Articles Posted in Bad Faith Insurance

Insurance companies and insurance agents have no general duty to obtain coverage nor to make sure the coverage is adequate.  On the other hand, courts have found insurance companies liable for affirmative misrepresentations, and an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so.  This is discussed in numerous cases, including, the 1992, Texas Supreme Court opinion, May v. United Services Ass’n of America.  Also, the 1999, 1st Court of Appeals opinion, Frazier v. Texas Farm Bureau Mutual Ins. Co.

An agent has a duty to keep the customer informed about the insurance policy’s expiration date when the agent receives information pertaining to expiration date that is intended for the customer.  This was discussed in the 1985, Texas Supreme Court opinion, Horn v. Hedgecoke Ins. Agency.

Additionally, the court in May suggested an agent could be found negligent if an explicit agreement or course of conduct showed the agent undertook to determine the customer’s insurance needs and counseled the customer as to how they could be met.

Insurance claims denial and negligence related to the insurance policy and claims are questions for insurers and the insured.  Here is a few things to keep in mind.

Negligence, in the insurance context as in others, consists of three elements:

(1)  a legal duty owed by one person to another;

Insurance claims lawyers are well aware that insurance companies prefer to litigate in Federal Court.  Proper pleading can often times prevent a case from being litigated in Federal Court.  Usually suing the adjuster who handled the claim will prevent removal to Federal Court.  The key is properly pleading claims against an adjuster.

This is discussed in a 2022, opinion from the Northern District of Texas, Dallas Division.  The style of the case is, Jackie Preston v. Nationwide Property & Casualty Insurance Company; Stevie Bruesewitz; and Matthew Vaughters.

Preston sustained damage to her property in 2019.  Nationwide was her property insurer and thus, Preston made a timely claim to Nationwide.  Preston became frustrated with Nationwide’s handling of her claim and sued Nationwide and the two adjusters, Stevie and Matthew.

Lawyers handling insurance claims that have been denied frequently have a conversations with clients about “bad faith” insurance.  Bad faith, generally speaking, often times centers around whether or not an insurance company has committed a fraud.

If allegations of fraud are going to be alleged, insurance lawyers need to understand that those claims that end up in a Federal Court are subjected to a higher pleading standard than those claims that are litigated in State or County Courts.  This is illustrated in a 2021, opinion from the Southern District of Texas, Galveston Division.  The opinion is styled, Smiley Team II, Inc. v. General Star Insurance Company.

Smiley made a claim against General Star after a vehicle was alleged to have crashed into Smiley’s building.  A lawsuit was eventually filed containing allegations that General Star failed to properly adjust the claim which resulted in an alleged underpayment of the claim.

Bad Faith insurance is a frequent topic when a person feels like they have been treated improperly by their insurance company.  This issue is discussed in a 2021 opinion from the Eastern District of Texas.  The opinion is styled, Aspen Specialty Insurance Company v. Yin Investments USA, LP.

This opinion was issued on competing Motions For Summary Judgment.  The only part discussed here deals with the “bad faith” claims at issue.

As stated by the Court, in Texas, insurance companies have a duty to deal fairly and in good faith with an insured in the processing of claims.  To succeed on a bad-faith claim, the insured must establish the absence of a reasonable basis for denying or delaying payment of the claim and that the insurer knew, or should have known, that there was no reasonable basis for denying or delaying payment of the claim.

An old Insurance Lawyer once stated about “bad faith” that if you have to have an expert to tell you whether the insurance company acted in bad faith, or not, then there probably not bad faith in whatever the insurance company did.

In 2021, a court in the Western District of Texas, San Antonio Division issued an opinion discussing bad faith.  It is styled, Richard Riley v. Safeco Insurance Company of Indiana.

The claim arises out of a claim being asserted by the insured, Riley, against his insurance company, Safeco.  The claim is for hail damage to Riley’s metal roof.  After a hail storm Riley made a claim for damages and Safeco assigned adjuster Doug Lehr to inspect the claim.  Lehr, after his initial inspection retained an engineering firm, Rimkus Consulting, to determine whether the damage to the roof was cosmetic or structural.  Rimkus determined the damage was structural.

Hee is a 2021, opinion dealing with bad faith claims by an insured and the insurance company efforts to dispose of the bad faith claim via summary judgement.  The opinion is from the Southern District of Texas, Houston Division, and is styled, GeoVera Specialty Insurance Company v. Sam Walker.

The insured is Walker.  The insurance company is GeoVera.  Walker suffered wind damage and a subsequent theft claim.  There are other issues in the case, but only the bad-faith / extra=contractual issues will be looked at here.

Geovera denied the claim and then sued Walker seeking a declaratory judgment that it did not owe any damages to Walker.