Texas Insurance Law Newsbrief

IN THIS ISSUE: Paid v. Incurred Medical Expenses; Coverage for Settlement of FTC Class Action; Insurable Interest; Twombly & Igbal; Premium Payment as Condition Precedent to Coverage; Duty to Defend; Policy Issuance; Extra-Contractual Abatement; Healthcare Individual Mandate.

PAID VS. INCURRED MEDICAL EXPENSES: TEXAS SUPREME COURT HOLDS THAT ONLY EVIDENCE OF RECOVERABLE MEDICAL EXPENSES IS ADMISSIBLE AT TRIAL.

In a paramount decision, the Texas Supreme Court recently held that only evidence of recoverable medical expenses, meaning those expenses, which have been or must be paid by or for the claimant, is admissible at trial. Haygood v. DeEscobedo, 2011 WL 2601363 (Tex. July 1, 2011).

FIFTH CIRCUIT DENIES COVERAGE OF $263 MILLION SETTLEMENT

On August 5, 2011, the Fifth Circuit Court of Appeals ruled that five insurers need not cover any part of Citigroup Inc.’s $263 million settlement of a statewide class action suit and a Federal Trade Commission action. Citigroup, Inc. v. Federal Insurance Co., 2011 WL 3422073 (5th.Cir. 2011). The class action and FTC action suits alleged that Citigroup's predecessor, Associates First Capital Corporation, misrepresented the benefits of refinancing to customers regarding policies from primary insurer Certain Underwriters of Lloyd’s of London (“Lloyd’s”) and nine excess insurers. Citigroup settled both cases for $263 million, with $15 million paid to Citigroup by Lloyd’s (of its $50 million limits of liability), without obtaining the consent of the excess insurers.

HARRIS COUNTY COURT DISMISSES INSURANCE CLAIMS ASSERTED BY PLAINTIFFS WHO WERE DEEMED NOT TO BE BENEFICIARIES OF THE INSURANCE CONTRACT

Harris County District Judge Mike Miller granted summary judgment to USAA in a homeowner’s policy dispute against plaintiffs represented by The Mostyn Firm in Schramm, et al v. USAA Texas Lloyd’s Company, et al, Cause No. 2009-33822 (August 2011).

GALVESTON FEDERAL COURT GRANTS MOTION FOR LEAVE TO AMEND PLEADINGS, WITH A WARNING THAT TWOMBLY AND IGBAL HAVE NOT RADICALLY ALTERED THE HEIGHTENED FEDERAL PLEADING REQUIREMENT AS OFTEN TOUTED BY DEFENDANTS

Cruz v. Allstate Texas Lloyds and Pilot Catastrophe Services, Inc. 2011 WL 3502772 (S.D. Tex., J. Froeschner, Aug. 10, 2011). The United States District Court in the Southern District of Texas in Galveston granted a plaintiff’s motion for leave to amend its Complaint on August 10, 2011 allowing the plaintiff to add claims against a newly identified individual adjuster assigned by the Defendants to handle a property damage claim following Hurricane Ike.

CORPUS CHRISTI APPEALS COURT HOLDS NO AMBIGUITY IN AN INSURANCE POLICY WHERE THE INSURED MUST PAY PREMIUM AS A CONDITION PRECEDENT TO THE INSURANCE CONTRACT GOING INTO EFFECT

In Becerra v. Ball d/b/a Ball Insurance Agency, 2011 WL 3366361 (Tex.App.—Corpus Christi [13th Dist.] 2011), the Corpus Christi-Edinburg Court of Appeals upheld a motion for summary judgment as to Plaintiff’s breach of contract claims against defendants because Plaintiff failed to pay the premium for the policy which was a condition precedent for the policy to go into effect.

APPELLATE COURT UPHOLDS DISMISSAL OF AN INSURED’S INSURANCE CLAIMS BASED ON A POLICY ENDORSEMENT EVEN THOUGH IT WAS NOT PROVIDED TO THE INSURED IN THE INSURANCE BINDER

On August 4, 2011, the First District Court of Appeals upheld the trial court’s grant of final summary judgment in favor of the Defendant/Appellee Certain Underwriters at Lloyd's, London after finding that the policy at issue contained an endorsement precluding coverage for a fire loss where the insured failed to install and maintain a central fire alarm at the insured property. QB Investments v. Certain Underwriters at Lloyd's, London, 2011 WL 3359683 (Tex.App.—Houston [1st.Dist] 2011).

COURT HOLDS INSURER HAS NO DUTY TO DEFEND AN INSURED WHO WAS NOT NAMED AS A DEFENDANT IN THE LAWSUIT AND WHERE THE INSURED DID NOT TENDER THE LAWSUIT TO THE INSURER.

In a case involving insurance coverage questions under a homeowners policy and related extra-contractual claims, a federal court in Dallas, held that an insurer did not have a duty to defend or indemnify the insured for lawsuits that alleged business-related claims, in which the insured was not a defendant, or that the insured did not tender to the insurer.

HOUSTON COURT OF APPEALS ORDERS SEVERANCE OF AN INSUREDS’ BREACH OF INSURANCE CONTRACT CLAIM FROM THE INSUREDS’ PROMPT PAYMENT CLAIM

On August 11, 2011, the Houston Court of Appeals ordered severance of breach of contract claim from extra-contractual claims and prompt payment claim in an insurance dispute. In re Loya Insurance Co., 2011 WL 3505434 (Tex. App.—Houston [1st Dist.] August 11, 2011)

11TH CIRCUIT COURT OF APPEALS FINDS THE INDIVIDUAL MANDATE IN THE OBAMA HEALTHCARE LEGISLATION UNCONSTITUTIONAL

On Friday, August 12, 0211, a federal appeals court in Atlanta struck down the "individual mandate" portion of the Patient Protection and Affordable

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