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Gap for insurance coverage worsens – Approved changes to agricultural policy | Legal insurance blog about property insurance



Last week, the Supreme Court of Texas weighed a long-running dispute over the decision of Farmers Group Inc. ("Farmers") to replace their HO-B homeowners policy with less extensive HO-A policy, back in 2001. 1 Following an influx of mold claims in Texas, farmers and other insurance companies decided to replace their HO-B policy, a broad "all-risk" policy, with tighter HO-A policies or "named risks" policies

Texas Department of Insurance ("TDI") approved Farmers' decision, obliging all insurance companies to remove HO-B insurance from the market. In return, TDI approved an improved HO-A policy that provides coverage for certain water requirements. The Texas Insurance Code allows insurers to cancel an insurance policy as long as it gives 30 days notice to the insured before it expires. 2 To this end, farmers notified policyholders in 2002 of the renewal of their HO-B policies and their continuation of coverage under its HO-A policy.

Following receipt of the non-renewal notice, plaintiff Geter filed a lawsuit against Farmers in August 2002, arguing that Farmers was not entitled to refuse to renew HO -B policies. Farmers, who rely on their statutory right not to renew the policy after a 30-day notice submitted for a summary judgment. Goats pointed to paragraph 6 of the "Terms" section of Farmer's policy and stated: "We may not refuse to renew this policy due to claims for losses due to natural causes." Goats posed the increased mold claims that led to the termination of the HO-B policy were "claims for losses due to natural causes." If correct, this prohibited farmers from refusing to renew their HO-B policy.

In addition, Geter claimed that farmers were violating its policy language by its decision not to renew because it did not qualify as a proper notice (based on a prohibited reason for non-renewal). The trial court granted Geter's claim of assertion and class certification and found that farmers violated the insurance contract by not renewing their HO-B policy. In 201

9, the Board of Appeal upheld the decision of the Court of Justice and concluded that the notice of renewal was based on claims and these claims were for losses due to natural causes, such as water, mold and basic claims.

Consequently, the Supreme Court of Texas did not agree. Referring to Section 551,105 of the Texas Insurance Code, Justice Backlock concluded:

By law, farmers were allowed to cancel their HO-B insurance as long as they gave 30 days notice that the insurance would not be renewed.

The Supreme Court found that farmers and other insurers (after approval by TDI) chose not to renew the HO-B policy due to government losses – not due to losses claimed by the plaintiffs or any particular policyholder. Justice Backlock reasoned:

Such a reading of the policy would undermine TDI's regulator to respond to changing conditions in the insurance industry and would bind farmers to suffer state insurance losses forever.

As such, the Court concluded that there was "Nothing wrong with the 30-day notice provided by farmers", which gives a summary judgment in favor of the farmers. The case was referred back to court for further hearing. For more information and updates on progress, check out Farmers Grp., Inc. v. Geter .
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1 Farmers Grp., Inc. v. Geter No. 19-0996, 2021 WL 1323407 (Tex. April 9, 2021).
2 Tex. Ins. Code § 551.105.


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