Missing Items of Damage: TWIA’s Failure to Admit or Deny Coverage for Items of Damage
When, in a Notice of Claim Acceptance letter, TWIA properly denies coverage for a portion of a claim, coverage for the remaining portions of the claim is by default accepted in full. See Texas Windstorm Ins. Ass’n v. Jones, 512 S.W.3d 545 (Tex.App. — Houston [1st Dist.] 2016, no pet.).
The TWIA Policy is Unique
The remedies available an insured under a TWIA policy are very different from a standard property damage policy. One notable difference is the extremely short amount of time an insured has to decide whether to demand appraisal or accept an adjuster’s estimate of the amount of loss for items of covered damage. See §2210.574(b) Worst of all, if an insured makes the wrong call and doesn’t demand an appraisal, they’re stuck with the adjuster’s estimate of covered damage. See §2210.574(f) That’s a lot of pressure on an insured.
The Race to Accept or Deny Coverage
The policyholder isn’t the only one operating ‘on the clock.’ For Hurricane Harvey claims, TWIA has by the 120th day after it receives the claim (and receives any information it timely requested) to provide notice of whether the association has 1) accepted coverage for the claim in full, 2) accepted coverage for the claim in part and denied coverage in part, or 3) denied coverage for the claim in full. See §2210.573(d) The notice letter TWIA sends out to comply with §2210.573(d) is commonly referred to as the Notice of Claim Acceptance.
Haste Makes Waste: The Case of the Missing Items of Damage
§2210.573(d) places the risk of not properly examining all items of damage on TWIA. This risk arises from TWIA’s duty to fully investigate the Claim and, in its Notice of Claim Acceptance, give notice of TWIA’s position as to coverage for all items of damage that make up an insured’s claim. See §2210.573(d). While not required to do so, during this 120 day time period, claimants often supply TWIA with a detailed itemization of damaged.
During appraisal, the insured’s appraiser will use the claimant’s estimate to point out items of the claim’s damage to the appraisal panel. Still, even though the claimant timely brought the items to TWIA’s attention, TWIA’s Notice of Claim Acceptance appears to have missing items of damage. Is TWIA allowed to, in its Notice of Claim Acceptance, neither accept nor deny coverage for the missing items? As shown below, neither accepting nor rejecting items of damage is not one of the options available to TWIA under §2210.573(d).
Why We Don’t Look at What TWIA Accepted as Covered in the Notice of Claim Acceptance?
TWIA is allowed to send three (3) possible Notice of Claim Acceptance letters: 1) Coverage Accepted in Full, 2) Coverage Accepted in Part, Denied in Part and, 3) Coverage Denied in Full. See Tex. Ins. Code §2210.573(d) TWIA is not given the option of sending a Notice of Claim Acceptance that, by implication, neither accepts nor rejects certain items of the claim’s damage.
If you compile a list of all the items of damage TWIA’s appraiser believes the Notice of Claim Acceptance letter accepted as covered and all items of damage the Notice of Claim Acceptance specifically denied, the combined list of these two categories of damage must address the entire claim. Remember, claim and coverage are distinctly different. If the combined list doesn’t address all the damage relating to the claim found during appraisal, there are items of damage missing from the Notice of Claim Acceptance. This is an impossibility under §2210.573(d).
What Does the Appraisal Panel Do With the Missing Items of Damage?
If the combined list (accepted and denied coverage items) does not represent all items of damage for the claim, the panel is confronted with two interpretations of the Notice of Claim acceptance: 1) TWIA’s Notice of Claim Acceptance letter neither accepted nor denied coverage for the “missing’ items of damage or 2) the Notice of Claim Acceptance is not missing items and the panel must decide if coverage for these items may be implied. For the reasons discussed below, the latter interpretation best fits TWIA duty under §2210.573(d) and allows for coverage for the missing items of damage to be implied.
A review of Texas Windstorm Ins. Ass’n v. Jones, 512 S.W.3d 545 (Tex. App. — Houston 545 [1st Div.] 2016, no pet.) may be instructive.
While the facts presented in Jones differ from our present scenario, the task before the court was substantially similar. In Jones, the parties disagreed as to the which portions of the claim the association’s notice letter accepted as covered. The court resolved the conflict by defining covered portions of the claim as those portions of the claim to which no denial of coverage was asserted in the association’s Notice of Claim Acceptance letter. The court held that because the association’s notice letter contained no denial of coverage for the damage in question or explanation of reasons for denial, the association had accepted coverage for all claims in full. See Jones, 512 S.W.3d at 550–52.
There are less than a handful of cases that address the new TWIA statute. At the time of this article, Texas Windstorm Ins. Ass’n v. Jones, 512 S.W.3d 545 (Tex. App. — Houston 545 [1st Div.] 2016, no pet.) is the only case available that provides some insight into how a court might interpret §2210.573(d) in the context discussed above.
Applying the methodology utilized by the court in Texas Windstorm Ins. Ass’n v. Jones (using notice of denial of coverage to define the extent of covered claims), one might extrapolate that when in a Notice of Claim Acceptance letter TWIA properly denies coverage for a portion of a claim, coverage for the remaining portions of the claim for windstorm or hail damages the property (real or personal) sustained on the date of loss is by default accepted in full.
The reader should proceed with caution as other courts are sure to weigh in and there is a real possibility that conflicting interpretations might result.
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