Bad Faith Claims and proving them have their own set of rules. These rules were discussed in a 2020 opinion from the Eastern District of Texas, Beaumont Division. The opinion is styled, Mt. Javed Ventures, Ltd. v. Mt. Hawley Insurance Company.
This is a summary judgment opinion. The legal history and the facts of the case can be read in the opinion. This writing will focus on the law related to “bad faith claims.”
The Texas Supreme Court has stated in previous case opinions that under Texas law, “an insurer has a duty to deal fairly and in good faith with its insured in the process of payment of claims.” This duty is breached if: “(1) there is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and (2) the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim.” Whether an insurance company’s liability has become reasonably clear is a question of fact as cited in the 1997, Texas Supreme Court opinion, Universal Life Ins. Co. v. Giles. However, evidence establishing only a bona fide coverage dispute does not demonstrate bad faith. Evidence that shows a bona fide coverage dispute does not, standing alone, demonstrate bad faith.