Insurer seeks return of interest from business loss proceeds

David Yates Mar. 25, 2009, 6:50am

An insurance company that paid proceeds on a business interruption claim says the business went too far when it also asked for interest and now wants those interest payments back.

Fidelity and Guaranty Insurance will ask an appeals court to reverse a local judge's decision to award more than $100,000 in interest to Preventive Medicine of Southeast Texas. Oral arguments before the Texas Ninth District Court of Appeals will be heard at 9 a.m. April 2.

According to court records, Preventive Medicine, a small group of family practice physicians in Beaumont, sued Fidelity alleging the insurer failed to pay benefits for lost business income in the aftermath of Hurricane Rita.

Preventive sued Fidelity and Cravens Warrens & Co. on May 8, 2007. Cravens was non-suited on June 23, 2008.

Court documents show that after the suit was filed, Fidelity paid the medical practice its alleged lost income. After it received the payment, Preventive then amended its petition and asserted claims for penalty interest.

In June 2008, Jefferson County 60th District Judge Gary Sanderson granted Preventive's motion for summary judgment, awarding the company $85,256.84 in penalty interest and $17,571.84 in pre-judgment interest.

Fidelity filed for appeal in July.

Court documents show that Preventive was initially paid $428,605 for hurricane-related damages. The medical practice then asked for an additional $300,000 in interest. Fidelity fought the claim, calling it a request for "new money."

In a brief, Preventive argued it was "entitled to an award of 18 percent penalty and pre-judgment interest because it is undisputed that Fidelity refused to pay voluntarily � thereby breaching its contract."

Based on its appellant's brief, Fidelity will most likely argue to the justices that the award of interest is superfluous since the company has already compensated Preventive for all of its assumed losses.

Fidelity is represented in part by attorney Karen Spivey of the Pate & Spivey law firm.

Preventive is represented in part by attorney Jon Burmeister of the Moore Landry law firm.

Trial case No. B179-276
Appeals case No. 09-08-00316-CV

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