Information residents of Grand Prairie, Keller, Azle, Arlington, Fort Worth, Mansfield, and other cities in Texas should know. Information about “bad faith” insurance.
The Texas Supreme Court, in 1997, adopted as the liability standard, the statutory language in Section 541.060(a)(2)(A), Texas Insurance Code, in the case, Universal Life Insurance Company v. Giles. Under this standard, an insurance company breaches its duty of good faith and fair dealing by “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.”
The standard adopted in Giles takes the place of the common-law standard for unreasonably denying a claim or unreasonably delaying payment. Texas Insurance Code, Section 541.060(a)(7), which prohibits “refusing to pay a claim without conducting a reasonable investigation with respect to the claim,” is also supported in the Giles case.
The state of the law now is that an insurance company may be in violation of its duty of good faith and fair dealing by:
1) failing to attempt in good faith to effectuate prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear. See, Universal Life Insurance Company v. Giles;
2) refusing to pay a claim without conducting a reasonable investigation with respect to the claim. Also, see Giles;
3) canceling a policy without a reasonable basis. See Union Bankers Insurance Company v. Shelton, a 1994 Supreme Court case.
For whatever it may be worth, the Court of Appeals, El Paso, has held that an insurer does not owe a duty of good faith and fair dealing to its insured in the calculation and payment of premiums. See Garrison Contractors, Inc. v. Liberty Mutual Insurance Company. This case was affirmed by the Texas Supreme Court in 1998, however, on other grounds.
One thing is certain, each of these cases have to be looked at on an individual basis and apply the current law to the fact situation. An experienced Insurance Law Attorney can look at the case, ask a few questions, and be able to give a reliable opinion as to the probable outcome of a case. The worst thing someone can do is, nothing.
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