Bad Faith Claim

Grand Prairie insurance lawyers need to be aware of the opinions issued by the appeals courts dealing with bad faith issues. The Dallas Court of Appeals issued an opinion on June 30, 2015, that discusses bad faith in insurance cases. The style of the opinion is, Bruce E. Bernstien v Safeco Insurance Company of Illinois.
This is Berstine’s appeal of a summary judgement in favor of Safeco.
Bernstien had an automobile insurance policy from Safeco to provide insurance coverage for his Porsche. The Porsche was damaged in an accident, and Bernstien notified Safeco. Safeco acknowledged the Porsche was covered by the insurance policy, but disagreed with Bernstien about the amount of money Safeco should pay Bernstien for the Porsche. The dispute was submitted to an appraiser, who concluded the value of the Porsche was $4,900 plus tax, title, and license. Nine days after the date of the appraisal award, Safeco sent a letter to Bernstien enclosing a check for $5,287.05. The letter stated Safeco was not applying Bernstien’s $1,000 deductible nor deducting money for the salvage value of the car.
Bernstien sued Safeco for breach of contract, bad faith, violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act (DTPA), and fraud. Safeco filed two traditional motions for summary judgment on Bernstien’s claims. In one, Safeco argued Bernstien’s extra-contractual claims failed because Safeco did not breach the contract.
Bernstien raised claims alleging Safeco acted in bad faith, violated chapter 541 of the insurance code, and violated the DTPA. In most circumstances, an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract. There are two exceptions to this rule: (1) the insurer’s failure to timely investigate the insured’s claim; or (2) the insurer’s commission of some act, so extreme, that would cause injury independent of the policy claim. Neither exception applies here. Because Safeco secured a final judgment in its favor on Bernstien’s breach of contract claim–a judgment Bernstien does not challenge on appeal–Bernstien is precluded from prevailing on his bad faith claim.
The common-law bad faith standard for breach of the duty of good faith and fair dealing is imputed to statutory liability under chapter 541 of the Texas Insurance Code and the DTPA. Hence, when an insured joins claims under the Texas Insurance Code and the DTPA with a bad faith claim, all asserting a wrongful denial of policy benefits, if there is no merit to the bad faith claim, there can be no liability on either of the statutory claims. Thus, a plaintiff also cannot maintain an action for violation of chapter 541 of the insurance code or the DTPA where the plaintiff’s claim for breach of contract fails and neither exception applies.
Having established Bernstien did not appeal the adverse judgment on his breach of contract claim and his claim for bad faith fails, the court also concluded his statutory claims under the Texas Insurance Code and the DTPA must fail for the same reasons.