Dallas Fort Worth Insurance Lawyer Blog
Bad Faith Insurance was a topic of discussion in this 2022, opinion from the Eastern District of Texas, Sherman Division. The opinion is styled, Michael Utley v. State Farm Lloyds.
Utley submitted a claim to his insurer, State Farm, for alleged hailstorm damage. State Farm adjusted the claim asserting the damage did not exceed the deductible of $2,577.00. Utley’s hired a public adjuster who asserted a damage estimate of $116,884.52.
Utley filed a lawsuit and asserted bad faith causes of action related to various violations of the Texas Insurance Code.
Insurance companies have a common-law duty to deal fairly and in good faith with their insureds. Similar to that common-law duty, the Insurance Code supplements the parties’ contractual rights and obligations by imposing procedural requirements that govern the manner in which insurers review and resolve an insured’s claim for policy benefits. Under the Insurance Code, actual damages are those damages recoverable at common law. A breach of the duty of good faith and fair dealing will give rise to a cause of action in tort that is separate from any cause of action for breach of the underlying insurance contract.
State Farm moves for summary judgment on all of Utley’s Section 541.060 claims. State Farm asserts that, because Utley’s common law bad faith claim fails, so too must his statutory bad faith claims under Section 541.060. In support of this contention, State Farm relies on case law that indicates if there is no merit to a bad faith claim, there can be no liability on the statutory claims. If there is no merit to the bad faith action in this case, there can be no liability under either the DTPA or the Texas Insurance Code. Utley does not respond substantively to this argument, focusing instead on the factual disputes between the parties.
State Farm’s argument misses the mark. The holdings in cases cited by State Farm came after
a factual finding that the defendants did not act in bad faith. Importantly, however, common law bad faith claims and claims under the Insurance Code are individual causes of action which do not depend on each other for support. When Utley waived his claims of common law bad faith against State Farm, he did not concede that State Farm never acted in bad faith. He simply dropped the claim. To be sure, the Court has not reached the merits regarding any of Utley’s claims up to this point in litigation. The dismissal of his common law bad faith claims without a determination on the merits, therefore, has no bearing on Utley’s claims under the Insurance Code.
That said, the question still remains whether State Farm is entitled to summary judgment in a different respect. State Farm asserts that Utley “fails to point to any competent summary
judgment evidence that State Farm committed statutory bad faith.” Utley urges that, despite years passing since the event at issue, State Farm “has unjustifiably and unreasonably refused to pay one dollar of Utley’s proven hail and/or windstorm damage claim.” In reply, State Farm contends that “a bona fide dispute as to the extent of coverage or whether the Policy provides coverage for certain damages . . . is insufficient to establish common law or statutory bad faith.
Indeed, evidence that shows only a bona fide coverage dispute does not rise to the level of bad faith. But Utley has offered evidence that State Farm estimated the total damage from the storm at $1,732.22. In contrast, a public adjuster completed its damages estimate to be $116,884.52. Despite the disparity in these amounts, State Farm declined to re-inspect Utley’s property. The Court makes no judgment as to the credibility of this evidence or to the weight it should receive. Indeed, that is the role of the jury. Because the Court must resolve all reasonable doubts in favor of the party opposing the motion for summary judgment, the Court concludes, pursuant to Federal Rule of Civil Procedure 56(a), there exists a genuine dispute as to a material fact. State Farm, accordingly, is not entitled to judgment as a matter of law at this juncture as to Utley’s claims under Insurance Code Sections 541.060(a)(1), 541.060(a)(2)(A), 541.060(a)(3), 541.060(a)(4), and 541.060(a)(7).