Benjamin Schindler

Do you ever feel like you are being given the run around, or worse, getting completely screwed by your insurance company?  You probably are… And in a time when we are seeing an uptick in litigation and natural disasters alike, insurers are poised to deny your claim to stay afloat!

This snippet will offer some tips and tricks, as well as mines to avoid, in holding your insurer accountable in the case that they are wrongfully withholding, delaying, or denying insurance coverage they sold you, and for which you paid expensive premiums.

Whether it’s health, auto., renter’s, homeowner’s, life, or corporate insurance for your business, virtually every single one of us holds some form of insurance policy for ourselves, our loved ones, and/or our businesses.  Fortunately for us, Texas is a fantastic place to be a policyholder.

Step 1: The Claim and Cooperation

What’s the first step? Submit a claim.  Virtually every insurance policy will have a requirement that the policyholder give prompt notice of a claim.  In most states, including Texas, late notice in and of itself will not be fatal to a claim (insurers must also show they were prejudiced – aka materially impacted – by the late notice); but it is always a good idea to submit your claim as soon as practicable.  Be sure to review the “Conditions” portion of your insurance policy and be on the lookout for any notice requirements, like who to notify, when, and how.

Once the Claim is submitted, insurers will almost always acknowledge the Claim or issue a reservation of rights, and request information they believe is material to their investigation.  Providing this information is another requirement of your insurance policy (see “cooperation” condition), but it may also provide insight into how your insurer is evaluating the claim.  Note: what kinds of questions are they asking, what policy provisions, if any, have they cited in their letter?  These things can provide meaningful insight, and offer a preview of an insurer’s claim determination.

Step 2: Analyze The Claim/Insurer’s Determination

Whether your insurer has outright denied a claim, or issued a reservation of rights to potentially deny a claim based upon certain policy provisions, a sophisticated policyholder like yourself should always conduct their own analysis.  Review your policy in its entirety (particularly any provisions cited by insurers in their correspondence) to determine whether your claim should be, or is potentially covered.

In Texas, the policyholder almost always gets the benefit of the doubt where coverage could go either way.  What does this mean?  It means that ANY ambiguity in an insurance policy (i.e., there is more than one reasonable interpretation) is construed in favor of coverage for the policyholder.  Let’s be real here: contracts are not always airtight, and this premier rule of insurance contract interpretation stems from the rule of contra proferentem, wherein the contract is interpreted as against the person who drafted it –here, the insurance company.

All this to say, don’t take your insurer’s word for it in the case of a reservation or denial.  Analyze your own coverage, and if you can fathom ANY reasonable explanation or policy interpretation that would afford coverage, there should be coverage.  See e.g. Tex. Indus., Inc. v. Factory Mut. Ins. Co., 486 F.3d 844, 848 (5th Cir. 2007)(citing Nat’l Union *849 Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991)(“[I]f a contract of insurance is susceptible of more than one reasonable interpretation, we must resolve the uncertainty by adopting the construction that most favors the insured. . .The court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent.”) (emphasis added).

And, if, based on that analysis, there should be or can be coverage, and you are not getting it, Texas law offers further relief.

Step 3: the Teeth of Texas Insurance Law –Bad Faith and Prompt Pay

If you believe coverage is owed, but your insurer is denying, delaying, or giving you the run-around, Texas law provides statutory ammunition in the form of the Texas Prompt Pay Act and the Texas Unfair Claim Settlement Practices Act.  See Texas Insurance Code Sections 541 and 542.

Texas Insurance Code Section 542- known as the Prompt Pay Act, provides statutory time limits for insurers to acknowledge, investigate, accept or reject, and pay a claim.  If Insurers are untimely in doing any of these things, and coverage was owed, policyholders are AUTOMATICALLY entitled to statutory interest and attorney’s fees (18% interest per year on claim amount for casualty insurance claims, and currently around 13.5% interest per year on property claims -542A).  Recovery under this sub-chapter does not require bad faith: only that coverage was owed and insurers wrongfully withheld or denied it.  (Note: 542A applies to first party property claims, like hurricane, tornado, hail, etc., regular 542 applies to all other claims).

Texas Insurance Code Section 541 (particularly 541.060), our bad faith statute, provides a laundry list of bad claims-handling practices often exhibited by insurers—delays, failing to reasonably investigate, misrepresenting the policy, failing to reasonably settle or pay a claim, etc.  Recovery under this sub-chapter does require bad faith by the insurer, but can, where a violation was knowing, lead to the recovery of claim amounts, attorney’s fees, and up to three times the claim amount (treble damages) as punishment to the insurer.

Before bringing litigation to recover under 541 or 542A (not regular 542), the statutes require 60-day pre-suit notice to the insurer of your intention to bring such claims.  Such notice can act to light a fire under your insurer, and let them know they are messing with the wrong sophisticated policyholder. . . NOW YOU!

Armed with the right tools, Texas policyholders have many ways to hold their insurers accountable and get the coverage they deserve.  Please do not hesitate to reach out for any and all insurance coverage inquiries!

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Benjamin Schindler is an associate in Haynes & Boone, LLP’s Corporate Insurance Recovery and Business Litigation Practice, is a member of DAYL’s 2023 Leadership Class and co-chair of the DAYL Judiciary Committee, and can be reached at s.benjamin.schindler@haynesboone.com.

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Articles on the DAYL website are provided for informational use only, and are in no way intended to constitute legal advice or the opinions or views of the DAYL.