A legal battle is brewing in Texas over an alleged “secret insurance payout” to the family of one of the victims killed in a tractor-trailer crash in December.
Truck driver Juan Manuel Carrera, 36, of Pharr, Texas, who drove for Josiah’s Trucking out of Edinburg, Texas, was traveling north on FM 493 near Edinburg on Dec. 19 when investigators say he lost control of his rig while navigating a curve and jackknifed. His trailer, which crossed over into the southbound lane, struck the vehicle driven by Anna Isabel Ortiz, 23, of Weslaco, Texas, and her passenger, Carlos Alberto Tellez Jr., 22, of Donna, Texas. Both later died of their injuries.
In its report, the Texas Department of Public Safety (DPS) stated that Carrera was traveling “at an unsafe speed due to roadway conditions” because it was dark and raining at the time of the crash.
At the center of the case is North Carolina-based Brooklyn Specialty Insurance Co., which insured Josiah’s Trucking for $750,000 — the minimum liability amount required by the Federal Motor Carrier Safety Administration (FMCSA), which regulates the trucking industry.
According to the FMCSA’s website, Josiah’s Trucking now has a new liability insurance policy with Progressive County Mutual, which was effective Jan. 21.
One attorney who is representing Tellez’s family alleges Brooklyn Specialty cut a “secret deal” with Ortiz’s mother, Ana Gomez, to pay her the full policy amount less than 24 hours after the crash, knowing the small carrier was insolvent, in an attempt to “wash their hands” of any further responsibility, including potential involvement in the carrier’s bankruptcy case.
The news that the insurance company had “exhausted its policy limit” triggered Texas attorney Shelby Jordan of Jordan, Holzer & Ortiz, to force involuntary Chapter 7 bankruptcy proceedings against Josiah’s Trucking and its owner, David Vasquez of Edinburg. Jordan’s firm, representing the Tellez family, also file an emergency motion to appoint an interim trustee, which U.S. Bankruptcy Judge Eduardo V. Rodriguez approved in an effort to “trap the funds wherever they might be,” Jordan said.
“The insurance company arranged it so that without investigations or inspections of the tractor or anything, they paid one person the policy limits and they claim to have washed their hands of the policy and have no further responsibility,” he told FreightWaves.
However, Jason Powers of Lewis Brisbois Bisgaard & Smith, representing Josiah’s Trucking’s insurance carrier, Brooklyn Specialty, disagrees.
“There was no secret deal,” Powers told FreightWaves. “Brooklyn Specialty paid the policy limit to the only demanding party and in accordance with Texas law.
Powers said he views this case “as a possibility for trucking companies to be pulled involuntarily into bankruptcy in catastrophic accidents.”
A hearing is set for Thursday in the U.S. Bankruptcy Court for the Southern District of Texas. Vasquez’s attorney, Antonio Villeda, filed an amended motion on Tuesday, seeking to revert the involuntary Chapter 7 bankruptcy petition into a Chapter 11 in an attempt to reorganize.
Villeda declined FreightWaves’ request to comment on the case until after the hearing.
Interim trustee seeks to recover funds paid to Ortiz family, attorneys
Interim trustee Catherine Stone Curtis, who was appointed to oversee the bankruptcy case in February, is seeking to recover funds “totaling $1 million” from Brooklyn Specialty that were allegedly transferred to Ortiz’s parents, Ana Gomez and Reyes Adrian Ortiz, and the family’s attorneys, Rogelio Solis and Daniel Sorrells, on or around Jan. 12.
However, Jordan claims Anna Ortiz’s dad, Reyes Adrian Ortiz, was not included in the financial settlement with Brooklyn Specialty.
After the crash, both families hired attorneys to “begin the claims process.”
According to court filings filed by Curtis, the Ortiz family filed a Stowers demand letter with Brooklyn Specialty less than 24 hours after the crash but claims Tellez’s family was unaware of the move.
A Stowers demand, unique to Texas, is used by plaintiff’s attorneys to negotiate with insurance companies to either pay their policy limit to settle a claim or risk a possible jury verdict that may exceed the policy’s coverage amount, Jordan said.
As of press time, Solis and Sorrells had not returned FreightWaves’ request for comment about the case.
Settlement triggers involuntary Chapter 7 petition
The news that Brooklyn Specialty had settled with the Ortiz family involved in the fatal crash triggered attorneys for the Tellez’s family to file an involuntary Chapter 7 bankruptcy petition on Jan. 24.
Jordan claims Brooklyn Specialty “faked their position that they were allowing inspections of the truck because it was going to be repaired” because the deal with the mother of Anna Ortiz was being finalized.
“All they were doing was delaying my clients, who believed that the insurance company was going to work toward a common settlement of the group,” he said.
Jordan said Josiah’s Trucking and its owner weren’t the real targets in the bankruptcy petition — its insurance company, Brooklyn Specialty, was — in an attempt to trap the funds potentially paid to one of the victim’s families.
“Our target was to marshall all of the money and get it back — that’s the first $1 million — and then to find out what the law is now,” Jordan said. “What is the law when an insurance company deliberately exhausts a policy, knowing insolvency and prevents anyone else from getting paid and then claims to have no further responsibility for attorneys’ fees or for prevailing issues with the insured.”
OGA Charters, insurance precedence
Jordan compares Josiah’s Trucking case with a similar one he appealed before the U.S. Court of Appeals for the 5th Circuit and won, which ruled that insurance proceeds can, in “limited circumstances,” be considered the property of a bankruptcy estate.
He’s referring to the decision in the fatal bus crash involving a driver for OGA Charters LLC that the National Transportation Safety Board found to have an “acute sleep deficit.” Investigators claim the driver left the road and overcorrected while driving a bus of people to the Kickapoo Lucky Eagle Casino Hotel outside Eagle Pass, Texas, resulting in the death of nine people and injuring nearly 40 others in 2016.
The appeals court rejected the bus company’s insurance deal with 14 victims and survivors of the crash because of its $5 million liability policy. Instead, the panel found that the money should be distributed to all 65 crash victims and their families.
“The 5th Circuit ruled that if the insolvency of the debtor and the obvious exhaustion of the insurance policy, which most of the time is a result of a mass injury incident, the proceeds now will become property of the estate and the relationship of the insured and the insurance company has changed,” Jordan said.
Tellez’s family files wrongful death suit
Unaware that Josiah’s Trucking’s insurance carrier, Brooklyn Specialty, had allegedly struck a deal with Anna Ortiz’s family to pay the entire policy amount, the attorney for Carlos Tellez Jr.’s family filed a wrongful death lawsuit in Hidalgo County, Texas, District Court on Jan. 4.
Tellez died on Dec. 27, eight days after the truck crash.
His parents, Carlos Tellez and Sonia Tellez, along with his wife, Rose Mary Rodriguez, and their daughter, claim that Carrera was negligent because he failed to drive at a safe speed and failed to safely negotiate a curved roadway given the weather conditions.
Because Carrera drove for Vasquez and Josiah’s Trucking, the lawsuit alleges the carrier is vicariously liable for his actions.
Tellez’s family named Josiah’s Trucking, Vasquez and Carrera in the suit, which seeks a jury trial and damages of over $1 million.
Two days after Tellez’s family filed its civil lawsuit, the driver, Anna Ortiz, died on Jan. 6.
The insurance company notified the family’s attorney, Luis Cardenas of Escobedo & Cardenas, on Jan. 12 that it agreed to the law firm’s request to inspect the tractor and trailer on a certain date, but that it opposed the removal of “any of the control modules.”
The email also stated that the “policy limits under Josiah’s Trucking LLC have been exhausted” and to “please advise if the inspection will go forward,” according to court documents.
Court filings state that Rick Shaw, president of Brooklyn Specialty Insurance Co. Risk Retention Group, sent Cardenas a notice of intent to repair the vehicle on Jan. 7, as well as an offer to allow Cardenas’ team to inspect the vehicle before fixing the 2015 Kenworth.
Cardenas’ firm sent a letter to Josiah’s Trucking’s insurance company, Brooklyn Speciality, on Dec. 29, seeking to have the tractor-trailer driven by Carrera inspected. Cardenas also requested Carrera’s logbooks dating back two years and all data relating to the truck’s electronic logging device, truck inspection records and company policies and guidelines.
Jordan claims Brooklyn Specialty “faked their position that they were allowing inspections of the truck because it was going to be repaired” because the deal with the mother of Anna Ortiz was being finalized.
“All they were doing was delaying my clients, who believed that the insurance company was going to work toward a common settlement of the group,” he said.
What happens next?
The mother of the victim, Gomez, could be forced to give the money back under the preference of fraudulent transfer rules, Jordan said.
“The first fight is to get the money back from the mother and the lawyers, but we have no clue what’s she done with it,” Jordan said. “That would be the standard preference — she doesn’t lose her claim — she shares either equally or in some fashion with everybody else. If the money’s gone, then you get a judgment against her for the money.”
The real battle is with the insurance company, he said.
“We do have a common enemy and it’s not Vasquez’s truck and trailer — it’s the insurance company,” Jordan said.
Click for more FreightWaves articles by Clarissa Hawes.
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