Delay In Paying The Claim?

Palo Pinto attorneys who handle insurance situations will need to be able to distinguish between situations where an insurance company can be held liable for not paying a claim and where they cannot be held liable for paying a claim.
The United States District Court for the Southern District of Texas issued a ruling at the end of July that hits on this topic. The style of the case is, Sebring Apartments, et al., v. Lexington Insurance Companym et al.,
This was a summary judgment case decided in favor of Lexington. Here are points made by the court when it rendered its opinion.
I. Lexington Insurance Company did not breach its contract with Nordling Propertylle. Lexington and its fellow insurers paid $25 million – the maximum amount they could have owed for that layer of coverage.
2. Nordling nevertheless insists that it is owed attorneys’ fees and 18% interest because Lexington did not pay its claim fast enough. What was not paid of what was owed was zero, and 18% of zero is zero.
3. The parties disagree about when Nordling presented its claim for payment. It is clear, however, Lexington made a good faith attempt to pay claims. It was tasked with sorting through thousands of claims in the wake of a major hurricane striking the nation’s fourth-largest city. That Lexington exhausted the policy limits is evidence of its earnestness.
4. Putting aside the factual dispute, Nordling may not recover attorneys’ fees and interest without their predicate – a successful breach of contract claim.
5. Nordling cites cases in which Texas courts have recognized bad faith claims untethered to their contractual counterpart. None of those cases factually parallels this case because those insurers had not exhausted their policy limits.
6. When an insurer pays the full amount it could possibly have owed under the policy, there is no basis for a claim against it.
7. Nordling will take no fees or interest from Lexington.
In this case, Sebring asserted violations of the Texas Insurance Code and sought recovery under Section 542.060 which says:
LIABILITY FOR VIOLATION OF SUBCHAPTER. (a) If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter, the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney’s fees.
(b) If a suit is filed, the attorney’s fees shall be taxed as part of the costs in the case.
This Court in #4 above is citing the United States 5th Circuit Court of Appeals case styled, Mid-Continent Casualty Company v. Eland Energy, Inc, et al.
Mid-Continent said that no Texas court has yet held that recovery is available for an insurer’s extreme act, causing injury independent of the policy claim.
This case appears to be a situation where the court is somehow sympathizing with an insurance company being busy. Not sure I agree with this one.

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