Issue-Based Memorandum - Henry and Hanna - Essay Example

number A lot of people consider homeowners insurance as an important purchase. This is because homeowner’s insurance protects against losses arising from a personal residence. Homeowner’s insurance can provide coverage for the place of abode, personal property, other structures, personal liability, and loss of use, scheduled coverage, and medical payments. In the event of a total or substantial loss of the property insured by a homeowner’s policy, the policy limits may be insufficient to fully compensate the policyholder for the loss. No matter what type of replacement cost coverage a policy provides, the extent of coverage is limited by the insurable interest in the home (Lowry et al, 68). In the case of Henry and Hanna, they had insured their home with Fastpay Insurance Company. However, the insurance policy document made it clear that, in case of a vacancy of up to sixty days, it would automatically lead to suspension of the coverage. Since Henry and Hanna brought their marriage to an end, this meant that their house would remain vacant until that time when there would be a potential buyer. Unfortunately, the house was damaged by wind and fire in a freak Plano tornado. The insurance company turned down their compensation claims on the mere fact that the house was vacated for 60 days prior to the emergence of the Plano tornado. On one, hand, the provisions of the policy document are legally binding, whereas another school thought thinks that this condition should not to be deterrence for denying Henry and Hanna some sought of compensation from the insurance company. Appelle Carnes filed a suit against Texas Farm Bureau Mutual Insurance Company. Appelle Carnes sought the services of the insurance company because they wanted to insure their cotton picking machine against risks such as fire. The two parties’ rubber stamped an endorsement that was known as “Endorsement No. 10.” The endorsement provided that the cotton picking machine was to be used within a radius not exceeding 50 miles away from the garage. The cotton picking machine had its garage in Victoria, Texas. While the endorsement was still in force, Carnes used the Cotton picking machine for custom farming in Clay, Texas, a location that is about 150 miles away from the garage. It is at this point that the machine was damaged by fire. At this point, Appelle Carnes and Texas Farm Bureau Mutual Insurance Company could not come into an agreement on the actual amount of damage payable. This forced Carnes to file a legal suit against the insurance company. The insurance company cited two reasons, both of which meant that Carnes did not stand to be compensated in anyway whatsoever. First, the insurance company argued that Carnes had violated “Enforcement No. 10” thus Carnes should not claim any payment. Second, the policy document requires Carnes to file a sworn proof of loss and Carnes failed to do so. Hence, this barred Carnes from any recovery based on the terms of this policy. On the other hand, Carnes argued that the violation of “Endorsement No. 10” could not be used as a point of reference, because the provision is unenforceable under Art. 6. 14 of the insurance code. It is a known fact that Carnes went against the terms set under “Endorsement No. 10” because he was using the cotton picking machine more than fifty miles away from the garage. That being the case, the jury concluded that the violation in that particular provision in the policy document, did not contribute to the damage of Carne’s cotton picker by fire. This finding was not challenged on appeal. In fact, the insurance company contends that Carne’s violation of “Endorsement No. 10” did not contribute to the loss, thus the edict could not apply. Furthermore, it is the contention of the insurance company that “Endorsement No. 10” is either a warranty or it is merely meant to limit the coverage, but the violation of this statute is connected to the risk, thus it bars recovery. Endorsement No. 10 is often considered to be a provision, condition or warranty contained in the policy of fire insurance, and Carnes violated a stipulation in the endorsement. Nonetheless, the violation of the provision did not contribute to the damage of the property. For this reason, Carnes argues that the insurance company should not be allowed to use the violation as a defense. This statute has been expounded by the courts so that it can have an effect on particular provisions, warranties, and conditions in policies, of which the violation might have led to the occurrence of the loss, but which, did not (Cox, 123). The fact that Henry and Hanna did not occupy the house for sixty days as stipulated in the policy document did not in any way aggravate the situation to occur since Plano tornado is considered to be a natural calamity. Therefore, the homeowners have a case against the insurer having not failed to pay their premiums. Ordinarily, the insurance adjuster who receives notice of the claim will send a proof of loss for the insured to complete. If the insurer fails to send the form, the insured with the help of their attorney should prepare a proof of loss form based on the requirements listed in the policy. While submission of the proof of loss form, if requested, is a condition precedent to coverage, all that is required is that the insured substantially comply with proof of loss terms. However, this was not the case with Henry and Hanna because the insurer detected defects in proof of loss. Regardless of the defects, Henry and Hanna are still determined to persuade the insurer to compensate them for their loss even if it means going for an out of court settlement. In addition, no coverage will be given unless the insured proves his or her conduct was not intentional. When it comes to Henry and Hanna’s case, moving from their matrimonial home was not intentional, but it was beyond their control since things did not work out between them. As a result, they were left with no other option other than to vacate from their home pending the sale of their matrimonial home. Another point of reference is the case between Hernandez v. Gulf Group Lloyds. In 1987, Elizabeth Hernandez was in the company of Charles McCullough. Both of them were involved in an accident that ultimately led to her death. The cause of the accident was as a result of Charles’ negligence who was the driver at the time of the accident. McCullough, 19 had a liability policy worth $25,000 with State Farm Mutual Automobile Insurance Company. On the other hand, Elizabeth was insured under an insurance policy with Gulf Group Lloyds that was under her parents’ belt. This policy covered both underinsured/uninsured parties in the amount of $100,000. However, Elizabeth’s parents incurred damages in the excess of $125,000. The Hernandez’s came into a mutual agreement with McCullough where they were to recover the excessive amount that was beyond $100,000. Thereafter, they sought to recover the parent amount from Gulf, but Gulf denied reimbursing them the money because they did not notify the company before striking an agreement with McCullough. Nonetheless, the court ruled in favor of the Hernandez’s and awarded them $100, 000 in addition to other costs such as attorney’s fees, pre judgment interest, and post judgment interest. The court found that the Hernandez’s did not subject Gulf to any material prejudice based on the fact that the Hernandez’s went against the settlement without consent policy. The Hernandez’s argued that the exclusion of Gulf was neither prejudicial nor intentional, thus Gulf cannot use this as a basis to deny them coverage based on the exclusion policy. As a result, the ruled in favor of the Hernandez’s and Gulf did not have any other option other than to oblige to the court’s ruling (Humphreys, 12). Dick. P., a citizen of Texas residing in Mexico, purchased a homeowners’ insurance policy in that country to cover his house. The policy was issued by a Mexican company which reinsured part of the risk to Home Insurance Co., a New York company. The reinsurance agreement was executed in Mexico and New York. After losing the house by fire, Dick filed a case in a Texas court to recover on the policy. The policy contained a clause requiring any such suit be brought within a year of the loss. A Texas statute required any such clause extend the time to sue to no less than two years. Dick brought suit more than one year after the loss, but the Texas court applied the Texas statute to allow the suit to proceed. In this case, the Texas statute is not merely a statute of limitations for it can, under proper circumstances extend liability where none would exist by the terms of the contract. It is, however, immaterial whether the statute is looked upon as procedural or remedial or substantive. Texas had no connection with the original policy or with the reinsurance contract save that Dick was a citizen of the state, and he filed a case in Texas courts (Appleman, 122). Submission of a proof of loss if requested is a condition precedent to coverage under the guiding principle. Hence, the insured ought to provide notice to the insurer of the loss in the manner and within the time the requirements specified by the policy. With respect to natural calamities such as Plano tornado, the actual proof loss requirements are in part provided by statute Texas. Ins. Code Sec. 862.054 While the insured should make all efforts to give prompt notice, the insurer has the burden to prove prejudice if notice is late (Cox, 201). On January 11, 2008, the Texas Supreme Court reversed the lower court’s rulings favoring an insurer that had denied coverage solely because of the policyholder’s failure to timely provide notice of its claim; the court ruled that, to avoid its coverage obligations, an insurer must demonstrate that it was prejudiced by any delay notice. PAJ Inc., a jewelry manufacturer and distributor, had a CGL policy with Hanover Insurance Company that insured, injury arising out of contravention of copyright rules. The policy required PAJ to notify Hanover of any suit or claim brought against it. Yurman Designs Inc. wanted the court to stop PAJ from promoting a particular jewelry line and ultimately sued PAJ for copyright infringement. However, PAJ was unaware that it had insurance potentially covering this claim. Hence, Hanover new nothing about the suit until six months after the litigation had commenced. Hanover Insurance Company refused to defend PAJ, thus PAJ sued Hanover seeking a declaration whether it was contractually obligated to defend and insure PAJ in the copyright suit. The parties’ argument focused upon whether the prompt-notice requirement was a condition precedent or merely covenant. Although the policy language did not state expressly that the prompt-notice requirement was a condition precedent, Hanover argued that, in context, it was a condition precedent, thereby rendering PAJ’s failure to satisfy the condition fatal to coverage. PAJ argued that the prompt-notice requirement was only a covenant, meaning that its breach could be excused as long as the insurer suffered no prejudice. Nonetheless, Texas law would require an insurer to demonstrate prejudice before it could avoid coverage on this basis alone. The court concluded that PAJ’s failure to notify Hanover in time of a claim or suit does not defeat payment of claims if the insurer was not prejudiced by the delay. The same case applies to Henry and Hanna. Even though they had not gone outside the borders, they filed a suit in court hoping that the court would help them to recover back their policy, not to mention that their policy contained a clause requiring that the house should be not vacated for a period of up to sixty days. Hence, they felt that would consider their plea even though they are required to walk their way out of some legal technicalities that seem to be in favor of the insurer. However, the fact that Henry and Hanna had terminated their marriage, this meant that they would not live under the same roof, and everyone had to go their own separate way. As a result, the matrimonial house had to remain vacant until that time when a potential buyer was available. This being the case, they continued paying up the required premiums because they had not forfeited the ownership of the house. As such, they feel that the insurer should honor their end of the bargain having not terminated the insurance contract even though they did not reside in the house as at the time of the tragedy. In their suit, Henry and Hanna argue that, the suspension of insurance coverage during the sixty day period of vacation should be reviewed since the cause of the damage was beyond their control. In the case of Farmers Insurance Exchange V. Fitzpatrick Greene, Fire Insurance Exchange provided Greene with a homeowner’s insurance policy which was divided into two sections. In section IA, the policy provided insurance for damages on the house based on the provisions on the declarations page. Section IB insured for damage on personal property. The second section provided for coverage on medical payments and personal liability to others. Also, the policy provided for a vacancy provision which suspended coverage for damage to the property after the property becomes vacant for sixty days. However, four months proceeding to the damage of the dwelling, Greene informed Fire Insurance Exchange that she intended to relocate to a retirement community, thus she was placing the dwelling on the market for sale. Before the house could be bought, a fire broke out from a neighboring property and it spread to Greene’s property, which destroyed the whole house. Consequently, Greene sought filed for compensation for her dwelling based on the policy for damages. In its reply, Fire Insurance Exchange denied the claim while citing the vacancy provision. This prompted Greene to sue Fire Insurance Exchange in order to recover payment as per the policy document as well as the attorney’s fees. However, Fire Insurance Exchange answered that coverage of the property against damage was suspended based on the vacancy clause, thus the insurance company was not in contravention of the policy, but Fire Exchange Insurance did not in any way argue that Greene had violated or breached the policy by having her house left vacant. In the final judgment, the jury awarded damages and attorney’s fees on her violation of contract claim. The jury also stated that both parties should agree to severance of the unsettled claims. As for Henry and Hanna, they were expecting the insurer to replace their damaged house. Even though Fastpay Insurance Company had a provision that prohibited their clients from vacating their houses for up to sixty days, it is argued that this would reduce the occurrence of damages. However, by vacating the house for up to sixty days, the insured is considered to have breached the contract regardless of them paying the premium or not. According to the insurer, the presence of the insured within the precincts of the house might help to lessen the amount of the damage in comparison to their absence. In the case of Henry and Hanna, their presence would not have helped to alleviate the damage caused on the house since the damage was as a result of a natural calamity. In fact, their presence would have put their lives in danger. For this reason, the insurer should consider shelving the policy of vacation for up to sixty days since the absence of Henry and Hanna from their matrimonial house was beyond their control. The insurer should consider their plea since it is not mandatory for married couples to stick together for the rest of their lives. The cause of the absence was as a result of divorce between the married which meant that they had to be away from each other. At the same time, they were required to dispose off their house and share the proceeds accrued from the sale of the house. Logic dictates that they had to vacate the house in order to give room for a potential buyer to have a look at the house. Of importance, is that they did not terminate their contract with the insurer since they found it necessary to insure house until that time when would find a potential buyer. Therefore, the insurer should take into consideration the unique nature of a married couple since their marriage can go sour at any given time. Failure to put this factor into consideration would be considered as discriminatory to a particular section of its clients (Miller, 27). This case is similar to that of AIG Aviation, Inc. v. Holt Helicopters, Inc. In this case, the court ensured that its decision will continue to be cited by holders of aircraft liability policies seeking coverage ion instances where they fail to abide by unambiguous policy requirements and safety regulations. The decision in Holt Helicopters meant that, in Texas and in any other state for that matter, a policyholder may be able to obtain insurance for damage arising from an aircraft accident where the requirements of the policy establishing the scope of the insured are not me, in particular, where the pilot in charge of the aircraft does not meet the policy’s flight experience requirements or where the aircraft does not have a current valid worthiness certificate as mandated by the FAA. In order to avoid coverage pursuant to policy exclusions that apply in such circumstances, existing law in Texas and other states that make use of the Texas approach require an insurer to prove the existence of a casual connection between the breach of the policy terms and the accident, even where the policy does not require such a link to exist (Alp, 8). The insurance policy issued to the helicopter’s owner provided in its declarations that it would apply only while the aircraft was piloted someone that met specific qualifications. In particular, the policy required the pilot to be either; one of the three people identified by name, or any appropriately rated pilot that had logged at least 1,000 flying hours. At the time of the accident, the pilot in charge did not meet the terms of the policy the declarations and had logged less than the required flying hours. The insurer denied coverage on this basis and Holt Helicopters filed a coverage action. The trial court ruled in favor of the insured, by ruling that, in order to avoid coverage; the insurance company must prove such a causal link. On the other hand, it is fundamental that an insurance contract defines the scope of the insured risk. Where an insurer is part and parcel of an activity such as flying its airplane without valid airworthiness certificate or with an untested pilot, and this triggers policy exclusion, then the prohibited operation takes place outside the scope of the insured risk. If the insurer had been willing to insure aircraft operated by untested pilots or in contravention of mandatory safety regulations, they could have chosen to do so in exchange for premium payments. The policy in Holt Helicopters unequivocally stated that the insurer opted not to provide coverage to a disaster that happened during a flight under prohibited circumstances, not because the flight was made under those circumstances. This distinction is fatal to the reasoning of the Texas courts, and forms the basis of various holdings in jurisdictions that do not impose a causation requirement (Carper & McKinsey, 113). Hence, it is apparent that even though Henry and Hanna had gone against the guiding principles the policy document, their presence would not have in any way stopped the Plano tornado from damaging the house. Therefore, the insurer should consider their stance and compensate the homeowners’ since their case is similar to that of AIG Aviation Inc. v. Holt Helicopters. The insurer should be asked to provide a causal requirement that connects the absence of homeowners with the occurrence of a Plano tornado that swept away their house. Works cited Alp, Paul. “Out of thin air: A Causation ‘Requirement’ in Aircraft Liability Policy Exclusions.” Emerging Insurance Disputes, 2008: Air Safety. Web. 23 Jan. 2008. Appleman, J. A. Appleman on Insurance Law and Practice. New York: LexisNexis Matthew Bender, 1996. Print. Carper, D. L. & McKinsey, J. A. Understanding the Law. Mason, OH: Cengage Learning, 2011. Print. Cox, R. The American Law Times Reports, Volume 3. California: Hurd and Houghton, 2006. Print. Humphreys, M. “Uninsured/ Underinsured Motorist Claim.” Law Office of Mark S. Humphreys, 2012: Dallas Fort Worth Insurance Lawyer Blog. Web. 25 Nov. 2012. Lowry et al. Insurance Law: Doctrines and Principles. Ontario: Hart Publishing Limited, 2011. Print. Miller, C. E. How Insurance Companies Settle Cases. Costa Mesa, CA: James Publishing, 1989. Print. Williams, O. M. Insurance Reciprocity and Uniformity: Regulators Have Made Progress in Producer Licensing, Product Approval, and Market Conduct Regulation, but Challenges Remain. USA: Diane Publishing, 2009. Print. Read More