Phelps Secures Early Exit for Insurers Through Judgment Clarifying Absence of Coverage for Unnamed Storms

Phelps’ insurance team helped two specialty insurers enforce the terms of their policy for non-covered tornado damage and defeat breach of contract and Texas Insurance Code claims. The declaratory judgment and early dismissals Phelps achieved highlight the importance of clear coverage language and term definition in insurance policies.

An insured filed the claims after a tornado damaged its property in January 2023. The insurers argued that the policy only covered damage caused by "named storms" designated by the U.S. National Hurricane Center (NHC), and the tornado did not meet this definition. The insurers sought a declaratory judgment to confirm that the damage was not covered, while the insured filed counterclaims for breach of contract and violations of the Texas Insurance Code.

The Texas federal court sided with the insurers. The court held the policy’s clear definition of the conditions needed to meet a “named storm” designation was decisive for several reasons:

• Where ordinary meaning differed from the policy’s definition, the policy’s definition governed.
• The policy made it clear that the NHC must name a storm to trigger coverage. Terms coined by other groups, including local media, did not qualify the storm as a “named storm” under the policy language.
• The policy’s definition of a “named storm” was not illusory because it included storms named by the NHC and was applied consistently throughout the policy.

Phelps lawyers Paige Jones, Erin Doctor and William de los Santos secured the insurer wins, reinforcing court reliance on clear policy language and the standard of evidence needed to argue ambiguity.