FEDERAL COURT DENIES INSUREDS’ CLAIMS FOR ATTORNEYS’ FEES IN TWO INSURANCE COVERAGE LAWSUITS
- Rahe v. Meridian/State Farm
Recently, the United States District Court for the Northern District of Texas—Dallas Division granted an insurer’s motion to deny an insured’s claim for attorneys’ fees in a case arising from an insurance coverage dispute. Rahe v. Meridian Security Ins. Co. d/b/a State Auto. Mut. Ins. Co., No. 3:21-CV-545-E, 2022 WL 614995 (N.D. Tex.—Dallas Feb. 28, 2022), involved a claim for wind and hail damage by the insured, who argued that a July 9, 2019 storm caused covered losses from wind and hail to her home. After the insured received a partial payment for her losses and a partial denial letter for the rest of her claims from her insurer, Meridian Security Insurance Company (“Meridian”), the insured hired attorneys to pursue the claim and possibly initiate litigation against Meridian.
On January 8, 2021, the insured’s attorneys sent a pre-suit notice letter to Meridian pursuant to the Texas Insurance Code. Three days later, the insured’s attorneys sent an amended pre-suit notice letter adding the alleged actual damages and interest under the Prompt Payment Statute. A week later, the insured’s attorneys received a letter from Meridian indicating that the insured’s claim had not been resolved due to a delay that was caused litigation was pending. The insured then filed suit on February 9, 2021.
In response, Meridian responded and argued that the insured could not recover attorneys’ fees incurred after the date Meridian asserted the defense—March 9, 2021—because the insured failed to comply with the provisions of the Texas Insurance Code requiring a pre-suit notice to contain the specific amount alleged to be owned by the insurer and to be provided at least sixty days prior to filing suit. Here, the insured filed suit a little less than one month from the date she sent her pre-suit notice containing her specific claim of damages.
The Court first noted the requirements of the provisions at issue and an exception applicable when providing the pre-suit notice would be impracticable because the insured has a “reasonable basis” for believing there is not enough time to give the notice before the statute of limitations expire or if the legal action is asserted as a counterclaim. Meridian argued that it was entitled to the sixty-day notice and did not receive it, while the insured argued waiting the full sixty days was unnecessary based on the purpose of the pre-suit notice and her interpretation of the insured’s letter detailing the reasons for the delay in resolving the insured’s claim. In the alternative, the insured argued that the appropriate remedy was to abate the lawsuit.
After confirming that Meridian had complied with the statutory requirements entitling it to contest the insured’s claim for attorneys’ fees, pointing out that the insured was not relying on the exceptions to the requirement, and rejecting the insured’s arguments as an improper attempt to create additional exceptions not contemplated by the statute or the legislature, the Court concluded that the insured failed to comply with the statute. Additionally, the Court held that abatement was not available in this case because the statute, as written, provided the insurer with the choice of whether to abate the case or choose to limit attorneys’ fees, not the insured.
Given the above, the Court granted Meridian’s motion to limit attorneys’ fees and barred the insured from recovering attorneys’ fees incurred after March 9, 2021.
- Paradise Fruits and Vegetables, L.P. v. State Auto
In another case being litigated in the United States District Court for the Northern District of Texas—Dallas Division, the Court granted the insurer’s motion to deny an insured’s claim for attorney’s fees due to the insured’s failure to comply with the statutory pre-suit notice requirement in an insurance coverage dispute. Paradise Fruits and Vegetables, L.P. v. Nat’l Fire & Marine Mut. Ins., et al., No. 3:21-CV-0962-N (N.D. Tex.—Dallas March 1, 2022). This case involves a dispute between the insured and two of its previous insurers, including State Automobile Mutual Insurance Company (“State Auto”) and National Fire & Marine Mutual Insurance (“National”), over alleged damages to the insureds’ property arising from several storms that occurred on the property in the spring of 2019 and summer of 2020. Both State Auto and National denied the insured’s claims, and the insured retained counsel to sue the insurers to obtain payment on its claims and other damages. The insured did not dispute that it failed to provide the required pre-suit notice or that State Auto did not timely plead and prove the deficiency in the pre-suit notice letter.
However, the insured argued that the exception regarding the impracticability of serving the pre-suit notice due to concerns about the statute of limitations applied because its claims against National Fire were about to be time barred, and it therefore sought to have State Auto’s motion stricken. According to the insured, the necessity of filing suit against National Fire should be “bootstrapped” to State Auto because State Auto was a “necessary and indispensable party” given that National Fire and State insured the same property at issue, and both denied its claims for damages.
The Court disagreed State Auto was a “necessary and indispensable party” because the insured’s claim against National Fire arose out of storms that allegedly occurred in March and May 2019, while the insured’s claim against State Auto arose out of a storm that allegedly occurred in August 2020—more than a year later. The Court therefore concluded that the insured could have sued National before August 2020, and the August 2020 storm and subsequent denial of the claim by State Auto had “no direct connection” to the insured’s claims against National Fire. That is, the Court emphasized that the claims by the insured were separate and related to independent occurrences, and the insured could have sued National Fire in March 2021 (before the statute of limitations would have run) while providing Tate Auto with the required pre-suit notice before commencing a section lawsuit against State Auto after the sixty-day period elapsed. Therefore, the Court granted State Auto’s motion to deny the insured’s claim for attorney’s fees and barred the insured from obtaining attorneys’ fees incurred after June 22, 2021.