Select Page

Insurance Law
South Texas College of Law Houston
Platts Jr., Henry S.

Insurance Law – Platts – Fall 2007
 
8/15/07
 
For 1st class, read 1st chapter.
 
Course organization:
Book has 13 chapters for 14 classes. 1 Chapter per class, with finish up and review the last class.
 
Alphabetical Recitation
90 M/C Q’s (half are really really easy!)
There’s a curve – centered over B.
 
Standard Insurance Policies will be attached to exam, no need to memorize, but you’ll probably know.
 
Every time he said, “This is on the exam,” I marked it with yellow highlight.
 
Direct Line (713) 960-7345  Call with questions.
 
I.       Chapter One: Texas Cases on Insurance Law
A.    Basic Principles
1.      Two Basic Types of Insurance – First Party & Third Party
a.       First Party – protects insured from loss on account of insured’s own damages
1)      Life insurance, health insurance, medical insurance, fire insurance, collision insurance
b.      Third Party – covers damage caused by insured to a third party (a.k.a. liability insurance)
c.       Whose damages are being covered?
1)       party named in the insurance contract = First party
2)       someone not named on the insurance contract = Third party
2.      Rules of Insurance Policy (Contract) Construction
a.       Contra proferentem – any ambiguities in the policy are construed against drafter
1)      Because contract of adhesion –
a)      Insurance company writes policy, and insured takes them as written; the insured cannot negotiate the terms of the contract.
b)      In Texas, the Texas Insurance Board dictates what is included in the insurance policy, so in Texas, the fact that the ins. co. did not actually draft the K does not really apply.
b.      Reasonable expectations – Insurance policy, if ambiguous, will cover what the average insured reasonable expectations of the meaning of the policy, regardless of what the policy states.
1)      Texas does not follow this.
c.       Barnett v. Aetna Life Ins. Co.: Ins co denied partial coverage (due to VA disability) due to “carve-out” provision in policy that stated it may offset payments by Social security, FELA, and similar government benefits. Alluding that payments from VA disability were “similar.”
1)      Rules of Construction
a)      Insurance policies are just contracts and are construable as contracts
b)      If the K is expressed in plain and unambiguous language, a court cannot resort to the various rules of construction
c)      Policy is Ambiguous – Patent ambiguity is when language in a policy is susceptible to more than one reasonable construction. Latent ambiguity is only ambiguous with certain facts.
(i)                 Does not mean subject to two constructions/meanings, MUST be two reasonable constructions.
(ii)               Question of Law: not for jury to decide, the judge decides.
d)     Ejusdem generis – where specific and particular enumerations of persons or things are followed by general words (such as “similar”), the general words are not to be construed in their widest meaning or extent but are to be treated as limited and applying only to persons or things of the same kind or class as those expressly mentioned.
e)      Each part of the policy should be given effect when it will not do violence to rules of law or construction; the court must avoid construction of policy that does not give all portions of the policy meaning and effect.
(i)                 When interpreting one section, it should be given construction that is in harmony and does not conflict with the rest of the K.
f)       When language is susceptible of more than one construction, such policies should be construed strictly against the insurer and liberally in favor of the insured
(i)                 Intent to exclude coverage must be expressed in clear and unambiguous language
g)      Exclusionary clause: part of contract that denies coverage to insured. Super strict construction so long as it is not itself unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intents
(i)                 I.e., for exclusions, must adopt the insured’s interpretation as long as it is reasonable, even if the insurer’s interpretation is more reasonable
(ii)               Applies only to exclusions
h)      When trying to construe a particular word or phrase, the plain, or ordinary meaning will be used (Webster’s definition, etc)
(i)                 An exception is when a term has been specifically defined within the policy itself
i)        Generally, whether or not an insurance company is prejudiced is a matter of fact
2)      Held: Exclusions from coverage must be in plain and unambiguous language.
d.      National Union Fire Ins. Co. v. Hudson Energy Co.: Hudson bought a plane, and on advice of ins. agent lied about his flying skills. Ins. co refused coverage. Although a student, Hudson was flying with an instructor when the plane crashed. The policy had a clause covering damage from named policy (covers Hudson accident) and “any pilot” policy (covers any qualified pilot).
1)      Rules of construction cited:
a)      When can have two reasonable constructions, then the one that favors insured applies
b)      An intent to exclude coverage must be unquestionably unambiguous.
2)      Held: Although Hudson was not covered, the other pilot clearly was.
e.       Analysis:
1)      Is language ambiguous? (is there more than 1 reasonable meaning?) If no, then take their obvious meaning
2)      If yes, then use the insured’s reas

eleased of it’s duties.
1)      Struna v. Concorde Ins. Servs., Inc.: Ins co was given a copy of petition and “told” ins co that defendant was served by substituted service. This was enough question that prevented the above exception from kicking in, so ins co needed to prove prejudice.
a)      Rule – with some actual knowledge of service, in order to deny coverage, ins co must show that they were prejudiced by the insured’s failure to receive notice.
2)      Chiles v. Chubb Lloyds Ins. Co.: W sues H for divorce and IIED. Trial court grants damages and divorce. Appellate ct only grants divorce, reversing IIED damages. H then notifies ins co for reimbursement of atty fees for defense, based on personal injury clause of homeowners ins. Ins co refused. H sues ins co. Trial found no duty to defend or pay costs. H appeals.
a)      For third party liability coverage in Homeowner policies, the insurance co. need not show prejudice, (This is history) need only show that notice was late and in breach of the condition requiring prompt notice
b)      This is not good law and is improperly decided, should have been denied based on intentional injury.
(i)                 Current law is that insurance co. must show prejudice to deny coverage for breach of notice except for homeowners.
 
II.    Chapter Two
A.    What is an “Occurrence”?
·         Prerequisites for Coverage under Commercial General Liability (CGL) Policy:
o       Damages must be the result of bodily injury (BI) or property damage (PD);
o       P must be seeking money damages;
§         no injunctions, etc.
o       BI/PD were result of an “occurrence”; and
o       The damages must occur during the policy period
§         The act/occurrence may occur outside of coverage period
§         Exception: where P alleges continuing loss or exposure to property damages or bodily injury; also, if D knew about continuing occurrences
·         Summary:
o       An occurrence is an unforeseen result;
§         Act unintentional = occurance
§         Act intentional, but negligent, harm not natural result = occurrence (Volentine)
§         Act intentional, but negligent, harm is natural result = NO occurrence (Argonaut & Cowan)