Posts By: Gregory Cokinos

In a bizarre twist, the insurance legislation originally billed as the “Hailstorm Bill” will likely have the greatest effect not on hailstorms, but on the most significant flooding event in Texas history. As Hurricane Harvey continues to deluge the Texas Coast, Texas Insurance Code Section 542A is set to take effect at 12:01 AM on Friday, September 1. Originally drafted as a response to the high volume of hail litigation in Texas, the new law now specifically applies to property damage resulting from all “forces of nature,” including hail, rain, floods, hurricanes, tornadoes, wind, etc.

The new law makes several changes to the remedies of property owners under the Texas Insurance Code. Most significantly, the law: (1) reduces penalties faced by insurance companies who wrongfully deny or delay payment of claims; and (2) creates complex notice requirements, which, if navigated incorrectly, potentially reduce the amount of attorneys fees the insured can ultimately recover from the insurance company.

Specifically, newly added Section 542.060(c) will reduce the statutory penalty for delayed or unpaid claims from 18% to a rate determined by a market-based formula, which is capped at 20% but would currently be only 10%. This section applies only to “claims” filed after September 1, 2017. So clients facing the certainty of a property damage claim resulting from Harvey should immediately report these claims to their insurance carrier (by August 31, 2017) and keep records of what was sent and when.

In the event that litigation becomes necessary, the law also requires a claimant to provide its insurer with written notice 61 days before a lawsuit can be filed. The notice must provide specific details, including “acts or omissions” leading to the claim, the dollar amount owed, and the reasonable and necessary attorney fees already incurred. In a potential pitfall for property owners, the recoverability of attorneys fees is now conditioned on the amount demanded in this original notice. Specifically:

1. If the insured prevails at trial and the jury awards 80% or more of the original demand, attorneys fees are recoverable in full.
2. If the insured prevails and the jury awards 20% or less than the original demand, no attorneys fees will be awarded.
3. If the jury award is in the 21-79% range, attorneys fees are pro-rated.

Unfortunately, this new portion of the law applies to all “actions” (as distinguished from “claims”) filed after September 1, 2017—meaning that unless insureds have already given the required written notice and are ready to file a lawsuit—the new law will likely apply. Thus, almost all litigation arising out of Harvey will be governed at least partially by this new law.

Policyholders will want to consult counsel in order to maximize their rights and recoveries. Feel free to contact us if you have any questions or if we can help in any way.

The destruction from Hurricanes Harvey, Irma, and Maria is virtually unprecedented. In fact, Harvey and Irma are the only Category 4 storms to hit the U.S. in the same year (let alone the same two-week span), and Maria made landfall in Puerto Rico as a Category 4 storm as well. The 100-plus mile-per-hour winds are bad enough, but the flooding in the areas hit by these storms reached near-Biblical proportions. Hurricane Harvey managed to dump 27 trillion gallons of water on Texas and Louisiana; parts of Houston received nearly 53 inches of rain during that time.

It’s no surprise that local residents have found themselves in desperate need of help, especially when it comes to rebuilding their homes and businesses. The Houston Builders Association estimates that 30,000 homes in the city were damaged. In addition, approximately 200,000 homes throughout the state of Texas will need to be repaired or rebuilt. And unfortunately, these “acts of God” are often not covered under standard homeowner’s insurance policies.

RMS, a catastrophe modeling company, estimates that $25 to $35 billion of the damages caused by Hurricane Harvey will be covered by insurance. However, the total amount of economic damage — which includes uninsured losses — may reach $70 to $90 billion. That means contractors and construction firms will be more in-demand than ever, but many contractors may find themselves in trouble following these types of disasters, too.

Although events like these may be difficult to predict, there are certain things contractors can do to protect themselves from storm damage during and following the construction process. By working with a construction lawyer to include force majeure provisions in contracts and investing in builder’s risk insurance, business owners and independent contractors will often safeguard their investments in calamitous situations.

Considering that the cost of cleanup from Harvey may eventually reach $180 billion, preparation and prevention is clearly the best way to go, particularly if you conduct business in locations that are prone to significant storm damage. While you may not be able to stave off the actual storm, including construction law components in contracts and purchasing better insurance policies may keep your business or home from going under.

Houston | San Antonio | Austin | Dallas/Fort Worth

On June 2nd, the Fifth Circuit designated its opinion in Austin v. Kroger, L.P., 2017 WL 1379453 (5th Cir. Apr. 14, 2017) for publication. In that opinion, the Fifth Circuit yet again remanded Randy Austin’s lawsuit against his former employer, Kroger Texas, L.P., to the United States District Court for the Northern District. In doing so, the Fifth Circuit (1) limited the court’s role in determining what is and is not a “necessary instrumentality”; and (2) narrowed the application of the “customary work” defense, under which an employer cannot be held liable if the injury results from performing the same character of work that employees in the plaintiff’s position have always done. The Fifth Circuit also held that the Northern District incorrectly applied a more stringent standard to Austin’s motion for reconsideration of the exclusion of Austin’s untimely expert report on causation. Under the proper, more lenient, standard the Fifth Circuit held the expert report should have been considered. The holding is a double-whammy for nonsubscribing employers. It makes it harder, as a legal matter, for nonsubscribing employers to obtain summary judgment on two critical defenses, while simultaneously making it easier for injured employees to overcome summary judgment by augmenting the summary judgment record with new evidence.

By now, nonsubscribing employers are quite familiar with facts of this case. In July 2009, Austin was on the job as an employee of Kroger at a Mesquite, Texas location when he slipped and fell while mopping a brown oily liquid from a restroom floor. Austin alleged that for this task he would normally use a product called “Spill Magic,” which Kroger’s safety manual recommended for cleaning up liquid spills. But on the date of the accident, there was no Spill Magic available. After a long and winding procedural history that involved multiple motions for summary judgment and a stop through the Texas Supreme Court, Austin’s only remaining negligence theory was that Kroger breached its duty to provide Austin with a “necessary instrumentality” (i.e. Spill Magic) for the safe performance of his job.

In April 2016, the Northern District of Texas granted summary judgment for Kroger on the remaining “necessary instrumentality” claim and denied Austin’s motion for reconsideration of the district court’s previous denial of Austin’s motion for leave to file a surreply to Kroger’s motion for summary judgment.

The district court granted summary judgment on two grounds. First, the district court ruled that Kroger had “no duty to provide an unnecessary instrumentality.” Because there was evidence that Austin had previously performed this same task safely using a dry mop (which was available on the date of the accident), the court reasoned Kroger had no duty to provide Spilll Magic. This holding is an extension of the principle, under Texas law, that an employer need only provide a reasonably safe method to perform the duties of employment, not the “best and safest” way.

The Fifth Circuit’s opinion, however, seems to call this principle into question, at least insofar as it can form the basis for summary judgment. In the Fifth Circuit’s opinion, whether the Spill Magic was a necessary instrumentality presented a “genuine issue of material fact” for the jury to decide. The Fifth Circuit opined that Kroger (and by extension the district court) placed “undue emphasis” on the fact that Austin had previously used the dry mop to clean up a “much smaller” spill. Thus, while the Fifth Circuit acknowledged that “the existence of a legal duty is a question of law for the court to decide,” the Court stopped short of making a case-specific determination of the extent of that duty. In other words, the Fifth Circuit seems to be saying that while the court can decide that there is a duty to provide necessary instrumentalities, whether a specific instrumentality is “necessary” is a fact question.

The district court also granted Kroger’s motion for summary judgment on the basis that Austin’s “injury occurred while he was performing his customary work duties.” The Fifth Circuit, however, disagreed, holding that an employer does have a duty to provide instrumentalities necessary for the safe performance of the employee’s customary work. This holding seems to limit the application of the “customary work” defense to situations where an employee is injured while performing his usual job duties, and there is no independent breach of a duty (such as the duty to furnish necessary instrumentalities).

Finally, the district court had previously denied leave to Austin to supplement its summary judgment briefing with an expert report that linked Austin’s injuries and medical expenses to the slip and fall. In the April 2016 opinion, the district court declined to reconsider that ruling. The Fifth Circuit, however, held that the district court abused its discretion in preventing Austin from introducing the expert report. The Fifth Circuit reasoned that the District Court erroneously relied upon Federal Rule of Civil Procedure 59(e) in denying reconsideration, instead of relying on the more lenient Federal Rule of Civil Procedure 54(b). Because of this abuse of discretion, the Fifth Circuit vacated that portion of the district court’s order and remanded the matter to the District Court for reconsideration of Austin’s argument under the correct Rule and standard.

Travis M. Brown
tbrown@cokinoslaw.com
817-635-3619

Roland F. Gonzales
rgonzales@cokinoslaw.com
210-293-8740