Insurance Denial – Potential Recovery

Being able to discuss the potential recovery when an insurance company wrongfully denies a claim is a topic any Dallas or Fort Worth insurance lawyer needs to be able to discuss with a client.

Policy benefits are the basic recovery allowed for an insurer’s breach of its contractual obligations.  An insurer’s refusal to pay the insured’s claim causes damages at least in the amount of the policy benefits wrongfully withheld, according to the 1988, Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Company.  The same Court in a 1996, opinion said that breach of contract allows recovery of benefit of the bargain damages, according to the case styled, Transportation Insurance Company v. Moriel.

In addition, an insured should be able to recover consequential damages that are the foreseeable result of the insurer’s breach of contract.  Numerous cases hold that insurance policies are subject to the same rules as other contracts.  This is exemplified in Hernandez v. Gulf Group Lloyds, a 1994 opinion.  It says one of the best established rules is that:

Where two parties have made a contract which one of them has broken, the damages the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally; i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach.

The Court in the 1981 opinion, Mead v. Johnson Group, Inc., stated, “in an action for breach of contract, actual damages may be recovered when loss is the natural, probable, and foreseeable consequence of the defendant’s conduct.”

A successful claimant may recover attorney’s fees for the insurer’s breach of contract according to Texas Civil Practice & Remedies Code, Section 38.001.

Punitive damages are not recoverable solely for breach of contract, there must be more, i.e., bad faith.