Bad Faith Insurance Attorneys need to read this 1988, opinion from the Texas Supreme Court. The opinion is styled, Vail v. Texas Farm Bureau Mut. Ins. Co.
This case involves a house burning down. A claim was made for the homeowner insurance benefits and the insurance company denied the claim. Here is how the court ruled on the recovery of money beyond the policy benefits:
The court of appeals did not make specific holdings on the Vails’ other points of error but generally agreed with the contentions of Texas Farm. Because we reversed the court of appeals and hold that the Vails stated a cause of action for unfair claims settlement practices and are entitled to treble damages under the DTPA, we will also address the parties’ points of error on which the court of appeals did not specifically rule.
First, Texas Farm contends that the Vails cannot recover on the basis of Texas Farm’s conduct after the home was destroyed by fire because the Vails only claimed damages recoverable under the insurance contract. Under Texas Farm’s theory, the amount due under the policy solely represents damages for breach of contract and does not constitute actual damages in relation to a claim of unfair claims settlement practices. Texas Farm argues that because the Vails did not plead, offer evidence, or submit a jury issue on “delay” damages resulting from unfair claims settlement practices, the Vails are not entitled to any recovery under the DTPA.
We hold that an insurer’s unfair refusal to pay the insured’s claim causes damages as a matter of law in at least the amount of the policy benefits wrongfully withheld, pursuant to Allstate Insurance Company v. Kelly, the 1984 opinion from the Tyler Court of Appeals. The Vails suffered a loss at the time of the fire for which they were entitled to make a claim under the insurance policy. It was not until Texas Farm wrongfully denied the claim that the Vails’ loss was transformed into a legal damage. That damage is, at minimum, the amount of policy proceeds wrongfully withheld by Texas Farm.
The fact that the Vails have a breach of contract action against Texas Farm does not preclude a cause of action under the DTPA and Texas Insurance Code.
The Vails pleaded and proved that the fire loss coverage was $25,000 on the home and $10,000 on the contents. Their policy as to the home itself was a “valued” policy, one in which the measure of the value of the property insured was set by the contract; thus, it was not necessary in the case of the Vails’ total loss to prove actual damages. This is pursant to the 1968, Texas Supreme Court opinion styled, Houston Fire & Casualty Ins. Co. v. Nichols. As to the contents, the jury found that the Vails sustained $10,000 in damages and Texas Farm has not challenged that finding. The Vails offered evidence that Texas Farm had wrongfully denied the claim, resulting in a failure to pay $35,000 when due. vThe Vails thus sustained $35,000 as actual damages as a result of Texas Farm’s unfair claims settlement practices.
Second, Texas Farm contends that the trebling of damages by the trial court was unwarranted because no discretionary damage issue was presented pursuant to section 17.50(b)(1) of the 1979 version of the DTPA. The Vails respond that the case was tried upon the 1977 version of the DTPA, which provided for mandatory trebling of damages. The Vails therefore argue that there was no need for an issue inquiring whether Texas Farm had “knowingly” violated the DTPA.
Whether the 1977 or the 1979 version of the DTPA applies is not dispositive of this case. article 21.21 of the Insurance Code in its entirety. Section 16(b)(1) of article 21.21 at the time this action arose provided:
(b) In a suit filed under this section, any plaintiff who prevails may obtain three times the amount of actual damages plus court costs and attorney’s fees….
Thus, because section 17.50(a)(4) of either version of the DTPA incorporates section 16 of article 21.21 and the Vails pleaded and presented evidence on damages, the trial court was warranted in awarding trebled damages to the Vails.
Third, Texas Farm contends that the Vails are not entitled to recover under the DTPA because they failed to comply with section 17.50A, stated:
This letter is to officially make demand upon you for payment under the policy for the value of the dwelling and the lost contents to the extent of the full coverage of the policy.
The Vails made their claim for a total loss under a policy with Texas Farm that specified the extent of coverage as $25,000 for the home and $10,000 for the contents. The notice was therefore sufficient to meet the requirements of section 17.50A, and the Vails are not precluded from recovering the trebled damages awarded by the trial court on this basis.
Judgment is here rendered that the Vails recover treble the amount of the policy, prejudgment interest on the amount of the policy only, and attorney’s fees.