Negligent Claims Handling

This may come as a surprise to many but here goes, — There is no such thing as “negligent claims handling” recognized by Texas courts.

This is re-stated by the U.S. District Court, Western District, Austin Division, in the case styled, Thomas G. Kezar and Sylvia Kezar v. State Farm Lloyds.

The Kezars home was damaged in a fire and they made a claim with their insurer, State Farm.  A lawsuit was eventually filed as a result of the claim.

The Kezars allege that State Farm provided them with an inadequate claims estimate; that State Farm failed to timely address damaged temporary roof coverings, causing more damage; and that State Farm delayed in responding t settlement communications.  The causes of action are for fraud, negligence, breach of contract, breach of duty of good faith and fair dealing, and unfair settlement practices.  There were further arguments about the appraisal process.  This a partial motion for summary judgement ruling in favor of State Farm.

State Farm had timely paid the appraisal award and thus, the Kezars were estopped by the appraisal award from maintaining a breach of contract cause of action against State Farm.

In the Kezars negligence claim, they allege State Farm breached its duty to “undertake a good faith effort to effectuate a prompt, fair, and equitable settlement of a claim when State Farm’s liability has become reasonably clear.”  State Farm points out that Texas law does not recognize a cause of action for negligent claim handling.  The Court agreed.  The United States Fifth Circuit stated in 1997, “Texas law does not recognize a cause of action for negligent claims handling.”  Thus, summary judgment is appropriate on this cause of action.

Other causes of action were discussed but the relevant point in this case is the re-stating that Texas does not recognize a cause of action for negligent claim handling.  It is important to realize however, that the Texas Insurance Code does a good job of allowing other causes of action that are as good, if not better, for pursuing an insurer who does not treat one of its insureds properly.