Bad Faith Damages

Weatherford lawyers who handle bad faith claims need to be able to know how to calculate damages that may be assessed in a bad faith claim. There are lots of opinions that deal with this issue and they all have to be read if a lawyer is to get a good idea as to what will be an end result. An opinion issued in 1995, by the Texas Supreme Court is one that is worth reading. The style of the case is, Twin City Fire Insurance Company v. Davis. Here is some of the relevant information from the case.
Davis injured her lower back while she was working at her place of employment. She filed a worker’s compensation claim after she was injured. As part of her therapy, her treating doctor prescribed a “hot tub or jacuzzi.” Davis later, settled her worker’s compensation case with the worker’s compensation insurance carrier agreeing to pay five years of future medical expenses. Davis immediately made a claim under the terms of the settlement for the hot tub which had been prescribed by her doctor.
Twin City investigated the medical necessity of the hot tub by requesting a confirmation from the doctor. The doctor confirmed the prescription with Twin City. An outside consultant also supported the doctor’s recommendation. Davis then requested a pre-hearing conference before the IAB to challenge Twin City’s failure to honor the hot tub claim. Twin City denied the hot tub was a medical necessity.
Davis filed a lawsuit against Twin City based upon the claim for the $3,500 hot tub, fraud, breach of contract, intentional and negligent infliction of emotional distress, insurance code violations, DTPA violations, failure to pay worker’s compensation benefits and breach of the duty of good faith and fair dealing. The jury, at trial, found that Twin City had engaged in unfair or deceptive trade practices, failed to deal fairly and in good faith, failed to pay reasonable and necessary medical expenses and awarded actual damages in the amount of $3,500, the exact price for the hot tub. The jury, however, did not specify which of the three theories of liability justified the award. The jury refused to find that Davis suffered physical pain or mental anguish but assessed punitive damages of $100,000 and awarded attorney’s fees. The trial court rendered judgment for $3,500 in actual damages, twelve percent penalty and attorney’s fees, but denied recovery of punitive damages. On appeal, the Court of Appeals reinstated the punitive damage award to Davis.
The Texas Supreme Court reversed the Court of Appeals’ reinstatement of punitive damages. They found that actual damages of $3,500 for the hot tub were contract damages only, not tort damages and could not support the award of punitive damages. They stated that a breach of contract claim alone would not support punitive damages, that the existence of an independent tort must be established. In this case, the jury did not award additional amounts clearly referable only to the bad faith cause of action, such as mental anguish damages. The employee must show that the claim for breach of duty of good faith and fair dealing is separate from the compensation claim and produced an independent injury. In this case, the jury declined to find any injury independent of the claim for wrongfully denied worker’s compensation benefits.
This is a case where it would be interesting to an experienced Insurance Law Attorney to be able to read the “Jury Charge” in order to see what wording was used to help the jury reach the findings the jury made.