Holding Insurance Company Liable For Bad Faith

What if a resident of Grand Prairie is involved in a wreck on his motorcycle with an uninsured driver? Any difference if he is a resident of Fort Worth, Arlington, or Dallas? Answer – not for anyone in Texas.
This is what happened in the 1987 case, Glen Arnold v. National County Mutual Fire Insurance Company. This Texas Supreme Court case is an insurance contract dispute. Arnold was severly injured when the motocycle he was operating was struck by an uninsured motorist. Arnold had uninsured motorist benefits protection on the policy he had with National County Mutual Fire Insurance Company (National). Arnold made a demand for payment and the independent adjusting firm hired by National recommended the claim be paid. In spite of this, National refused to pay.
Arnold sued and won a judgment exceeding the policy limits then sued National for breaching its duty of good faith and fair dealing.
National had refused to initially pay benefits because they believed that potential jurors would be prejudiced against Arnold because he was a “motorcyclist.”
In this case, Arnold raised the issue of whether there is a duty on the part of insurers to deal fairly and in good faith with their insureds. The court held that such a duty of good faith and fair dealing did exist. The court stated, “While this court has declined to impose an implied covenant of good faith and fair dealing in every contract, we have recognized that a duty of good faith and fair dealing may arise as a result of a special relationship between the parties governed by a contract.” This was stated in the 1984, Texas Supreme Court case, Manges v. Guerra.
The court further stated, “In the insurance context a special relationship arises out of the parties’ unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds’ misfortunes in bargaining for settlement or resolution of claims. In addition, without such a cause of action insurers can arbitrarily deny coverage and delay payment of a claim with no more penalty than interest on the amount owed. An insurance company has exclusive control over the evaluation, processing, and denial of claims. For these reasons a duty is imposed that an indemnity company is held to that degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business.” This in part cites the famous Stowers case.
An expereinced Insurance Law Attorney is going to be familiar with this case and others like it. In this regard, he is in position to give advice on the facts he may be presented with by clients having difficulties with their insurance company.