Bad Faith Insurance – Reasonable Investigation

Texas Insurance Code, Section 541.060(a)(7) requires an insurance carrier to conduct a reasonable investigation when refusing to pay a claim.

The Texas Supreme Court 2009, opinion styled, Tex. Mut. Ins. Co. v. Morris, found there was sufficient evidence to support finding the insurance carrier refused to pay a claim without conducting a reasonable investigation.

The jury had before it proof that medical and non-medical personnel for the carrier initially authorized a surgery; that the carrier’s adjuster disputed coverage the same day she first reviewed the file, ignored accepted methods of investigating a claim, may or may not have spoken briefly with the claimant’s former employer, never spoke with the two people who would know the most about the initial injury and/or the current state of the claimant’s spine, and did not speak with any other treating physician before deciding to dispute the claim – that the carrier complained that it had trouble getting claimant’s medical records, yet claimant’s attorneys faxed his records to the carrier on more than one occasion, claimant’s wife signed a release for claimant’s medical records, and claimant himself signed a release for his medical records – twice the carrier sent medical records to its medical expert claiming that those were all the records when, in fact, one key page detailing multiple visits to claimant’s chiropractor was left out of the file, that the page left out of the records sent to the carrier’s medical expert showed that the claimant saw his chiropractor between the injury in 2000 and the surgery in 2003 – the carrier’s medical expert informed the carrier that he would give claimant the benefit of the doubt if claimant’s records supported ongoing trouble with his back and if he had back trouble prior to 2000.  The carrier neither did not know its files well enough to know that it had a page of treatment notes from the claimant’s chiropractor showing the visits between 2001 and 2–3, or it chose not to give the sheet to its medical expert.

Reasonable jurors could have concluded from this evidence that Texas Mutual failed to reasonable investigate the claim and that, after failing to attempt in good faith to settle the claim when its liability had become reasonably clear, the carrier intentionally undertook a pretextual investigation designed to support its denial of the claim.

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