Whether you are talking about life insurance claims, homeowners claims, disability claims, auto claims, or other types of first party claims, policy benefits are the basic recovery allowed for an insurance company breach of the contractual obligations. An insurer’s refusal to pay the insured’s claim causes damages in at least the amount of the policy benefits wrongfully withheld. This is supported in the Texas Supreme Court cases, Vail v. Texas Farm Bureau Mutual Insurance Co. and Transportation Insurance Co. v. Moriel.
In addition, the same court stated in Hernandez v. Gulf Group Lloyds, an insured should be able to recover consequential damages that are the foreseeable result of the insurer’s breach of contract. Numerous cases hold that insurance policies are subject to the same rules as other contracts. One of the best established rules is that:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally; i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach.
In Mead v. Johnson Group, Inc., a 1981, Texas Supreme Court opinion, the court stated, “In an action for breach of contract, actual damages may be recovered when loss is the natural, probable, and foreseeable consequence of the defendant’s conduct.”
A successful claimant may recover attorney’s fees for the insurer’s breach of contract.
One thing to keep in mind is that punitive damages are not recoverable for simple breach of contract claims. In the insurance context, there needs to be a breach of one or more of the insurance code statutes.o recover punitive damages.