the old policy which required permission for a temporary vehicle. Progressive County Mutual Ins. Co. v, Sink, 107 S.W.3d 547 (Tex. 2003). vi. vii. Also note, that a temporary substitute vehicle must meet certain requirements under the policy to qualify. It must, in essence, be a replacement vehicle for the insured vehicle, because the insured vehicle is unavailable because of breakdown, repair, servicing, loss or destruction. Villegas v. Nationwide Mutual Ins. Co., 10 S.W.3d 380 (Tex. App. Austin 1999, rev. den d). The rationale is that the carrier is not liable for more than one vehicle at a time. Finally, it should be noted that some of the newer policies (including some USAA policies) do not cover temporary substitute vehicles. b. What s an accident? i. Tex. Transp. Code mandates that an owner s policy must pay on behalf of the named insured [or permissive user] amounts the insured becomes obligated to pay as damages arising out of the ownership, maintenance, or use of the motor vehicle 17

24 The standard policy states: We will pay damages which any covered person becomes legally responsible because of an auto accident. ii. iii. Auto policies cover auto accidents under the liability coverage. Texas courts have held that there must be a causal connection between the damage and the vehicle. In other words, the vehicle cannot merely be the site of the occurrence. Mid-Century Ins. Co. of Texas v. Lindsey, 997 S.W.2d 153, 157 (Tex. 1999). This holding was recently reaffirmed by the Tex. Sup. Ct. in Lancer Ins. Co. v. Garcia Holiday Tours, 345 S.W.3d 50 (Tex. 2011). Naturally, intentional conduct is excluded from liability coverage. However, the Supreme Court recently held that intent goes to the damages, not the conduct that caused the damages. Tanner v. Nationwide Mutual Fire Ins. Co., 289 S.W.3d 828 (Tex. 2009) This case involved an insured driver who was evading the police, driving at high rates of speed, and violating most of the traffic laws contained in the Transportation Code, when he collided with the plaintiff. This case involved an Ohio policy with somewhat more restrictive language than our standard policy. Property damage or bodily injury caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct. Id. at 831 n. 11. The court held there was coverage in this case, since the insured did not intend the harm. c. Loading and unloading i. loading and unloading is included under the definition of use Collier v. Employers Nat. Ins. Co., 861 S.W.2d 286 (Tex. App. Houston [14 th dist] 1993, writ denied). ii. Texas has adopted the majority definition of unloading as a complete operation, that is the loading begins, and the unloading is finished when the goods have been transported to or from the vehicle to the place from or to which they are being delivered. Travelers Insurance Co. v. Employers Casualty Co., 380 S.W.2d 610 (Tex. 1965),. Case involved the delivery of concrete from a concrete truck to a form. Court held that delivery was still in progress while the concrete was in a bucket moving it from the truck to the form. Similar holding in Commercial Standard Insurance Co. v. American General Insurance Co., 455 S.W.2d 18

25 714, 716 (Tex. 1970). Also, quoting Appleman, iii. iv. Court may treat each load as a separate event. Home State County Mutual Ins. Co. v. Acceptance Insurance Co., 958 S.W.2d 263 (Tex. Civ. App. Amarillo, 1997, no writ) dump truck unloaded gravel and went back for more. Gravel delivery was only part of the amount to be delivered. Court held delivery was complete hence the coverage in auto policy did not apply, nor did the loading or unloading exclusion in the CGL policy. Loading and unloading held to be covered under the standard UM language. Farmers Insurance Exchange v. Rodriguez, No CV, February 16, 2012 (Houston [14 th dist] v. Note, though, that the term use of a covered auto without more, has been held to be a more limited term and does not encompass loading and unloading. St. Paul Fire and Marine Insurance Company v. American International Surplus Lines Insurance Company, 1997 WL (N.D. Tex. March 31, 1997). This case involves an ambulance, and transporting a patient on a stretcher. If this holding provides any authority for Texas law it is very limited. The court in Farmers Insurance Exchange v. Rodriguez, noted the opinion in a footnote, but apparently did not consider it. d. Damages Covered i. The policy must provide coverage for the amounts the insured, or permissive user, becomes liable to pay as damages arising from motor vehicle use. Tex. Transp. Code Tex. Transp. Code An owners motor vehicle liability insurance policy must: (1) cover each motor vehicle for which coverage is to be granted under the policy; and (2) pay, on behalf of the named insured or another person who, as insured, uses a covered motor vehicle with the express or implied permission of the named insured, amounts the insured becomes obligated to pay as damages arising out of the ownership, maintenance, or use of the motor vehicle in the United States or Canada, subject to the amounts, excluding interest and cost, and exclusions of Tex. Transp. Code (which sets out limits) Note that there are older Texas cases that exclude 19

26 liability for maintenance for a permissive user, but they pre-date the above statutory language, and are probably no longer applicable to SRA compliant policies. See State Farm Mutual Auto Ins. Co. v. Pan Am Ins. Co., 437 S.W.2d 542, 545 (Tex. 1969). ii. iii. As a general rule, the coverage is often broader for the named insured than for permissive users. An analysis must be made, not only of the policy language, but of the statutory requirements in the Transportation Code. See Universal Underwriters Ins. Co. v. Hartford Acc.& Ind. Co., 487 S.W.2d 152 (Tex. App. Houston [14 th Dist.] 1972, writ ref d n.r.e. Punitive damages are covered under the liability portion of the policy. a. We will pay damages for bodily injury includes coverage for punitive damages. Manriquez v. Mid- Century Ins. Co. of Texas, 779 S.W.2d 482, (Tex. App. - El Paso, 1989, writ denied) Average insured would assume the term damages would include all damages except those intentionally caused. Id. at 484. Policy could have been drafted to make clear no punitive damages were covered. b. Texas law has traditionally allowed punitive damages to be insurable. Westchester Fire Ins. Co. v. Admiral Ins. Co., 152 S.W.3d 172 (Tex. App. - Ft. Worth 2004, rev. den d) Nursing home case. Lawsuit follows adverse verdict. Suit against primary carrier and defense firm. Spends a lot of the opinion discussing the insurability of punitive damages, questioning the public policy of allowing same, but finally decides punitive damages are insurable. Id. at Also, acknowledges that primary carrier has duty to excess carrier to reasonably settle claim within its limits if it can. c. Texas public policy allows a liability insurance provider to indemnify an insured against an award of punitive damages imposed on its insured because of gross negligence. Fairfield Insurance Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653 (Tex. 2008). d. There is an unpublished Fifth Circuit case that made an 20

27 Erie guess based on Fairfield (without much analysis) that held that with extreme enough conduct (third time DWI) punitive damages are not allowed as a matter of public policy. Minter v. Great American Ins. Co. of NY, 2010 W.L , 394 Fed. Appx. 47 (5 th Cir. 2010). Although there are now approved personal auto policies that exclude exemplary damages, the Texas Department of Insurance website suggests that when an insurance carrier attempts to limit these damages, they must justify the rate charged by the change, and adjust it according to actuarial data. 3. Policy Limits (See Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm n App. 1929, holding approved) As one might guess, there has been considerable litigation over policy limits. What injuries qualify to trigger an additional limit? When a carrier divides up policy limits between multiple injuries, what duties are imposed upon them? If they fail to pay policy limits, when is the Stowers doctrine applicable? Not all of these questions have definitive answers, but some do. a. What Injuries Qualify to Trigger Additional Limits? i. Loss of consortium claims do not trigger a second per person limit. McGovern v. Williams, 741 S.W.2d 373 (Tex. 1988) Loss of consortium claim is derivative of bodily injury claim and does not trigger a second per person limit in the policy. Case holds that loss of consortium claim is still viable under policy. It will merely make a consortium claim and the bodily injury claim subject to the per person limit. Id. at 376. ii. iii. Purely emotional damages do not trigger coverage under bodily injury definitions in policy. (Homeowner s policy). Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997) (cited in several auto policy cases to support single limit per injury). Additional insured on the policy does not create an additional limit. American States Ins. Co. of Texas v. Arnold, 930 S.W.2d 196 (Tex. App. - Dallas 1996, writ denied) The per person liability limit is per person injured regardless of the number of insured s covered. It is not expanded simply because the injured person could have sued an additional insured. iv. Bystander claims, at least in the Tort Claims context, have been held to be independent claims and not derivative of the injury 21

28 claim Hermann Hospital v. Martinez, 990 S.W.2d 476 (Tex. App. - Houston [14 th dist.] 1999, rev. denied), but this concept has been steadily eroded in auto claims. Bystander claim must show that defendant was negligent and: 1) bystander was located near the scene of the accident, 2) the shock must result from the sensory and contemporaneous observance of the accident, and 3) the bystander and the victim were closely related. In Hermann Hospital v. Martinez, a tort claims case, the Court holds that claim is not derivative of the victim s and thus allows a separate per person recovery for the bystander claim. Court looks at the language of the Tort Claims Act (Tex. Civ. Prac. & Rem. Code e) that states that liability is limited to money damages in the maximum amount of $250,000 for each person for bodily injury or death. Court relies on City of Austin v. Davis, 693 S.W.2d 31 (Tex. App. - Austin 1985, writ ref d n.r.e.), Genzer v. City of Mission, 666 S.W.2d 116 (Tex. App. - Corpus Christi 1983, writ ref d n.r.e.) and Harris County v. White, 823 S.W.2d 385 (Tex. App. - Texarkana 1992, no writ). In contrast, Christian v. Charter Oak Fire Ins. Co., 847 S.W.2d 458 (Tex. App. - Tyler, 1993, writ denied) held that 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. Still further eroding the argument for an extra limit, in a memorandum opinion, the Amarillo court has held that bystander s mental anguish claims are not covered as a bodily injury under the UM portion of the policy. The decision based its rationale on Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997). Southern Farm Bureau Cas. Ins. Co. v. Franklin ex rel. Walker, 2006 WL (Tex. App. - Amarillo May 19, 2006, memorandum opinion.). However, if the claimant can demonstrate a physical manifestation because of the mental or emotional injury, there may be coverage. State Farm Lloyds v. C.M.W., 53 S.W.3d 877, (Tex. App. Dallas 2001, no pet.). Also, look at a recent federal district court case that makes an Erie guess that Texas would allow a separate limit where the bystander suffers a substantial physical manifestation from the event. Haralson v. State 22

29 Farm, 564 F. Supp. 616 (N.D. Tex. July 8, 2008). b. When a carrier divides up policy limits between multiple injuries, what duties are imposed upon them? i. Carrier has broad discretion in allocating damages among multiple claimants. Texas Farmers Insurance Co. v. Soriano, 881 S.W.2d 312, 315 (Tex. 1994) ii. This same discretion has been given to carriers on UM claims. Lane v. State Farm Mut. Auto Ins. Co., 992 S.W.2d 545 (Tex. App. - Texarkana 1999, rev. den d) c. If carrier fails to pay policy limits, when is the Stowers doctrine applicable? i. Stowers doctrine may expose carrier to liability beyond its policy limit. Stowers Furniture Co. v. American Indemnity Company, 15 S.W.2d 544, 547 (Tex. Comm'n App.1929, holding approved)...the indemnity company was in duty bound to exercise ordinary care to protect the interest of the insured up to the amount of the policy, for the reason that it had contracted to act as his agent, and assumed full and absolute control over the litigation... If the carrier breaches this duty, it is liable for damages. Id. at 547. ii. Stowers doctrine creates liability only if: 1) carrier negligently rejected a demand within policy limits, or 2) the settlement demand itself was unreasonable. Texas Farmers Insurance Co. v. Soriano, 881 S.W.2d 312, 315 (Tex. 1994) Case involves multiple plaintiffs with severe injuries and two deaths. Minimum limits policy. Carrier paid out its limits, divided between claimants. Court held that Stowers doctrine created liability only if 1) carrier negligently rejected a demand within policy limits, or 2) the settlement itself was unreasonable. Court found no evidence of either. Id. at 315. iii. Settlement offer must offer a full release in exchange for the payment of the policy limits. Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489 (Tex. 1998) In this case, a hospital lien had attached to the claim (Tex. Prop. Code ), and the Stowers demand did not 23

30 include a release of the hospital liens. Court held that the offer of settlement was insufficient to satisfy Stowers. Note, one unpublished opinion has held that the validity of the hospital lien is irrelevant in a Stowers action. It still has to be accounted for. McDonald v. Home State County Mut. Ins. Co., No , 2011 W.L (Tex. App. Houston [1 st Dist.] Mar. 24, 2011, pet. denied). iv. Stowers doctrine applies only to covered claims. A policy that does not cover punitive damages has no liability under Stowers for those claims. St. Paul Fire & Marine Ins. Co. v. Convalescent Services, Inc., 193 F.3d 340 (5 th Cir. 1999). v. It is critical to accurately identify the party to whom the release is offered. Where insured was offered release, but the permissive driver was not offered a release in the Stowers letter, no Stowers duty was created. Home State County Mutual Inc. Co. v. Horn, 2008 W.L (Tex. App. Tyler June 25, 2008, memorandum opinion). This opinion seems in opposition to a recent Fifth Circuit opinion in which a settlement offer was made to only one of two insureds. The carrier paid the demand and the other insured sued. The Fifth Circuit held that by paying a reasonable demand within the policy limits for one insured, the other could not complain even though it left them without coverage. Pride Transportation v. Continental Casualty Co., 2013 W.L (5 th Cir. Feb. 6, 2013, slip copy) The distinction between these two case likely lies in the assignment in Horn. The permissive driver s estate, rather than the policy holder made the Stowers assignment to the injured plaintiff. The Stowers demand was made only to the insured not the permissive driver s estate. Consequently, Home State was able to argue that even though they had a duty to defend and indemnify the permissive driver, the Stowers demand was made only on the insured not the estate of the permissive driver. vi. vii. An excess carrier may also claim a Stowers duty when it is exposed because of the primary carrier s failure to settle within the primary limits. American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480 (Tex. 1992). Finally, since the Stowers action belongs to the insured, and is predicated on the insured s exposure to an excess judgment, the bankruptcy of the insured may effectively destroy any Stowers action. There are devils in the details in this case, however, so the holding does not have universal application. In re Davis, 253 F. 3d 807 (5 th Circuit, 2001). 24

31 d. What constitutes separate occurrences? Two collisions separated by 2 to 5 seconds, and 30 to 300 feet, constituted two separate occurrences, and required the payment of two separate policy limits. Liberty Mutual Ins. Co. v. Rawls, 404 F.2d 880 (5 th Cir. 1968). Opinion notes that there was no evidence the defendant s car lost control between the two collisions. The Court held, as a matter of law, there were two accidents, determining the event from the standpoint of conduct forming the causative act, or the effect theory...when an event is judged from the point of view of a person sustaining injury. Id. at First party rights under liability policy. a. Liability carrier is not liable for the acts of the defense counsel it hires to defend the insured. State Farm Mutual Automobile Insurance Co. v. Traver, 980 S.W.2d 625 (Tex. (1998) Case reaffirms Stowers obligations, and suggests that there may be broader liability when defense is undertaken, but done so in a way that undermines their insured. b. Older case law held that when liability carrier simply refuses to defend, the insured s remedy is contractual and Stowers, only. Maryland Insurance Co. v. Head Industrial Coatings & Service, Inc., 938 S.W.2d 27 (Tex. 1996). But, see Rocor International, Inc. v. National Union Fire Ins., 77 S.W.3d 253 (Tex. 2002) which holds that a carrier can be liable under Tex. Ins. Code for unfair practices in defending a third party claim. Case imposes Stowers elements in triggering liability, including a demand within policy limits. The even more recent case of Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007), re-enforces this liability. Rocor also gives more latitude to the undefended insured in making deals with the plaintiff to protect himself. In State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996) the court disallowed a collusive deal where the carrier was still providing a defense under a reservation of rights. If you encounter this situation read Rocor and Gandy to see where the boundaries are placed. Look also at Evanston Ins. Co. v. Atofina Petrochemicals, 256 S.W.3d 660 (Tex. 2008) c. When a carrier pays a non-covered claim, it will be very difficult for them to get their money back. Texas Association of Counties County Government Risk Management Pool v. Matagorda County, 53 S.W.3d 128 (Tex. 2000). 25

32 Excess Underwriters of Lloyd s, London v. Frank s Casing Tool and Rental Tools, Inc., 243 S.W.3d 42 (Tex. 2008), in an earlier rendition of the opinion had held otherwise. On rehearing, the court realigned its ruling with Texas Association of Counties County Government Risk Management Pool v. Matagorda County. d. When limits are paid, duty to defend ends. Mid-Century Insurance Co. v. Childs, 15 S.W.3d 187 (Tex. App. - Texarkana 2000, no pet.) Once policy limits are paid the duty to defend ends. This case follows clear policy language. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. 5. Additional third party rights under liability coverage. a. Claimant in a liability claim has third party beneficiary status as to the insurance contract. Action is not ripe until after judgment is entered against insured. Dairyland County Mutual Insurance Co. v. Childress, 650 S.W.2d 770 (Tex. 1983) b. Third party claimant does not have Ins. Code, or consumer status in an action against liability carrier. His third party beneficiary status allows only contract damages after judgment. Allstate v. Watson, 876 S.W.2d 145 (Tex. 1994). This rule holds true even if the third party claimant is also a named insured under the policy (wife suing a husband). Rumley v. Allstate Indem. Co., 924 S.W.2d 448, (Tex.App.-Beaumont 1996, no writ hist). Hint: After a judgment, get an assignment from the insured, or, better still, a turnover order from the court. This will open the door to all of the first party claims. c. Carrier may create liability under the DTPA by its actions toward a third party claimant. Webb v. International Trucking Co., Inc., 909 S.W.2d 220 (Tex. App. - San Antonio 1995, no writ) 6. Out of State Policies Carrier that authorized repairs, told third party claimant where to take the truck and promised to have it fixed. By doing so, carrier incurred liability under the DTPA, despite lack of the claimant s consumer status, under section prohibiting one from representing that an agreement has certain rights, remedies or obligations that it does not have. This section does not require consumer status. Distinguishes case from Allstate v. Watson in that liability does not arise from settlement negotiations. Which law governs an out of State policy when the wreck happens in Texas? Texas follows the most significant relationship rule articulated in Duncan v. 26

33 Cessna Aircraft Co., 665 S.W.2d 414, (Tex. 1984) in applying a particular State s law to the contract. However, Tex. Ins. Code mandates that Texas law will apply to the contract if 1) the proceeds are payable to a Texas citizen or inhabitant, 2) the policy is issued by a carrier authorized to do business in Texas, and the 3) the policy is issued in the course of the carrier s Texas business. Scottsdale Ins. Co. v. National Emergency Services, Inc., 175 S.W.3d 284 (Tex. App. Houston [1 st Dist.] 2004, rev. denied). Finally, most liability policies will have a clause in them that provides the minimum insurance requirements of the where the vehicle is being operated. B. PERSONAL INJURY PROTECTION (PIP) 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 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 27

34 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 causal connection exists between the motor vehicle s use and the injuryproducing 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 28

35 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 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). 29

36 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 is an exception to this rule, but the amounts due Medicare must be specific. The PIP carrier cannot simply add Medicare 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. C. MEDICAL PAYMENTS COVERAGE This coverage is often sold in lieu of PIP. Always buy the PIP. PIP covers 80% of lost income (or household expenses for a non-income producer) as well as medical expenses. Further, you don t have to pay it back out of your third party recovery. Med Pay covers only medical expenses and you may have to pay it back. Importantly, it has no statutory basis and consequently, no legal restrictions on its terms. The catch-all subrogation clause in the standard policy under Part F - General Provisions provides that if the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. This clause does not apply to the PIP coverage, but it does to the Med Pay. Never let your client agree to this sorry substitution. 30

37 1. Med-Pay Benefits Policy provision which gave credit for med pay against UM benefits was ineffective to extent it reduced benefits below the statutory minimum limits. Westchester Fire Ins. Co. v. Tucker, 512 S.W.2d 679 (Tex. 1974). 2. Reimbursement/Offset PIP and UM offset provisions within one policy are effective to the extent of actual damages. Both policies must be paid if the damages reach that amount. Mid-Century Insurance Company of Texas v. Kidd, 997 S.W.2d 265 (Tex. 1999) (cites State Board of Ins. rate setting as one justification.) 3. Settlement with third party Settlement with the third party liability carrier destroys the subrogation rights of the Med Pay carrier. Court holds that the settlement constitutes a material breach of the contract by the insured, and allows carrier to deny Med Pay benefits. Mendez v. Allstate Property & Casualty Ins. Co., 231 S.W.3d 581 (Tex. App. Dallas 2007, no pet. hist). 4. Common fund and attorney s fees The case law is split on this issue. Valle v. State Farm, 5 S.W.3d 745 (Tex. App. San Antonio 1999, rev. denied), summary judgment in favor of State Farm affirmed, holding that St. Fm. conclusively showed that liability was uncontested and damages were liquidated, hence no common fund was created by plaintiff attorney s efforts. Allstate v. Edminster, 224 S.W.3d 456 (Tex. App. Dallas 2007, no pet.) held that there was a fact issue that precluded summary judgment for either party. Two cases are hard to reconcile. D. 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 31

38 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 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.) 32

39 This case involves a divorced couple. Ex-husband was driving, exwife 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. d. If the other vehicle has insurance, a potential policy defense does not make it an uninsured vehicle. Garcia v. Travelers Insurance Co., 501 S.W.2d 754 (Tex. Civ. App. Houston [14th Dist.] 1973, no writ). In this case the insured failed to cooperate with its liability carrier. The plaintiff s claim that this made the vehicle uninsured was rejected. This case should not be read too broadly. Here the appellate court simply sustained the trial court s finding that liability coverage had not been adequately refuted on the record. The opinion goes on to state, Quite a different question would have been presented by the record had the trial judge in this case made different factual findings. The covering company may delay or avoid decision as to coverage for such a length of time and in such a manner as to constitute some evidence of denial of coverage in fact. Defending under a reservation of right, a non-waiver agreement, or institution of a suit for declaratory judgment may constitute evidence of such denial in a proper case. at 755. e. However, if the liability carrier actually denies coverage, the vehicle is uninsured and the UM coverage comes into play. Milton v. Preferred Risk Ins. Co., 511 S.W.2d 83, 85 (Tex.Civ.App.-Houston [14th Dist.] 1974, writ ref'd n.r.e.) 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. 33

40 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., 176 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. 3. Accident under the UM policy 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.). a. Like the liability and PIP portions of the policy, a claim under the UM portion of the policy requires an accident. Farmers Insurance Exchange v. Rodriguez, 366 S.W (Tex. App. Houston [14 th dist.] 2012, rev. denied). Here unloading a trailer was considered use of a vehicle and therefore covered. b. An intentional act by another may give rise to a covered accident under the UM policy. Whitehead v. State Farm Mut. Auto. Ins. Co., 952 S.W.2d 79 (Tex.App.-Texarkana 1997), reversed on other grounds, 988 S.W.2d 744 (Tex. 1999). In this case an insured was shot by someone in another vehicle. The case was later reversed on the use of a vehicle question, but the Court of Appeals opinion is undisturbed on the intentional act issue. The 34

41 Court of Appeals held that even if the act was intentional by the shooter, it was unexpected from the point of view of the insured. See also, Home State County Mut. Ins. Co. v. Binning, 390 S.W.3d 696 (Tex.App. Dallas,2012, no pet.) 4. 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 recover simply requires that the uninsured motorist was at fault and the extent of the plaintiff s damages. c. Conversely, if the plaintiff allows the limitations period to run against an insured motorist, the carrier still gets the credit for the, now uncollectable, liability limits. State Farm Mutual Automobile Ass. v. Bowen, 2013 W.L (Tex. App. Eastland 2013). d. 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 issue, 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 insured...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] 35

42 2010, rev. denied). e. 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). f. 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). 5. 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 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 multi-vehicle 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. Insured s 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 36

43 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 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). 6. 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 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 37

44 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). 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 underinsured 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. d. Looking from the other direction, some entities have a subrogation interest against UM benefits and some do not. Judy Kostura s exhaustive work on subrogation is recommended for the details. Here is a quick summary. -Hospital Liens do not attach to UM benefits. Members Mutual Ins. v. Hermann Hospital, 664 S.W.2d 325, 328 (Tex. 1984). -U.S. Army medical benefits are entitled to subrogate against UM benefits under the Federal Medical Care Recovery Act. Warmbrod v. USAA County Mutual Ins. Co., 367 S.W.3d 778 (Tex. App. El Paso 2012, rev. denied). -ERISA subrogation interest may or may not attach, depending on the language of the plan. 7. 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 38

45 coverage, it will reduce the amount available under the other. Also, both coverages state they are excess over any collectable insurance from a non-owned 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 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 39

46 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. i. 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). ii. 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. 8. Hit and run UM policies have special provisions for hit and run collisions. The general rule is there 40

47 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). 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). 9. 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, sue 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). Contrast this case with Terry v. Safeco Ins. Co. of America F. Supp. 2d, 2013 W.L (S.D. Tex. 2013) which held that when the carrier makes an offer on the UM claim, it must comply with the 542 deadlines in paying that amount. 41

48 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 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. Perhaps the best summary of where we are on this issue is proclaimed in Accardo v. America First Lloyds Ins. Co., 2013 W.L (S.D. Tex. September 10, 2013). Here the court followed the majority of Texas Federal District courts by re-affirming that bad faith survived Brainard, but the bar is set high. In granting summary judgment for the insurance company, the court held, Once the insurer has met its burden of showing undisputed evidence that supports finding a reasonable basis to delay payment because there was a bona fide dispute as to the uninsured motorist's fault or the extent of the insured's damages, the insured must point to factual evidence that calls into doubt the bona fides of the dispute and the reasonableness of the insurer's actions. at 8. It will take a truly outrageous case to meet this standard. 10. Trying the UM Case a. Severance and Abatement of bad faith issues. A UM carrier can generally sever and abate any bad faith claim that is plead with the underlying claim. The rationale has been that if an offer is made on the underlying claim that evidence is relevant to the bad faith portion of the claim and prejudicial to the carrier on the underlying claim as an inadmissible offer of settlement. In re United Fire Lloyds, 327 S.W.3d 250 (Tex. App. San Antonio 2010, no pet.) At least one court has ignored the offer of settlement element in ordering a severance and abatement. In re Old American County Mut. Fire Ins. Co., 2013 WL (Tex.App.-Corpus Christi,2013, no pet.) b. Severance and abatement without bad faith allegations. Generally, the underinsured, or uninsured, driver can ask for abatement. The thinking is that this defendant is entitled to keep insurance out of his case. In re Koehn, 86 S.W.3d 363 (Tex.App. Texarkana,2002, no pet.). However, the UM carrier does not have this argument. In re Teachers Ins. Co., No CV., 2004 WL , Tex.App.-Amarillo,2004, no pet.- not designated for publication). c. Venue. Tex. Ins. Code allows a UM suit to be brought in the county of the collision or the county where the claimant resides. Once a suit is severed, venue can be revisited and moved out of the claimant s county for the action against the uninsured/underinsured defendant. In re Teachers Ins. Co. d. Proof at trial. The plaintiff must prove liability against the uninsured/underinsured driver and the amount of their damages. They must also prove the policy and, in an underinsured case, the 42

49 amount of underlying liability coverage. Mid-Century Ins. Co. Of Texas v. McLain No CV., 2010 WL (Tex.App.- Eastland,2010, no pet.) e. Declaratory judgment or breach of contract? Brainard held there is no breach of contract until liability and damages have been judicially determined.216 S.W.3d at 819. Some courts have held that a breach of contract claim is not ripe as an initial action against the UM carrier. Terry v. Safeco Ins. Co. of America, supra. We have little guidance from the appellate courts on the application of Chapter 37 (declaratory judgment) to UM claims, to date. Two of our learned colleagues, Brooks Schuelke and Tom Herald, have both advocated this approach. An alternative is simply to bring suit for the benefits due under the UM policy without specifically naming the cause of action. At some point soon, we will likely have a more definitive answer, though in practice, it makes little difference. The jury issues are the same with either approach. f. Conditions precedent. The plaintiff should allege that the plaintiff has complied with all conditions precedent. This allegation simply means that the plaintiff has done everything necessary under the policy to bring the lawsuit. (e.g. paying the premiums, notifying the carrier, calling the police in a hit and run case, etc.). With this allegation in the petition, the defendant must specifically deny, under oath, any condition precedent with which the plaintiff did not comply. If the defendant makes this allegation, then the burden is on the plaintiff to prove that specific condition precedent. Otherwise, the plaintiff s assertion is taken as true. Tex. R. Civ. Proc. 54 and 93.15, Love of God Holiness Temple Church v. Union Standard Ins. Co., 860 S.W.2d 179, 181 (Tex. App. - Texarkana 1993, writ denied). g. Insured status of at-fault driver. Naturally, there is an issue in an uninsured motorist case over whether the at-fault driver was insured or not. The UM carrier has the burden of proof on this issue. Tex. Ins. Code This section was passed as a legislative overruling of State Farm Mutual Ins. Co. v. Matlock, 462 S.W.2d 277 (Tex. 1970) which held the opposite. E. 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 43

50 necessarily what you re owed. Finally, UM property damage claims are governed by third party rules (diminished value, loss of use, etc. are recoverable). Noteboom v. Farmers Texas County Mutual Ins. 406 S.W.3d 381, (Tex. App. Ft. Worth 2013, no pet.). 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. Note: a recent opinion has expanded Mondragon to hold that loss of use may be recoverable on a total loss if the carrier acted unreasonable in delaying payment on the total loss. Morrison v. Campbell 2014 WL (Fort Worth, Jan. 16, 2014). Note, further that the Waco court, while distinguishing Morrison, has also expressly refused to follow the Fort Worth court in this decision. American Alternative Ins. Corp. v. Davis, --- S.W.3d ----, 2014 WL (Tex.App.-Waco, 2014). 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) i. 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) ii. 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). 44

51 b. If vehicle is repairable, it must be repaired to its useful pre-accident condition. Carrier cannot simply depreciate the value 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 postaccident 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 45

52 with notice of their rights under this section. F. COMMERCIAL COVERAGE 1. Basic auto coverage under the commercial policy The coverage under commercial general liability policies is vast and varied. If you have a claim against a commercial entity, it is likely that this type of policy is the policy you will be dealing with. Unlike, the personal auto policy, there is no standard policy. Most commercial general liability policies still require Texas Department of Insurance approval. However, there are certain risks that mainline, regulated carriers will not insure against. Policies that insure for these risks often trade in an international market and are not strictly regulated by TDI. It s a jungle out there. Who is an insured, what is covered, and under what circumstances varies quite a bit. If the caveat get a copy of the policy applies to personal auto coverage, it applies doubly to CGL policies. a. General Liability If a company that has purchased CGL coverage, does something culpable, the general liability section of the policy is the part of the policy that determines who pays what. These policies are generally occurrence based policies that cover activities related to the company s business. They provide coverage for the company and usually certain other individuals who are identified or described in this portion of the coverage. i. Who s covered? a. Named Insured The company (LLC, LLP, corporation, etc.) is likely the named insured. There will be other named insureds, either listed in the declaration page of the policy, or included by definitions within the policy (officers, directors, managers, employees, etc.). Note, there is no uniformity in who is an insured from policy to policy. Some are expansive, some are restrictive. Some are insureds only under certain circumstances. These folks are referred to as additional or omnibus insureds because they are described as a class rather than named individually. The contract language is usually given affect as to those covered and those excluded. Amanzoui v. Universal Underwriters Ins. Co. No. 2:09-CV-65-TJW, 2010 W.L (E.D. Tex. May 12, 2010). b. Additional Insureds 46

53 An additional insured has standing in Texas to bring an action under the insurance contract. Transport Intern. Pool, Inc v. Continental Ins. Co. 166 S.W.2d 781 (Tex. App. Ft. Worth 2005, no pet.) at If the policy insures others from claims that arise out of the named insured s activities, all that is required is that the claim against these additional insureds arise out of the activity not that the primary insured has any direct liability for the claim. In other words, the additional insured can be the only one responsible and still come under the primary insured s coverage. Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc. 256 S.W.3d 660,665 (Tex., 2008). This opinion resolves a conflict between earlier Courts of Appeal decisions on the issue; consequently, any opinion on the issue that predates this opinion is suspect. Often the policy will name as additional insured, people or companies that the named insured has a contractual obligation to provide coverage for. In these cases reference needs to be made to the contract that triggers the coverage. Transport Intern. Pool, Inc. v. Continental Ins. Co., 166 S.W.3d 781 (Tex. App.-Fort Worth 2005, no pet.). c. Separation of Insureds Most CGL policies have a separation of insureds clause. This provision simply means that each insured s action will be looked at separate and apart from every other insureds. King v. Dallas Fire Ins. Co., 85 S.W.3d 185 (Tex. 2002). Consequently, the intentional act of one insured will not relieve the carrier from covering the negligent acts of another insured for the same event. Even without the separation of insureds clause, common law construction generally gives a policy this effect. See Verhoev v. Progressive County Mut. Ins. Co., 300 S.W.3d 803, 810 (Tex.App. Fort Worth,2009, no pet.) d. Demand by the insured for defense and indemnity It is axiomatic that just because you have coverage, doesn t mean you have to use it. The insured must request from the carrier a defense and indemnity. National Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 608 (Tex. 2008). In this case, the insured (an additional insured) did not even know he had coverage. The carrier knew and didn t tell him even 47

54 though the guy was in the lawsuit that the carrier was defending for the named insured. The court held that the carrier not only had no duty to defend him, no duty to indemnify him after the judgment, but also the carrier did not even have a duty to let him know about the coverage. ii. What s covered? Under CGL policies occurrences are covered. What s an occurrence? It s what the policy says it is. Generally, an occurrence is defined as an accident - something unintentional. Much litigation has ensued from these simple definitions. What if the event occurs one year, but doesn t cause any damage until the next year? What if no one could reasonably discover the damage until the following year? What if the occurrence could be called a breach of contract? a. Auto Coverage Under most CGL policies, auto liability is excluded. Often the CGL policy is delivered as a package that includes an additional commercial auto policy. Also, as part of the main CGL policy itself there may be what is called hired and non-owned auto endorsement. As the term implies, this endorsement provides only limited coverage under limited circumstances. Auto coverage under a CGL policy is not governed by the statutes that pertain to personal auto policies. Uninsured motorist coverage is not required even absent a waiver. Taylor v. State Farm Lloyds, Inc., 124 S.W.3d 665 (Tex. App. Austin 2003, rev. denied). b. Garage Coverage Garage coverage is a common provision in CGL policies that cover auto sales, repairs and related enterprises. This coverage generally applies to the operation of vehicles in and around the company s premises, or in furtherance of its business. The details of the policy language describe its scope. The following two cases are illustrative of the extent of garage coverage. Again, they both turn on the particular language of the policy. Farmers Enterprises, Inc. v. Gulf States Ins. Co., 940 S.W.2d 103 (Tex. App. Dallas 1996, no writ) and Continental Ins. Co. v. Colston, 463 S.W.2d 48

55 461 (Tex. App. Fort Worth 1971, writ ref d n.r.e.). c. PIP and UM coverage under a commercial policy. There are cases noted earlier that hold some commercial policies are not bound by the rules governing personal auto policies, and do not have to include PIP and UM. These cases deal, however, with policies that are not primary for the vehicle coverage. Taylor v. State Farm Lloyds, Inc., supra. If the commercial policy is the primary coverage on the vehicle, the Texas Department of Insurance takes the position that PIP and UM coverage is required absent a waiver. This position is consistent with the statute and supported by case law. Safeco Lloyds Ins. Co. v. Allstate Ins. Co., supra. 2. Trucking coverage Trucking companies have their own minimum insurance requirements. If they are interstate carriers, then federal law spells out the coverage requirements in 49 C.F.R The minimum limits range from $750, to $5,000,000.00, depending on the cargo the carrier is licensed to haul. If the carrier is intrastate only, the minimum limits are described in 43 Tex. Admin. Code and essentially mirror the federal requirements for trucks. The Texas Code also provides limits for buses and other common carriers. Like other Commercial General Liability policies, the devil is in the details. Who is an insured, under what conditions, and what the policy covers is dependent on the policy language. Some policies apply only when the truck is actually hauling, some cover the driver when driving without an attached trailer (bobtailing). MCS-90 Endorsement. The federal statute cited above creates an endorsement to the interstate trucking policies that is mandatory and is triggered if for some reason the main policy does not cover the company s negligence. Separate rules govern claims under the MCS-90 endorsement and they generally favor the plaintiff. However, this endorsement is triggered only by a judgment. In most trucking cases, the primary CGL policy will be the one dealing with the claim. III. Miscellaneous Coverage Issues A. MISREPRESENTATION ON THE POLICY APPLICATION 1. Material misrepresentations that effect risk may void policy....where false statements and representations, which are warranted to be true, are written into an application for insurance by the agent, and the 49

56 applicant knows or has the means of knowing that such statements are contained in the application, and are not true, the insurance company is not precluded from avoiding the policy where it has been conditioned upon such false representations. Odom v. Insurance Company of State of Penn., 455 S.W.2d 195, 198 (Tex 1970) Agent knew of bad driving record, but denied in application. Insured had copy of application and knew it was false. Application was part of policy. Declaratory Judgment action filed by carrier. Summary judgment for carrier. Court affirms summary judgment. 2. However, note Chapter 705 of the Texas Insurance Code: Tex. Ins. Code Misrepresentation must be material to the risk and contribute to the contingency or event on which the policy became due and payable. Tex. Ins. Code Defense of misrepresentation is available only if insurer can show that it gave notice to the insured by the 91 st day that it learned of the misrepresentation. Tex. Ins. Code Misrepresentation does not defeat recovery unless it is a material fact and affects the risk assumed 3. Misrepresentation must be material to the risk and contribute to the loss. Harrington v. Aetna Casualty and Surety Co., 489 S.W.2d 171 (Tex. App. - Waco, writ ref d n.r.e.) (follows Tex. Ins. Code (old 21.16)). B. PRIMARY/EXCESS 1. Generally, the vehicle coverage is primary and the driver s is excess Both policies (owner and driver) have other insurance clauses which state that liability coverage for non-owned vehicles is excess. The owner s policy is primary and driver s policy is excess. Snyder v. Allstate, 485 S.W.2d 769 (Tex 1972) It is undisputed and uncontested...that under Texas law...u.s. Fire policy (on the car) would be primary, and the United Service automobile policy (on the driver) would be the excess policy. United States Fire Ins. Co. v. United Service Automobile Ass., 772 S.W.2d 218 (Tex. App. - Dallas, 1989, writ denied) (passenger grabs the wheel case). Although the author of this paper believes that the above is an accurate statement of the law on excess/primary coverage, there are those learned colleagues who disagree and cite American Motorists Insurance Co. v. Briggs, 514 S.W.2d

57 (Tex. 1974) as authority. Briggs presented a unique set of circumstances where two UM policies were at issue. The claimant settled with one carrier for less than the limits and went to trial against the other. The non- settling carrier argued for a full credit of the settling carriers policy limit against the judgment. The court in Briggs refused to grant credit for more than the actual settlement (rather than the policy limit) holding that to do otherwise would allow the plaintiffs less than their actual damages. However, the policy language generally states that the primary coverage is the vehicle coverage, and the opinions cited above honor that language except as follows: 2. A policy that claims to be excess under an other insurance clause may be jointly and severally liable. Other insurance clause is invalid to the extent it precludes recovery of actual damages within the combined policy limits. American Motorists Insurance Co. v. Briggs, supra. Again, the carrier argued in this case that other insurance clause in its UM coverage precludes recovery if other insurance is available in the same amount under another policy, and that its limit is only excess. To prevent this shortfall the court held that the two carriers are jointly and severally liable. (see above). 3. Where both policies claim to be excess they will be held jointly and severally liable. The insured will not be afforded less coverage with two policies than they would have had with one. Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Co., 444 S.W.2d 583 (Tex. 1969) 4. Finally, with the variation in policy language that has proliferated since 2003, the language of each policy is critical. Safeco v. Allstate, 308 S.W.3d 49, (Tex. App.-San Antonio, 2009, no pet.) holds that where one policy says it is secondary on non-owned vehicle (Allstate, standard policy) and the other does not, then both are joint and several. C. CANCELLATION 1. Tex. Ins. Code , et seq., governs cancellation of auto policies. This section lists the various grounds for cancellation, and prohibits cancellation for any other reason. There are also notice requirements in this statute. Finally, the statute also requires notice for a nonrenewal of an existing policy. 2. Texas Transp. Code prohibits a carrier from cancelling a policy retroactive to an existing claim, even in the unlikely event the insured consents. 3. A carrier may be estopped from cancelling a policy if they continue coverage with full knowledge of grounds to cancel. National Old Line Ins. Co. v. Garcia, 51

58 517 S.W.2d 621, 625 (Tex. App. Fort Worth, 1975, writ ref d n.r.e.) 4. If the coverage is not timely renewed, however, a late payment will not necessarily reinstate the policy back to its expiration date. Hartland v. Progressive, 290 S.W.3d 318 (Tex. App. Houston [14 th dist.] 2009, no pet.). IV. General Practice Tips A. DISCOVERY OF THE POLICY 1. Get the policy from the defendant. You are entitled to it. a. Tex. R. Civ. Proc (f) Indemnity and insuring agreements. Except as otherwise provided by law, a party may obtain discovery of the existence and contents of any indemnity or insurance agreement under which any person may be liable to satisfy part or all of a judgment rendered in the action or to indemnify or reimburse for payments made to satisfy the judgment... b. Tex. Transp. Code (f) 2. But maybe not all of it... The policy, any written application for the policy, and any rider or endorsement that does not conflict with this chapter constitutes the entire contract between the parties. In re Dana Corporation, 138 S.W.2d 298 (Tex. 2004) Discovery case. Plaintiff sought discovery of a broad range of insurance documents, including erosion information on an eroding policy. Court held that nothing more than the insurance agreement is discoverable under Tex. R. Civ. Proc (f). Insurance information beyond that is subject to the general scope of discovery rule, relates to the claim or defense of the party. In re American Home Assurance Company, 88 S.W.3d 370 (Tex. App.-Texarkana 2002, orig. proceeding) First party case. Court granted mandamus, denying production of information on reserves set by carrier. But, see In re General Ins. Agencies of America, Inc.224 S.W.3d 806 (Tex. App. Houston [14 th Dist.] 2007). In re Madrid 242 S.W.3d 563 (Tex. App. El Paso, 2007) 52

59 Third party case. Plaintiff sought reservation of rights letters through discovery which trial court granted. El Paso Court of Appeals granted mandamus holding that the trial court abused its discretion. B. BALANCING COVERAGE BETWEEN THE VARIOUS TYPES OF INSURANCE Often the plaintiff will have health insurance, PIP, UM coverage and collision. All of these coverages need to be balanced, along with the third party liability coverage, so that the plaintiff ends up with the maximum benefit from the coverages available. 1. Healthcare providers - get them to take the health insurance Healthcare providers are getting squeezed right and left. Their costs are going up and their reimbursements are going down. Often they see a patient, even an established patient, who has been in a car wreck and see an opportunity to get paid retail instead of wholesale. Even if they have a contract with the health insurance carrier, they would rather submit their bill through PIP or even wait on a third party settlement. The reason is simple. They have a discount agreement with the health insurance carrier that they do not have with the auto carriers. Still, it is in the client s best interest to have their bills paid through the health insurance, even if they have to pay part of it back at settlement. They then get the benefit of the discount and can use their PIP for deductible s, co-pays, and lost wages. Unfortunately, Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007) obliteration of the common fund doctrine makes this approach less beneficial than it used to be. a. If the healthcare provider is required or authorized to bill a health insurance carrier and they do not do so in a timely manner, they may waive the right to payment altogether. See Tex. Civ. Prac. & Rem. Code , et seq b. Encourage your client not to give an assignment of the PIP benefits. See Texas Farmers Insurance Co. v. Fruge, supra 2. Property damage There is often a dispute at the beginning of the case over property damage. There are three main sources for evaluating fair market value for a vehicle. Kelly Blue Book, NADA and CCC. Kelly Blue Book and NADA are available online, so you can make a pretty close evaluation of your client s vehicle from your office. NADA is the gold standard. It is the source the banks and car dealers use the most. CCC is a private company which uses market comparisons and is usually lower than the other two. Guess which source the insurance companies frequently use? If you have difficulty getting the liability carrier to pay the property damage, go through your own carrier on the collision coverage, if it s available. Even though your client will have to eat the deductible, you at least will be dealing with a carrier who has duties under the Insurance Code and the common law to your client. The third party carrier does not. Finally, your client s 53

60 carrier will subrogate against the liable carrier to get their money, and your client s deductible back. Let two insurance companies fight it out. If your client s insurance carrier goes after the third party for their money, they have to also go after the deductible on behalf of their insured, or pay the deductible themselves. If they don t, they have to notify the insured of their inaction in writing at least 90 days before the statute of limitations runs on the negligence action. Tex. Ins. Code Finally, if your client is upside down on their note and their car is a total loss, sometimes they can go back to the dealer, pick another car and arrange a transfer of collateral on the original note. They will still lose a little, but they will be able to get back into another car with the same payment. 3. If the third party defendant ignores your lawsuit, make sure you copy his insurance carrier with the lawsuit, the returned citation, and any default judgment you get. The carrier can assert lack of notice and lack of cooperation as defenses, but they must show prejudice to benefit from these conditions precedent. Struna v. Concord Insurance Services, Inc, supra. The more notice they have, the more difficult it will be to show prejudice. Once you have the judgment, you become a third party beneficiary to the third party insurance policy. Dairyland County Mutual Insurance Co. v. Childress, supra. C. INSURANCE COVERAGE AS EVIDENCE Tex. R. of Evid. 411: Evidence that a person was or was not insured against liability is not admissible upon the issue whether the person acted negligently or otherwise wrongfully. This rule does not require the exclusion of evidence of insurance against liability when offered for another issue, such as proof of agency, ownership, or control, if disputed, or bias or prejudice of a witness. 1. When defendant repeated references to missing wreckage, it was proper for plaintiff to show defendant s insurance company took control of the wreckage. Davis v. Stallones, 750 S.W.2d 235, 237 (Tex. App. Houston, 1 st Dist. 1987, no writ) 2. Evidence of insurance certificate was proper to prove defendant s ownership of the culpable entity. Meuth v. Hartgrove, 811 S.W.2d 626, 628 (Tex. App. - Austin 1990, writ denied) 3. Under limited circumstances, a party may inform the jury of its own insurance status to clarify certain misconceptions that the jury might have formed. See University of Tex. V. Hinton, 822 S.W.2d (Tex.App.- Austin 1991, no writ). In most cases, however, the general prohibition against admitting evidence of insurance operates to preclude defendants from 54

61 showing that they are uninsured. Bleeker v. Villareal, 941 S.W.2d 163 (Tex. App. Corpus Christi 1996, writ dismissed) 4. Insurance carrier s attorney (in UM case) cannot hide behind a pro se defendant and mislead the jury as to their real client in order to exclude evidence of insurance coverage. Perez v. Kleinert, 211 S.W.3d 468 (Tex. App. Corpus Christi 2006, pet. filed) D. RECOMMENDATIONS TO CLIENTS ON AUTO COVERAGE As practitioners in this area of the law, we are sometimes asked by our clients for recommendations on their own auto policies. Here are a few: 1. Shop price through an independent agent. I know we like dealing with some carriers better than others, but the landscape is changing constantly. The carrier who settles this year, will change direction next. One carrier will buy out another and will fire all their old adjusters and replace them with neophytes. Find an agent that deals with several different carriers and get the best deal you can. (Also, look at the policy - remember there are significant differences in coverage now.) Finally, look at the TDI website for a comparison of policy prices. 2. Most of the time, we are better off with the standard policy rather than some insurance company s creative departure from the standard policy. A lot of different companies offer it at a broad range of prices. If your client departs from this coverage, make sure they read what they are getting. They may be paying a lot for very limited coverage. Finally, a lot of carriers write the standard policy then substantially amend it with endorsement. Look out for that approach. 3. To save money, get high deductibles. 4. Buy UM coverage in an amount equal to the liability coverage. Tex. Ins. Code says you cannot buy higher UM coverage than you have liability, but you can and should match the limits. 5. Buy PIP instead of Med Pay. If your agents suggest otherwise, get another agent. 6. Buy high limits on everything. It usually doesn t cost much more to raise liability, UM and PIP limits significantly higher than the minimum. If your client gets in a wreck, high UM and PIP limits can be a godsend. E. THE HUMAN CONDITION I have no legal authority for any of this, but from practicing thirty five years, mainly on the plaintiff s side, I have observed the following: 55

62 1. Keep your client s expectations in line with reality. Lawsuits are generally no fun for the client, and they seldom produce pots of gold. Let them know this from the beginning. It is an honest thing to tell them and it will make your life much easier down the road. If they balk, let some other lawyer make them unhappy. 2. Try to get along with everyone. The other side of the docket is generally not evil. They usually are just doing a difficult job the best they can. Not only will your stress level stay down, but it generally helps your case if the other side does not have an extra motivation to fight you. 3. If you are on the plaintiff s side, try to know the other carrier and adjuster as well as you can. Talk to other attorneys, mediators and the folks themselves to learn as much as you can about their process. Some carriers will wait for mediation before they make a serious offer. Some will wait until a lawsuit is filed. With some carriers, you might as well go pick a jury. 56

63 V. Appendix Table of Authorities... A Standard Auto Policy... B Tex. Ins. Code, Chap (general auto coverage)... C Tex. Ins. Code, Chap (form requirements)... D Tex. Transp. Code Chap. 601 (Safety Responsibility Act)... E Texas Department of Insurance website, Form for approval of new policies... F Minimum limits for commercial trucking cases... G Sample Stowers letter with annotations... H 57

64 APPENDIX A Table of Authorities

65 Authorities CASES Accardo v. America First Lloyds Ins. Co., 2013 W.L (S.D. Tex. September 10, 2013). 42 Allstate Indem. Co. v. Forth, 204 S.W.3d 795 (Tex. 2006) Allstate Insurance Co. v. Pare, 688 S.W.2d 680 (Tex. App. - Beaumont 1985, writ ref d n.r.e.)... 9 Allstate v. Edminster, 224 S.W.3d 456 (Tex. App. Dallas 2007, no pet.) Allstate v. Watson, 876 S.W.2d 145 (Tex. 1994) Amanzoui v. Universal Underwriters Ins. Co. No. 2:09-CV-65-TJW, 2010 W.L (E.D. Tex. May 12, 2010) American Alternative Ins. Corp. v. Davis, --- S.W.3d ----, 2014 WL (Tex.App.-Waco, 2014) American Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480 (Tex. 1992) American Liberty Ins. Co. v. Ranzaus, 481 S.W.2d 793 (Tex. 1972)... 6 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)... 37, 50, 51 American States Ins. Co. of Texas v. Arnold, 930 S.W.2d 196 (Tex. App. - Dallas, 1996, writ denied) Arellano v. Maryland Casualty Co. 31 S.W.2d 701 (Tex. App. - El Paso 1958, no writ) Armendariz v. Progressive County Mutual Insurance Company, 112 S.W.3d 736 (Tex. App. - Houston [14 th Dist.] 2003, no pet.) Bartley v. Guillot, 990 S.W.2d 481 (Tex. App. - Houston, 1 st Dist., 1999, rev. denied) Bergensen v. Hartford Insurance Company, 845 S.W.2d 374 (Tex. App. - Houston, 1 st Dist., 1993, writ ref d)... 32, 36 Berry v. State Farm Mutual Automobile Ins. Co., 9 S.W.3d 884 (Tex. App. - Austin 2000, no pet.) Black v. BLC, Ins. Co., 725 S.W2d 286 (Tex. App. - Houston [1 st Dist.] 1986, writ ref d n.r.e.). 16 Black. Valdez v. Colonial County Mutual Ins. Co., 994 S.W.2d 910 (Tex. App. - Austin, 1999, rev. denied) Bleeker v. Villareal, 941 S.W.2d 163 (Tex. App. Corpus Christi 1996, writ dismissed) Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 50 Tex. Sup. Ct. J. 271, Tex, 2006) 32, 41 Briones v. State Farm Mutual Auto Ins. Co. 790 S.W.2d 70 (Tex. App. - San Antonio 1990, writ denied) 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.) 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) 22, 37 City of Austin v. Davis, 693 S.W.2d 31 (Tex. App. - Austin 1985, writ ref d n.r.e.) 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)... 8 Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) Collier v. Employers Nat. Ins. Co., 861 S.W.2d 286 (Tex. App. Houston [14 th dist] 1993, writ denied)... 18

66 Commercial Standard Insurance Co. v. American General Insurance Co., 455 S.W.2d 714, 716 (Tex. 1970) Continental Casualty Co. v. Thomas, 463 S.W.2d 501, (Tex. Civ. App. Beaumont 1971, no writ) Continental Ins. Co. v. Colston, 463 S.W.2d 461 (Tex. App. Fort Worth 1971, writ ref d n.r.e.) Cunningham v. Zurich American Ins. Co. 352 S.W.3d 519 (Tex.App. Fort Worth 2011, pet. filed) Dairyland County Mutual Insurance Co. v. Childress, 650 S.W.2d 770 (Tex. 1983)... 26, 54 Davis v. Stallones, 750 S.W.2d 235, 237 (Tex. App. Houston, 1 st Dist. 1987, no writ) Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, (Tex. 1984) Emert v. Progressive County Mutual Insurance Co., 882 S.W.2d 32 (Tex.App.-Tyler, 1996, writ den d)... 7 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) 36 Evanston Ins. Co. v. Atofina Petrochemicals, 256 S.W.3d 660 (Tex. 2008) Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc. 256 S.W.3d 660,665 (Tex., 2008) Excess Underwriters of Lloyd s, London v. Frank s Casing Tool and Rental Tools, Inc., 243 S.W.3d 42 (Tex. 2008) Fairfield Insurance Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653 (Tex. 2008) Farmers Enterprises, Inc. v. Gulf States Ins. Co., 940 S.W.2d 103 (Tex. App. Dallas 1996, no writ) Farmers Insurance Exchange v. Rodriguez, 366 S.W (Tex. App. Houston [14 th dist.] 2012, rev. denied) Farmers Insurance Exchange v. Rodriguez, No CV, February 16, 2012 (Houston [14 th dist] 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) Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007) 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) Garcia v. Travelers Insurance Co., 501 S.W.2d 754 (Tex. Civ. App. Houston [14th Dist.] 1973, no writ) Gaulden v. Johnson, 801 S.W.2d 561, 563 (Tex.App.-Dallas 1990, no writ)... 9 Genzer v. City of Mission, 666 S.W.2d 116 (Tex. App. - Corpus Christi 1983, writ ref d n.r.e.). 22 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) 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) Great Texas County Mutual Ins. Co. v. Lewis, 979 S.W.2d 72 (Tex. App. - Austin 1998, no pet.) 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.) Guerrerro v. Aetna Casualty and Surety Co., 575 S.W.2d 323 (Tex. App. - San Antonio 1978, no writ) GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305 (Tex. 2006)... 11

67 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).. 39, 40 Haralson v. State Farm, 564 F. Supp. 616 (N.D. Tex. July 8, 2008) Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Co., 444 S.W.2d 583 (Tex. 1969) Harrington v. Aetna Casualty and Surety Co., 489 S.W.2d 171 (Tex. App. - Waco, writ ref d n.r.e.) Harris County v. White, 823 S.W.2d 385 (Tex. App. - Texarkana 1992, no writ) Hartford Casualty Ins. Co. v. Phillips, 575 S.W.2d 62 (Tex. App. - Texarkana 1978, no writ) Hartland v. Progressive, 290 S.W.3d 318 (Tex. App. Houston [14 th dist.] 2009, no pet.) Hermann Hospital v. Martinez, 990 S.W.2d 476 (Tex. App. - Houston [14 th dist.] 1999, rev. denied)... 21, 22 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.) Home State County Mut. Ins. Co. v. Binning, 390 S.W.3d 696 (Tex.App. Dallas,2012, no pet.). 35 Home State County Mutual Inc. Co. v. Horn, 2008 W.L (Tex. App. Tyler June 25, 2008, memorandum opinion) Home State County Mutual Ins. Co. v. Acceptance Insurance Co., 958 S.W.2d 263 (Tex. Civ. App. Amarillo, 1997, no writ) In re American Home Assurance Company, 88 S.W.3d 370 (Tex. App.-Texarkana 2002, orig. proceeding) In re Dana Corporation, 138 S.W.2d 298 (Tex. 2004) In re Davis, 253 F. 3d 807 (5 th Circuit, 2001) In re General Ins. Agencies of America, Inc.224 S.W.3d 806 (Tex. App. Houston [14 th Dist.] 2007) In re Koehn, 86 S.W.3d 363 (Tex.App. Texarkana,2002, no pet.) In re Madrid 242 S.W.3d 563 (Tex. App. El Paso, 2007) In re Old American County Mut. Fire Ins. Co., 2013 WL (Tex.App.-Corpus Christi,2013, no pet.) In re Teachers Ins. Co., No CV., 2004 WL , Tex.App.-Amarillo,2004, no pet.- not designated for publication) In re United Fire Lloyds, 327 S.W.3d 250 (Tex. App. San Antonio 2010, no pet.) Jankowiak v. Allstate, 201 S.W.3d 200 (Tex. App. - Houston [14 th dist] 2006, no pet.)... 39, 40 King v. Dallas Fire Ins. Co., 85 S.W.3d 185 (Tex. 2002) Laine v. Farmers Ins. Exchange, 325 S.W.3d 661, 666 (Tex. App. Houston [1 st Dist] 2010, rev. denied) Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) Lancer Ins. Co. v. Garcia Holiday Tours, 345 S.W.3d 50 (Tex. 2011)... 18

68 Lane v. State Farm Mut. Auto Ins. Co., 992 S.W.2d 545 (Tex. App. - Texarkana 1999, rev. den d) 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.) Liberty Mutual Ins. Co. v. Rawls, 404 F.2d 880 (5 th Cir. 1968) Liberty Mutual Insurance Co. v. Cruz, 883 S.W.2d 164 (Tex. 1993)... 9 Love of God Holiness Temple Church v. Union Standard Ins. Co., 860 S.W.2d 179 (Tex. App. - Texarkana 1993, writ denied)... 8, 43 Love of God Holiness Temple Church v. Union Standard Ins. Co., 860 S.W.2d 179, 181 (Tex. App. - Texarkana 1993, writ denied) Manriquez v. Mid-Century Ins. Co. of Texas, 779 S.W.2d 482, (Tex. App. - El Paso, 1989, writ denied) Maryland Insurance Co. v. Head Industrial Coatings & Service, Inc., 938 S.W.2d 27 (Tex. 1996) McDonald v. Home State County Mut. Ins. Co., No , 2011 W.L (Tex. App. Houston [1 st Dist.] Mar. 24, 2011, pet. denied) McDonald v. Southern County Mutual Ins. Co., 176 S.W.3d 464 (Tex. App. Houston [1 st Dist.] 2004, no pet.) McGovern v. Williams, 741 S.W.2d 373 (Tex. 1988)... 21, 36, 37 Melencon v. State Farm Mut. Auto Ins. Co., 343 S.W.3d 567, 570 (Tex. App. Houston [14 th dist.] 2011, no pet.) Members Mutual Ins. v. Hermann Hospital, 664 S.W.2d 325, 328 (Tex. 1984) Meuth v. Hartgrove, 811 S.W.2d 626, 628 (Tex. App. - Austin 1990, writ denied) Mid-Century Ins. Co. of Texas v. Daniel, 223 S.W.3d 586 (Tex. App. Amarillo 2007, pet. denied) Mid-Century Ins. Co. of Texas v. Lindsey, 997 S.W.2d 153, 157 (Tex. 1999) Mid-Century Ins. Co. Of Texas v. McLain No CV., 2010 WL (Tex.App.- Eastland,2010, no pet.) Mid-Century Insurance Co. v. Childs, 15 S.W.3d 187 (Tex. App. - Texarkana 2000, no pet.) Mid-Century Insurance Company of Texas v. Kidd, 997 S.W.2d 265 (Tex. 1999)... 27, 31 Miller v. Windsor Insurance Co., 923 S.W.2d 91 (Tex. App. - Fort Worth, 1996, writ denied) Milton v. Preferred Risk Ins. Co., 511 S.W.2d 83, 85 (Tex.Civ.App.-Houston [14th Dist.] 1974, writ ref'd n.r.e.) Minter v. Great American Ins. Co. of NY, 2010 W.L , 394 Fed. Appx. 47 (5 th Cir. 2010) 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) Morrison v. Campbell 2014 WL (Fort Worth, Jan. 16, 2014) National County Mutual Fire Ins. Co. v. Johnson, 879 S.W.2d 1 (Tex. 1993) National Old Line Ins. Co. v. Garcia, 517 S.W.2d 621, 625 (Tex. App. Fort Worth, 1975, writ ref d n.r.e.) National Union Fire Ins. Co. v. Crocker, 246 S.W.3d 603, 608 (Tex. 2008) National Union v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991) Nationwide Ins. Co. v. Elchehimi, 249 S.W. 3d. 430 (Tex., 2008) Noteboom v. Farmers Texas County Mutual Ins. 406 S.W.3d 381, (Tex. App. Ft. Worth 2013, no pet.)... 44

69 Nutt v. Members Ins. Co., 474 S.W.2d 575 (Tex. App.- Dallas 1971, writ ref d n.r.e.)... 9 Odom v. Insurance Company of State of Penn., 455 S.W.2d 195, 198 (Tex 1970) Ohio Casualty Group v. Risinger, 960 S.W.2d 708 (Tex. App. - Tyler, 1997, writ denied)... 9 Old American Mutual Fire Ins. Co. v. Sanchez, 149 S.W.3d 111 (Tex. 2004)... 28, 41 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)... 9 Perez v. Kleinert, 211 S.W.3d 468 (Tex. App. Corpus Christi 2006, pet. filed) Pride Transportation v. Continental Casualty Co., 2013 W.L (5 th Cir. Feb. 6, 2013, slip copy) Progressive County Mutual Ins. Co. v, Sink, 107 S.W.3d 547 (Tex. 2003) Progressive County Mutual v. Kelley, 284 S.W.3d 805 (Tex. 2009) Progressive v. Delgado, 335 S.W.3d 689 (Tex. App. Amarillo, 2011, rev. denied) Ramsay v. Maryland American General Ins. Co., 533 W.W.2d 344 (Tex. 1976) Rocor International, Inc. v. National Union Fire Ins., 77 S.W.3d 253 (Tex. 2002) 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)... 32, 40 Rumley v. Allstate Indem. Co., 924 S.W.2d 448, (Tex.App.-Beaumont 1996, no writ hist) Safeco Lloyds Ins. Co. v. Allstate Ins. Co. 308 S.W.3d 49 (Tex.App. San Antonio 2009, no pet. 12 Safeco v. Allstate, 308 S.W.3d 49, (Tex. App.-San Antonio, 2009, no pet.)... 49, 51 Schober v. State Farm Mutual Automobile Ins. Co., 2007 W.L (N.D. Texas, July 18, 2007) Scottsdale Ins. Co. v. National Emergency Services, Inc., 175 S.W.3d 284 (Tex. App. Houston [1 st Dist.] 2004, rev. denied) Sidelnik v. American States Ins. Co. 914 S.W.2d 689 (Tex. App, - Austin 1996, writ denied) Simpson v. GEICO Gen. Ins. Co., 907 S.W.2d 942 (Tex. App. -- Houston [1 st Dist.] 1995, no writ) Simpson v. Geico General Insurance Co., 907 S.W.2d 942 (Tex. App. - Houston, 1 st Dist., 1995, no writ)... 9 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) Smith v. Eagle Star Insurance Co., 370 S.W.2d 448, 450 (Tex. 1963) Snyder v. Allstate Insurance Co., 485 S.W.2d 769 (Tex. 1972)... 16, 17 Snyder v. Allstate, 485 S.W.2d 769 (Tex 1972) Southern Farm Bureau Cas. Ins. Co. v. Franklin ex rel. Walker, 2006 WL (Tex. App. - Amarillo May 19, 2006, no pet. hist.) Southern Farm Bureau Casualty Ins. Co. v. Kimball, 552 S.W.2d 207 (Tex. App. - Waco 1977, writ ref d n.r.e.) St. Paul Fire & Marine Ins. Co. v. Convalescent Services, Inc., 193 F.3d 340 (5 th Cir. 1999) St. Paul Fire and Marine Insurance Company v. American International Surplus Lines Insurance Company, 1997 WL (N.D. Tex. March 31, 1997) State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996) State Farm Fire and Cas. v. Mower, 917 S.W.2d 2, 4 (Tex. 1995) State Farm Lloyds Inc. v. Williams, 960 S.W.2d 781 (Tex. App. - Dallas, 1997, review dismissed by agreement)... 11

70 State Farm Lloyds v. C.M.W., 53 S.W.3d 877, (Tex. App. Dallas 2001, no pet.)... 22, 37 State Farm Mut. Auto. Ins. Co. v. Perkins, 216 S.W.3d 396, (Tex.App.-Eastland,2006, no pet.). 39 State Farm Mutual Auto Ins. Co. v. Nguyen, 920 S.W.2d 409 (Tex. App. - Houston [1 st dist.] 1996, no pet.) State Farm Mutual Auto Ins. Co. v. Pan Am Ins. Co., 437 S.W.2d 542, 545 (Tex. 1969) State Farm Mutual Auto Ins. v Nickerson, 216 S.W.3d 823 (Tex. 2006)... 32, 41 State Farm Mutual Auto Ins. v Norris, 216 S.W.3d 819 (Tex. 2006)... 32, 41 State Farm Mutual Automobile Ass. v. Bowen, 2013 W.L (Tex. App. Eastland 2013) State Farm Mutual Automobile Insurance Co. v. Traver, 980 S.W.2d 625 (Tex. (1998) State Farm Mutual Ins. Co. v. Matlock, 462 S.W.2d 277 (Tex. 1970) Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm n App. 1929, holding approved) Stowers Furniture Co. v. American Indemnity Company, 15 S.W.2d 544, 547 (Tex. Comm'n App.1929, holding approved) 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)... 32, 37, 39 Struna v. Concord Insurance Services, Inc., 11 S.W.3d 355 (Tex. App.- Houston, 1 st Dist., 2000, no writ)... 8, 54 Tanner v. Nationwide Mutual Fire Ins. Co., 289 S.W.3d 828 (Tex. 2009) Taylor v. State Farm Lloyds, Inc., 124 S.W.3d 665 (Tex. App. Austin 2003, rev. denied).. 48, 49 Taylor v. State Farm Lloyds, Inc., 124 S.W.3d 665 (Tex.App. Austin 2003, rev. denied) Taylor v. State Farm Lloyds, Inc.,124 S.W.3d 665 (Tex. App. - Austin 2003, rev. denied) Terry v. Safeco Ins. Co. of America F. Supp. 2d, 2013 W.L (S.D. Tex. 2013) Texas Farmers County Mutual Insurance Company v. Wilkinson, 601 S.W.2d 520 (Tex. App. - Austin 1980, writ ref d n.r.e.) Texas Association of Counties County Government Risk Management Pool v. Matagorda County, 53 S.W.3d 128 (Tex. 2000)... 25, 26 Texas Farm Bureau Mutual Ins. Co. v. Sturrock, 146 S.W.3d 123 at 134 (Tex. 2004) Texas Farmers County Mutual Ins. Co. v. Wilkinson, 601 S.W.2d 550 (Tex. App. - Austin, 1980, writ ref d n.r.e.) 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) Texas Farmers Insurance Co. v. Fruge, 13 S.W.3d 509 (Tex. App. - Beaumont, 2000, rev. denied)... 30, 53 Texas Farmers Insurance Co. v. Soriano, 881 S.W.2d 312, 315 (Tex. 1994)... 23, 37 Transport Intern. Pool, Inc v. Continental Ins. Co. 166 S.W.2d 781 (Tex. App. Ft. Worth 2005, no pet.) at Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 33 (Tex. 1994) Travelers Indemnity Co. of Rhode Island v. Lucas, 678 S.W (Tex. App. - Texarkana 1984, no writ) Travelers Insurance Co. v. Employers Casualty Co., 380 S.W.2d 610 (Tex. 1965) Traylor v. Cascade Ins. Co., 828 S.W.2d 292 (Tex. App. - Dallas 1992, no writ) Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489 (Tex. 1998) Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997)... 21, 22 Ulico Casualty Co. v. Allied Pilots Ass., 262 S.W.3d 773(Tex 2008)... 10, 11

71 Unigard Sec. Ins. Co. v. Shaefer, 572 S.W.2d 303 (Tex. 1978)... 15, 28 United States Automobile Association v. DiCarlo, 670 S.W.2d 756 (Tex. App. -El Paso 1984, writ ref d n.r.e.) United States Fire Ins. Co. v. United Service Automobile Ass., 772 S.W.2d 218 (Tex. App. - Dallas, 1989, writ denied) United States Fire Ins. Co. v. United Service Automobile Assn., 772 S.W.2d 218 (Tex. App. - Dallas 1989, writ denied) Universal Underwriters Ins. Co. v. Hartford Acc.& Ind. Co., 487 S.W.2d 152 (Tex. App. Houston [14 th Dist.] 1972, writ ref d n.r.e University of Tex. V. Hinton, 822 S.W.2d (Tex.App.- Austin 1991, no writ) Upshaw v. Trinity Companies, 842 S.W.2d 631 (Tex. 1992) Urrutia v. Decker, 992 S.W.2d 440 (Tex. 1999)... 7 Valdez v. Colonial County Mutual Ins. Co., 994 S.W.2d 910 (Tex. App. - Austin, 1999, rev. denied) Valentine v. Safeco Lloyds Ins. Co., 928 S.W.2d 639 (Tex. App. - Houston [1 st Dist] 1996, writ den d) Valle v. State Farm, 5 S.W.3d 745 (Tex. App. San Antonio 1999, rev. denied) 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) Verhoev v. Progressive County Mut. Ins. Co., 300 S.W.3d 803 (Tex.App. Fort Worth,2009, no pet.) Verhoev v. Progressive County Mut. Ins. Co., 300 S.W.3d 803, 810 (Tex.App. Fort Worth,2009, no pet.) Villegas v. Nationwide Mutual Ins. Co., 10 S.W.3d 380 (Tex. App. Austin 1999, rev. den d).. 17 Warmbrod v. USAA County Mutual Ins. Co., 367 S.W.3d 778 (Tex. App. El Paso 2012, rev. denied) Webb v. International Trucking Co., Inc., 909 S.W.2d 220 (Tex. App. - San Antonio 1995, no writ)... 26, 44 Weir v. Twin City Fire Ins. Co., 622 F. Supp. 2d 483 (S.D. Tex. March 31, 2009) Westchester Fire Ins. Co. v. Admiral Ins. Co., 152 S.W.3d 172 (Tex. App. - Ft. Worth, 2004, rev. den d) Westchester Fire Ins. Co. v. Tucker, 512 S.W.2d 679 (Tex. 1974)... 20, 31, 36 Western Alliance Ins. Co. v. Alberez, 380 S.W.2d 710 (Tex. App. Austin 1964, writ ref d n.r.e.) Whitehead v. State Farm Mut. Auto. Ins. Co., 952 S.W.2d 79 (Tex.App.-Texarkana 1997) Williams v. Allstate Ins. Co., 849 S.W.2d 859 (Tex. App. - Beaumont 1993, no writ) Zamora v. Dairyland County Mutual Ins. Co., 930 S.W.2d 739 (Tex. App. - Corpus Christi 1996, writ denied) REGULATIONS 49 C.F.R STATUTES 43 Tex. Admin. Code

72 Tex. Civ. Prac. & Rem. Code , et seq Tex. Civ. Prac. & Rem. Code Tex. Civ. Prac. & Rem. Code Tex. Ins. Code Tex. Ins. Code , 13, 44 Tex. Ins. Code policy forms... 3 Tex. Ins. Code standard policy... 3 Tex. Ins. Code short term coverage... 3 Tex. Ins. Code Tex. Ins. Code effect of divorce... 3 Tex. Ins. Code drug forfeiture... 3 Tex. Ins. Code Uninsured Motorist Coverage... 3, 31 Tex. Ins. Code definition of uninsured... 3 Tex. Ins. Code underinsured... 4 Tex. Ins. Code UM limits... 4, 55 Tex. Ins. Code UM limits and deductible... 4 Tex. Ins. Code defines UM coverage... 4 Tex. Ins. Code may stack UM and collision coverage... 4 Tex. Ins. Code UM subrogation... 4 Tex. Ins. Code burden of proof, UM... 4 Tex. Ins. Code UM venue... 4 Tex. Ins. Code personal injury protection... 5 Tex. Ins. Code PIP required unless waived... 5, 27 Tex. Ins. Code PIP minimum coverage... 5 Tex. Ins. Code lost income under PIP... 5 Tex. Ins. Code collateral source irrelevant to PIP... 5, 29 Tex. Ins. Code payments under PIP... 5, 29 Tex. Ins. Code Penalty for failure to pay PIP... 5, 29 Tex. Ins. Code Exclusions... 5 Tex. Ins. Code Offset against liability claim... 6, 29 Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code Tex. Ins. Code policy must be in plain English... 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. Occ. Code (b)... 45

73 Tex. Prop. Code Tex. Transp. Code Tex. Transp. Code , 15, 19 Tex. Transp. Code policy must contain... 2, 51, 52 Tex. Transp. Code allowable terms... 2, 16 Tex. Transp. Code prohibited terms... 2 Tex. Transp. Code Tex. Transp. Code permissive users... 3, 15, 17, 19 Tex. Transp. Code additional coverage... 3 RULES Tex. Civ. Prac. & Rem. Code e Tex. R. Civ. Proc Tex. R. Civ. Proc. 94 Affirmative Defenses Tex. R. of Evid

74 APPENDIX B Standard Auto Policy

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93 APPENDIX C Insurance Code 1952

94 Effective: April 01, 2007 Vernon's Texas Statutes and Codes Annotated Currentness Insurance Code Title 10. Property and Casualty Insurance (Refs & Annos) Subtitle C. Automobile Insurance Chapter Policy Provisions and Forms for Automobile Insurance Subchapter A. General Provisions Applicability of Chapter Except as provided by Section , this chapter applies to an insurer writing automobile insurance in this state, including an insurance company, corporation, reciprocal or interinsurance exchange, mutual insurance company, association, Lloyd's plan, or other insurer. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 Subchapter B. Policy Forms and Provisions in General Policy Forms for Automobile Insurance Notwithstanding Subsections (1)-(4) and (7), Article 5.06, [FN1] policy forms and endorsements for automobile insurance in this state are regulated under Chapter 2301 and Article [FN2] [FN1] V.A.T.S. Insurance Code, art [FN2] V.A.T.S. Insurance Code, art <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Use of Previously Approved or Adopted Policy Forms Authorized 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

95 Page 2 An insurer may continue to use a policy form or endorsement approved or adopted by the commissioner under Article 5.06 before June 11, 2003, on notification in writing to the commissioner that the insurer will continue to use the policy form or endorsement. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Withdrawal of Approval Effective: April 01, 2007 The commissioner may, after notice and hearing, withdraw the commissioner's approval of a policy or endorsement form that was approved by the commissioner under Article [FN1] [FN1] V.A.T.S. Insurance Code, art <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Required Disclosures Regarding Short-term Policies (a) An insurance policy or other document evidencing proof of purchase of a personal automobile insurance policy written for a term of less than 30 days may not be used to obtain an original or renewal driver's license, an automobile registration or license plates, or a motor vehicle inspection certificate. An insurance policy or other document described by this subsection must contain the following statement: TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES. (b) Before accepting any premium or fee for a personal automobile insurance policy or binder for a term of less than 30 days, an agent or insurer must make the following written disclosure to the applicant or insured: TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Certificate of Insurance as Substitute for Insurance Policy (a) An insurer that complies with applicable requirements may issue and deliver a certificate of insurance as a substitute for issuing and delivering an insurance policy adopted or approved by the commissioner. The certificate must: (1) be in the form prescribed by the commissioner; and (2) refer to and identify the policy form for which the certificate is substituted. (b) A certificate under this section represents the insurance policy and, when issued, is evidence that the certificate holder is insured under the identified policy form. The certificate is subject to the same limitations, conditions, 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

96 Page 3 coverages, selection of options, and other provisions provided in the policy, and the certificate must show and adequately reference that policy information. The certificate or subsequent attachments to the certificate must refer to all endorsements to the policy. (c) A certificate under this section must be executed in the same manner as though an insurance policy were issued. If an insurer substitutes a certificate for a policy, the insurer shall simultaneously provide the insured receiving the certificate with an outline of coverages in the form and content approved by the commissioner. At the insured's request, the insurer shall provide the insured with a copy of the policy. (d) The commissioner may adopt rules necessary to implement this section, including a rule limiting the application of this section to private passenger automobile insurance policies. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Required Provision: Coverage for Certain Spouses A personal automobile insurance policy or any similar policy form adopted or approved by the commissioner under Article 5.06 [FN1] or filed under Subchapter B, Chapter 2301, [FN2] that covers liability arising out of ownership, maintenance, or use of a motor vehicle of a spouse who is otherwise insured by the policy must contain a provision to continue coverage for the spouse during a period of separation in contemplation of divorce. [FN1] V.A.T.S. Insurance Code, art [FN2] V.T.C.A., Insurance Code et seq. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Prohibited Provision: Payment on Conviction for Drug Offense (a) An insurer may not deliver or issue for delivery in this state an automobile insurance policy that provides payment on final conviction of the named insured for loss for a covered motor vehicle seized by federal or state law enforcement officers as evidence in a case against the named insured under Chapter 481, Health and Safety Code, or under the federal Controlled Substances Act (21 U.S.C. Section 801 et seq.). (b) For purposes of this section, a named insured for: (1) an individual automobile insurance policy is the person named on the declaration page of the policy and the person's spouse; and (2) an automobile insurance policy other than an individual policy is the company or corporation named on the declaration page of the policy and any officer, director, or shareholder of that company or corporation. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Loss Control Information and Services Required (a) An insurer must provide loss control information as a prerequisite to writing commercial automobile liability insurance in this state Thomson/West. No Claim to Orig. U.S. Govt. Works.

97 Page 4 (b) The insurer shall provide to the insurer's policyholders loss control information reasonably commensurate with the risks, exposures, and experience of the insured's business. To provide loss control information or services, the insurer may: (1) employ qualified personnel; (2) retain qualified independent contractors; (3) contract with the policyholder to provide qualified loss control personnel and services; or (4) use a combination of methods described by this subsection. (c) If there is evidence that an insurer is not providing reasonable loss control information or is not using that information in a reasonable manner to reduce losses, the commissioner shall order a hearing to determine whether the insurer is in compliance with this section. If the commissioner determines that the insurer is not in compliance, the commissioner may impose any sanction authorized by Chapter 82. (d) An insurer or an agent or employee of the insurer is not liable, and a cause of action does not arise against the insurer, agent, or employee, for any accident based on the allegation that the accident was caused or could have been prevented by a program, information, inspection, or other activity or service undertaken by the insurer for the prevention of accidents in connection with operations of the insured. The immunity provided by this subsection does not affect the liability of an insurer for compensation or as otherwise provided in an insurance policy. (e) Loss control information an insurer provides to an insured under this section is not subject to discovery and is not admissible as evidence in any civil proceeding. (f) The commissioner, after holding a public hearing on the proposed rules, may adopt reasonable rules for the enforcement of this section. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 Subchapter C. Uninsured or Underinsured Motorist Coverage Uninsured or Underinsured Motorist Coverage Required (a) In this section, "uninsured or underinsured motorist coverage" means the provisions of an automobile liability insurance policy that provide for coverage in at least the limits prescribed by Chapter 601, Transportation Code, that protects insureds who are legally entitled to recover from owners or operators of uninsured or underinsured motor vehicles damages for bodily injury, sickness, disease, or death, or property damage resulting from the ownership, maintenance, or use of any motor vehicle Thomson/West. No Claim to Orig. U.S. Govt. Works.

98 Page 5 (b) 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 Chapter 2151, that covers liability arising out of the ownership, maintenance, or use of any motor vehicle unless the insurer provides uninsured or underinsured motorist coverage in the policy or supplemental to the policy. (c) 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. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Uninsured Motor Vehicle Effective: April 01, 2007 (a) For purposes of the coverage required by this subchapter, "uninsured motor vehicle," subject to the terms of the coverage, is considered to include an insured motor vehicle as to which the insurer providing liability insurance is unable because of insolvency to make payment with respect to the legal liability of the insured within the limits specified in the insurance. (b) The commissioner may, in the policy forms filed under Subchapter B, Chapter 2301, allow "uninsured motor vehicle" to be defined or, in policy forms adopted under Article 5.06, [FN1] define "uninsured motor vehicle," to exclude certain motor vehicles whose operators are in fact uninsured. [FN1] V.A.T.S. Insurance Code, art <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Underinsured Motor Vehicle Effective: April 01, 2007 For purposes of the coverage required by this subchapter, "underinsured motor vehicle" means an insured motor vehicle on which there is collectible liability insurance coverage with limits of liability for the owner or operator that were originally lower than, or have been reduced by payment of claims arising from the same accident to, an amount less than the limit of liability stated in the underinsured coverage of the insured's policy. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Required Provisions Relating to Uninsured or Underinsured Motorist Coverage The portion of a policy form adopted under Article 5.06 [FN1] or filed as provided by Subchapter B, Chapter 2301, [FN2] to provide coverage under this subchapter must: (1) provide that, regardless of the number of persons insured, policies or bonds applicable, vehicles involved, or claims made, the total aggregate limit of liability to any one person who sustains bodily injury or property damage as the result of a single occurrence may not exceed the limit of liability for those coverages as stated in the insurance policy and that the total aggregate limit of liability to all claimants, if more than one, may not exceed the total limit of liability per occurrence as stated in the policy; 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

99 Page 6 (2) provide for the exclusion of the recovery of damages for bodily injury or property damage, or both, resulting from the intentional acts of the insured; and (3) require that, for the insured to recover under the uninsured motorist coverage if the owner or operator of any motor vehicle that causes bodily injury or property damage to the insured is unknown, actual physical contact must have occurred between the motor vehicle owned or operated by the unknown person and the person or property of the insured. [FN1] V.A.T.S. Insurance Code, art [FN2] V.T.C.A., Insurance Code et seq. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Liability Limits Effective: April 01, 2007 (a) The limits of liability for bodily injury, sickness, disease, or death must be offered to an insured in the amounts desired by the insured, but not in amounts greater than the limits of liability specified in the bodily injury liability provisions of the insured's policy. (b) Subject to a deductible amount of $250, coverage for property damage must be offered to an insured in the amounts desired by the insured, but not in amounts greater than the limits of liability specified in the property damage liability provisions of the insured's policy. (c) Notwithstanding Subsections (a) and (b), amounts of liability limits for bodily injury, sickness, disease, or death and amounts for coverage for property damage may not be offered in amounts less than those prescribed by Chapter 601, Transportation Code. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Recovery Under Underinsured Motorist Coverage Underinsured motorist coverage must provide for payment to the insured of all amounts that the insured is legally entitled to recover as damages from owners or operators of underinsured motor vehicles because of bodily injury or property damage, not to exceed the limit specified in the insurance policy, and reduced by the amount recovered or recoverable from the insurer of the underinsured motor vehicle. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Recovery Under Collision or Combined Coverage (a) An insured who has collision coverage and uninsured or underinsured property damage liability coverage may recover under the coverage the insured chooses. (b) If neither the collision coverage or the uninsured or underinsured property damage liability coverage is sufficient alone to cover all damage resulting from a single occurrence, the insured may recover under both coverages. If recovering under both coverages, the insured shall designate one coverage as the primary coverage and pay the deductible applicable to that coverage. The primary coverage must be exhausted before any recovery is made under the secondary coverage Thomson/West. No Claim to Orig. U.S. Govt. Works.

100 Page 7 (c) If both the primary and secondary coverages are used to pay damages from a single occurrence, the insured may not be required to pay the deductible applicable to the secondary coverage when the amount of the deductible otherwise applicable to the secondary coverage is the same as or less than the amount of the deductible applicable to the primary coverage. If both coverages are used to pay damages from a single occurrence and the amount of the deductible otherwise applicable to the secondary coverage is greater than the amount of the deductible applicable to the primary coverage, the insured shall pay the difference between the amount of the two deductibles with respect to the secondary coverage. (d) The insured may not recover under both the primary and secondary coverages more than the actual damages suffered. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Insurer's Right of Recovery Effective: April 01, 2007 (a) An insurer that makes a payment to any person under any coverage required by this subchapter is subject to the terms of that coverage and, to the extent of the payment, is entitled to the proceeds of any settlement or judgment resulting from the exercise of any right of recovery of the person to whom the payment is made against any person or organization legally responsible for the bodily injury, sickness, disease, or death for which the payment is made, including the proceeds recoverable from the assets of an insolvent insurer. (b) If, under an insurance policy issued under this subchapter, an insurer makes a payment as a result of the insolvency of another insurer: (1) the insolvent insurer's insured shall be given credit to the extent of the paying insurer's payment in any judgment obtained against the insured with respect to the insured's legal liability for damages described by Subsection (a); and (2) subject to Subchapter F, Chapter 462, [FN1] the paying insurer has the right to proceed directly against the insolvent insurer or that insurer's receiver, and in pursuing that right the paying insurer has any rights that the insolvent insurer's insured might otherwise have had if the insured had made the payment. [FN1] V.T.C.A., Insurance Code et seq. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Burden of Proof in Dispute Effective: April 01, 2007 The insurer has the burden of proof in a dispute as to whether a motor vehicle is uninsured. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Venue Effective: April 01, 2007 Notwithstanding Section , Civil Practice and Remedies Code, an action against an insurer in relation to the coverage provided under this subchapter, including an action to enforce that coverage, may be brought only in the county in which: (1) the policyholder or beneficiary instituting the action resided at the time of the accident involving the uninsured or underinsured motor vehicle; or 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

101 Page 8 (2) the accident occurred. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 [Sections to reserved for expansion] <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 Subchapter D. Personal Injury Protection Coverage Personal Injury Protection "Personal injury protection" consists of provisions of an automobile liability insurance policy that provide for payment to the named insured in the policy, members of the insured's household, and any authorized operator or passenger of the named insured's motor vehicle, including a guest occupant, of all reasonable expenses that: (1) arise from an accident; (2) are incurred not later than the third anniversary of the date of the accident; and (3) are for: (A) necessary medical, surgical, x-ray, or dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing, or funeral services; (B) in the case of an income producer, replacement of income lost as the result of the accident; or (C) in the case of a person injured in the accident who was not an income or wage producer at the time of the accident, 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. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Personal Injury Protection Coverage Required (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 Chapter 2151, 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 to the policy Thomson/West. No Claim to Orig. U.S. Govt. Works.

102 Page 9 (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. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Maximum Required Amount of Personal Injury Protection This subchapter does not require an insurer to provide personal injury protection coverage in an amount that exceeds $2,500 for all benefits, in the aggregate, for each person. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Loss of Income Benefits Effective: April 01, 2007 An insurer providing loss of income benefits under coverage required by this subchapter may require that the insured, as a condition of receiving those benefits, provide the insurer with reasonable medical proof of the insured's injury causing loss of income. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Benefits payable without regard to fault or collateral Source; Effect on Subrogation (a) The benefits under coverage required by this subchapter are payable without regard to: (1) the fault or nonfault of the named insured or recipient in causing or contributing to the accident; and (2) any collateral source of medical, hospital, or wage continuation benefits. (b) An insurer paying benefits under coverage required by this subchapter does not have a right of subrogation or claim against any other person or insurer to recover any benefits by reason of the alleged fault of the other person in causing or contributing to the accident. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Payment of benefits Effective: April 01, 2007 (a) Subject to the requirements of this section and Section , an insurer shall pay benefits under the coverage required by this subchapter periodically as claims for those benefits arise, but not later than the 30th day after the date the insurer receives satisfactory proof of a claim. (b) The coverage required by this subchapter may: (1) prescribe a period of not less than six months after the date of an accident within which the original proof of loss with respect to a claim for benefits must be presented to the insurer; and 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

103 Page 10 (2) provide that an insurer may require reasonable medical proof of an alleged recurrence of an injury for which an original claim for benefits was made if a lapse occurs in the period of total disability or in the medical treatment of an injured person who: (A) has received benefits under that coverage; and (B) subsequently claims additional benefits based on the alleged recurrence. (c) The aggregate benefits payable under the coverage required by this subchapter to any person may not exceed the maximum limits prescribed in the insurance policy. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Action for Failure to Pay Benefits Effective: April 01, 2007 (a) If the insurer fails to pay benefits under the coverage required by this subchapter when due, the person entitled to those benefits may bring an action in contract to recover the benefits. (b) If the insurer is required to pay benefits described by Subsection (a), the person entitled to the benefits is entitled to recover reasonable attorney's fees, a penalty of 12 percent, and interest at the legal rate from the date those amounts became overdue. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Exclusion of Benefits Effective: April 01, 2007 An insurer shall exclude benefits to an insured or the insured's personal representative under the coverage required by this subchapter if the insured's conduct contributed to the injury the insured sustained and that conduct: (1) involved intentionally causing injury to the insured; or (2) occurred while committing a felony or while seeking to elude lawful apprehension or arrest by a law enforcement official. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Offset Against Liability Claim Effective: April 01, 2007 (a) If a liability claim is made by a guest or passenger described by Section against the owner or operator of the motor vehicle in which the guest or passenger was riding or against the owner's or operator's liability insurer, the owner or operator of the motor vehicle or the owner's or operator's liability insurer is entitled to an offset, credit, or deduction against any award made to the guest or passenger in an amount equal to the amounts paid by the owner, the operator, or the owner's or operator's automobile liability insurer to the guest or passenger under personal injury protection. (b) This subchapter does not authorize a direct action against a liability insurer if that right does not presently exist at law Thomson/West. No Claim to Orig. U.S. Govt. Works.

104 Page 11 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Inapplicability to Accident or Health Insurance This subchapter applies only to an automobile insurance policy subject to this subtitle or Subchapter A, Chapter 5, and does not apply to any other accident or health insurance policy, regardless of whether the accident or health insurance policy provides indemnity against automobile-connected injuries. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Certain Coverage Unaffected This subchapter does not: Effective: April 01, 2007 (1) affect the offering of medical payments coverage, disability benefits, or accidental death benefits, as presently prescribed by the commissioner; or (2) prevent an insurer from providing benefits broader than the minimum benefits described by this subchapter, subject to the rules prescribed by the commissioner. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 Subchapter E. Short-Term Liability Insurance for Certain Motorists Applicability of Subchapter This subchapter applies to an insurer authorized to write automobile insurance in this state, including an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, Lloyd's plan, or other entity. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Thomson/West. No Claim to Orig. U.S. Govt. Works.

105 Page Definitions In this subchapter: (1) "Motor vehicle" means any private passenger vehicle or utility type vehicle that has a gross weight of not more than 25,000 pounds. (2) "Short-term liability insurance policy" means an insurance policy that: (A) provides coverage for at least 24 hours but not for more than one week; (B) meets the requirements of Chapter 601, Transportation Code; (C) covers liability for bodily injury, death, and property damage arising from the use or operation of a motor vehicle; and (D) is not insurance assigned to an authorized insurer by the Texas Automobile Insurance Plan Association under Section (a). <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Short-term Liability Insurance Program Effective: April 01, 2007 (a) The commissioner by rule may establish a program to provide for the sale of short-term liability insurance policies to nonresident motorists who are visiting this state. (b) The commissioner may negotiate an agreement with any insurer under which the insurer will sell insurance policies described by this section. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Agent License Required Effective: April 01, 2007 A person representing an insurer in selling short-term liability insurance policies under this subchapter must be licensed under Title 13. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Sale of Short-term Liability Insurance Policies An insurer selling short-term liability insurance policies under this subchapter shall use policy forms adopted by the commissioner under Article 5.06 or filed and in effect as provided by Subchapter B, Chapter 2301, as applicable, unless the insurer is exempt from using those forms. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, 2007 [Sections to reserved for expansion] 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

106 Page 13 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Subchapter F. Garage Insurance Effective: April 01, Definitions In this subchapter: (1) "Garage customer" means a person or organization other than: (A) the named insured under a garage insurance policy; (B) an employee, director, officer, shareholder, partner, or agent of the named insured; or (C) a resident of the same household as: (i) the named insured; or (ii) an employee, director, officer, shareholder, partner, or agent of the named insured. (2) "Garage insurance" means automobile insurance as defined by Article 5.01 [FN1] issued to a named insured who is engaged in the business of selling, servicing, or repairing motor vehicles as defined by commissioner rule or order. [FN1] V.A.T.S. Insurance Code, art <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Garage Insurance Effective: April 01, 2007 (a) A garage insurance policy may provide that a garage customer is not an insured under the policy and that the coverage under the policy does not apply to a garage customer except to the extent that any other insurance coverage that is collectible and available to the garage customer is not equal to the minimum financial responsibility limits specified by Chapter 601, Transportation Code. (b) Notwithstanding any provision to the contrary in another insurance policy as to whether the insurance coverage described by Subsection (a) that is provided under that policy is primary, excess, or contingent insurance, or otherwise, the other insurance coverage is the primary insurance as to the garage customer. (c) A garage insurance policy containing a provision described by Subsection (a) may not cover a garage customer except to the extent permitted by this section, notwithstanding the terms of the other insurance policy providing coverage described by Subsection (a) Thomson/West. No Claim to Orig. U.S. Govt. Works.

107 Page 14 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Subchapter G. Repair of Motor Vehicles Effective: April 01, Limitation on Parts, Products, or Repair Persons or Facilities Prohibited (a) Except as provided by rules adopted by the commissioner, under an automobile insurance policy that is delivered, issued for delivery, or renewed in this state, an insurer may not directly or indirectly limit the insurer's coverage under a policy covering damage to a motor vehicle by: (1) specifying the brand, type, kind, age, vendor, supplier, or condition of parts or products that may be used to repair the vehicle; or (2) limiting the beneficiary of the policy from selecting a repair person or facility to repair damage to the vehicle. (b) In settling a liability claim by a third party against an insured for property damage claimed by the third party, an insurer may not require the third-party claimant to have repairs made by a particular repair person or facility or to use a particular brand, type, kind, age, vendor, supplier, or condition of parts or products. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Prohibited Acts in Connection with Repair of Motor Vehicle In connection with the repair of damage to a motor vehicle covered under an automobile insurance policy, an insurer, an employee or agent of an insurer, an insurance adjuster, or an entity that employs an insurance adjuster may not: (1) solicit or accept a referral fee or gratuity in exchange for referring a beneficiary or third-party claimant to a repair person or facility to repair the damage; (2) state or suggest, either orally or in writing, to a beneficiary that the beneficiary must use a specific repair person or facility or a repair person or facility identified on a preferred list compiled by an insurer for the damage repair or parts replacement to be covered by the policy; or (3) restrict the right of a beneficiary or third-party claimant to choose a repair person or facility by requiring the beneficiary or third-party claimant to travel an unreasonable distance to repair the damage Thomson/West. No Claim to Orig. U.S. Govt. Works.

108 Page 15 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Contracts Between Insurer and Repair Person or Facility (a) A contract between an insurer and a repair person or facility, including an agreement under which the repair person or facility agrees to extend discounts for parts or labor to the insurer in exchange for referrals by the insurer, may not result in a reduction of coverage under an insured's automobile insurance policy. (b) The commissioner may adopt rules under Chapter 542 with respect to any fraudulent activity of any party to an agreement described by Subsection (a). <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Provision of Information Regarding Repairs An insurer may not prohibit a repair person or facility from providing a beneficiary or third-party claimant with information that states: (1) the description, manufacturer, or source of the parts used; and (2) the amounts charged to the insurer for the parts and related labor. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Effective: April 01, Notice of Rights Regarding Repair of Motor Vehicle (a) At the time a motor vehicle is presented to an insurer, an insurance adjuster, or other person in connection with a claim for damage repair, the insurer, insurance adjuster, or other person shall provide to the beneficiary or thirdparty claimant notice of the provisions of this subchapter. (b) The commissioner shall adopt a rule establishing the method or methods insurers must use to comply with the notice provisions of this section. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Complaints Effective: April 01, 2007 A beneficiary, third-party claimant, or repair person or facility may submit a written, documented complaint to the department with respect to an alleged violation of this subchapter. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Rules Effective: April 01, 2007 Rules adopted by the commissioner to implement this subchapter must include requirements that: 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

109 Page 16 (1) any limitation described by Section (a) be clearly and prominently displayed on the face of the insurance policy or certificate in lieu of an insurance policy; and (2) the insured give written consent to a limitation described by Section (a) after the insured is notified orally and in writing of the limitation at the time the insurance policy is purchased. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle C effective April 1, 2007.> Current through Chapters effective immediately through Ch. 3 of the Legislature END OF DOCUMENT 2007 Regular Session of the 80th 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

110 APPENDIX D Insurance Code 2301

111 Effective: April 01, 2007 Vernon's Texas Statutes and Codes Annotated Currentness Insurance Code Title 10. Property and Casualty Insurance (Refs & Annos) Subtitle I. Policy Forms in General Chapter Policy Forms Subchapter A. Policy Forms Generally Purpose The purposes of this subchapter are to: (1) promote the availability of insurance; (2) regulate the insurance forms used for lines of insurance to which this subchapter applies to ensure that the forms are not unjust, unfair, inequitable, misleading, or deceptive; and (3) provide regulatory procedures for the maintenance of appropriate information reporting systems. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Definitions In this subchapter: Effective: April 01, 2007 (1) "Form" means an insurance policy form or a printed endorsement form. (2) "Residential property insurance" means insurance coverage against loss to real or tangible personal property at a fixed location that is provided through a homeowners insurance policy, including a tenants insurance policy, a condominium owners insurance policy, or a residential fire and allied lines insurance policy. (3) "Supporting information" means any information required by the department to be filed. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Applicability of Subchapter (a) This subchapter applies to: Effective: April 01, 2007 (1) an insurer to which Article 5.13 applies, other than the Texas Windstorm Insurance Association, the FAIR Plan Association, and the Texas Automobile Insurance Plan Association; and (2) except as provided by Subsections (c) and (d), a Lloyd's plan, reciprocal or interinsurance exchange, and county mutual insurance company with respect to the lines of insurance described by Subsection (b). (b) This subchapter applies to all lines of the following kinds of insurance written under an insurance policy or contract issued by an insurer authorized to engage in the business of insurance in this state: 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

112 Page 2 (1) general liability insurance; (2) residential and commercial property insurance, including farm and ranch insurance and farm and ranch owners insurance; (3) personal and commercial casualty insurance, except as provided by Section ; (4) medical professional liability insurance; (5) fidelity and surety bonds other than criminal court appearance bonds; (6) personal umbrella insurance; (7) personal liability insurance; (8) guaranteed auto protection (GAP) insurance; (9) involuntary unemployment insurance; (10) financial guaranty insurance; (11) inland marine insurance; (12) rain insurance; (13) hail insurance on farm crops; and (14) personal and commercial automobile insurance. (c) Section does not apply to a Lloyd's plan or a reciprocal or interinsurance exchange with respect to commercial property insurance. (d) This subchapter does not apply to a Lloyd's plan or reciprocal or interinsurance exchange with respect to inland marine insurance, rain insurance, or hail insurance on farm crops. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Exemption for Large Risks Effective: April 01, 2007 Sections , (a) and (b), and do not apply to forms for use with an insured that has: (1) total insured property values of $5 million or more; (2) total annual gross revenues of $10 million or more; or (3) a total premium of $25,000 or more for property insurance, $25,000 or more for general liability insurance, or $50,000 or more for multiperil insurance. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, Thomson/West. No Claim to Orig. U.S. Govt. Works.

113 Page Regulation of Inland Marine Forms The commissioner shall adopt rules governing the manner in which forms for the various classifications of risks insured under inland marine insurance, as determined by the commissioner, are regulated. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Filing and Approval of Forms Effective: April 01, 2007 (a) Except as provided by Section , an insurer may not deliver or issue for delivery in this state a form for use in writing insurance described by Section unless the form has been filed with and approved by the commissioner. (b) An insurer must file the form not later than the 60th day before the date an insurer uses the form or delivers the form for use. (c) A filed form is approved at the expiration of 60 days after the date the form is filed unless the commissioner by order approves or disapproves the form during the 60-day period. The commissioner's approval of a filed form constitutes a waiver of any unexpired portion of the 60-day period. (d) The commissioner may extend by not more than 10 days the 60-day period described by Subsection (c) during which the commissioner may approve or disapprove a form filed by an insurer. The commissioner shall notify the insurer of the extension before the expiration of the 60-day period. (e) A filed form for which an extension has been granted under Subsection (d) is considered approved at the expiration of the extension period described by that subsection absent an earlier approval or disapproval of the form. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, Disapproval of Forms; Withdrawal of Approval (a) The commissioner may disapprove a form filed under Section or withdraw approval of a form if the form: (1) violates any law, including a rule adopted under this code; or (2) contains a provision or has a title or heading that is unjust or deceptive, encourages misrepresentation, or violates public policy. (b) For good cause shown, the commissioner may withdraw approval of a form after notice and hearing. (c) An order issued by the commissioner disapproving a form, or a notice of the commissioner's intention to withdraw approval of a form, must state the grounds for the disapproval or withdrawal of approval in sufficient detail to reasonably inform the insurer of those grounds. (d) An order of withdrawal of approval of a form takes effect on the date prescribed by the commissioner in the order. The commissioner may not prescribe a date earlier than the 30th day after the effective date of the order, as prescribed by the commissioner. (e) An insurer may not use a form in this state after the commissioner disapproves the form or withdraws approval of the form Thomson/West. No Claim to Orig. U.S. Govt. Works.

114 Page 4 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Adoption and Use of Standard Forms Effective: April 01, 2007 The commissioner may adopt standard insurance policy forms, printed endorsement forms, and related forms other than insurance policy forms and printed endorsement forms, that an insurer may use instead of the insurer's own forms in writing insurance subject to this subchapter. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Public Inspection of Information Effective: April 01, 2007 Each filing made, and any supporting information filed, under this subchapter is open to public inspection as of the date of the filing. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> [Sections to reserved for expansion] Effective: April 01, 2007 <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, 2007 Subchapter B. Policy Forms for Personal Automobile Insurance Coverage and Residential Property Insurance Coverage Definitions In this subchapter: (1) "Insurer" means an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock insurance company, county mutual insurance company, Lloyd's plan, or other legal entity authorized to write personal automobile insurance or residential property insurance in this state. The term includes an affiliate, as described by this code, that is authorized to write and is writing personal automobile insurance or residential property insurance in this state. The term does not include: (A) the Texas Windstorm Insurance Association; (B) the FAIR Plan Association; or 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

115 Page 5 (C) the Texas Automobile Insurance Plan Association. (2) "Personal automobile insurance" means automobile insurance coverage for the ownership, maintenance, or use of a private passenger, utility, or miscellaneous type motor vehicle, including a motor home, trailer, or recreational vehicle, that is: (A) owned or leased by one or more individuals; and (B) not primarily used for the delivery of goods, materials, or services, other than for use in farm or ranch operations. (3) "Residential property insurance" means insurance coverage against loss to tangible personal property or to residential real property at a fixed location that is provided through a homeowners insurance policy, including a tenants insurance policy, a condominium owners insurance policy, or a residential fire and allied lines insurance policy. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, Regulation of Policy Forms and Endorsements (a) Notwithstanding any other provision of this code and except as provided by this section, Subchapter A applies to an insurer with respect to insurance policy forms and endorsements for personal automobile insurance and residential property insurance. (b) An insurer may continue to use an insurance policy form or endorsement promulgated, approved, or adopted under Article 5.06 or 5.35 before June 11, 2003, on written notification to the commissioner that the insurer will continue to use the form or endorsement. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, Requirements for Forms; Plain-language Requirement (a) Each form filed in accordance with this subchapter must comply with applicable state and federal law. (b) Each form for a personal automobile insurance policy must provide the coverages mandated under Subchapters C and D, Chapter 1952, unless the coverages are rejected by the named insured in the manner provided by those subchapters. (c) A form may not be used unless the form is written in plain language. For purposes of this section, a form is written in plain language if: (1) the form achieves the minimum score established by the commissioner on the Flesch reading ease test or an equivalent test selected by the commissioner; or (2) at the commissioner's option, the form conforms to the language requirements in a National Association of Insurance Commissioners model act relating to plain language. (d) Subsection (c) does not apply to policy language that is mandated by state or federal law. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Effective: April 01, Thomson/West. No Claim to Orig. U.S. Govt. Works.

116 Page Certain Contracts or Agreements Prohibited; Revocation of Certificate of Authority (a) A contract or agreement that is not written into an application for personal automobile insurance coverage and the personal automobile insurance policy is void and violates this code. (b) A contract or agreement described by Subsection (a) constitutes grounds for the revocation of an insurer's certificate of authority to write personal automobile insurance in this state. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Rules Effective: April 01, 2007 The commissioner may adopt reasonable and necessary rules to implement this subchapter. <Acts 2005, 79th Leg., ch. 727, 2 added Subtitle I effective April 1, 2007.> Current through Chapters effective immediately through Ch. 3 of the Legislature END OF DOCUMENT 2007 Regular Session of the 80th 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

117 APPENDIX E Transportation Code 601

118 Vernon's Texas Statutes and Codes Annotated Currentness Transportation Code (Refs & Annos) Title 7. Vehicles and Traffic (Refs & Annos) Subtitle D. Motor Vehicle Safety Responsibility Chapter 601. Motor Vehicle Safety Responsibility Act (Refs & Annos) Subchapter D. Establishment of Financial Responsibility through Motor Vehicle Liability Insurance (Refs & Annos) Motor Vehicle Liability Insurance; Requirements For purposes of this chapter, a motor vehicle liability insurance policy must be an owner's or operator's policy that: (1) except as provided by Section , is issued by an insurance company authorized to write motor vehicle liability insurance in this state; (2) is written to or for the benefit of the person named in the policy as the insured; and (3) meets the requirements of this subchapter. CREDIT(S) Acts 1995, 74th Leg., ch. 165, 1, eff. Sept. 1, Current through the end of the 2007 Regular Session of the 80th Legislature Effective: September 1, Minimum Coverage Amounts; Exclusions <Text of subsec. (a) effective until December 31, 2010> (a) Effective April 1, 2008, the minimum amounts of motor vehicle liability insurance coverage required to establish financial responsibility under this chapter are: (1) $25,000 for bodily injury to or death of one person in one accident; (2) $50,000 for bodily injury to or death of two or more persons in one accident, subject to the amount provided by Subdivision (1) for bodily injury to or death of one of the persons; and (3) $25,000 for damage to or destruction of property of others in one accident. (a-1) Effective January 1, 2011, the minimum amounts of motor vehicle liability insurance coverage required to establish financial responsibility under this chapter are: (1) $30,000 for bodily injury to or death of one person in one accident; (2) $60,000 for bodily injury to or death of two or more persons in one accident, subject to the amount provided by Subdivision (1) for bodily injury to or death of one of the persons; and (3) $25,000 for damage to or destruction of property of others in one accident. (b) The coverage required under this section may exclude, with respect to one accident: (1) the first $250 of liability for bodily injury to or death of one person; 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

119 Page 2 (2) the first $500 of liability for bodily injury to or death of two or more persons, subject to the amount provided by Subdivision (1) for bodily injury to or death of one of the persons; and (3) the first $250 of liability for property damage to or destruction of property of others. (c) The Texas Department of Insurance shall establish an outreach program to inform persons of the requirements of this chapter and the ability to comply with the financial responsibility requirements of this chapter through motor vehicle liability insurance coverage. The commissioner, by rule, shall establish the requirements for the program. The program must be designed to encourage compliance with the financial responsibility requirements, and must be made available in English and Spanish. <Text of subsec. (d) effective until December 31, 2010> (d) Subsection (a) and this subsection expire December 31, CREDIT(S) Acts 1995, 74th Leg., ch. 165, 1, eff. Sept. 1, Amended by Acts 2007, 80th Leg., ch. 1298, 1, eff. Sept. 1, Current through the end of the 2007 Regular Session of the 80th Legislature Required Policy Terms (a) A motor vehicle liability insurance policy must state: (1) the name and address of the named insured; (2) the coverage provided under the policy; (3) the premium charged for the policy; (4) the policy period; and (5) the limits of liability. Effective:[See Text Amendments] (b) The policy must contain an agreement or endorsement that the insurance coverage provided under the policy is: (1) provided in accordance with the coverage required by this chapter for bodily injury, death, and property damage; and (2) subject to this chapter. (c) The liability of the insurance company for the insurance required by this chapter becomes absolute at the time bodily injury, death, or damage covered by the policy occurs. The policy may not be canceled as to this liability by an agreement between the insurance company and the insured that is entered into after the occurrence of the injury or damage. A statement made by or on behalf of the insured or a violation of the policy does not void the policy. (d) The policy may not require the insured to satisfy a judgment for bodily injury, death, or property damage as a condition precedent under the policy to the right or duty of the insurance company to make payment for the injury, death, or damage Thomson/West. No Claim to Orig. U.S. Govt. Works.

120 Page 3 (e) The insurance company may settle a claim covered by the policy. If the settlement is made in good faith, the amount of the settlement is deductible from the amounts specified in Section (f) The policy, any written application for the policy, and any rider or endorsement that does not conflict with this chapter constitute the entire contract between the parties. (g) Subsections (c)-(f) apply to the policy without regard to whether those provisions are stated in the policy Optional Terms Effective:[See Text Amendments] (a) A motor vehicle liability insurance policy may provide that the insured shall reimburse the insurance company for a payment that, in the absence of this chapter, the insurance company would not have been obligated to make under the terms of the policy. (b) A policy may allow prorating of the insurance provided under the policy with other collectible insurance Prohibited Terms A motor vehicle liability insurance policy may not insure against liability: (1) for which the insured or the insured's insurer may be held liable under a workers' compensation law; (2) for bodily injury to or death of an employee of the insured while engaged in the employment, other than domestic, of the insured, or in domestic employment if benefits for the injury are payable or required to be provided under a workers' compensation law; or (3) for injury to or destruction of property owned by, rented to, in the care of, or transported by the insured. Effective:[See Text Amendments] Required Terms: Owner's Policy An owner's motor vehicle liability insurance policy must: (1) cover each motor vehicle for which coverage is to be granted under the policy; and (2) pay, on behalf of the named insured or another person who, as insured, uses a covered motor vehicle with the express or implied permission of the named insured, amounts the insured becomes obligated to pay as damages arising out of the ownership, maintenance, or use of the motor vehicle in the United States or Canada, subject to the amounts, excluding interest and costs, and exclusions of Section Effective:[See Text Amendments] Required Terms: Operator's Policy An operator's motor vehicle liability insurance policy must pay, on behalf of the named insured, amounts the insured becomes obligated to pay as damages arising out of the use by the insured of a motor vehicle the insured does not own, subject to the same territorial limits, payment limits, and exclusions as for an owner's policy under Section Additional Coverage Effective:[See Text Amendments] 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

121 Page 4 (a) An insurance policy that provides the coverage required for a motor vehicle liability insurance policy may also provide lawful coverage in excess of or in addition to the required coverage. (b) The excess or additional coverage is not subject to this chapter. (c) In the case of a policy that provides excess or additional coverage, the term motor vehicle liability insurance policy applies only to that part of the coverage that is required under this subchapter Multiple Policies Effective:[See Text Amendments] The requirements for a motor vehicle liability insurance policy may be satisfied by a combination of policies of one or more insurance companies if the policies in combination meet the requirements Insurance Binder Effective:[See Text Amendments] A binder issued pending the issuance of a motor vehicle liability insurance policy satisfies the requirements for such a policy. Effective:[See Text Amendments] Standard Proof of Motor Vehicle Liability Insurance Form A standard proof of motor vehicle liability insurance form prescribed by the Texas Department of Insurance must include: (1) the name of the insurer; (2) the insurance policy number; (3) the policy period; (4) the name and address of each insured; (5) the policy limits or a statement that the coverage of the policy complies with the minimum amounts of motor vehicle liability insurance required by this chapter; and (6) the make and model of each covered vehicle. Effective:[See Text Amendments] Motor Vehicle Liability Insurance; Certification If evidence of financial responsibility is required to be filed with the department under this chapter, a motor vehicle liability insurance policy that is to be used as evidence must be certified under Section or Effective:[See Text Amendments] Certificate of Motor Vehicle Liability Insurance 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

122 Page 5 (a) A person may provide evidence of financial responsibility by filing with the department the certificate of an insurance company authorized to write motor vehicle liability insurance in this state certifying that a motor vehicle liability insurance policy for the benefit of the person required to provide evidence of financial responsibility is in effect. (b) The certificate must state the effective date of the policy, which must be the same date as the effective date of the certificate. (c) The certificate must cover each motor vehicle owned by the person required to provide the evidence of financial responsibility, unless the policy is issued to a person who does not own a motor vehicle. (d) A motor vehicle may not be registered in the name of a person required to provide evidence of financial responsibility unless the vehicle is covered by a certificate. (e) If a person files a certificate of insurance to establish financial responsibility under Section , the certificate must state that the requirements of Section (b) are satisfied Nonresident Certificate Effective:[See Text Amendments] (a) Subject to Subsection (c), a nonresident owner of a motor vehicle that is not registered in this state may provide evidence of financial responsibility by filing with the department the certificate of an insurance company authorized to transact business in the state in which the vehicle is registered certifying that a motor vehicle liability insurance policy for the benefit of the person required to provide evidence of financial responsibility is in effect. (b) Subject to Subsection (c), a nonresident who does not own a motor vehicle may provide evidence of financial responsibility by filing with the department the certificate of an insurance company authorized to transact business in the state in which the nonresident resides. (c) The department shall accept the certificate of an insurer not authorized to transact business in this state if the certificate otherwise complies with this chapter and the insurance company: (1) executes a power of attorney authorizing the department to accept on its behalf service of notice or process in an action arising out of a motor vehicle accident in this state; and (2) agrees in writing that its policies will be treated as conforming to the laws of this state relating to the terms of a motor vehicle liability insurance policy. (d) The department may not accept a certificate of an insurance company not authorized to transact business in this state during the period that the company is in default in any undertaking or agreement under this section. Effective:[See Text Amendments] Termination of Certified Policy (a) If an insurer has certified a policy under Section or , the policy may not be terminated before the sixth day after the date a notice of the termination is received by the department except as provided by Subsection (b). (b) A policy that is obtained and certified terminates a previously certified policy on the effective date of the certification of a subsequent policy. Effective:[See Text Amendments] 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

123 Page Response of Insurance Company if Policy Not in Effect An insurance company that is notified by the department of an accident in connection with which an owner or operator has reported a motor vehicle liability insurance policy with the company shall advise the department if a policy is not in effect as reported. Effective:[See Text Amendments] Repealed by Acts 1999, 76th Leg., ch. 659, 4, eff. Sept. 1, Effect on Certain Other Policies (a) This chapter does not apply to or affect a policy of motor vehicle liability insurance required by another law of this state. If that policy contains an agreement or is endorsed to conform to the requirements of this chapter, the policy may be certified as evidence of financial responsibility under this chapter. (b) This chapter does not apply to or affect a policy that insures only the named insured against liability resulting from the maintenance or use of a motor vehicle that is not owned by the insured by persons who are: (1) employed by the insured; or (2) acting on the insured's behalf. Effective:[See Text Amendments] [Sections to reserved for expansion] 2007 Thomson/West. No Claim to Orig. U.S. Govt. Works.

124 APPENDIX F Texas Department of Insurance Form for approval of new policies

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129 Review Requirements Checklist - Personal Automobile from the Texas Department of Insu... Page 1 of 4 7/7/2010 More TDI Sites: Help Insure Healthy Texas Texas Health Options Texas Sure TX Comp Exit Strategy Quick Link to: Agent Lookup Company Lookup Publications File a Complaint Forms REVIEW REQUIREMENTS CHECKLIST PERSONAL AUTOMOBILE You are here: commercial pcckautp.html Updated August 19, 2009 Return to Index Indicates new addition since last update REVIEW REQUIREMENTS REFERENCE Personal Auto Checklist COMMENTS FORMS Filing Standards - Policy forms and endorsements may not be unjust, unfair, inequitable, misleading or deceptive. POLICY FORMS & Chapter 2301 (formerly An insurance policy form or endorsement may not be delivered or issued ENDORSEMENTS Prior Approval of Policy Article 5.145, as governed by the for delivery in this state unless the form has been filed with and approved by the commissioner. Filings must be submitted to the Texas Department Forms and provisions of 8, Article of Insurance at least 60 days before the effective date of filing. An insurer Endorsements ), Texas Insurance Code may continue to use the policy forms and endorsements promulgated, approved, or adopted under Chapter 1952 (formerly Article 5.06) on notification to the commissioner in writing that the insurer will continue to use those forms. Disapproval of Forms; Withdrawal of Approval , Texas Insurance Code Applications Not Required to be Filed for Approval Unless Being Made a Part of the Policy. The commissioner may disapprove a form filed under or withdraw approval of a form if the form (1) violates any law, including a rule adopted under the Texas Insurance Code, or (2) contains a provision or has a title or heading that is unjust or deceptive, encourages misrepresentation, or violates public policy. Selection / Rejection Forms Explanatory Memorandum Comparative Evaluation Written rejections Although Personal Injury Protection and Uninsured/Underinsured required under Motorists coverage must be rejected in writing if the insured does not wish to have these coverages; there are no promulgated rejection forms. and The rejection/selection forms would be internal company forms and are (formerly not required to be filed with the Department. Articles and ), Texas Insurance Code Filings Made Easy Guide Filings Made Easy Guide A detailed explanatory memorandum must be attached to describe a new or revised product, its application and any changes in coverage, limits, exclusions, etc., from that provided by the previously promulgated/approved/adopted forms. A side-by-side comparison must be attached showing any differences between the filed forms and the previously promulgated, approved, or adopted forms to which the filed form is being compared. Differences must be clearly indicated and explained. When a previously promulgated, approved, or adopted form is being amended, companies must use underlining to denote any new language added and bracketing to remove

130 Review Requirements Checklist - Personal Automobile from the Texas Department of Insu... Page 2 of 4 7/7/2010 existing language from a form. Flesch Scoring Filings must include the Flesch Score indicating the filed forms meet the (formerly Article 5.145), minimum readability standards established by the Commissioner of Texas Insurance Code Insurance under Commissioner Order No Forms that fail to and Commissioner meet a minimum Flesch Score of "40" cannot be approved. Order No Coverage Issues Uninsured or Statutory requirement that uninsured/underinsured motorist coverage Underinsured Motorist (formerly Article ), must be provided unless rejected in writing by the named insured. Coverage Texas Insurance Code Personal Injury Statutory requirement that personal injury protection coverage must be Protection Coverage (formerly Article ), provided unless rejected in writing by the named insured. Texas Insurance Code Recovery Prohibited for Vehicles Impounded for Drug Violation Required Provision: Coverage for Certain Spouses Intentional Acts Defense Special Conditions for Lloyds, Mutuals, Reciprocals, & Participating Stock Companies Permissive Use of an Automobile Arbitration Limited to Coverage Disputes Toll Free Information Notice to Accompany Policy Department Toll-Free Number for Information and Complaints (formerly Article ), Texas Insurance Code (formerly Article ), Texas Insurance Code Chapter 2301 (formerly Article , 8), Texas Insurance Code A motor vehicle insurance policy delivered or issued for delivery in the state of Texas may not provide payment on final conviction of the named insured for loss for a covered motor vehicle that is seized by federal or state law enforcement officers as evidence in a case against the named insured under Chapter 481, Health and Safety Code or the federal Controlled Substances Act, 21 U.S.C. Section 801 et seq. Statutory requirement that a personal automobile policy must contain a provision to continue coverage for the spouse during a period of separation in contemplation of divorce. Policy language must protect interest of innocent spouse or insured. Chapter 2301 (formerly Cost of defense within limits is not permitted. Article , 8), Texas Insurance Code General Casualty When a policy is issued by a Lloyds, a mutual company, a reciprocal Bulletins Nos. 276, 443, association or a participating stock company having special provisions and 446 applicable to its membership, dividends and/or policyholders, such provisions, when approved, in accordance with the provisions of the Texas Insurance Code, of 1951, as amended must be inserted in the policy. Chapter 2301 (formerly Article , 8), Texas Insurance Code Chapter 2301 (formerly Article , 8), Texas Insurance Code (formerly Article 1.35), Texas Insurance Code (formerly Article 1.35D), Texas Insurance Code Insurer Toll-Free Number for Information and (formerly Article 21.71), Complaints Texas Insurance Code Notice of Toll-Free 28 TAC Telephone Numbers and 1.602, Texas Procedures for Obtaining Administrative Code Information and Filing Complaints Policy language must provide coverage for individuals, other than family or household residents, using a covered automobile with permission. Voluntary, post dispute arbitration only. May be either binding or nonbinding. Texas Insurance Code requires a brief written notice of suggested procedure to be followed by the policyholder in the event of a dispute concerning a policyholder's claim or premium. The notice must include the name and address of the department and the toll-free telephone number maintained under (formerly Article 1.35D) of the Texas Insurance Code. Toll-Free number for the Texas Department of Insurance. Insurer's requirement to maintain a toll-free number to provide information concerning policies issued by the insurer and to accept complaints from the policyholder. Article contains an exception for insurers whose gross initial premium receipts collected in this state are less than $2 million a year. To satisfy requirements for , , and (formerly Article 1.35, 1.35D and 21.71) noted above.

131 Review Requirements Checklist - Personal Automobile from the Texas Department of Insu... Page 3 of 4 7/7/2010 Cancellation, Nonrenewal and Other Termination Provisions Authorized Cancellation and Nonrenewal of Policies (formerly Article B), Texas Insurance Code Elected Officials & (formerly Article D), Texas Insurance Code Insured's Right to Cancel Chapter 2301 (formerly Article , 8), Texas Insurance Code Cancellation and Nonrenewal of Certain Property and Casualty Policies: Note: Unless the insurer has mailed written notice of nonrenewal to the insured not later than the 30th day before the date on which the insurance policy expires, the insurer must renew an insurance policy, at the request of the insured, on the expiration of the policy. An insurer may not cancel or refuse to renew an insurance policy based solely on the fact that the policyholder is an elected official. Insurance company cannot limit or restrict the insured's right to cancel a policy. Voiding Coverage Chapter 705, "Void Coverage" language must comply with Chapter 705, Subchapter A, Subchapter A (formerly and the misrepresentation must be material. Article 21.16), Texas Insurance Code Assignment of Benefits Personal Injury Protection and Medical Payments Coverage Claims Settlement Prompt Payment of Claims Notice of Settlement of Liability Claims Contractual Limitations Period - Suits Notice Requirements Damages Punitive / Exemplary Damages Compensatory Damages Exclusions Abuse, Physical Abuse or Molestation Exclusions "Expected or Intended Injury" or "Assault and Battery" (formerly Article ), Texas Insurance Code A personal auto policy containing personal injury protection or medical payments coverage must include language which provides that payments for medical expenses will be paid directly to a physician or other health care provider if the insurer receives a written assignment signed by the covered person to whom such benefits are payable Prompt payment of claim requirements. When the term "Business Day" is (formerly Article 21.55), used, the definition must be in the policy. Texas Insurance Code (formerly Article 21.56), Texas Insurance Code , Civil Practice & Remedies , Civil Practice & Remedies Chapter 2301 (formerly Article , 8), Texas Insurance Code Chapter 2301 (formerly Article , 8), Texas Insurance Code Chapter 2301 (formerly Article , 8), Texas Insurance Code Chapter 2301 (formerly Article , 8), Texas Insurance Code Notice of settlement of claim under casualty insurance policy. EXCEPTION - This article does not apply to a casualty policy that requires the insured's consent to settlement of a claim against the insured or to fidelity, surety, or guaranty bonds. A person may not enter a stipulation, contract, or agreement that purports to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years. A stipulation, contract or agreement that establishes a limitations period that is shorter than two years is void in this state. A contract stipulation that requires a claimant to give notice of a claim for damages as a condition precedent to the right to sue on the contract is not valid unless the stipulation is reasonable. A stipulation that requires notification within less than 90 days is void. Exclusions may be considered with appropriate rate consideration and rate analysis. A "rate analysis" is the company's actuarial justification for the rate consideration given, or not given, for use of the exclusion. This would include the reasons for the amount of any rate credit or the justification for the position that no rate credit is given. Endorsements will not be approved until P&C Actuarial acknowledges that the rates are acceptable. NOTE: Approval of a punitive/exemplary damage exclusion does not relieve an insurer of any contractual obligation to defend which may otherwise exist in the policy. If insuring agreement specifies policy pays for compensatory damages, rate consideration may be necessary as policy may not cover noncompensatory damages such as punitive/exemplary damages. If policy or endorsement contains this type exclusion, definition of "abuse" in abuse, physical abuse, or molestation exclusion must be included. Must include wording, "For purposes of this endorsement, abuse means an act which is committed with the intent to cause harm." An exclusion for "expected or intended injury" or "assault and battery", must be limited to "the" insured and not "any" insured.

132 Review Requirements Checklist - Personal Automobile from the Texas Department of Insu... Page 4 of 4 7/7/2010 Communicable Disease Exclusion General Casualty Bulletin No. 708 General Change Endorsements May Not Manuscript Chapter 2301 (formerly Coverage Once Article , 8), Approved Texas Insurance Code Rebating or Discrimination Prohibited Practices and Chapter 1806, Rebates Related to Subchapters A & B Policies (formerly Article 5.41), Texas Insurance Code Choice of Law Texas Laws Govern Article 21.42, Texas Policies Insurance Code Texas Motor Vehicle Safety Responsibility Act Motor Vehicle Liability Transportation Code Insurance; Requirements Minimum Coverage Transportation Code Amounts Occupations Code Vehicle Storage Facilities Payment by Lienholder Occupations Code or Insurance Company (b) Communicable disease exclusion will not be approved. EXCEPTION: Consideration for approval will be given to an exclusion with wording similar to that contained in "Exclusion of Sexually Transmitted Disease" as set forth in General Casualty Bulletin No Coverage forms are prior approval. Change endorsements may be used to change insured address, etc., but may not be used to change, alter, or "clarify" coverage in any way. Company must provide verification that the endorsement will not be used to change, alter, or clarify coverage. Inducements prohibited. Texas must be choice if filing contains choice of law provision. Provides requirements of a motor vehicle liability insurance policy for meeting financial responsibility. Provides minimum amounts of motor vehicle liability insurance required when using insurance to establish financial responsibility. An insurance company that pays a claim of total loss on a vehicle in a vehicle storage facility is liable to the operator of the facility for any money owed to the operator in relation to delivery of the vehicle to or storage of the vehicle in the facility regardless of whether an amount accrued before the insurance company paid the claim. RATES Filing Standards File & Use Chapter 2251 (formerly Article ), Texas Insurance Code Each insurer shall file with the Commissioner all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. RULES Filing Standards File & Use Chapter 2301 & Manual rules should reflect specific requirements for usage of policy Chapter 2251 (formerly forms, endorsements, and disclosures. Article ), Texas Insurance Code Required Documentation Refer to Property & Go to Property & Casualty Filings Made Easy now Casualty Filings Made Easy For more information contact: [email protected] Last updated: 08/19/2009 Copyright 2009 Texas Department of Insurance 333 Guadalupe, Austin P.O. Box , Austin

133 APPENDIX G Minimum limits for commercial trucking cases

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138 APPENDIX H Sample Stowers letter with annotations

139 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 * TELEPHONE (512) JAYME BOMBEN FACSIMILE (512) Jane Doe, adjuster Evil Insurance Company Houston, Texas date Re: Virtuous Plaintiff v. Bad Defendant Dear Ms. Doe: We are submitting the following documents for your review in hopes that we can resolve Virtuous Plaintiff s claim. This letter is intended as a settlement proposal and the information it contains are being provided to you in that context. THE FACTS: As we know from deposition testimony, Mr. Defendant freely acknowledges that he ran into the rear of Virtuous car at the Whataburger drive through, and that he bears responsibility for whatever damages resulted. Although the property damage to both vehicles was not severe, both vehicles did require repair. Virtuous trailer hitch had to be re-welded back onto the frame of his truck as a result of the impact. Unfortunately, the impact was hard enough to cause injury to Virtuous right knee. As we also learned from deposition testimony, Virtuous had his truck in park, his seatbelt off and his foot on the brake at the time of impact. The impact from Mr. Defendant s vehicle caused Virtuous body to move forward, twisting his right knee out and into the CB radio. This twisting motion caused a large tear in the medial meniscus which required surgical repair. NECESSARY MEDICAL TREATMENT: Virtuous is a tough man. Although he experienced pain and swelling after the collision, he did not want to make a mountain out of a molehill and he limped around for a few days hoping the injury would resolve on its own. Instead the pain continued. He then went to South Austin Hospital emergency room where he was diagnosed with injured ligaments or cartilage in his knee and was splinted. As instructed by the ER physician, Virtuous followed up with his primary care physician, Dr. Romanek. He presented to Dr. Romanek complaining of persistent pain along the medial joint line and was referred for an MRI. The MRI revealed the large medial meniscus tear for which Virtuous was then referred to Dr. Burns at Westlake Orthopedics. Dr. Burn s records indicate that meniscus cartilage is avascular in nature and does not spontaneously heal and over time the tear

140 could become larger if not addressed and he recommended a surgical repair. Dr. Burn s notes also state: [I]n my professional opinion, with all reasonable degree of medical certainty, [Virtuous ] medical condition is a direct proximate association to the accident which occurred. Dr. Burns performed a successful surgical repair of the tear. As instructed by Dr. Burns, Virtuous completed post surgery physical therapy for his knee. Virtuous medical expenses relating to this crash total $18, Fortunately, he has made a complete recovery and his knee is doing well. you: EXHIBITS: The following medical records and bills have been previously provided to PROVIDER DATE CHARGE TOTAL South Austin Hospital 12/27/2006 $ 1, Capitol Emergency Associates 12/27/2006 $ Westlake Orthopaedics Spine & Sports, Burns, MD 1/9/2007 $ /23/2007 $ 4, /2/2007 $ - 4/30/2007 $ - 5/8/2007 $ - Lockhart Family Practice - Romanek, MD Target RX The Hospital at Westlake Medical Center Integrity Physical Therapy 1/5/2007 $ /30/2006 $ /30/2006 $ /23/2007 $ 8, /4/2007 $ /5/2007 $ /16/2007 $ $ 1, $ $ 4, $ $ $ 8, $

141 Westlake Anesthesia Group PA Austin Radiological Assn. 3/23/2007 $ /23/2007 $ /27/2006 $ /27/2006 $ /27/2006 $ /5/2007 $ 1, $ 1, $ 1, GRAND TOTAL $ 18, Since there is no health insurance, Medicare, Medicaid or other healthcare benefit available to Mr. Plaintiff, there is no alternative paid or incurred number. CONCLUSION: Naturally, it is our desire to see this case resolved with as little conflict as possible. Although we represent Mr. Plaintiff, we have no interest in exposing Mr. Defendant to an excess judgment if that can be avoided. (1) Towards that end, our offer is to settle Virtuous case for Mr. Defendant s policy limit of $25, (2) Naturally, this offer includes a complete release of your insured and others who may be liable under your policy, with indemnification for all other claims which might be asserted by, through or under Virtuous Plaintiff. (3) This offer is intended as a complete and unconditional settlement of the case and is extended through August 25, 2009, 5:00 P.M. at which time it expires by its own terms. (4) Time is of the essence. (5) Once you have had an opportunity to review this letter and the enclosed support, please call me so we can determine whether an amicable resolution to this matter is possible. I thank you in advance for your time and consideration. (6) Sincerely, Henry Moore HM:pr

142 Notes (1) The heart of the Stowers duty is the protection of the insured against an excess judgment. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm n App. 1929, holding approved). (2) The demand must be within the policy limit. American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex. 1994) policy limit can be substituted for a sum certain. (3) The offer to settle must be unconditional and include a full release of all potential, related claims. Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489, 491 (Tex. 1998). It must also release all potential defendants under the policy. Home State County Mut. Ins. Co. v. Horn, 2008 W.L (Tex. App. Tyler Jun 25, 2008), rehearing overruled (Aug 13, 2008, petition for review denied (Nov. 7, 2008). (4) The time to respond must be firm and reasonable. State Farm Lloyds Ins. Co. v. Maldanado, 963 S.W.2d 38, 41 (Tex. 1998). (5) time is of the essence is a legal term of art. It means that the time specified is absolute and not approximate. It is a common term in contracts. There is no Stowers case that says this language is required in the demand, but I think it is prudent to add it. McKnight v. Renfro, 371 S.W.2d 740, 745 (Tex. App. Dallas 1963, writ ref d n.r.e.). (6) We always envision an exhibit sticker on our letter. Juries don t like threats and they don t really like lawsuits. We want the tone of our letters to be conciliatory, polite, and reasonable. If the Stowers case goes to trial, we want the jury to see our side as Virtuous and the insurance company as Evil.