A 1998, Dallas Court of Appeals case is a good read for lawyers wanting to recover mental anguish damages in bad faith insurance cases. The case is styled, State Farm Lloyds v Johns.
Johns house was built in 1964. Johns moved in to her house in 1972. In the summer of 1990, Johns noticed evidence of extensive foundation problems including door misalignment, significant cracks in the interior walls and a slope on the floor. Repairmen later discovered two plumbing leaks under the house. Johns made a claim for foundation damage alleging that the plumbing leaks caused the soil underneath the house to expand resulting in upheaval of the foundation, thereby damaging the structure. State Farm concluded that John’s foundation problems were not cause by the plumbing leaks, but rather asserted that the damage occurred from natural soil movement common to north Texas. State Farm’s homeowners policy excludes damage caused by ordinary settlement. Based on the exclusion, State Farm denied the claim.
Johns filed suit against State Farm alleging wrongful denial of her claim, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act. The trial court rendered judgment on the verdict in favor of Johns based on the DTPA and Insurance Code claim. State Farm appealed.
The trial court judgment in favor or Johns and against State Farm was affirmed by this court.
In this case, the following evidence was presented:
*Mr. Biting, a professional engineer, believed that foundation problems rarely occurred because of plumbing leaks.
*Mr. Bitting’s work came from State Farm and other insurance companies.
*Mr. Bitting’s firm had received increasing amounts of business from State Farm over the previous years.
*Johns was present during Mr. Bitting’s inspection and she felt that she was not getting a “fair shake” from State Farm.
*Johns had the plumbing system inspected again and a second leak was found.
*The location of the second leak was in the bath in the master bedroom where the most severe distress was found.
*Johns hired her own expert who concluded that the foundation stress was caused by plumbing leaks, swelling the soil under the slab foundation causing the foundation to “heave” upward creating a dome shape.
*Johns forwarded her expert’s report to State Farm. Mr. Bitting did not attempt to confirm his inspection.
*State Farm’s adjuster testified that State Farm had no procedure for resolving opposing or conflicting expert opinions on the cause of foundation damage.
Based on the evidence, the appellate court concluded that State Farm’s reliance on Mr. Bitting’s report was unreasonable and State Farm denied the claim after it knew or should have known that it was reasonably clear that the claim was covered. The evidence showed that when confronted with the report from a geo-technical engineer contradicting Mr. Biting’s opinion, State Farm continued to insist that Mr. Bitting’s opinion was correct, did not seek a third opinion, did not require Mr. Bitting to re-inspect the house, did not require soil testing, and did not interview the engineer which Johns had retained. Furthermore, State Farm assigned the claim to an adjuster who did not understand that the policy unambiguously covered foundation damage resulting from a plumbing leak and thought the claim should be denied.
In this case, Johns testified that she was ashamed and embarrassed by the condition of her home, the claim weighed on her mind daily, she was not able to entertain and socialize in her home, she was reminded of the problems repeatedly, she had trouble sleeping, had vivid nightmares, became very stressed and tense, and suffered from neck pain radiating down her arms and hand. In addition, friends and family testified that Johns was suffering from tension and stress. It is not necessary for a party to have suffered any physical injury to recover damages for mental anguish. There is sufficient evidence to sustain the jury’s verdict awarding mental anguish damages.
Updated: