Burned building is legal flashpoint in Victoria County courts

April 22--The owners of a burned Victoria building want at least three times the amount of their initial claim after waiting more than two years for their insurance company to pay out.

"Some insurance companies are doing an excellent job taking care of the insured - and then you have some that are just dragging their feet," said Victoria attorney Bill Russel, who is representing property owners Wayne and Kelly Pozzi.

Citing a portion of the Texas Insurance Code that deals with unfair settlement practices, Russell said his clients are entitled to at least three times their $1.1 million claim because their insurance company, State Automobile Mutual Insurance, has not responded to their claim in good faith. But attorneys for State Auto contend in court documents that because the Pozzis failed to mention in their policy application the presence of explosives used by a business renting space in the building, the claim may not be valid.

"At the time that the application for insurance was made, (the Pozzis) knew that explosives were stored on the subject property," said State Auto's attorneys in court documents.

The attorney representing State Auto did not respond to requests for comment, and State Auto representatives could not be reached. The Pozzis also declined to comment.

Even as firefighters continued to battle the billowing flames at the two-story stone and metal building at 16108 Zac Lentz Parkway on the evening of Feb. 16, 2016, fire investigators got to work. Over the next few days, former Victoria County Fire Marshal Ron Pray and his assistants took dozens of photographs, interviewed witnesses and examined the building's charred remains.

In his investigation report, Pray traced the fire's cause to an employee of Excalibur Rentals, a business renting space in the Pozzis' building. Excalibur rented various equipment and machinery to those working in the oil and gas industry. As he worked with a cutting torch on a front-end loader, an Excalibur employee failed to notice a piece of heated metal that became lodged between a wall and a 10-foot tub for storing used machine oil.

When employees at Excalibur finally discovered what had happened, the flames - fueled by the oil - had turned into an unmanageable inferno. After the fire had cooled, fire investigators noted the flames were hot enough to warp metal paneling near the tub into twisted, ribbon-like shapes.

Although Russell said the Pozzis' insurance covered accidental fires, the real point of contention lies with a second business, P&S Perforators, which also rented space in the Pozzis' building. That business, called a wireline service among those in the industry, used explosive devices to open buried oil and gas reserves in the bottoms of wells. Those explosives were never mentioned in the Pozzis' insurance claim, making the agreement invalid, the insurance company's attorneys said in court documents.

Mark Hannah, spokesman for the Insurance Council of Texas, agreed that lying or failing to mention such a risk could create problems for policyholders.

At the very least, State Auto attorneys should be allowed the necessary time to investigate the validity of the claim and agreement, Hannah said. Once such disputes enter the legal system, he said, determining the details of what happened can take time - often a lot of time.

"Once it gets into a lawsuit, the months just start clicking by," Hannah said.

But Russell said State Auto has wasted the two years since the fire and only recently begun their investigation.

And although P&S may have used explosives in the course of doing business, the devices were safely stored and posed no risk of detonating - even as flames swept over their protective bunkers, Russell said.

In an affidavit, Pray supported the Pozzis' case with a creative analogy.

"If Mr. Pozzi stored milk in the building and chocolate somewhere else in the building and then Mr. Pozzi took the milk and the chocolate to a school and ... mixed the milk and chocolate for the children, the children would ultimately get chocolate milk," he said in the affidavit. "But it would not be chocolate milk until you mixed it together at the school, and there is never chocolate milk back in Mr. Pozzi's warehouse."

Like the theoretical chocolate milk, the explosives used by P&S were only at risk of detonating after their three separate parts - detonators, charges and primer cords - were combined and shocked with a jolt of electricity.

"The building both on the day of the fire, and throughout its entire operation and history, was never exposed to explosives as a result of the various items that were stored in the three separate bunkers," Pray said in his affidavit. Those components were found safely destroyed in their bunkers by the fire's immense heat during his investigation.

With trial set for May 21 as of Sunday, Russell said he hopes a jury will rule that State Auto not only has no grounds for refusing the Pozzis' claim. He said he also hopes jurors will find State Auto unfairly delayed payment of the claim. According to the Texas Insurance Code, State Auto could be required to pay an additional 18 percent of the original claim for every year they delayed. That amount would be added to the tripled payment that would result from a jury finding the insurance company acted in bad faith.

But, however the case may appear to the public, Hannah said insurance companies understand that working in bad faith is ultimately not profitable.

"There are two sides of the story, and you don't often hear the insurance side of the story," he said.

But Russell disagreed.

"The only way you can stop insurance companies from cheating their insured is you penalize them when they don't do what they should," Russell said.

Jon Wilcox reports on courts for the Victoria Advocate. He may be reached jwilcox@vicad.com or 361-580-6515.

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