Life Insurance Lawsuits And Texas Insurance Code, 541.060

This life insurance claim opinion is from the Northern District of Texas, Dallas Division, and is styled, Wharlest Jackson v. Farmers New World Life Insurance Company.

Among other causes of action, Jackson has sued Farmers under an insurance policy for violations of the Texas Insurance Code. Farmers has filed a Partial Motion to Dismiss the lawsuit based on the allegation that Jackson has not properly pled violation of Texas Insurance Code, Section 541.060 against Farmers.  The Court reviewed the papers filed with the Court and discussed and ruled as follows.

Crystal Jackson purchased a life insurance policy from Farmers.  Wharlest Jackson was the sole beneficiary of the policy.  Crystal died in a motorcycle accident and Wharlest made a claim which Farmers denied based on alleged misrepresentations in the policy application.

Farmers filed the Motion for Partial Dismissal on various causes of action and the Insurance causes of action are discussed here.

Section 541.060 of the Texas Insurance Code prohibits unfair settlement practices.  These include, among others:

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

(2) failing to attempt in good faith to effectuate a prompt,fair,and equitable settlement . . . ;

(3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim . . . ;

(4) failing within a reasonable time to

(A) affirm or deny coverage of a claim to a policyholder; . . .

(7) refusing to pay a claim without conducting a reasonable investigation with respect to the claim.

Wharlest’s amended complaint merely restates this section of the Texas Insurance Code without providing factual detail of how Farmers committed unfair settlement practices.

Regardless of the standard that the Court must apply—whether it be Rule 8(a) or 9(b)—Wharlest has failed to meet his burden.  The Court finds a prior case, SHS Investment v. Nationwide Mutual Insurance Company, instructive.  In that case, like here, the plaintiff alleged misrepresentations and actionable conduct by the defendant, yet did not provide the court details of the conduct; instead, the plaintiff’s allegations were vague and conclusory.   Citing from SHS – “[Plaintiff’s] only allegation is vague and generic: ‘[Defendant] misrepresented to Plaintiff that the damage to the property was not covered under the policy, even though the damage was caused by a covered occurrence.’”  The court, in dismissing the plaintiff’s DTPA and Texas Insurance Code claims, explained that the plaintiff’s complaint was “largely composed of legal conclusions couched as factual allegations, formulaic recitations of the elements of a cause of action, generic paraphrases of statutory language,and conclusory statements without supporting facts.”  Especially applicable here is the court’s point that the “Plaintiff failed to identify what was inadequate in Defendant’s investigation,” and that questions that needed to be answered by the complaint included, “what would a reasonable investigation consist of, and what facts show that the investigation was outcome oriented.”

Similarly, here, without more facts showing “what conduct by Farmer’s misrepresented what,” how Farmer’s investigation was outcome-oriented, and so forth, Wharlest has failed to adequately state a claim under Texas Insurance Code, Section 541.060.  As will be explained further below, the Court will give Wharlest an opportunity to re-plead.  The Court recommends that Wharlest looks to footnotes 2–17 of SHS Investment, and that decision in general, for guidance on what the Court expects from a sufficiently pled complaint, both for a claim under Section 541.060 of the Texas Insurance Code and the remainder of Wharlest’s claims at issue.

The Section 540.060 part of the claim is Dismissed Without Prejudice.

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