Bad Faith And Homeowners Insurance

There are homeowners in Grand Prairie, Arlington, Mansfield, Weatherford, Aledo, Fort Worth, and everywhere else in Texas. 95% of those homeowners have insurance. So how do you know if your insurance company is violating the “bad faith” laws in Texas?
Here is a 1997, Texas Supreme Court case to read to give some insight into the above question. The case is, State Farm Lloyd’s v. Ioan and Liana Nicolau.
In the insurance claim giving rise to this dispute, the Nicolau sought coverage for extensive foundation damage to their home. The homeowners policy, issued by State Farm Lloyds, (State Farm) generally excludes losses caused by “inherent vice,” or by “settling, cracking, bulging, shrinkage, or expansion of foundations.” Under an express exception, however, these exclusions do not apply to losses caused by an “accidental discharge, leakage or overflow of water” from within a plumbing system.
The Nicolau suspected damages for an extended period of time and had it investigated before turning to State Farm. They hired a foundation repair contractor and a structural engineer with Maverick Engineering. After much time went by and numerous tests, they finally concluded the problem was the result of a substantial leak in the plumbing system.
State Farm, hired an adjuster with ABJ Adjusters, Inc., who submitted two reports expressing doubt about the foundation problem being the result of the plumbing leak. State Farm then hired Haag Engineering Company who did a report concluding that the leak was not causing the foundation problems. Based on this report State Farm denied the claim made by Nicolau.
The Nicolau then hired Trinity Engineering Testing Corporation (Tetco) who filed a professional and detailed report stating the foundation problem was the result of the leak and detailing why that conclusion was reached.
The Nicolau then sued State Farm, asserting breach of contract and several extracontractual claims based on State Farm’s conduct. The jury found for the Nicolau and State Farm filed this appeal.
At the trial of this matter, evidence was introduced that Haag worked almost exclusively for State Farm. That they always found in favor of State Farm in ways to exclude coverage on the policy. That in the two cases where they had made finding against State Farm that the employees responsible for the findings were terminated.
In ruling in favor of the Nicolau the jury also assessed punative damages against State Farm. The Texas Supreme Court took away some of these punative damages but remanded the case to the trial court for findings of damages under the Texas Deceptive Trade Practices Act.
The relevance of this case is seeing how the appeals court looks at these bad faith cases to determine whether or not the insurance company has actually acted in “bad faith.” An experienced Insurance Law Attorney is very helpful in understanding how the courts in Texas look at these cases. He can advise as to the best course of action to get a remedy for the wrongs that are committed.

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