Insurance Company And Breach Of Contract

When an insurance company denies a claim, 99% of the time the claim the insured has against the insurance company is a claim for breach of contract.  Issues related to “bad faith” and statutory violations of the Texas Insurance Code are relevant and important but usually those do not matter unless or until it is shown that the insurance contract was breached by failure to pay the claim.

A 2022, opinion from the Northern District of Texas, Amarillo Division, discusses the breach of contract part of an insurance claim.  The opinion is styled, Valleyview Church of the Nazarene v. Church Mutual Insurance Company.

The full facts of the case can be read in the opinion.  Church Mutual filed a motion for summary judgment.

In discussing the breach of contract part of the lawsuit, the Court stated that a “breach of contract” occurs when a party fails to perform an act it has promised to
perform.  A breach-of-contract claim has four elements under Texas law: “(1) the existence of a valid contract between plaintiff and defendant; (2) the plaintiffs performance or tender of performance; (3) the defendant’s breach of the contract; and (4) the plaintiffs damage as a result of the breach.”

In Texas, special rules accompany insurance contracts. Courts must construe insurance policies using ordinary rules of contract interpretation.  Thus, an insurance policy is interpreted as a whole in accordance with the plain meaning of its terms.  When policy language is “clear and definite,” the policy “is not ambiguous and will be construed as a matter of law.

Initially, the insured has the burden of establishing coverage under the terms of the policy.  lf the insured establishes coverage, it is then the insurer’s burden to plead and prove that the loss falls within an exclusion to the policy’s coverage.  If the insurer proves that an exclusion applies, the burden shifts back to the insured to show that an exception to the exclusion brings the claim back within coverage.

Texas also recognizes the concurrent-causation doctrine.  Under the concurrent-causation doctrine, when excluded and covered events combine to cause a loss and the two causes cannot be separated, concurrent causation exits and the exclusion is triggered such that the insurer has no duty to provide the requested coverage.  It is the insured’s burden to segregate damages only attributable to the covered peril.

Without a showing that the insurance contract was breached by the insurance company, 99% of cases will lose at the summary judgment stage of a lawsuit.

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