Supreme Court Upholds Homeowner’s Right to Insurance Money
The Texas Supreme Court’s reaffirmation of the USAA Texas Lloyds Company v. Gail Menchaca case may begin to eliminate the wide-spread insurance abuses found in Texas. An insurance policy is a unique type of contract because an insurance company generally has exclusive control over the evaluation, processing, and denial of claims, and it can easily use that control to take advantage of its insurance customers. This arrangement routinely creates an unequal bargaining power, which has been routinely abused by insurance companies.
The improper insurance adjusting facts of the Menchaca case are commonplace and instructive for the home owners of Texas. Following Hurricane Ike, a USAA adjuster sent to Menchaca’s home found only minimal damages and determined that the amount of the damages fell below the Menchaca’s insurance policy deductible. Menchaca requested another USAA inspection, which “generally confirmed the first adjuster’s findings”. At trial, the jury found Menchaca was entitled to $11,350.00 and not $0.00 as claimed by USAA.
Too often, insurance companies use this exact same approach to deny insurance claims. This is how the insurance denial/underpayment process works: The first adjuster fails to find sufficient damages to warrant any payment above the deductible or a massive underpayment of policy benefits – often about 20% of what is owed. If the policyholder requests another inspection, a second inspector or engineer will be retained to copy over the first adjuster’s findings. Insurance companies have begun to routinely use engineers as Texas law makes it challenging to sue an engineer, regardless of the illegal actions.
The Texas Supreme Court recently reaffirmed that “bad faith” still exists in Texas. USAA Tex. Lloyds Co. v. Menchaca, No. 14-0721, 2018 Tex. LEXIS 313, 2018 WL 1783097 (Tex. 2018). Also, the Texas Senate’s refusal to erode policyholder’s rights any further during the 2017 legislative meeting is a sign that the time of wide-spread insurance abuse may finally come to an end. In the past, Texas insurance companies have reduced the ability for property owners to have any legal remedies beyond the insurance policy – basically nullifying the Texas Insurance Code and Deceptive Trade Practices Act. USAA v. Menchaca reaffirmed the law that property owners can seek “bad faith” damages, Texas Insurance Code, and Deceptive Trade Practices Act violations depending on the circumstances.
Historically, insurance companies took the position that a policyholder can only recover policy benefits as monetary damages on a breach-of-contract claim, and that the Texas Insurance Code and Deceptive Trade Practices Act statutes were simply illusionary. The Texas Supreme Court disagreed with this decades-old misinterpretation of Texas law. In Menchaca the Court stated, “According to USAA, in other words, an insured can only recover policy benefits as damages on a breach-of-contract claim and can never recover policy benefits as damages on a statutory-violation claim. We disagree.” Menchaca, Tex. LEXIS 313, 2018 WL 1783097, at *19.
The Supreme Court went on to clarify that improper insurance investigations, which cause policyholders to lose their benefits by means of improper denials and underpayments are illegal. “[I]f the insured was entitled to the benefits and the insurer’s statutory violation caused the insured to lose those benefits, the statute authorizes the insured to recover those benefits as ‘actual damages . . . caused by’ the statutory violation, even if the insured does not submit a separate breach-of-contract claim. TEX. INS. CODE § 541.151.” The Supreme Court has twice now confirmed that the commonplace illegal insurance adjusting practices will result in money damages to the homeowner. Hopefully, this is a signal to the insurance companies to stop improper denials and underpayments. If you feel that you’ve been taken advantage of by your insurance company, call today to discuss your legal rights.
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