COURT APPLIES PREJUDICE REQUIREMENT TO INSURED’S FAILURE TO PROVIDE SWORN PROOF OF LOSS

On April 10th, Judge Amos Mazzant of the Eastern District of Texas adopted the report and recommendations of a magistrate and denied an insurer’s Rule 12(b)(1) and 12(b)(6) motions to dismiss. In Wilson v. Allstate Ins. Co., No. 4:16-CV-970, 2017 WL 1313854, at *1 (E.D. Tex. Apr. 10, 2017) the District Judge analyzed whether the insured’s failure to comply with the Proof of Loss requirement in an insurance policy warrants dismissal.

Tommy Wilson filed suit against his insurer asserting breach of contract and violations of the Texas Insurance Code. Wilson had a Texas Homeowner's Insurance Policy issued by Allstate Vehicle and Property Insurance Company.  Wilson submitted a claim for damage to his residence from a storm in March 2016 and later filed suit alleging that Allstate grossly underestimated the property damage.

Allstate filed a Motion to Dismiss arguing that Wilson's suit was not yet ripe because of he failed to comply with the Policy's express requirement to submit a sworn proof of loss before filing suit. And the parties agreed that Wilson did not submit a proof of loss prior to initiating litigation. Nevertheless, the Magistrate Judge entered a report recommending the denial of Allstate’s motion. Allstate objected to the Magistrate’s report and recommendation.

Judge Mazzant overruled Allstate’s first objection finding that the Magistrate Judge assumed the proof of loss provision applied to this dispute and then proceeded to analyze the prejudice, if any, imposed on Allstate by Wilson's failure to comply with the policy requirement. The court also found that under Texas law the proof of loss provision in an insurance contract is “akin to a notice provision” aimed at “aiding the insurer in administration of its coverage of claims.”  Further, the court found that “under current Texas law, regardless of whether a policy provision is characterized as a covenant, condition precedent or exclusion, the insurer must still demonstrate prejudice caused by the plaintiff's non-compliance.”

Allstate claimed it suffered prejudice because it was forced to prematurely litigate the claim before receiving the information contained in the proof of loss. Utilizing the prejudice analysis, the court found that a finding of prejudice could not be supported. In making this finding, the court recited the history of the case and noted that Wilson timely submitted a claim, Allstate had an opportunity to inspect the damage, and that the parties engaged in correspondence for several months regarding the disputes between them. Finally, the court noted that “Plaintiff's civil complaint provides the bulk of the information required by the terms of the POL.”  Based on the finding that the Allstate had suffered no prejudice, the court denied the motions to dismiss and allowed the case to proceed.