INSURANCE LAW

WINTER 2009-2010

In re Liberty Mut. Fire Ins. Co., W.L. 2666900; LEXIS 627 (Tex. 2009)

Workers’ Compensation; “Bad Faith”; Exhausting Administrative Remedies: The insured sought bad-faith damages against his workers' compensation carrier, for denying preauthorization of medical treatment. However, the insured only alleged that the carrier turned down office visits (for which preauthorization was not required) and possible back surgery (for which preauthorization was not sought). Held: The Workers' Compensation Act vests the Workers' Compensation Division with exclusive jurisdiction to determine a claimant's entitlement to medical benefits. The claimant’s bad-faith claim depended upon whether he was entitled to further medical care, thus that issue must first be addressed administratively. By demanding preauthorization when it was not required and failing to request it when it was, the insured avoided all the administrative remedies that governed his claims. As the insured did not have his claim addressed administratively, the trial court should have granted the insurer’s plea to the jurisdiction and dismissed the suit and failure to do so was correctable by mandamus.

Leigh v. Kuenstler, W.L. 3126538; LEXIS 7633 (Tex. App. - Houston [14^th Dist.] 2009) (memo op.)

Agent Liability; Duty; Insurance Code Violations; Misrepresentation: What is an insurance agent's duty to his insured in connection with making sure that the uninsured/underinsured policy limits match the primary limits of liability coverage? Stated a bit differently, does an insurance agent have a duty to recommend or procure UM/UIM coverage in an amount equal to the coverage limits of the primary liability policy? Held: Under well-established Texas law, an insurance agent who undertook to procure insurance for another owed his client the common-law duties to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if he was unable to do so. An agent had no duty to extend the client's insurance protection merely because the agent may know of the client's need for additional insurance, especially in the absence of evidence of prior dealings in which the agent customarily had attended to the client's insurance needs without consulting her. “According to the uncontroverted summary-judgment evidence, Leigh requested from Kuenstler only that he procure insurance coverage in an amount at least equal to the coverage provided to Leigh's parents under their automobile insurance policies. Leigh's parents had $ 20,000 in UM/UIM coverage; Kuenstler procured $ 50,000 in UM/UIM coverage for Leigh. Thus, he fulfilled his common-law duty to Leigh, and as a matter of law, he had no duty to do more.” In regard to the Insurance Code violation claims, the insured identified no statements by the agent that were misleading absent explanations of the coverage provided by the umbrella policy and the availability of UM/UIM insurance with higher policy limits; to the contrary, the insured testified that she "just thought" that the umbrella policy would provide coverage for the same expenses covered by the UM/UIM policy, and she admitted that this was simply an assumption on her part. Note: “In the absence of some specific misrepresentation by the insurer or agent about the insurance, a policyholder's mistaken belief about the scope or availability of coverage is not generally actionable'" under the DTPA or the Insurance Code.”

Alexander v. Hartford Life & Accident Ins. Co., W.L. 906786; LEXIS 27210 (N.D. Tex. 2008)

ERISA; Disability Insurance; Claim Denial; Abuse of Discretion: The Court reviewed the summary judgment in this ERISA case de novo, reviewing an administrator's denial of ERISA benefits for abuse of discretion as the administrator had discretionary authority with respect to the claim decision. The Court found that Hartford had a financial conflict of interest because it was responsible both for determining eligibility for benefits and for paying benefits. Thus, although the standard of review wasn’t changed, it was one factor that courts must consider in deciding whether the administrator abused its discretion. A denial of benefits was not an abuse of discretion if it "is supported by substantial evidence and is not arbitrary and capricious." "Substantial evidence is 'more than a scintilla, less than a preponderance, and is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,'" and must be considered "in the light of all the evidence." A decision was arbitrary if it was "made without a rational connection between the known facts and the decision." Held: Hartford abused its discretion because there was not a rational connection between its conclusion that Alexander was not disabled and the information on which it relied to support that conclusion.

Nat’l Union Fire Ins. Co. V. McMurray, W.L. 2710076; LEXIS 19366 (5^th Cir. 2009)

Life Insurance; “Common Carrier”; Undefined terms: The insureds went on a honeymoon cruise purchased with a credit card that included a $1,000,000 accidental death or dismemberment insurance policy. Among the covered hazards for which accidental death benefits were provided was injury or death that occurred while an insured person was "riding as a passenger in or on (including getting in or out of, or on or off of) any Common Carrier." The policy defined "common carrier" as "any licensed land, water or air conveyance operated by those whose occupation or business is the transportation of persons for hire." "Passenger" was defined as "a person not performing as a pilot, operator or crew member of a conveyance." While on the cruise, the insureds purchased a whitewater rafting excursion, charged to the insureds credit card account. During the rafting trip, the husband insured was thrown from the raft and drowned. The insurer denied the claim, concluding that the raft in which the insureds were riding was not a common carrier, and they were not passengers under the policy. Insured contended that a rafting trip necessarily involved transportation from one place to another, and even if such transportation incorporated entertainment, the policy did not exclude transportation in which entertainment was offered. Held: “We disagree with characterizing the district court's analysis as looking beyond the contract definition to impose a requirement not included in the policy. Instead, the court looked to common law for assistance in interpreting undefined terms within the policy's common carrier definition. There were some definitions. The policy defined common carrier as "any licensed land, water or air conveyance operated by those whose occupation or business is the transportation of persons for hire." It did not define, though, what it meant to be in the "occupation or business" of "transportation" for hire. We also conclude that undefined terms are not per se ambiguous terms. Undefined policy terms are given their plain, ordinary meaning, if such a meaning can with some clarity be determined. Accordingly, the district court properly looked to Texas common law to seek the ordinary meaning of these undefined terms, citing Tenaska Frontier Partners, Ltd. v. Sullivan, 273 S.W.3d 734, 737 (Tex. App.- Houston [14th Dist.] 2008, no pet.) ("In determining the ordinary meaning of an undefined term, Texas courts have consulted the term's common-law usage, interpretation when used in other statutes, and definitions in secondary sources.").

Nat'l Union Fire Ins. Co. v. Puget Plastics Corp., 450 F. Supp. 2d 682 (S.D. Tex. 2009)

Property Coverage; Concurrent Causation: “Texas law recognizes the doctrine of concurrent causes, which provides that where covered and non-covered perils combine to create a loss, the insured is entitled to recover only that portion of the damage caused solely by the covered peril. The damages recited in a judgment must be apportioned between claims covered by the policy and those that are not. Since the insured bears the burden on coverage, when there are covered and non-covered perils, the insured must present evidence upon which the fact-finder on coverage can allocate and segregate covered losses from non-covered losses. Because allocation is central to the claim for coverage, an insured's failure to carry its burden of proof on allocation is fatal to the claim. The insured is not required to establish the amount of its damages with mathematical precision, but there must be some reasonable basis upon which the jury's finding rests. As this Court has found that economic damages were awarded in the Underlying Case, at least in part, due to covered and uncovered property damage related to the leaking chambers, Puget bears the burden of presenting evidence by which this Court can reasonably apportion the economic damages awarded due to the leaking chambers between covered and uncovered property damage.”