Bad Faith Claim – Attorney Fees

Insurance lawyers are frequently asked, “Can you make the insurance company pay my attorney fees?”

Here is a case from the Southern District of Texas, Houston Division.  The case is styled, Shane and Shannon Richardson v. Liberty Insurance Co.

Most case, over 98%, get resolved short of a trial.  Some cases get dismissed for legal reasons soon after the lawsuit is filed or at the Motion for Summary Judgment stage of the case.  The others reach a settlement.  When a case is settled, the insurance company really doesn’t care how the settlement money is applied.  They are going to pay a certain sum of money and how that money gets distributed, i.e., actual damages, exemplary damages, interest, court costs, or attorney fees is not really important to them.

However, when on that rare occasion that a case goes to trial, the damages are broken down and divided among the various possible damages incurred.  The case discussed here goes like this:

It is a dispute between the Richardson’s and their insurer, Liberty, over a wind and hail damage claim.  The Richardson’s demanded policy benefits and Liberty denied the benefits.  The Richardson’s sued for Liberty’s failure to comply with the
insurance policy, failed to comply with the duty of good faith and fair dealing, and made misrepresentations about the extent of the covered damage.

The jury found that Liberty did not breach the insurance policy or fail to comply with its duty of good faith and fair dealing in its handling of the claim.  The
jury awarded no damages for breach of contract or breach of the duty of good faith and fair dealing.  The jury did find that Liberty engaged in “false, misleading and deceptive acts or practices in the business of insurance in this case” and “misrepresent[ed] to the Richardsons the scope or cause of the damage from wind or hail,” in violation of the Texas Insurance Code, Section 541 et seq The jury awarded no actual damages, but, based on its finding that Liberty’s violation of the Insurance Code was “knowing,” the jury awarded the Richardsons $7,082.54 in “additional” damages.

Based on the verdict, Liberty moved for entry of a take-nothing verdict.  Liberty argues that the jury’s answer to Question No. 5, finding no breach of contract,
bars the Richardsons’ extra-contractual claim for costs and fees.  The
Richardsons moved for entry of judgment awarding them the $7,082.54 in damages, pre- and post-judgment interest, treble costs of court, and attorney’s fees.

Liberty argues that the recovery the Richardsons seek under the Texas Insurance Code is barred as a matter of law because the jury found no breach of contract.  The Richardsons argue that they are due the “additional” damages because Liberty did not object to the jury charge before the verdict.

Under Texas law, “an insured cannot recover any damages based on an insurer’s statutory violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits.’”  This discussed in USAA Tex. Lloyds Co. v. Menchaca, a Texas Supreme Court case.  An Insurance Code violation alone is not an “independent injury”; a finding of liability under the insurance policy is a prerequisite to recovery on Insurance Code claims.  Because the jury found that Liberty did not breach the policy, and because there is no
showing of an injury independent of a right to receive policy benefits, the Richardsons may not recover, as a matter of law.

Under Texas law, an award of attorney’s fees is also premised on an award of underlying actual damages.  The jury awarded no actual damages. The Richardsons are not entitled to an award of attorney’s fees.

The Richardson’s recovered nothing.


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