Insurance Company Failure To Effectuate A Prompt, Fair, And Equitable Settlement

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.

Defendants argue there is no evidence of any such bad faith.  Plaintiff’s argue the opposite.

Here, a reasonable jury could conclude Defendants had no reasonable basis for delaying settlement of the claim.  Even before the first Stowers demand, AIG claims adjuster acknowledged the “case has a potential for serious exposure.”  Williams had not worked since the accident and showed well in her deposition.  After the first Stowers demand, Medallion’s defense counsel noted the seriousness of the case, that there was no chance of a defense verdict, and that the jury verdict could be $1.75 million to $3.3 million.  Defense counsel also recommended to AIG claims that it try to settle the case.  Medallion’s independently retained attorney also encouraged AIG to accept the demand to protect Medallion from an excess verdict.  Still, AIG claims and Carman rejected the second Stowers demand, even though Medallion was at that time precluded from proffering experts at trial.

Read the case.