Dallas Fort Worth Insurance Lawyer Blog
Bad Faith Insurance claims in Texas are not as easy as many people think. This is illustrated in this 2024, opinion from the Western District of Texas, Austin Division. The opinion is styled, Franklin Square Condo Owner Ass’n v. Amguard Insurance Company. This is a summary judgment opinion.
After Franklin Square submitted a claim for the damage caused by the hailstorm, AmGuard sent an adjuster to inspect the property damage, notified Franklin Square that its inspector had assessed $13,034.90 in damages, and sent Franklin Square a check for an amount of $5,534.90 (the $13,034.90 in damages minus the deductible). Franklin Square indicated that they disagreed with the assessment of the roof damage. In response, AmGuard sent an engineer, Wyatt Hardenberg, to inspect the property on October 26, 2022, who found that 41 roof tiles exhibited hail damage, but observed that other cracked tiles lacked “a centralized focal (impact) point on the tile surface” as would indicate hail damage. Hardenburg further observed that the cracked tiles evidenced earlier damage than the hailstorm and that the roof had been treated with sealant prior to the hail damage, indicating “prior maintenance activities to arrest known water intrusions.” After Hardenburg’s assessment, AmGuard notified Franklin Square that it had readjusted its estimate and provided an additional check for $2,409.20 to replace the 41 cracked tiles and a broken window screen.
Franklin Square was dissatisfied with the amount paid and sued AmGuard for breach of contract damages, Insurance Code violations and bad faith the way the claim was handled. There were other issued in the case related to experts that will not be discussed here.
A claim for breach of an insurance contract under Texas law requires the insured to prove “coverage, breach of the contract, damage caused by the breach to the insured, and the amount of damages caused by the breach.” It is undisputed that coverage existed, i.e., that AmGuard and Franklin Square had an insurance policy pursuant to which AmGuard agreed to reimburse Franklin Square for the direct physical loss or damage associated with the April 28, 2021 hailstorm event as a covered loss, minus a deductible. The parties dispute the extent of that coverage and ensuing damages, i.e., the extent to which the hailstorm damaged Franklin Square’s roof and interior and the extent of the repairs required.
As to its claims under the Texas Insurance Code, Franklin Square has conceded that it does not have a valid claim and says it “withdraws its claim” under that statute. The parties agree that the Texas Insurance Code sections require insurers to promptly investigate, accept or reject claims, and pay damages, but do not apply to a dispute as to the amount of an insurance payment. So too, Franklin Square correctly “concedes that Texas does not recognize a cause of action for negligent claims handling and withdraws its claims for such.”
To overcome a summary judgment motion on the question of bad faith, Franklin Square must show that there is a material dispute of fact as to, among other elements, whether AmGuard had “any reasonable basis for denial of coverage.” As long as the insurer has a reasonable basis to deny or delay payment of a claim, even if that basis is eventually determined by the fact finder to be erroneous, the insurer is not liable for the tort of bad faith.