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Recent Court Cases
By Kevin McGillicuddy - Parker & Associates

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PIP COVERAGE INTERPRETED BY TEXAS SUPREME COURT

TEXAS FARM BUREAU v. STURROCK, 146 S.W.3d 123 (Tex.2004)

FACTS – Jeff Sturrock drove his truck to work, parked, and turned off the engine. While exiting the truck, he entangled his left foot on the raised portion of the truck’s door facing and injured his neck and shoulder when he attempted to prevent himself from falling. He filed a claim for PIP benefits under his vehicle’s policy with Texas Farm Bureau.

CASE HISTORY – Sturrock sued Texas Farm Bureau for breach of contract and violations of Article 21.21 of the Texas Insurance Code after the carrier denied that his injuries resulted from a “motor vehicle accident” within the policy’s PIP coverage. Both parties filed motions for summary judgment and filed an agreed statement of facts and asked the trial court to apply the law to the facts and to determine whether his injuries resulted from a “motor vehicle accident” within the meaning of the policy. The trial court held that Sturrock’s injuries resulted from a motor vehicle accident and were covered under the policy. The court of appeals affirmed.

HOLDING – Texas Farm Bureau appealed, and the Supreme Court holds that “motor vehicle accident” does not require some involvement between the covered motor vehicle and another vehicle, person or object. The Court concludes that “a motor vehicle accident” occurs when “(1) one or more vehicles are involved with another vehicle, an object, or a person, (2) the vehicle is being used, including exit or entry, as a motor vehicle, and (3) a causal connection exists between the vehicle’s use and the injury-producing event.” If Sturrock had fallen after he had finished exiting the truck, or if he had fallen out of the truck without any involvement of the vehicle, there would be no coverage. But here, the vehicle’s door facing was a causative factor in his fall, and therefore there is coverage.

SIGNIFICANCE – While this is a broad reading of the policy’s coverage, the Court clearly states the elements that must be considered when a determination is made as to PIP coverage for injuries resulting from a “motor vehicle accident.”

FEDERAL COURT HOLDS SHOWING OF PREJUDICE REQUIRED FOR LATE NOTICE DEFENSE IN PROPERTY POLICY

RIDGLEA ESTATE CONDOMINIUM ASSOCIATION v. LEXINGTON INSURANCE COMPANY, 2005 WL 1540804 (5th Cir.(Tex.) July 1, 2005)

FACTS – In July 2001, a roofing inspector informed Ridglea that the roofs of its condominiums had suffered significant hail damage. Ridglea first submitted the claim to its insurer, Chubb Custom Insurance. Chubb advised Ridglea that the damage must have been caused by a May 5, 1995 hailstorm and that Ridglea would need to submit its claim to the carrier that insured it at that time. In November of 2001, Ridglea submitted the claim to its 1995 carrier, Lexington. Lexington denied the claim on December 19, 2001, based on its conclusion that the damage did not exceed its deductible, and also that it found no evidence that the damage was incurred during the policy period (February 1995 to 1996).

CASE HISTORY – After about a year of negotiations between Ridglea, Lexington, Chubb and another insurer, General Star, Ridglea made a final demand against Lexington for $449,198.63 plus attorney’s fees of $10,000. Lexington denied the claim again and then brought suit against Ridglea in federal district court, seeking declaratory judgment that it was not liable for the damage. Both parties moved for summary judgment. The district court dismissed the declaratory judgment action and realigned the parties, making Ridglea the plaintiff and Lexington the defendant in a suit under the policy. Both parties moved for summary judgment, and the district court granted Lexington’s motion, holding that Ridglea’s claim was barred because Ridglea failed to provide prompt notice of the damage as required by the policy. The pertinent policy provision provides that no policyholder may bring an action against Lexington without first giving “prompt notice of the loss or damage.” The trial court concluded that the delay between May 1995 and November 2001 was so great that “no rational finder of fact could conclude…that Ridglea reported the hail loss and damage to buildings within a reasonable time after it was suffered.” The court rejected Ridglea’s argument that Lexington had to show that it was prejudiced by the late notice.

HOLDING – Ridglea appealed, arguing that the trial court erred in finding (1) that Lexington had not waived its late notice defense; (2) that the notice requirement was unenforceable as a matter of public policy; (3) that the notice requirement was ambiguous and should be construed in the manner most favorable to the insured; and (4) that Lexington should have been required to show prejudice in order to raise late notice as a defense. The circuit court of appeals first addresses the waiver argument, which is based on the argument that in its first denial, Lexington denied the claim on the sole basis that the damage did not occur during the coverage period. Ridglea’s own expert testified that the hail damage was extensive and that it was such that would have been evident on May 5, 1995. Ridglea responded that since the roofs involved are on two story buildings, the damage was not visible from the ground. The court states that Ridglea should have been aware of the likelihood that the roof were damaged based on damage to other parts of the building (shutters and windows) and other property on the ground, such as automobiles in the vicinity. Therefore, Ridglea’s lack of actual awareness of the damage did not excuse Ridglea from having to give prompt notice. The court affirms the trial court’s finding that to delay an inspection for 6 years was unreasonable as a matter of law. Therefore, Lexington’s subsequent denial did not constitute a waiver of the defense of late notice. The court of appeals also holds that the notice provision is not unenforceable as a matter of public policy. The court also holds that the requirement that Ridglea give “prompt” notice of the loss means that Ridglea should have given notice “within a reasonable time after the occurrence,” and the court agreed that since no rational finder of fact could conclude that Ridglea’s 6 year delay was reasonable, any possible ambiguity in the meaning of “prompt” does not help Ridglea overcome the defense of late notice. Finally, the court turns to what it considers the central issue in the case - the question of whether Lexington must show that it was prejudiced by the late notice. Lexington argued that the requirement that the carrier show prejudice applies only to certain types of policies, such as general liability and automobile insurance policies, as provided in orders issued by the Texas Department of Insurance. Ridglea responded that Texas law requires a showing of prejudice in order to raise a breach of notice provision as a defense, regardless of the type of policy involved. The court of appeals holds that the prejudice requirement applies to all “occurrence” policies, not just those covered by TDI orders. Therefore, there is an implied requirement of prejudice before the carrier can invoke the notice provision. The court therefore holds that the trial court erred as a matter of law in failing to require a showing of prejudice and remands the case to the district court to determine whether Ridglea raised questions of material fact as to whether Lexington was prejudiced by Ridglea’s breach of the policy’s prompt notice provision.

SIGNIFICANCE – This is a significant decision. Lexington will still have the opportunity at trial to show conclusively that it was prejudiced by late notice, but absent such a showing, summary judgment would be improper as there would be a fact question for the trier of fact on the prejudice issue. The court does distinguish “claims made” policies in its discussion and states that the prejudice requirement does not apply to those types of policies. So, with respect to “claims made” policies, no showing of prejudice is required to defeat a claim based on late notice.

COURT OF APPEALS RULES ON HEART ATTACK REQUIREMENTS

TRANSCONTINENTAL INSURANCE COMPANY v. SMITH, 135 S.W.3d 831 (Tex.App.—San Antonio 2004, no pet.)

FACTS – Robert Smith, age 63, worked for Diamondback Construction. On April 17, 1998, he was working driving grade stakes into the ground at a parking lot project. He set 30 - 40 grade stakes using a twelve-pound sledgehammer over a 2 1/2 hour period. While doing this work, he began to experience pains in his left elbow as well as discomfort in his chest. He took a short break and then completed the job. By the time he finished his break, he was sweating profusely. He then got in his own truck and drove 20 miles home. At his house, he took two aspirin and laid down on a couch. Two hours later, his wife arrived home and took him to the emergency room, where he learned that he had suffered a heart attack. Although he stated he was not aware of his cardiovascular condition before the heart attack, medical testimony established that he had a pre-existing two-vessel coronary heart disease, with blockage of 90% and 75% in the two arteries. Both are considered significant blockages. After a CCH, the hearing officer found that the heart attack was a compensable injury and ordered payment of benefits. The hearing officer concluded that the preponderance of the medical evidence showed that Smith’s physical labor was a substantial contributing factor of his heart attack and that the pre-existing heart condition was not a substantial contributing factor. The appeals panel reversed, disagreeing with both of those conclusions.

CASE HISTORY – Smith filed suit. At trial, Smith testified that he felt abnormal amounts of pain in his chest and elbow while driving the stakes into the ground and that he began to sweat profusely while doing the work. The symptoms came on gradually. His treating physician, Dr. Garza, testified that the heavy labor of performing the job caused a piece of cholesterol to break loose and seal one of Smith’s arteries entirely, thereby causing the heart attack. He further testified that Smith might not have suffered the heart attack if he had not undergone such heavy physical labor. Although he agreed that his preexisting condition was a significant factor in causing his heart attack, he opined that the work initiated the attack. Medical evidence offered by Transcontinental supported the carrier’s position that Smith could have suffered a heart attack while engaging in no physical activity. Transcontinental’s doctor, Dr. Silverman, disagreed that a blood clot or piece of cholesterol broke loose, sealing one of his arteries. Instead, he testified that the direct cause of Smith’s heart attack was inadequate blood flow through the arteries due to Smith’s severe heart disease, but he also conceded that an increased workload could certainly play a contributing part in causing his heart attack. After a jury trial, the court rendered judgment in Smith’s favor. The trial court also awarded attorney’s fees of 25% of his recovery, plus expenses, to Smith’s attorney.

HOLDING – Transcontinental appealed, challenging the legal and factual sufficiency of the evidence. Transcontinental argued that the heart attack did not occur at a definite time and place and was not caused by a specific event. The carrier argued more specifically that his symptoms came on gradually, so that it did not occur at a definite time and place. The court of appeals writes that heart attack cases involving physical activity must demonstrate some type of physical strain or overexertion, but that this may result from the collective efforts required in a day’s work, rather than from a single isolated incident. Prior cases under “old law” have held that a person suffering from a pre-existing heart condition can have a compensable injury under lesser amounts of strain or overexertion than a person with no such pre-existing condition. However, even where there is a pre-existing condition that makes a person more susceptible to a heart attack, performing a task that requires no more than “normal physical exertion” will not make a heart attack compensable. The court concludes that the evidence in this case of heavy physical labor done over the workday was sufficient to satisfy the requirement that the heart attack must occur during a specific event. Therefore, the jury’s finding in his favor was supported by sufficient evidence. With regard to the second requirement that the medical evidence must show that the work, rather than the natural progression of a pre-existing heart condition or disease was a substantial contributing factor of the heart attack, the court of appeals notes that there have been no prior appellate court decisions addressing this requirement. Prior to the 1989 Act, there was no such requirement. Courts merely looked to whether the job-related strain was a contributing cause of the heart attack. Under the 1989 Act, the work can no longer merely be a contributing factor. Instead, it must be a substantial contributing factor to the heart attack. The court of appeals looks to TWCC appeals panel decisions that have held that there can be more than one substantial factor, and the heart attack will be compensable so long as the work is a greater factor than the natural progression of the underlying heart condition or disease. The court of appeals adopts this interpretation of the Act. Upon review of the evidence in this case, the court of appeals holds that, while the evidence is conflicting, it was sufficient to support the jury’s decision that a preponderance of the medical evidence indicated that the work rather than the natural progression of a pre-existing heart condition or disease was a substantial contributing factor of the heart attack, so it affirms the trial court’s judgment in Smith’s favor. With regard to attorney’s fees, the court states that §408.221 provides that the TWCC or court must approve the fees. Other than a 25% cap, the trial court has discretion as to the manner and amount of fees awarded. This is to be determined by the judge, not by the jury. Fees are to be based on the attorney’s time and expenses according to written evidence presented to the TWCC or court. Although such time and expenses are to be itemized under TWCC Rule 152.5, the record in this case did not contain an itemized list of expenses incurred in trying the case. It merely indicated the date Smith hired counsel and his hourly fee. Nonetheless, Transcontinental had the burden to provide a record demonstrating that the trial court abused its discretion, which it did not do. The trial court’s order granting attorney’s fees stated that it based its decision on the evidence and arguments presented by counsel. Since no other record was presented to the court of appeals, it would not hold that the trial court abused its discretion.

SIGNIFICANCE – This is a case of first impression with regard to the statutory provision requiring medical evidence to prove that the work rather than the preexisting heart condition or disease was a substantial contributing factor causing the heart attack. Since the court of appeals holds that there can be more than one substantial contributing factor and that the claimant need only prove that the work was the greater factor, it will be difficult for courts of appeals applying that standard to find that whatever result is reached by a jury was against the great weight of the evidence when the evidence is conflicting. Note that the carrier prevailed before the TWCC, so that the provision of §408.221(c) allowing fees to be ordered over and above the claimant’s recovery was not applicable in this case, although the court did not address this possibility.

Submitted by:

J.T. Parker & Associates, L.L.C.

1341 W. Mockingbird Ln., Suite 300W

Dallas, TX 75247

214.631.1000

214.631.3700 Fax

www.parkerclaims.com

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