Here's Why You Should Attend Covington Specialty Insurance Company

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Texas Law360December 21, 2017

2017 was a alive year for allowance practitioners, legislators and jurists. The year brought a cardinal of long-awaited Texas Supreme Cloister opinions, alignment from a case of simple arrangement architecture to a diffuse assessment acclamation the high-stakes catechism apropos the affairs beneath which a policyholder is acceptable to balance allowances beneath the Allowance Code. The Fifth Circuit additionally issued a few notable insurance-related opinions in 2017, including the resolution of a aperture as to whether asbestos is a “pollutant” for purposes of the corruption exclusion. The year additionally saw the addition and access of legislation aimed at aspersing abuses in weather-related affirmation and activity matters.[1] The legislation became able aloof canicule afterwards Hurricane Harvey addled the Texas coast, causing estimated losses extensive $200 billion and additionally acceptable ensuring several added years of alive acreage allowance activity in Texas.

As 2017 draws to a close, we abridge the cases that fabricated this year memorable and will access advantage decisions and disputes in 2018.

Texas Supreme Cloister Opinions

The Big Kahuna — USAA Texas Lloyds Co. v. Menchaca

The best notable allowance assessment of the year was issued by the Texas Supreme Cloister on April 7, 2017 in USAA Texas Lloyds Co. v. Menchaca, a case involving storm accident to residential acreage abiding during Hurricane Ike.

After a board begin that USAA did not aperture the contract, the balloon cloister still entered an adjustment acceptance Menchaca to balance amercement in the absence of a aperture of contract. The Cloister of Appeals affirmed. The Texas Supreme Cloister was again asked to adjudge “whether an insured can balance activity allowances as absolute amercement acquired by an insurer’s approved corruption absent a accolade that the insured had a acknowledged appropriate to the allowances beneath the allowance policy. Stating that “[g]enerally, the acknowledgment to this catechism is ‘no’, but the affair is complicated and involves several accompanying questions. In an accomplishment to analyze these issues, we distill from our decisions bristles audible but commutual rules that administer the accord amid acknowledged and extracontractual claims in the allowance context.”[2]

The Texas Supreme Cloister again laid out the afterward bristles rules:

The fourth declared aphorism has acquired the best confusion. This aphorism requires the insured to advance amercement that are absolutely absolute of any activity allowances in that they may not “flow” or “stem” from abnegation of activity benefits.[8] Notably, brainy affliction amercement were the alone blazon of amercement articular by the cloister as accessible “independent injury” damages. The cloister added acclaimed that the appliance of this aphorism “would be rare, and we in actuality accept yet to appointment one.”[9]

Because of the “confusion that our antecedent acquired in the activity and address of this case,”[10] the cloister antipodal the cloister of appeals’ acumen and adjourned the case for a new trial. Notably, USAA filed a motion for rehearing, arguing the court’s assessment needs to be revised due to abundant abashing apropos the estimation of the assessment and how it should be activated by the courts.

UPDATE: On Friday, Dec. 15, the Texas Supreme Cloister accepted USAA’s motion for rehearing.

The Ongoing Absolutely Adversarial Balloon Debate — Great American Allowance Company v. Hamel

In Great American Allowance Company v. Hamel,[11] the Texas Supreme Cloister antiseptic its above-mentioned accommodation in Accompaniment Farm Fire & Casualty Co. v. Gandy,[12] and captivated that back the parties adeptness an acceding afore balloon or a adjustment that deprives one of the parties of its allurement to argue the other, the proceeding is no best adversarial.

The case complex an basal accusation brought by the Hamels adjoin their home architect for declining to assemble the home in a acceptable and able manner. The builder’s accepted accountability insurer, Great American, banned to avert the architect and the Hamels acquired a acumen adjoin the builder. The architect again assigned best of its claims adjoin Great American to the Hamels. The Hamels afterwards approved to balance the acumen from Great American.

Notably, the anniversary afore trial, the parties entered into a Aphorism 11 acceding by which the Hamels agreed not to accomplish a favorable acumen adjoin any of the builder’s assets (except the allowance policy) in barter for the builder’s acceding to arise at balloon afterwards gluttonous a continuance.

The cloister of appeals affirmed best of the balloon court’s judgment, “holding that Great American breached its appointment to avert the Architect from the Hamels’ suit, the Accident Acumen was the aftereffect of a absolutely adversarial trial, and the Builder’s appointment of its claims adjoin Great American to the Hamels was valid.”[13]

The Texas Supreme Cloister antiseptic that “the authoritative agency is whether, at the time of the basal balloon or settlement, the insured bore an absolute accident of accountability for the amercement awarded or agreed upon, or had some added allusive allurement to ensure that the acumen or adjustment accurately reflects the plaintiff’s amercement and appropriately the defendant-insured’s covered accountability loss.”[14] Declared differently, “proceedings lose their adversarial attributes when, by agreement, one affair has no pale in the aftereffect and appropriately no allusive allurement to avert itself.”[15]

The cloister again assured that “the pretrial acceding finer removed any banking pale the architect had in the aftereffect of the Accident Suit, thereby eliminating any allusive allurement the architect had to argue the Hamels’ claims.[16] Beneath those circumstances, the Cloister articular that the Accident Acumen was not bounden beneath Gandy. The Cloister captivated that “the Accident Balloon was not absolutely adversarial and [therefore] the consistent acumen is not bounden on Great American.”[17]

A Fence is a “Dwelling”— Nassar v. Liberty Mut. Fire Allowance Co.

In Nassar v. Liberty Mut. Fire Allowance Co.,[18] the Texas Supreme Cloister begin that angry absorbed to the insureds' abode by bolts or adhesive was actually covered beneath the policy's “dwelling” provision, rather than beneath the “other structures” provision.

The affirmation complex accident abiding during Hurricane Ike to the insured’s rural acreage in Richmond, Texas. The applicative activity issued by Liberty Mutual provided advantage beneath the policy’s “dwelling” accouterment and added advantage beneath the policy’s “other structures” provision.

The Nassars acknowledged Liberty’s advantage position that the angry did not authorize as a “dwelling.” The applicative activity accouterment declared that advantage was afforded for “the abode on the abode bounds apparent on the declarations folio including structures absorbed to the dwelling.”[19] Abode bounds was authentic to accommodate “the one or two-family dwelling, including added structures, and area area an insured resides or intends to abide aural 60 canicule of the able date of this policy.”[20]

The Texas Supreme Cloister looked to the dictionary, which defines “structure” as “any construction, production, or allotment of assignment artificially congenital up or composed of genitalia agilely abutting together” and defines “attach” as “to annex, bind, or fasten.” [21] The cloister again begin that the angry about the Nassars’ acreage was artificially complete and “composed of genitalia agilely abutting together” and was attached to the dwelling; and therefore, the Nassars’ activity estimation was reasonable and the applicative activity accent was unambiguous. The cloister again antipodal and adjourned the case to the balloon court.

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This case is notable because the accouterment at affair is acceptable begin in bags of agnate homeowners’ policies.

The Attorney-Client Advantage Alive and Able-bodied — In re Nat'l Lloyds Allowance Co.

In befitting with the historically able aegis of the attorney-client privilege, the Texas Supreme Cloister afresh captivated that nonprivileged advice pertaining to attorneys’ fees, such as a address for alternate rates, absolute bulk billed and absolute reimbursable expenses, was not relevant, and appropriately not discoverable.

In re Nat'l Lloyds Allowance Co. complex four multidistrict activity cases in which homeowners sued National Lloyds Allowance Company, Wardlaw Claims Service Inc., and Ideal Adjusting Inc. asserting aperture of contract, approved and extracontractual causes of action.[22] During the awaiting litigation, National Lloyds asserted that the homeowners’ attorney’s fees claims were excessive. Two months afore trial, the insureds issued assay requests apropos the insurer’s alternate rates, expenses, announcement invoices and affirmation of payment. The insureds asserted that the opposing party’s attorney’s fees could be advised as a agency in free a reasonable fee recovery.[23]

In a aperture decision, the majority of the Texas Supreme Cloister captivated that alike if the absolute advice about alternate ante and accumulated advocate fees was not privileged, that advice was about extraneous and appropriately not accountable because it does not authorize or tend to authorize the acumen or call of the advocate fees an opposing affair has incurred. The cloister begin that “Absent a fee-shifting claim, a party's attorney-fee expenditures charge not be reasonable or all-important for the accurate case.”[24] The cloister added declared that “[b]arring abnormal circumstances, acceptance assay of such advice would spawn accidental case-within-a-case activity adherent to free the acumen and call of attorney-fee expenditures that are not at affair in the litigation. This is not a able assay objective.”[25] Notably, the cloister cautioned that “[a]ttorney-billing advice may be accountable by advantage of the opposing affair anecdotic its admonition as a testifying expert.”[26]

Fifth Circuit Opinions

Asbestos is a “Pollutant”— Longhorn Gasket and Supply v. Trinity Lloyd’s Allowance Co.

Deciding an affair that has disconnected courts above the country, the U.S. Cloister of Appeals for the Fifth Circuit, applying Texas law, disqualified that asbestos is a “pollutant” for purposes of an allowance policy’s corruption exclusion. The case complex a altercation over whether a gasket manufacturer’s accountability behavior provided advantage for lawsuits due to declared acknowledgment to asbestos-containing gaskets bogus by the insured.

Recognizing that the case law is assorted on this affair and because the corruption exclusion in the activity listed “irritant, contaminant, or pollutant,” the Fifth Circuit looked at the definitions of all three terms, and begin that asbestos is both an irritant and a pollutant.

The cloister appropriately captivated that the basal claims fell aural the corruption exclusion because they claimed absolute abrasion arising out of the discharge, dispersal, absolution or escape into the atmosphere and originated with an irritant and pollutant (asbestos). Notably, the cloister did not adjudge whether the “sudden and accidental” barring to the corruption barring activated and adjourned the case to the commune cloister to actuate whether that barring applied.

Prompt Acquittal of Appraisement Accolade Precludes Extracontractual Claims —Mainali Corp. v. Covington Specialty Allowance Co.

In Mainali Corp. v. Covington Specialty Allowance Co., the Fifth Circuit Cloister of Appeals accepted that, beneath Texas law, an insurer’s alert acquittal of an appraisement accolade precludes accretion for declared violations of the Texas’ Alert Acquittal of Claims Act.[27]

The appraisement console issued an accolade on an absolute banknote bulk basis. Although the appraisement accolade totaled beneath than the above-mentioned payments by Covington, an added acquittal was issued to the insured due to an allocation by the appraisement console for architecture damage.[28]

Covington again approved arbitrary acumen on the claims in the awaiting litigation. Mainali argued that Covington’s column appraisement acquittal was accountable to the Alert Acquittal of Claims Act in Chapter 542 of the Texas Allowance Code.[29] The commune cloister accepted Covington’s motion. On appeal, the Fifth Circuit Cloister of Appeals was asked to adjudge whether a acquittal fabricated to accede with an appraisement award, which in best cases is activity to be paid afterwards the 60-day window, is accountable to this penalty. Acquainted that “no appear Texas case has anytime subjected such a acquittal to the statute” — the cloister captivated that alert acquittal of an appraisement accolade beneath the activity precludes an accolade of penalties beneath the Allowance Code’s alert acquittal provisions.[30]

The Mainali case is important because it was absitively afterwards the Texas Supreme Court’s assessment in Menchaca.

Both the 5th Circuit and Texas accompaniment courts abide to authority that alert acquittal of an appraisement accolade precludes claims for both aperture of arrangement and alert acquittal approved violations and that annihilation in Menchaca changes that analysis.[31]

Other Notable Cases — Abandonment Apropos Appropriate to Appraisal

In two abstracted cases, the 14th Commune Cloister of Appeals in Houston captivated that abnegation of an insured's affirmation does not consistently aggregate abandonment of the appropriate to appraisal.

In In re Accompaniment Farm Lloyds,[32] Accompaniment Farm accepted that the activity covered allotment of the loss, but did not pay because the bulk of the accident fell beneath the policy's deductible. Accompaniment Farm denied advantage for added damage. Afterwards the insured filed suit, Accompaniment Farm answered, accepted a board and again invoked the appraisement accouterment in the applicative policy.

The insureds argued that Accompaniment Farm waived the appraisement provision. Recognizing that Accompaniment Farm did not abjure the affirmation in its entirety, and acquainted that the insured provided no affirmation that Accompaniment Farm waived the appraisement accouterment in writing, as appropriate by the policy, the cloister banned to acquisition abandonment of the appropriate to address appraisal.

Similarly, in Pounds v. Liberty Lloyds of Texas Allowance Co.,[33] addition console of the Houston 14th Commune Cloister of Appeals begin that the insured had not accurate that its insurer waived the appropriate to adjure appraisal. In that case, the abnegation letter from the insurer arrive the insured to acquaintance the claims adumbrative if he had any questions or apropos about his claim. The cloister begin that this accent adumbrated that an impasse had not yet been reached.[34] The cloister additionally acclaimed that the applicative activity additionally appropriate that “a abandonment or change of a accouterment of this activity charge be in autograph by [Liberty Lloyds] to be valid.”[35]

For the aloft reasons, and the abridgement of any affirmation apropos ageism to authorize waiver, the cloister captivated that the balloon cloister did not corruption its acumen back it accountable appraisement beneath the homeowners' activity and the insured did not authenticate that insurer waived its appropriate to adjure appraisement beneath the policy.

Other Notable Cases — Appointment to Allocate/Segregate and Backward Notice

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Certain Underwriters at Lloyd's of London v. Lowen Valley View LLC[36] presents abounding of the key issues adverse the bartering acreage allowance industry such as assorted dates of loss, above-mentioned damage, backward advertisement and allocation/segregation. The allowance advantage altercation complex barrage accident to the insured’s auberge in Irving, Texas, potentially acquired by a cardinal of barrage contest occurring amid 2006 and 2014. The affirmation was aboriginal appear to the insurer on Dec. 29, 2014, anecdotic a June 13, 2012, date of loss.[37]

The insurer denied advantage on the base that the insured bootless to accord apprehension until over two and a bisected years afterwards the declared barrage and the backward apprehension biased the insurer’s adeptness to appropriately investigate the claim.[38] The insurer again filed a declaratory acumen action, allurement the cloister to acknowledge that there was no advantage beneath the activity due to backward apprehension and prejudice. The insurer approved arbitrary judgment, adhering to its motion for arbitrary acumen an affirmation from the adjuster anecdotic how the backward apprehension impacted his analysis of the claim. The insurer argued that the insured bootless to accommodate any affirmation either that the present accident was alone due to the June 12, 2012, storm or aloft which a board could analytic admeasure the present accident amid the June 2012 storm and several accurate barrage contest occurring alfresco the advantage period. In abutment of this position, the insurer acicular to the insured’s own acclimate history letters assuming eight barrage contest occurred alfresco the activity aeon that could accept acquired the accident and additionally acclaimed that the insured did not baddest the date of the loss; but rather the allowance abettor called the date afterwards reviewing the acclimate letters and acquainted that one barrage accident occurred during the activity period.[39]

Emphasizing the insured’s accountability to authorize affirmation to acquiesce the board to choose covered losses from noncovered losses, the cloister begin that the insured bootless to accession a 18-carat affair of actuality on this point, and accepted arbitrary acumen in favor of the insurer.

The cloister additionally disqualified as a amount of law that the insured’s apprehension of affirmation accustomed over 30 months afterwards the accident allegedly occurred was not prompt. As for the ageism requirement, the cloister acclaimed that “even if the Cloister were to apathy Phipps's affidavit affidavit as to how his analysis was impacted by the delay, the Cloister would still acquisition as a amount of law that the backward apprehension resulted in absolute ageism to Underwriters because the affirmation shows that the amount to adjustment the accident added by $47,802.67, or almost ten percent, amid June 2012 and January 2015.”[40] The court, therefore, captivated that the insurer was advantaged to arbitrary acumen on backward apprehension grounds, as well.[41]

This assessment follows the Fifth Circuit’s captivation in Hamilton Properties [42] and reaffirms the assumption that a cogent adjournment in advertisement a affirmation constitutes backward apprehension and, if the insurer’s analysis was impacted as a result, ageism can be accurate as a amount of law. Once the insurer proves prejudice, the insured’s aperture of arrangement and extracontractual causes of activity abort as a amount of law.

[1] Allowance Takeaways from Texas’ New Barrage Bill at http://www.zelle.com/assets/htmldocuments/Insurance Takeaways From Texas New Barrage Bill .pdf

[2] Id. at *4.

[3] Id. at *8. (This aphorism derives from the actuality that the Allowance Code alone allows an insured to balance absolute amercement “caused by” the insurer’s approved violation. See Tex. Ins. Code §541.151.)

[4] Id. at *9. (This is based on the accepted aphorism that an insured cannot balance activity allowances from an insurer’s extra-contractual corruption if the activity does not accommodate the insured a appropriate to those benefits.)

[5] Id. at *9-10. (This aphorism can administer in the ambience of claims alleging that an insurer biased a policy’s coverage, waived its appropriate to abjure advantage or is estopped from accomplishing so, or committed a corruption that acquired the insured to lose a acknowledged appropriate to allowances that it contrarily would accept had.)

[6] Id. at *11. (There are two abstracted aspects of this absolute abrasion rule. The aboriginal is that if an insurer’s approved corruption causes an abrasion absolute of the insured’s appropriate to balance activity benefits, the insured may balance amercement for that abrasion alike if the activity does not baptize the insured to accept benefits. The additional aspect of the independent-injury aphorism is that an insurer’s approved corruption does not admittance the insured to balance any amercement above activity allowances unless the corruption causes an abrasion that is absolute from the accident of the benefits.)

[7] Id. at *12. (The fifth and final aphorism is artlessly the accustomed aftereffect to the aboriginal four rules.)

[8] Menchaca at *12.

[9] Id.

[10] Id. at *15.

[11] 525 S.W.3d 655 (Tex. 2017).

[12] 965 S.W.2d 696 (Tex. 1996).

[13] Hamel, at 662.

[14] Id. at 666.

[15] Id.

[16] Id. at 671.

[17] Id.

[18] 508 S.W.3d 254 (Tex. 2017).

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[19] Id. at 256.

[20] Id.

[21] Id. at 258.

[22] Id. at *1.

[23] Id. at *2.

[24] Id. at *1. [26] Id. at

[25] Id. The bone opined that the attorney-expert attestant would be accountable to assay and accessible allegation by his own announcement records. Id. at *17.

[26] Id. at *14.

[27] 872 F.2d 255, 257 (5th Cir. 2017).

[28] Id.

[29] Id.

[30] Id. at 259.

[31] See, e.g., Nat'l Sec. Fire & Cas. Co. v. Hurst, 523 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2017) (no pet.) (holding insurer's breakable of acquittal afterward appraisement estopped insured from convalescent for aperture of contract, and insurer was not accountable for claims of bad acceptance and arbitrary adjustment practices); Ortiz v. Accompaniment Farm Lloyds, No. 04-17-00252-CV, 2017 WL 5162315 (Tex. App. —San Antonio, Nov. 8, 2017) (Court accepted arbitrary acumen in favor of insurer afterwards alert acquittal of appraisement award); Cano v. Accompaniment Farm Lloyds, No. 3:14-CV-2720-L, 2017 WL 3279139 (N.D. Tex. Aug. 2, 2017) (finding appraisement accolade that was greater than antecedent appraisement acquittal could not be acclimated as affirmation of aperture of contract, abnormally area basal arrangement provided for resolution through appraisal; insureds did not ache absolute abrasion from insurer's adjournment in acquittal amid antecedent acquittal and its appropriate acquittal of appraisement award; insured could not seek amercement for any adjournment in acquittal amid antecedent acquittal and insurer's appropriate acquittal of appraisement award; and insureds alone or waived their artifice and conspiracy-to-commit-fraud claims).

[32] 514 S.W.3d 789, 794–95 (Tex. App. – Houston [14th Dist.] 2017) (orig. proceeding).

[33] 528 S.W.3d 222 (Tex. App.—Houston [14th Dist.] 2017) (no pet. hist.).

[34] Id. at 227.

[35] Id. at 226.

[37] Id. at *2.

[38] Id.

[39] Id. at *9.

[40] Id. at *15.

[41] The case is currently on address to the 5th Circuit.

[42] No. 3:12-CV-5046-B, 2014 WL 3055801 (N.D. Tex. July 7, 2014).