Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/hurricane-ike/page/2/
Timestamp: 2019-04-26 11:47:08+00:00

Document:
The court agreed with the insurer that the litigation should be abated during the appraisal for damage caused by Hurricane Ike. See United Neurology, P.A. v. Hartford Lloyd's Ins. Co., 2012 U.S. Dist. LEXIS 15675 (Feb. 8, 2012).
Harford invoked the appraisal process, which was required under the policy if the parties failed to agree on the amount of loss. Hartford argued if it satisfied any appraisal award to the insured, the insured's breach of contract and bad faith claims would be subject to dismissal. Therefore, the court was asked to abate the suit until the appraisal process was completed.
The insured did not oppose the appraisal, but argued the abatement was improper during appraisal. The insured urged the court to allow discovery to proceed so that once the appraisal award was made, the case would be ready to be tried. The insured also argued that because the dispute involved both coverage and valuation disputes, the court should stay the valuation issue and proceed with the coverage issue. Hartford's adjuster found some damage to the insured's building that was not attributable to Hurricane Ike,. Therefore, the insured submitted, abatement of the causation and coverage issue should be denied.
Hartford argued the court had discretion whether to abate the case during the appraisal process. Further, the appraisal condition, once invoked, was a condition precedent to liability. The policy stated no suit could be brought against the insurer unless the policy provisions had been complied with.
The court agreed with Hartford. Abatement of the entire suit was appropriate while the appraisal process went forward. Hartford's motion to compel appraisal and abate the remaining proceeding was granted.
The shopping mall owner, Bender Square Partners, sought to recover from the insurer for losses resulting from Hurricane Ike to property it had leased to PNS Stores, Inc. Bender Square Partners v. Factory Mut. Ins. Co., 2012 U.S. Dist. LEXIS 8095 (S.D. Texas Jan. 24, 2012). It turned out Bender was not an additional insured under the lessee's policy with Factory Mutual.
The lease required the lessee to maintain property insurance. The policy that was acquired from Factory Mutual did not identify Bender as an insured or as an additional insured. The policy stated that additional insured interests were added to the policy when named as an additional named insured in a Certificate of Insurance in a schedule on file with the insurer.
Bender argued it was a named holder of the Certificate of Insurance and was also an intended or implied third-party beneficiary of the policy.
The Certificate of Insurance specifically stated it was issued for informational purposes only and conferred no rights upon the holder other than those provided in the policy. Under Texas law, the Certificate did not confer any rights to Bender under the policy.
Further, there was no evidence to support an inference that Bender was an intended third-party beneficiary. Nor was Bender an implied third-party beneficiary. There was no provision in the lease requiring the lessee to procure a policy on the lessor's behalf, or requiring the policy to name the lessor as an insured, additional insured, or loss payee. Therefore, Bender could not be an implied third-party beneficiary.
Consequently, because it was not an insured, additional insured, or third-party beneficiary under the Policy, Bender could not sue Factory Mutual for breach of contract or for the breach of the duty of good faith and fair dealing. Factory Mutual was entitled to summary judgment as to all of Bender's claims against it.
Whether the insured's claims based upon the adjustor's inadequate inspection after Hurricane Ike stated a claim was at issue in Stewart v. Nationwide Prop. & Cas. Ins. Co., 2011 U.S. DIst. LEXIS 111465 (S.D. Tex. Sept. 29, 2011).
Based on the complaint's allegations, the insured's home suffered extensive damage from Hurricane Ike when a tree limb fell on part of the roof, allowing water to enter. Nationwide assigned an adjuster to the claim, who did not perform a thorough investigation. Although damage for the entire roof was claimed, the adjuster failed to inspect the attic area under the damaged roof and did not inspect the potential roof damage over the main part of the house. Nationwide's payment only covered a portion of the roof and interior coverage for only a couple of rooms in the house. Nationwide also failed to give a reasonable explanation for its non-payment of particular damage claims.
Ruling on the motion to dismiss, the court dismissed fraud claims because the insured did not take any action in reliance on the adjustor's misrepresentations and inadequate inspection.
Claims based on the breach of the duty of good faith and fair dealing survived the motion to dismiss, however. The complaint alleged that the investigation and evaluation were unreasonable, as Nationwide knew or should have known that its liability was reasonably clear based on the inspection and the reported damages.
Claims under the Texas Insurance Code were also adequately pled. Nationwide failed to provide a reasonable explanation of its offer of a compromise settlement of the claim. Nor had an adequate investigation been performed. Finally, allegations that Nationwide delayed payment of the claim following its receipt of all items, statements, and forms adequately stated a claim.
The importance of careful preparation and documentation was the take away lesson in a Texas bad faith case, C.K. Lee v. Catlin Specialty Ins. Co., 2011 U.S. Dist. LEXIS 19145 (S.D. Tex. Feb. 28, 2011).
C.K. Lee owned a commercial shopping center in Houston. Catlin issued a commercial property policy to Lee. On September 12, 2008, Hurricane Ike hit and caused substantial property damage throughout the Texas Gulf Coast area. On September 24, 2008, Lee submitted a claim for damage to the roof of his shopping center to Catlin.
Catlin hired Engle Martin to represent its interests in adjusting the claim. Engle Martin eventually adjusted over 200 Ike-related claims for Catlin.
In November 2008, Engle Martin and Emergency Services Inc., retained by Lee, inspected Lee's property. Engle Martin observed evidence of roof repairs that had apparently been made both before and after Hurricane Ike. Engle Martin decided it was necessary to use an infrared scan of the roof to help identify which damages, if any, were attributable to wind and which, if any, were attributable to sub par, prior repairs or natural deterioration.
Engle Martin retained Project, Time & Cost (PT&C) to conduct the infrared inspection. PT&C's inspection determined there was no wind-related damage to the roof and no breaches or openings created by wind. Instead, the roof had exceeded its life expectancy and was in need of replacement due to normal wear and weathering. Consequently, Catlin decided that the damage to Lee's roof was not caused by winds from Hurricane Ike.
Meanwhile, Lee's contractor, Emergency Services, prepared a report estimating that the total cost of repairing the roof would be $871,187. Engle Martin's estimate for repair of the roof was $22,864.
Lee filed suit for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. Catlin moved for summary judgment on all claims but breach of contract, arguing that because there was a bona fide dispute concerning the cause of the damages and whether they were covered under the policy, there was no evidence of bad faith or violations of the Texas Insurance Code.
The court granted the motion on the bad faith claims. Under Texas law, an insurer was in bad faith if it failed to settle the claim even though it knew or should have known that it was reasonably clear that the claim was covered. Evidence that merely showed a bona fide dispute about the insurer's liability on the contract was not bad faith. But denying a claim solely in reliance on an expert's report did not shield the insurer from bad faith liability if there was evidence that the report was not objectively prepared or the insurer's reliance on the report was unreasonable.
Here, the insurer had an independent adjuster and a roof consultant conduct three inspections of the roof. After Engle Martin inspected, it called in PT&C, who conducted the infrared inspection. PT&C then went back to reinspect the roof. Reports were filed after each inspection. Each inspection determined there was no wind-related damage.
Nevertheless, Lee argued there was a genuine issue of mater fact as to both the objectivity of the reports and the reasonableness of Catlin's reliance on them. Lee argued that Catlin failed to reconcile the contradictions of the conclusions found in reports of its experts with those of Lee's expert, Emergency Services. Moreover, Engle Martin's report was biased because it had a financial interest in preparing reports that favored Catlin's position.
The record, however, did not contain a report with conclusions that conflicted with those of Engle Martin and PT&C. Lee's experts had not submitted anything relating to the cause of the damage, but had only submitted an estimate for repairs. Therefore, there was nothing in the record to show that Catlin's decision to believe its own experts, rather than other experts, was unreasonable. Moreover, there was no evidence that the investigations were outcome-oriented or that Catlin expected to receive reports concluding that the claim should be denied. Nor did Lee submit anything to show Catlin's experts were unqualified. Therefore, Lee failed to raise a genuine issue of material fact in support of its contentions that Engle Martin's reports were not objectively prepared or that Catlin's reliance on the reports was unreasonable.
Regarding Lee's claims under the Texas Insurance Code, Lee argued the insurer was required to notify the insured within fifteen business days whether the claim was accepted or denied and the underlying reasons for a rejection. Catlin argued Lee had failed to submit invoices for prior roof repairs and other documentation that had been requested. But Catlin had not demonstrated such evidence was necessary for it to make a determination on coverage. Accordingly, there was a genuine issue of material fact as to whether Catlin's delay in notifying Lee of its decision was warranted on the basis that it had not received all items, statements, and forms that were required for it to determine coverage and the amount of loss.
After flood coverage was denied, the insured sued under state law theories. See Worthen v. Galveston Ins. Associates, 2010 U.S. Dist. LEXIS 94925 (S.D. Tex. Sept. 13, 2010). The district court dismissed the state law claims on preemption grounds.
The insured purchased a flood policy on August 10, 2007 for his home located on the Texas Gulf coast. The policy was placed by Galveston Insurance Associates and issued by Fidelity National Property and Casualty Insurance Company pursuant to the National Flood Insurance program. Fidelity sent a renewal notice to the insured in June 2008, which the insured admitted he received. Galveston Insurance thereafter contacted the insured about paying the premium in order to renew the policy. On August 22, Galveston Insurance forwarded an expiration letter to the insured reminding him that his policy had expired on August 10, 2008.
The insured finally made payment for a new policy on September 9, 2008. On September 11, Fidelity issued the flood policy, but not effective until October 9, 2008. Hurricane Ike struck on September 13, causing flood damage to the insured's home. When the insured submitted his claim, Fidelity denied coverage.
The insured sued under a variety of theories, including extra-contractual claims for unfair insurance policies, deceptive trade practices, promissory estoppel, negligent misrepresentation, negligence, knowledge and attorney fees. Fidelity move to dismiss. The insured conceded his extra-contractual and tort claims were preempted and barred by federal law. But he argued his "procurement-based claims", as opposed to "claims handing disputes" against the insurer, were valid.
The court disagreed. Insurers offering flood insurance could not alter the terms offered by the National Flood Insurance Program. Further, the insured was charged by statute with constructive knowledge of the content of the program. Under the National Flood Insurance Program, when the premium payment was received within 30 days of the policy expiration, the same policy would issue. Therefore, on September 9, the insured was covered by his expired policy and qualified for a reissued policy under the same terms. Hence, the insured had no procurement claims since he had coverage under the Program. Paying the premium on the 30th day after expiration was timely. Nevertheless, the fact that Fidelity issued a policy effective October 10, 2008 did not alter the result. Accordingly, Fidelity's motion to dismiss the extra-contractual claims was granted.
The insureds originally had flood coverage with Allstate. See Dennis v. Fidelity Nat. Prop. and Cas. Ins. Co., 2010 U.S. Dist. LEXIS 28759 (March 25, 2010). To reduce their premiums, the insureds requested their agent, Lyons Insurance, Inc., to obtain a new flood insurance policy on their home in May 2007. The insureds did not submit the required elevation certificate until September 9, 2008, when Lyons finally secured a new flood policy from Fidelity. Hurricane Ike struck the area two days later on September 11, 2008, resulting in flood damage to the insureds' home. The insurer denied coverage for flood damage because the 30-day delay period after purchase of the flood policy had not expired.
The insureds sued, alleging that Lyons was negligent in failing to properly secure flood insurance on their property. In moving for summary judgment, Lyons argued that in May 2007, the property was insured by the Allstate flood policy which did not expire until September 30, 2007. Therefore, the insureds were unable to obtain another flood policy in May 2007. The insureds then delayed submitting the necessary documentation for a new flood policy until September 2008.
The Court the insureds had received notice in 2007 that their Allstate policy would expire on September 30, 2007. The insureds were also charged with the knowledge of the terms of a Standard Flood Insurance Policy, including the 30-day delay after applying before the policy would be issued. Therefore, any reliance on an agent of Lyons was unreasonable. Lyons' motion for summary judgment was granted.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v.