Jury Verdict Punishing Insurer for Theft by Contractor Hired by Insured Uninforceable

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MLLCA, Inc. hired a contractor named Frank Walley to repair its gas station after a hail storm. Walley stole several thousand dollars of the insurance proceeds meant for repairs, and MLLCA’s insurer, Argonaut refused to issue any further payments under the policy. MLLCA went on to obtain a money judgment against Argonaut for its supposed role in enabling the theft and for wrongfully denying policy benefits. In Argonaut Great Central Insurance Company v. MLLCA, Inc., Court of Appeals Texas (May 13, 2021)

ZALMA OPINION

MLLCA was damaged by its chosen contractor’s theft of the money it received from Argonaut that it voluntarily handed over to the thief. Since they couldn’t find Wally they sued their insurer and convinced a jury that the insurer should pay for the losses incurred as a result of MLLCA’s own error in signing over its ACV payment to a thief rather than controlling its expenditures. The jury erred and the court of appeal reversed the unwarranted decision to punish the insurer for the insured’s error.