Insured people in Grand Prairie, Fort Worth, Arlington, Dallas, and other places in the Dallas and Fort Worth metroplex would probably not understand how to hold an insurance company responsible for a knowing violation of the Texas Insurance Code. Here is a case where the lawyer had success in this area of the law.
The style of the case is, State Farm Lloyds v. Johns. The case was decided by the Dallas Court of Appeals in 1998. Here are the facts.
Ms. 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 mis-allignment, significant cracks in the interior walls and a slope to 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 an upheaval of the foundation, thereby damaging the structure. State Farm hired a foundation expert, Mr. Betting, who concluded that Johns’ foundation problems were not caused by the plumbing leaks, but rather asserted that the damage occurred from natural soil movement common to north Texas. State Farm’s homeowners policy excluded 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 and allegations that the conduct of State Farm was committed “knowingly” as that term is defined in the Texas Insurance Code.
In this courts ruling, the court said that the evidence was legally and factually sufficient to support a finding of a “knowing” violation. “Knowingly” means “actual awareness of the falsity, unfairness or deception of the act or practice made the basis of the claim for damages.” In St. Paul Surplus Lines Insurance Company v. Dal-Worth Tank Co., the Texas Supreme Court stated that “actual awareness” does not mean merely that a person knows what his is doing; rather, it means that a person knows what he is doing is false, deceptive or unfair. In other words, a person must think to himself at some point, “Yes, I know this is false, deceptive or unfair to him but I am going to do it anyway.” In this case, the adjuster testified that he knew that State Farm had no procedures for resolving disputes between experts, that he had no expertise to evaluate engineer reports, but yet he chose to believe Mr. Bitting’s reports. In addition, the adjuster erroneously testified that the policy did not provide any coverage for foundation damage (despite claiming familiarity with the policy), that he knew that he did not investigate Mr. Bitting’s qualifications, that he was also aware that Mr. Bitting usually concluded foundation damage occurred from settlement rather than from plumbing leaks, and that he was aware that Johns claimed to have discovered a second plumbing leak, did not request that Mr. Bitting or any other engineer re-inspect the house. The jury could have concluded that State Farm knew it had no reasonable basis for denying the claim and knowingly designed to “paper” the file to justify denying the claim.
Additionally, State Farms’ conduct must be viewed from the information available to it at the time it denied the claim. Although State Farm retained a second expert for litigation, State Farm did not obtain his opinion before it denied the claim and it could not have relied on the second expert’s opinion in denying the claim.
Even when it can be proved that an insurance company was wrong in it’s denial of a claim, it is especially hard to prove a “knowing” violation. And of course, this is why an experienced Insurance Law Attorney should be consulted.
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