Texas Insurance – Actual Damages – Policy Benefits

For the Grand Prairie resident or the resident in Arlington, Weatherford, Fort Worth, or Dallas, the concern is – What do I get paid if the insurance company does me wrong.
There are several types of damages to be recovered, depending on the wrong committed by the insurance company. This article will deal with “actual damages” and the recovery of policy benefits.
It makes sense that the most common actual damages are the policy benefits themselves. As a matter of law, at least in certain cases, the amount of policy benefits wrongfully withheld is an element of damages caused by the insurance companies wrongful conduct in the matter. This was stated in the Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Co. This was a 1988 court decision where the Court rejected Texas Farm Bureau’s arguement that damages for an unfair settlement practice had to be something more than the amounts due under the policy. The Supreme Court said that damages for a wrongful refusal to pay are at least equal to the policy benefits, as a matter of law. The Court in its reasoning stated:
The fact that the Vails have a breach of contract action against Texas Farm does not preclude a cause of action under the DTPA and Article 21.21 of the Insurance Code. Both the DTPA and the Insurance Code provide that the statutory remedies are cumulative of other remedies … It is well settled that persons without insurance are allowed to recover based on false representations of coverage, … and that an insurer may be liable for damages to the insured for its refusal or failure to settle third-party claims … It would be incongruous to bar an insured who has paid premiums and is entitled to protection under the policy from recovering damages when the insurer wrongfully refuses to pay a valid claim. Such a result would be in contravention of the remedial purposes of the DTPA and the Insurance Code.
One thing to be aware of here is that Courts construing this language from Vail have concluded that policy benefits are not always damages as a matter of law. This highlights a point that anyone finding themselves in the position of having policy benefits or coverages denied should seek the advice of an experienced Insurance Law Attorney.
In another Texas Supreme Court case, decided in 1995, Twin City Fire Insurance Company, v. Davis, the court held that policy benefits could not serve as independent tort damages resulting from the insurance company’s breach of its duty of good faith and fair dealing, which were necessary to support exemplary or punitive damages. Other cases have concluded that policy benefits are not necessary damages as a matter of law. This can be seen in several cases. One example is Seneca Resources Corp. v. Marsh & McLennan, Inc., a 1995, Houston 1st District Court of Appeals case. Another case is a 1993, Austin Court of Appeals case, Beaston v. State Farm Life Insurance Company. For an attorney, the advise is, when in doubt, the best approach is to plead, prove, and get a jury finding on policy benefits as damages.