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One very important aspect of suing an insurance company for bad faith in their claims handling process is that first, with extremely rare exception, you have to prove a breach of the insurance contract.

Insurance policies are contracts, and as such are subject to rules applicable to contracts generally.

A plaintiff seeking to recover on an insurance contract must prove that the contract was in force at the time of the loss.  Also, a party who claims under a policy is required to produce the insurance contract upon which he sues or to prove its terms.  This was made clear in the 1975, Tyler Court of Appeals opinion, Hartford Acc. & Indem. Co. v. Spain.  And, as illustrated in the 1992, Dallas Court of Appeals opinion, St. Paul Ins. Co. v. Rakkar, to prove a breach of contract, the insured has to establish:

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Here is something almost any insurance law attorney can tell you:

One of the most common bases for an insurance dispute is the complaint that someone misrepresented something.  After a claim arises, the insured may feel that the coverage accepted by the insurer is less than the coverage promised at the time of sale.  Depending on the facts of the case, a representation by the insurer or its agent may lead to liability for breach of contract, unfair insurance practices, deceptive trade practices, negligence, or fraud.

In the 2003, 14th Court of Appeals opinion, Vecellio Insurance Agency, Inc. v. Vanguard Underwriters Ins. Co., an insurer had an indemnity cause of action against one of its agents if the agent’s conduct resulted in vicarious liability for the insurer.  Further, in the 2002, 14th Court of Appeals opinion, Omni Metals, Inc. v. Poe & Brown of Texas, Inc., it was found by the court that an agent may be held liable for misrepresentation in the case of a bailee liability policy even where the insured failed to read the coverage, where the jury could find that the insurer and the agent misrepresented the extent of coverage under the policy.  The 2003, Austin Court of Appeals opinion, New York Life Ins. Co. v. Miller, sets out what constitutes negligent misrepresentation.

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It’s probably not right to pick only on State Farm.  Most if not all, of the insurance companies or their individual employees will break the rules for their own gain.  This is illustrated in a Chicago Tribune story titled, State Farm Pays $250 Million, Ducks Trial Over Allegations It Tried To Rig Illinois Justice System.

The story tells us State Farm agreed to pay $250 million on the brink of a trial to customers who claimed the company tried to rig Illinois justice system to wipe out a $1 billion jury verdict from 19 years ago.

The customers were seeking as much as $8.5 billion in damages in a civil racketeering trial that was set to start Tuesday in federal court in East St. Louis, Illinois.  A judge granted preliminary approval to the accord and set a final fairness hearing for December.

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Insurance lawyers who handle disability cases need to know these coverage issues.

Disability policies normally require that any claimed disability occur while the policy is in effect or within a specified time after any claimed accident or injury.  As an example, the policy may provide coverage for an illness or injury that “totally and continuously disables the insured within 30 days of the date of the accident so as to prevent him from performing each and every duty pertaining to his occupation.”

Disability insurance policies usually distinguish between disabilities caused by illness and those resulting from accidental injury.  This is seen in the 1978, Beaumont Court of Appeals opinion, Lone Star Life Ins. Co. v. Griffin.  In this case the policy provided that the insurer would pay the insured $1,000 per month for 60 months for an accidental injury resulting in total disability and that it would pay $1,000 per month for 24 months for total disability resulting from sickness.

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Insurance attorneys representing the insureds would prefer to fight cases in State Court.  One way of doing this is to successfully plead a case against the insurance adjuster.  Insurance companies would prefer to fight in Federal Court.

Here is a case wherein the case was filed in State Court against the insurer and the adjuster and removed to Federal Court by the insurance company.  The insurance company successfully kept the case in Federal court but expressly allowed the insured to replead the case against the adjuster.

The case was replead and now the insured is seeking to have the case remanded to the State Court.  This 2018, opinion is from the Northern District of Texas, Dallas Division and is styled, William W. Caruth, III, et al. v. Chubb Lloyd’s Insurance Company of Texas, et al.

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The 14th Court of Appeals issued an opinion recently dealing with Texas Workers Compensation law and subrogation.  The opinion is styled, Liberty Mutual Insurance Company v. Buddy J. Trahan.

When as in this case, a person suffers an injury due to the actions of a third party and the injured person is on a job that is covered by Texas Workers Compensation benefits and those benefits as paid, as a general rule the workers compensation carrier has subrogation interests in any recovery made by the injured employee against the responsible third party.

It is important that these subrogation interests are handled properly to keep the injured employee and others from being sued by the workers compensation carrier for monies recovered from the third party.

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Here is a case where the Prompt Payment of Claims Act was not violated, even though at first glance it appears it was violated.  Knowing how the facts and the law square on these issues is important in evaluating a case.  This 2018, case is from the Amarillo Court of Appeals and is styled, Steven Biasatti And Paul Gross D/B/A Topdog Properties v. GuideOne National Insurance Company and John Karl Graves.

TopDog was insured with GuideOne and suffered property damage during a storm.  A claim was made and GuideOne adjusted the loss as being $1,896.88.  TopDog requested an additional inspection.  GuideOne retained an engineer who confirmed the adjuster’s findings.  TopDog wished to proceed with an appraisal and GuideOne responded that only they, GuideOne, could invoke the appraisal process.

TopDog filed this lawsuit and then GuideOne invoked the appraisal clause in the insurance contract.  The trial court ordered appraisal, the parties designated appraisers, and the court appointed an umpire.  The umpire filed the appraisal award, in which the parties’ appraisers and the umpire unanimously set the amount of loss at $168,808.

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Insurance lawyers who handle home owner and property claims must know this case.  It is a 2018 case from the Northern District of Texas, Dallas Division.  It is styled, Meisenheimer v. Safeco Insurance Company of Indiana.

This is a storm damage claim.  Plaintiff suffered damage and made a claim.  Safeco sent out an adjuster who found total damage that was less than the $7,700 deductible amount.  Plaintiff hired a public adjuster who determined the loss to be $129,794.  Safeco re-inspected the property and the parties still could not reach a resolution.  Plaintiff claims the inspections were substandard.

The insurance contract includes an appraisal provision for resolving disputes over the proper amount of the claim.  Safeco invoked the appraisal process and both parties participated.  An umpire issued a final appraisal award of $54,535.  Safeco timely paid the final appraisal amount.

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Anytime an insurance company is sued from conduct arising from insurance policy and the investigation of a claim, the insurance company is going to seek to have the case heard in a federal court.  This is seen again in the 2018, opinion from the Western District of Texas, San Antonio Division, styled, Electro Grafix, Corp. D/B/A Aetna Sign Group, LTD., D/B/A Aetna Sign Company, Inc. v. Acadia Insurance Company, and Marlin Douglas Odermatt.

This is a lawsuit filed in State District Court arising out of claim for property damage wherein Acadia claims there was no damage or minimal damage to Aetna’s property.  Marlin was an engineer assigned to investigate the claim by Acadia.  Aetna claims Acadia has not accepted responsibility for the conduct of Marlin and thus Marlin is being sued in his individual capacity.

Acadia had the case removed to federal court and Aetna is filing this motion remand based on Marlin being improperly joined.

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Insurance lawyers need to know what the policy at issue says and how the courts interpret those policies and make their rulings.

For a homeowners policy, the 2018 Eastern District of Texas, Sherman Division, opinion styled, Rainey Rogers v. Nationwide General Insurance Company, is a good read.

The Rainey case arises out of a dispute between a policyholder and Nationwide regarding the extent of damages and the amount of loss suffered to Rainey’s property.  On March 26, 2017, the property suffered damage due to storm-related conditions and Rainey made a claim for benefits.

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