• Atlanta
• Boston
• Dallas
• Ft. Lauderdale
• London
• Minneapolis
• New York
• Oakland
• Philadelphia
• Washington, DC

by Zachary Fechter

Before an insured can sue an insurer based on a claim for wind and hail damage to property, Texas Insurance Code § 542A requires the insured to send the insurer a presuit demand letter at least 61 days before filing suit, or else the case can be automatically abated. The Northern District of Texas, Amarillo Division recently reiterated this requirement in Lotus Sky LLC v. Lexington Ins. Co., No. 2:24-cv-00085-Z-BR, 2024 WL 3906768, at *1 (N.D. Tex. Aug. 22, 2024, no pet.) (mem. op.).

In this case, Lexington Insurance Company (“Lexington”) participated in a market program providing excess property insurance. Lotus Sky LLC d/b/a OYO Hotel (“Lotus Sky”), an additional insured on the policy, submitted a claim to Lexington and other excess market insurers for damage caused to its property by windstorm and hail. After Lexington denied the claim, Lotus Sky sent a presuit demand letter pursuant to Texas Insurance Code § 542A, which applies to claims for property damage caused by wind and hail. But Lotus Sky only sent a presuit demand letter to other market insurers, not Lexington. Nonetheless, Lotus Sky sued Lexington for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code and Texas Business and Commercial Code. Lexington then filed a Verified Plea in Abatement and a Plea Invoking Texas Insurance Code § 542A.007(d), arguing the case was automatically abated by statute because Lotus Sky failed to give it proper presuit notice.

In analyzing Lexington’s motion, the court noted that, when an insured does not give proper presuit notice under § 542A, an insurer may file a plea in abatement within 30 days of filing its answer. Tex. Ins. Code § 542A.005. The court further noted that a case may be abated automatically “and without court order if the [insurer] [1] verifies the plea in abatement,” [2] alleges failure to comply with § 542A.003, “and [3] the [insured] does not controvert the verified plea [by filing an affidavit] before the 11th day after the plea in abatement is filed.” Lotus Sky, 2024 WL 3906768, at *2 citing Rodriguez v. Metropolitan Lloyds Ins. Co., No. 5:15-CV-143-C, 2015 WL 12699855, at *4 (N.D. Tex. July 27, 2015, no pet.).

In its Motion to Abate, Lexington alleged Lotus Sky’s presuit notice to a different market insurer was insufficient as to Lexington, and the court agreed. Lotus Sky, 2024 WL 3906768, at *2. The court found Lotus Sky failed “to dispute or oppose by reasoning” that it did not send proper presuit notice. Id. at n.4. The court therefore held that the case automatically abated eleven days after Lexington filed its verified plea and would remain in abatement for 60 days from the date Lotus Sky provides presuit notice. Id. at *3.

The Lowdown: Lotus Sky is a good reminder that an individual insurer – even if a participant in a larger market – is entitled to receive a presuit demand letter before an insured files suit. And when an insured does not send a presuit demand letter as required by § 542A, insurers should file a verified plea in abatement within 30 days of filing their answers so the case can be automatically abated. 

______________________________________

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.