Tuesday, February 21, 2017

Texas Jury Turns $76,000 insurance Claim into $1.8 Million Verdict

By David Metzler

It’s been said that bad faith claims against insurance companies are heading toward extinction in Texas, but a South Texas jury verdict recently harkened back to the days before tort reform.    A Hidalgo County jury hit an insurance company for $1,000,000 in actual damages and an additional $800,000 in punitive damages on a $76,000 hailstorm claim.

The plaintiff sued USAA Texas Lloyd’s Co. and its independent claims adjuster AllCat Claims Service of Boerne in 2014 claiming the defendants worked together to pay less than what was due on the claims.  According to a report in the San Antonio Express-News, the plaintiff suffered severe loses to his home and auto after a storm dropped hail the size of baseballs. The roof, windows and siding of the home were damaged and water leaked into the house, damaging the ceilings, walls, insulation and flooring.  The plaintiff further contended the water leaks caused structural problems with the home.

USAA retained AllCat to inspect the property and adjust the claim.  Allegedly, AllCat did not recognize the extent of the damage and “grossly undervalued” the loss at just under $39,000.  An independent adjuster hired by the plaintiff estimated the true cost of repair to be $119,000.

After hearing the evidence, the jury awarded plaintiff $76,500 for the unfair or deceptive acts USAA and AllCat and another $76,500 for USAA’s breach of the terms of the insurance policy. The jury also awarded $109,500 for USAA’s fraud and $335,000 because USAA acted “knowingly.” AllCat was hit for another $200,000 and the plaintiff was awarded attorneys’ fees of about $200,000.  After finding the insurance company also acted with malice, the jury punished USAA with an additional $800,000 punitive damage award.

In my experience it is very difficult to prove the type of intent necessary to justify punitive damages in Texas.  As a result, USAA will almost certainly appeal the award if it cannot be otherwise resolved.  Regardless, insurers need to pick their battles in South Texas carefully and, if they pick the wrong battle, prepare themselves to suffer the monetary consequences.

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