Supreme Court Rules In Favor of Property Owner

In June 2013, commercial properties owned by TopDog Properties and insured by GuideOne National Insurance Company sustained wind and hail damage. After its first inspection, GuideOne determined that the loss fell below TopDog’s deductible and denied the claim. GuideOne refused to reinspect the property and then rejected TopDog’s request to resolve the dispute through appraisal, explaining that the policy had a unilateral appraisal provision which only GuideOne could invoke and it refused to do so.

TopDog’s only option was to hire an attorney and file suit against GuideOne, which they did in 2014, alleging claims for breach of contract, common-law and statutory bad faith, and violations of the Texas Prompt Payment of Claims Act (TPPCA).

Over eight months after the lawsuit was filed, GuideOne reversed course and demanded appraisal. Over TopDog’s objection, the trial court compelled the case to appraisal. The damage was so obvious that both appraisers agreed that TopDog’s roofs needed to be replaced as a result of the hail damage, and set the loss at $168,808. After paying the appraisal award, GuideOne moved for summary judgment arguing that TopDog was not entitled to attorney’s fees or any other damages because GuideOne paid the appraisal award. The trial court granted GuideOne’s summary judgment dismissing all of TopDog’s claims, and the court of appeals affirmed. TopDog appealed the case to the Texas Supreme Court.

Today, without hearing oral argument, the Texas Supreme Court of Texas reversed the judgment of the court of appeals and trial court. The case will now go back to the trial court to consider TopDog’s claims for breach of contract, common law and statutory bad faith claims and Texas Prompt Payment of Claims Act (TPPCA) claim. Matthew Pearson, TopDog’s lead attorney, said that “Today’s Supreme Court decision is a win for all Texas policyholders.”

Pearson Legal, P.C. represents property owners on contingency in insurance recovery and construction defects litigation, as well as commercial litigation, throughout the states of Texas, Oklahoma and Colorado. The firm represents commercial property owners, school districts and other public and private entities. According to Texas Lawyer, Matthew R. Pearson (founder of Pearson Legal), is responsible for some of the largest insurance verdicts in the State of Texas in recent years.


Breaking News—President Trump Demands Insurance Companies to Pay Up! Business Interruption Coverage

A picture is worth a thousand words. But, this one video of President Donald Trump may prove to be worth hundreds of billions of dollars.

Donald Trump said he knows how to read insurance policies. He did not see any reference to anything about an exclusion for a “pandemic.”

He said that the insurance executives know what is fair and that they should Pay Up!

Trump said that we cannot let insurance companies off the hook after small businesses have been paying premiums all these years, and when they need the coverage, the insurance companies do not pay. He said: “We cannot let that happen.”

I wish I had been a fly on the wall at the Insurance Information Institute propaganda room this afternoon.


Coronavirus Insurance Law Update March 26—Ohio and Massachusetts File Proposed Legislation Requiring Retroactive Removal of Virus Exclusion To Coronavirus Business Income and Civil Authority Claims


New Jersey started the coronavirus business insurance legislation, but just like a virus, it is spreading to other jurisdictions. Ohio and Massachusetts filed very similar bills to what was filed in the New Jersey Assembly.

I blogged about the ex post facto issues of this legislation last night in Coronavirus Insurance Law Update March 25—New Jersey Anti-Virus Bill and Civil Ex Post Facto Laws. If you read these legislative bills very carefully, one can discern the strong public safety and public policy reasons for the legislation and the need for a retroactive remedy.

I am not a constitutional lawyer, but an insurance lawyer I have a lot of respect for is Barry Zalma. I did not get to see his scheduled presentation this week at the now-canceled First Party Claims West Conference. Zalma made the following comment to my prior post:

Don’t forget the Fifth Amendment, this is a taking without compensation.

I am not a Fifth Amendment Constitutional expert either.

Some insurance company attorneys will argue that this is more akin to a Robin Hood scenario. I get accused of acting like Robin Hood sometimes. But, I correct that because Robin Hood had nothing to do with King Arthur, Noble Knights of The Round Table, or a very special wizard.

Thought For The Day


Louisiana–COVID-19 Pandemic Relief: My Mortgage is Deferred, What about My Insurance Premiums?

By Deborah Trotter on April 7, 2020POSTED IN INSURANCEREGULATION

This past weekend I was asked the question above. This is what I found in Louisiana. On March 26, 2020, by Proclamation No. JBE 2020-37, Louisiana Governor John Bel Edwards transferred certain insurance matters to Commissioner of Insurance James J. Donelon. Commissioner Donelon quickly instituted reasonable emergency measures to address the growing concerns of Louisiana’s residents through Emergency Rule 40 – Moratorium on Policy Cancellations and Non-Renewals for Policyholders in Louisiana during the Outbreak of Coronavirus Disease (COVID-19) (“Rule 40”).1

Rule 40 applies to any and all kinds of insurers and insurance, including all property and casualty insurers, all life insurers, and all other insurance-related entities licensed by the commissioner or doing business in Louisiana and their insureds, policyholders, members, subscribers, enrollees, and certificate holders.2 To specifically address the question posed, Louisiana has suspended the cancellation, nonrenewal or nonreinstatement of any insurance policy in force and effect on at 12:01 a.m. on March 12, 2020, until the earlier of 11:59 p.m. on May 12, 2020, or 11:59 p.m. on the date the governor lifts the state of emergency presently in effect, inclusive of any renewal.3 Rule 40 does provide that a policyholder may cancel a policy in writing or by written consent,4 and an insurer may cancel a policy for acts or practices constituting fraud or intentional misrepresentations of material fact.5

To address the issue regarding premiums, for all but Health insurance policies, Rule 40 provides that a premium owed from an insured may be offset from any claim payment made to the insured under the insurance policy.6 Rule 40 also provides that after the state of emergency is lifted, the insurer may provide notice of cancellation or non-renewal de novo in accordance with existing statutory requirements,7 which would address the issue of non-payment of premiums.

Further, Rule 40 clarifies that nothing in Rule 40 shall be construed to exempt or excuse an insured from the obligation to pay the premium otherwise due for actual insurance coverage provided.8 And further, Rule 40 makes it clear there is no intent to delay or defer the claims adjustment process for a pending or newly filed claim: “Emergency Rule 40 shall not relieve an insured who has a claim filed before or during the pendency of Emergency Rule 40 from compliance with the insured’s obligation to provide information and cooperate in the claim adjustment process relative to the claim.”9

This initial and fast-acting approach taken in Louisiana seems to be fair and reasonable for both the insurer and the insured given the extraordinary circumstances and events. If you have questions regarding this issue in another jurisdiction, check with both your state governor’s office and/or the Department of Insurance for updated guidance. We look forward to seeing these creative solutions to this issue as we all look forward to moving through this pandemic as quickly and smoothly as possible. All the best.
1 Title 37 Insurance Part XI. Rules Chapter 40. Emergency Rule 40—Moratorium on Policy Cancellations and Non-Renewals for Policyholders in Louisiana during the Outbreak of Coronavirus Disease (COVID-19).
2 Id. at §4005. Cancellation, Nonrenewal, and Nonreinstatement, (A).
3 Id. at §4043. Effective Date.
4 Id. at §4009. Written Request for Cancellation by Insured.
5 Id. at §4005. Cancellation, Nonrenewal, and Nonreinstatement, (D).
6 Id. at §4015. Premium Offset.
7 Id. at §4005. Cancellation, Nonrenewal, and Nonreinstatement, (A).
8 Id. at §4017. Obligation of Insured to Pay Premium.
9 Id. at §4023. Insureds Obligation to Cooperate in Claim Process.


Corona Virus and Physical Damage—The Louisiana Case Law That Will Be Relied Upon in the First Coronavirus Case Filed

By Chip Merlin on March 22, 2020POSTED IN INSURANCE

The first coronavirus lawsuit filed was in Louisiana. The subject policy has no ISO virus exclusion which was discussed in, Coronavirus Insurance Coverage Update—The ISO Circular Regarding the Virus Exclusion. Louisiana attorney John Houghtaling filed the lawsuit, and he will undoubtedly be relying upon a Louisiana case, Widder v. Louisiana Citizens Property Insurance Corporation,1 for the proposition that the coronavirus caused physical damage.

Let me say that I am biased about this. My first gut reaction is that this virus is so dangerous it has us cooped away from each other by government order. I am paying extra money for people to fumigate and wipe the surfaces at our offices in Tampa between our reduced maximum ten-person shifts. The ISO is so concerned about the virus that it issued an exclusion to make certain we cannot claim it as covered property damage. Why would anybody think that such a virus that is on property does not physically change property?

If the non-dangerous teenage pranks of “egging” or “TPing” a house are acts of vandalism and property damage, the dangerous virus on my business property certainly is property damage as far as we all should be concerned. But that is just my gut reaction. People can have different gut reactions which will probably turn on whose side you represent and whether you think insurance policies should be looked at as vehicles actually providing coverage. (My bet is that there is little vandalism with eggs or toilet paper at the present time.)

While Widder eventually held lead dust on property constitutes “property damage,” the facts of Widder were very compelling for that fact. As noted in the policyholder’s briefing:

Defendant’s own engineers stated in their report that the lead needed to be removed and caused direct physical harm to property. As stated above, the engineers recommended that the entire property be gutted, recommended that the children’s toys be destroyed, and other personal property should be destroyed if not properly cleanable. In fact; the damage was so severe that they stated ‘given the concentrations of inorganic lead in the wipe samples, the home is not safe to occupy, especially for the child.’

Accordingly, Defendant’s own engineers have assigned the source of the lead as originating, at least in part, outside the property. This created an ‘event’ which lead to the damage, which lead to the recommendation that the entire property needs to be gutted and contents destroyed.

It helps the claim that “property damage” occurred under policy terms when the insurance company’s engineers say that the lead dust made the property damaged and that the house needed to be gutted and contents destroyed. I doubt that the insurance company’s engineers are going to say the same thing with the current coronavirus.

Still, whether lead dust or a dangerous virus falling upon business, it is the fact the pre-existing state of the property has changed with the addition of these non-maintenance types of physical additions. These are unexpected and dangerous additions to property—I doubt anybody will disagree with that.

Yet, big questions are begging—does anybody have any evidence that something more than a quick fumigation or hygienic cleaning is all that is needed to remove the virus? There is usually a 72-hour shutdown period and the remediation seems to be a lot quicker. And, while I have routinely tested for lead on property to prove its existence, is anybody testing for the virus to prove it is even on the business property? The fact that many restaurants and grocery stores are doing a general fumigation and remediation and then opening the next day or providing take out business is not helpful to find coverage. The safe thing is to simply assume the coronavirus is on the property whether it is or is not. For the direct business income claim, these are pretty significant proof issues that will need to be addressed because those “clever and skeptical” insurance defense attorneys are definitely going to be asking these questions.

Still, the Widder holding is helpful in finding coverage and direct physical loss:

The record is clear that Ms. Widder’s home is contaminated with inorganic lead which makes it uninhabitable until it has been gutted and remediated. For the purpose of determining direct physical loss, this type of loss is similar to the type of loss experienced from Chinese drywall. The issue of what constitutes a direct physical loss was recently addressed in connection with Chinese drywall litigation….the court found that the presence of Chinese drywall, from which gaseous fumes were released, did in fact constitute a direct physical loss. The court stated that when a home has been rendered unusable or uninhabitable, physical damage is not necessary….In this case, we find the intrusion of the lead to be a direct physical loss that has rendered the home unusable and uninhabitable. See, Ross v. C. Adams Construction & Design, 10–852 (La.App. 5 Cir. 6/14/11), 70 So.3d 949 (Although the Chinese drywall is physically intact and functional, its inherent qualities require it to be taken down and replaced. Therefore, there was a direct physical loss.).

The New Orleans based coronavirus case filed in Louisiana is certainly in a favorable jurisdiction for policyholders, and with favorable case law. The policy is one without the ISO virus exclusion. That is a good start for policyholders. These are not the only issues, and I have not spoken about the Civil Authority Coverage aspects of the case, which deserves further comment. I again suggest everybody read Bill Wilson’s post on the case.

Thought For The Day

In America, there might be better gastronomic destinations than New Orleans, but there is no place more uniquely wonderful.
—Anthony Bourdain
1 Widder v. Louisiana Citizens Prop. Ins. Corp., 82 So.3d 294 (La. App. 2011).


Do Insurance Carriers Create a Crisis to Obtain Rate Increase and Anti-Consumer Changes to Insurance Laws?


The Consumer Federation of America and New York’s Law School’s Center For Justice and Democracy issued a study today, How the Cash Rich Insurance Industry Fakes Crises and Invents Social Inflation. I would suggest readers read this study and also consider my post from last week, How Playing the Float, Taking Depreciation on Labor or Tear Out Is Needed Cheating For Many Insurance Companies, where I had a long quote from Warren Buffet about how insurance companies make big money on the float.

The study noted what we see in legislatures across the country where insurance lobbyists and their publicists try to portray a crisis to get what they want:

Today, this overcapitalized industry is already charging many businesses far too much in premiums while threatening even greater increases, all while attempting to create the perception that it is too financially troubled to pay claims. Yet this is an industry that has stored away so much excess profit that it now sits on more surplus than at any time in history – a record level of well over $800 billion.

For most Americans who do not pay close attention to insurance markets, it is easy to be misled by this industry when it tries to justify rate hikes after years of stable or decreasing premiums. This is exactly the situation in which some businesses find themselves today.

Insurance companies have never been forthcoming about why ups and downs in insurance premiums happen. In these cyclical hard markets, they have internally admitted that the cause is the industry’s own self-made boom and bust economic cycle. But publicly they have attempted to cover up their mismanaged underwriting and accounting practices by blaming lawyers, juries, and the legal system. Today they are making such claims even though both litigation data and the industry’s own loss data show that claims are not spiking and ‘tort costs’ are stable.

In previous crises, the industry pointedly blamed the legal system, but that old attack has been exposed as incorrect in each of the three previous hard market periods. So, in the current run-up to a new hard market, the insurance industry needed a new public relations term to make the case for higher rates. It has settled on a new name to describe its current interest in raising prices: ‘social inflation.’ Over the last several months, insurance industry representatives have begun a seemingly coordinated effort to market the idea that ‘social inflation’ (i.e., lawsuits by injured, harmed, and defrauded consumers and policyholders) are hurting insurers financially.

This study will take time to digest, but I encourage those concerned about the insurance industry and how it operates to fully read this newly published report.


Insurance companies need to pay up for legit hurricane claims

Hurricane Michael hit the Florida Panhandle over a year ago, turning more than 150,000 property owners’ lives upside down. Today, thousands of homeowners’ lives and local businesses are still on hold because their properties were destroyed and their insurance companies have failed them miserably.

For far too many property owners, their insurance carriers denied or only offered minimum benefits for the total loss of their homes and businesses.

Today, 15,893 home and business property owners still have open claims — and approximately 20,980 have had their claims closed without receiving a single penny. According to the Office of Insurance Regulation’s Hurricane Michael claims data, as of October 25, 2019, 31% commercial claims and 11% residential claims were still open.

These Florida property owners had insurance and expected to be protected.

When a storm actually hits, and it’s the insurance company’s turn to be responsible, we see the most irresponsible behavior – delays, underpayment, disregard for Florida law and acting in bad faith.

Some insurers have adopted the practice of sending multiple adjusters to survey property, in an attempt to delay payment. I know many property owners who are left with a concrete slab where their home once stood — and their insurer is still trying to “assess” the damage.

How many adjusters need to look at the total destruction before insurers actually uphold their promise to consumers?

All evidence points to insurers setting up a system to confuse, confound and convolute the claims process so that consumers either take gross underpayment for the total loss of property or just give up and go away.

In any other industry, a company whose business model is to gain revenue while intentionally not performing under contract would be prohibited from operating. Yet this has become standard practice for insurance companies.

Who is going to stand up for 93,645 consumers — 17,347 open Hurricane Michael claims and 76,298 for Hurricane Irma more than two years ago, according to the Office of Insurance Regulation website — who are still waiting?

Chief Financial Officer Jimmy Patronis has proposed legislation that would speed up the claims process after a storm. SB 1492, sponsored by Sen. Tom Wright and HB 1137, sponsored by Rep. Chuck Clemons, are a step in the right direction in protecting property owners who face delay after delay by their insurance company.

Other proposals, like the property insurance bills proposed by Sen. George Gainer and Rep. Jay Trumbull (HB 1357/SB 1760), go even further in protecting property owners and preventing insurers’ practice of failing to properly pay claims.

If insurance companies won’t uphold their promise to consumers, it’s up to lawmakers to uphold their commitment to constituents and hold insurance companies accountable.

Amy Boggs is CEO of Boggs Law Group, P. A., which has offices in St. Petersburg and Marianna to serve Hurricane Michael policyholders.


After the tornado, life at St. Mark’s isn’t going back to normal, and that’s OK

After the hundreds of class messages, photos and the three trips I made to campus that week, nothing really started to set in for me until 3:07 p.m. on Friday Oct. 25. Staring in absolute shock as I sidestepped pieces of glass and stray nails from the events of the prior Sunday night, I still couldn’t believe everything that I saw at 10600 Preston Rd. and the surrounding community.

As I came around the corner, the sign hit me straight on as I looked up from my phone and paused my playlist on Spotify.

St. Mark’s [heart] Hockaday — Strong Together.

After the hundreds of class messages, photos and the three trips I made to campus that week, nothing really started to set in for me until 3:07 p.m. on Friday Oct. 25. Staring in absolute shock as I sidestepped pieces of glass and stray nails from the events of the prior Sunday night, I still couldn’t believe everything that I saw at 10600 Preston Rd. and the surrounding community.

The photos and GroupMe messages couldn’t convey the significance of what happened: the damage to Hicks Gym, tennis courts, choir loft, bell tower, chapel, Decherd Performance Hall, the black box theater and some broken windows here and there. I felt numb, scrolling through the dozens of photos and horror stories of houses destroyed or lives almost lost as I was sitting in my bed, too nervous and anxious to sleep.

At 3:07 that Friday afternoon, I walked into Penson Gym at Hockaday. Getting ready for the St. Mark’s volleyball homecoming game against Greenhill, the images of the damage kept creeping up from the back of my mind, but I tried to push them out. They brought back that same nervous and anxious feeling I had on Sunday night.

As I came around the corner, the sign hit me straight on as I looked up from my phone and paused my playlist on Spotify.

St. Mark’s [heart] Hockaday — Strong Together.

I stood there and tears I knew I had but could never get out poured all over my face. I walked in the gym, and instead of seeing the Hockaday net that I have seen dozens of times, our associate athletic director, Josh Friesen, had replaced it with the restrung net from Hicks Gym that remained standing despite all the damage. The pads on the sides were replaced with the beaten and torn up St. Mark’s pads that still smelled like Hicks Gym. And the senior portrait shots, the ones that I thought were gone forever, were reprinted and strung along the north wall, reminding me of the three games I had left before our conference championship, wearing the blue and gold jersey for the last time.

At 4:30 p.m., those same tears came back. Huddling up before the game, I reminded everyone on the court that this was so much more than just a game. It was a moment when members of the community could come together to forget the devastation of the storm. It was a moment when people could be surrounded by others, bringing back that sense of normalcy that we all desperately needed.

I told my teammates that this game wasn’t for us.

It was for the workers who have made the campus their home the past few days, sacrificing their time and energy to make sure students and faculty could return to campus as soon as possible. It was for the parents, students and alumni who dedicated the next few days to serving the greater Dallas community by delivering countless meals, canvassing homes and volunteering to clear yards. It was for the younger Marksmen who worried about when they would be able to come back to school and see their friends at lunch again. And it was for the families whose houses were damaged. Families with no roof to live under.

Through all of this, St. Mark’s was just one site of destruction, and we made sure to keep that in the back of our minds. While the school initiated a ready plan for repair, we were very cognizant that others in our community needed help and so began our outreach to other communities. Thousands of other homes across the Dallas area were destroyed, and Marksmen made sure to do their best to take care of their greater community by volunteering to help the Dallas ISD schools in need. Organizing a fundraiser for those schools who faced many challenges, members of our community created “Dallas Strong” shirts, rewriting the definition of community to extend even further.

That whole night, members of Greenhill and Hockaday did everything they could to make their gym and fields feel like our home. As we finished the three-set match, we shook hands with the Greenhill players and immediately exchanged expressions of concern and support for both of our communities. And two days before, we had also received word of the support from the Trinity Valley team, who worked with Molten USA, provider of volleyball equipment, to get us new gear.

As I walked out of that gym, a sense of relief came over me to see a smile on the faces of every person in those grey and green Hockaday stands that night.

But I still wanted things to go back to normal.

I wanted to be able to put on my blue shirt, grey shorts, white socks and black Nike tennis shoes and go back to the Friday edition of AP economics or production week in the journalism suite or eighth-period calculus. I wanted to be surrounded by my 88 classmates, whom I consider my brothers, and laugh through the pain of the first trimester, volleyball season and college applications.

But the reality is that things are going to be different at St. Mark’s and across Dallas, and I’m okay with that. We can never return to normal, but we must continue on whatever path this new normal takes us. It’s a new normal that will unite us and the Dallas community like we have never seen before, extending helping hands further than we ever have.

Change — even when it’s unexpected — can be a beautiful thing.

Sam Ahmed is a senior at St. Mark’s School of Texas and editor of the school newspaper, the ReMarker. He wrote this column for The Dallas Morning News.