The title question was recently answered by a newly appointed judge of the Dallas Federal District Court for the Northern District of Texas, the Honorable Ada Brown. I Singer v. State Farm Lloyds no. 3: 19-cv-1672 (Tex. ND. 3 September 2020), the court analyzed each statement and explained the reasoning to determine either that the claim was subject to rule 9 (b)'s increased requirement for pleadings or only subject to rule 8 's general requirements for the submission. Although this issue and the outcome are not new, this case is an excellent reminder to lawyers who practice insurance law on how to properly initiate a first-party insurance dispute and thereby avoid an insurer's rule 1
The place to start is, of course, with the federal rules of civil procedure. Rule 8 with the title: General rules for submission say in relative part:
(a) Claim for relief. A statement of claim must contain:
(1) a brief and clear statement of the grounds of jurisdiction, unless the court already has jurisdiction and the claim does not require new jurisdiction,
(2) a brief and a clear statement of the claim showing that the person invoking the right to exemption, and
(3) a claim for the requested exemption, which may include exemption in alternative or different types of exemption.
Rule 9 entitled Pleading Special Matters requires, in the relevant part:
(b) Fraud or mistake: Conditions for the mind. In the case of allegations of fraud or error, a party must state with specific specificity the circumstances that constitute fraud or error. Evil, intent, knowledge and other conditions of a person's mind can be asserted in general.
This rule requires at least one plaintiff to rely on facts about who, what, where, when and how the alleged fraud occurred.
The facts in this case are typical of these types of suits. On March 28, 2017, the Dallas hailstorm severely damaged the plaintiff's house. State Farm paid the plaintiff a real cash value ("ACV") of $ 63,640.67, which was not sufficient for the plaintiff to perform all necessary repairs. In early June 2017, another storm hit and the home suffered further damage, especially water damage to the interior. The State Farm Inspector of the Second Storm's damage acknowledged that the plaintiff was originally underpaid. A new claim was filed for the second storm damage. State Farm informed the plaintiff that the compensation cost value ("RCV") for the second storm damage was $ 6182.61. The statement said that "State Farm incorrectly presented the amount of damages and the policy coverage for costs associated with water reduction." (Singer at 2.) Plaintiff did not fare better in a second inspection of the second storm which resulted in an additional payment of only $ 388.09. The plaintiff hired a lawyer and claimed the plaintiff's estimate of $ 179,053.75. State Farm conducted a third inspection and found $ 12,757.83 in additional damages that had originally been declared uncovered. State Farm made two additional payments of $ 2161.64 and $ 529.78 but refused to consider the estimate for the public adjuster.
The plaintiff filed a lawsuit alleging breach of contract, breach of Texas Insurance Code Chapters 541 and 542, breach of fraudulent commercial practice ("DTPA"), breach of good faith and fair trade obligations, attorney's fees and further damages for knowingly committed conduct. and intentionally.
State Farm submitted a proposal for Article 12 (b) (6) to dismiss all the plaintiffs' claims except for the breach of contract, arguing that the complaint did not meet the increased standard of filing required by Rule 9 (b) for those claims. The plaintiff countered that his complaint was sufficient.
From the plaintiff's Texas Insurance Code violations, the court questioned State Farm's comprehensive allegation that the plaintiff had failed to invoke all of his insurance code violations strictly required by Rule 9 (b). (Id at 5.) The court wrote that not all violations of the insurance code's insurance code involved allegations of fraud. In fact, the Court listed all subsections of section 541,060 so that they do not relate to fraud as follows:
541,060 (a) (1) misrepresentation to a plaintiff of an essential fact or policy provision relating to the current coverage;
541.060 (a) (2) (A) who does not in good faith seek to obtain a prompt, fair and equitable solution of:
(A) a statement, in respect of which the insurer's liability has become reasonably clear; or
(B) a claim under a part of an insurance in respect of which the insurer's liability has become reasonably clear to affect the applicant to settle another claim under another part of the cover unless payment under a part of the coverage constitutes proof of liability under another part;
541.060 (a) (3) fails to promptly provide a policyholder with a reasonable explanation of the basis of the policy, in relation to facts or applicable law, for the insurer's denial of a claim or offer of a compromise solution of a claim;
541.060 (a) (4) fails within a reasonable time to:
(A) confirm or deny coverage of a claim against a policyholder; or
(B) make a reservation of rights to a policyholder;
541.060 (a) (7) refuses to pay a claim without making a reasonable inquiry as to the claim.  In addition, the court found that none of the insurance code sections 542.055-058 which constituted late payment involved fraud and considered that in respect of these claims rule 8 for letter was applied.
However, the Court found that the plaintiff's Section 541,061 insurance code requirements for material misstatement of an insurance entailed allegations of fraud or error and that these claims required compliance with the stricter rule 9 (b) standard which the plaintiff had not complied with. The court found that the plaintiff did not provide the details of who, what, when, where and how the alleged misleading statements.
The trial court also found that, under Article 9 (b), the plaintiff had not relied on specific DTPA allegations involving fraud and error. As regards the plaintiff's breach of the duty of good faith and fair trade, the court held that the plaintiff's actual allegations of this allegation were not fraudulent. State Farm's movement to reject this claim was denied. The court also denied State Farm's request for dismissal regarding the plaintiff's claim for further damages for State Farm's deliberate and intentional conduct.
The court granted State Farm's claim in part and dismissed it in part and ordered the plaintiff to resume and file an amended complaint within 30 days.
Although this opinion does not contain any new law, I chose to present a review of this case as a "refresher" of important federal legal rules. The statement is well written and from a new federal judge in Texas. Most federal courts will allow an amendment at least once to correct deficiencies. But in federal court, it is always the best practice to get it right the first time to make a good first impression.