Texas Update was shocked to learn that it did not receive a major bowl invitation. At the last possible moment, we were edged out by the National Enquirer as a result some suspicious voting activity in the Coaches Poll.
TEXAS COURT HOLDS PUNITIVE DAMAGES ARE INSURABLE: AN INTERMEDIATE TEXAS APPELLATE COURT HAS JUST HELD that it is not against Texas public policy to insure punitive damages. A patient was awarded actual and punitive damages against a nursing home in an amount that exceeded the nursing home’s primary policy limits. The nursing home’s excess insurer brought suit against the primary carrier on an equitable subrogation theory seeking reimbursement of the excess based upon the Texas Stowers Doctrine. The primary carrier argued it had no liability for punitive damages because it is against Texas public policy to insure punitive damages. The trial court agreed with the primary carrier holding that punitives are not insurable. The excess carrier appealed. The appellate court reversed and remanded the case for trial, stating that neither the Texas legislature nor any Texas state court had ever held that insuring punitives was against Texas public policy. Without a prior legislative or judicial pronouncement of public policy in this arena, the court declined to be the first to go there. But the court significantly limited its holding to the “subject insurance policy issued in 1993, an occurrence in 1994 and a suit and settlement in 1995…against a for-profit nursing home.” The court specifically said it was not deciding whether current Texas public policy prohibits the insurability of punitive damages in other situations. WESTCHESTER FIRE INS CO. v. ADMIRAL INS CO (TEX.APP–FORT WORTH 2004).
As Texas Update reported several weeks ago, the Texas Supreme Court is currently considering an unrelated case that will ultimately decide this issue.
DOES A HOMEOWNERS POLICY COVER MOLD DAMAGE? That’s the very question the federal fifth circuit court of appeals has sent to the Texas Supreme Court for determination. Saying that it could find no binding Texas Supreme Court law addressing the issue, the federal court asked the Supremes: “Does the ensuing loss provision contained in section I exclusions, part (f), of the Homeowners Form B (HO-B)…provide coverage for mold contamination caused by water damage that is otherwise covered under the policy?”
The Texas Supremes have discretion as to whether they will accept a certified question from a federal court. For many decades, the Court declined to answer the Fed’s call for assistance on sticky questions of Texas law. That judicial reluctance had more to do with an unsatisfactory experience with reconstruction after the Civil War than pure laziness. In recent years, however, the court has answered most calls for help. FEISS v. STATE FARM (5TH CIR.2 004)
HOW LATE IS TOO LATE? If it is a claims-made policy, it may not make much difference. In this case, the insured website designer was covered by a claims-made policy and was sued by a customer for failing to complete the customer’s website in a timely manner. The insured notified the insurer of the suit about 10 months after it was sued, but almost a year before the case was submitted to arbitration. The insurer denied coverage, alleging late notice. The insured’s assignee argued that the insurer had failed to show that it had been prejudiced by any late notice. The court sided with the insurer saying that a claims-made policy is distinguishable from an occurrence policy. The failure to provide proper notice under a claims-made policy negates coverage, regardless of whether the insurer has been prejudiced. SINGLEENTRY.COM, INC V. ST. PAUL, (5TH CIR 2004).
ACROSS STATE LINES: JACK HAS BETTER LAWYERS THAN McDONALDS: A woman who claimed thigh and genital injuries as a result of being burned by coffee in a Jack in the Box drive-thru was denied recovery on her claim against the San Diego-based fast food chain. Esther Guthrie, 40, was at a Jack in the Box in Bellflower, Calif., when, as she was receiving a cup of hot coffee, some of it spilled on her. She sued, contending that it was excessively hot and the lid wasn’t on securely. Jack in the Box denied both assertions and argued that coffee is inherently unsafe and is known to be unsafe by the ordinary consumer. Jack in the Box won a summary judgment.