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Texas Supreme Court Axes Policyholder’s Attempt to Expand Insurer Tort Liability

In Elephant Insurance Co., LLC v. Kenyon, the Supreme Court of Texas reiterated the framework of an insurer’s common-law duties to insureds under Texas law.[1] In applying that framework to the facts of the case, the Court rejected an attempt to expand an insurer’s obligations under existing common-law tort principles. The Court also refused to recognize new common-law duties, requiring insurers to protect or warn policyholders following car accidents. About The Author

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Posted in Uncategorized

Fifth Circuit Weighs in on Aftermath of Texas Supreme Court’s Decisions Affecting Insurers’ Pre-Appraisal Award Payments and Damages under the Texas Prompt Payment of Claims Act

Just a few short years ago, there was a bright line rule under Texas law concerning appraisal awards.  If an insurer timely paid an appraisal award, that payment extinguished all of the insurer’s contractual and extracontractual liability to the insured.  See, e.g., Garcia v. State Farm Lloyds, 514 S.W.3d 257, 264-273 (Tex. App.—San Antonio 2016, pet. denied); Anderson v. Am Risk Ins. Co., 2016 Tex. App. LEXIS 6538, *10 (Tex. App.—Houston [1st Dist.] 2016, no pet.); Perry v. United Servs. Auto Ass’n, 2018 Tex. App. LEXIS 10108, *7 (Tex. App.—Amarillo 2018, no pet.); Gonzales v. Allstate Vehicle and Property Ins. Co., 2019 U.S. Dist. LEXIS 26203, *3 (S.D. Tex. 2019).  The Fifth Circuit had previously agreed, making an Erie guess

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Posted in Bad Faith

Texas Supreme Court Crafts “Undisputed Evidence of Collusive Fraud” Exception to Eight-Corners Rule

In Texas, and as a general rule, only the four corners of the policy and the four corners of the petition against the insured are relevant in deciding whether the duty to defend applies. Richards v. State Farm Lloyds, ___S.W.3d ___, 2020 WL 1313782 at *1 (Tex. 2020). Texas courts and practitioners refer to this general rule as the “eight-corners” rule. After years of implicitly acknowledging an exception to the eight-corners rule may exist, in Loya Insurance Company v. Avalos, ___ S.W.3d ___, 2020 WL 2089752 (Slip.Op. Tex. May 1, 2020), the Texas Supreme Court affirmatively adopted a narrow exception to the rule: “courts may consider extrinsic evidence regarding whether the insured and a third party suing the insured colluded

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Posted in Bad Faith

From Birdseed to Crop Dusting, Liability-Triggering Event Determines Number of Occurrences

Texas applies the “cause” test to determine the number of accidents or occurrences, but its emphasis on the “liability-triggering event” requires an analysis of intervening causes. The Fifth Circuit Court of Appeals doubled-down on its focus on the liability-triggering event, reversing the trial court and finding a truck driver’s negligent operation of his vehicle that caused multiple collisions (four autos and a toll plaza booth) was one accident for purposes of liability insurance in Evanston Ins. Co. v. Mid-Continent Cas. Co., —F.3d.—, No. 17-20812, 2018 WL 6037507. The court acknowledged that the analysis espoused in Pincoffs[1] and Goose Creek[2] (i.e., count the number of acts by the insured that give rise to liability) is incomplete because it does not address

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Posted in Bad Faith

Texas Federal Court Holds Rock Dust Discharged into Stream is Excluded “Pollutant,” so Insurer Owed No Duty to Defend or Indemnify, and Committed No Bad Faith

On July 10, 2018, Judge John H. McBryde of the United States District Court for the Northern District of Texas, Fort Worth Division, held an insurer owed no coverage to a New Jersey rock quarry owner for the accidental pumping of crushed rock particles into a stream. The policy’s pollution exclusion precluded coverage, regardless of whether the rocks were “wanted or useful.” Great Am. Ins. Co. v. ACE Am. Ins. Co., No. 4:18-CV-114-A, 2018 WL 3370620, at *5 (N.D. Tex. July 10, 2018). Absent coverage or any injury independent of the claim for policy benefits, the court also rejected the insured’s bad faith claim. Background Eastern Concrete Materials, Inc. operates a New Jersey rock quarry, where it crushes rock into

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Posted in Bad Faith
Avoiding Insurance Bad Faith
Cozen O’Connor represents insurance clients in jurisdictions throughout the U.S. against statutory and common law first- and third-party extracontractual claims for actual and consequential damages, penalties, punitive and exemplary damages, attorneys’ fees and costs, and coverage payments. Whether bad faith claims are addenda to a broader coverage matter or are central to the complaint, Cozen O’Connor attorneys know how to efficiently respond to extracontractual causes of action. More
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