Articles Posted in Bad Faith Insurance

Here is a 2018, case with circumstances this insurance lawyer has not seen before.  The case is out of the San Antonio Court of Appeals and is styled, Virginia Bretado v. Nationwide Mutual Insurance Company.

This case is an appeal from a motion for summary judgment granted in favor of Nationwide.  Bretado was struck from behind by Paul Moryl.  On the same day, Bretado filed a claim against Nationwide for underinsured motorist (UIM) benefits.  Later, Bretado sued Moryl.

Nationwide denied the claim, stating the Moryl’s insurance was sufficient to satisfy Bretado’s damages.

Suing Adjusters in federal court is often times difficult.  The reason is that an adjuster is usually sued in state court in an effort to defeat diversity jurisdiction thus, keeping the case in state court.  When an insurance company believes the adjuster has been sued solely to defeat diversity jurisdiction, the insurance company will remove the case to federal court and ask the Judge to dismiss the adjuster.

This is what happened in this 2018, 5th Circuit opinion styled, William Mauldin v. Allstate Insurance Company; Mayella Gonzales; Theresa Hernandez.

Pursuant to 28 U.S.C., Section 1441 and 1446, Allstate removed this case to federal court where the Judge allowed the removal.  Mauldin appealed this issue to this Court.

Insurance company unfair settlement practices is dealt with in a specific section of the Texas Insurance Code.  Look at Texas Insurance Code, Section 541.060.

The statute prohibits engaging in any of the following settlement practices with respect to a claim by an insured or beneficiary:

(1)  misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;

Any Insurance Law Attorney knows the heart of the law regarding bad faith insurance is found in the Texas Insurance Code.  Other sources include the Texas Department of Insurance and the Texas Administrative Code, among other sources.

The Texas Insurance Code, Chapter 541, defines and prohibits unfair and deceptive insurance practices.

The statutes allow a private cause of action by any person who has sustained actual damages caused by another’s engaging in any act or practice that is defined as an unfair method of competition or unfair or deceptive act or practice in the business of insurance, or defined as an unlawful deceptive trade practice.  This is found in Section 541.151.  The definitions of unfair and deceptive practices are found in two places: (1) Texas Insurance Code, Sections 541.051 to 541.061; and (2) Section 17.46(b) of the Business & Commerce Code, the Texas Deceptive Trade Practices — Consumer Protection Act (DTPA).

Insurance lawyers know there are time limits upon which lawsuits for bad faith insurance claims must be filed.

These limitations are illustrated in the 2018, U.S. Fifth circuit Court of Appeals opinion styled, Susan Sideman; Mark Sideman v. Farmers Group, Incorporated.

The Sidemans sued Farmers for breach of the Texas Insurance Code, Section 541.  In June 2013, Farmers mailed the Sidemans an offer package including (1) notice that Farmers was  not renewing the policy; (2) an offer for a new policy; (3) a summary comparison of the old policy and the new policy; and (4) a new endorsement, prominently titled “Exclusion of Marring of Metal Roof Materials” that limited coverage to situations where a covered peril such as hail punctures a roof or renders it functionless, and explicitly excluded coverage for mere marring like denting or scratching.

Bad Faith insurance claims require specific pleading in Federal Court.  This is illustrated in the Northern District of Texas, Fort Worth Division, opinion styled, Charlotte R. Carroll v. State Farm Mutual Automobile Insurance Company.

Carroll alleges:

The plaintiff filed a claim with the defendant under her insurance policy after a severe blow out on the expressway.  After several weeks of getting the run  around, the defendant deceived the plaintiff into believing a check they mailed to her in the amount of $3496.94 would completely pay for all covered repairs to the plaintiffs vehicle.  Which was more than far from the truth.

One very important aspect of suing an insurance company for bad faith in their claims handling process is that first, with extremely rare exception, you have to prove a breach of the insurance contract.

Insurance policies are contracts, and as such are subject to rules applicable to contracts generally.

A plaintiff seeking to recover on an insurance contract must prove that the contract was in force at the time of the loss.  Also, a party who claims under a policy is required to produce the insurance contract upon which he sues or to prove its terms.  This was made clear in the 1975, Tyler Court of Appeals opinion, Hartford Acc. & Indem. Co. v. Spain.  And, as illustrated in the 1992, Dallas Court of Appeals opinion, St. Paul Ins. Co. v. Rakkar, to prove a breach of contract, the insured has to establish:

Here is something almost any insurance law attorney can tell you:

One of the most common bases for an insurance dispute is the complaint that someone misrepresented something.  After a claim arises, the insured may feel that the coverage accepted by the insurer is less than the coverage promised at the time of sale.  Depending on the facts of the case, a representation by the insurer or its agent may lead to liability for breach of contract, unfair insurance practices, deceptive trade practices, negligence, or fraud.

In the 2003, 14th Court of Appeals opinion, Vecellio Insurance Agency, Inc. v. Vanguard Underwriters Ins. Co., an insurer had an indemnity cause of action against one of its agents if the agent’s conduct resulted in vicarious liability for the insurer.  Further, in the 2002, 14th Court of Appeals opinion, Omni Metals, Inc. v. Poe & Brown of Texas, Inc., it was found by the court that an agent may be held liable for misrepresentation in the case of a bailee liability policy even where the insured failed to read the coverage, where the jury could find that the insurer and the agent misrepresented the extent of coverage under the policy.  The 2003, Austin Court of Appeals opinion, New York Life Ins. Co. v. Miller, sets out what constitutes negligent misrepresentation.

The general rule in first party insurance cases is that in order to recover for bad faith insurance causes of action and insured must first prove a breach of the insurance contract.  There is an exception to this rule.  The exception is discussed in this July, 2018, opinion from the United States 5th Circuit.  The opinion is styled, Glen Moore v. Allstate Texas Lloyd’s.

This case is an appeal from a summary judgment granted in favor of Allstate.  The case resulted from a lawsuit filed in State Court and the removed to Federal Court by Allstate.  This court sustained the ruling in favor of Allstate.

Moore alleged his property “suffered incredible damage due to storm related conditions.”  Moore alleged there were a “laundry list of perils, which Allstate would not cover under the claim.”

The United States District Court, Eastern District, Marshall Division, issued an opinion on June 27, 2018, that discusses the law regarding the above title.  The opinion is styled, Medallion Transport & Logistics, LLC v. AIG Claims, Inc., Granite State Insurance Co., and Jay Carman.

The facts of the case will not be discussed here but can be read in the opinion.  It deals with the refusal of an insurer to pay a Stowers demand.  The opinion is a good read for it’s discussion of Texas Insurance Code, Section 541.060(a).  The allegation was that the defendants in the case failed to effectuate a prompt, fair, and equitable settlement of a claim for which the insurer’s liability had become reasonably clear.  Also, part of the claim dealt with Texas Insurance Code, Section 541.060(a)(7) wherein the defendants were accused of refusing to pay a claim without conducting a reasonable investigation of the claim.

The Texas Supreme Court has held that liability under the language of Section 541.060(a)(2)(A) requires the insured the show “that (1) the policy covers the claim, (2) the insured’s liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand’s terms are such that an ordinary prudent insurer would accept it.”  Unlike a Stowers claim, the statute requires a bad-faith component.  The statute defines the foregoing failure to act in good faith as an unfair or deceptive act.  That means in the context of resisting a “no evidence” motion for summary judgment, the plaintiff must show some evidence that the insurer had no reasonable basis for denying or delaying payment or settlement of a claim.