In this matter, a materials manufacturer sued an insurance broker for a Texas DTPA violation for improperly preparing a policy application. The violation became known after the plaintiff suffered nearly $1 million in theft from a facility they believed insured.
The plaintiff in this matter, Hobbs Bonded Fibers, manufactures a variety of specialty nonwoven products used in many different industries. In August 2008, Hobbs purchased an insurance policy from Commonwealth Insurance Company to protect several of its properties, including warehouses in Mexia, Texas. That purchase was brokered by the defendant Bailey Insurance. On November 2008, one of the Mexia properties was burglarized, with thieves making off with approximately $888,000 in copper electrical components from the building’s infrastructure. Hobbs filed a policy claim with their insurer for the lost copper and related lost value to their property. The insurer denied the claim, stating that the warehouse was not covered, as it was unoccupied at the time of theft. They further argued that, due to numerous mistakes and misrepresentations in the insurance application produced by Bailey Insurance, the policy itself was invalid.
The plaintiff filed suit against Bailey Insurance & Risk Management in the 74th District Court of McClennan County, Texas. They sought recovery for violations of the Texas Deceptive Trade Practices Act and the Texas Insurance Code, as well as actual damages for non-recoverable losses due to the invalidated insurance policy. Specifically, the plaintiff sought recovery of $888,000 in damages for the lost copper wiring, as well as $816,000 for the lost rental value of the property. The defendants offered $250,000 in pretrial settlement. At the close of evidence they offered $1 million, and at closing offered $1.3 million.
During the five day trial, the plaintiff presented their argument that the defendant had misrepresented the coverage in the service. Further, they presented evidence that they never approved the policy application, and instead it was signed by an official of the defendant company without their knowledge.
The defense argued that they had not acted with malice in their preparation of the application and that the plaintiff likely could not have gotten insurance on the buildings for precious metals, as they were unoccupied. The defendant disputed the plaintiff’s assessment of the copper’s actual cash value, asserting that the building was very old and that the estimate was $100,000 too high. The defendant further argued that the plaintiff should only be entitled to actual cash value, approximately half of the requested amount. Finally, they asserted that 35,000 pounds of stolen copper ripped out of the walls of a massive warehouse could not have been taken in one burglary. Therefore, they argued, the loss should be subject to multiple $25,000 deductibles.After two hours of deliberation, the jury returned with a $1.45 million verdict for Hobbs Bonded Fibers. The plaintiff was awarded $888,464 in damages for the lost wiring and $250,000 in statutory damages for the defendant’s breach of the Texas Deceptive Trade Practices Act and the Texas Insurance Code. No damages were awarded for the loss of value to the building. They were also ordered to pay more than $313,860 in attorneys’ fees.
Reference
Plaintiff’s electrical/copper (value) expert: Ralph Lange. Plaintiff’s insurance practices and standards expert: Joe Williams from Houston, TX. Defendant’s damages expert: Tim Lozos from Dallas, TX. Defendant’s insurance practices and standards expert: Bart Tucker from Fort Worth, TX. Defendant’s real estate expert: Matthew Deal from Houston, TX.
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Hobbs Bonded Fibers vs. Bailey Insurance & Risk Management. Case no. 2009-2767-3; Judge Gary Coley, 11-14-11.
The case(s) cited herein was(were) reprinted with the permission of the publisher Jury Verdict Review Publications, Inc. www.jvra.com
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