Bad Faith Insurance – Trebling Of Damages

Insurance lawyers know that if a jury is convinced of the wrong an insurance company has committed that there is a chance to recover a trebling of the actual damages in the case.  So how does that work?  This is discussed in a 2019, opinion from the Texas First Court of Appeals.  The opinion is styled, Certain Underwriters At Lloyd’s, London, Syndicate Numbers 2020, 1084, 2001, 457, 510, 2791, 2987, 3000, 1221, 5000 And Navigators Insurance Company UK v. Prime Natural Resources, Inc.

The facts of this case can be read by reading the opinion.  The case was tried to a jury and the jury found in favor of Prime.  The jury also awarded treble damages based on the conduct of the insurance companies.  The focus here is on how the Court dealt with the issue of treble damages.

As a result, Underwriters argues that even if Prime were entitled to recover additional Policy benefits, it is not entitled to additional damages under Chapter 541 of the Insurance Code.

Pursuant to the Insurance Code, Section 541.152(b), when an insurer’s violations of Chapter 541 cause the denial of benefits, an insured may recover additional damages of up to three times the amount of actual damages when the complained-of act or acts were done knowingly.  Thus, the award of statutory treble damages requires more than just a wrongful denial of policy benefits—it requires that the violations were committed knowingly.

As stated in Section 541.002(1), the Insurance Code defines “knowingly”as “actual awareness of the falsity, unfairness, or deceptiveness of the act or practice on which a claim for damages under Subchapter D is based.”  “Actual awareness may be inferred if objective manifestations indicate that a person acted with actual awareness.”  The Texas Supreme Court has described the type of awareness that will establish this type of “knowing”conduct:

“Actual awareness” does not mean merely that a person knows what he is doing; rather, it means that a person knows that what he is doing is false, deceptive, or unfair. In other words, a person must think to himself at some point, Yes, I know this is false, deceptive,or unfair to him, but I’m going to do it anyway.

The Court then discussed the facts in this case and applied those facts to the law regarding the recovery of treble damages and found in favor of Underwriters.