A Weatherford attorney who handles insurance claims needs to have an awareness of the potential recovery on a breach of insurance contract claim. Here is a little food for thought in that regard.
The 1988, Vail v. Texas Farm Bureau Mutual Insurance Co., case discusses this. The Texas Supreme Court issued the opinion and the case regards lots of issues and discussion regarding insurance law. Part of that law deals with damages for breach of the insurance contract. The Court said that policy benefits are the basic recovery allowed for an insurance company breach of its contractual obligations under the insurance contract. An insurance company’s refusal to pay the insured’s claim causes damages in at least the amount of the policy benefits wrongfully withheld. Some would call this “benefit of the bargain” damages.
In addition, the insured should be able to recover consequential damages that are the foreseeable result of the insurance company breach of the insurance contract. The argument to be anticipated with this rule is being able to explain what and why a consequential damage is actually a consequential damage and not a damage they may have occurred anyway. But as far as consequential damages are concerned, numerous cases hold that insurance contracts are subject to the same rules as other contracts. This is backed up in Texas case law and made clear in the 1994, Texas Supreme Court case, Hernandez v. Gulf Group Lloyds.
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.
This rule was articulated in case law as far back as 1854, in the case styled, Hadley v. Baxendale. And in the 1981, Texas Supreme Court case, Mead v. Johnson Group, Inc. The Mead 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 insurance company’s breach of the insurance contract. This principle is codified in the Texas Civil Practice & Remedies Code, Section 38.001. There is lots of Texas case law also that supports the recover of attorney’s fees for an insurance company’s breach of the insurance contract.
When an insurance company breaches an insurance policy contract, the harm can be pretty serious. Not only that, but many times the obvious and intentional wrong of the breach seems like there should be more punishment than what has been discussed above. In that regard, punitive damages are not recoverable for a breach of contract claim So, here is why an experienced Insurance Law Attorney needs to be involved early in the process. What has been discussed above is related to breach of contract issues. Breach of contract issues have a four year statute of limitations. However, most the remedies available through violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act have a two year statute of limitations. And these damages that are available that are beyond breach of contract have the potential of recovery for punitive damages.
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