Bad Faith Insurance – Multiple Inspections

There are many actions or inactions an insurance can be accused of that may amount to bad faith.  One of those is discussed in a 2021 opinion from the Northern District of Texas, Sherman Division.  The opinion is styled, Deanne M. Hinson v. State Farm Lloyds.

A Magistrate Judge was assigned to hear a Motion for Summary Judgment on the case.  The Magistrate Judge ruled in favor of State Farm and Hinson appealed that ruling to the sitting Judge.  The sitting Judge affirmed the finding of the Magistrate.

This is a hail damage claim that was originally filed in State Court and then removed to Federal Court.  The Magistrate ruled in favor of State Farm on all of Hinson’s causes of action.  Hinson is appealing the decision as to one cause of action only.

Texas Insurance Code, Section 541.060(a), imposes procedural requirements that govern the manner in which insurers review and resolve an insured’s claim for policy benefits.  The Code grants insureds a private action against insurers that engage in certain discriminatory, unfair, deceptive, or bad-faith practices, and it permits insureds to recover “actual damages . . . caused by” those practices, court costs, and attorney’s fees, plus treble damages if the insurer “knowingly” commits the prohibited act.  This can be found in Sections 541.151 and 541.152.

Hinson has objected to the Magistrate Report as to only one claim, specifically her allegation that State Farm violated Section 541.060(a)(7) of the Texas Insurance Code, which provides that it is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to refuse to pay a claim without conducting a reasonable investigation with respect to the claim.

In 2012, Hinson’s Property was impacted by a hailstorm that caused damage to the exterior of the home, which was covered in part by the Policy.  Later, on March 10, 2019, Hinson made another insurance claim, asserting that her home had been subject to another wind/hail event on June 6, 2018.   State Farm contacted Hinson and scheduled to have an adjuster visit the home for an inspection on March 19, 2019.  Ultimately, State Farm conducted three inspections of the Property, one of which was performed by an independent engineer.

Each inspection concluded with a finding that the damage to Hinson’s roof (and the shingles thereon) was not caused by hail but rather resulted from a manufacturing defect in the hail-impact-resistant shingles that were installed in 2013 after the earlier 2012 storm and insurance claim.  State Farm estimated that to repair or replace the property damaged by hail—including attic vent covers, turbine roof vents, a flue cap, and chimney flashing—would cost $2,785.76, which fell below Hinson’s $3,404.00 deductible.  Hinson contends, contrary to the inspection findings, that the damage to her roof was caused by hail (a covered loss), not a manufacturing defect.

The Court concludes that the Magistrate Judge properly determined that the summary judgment was warranted on Hinson’s claim for failure to conduct a reasonable investigation.  Hinson does not contest that State Farm had three separate inspections of the Property conducted, and it is well established that conducting multiple inspections of an insured’s property demonstrates that the insurer’s investigation was not performed unreasonably or in bad faith.  Indeed, an insurance company’s decision to consult with additional experts before making a final coverage decision speaks to the thoroughness of its investigation.  Here, State Farm had three separate inspections of the Property completed, one of which was performed by Frank Griffin—a senior project engineer (about whom Hinson does not complain in her Objection)—and each of which reached the same conclusion.

For these reasons, the Magistrate Judge correctly concluded that summary judgment is appropriate as to Hinson’s claim that State Farm violated Section 541.060(a)(7) of the Texas Insurance Code.

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