Bad Faith Insurance

Bad Faith / Reasonable Basis

May 23, 2010 | Mark S. Humphreys

How does the policyholder in Grand Prairie know if his insurance company is acting in bad faith? This same question might be asked in Arlington, Aledo, Mansfield, Fort Worth, or anywhere else in Texas.

When an insurance company denies a claim it should be obvious that there are times when they have a good reason for doing so. But how do you know if their reason is a good reason or not? What the courts ask or look for is, “proof that the insurance company had a reasonble basis to deny the claim, delay payment, or cancel the policy.” Legally, this is often times called the “bona fide dispute” defense, an insurance company will use to escape some of the liability accusations that are tied to bad faith cases. Another way of putting this is, an insurance company is not liable merely for being wrong on a coverage issue, only for being unreasonable. Even an experienced Insurance Law Attorney will often times have trouble knowing for sure whether the actions and conduct of the insurance company rise to the level of bad faith. Some cases are easy to call, but some are not.

A Texas Supreme Court case, decided in 1994, styled, Transportation Insurance Company v. Moriel, states:

“Standing” To Sue For Bad Faith

May 16, 2010 | Mark S. Humphreys

Who has “standing” to sue an insuance company for bad faith. Does someone living in Grand Prairie, Arlington, Mansfield, Keller, Colleyville, Fort Worth or Dallas?

USLegal defines “standing” this way:

Standing is the ability of a party to bring a lawsuit in court based upon their stake in the outcome. A party seeking to demonstrate standing must be able to show the court sufficient connection to and harm from the law or action challenged. Otherwise, the court will rule that you “lack standing” to bring the suit and dismiss your case.

Bad Faith Insurance And Fire Claims

May 15, 2010 | Mark S. Humphreys

When a house burns in Grand Prairie, Arlington, Colleyville, Keller, Mansfield, Fort Worth, Azle, Aledo, or Weatherford, or anywhere else in Texas; What happens when the house catches on fire? Will the insurance company pay for the damages?

In, State Farm Fire & Casualty Insurance Company v. Simmons, the answer was no until the case went to court. At that point, State Farm Fire & Casualty Company (State Farm) was eventually ordered to pay the damages. This is a 1998, Texas Supreme Court case. In this case, the Simmons had moved into a new home and spent monies improving the property and buying items for the inside of the house. Their house had been burglarized in the middle of the day and later those responsible were located.

Mr. Simmons, a construction supervisor, had experienced down time from work and the Simmons had missed house payments. They later refinanced the house. They continued to experience problems with vandalism and other strange occurrances around the house.

Bad Faith And Homeowners Insurance

May 13, 2010 | Mark S. Humphreys

There are homeowners in Grand Prairie, Arlington, Mansfield, Weatherford, Aledo, Fort Worth, and everywhere else in Texas. 95% of those homeowners have insurance. So how do you know if your insurance company is violating the “bad faith” laws in Texas?

Here is a 1997, Texas Supreme Court case to read to give some insight into the above question. The case is, State Farm Lloyd’s v. Ioan and Liana Nicolau.

In the insurance claim giving rise to this dispute, the Nicolau sought coverage for extensive foundation damage to their home. The homeowners policy, issued by State Farm Lloyds, (State Farm) generally excludes losses caused by “inherent vice,” or by “settling, cracking, bulging, shrinkage, or expansion of foundations.” Under an express exception, however, these exclusions do not apply to losses caused by an “accidental discharge, leakage or overflow of water” from within a plumbing system.

Holding Insurance Company Liable For Bad Faith

May 12, 2010 | Mark S. Humphreys

What if a resident of Grand Prairie is involved in a wreck on his motorcycle with an uninsured driver? Any difference if he is a resident of Fort Worth, Arlington, or Dallas? Answer – not for anyone in Texas.

This is what happened in the 1987 case, Glen Arnold v. National County Mutual Fire Insurance Company. This Texas Supreme Court case is an insurance contract dispute. Arnold was severly injured when the motocycle he was operating was struck by an uninsured motorist. Arnold had uninsured motorist benefits protection on the policy he had with National County Mutual Fire Insurance Company (National). Arnold made a demand for payment and the independent adjusting firm hired by National recommended the claim be paid. In spite of this, National refused to pay.

Arnold sued and won a judgment exceeding the policy limits then sued National for breaching its duty of good faith and fair dealing.

More On Bad Faith In Texas

May 11, 2010 | Mark S. Humphreys

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.

Historical Development Of Texas Bad Faith Law

May 10, 2010 | Mark S. Humphreys

Someone who has insurance in Grand Prairie, Arlington, Keller, Colleyville, or any other town in Texas would be curious to know what can be done when they are treated wrong by their insurance company. This article is largely taken from a legal book for insurance law attorneys and gives some insight into the legal history of the development of the duty of good faith and fair dealing law, in Texas.

Reviewing the theory’s history aids in understanding the current law which will be discussed in a follow-up article.

The development of the common-law duty of good faith and fair dealing in Texas began in the Texas Supreme Court case, English v. Fisher, decided in 1983. There, the insureds asked the court to recognize an implied covenant of good faith and fair dealing that would require insurance policy proceeds to be paid contrary to the terms of the contract. The court said no. In its divided opinion the court pointed out that in other circumstances a duty of good faith and fair dealing arises from a special relationship between the parties. Insurance was one area where such a duty had been recognized.

Bad Faith Insurance In Texas

May 8, 2010 | Mark S. Humphreys

The guy in Grand Prairie, Arlington, Weatherford, Fort Worth, Dallas, or any other place in Texas, wonders what he can do when his insurance company does him wrong. Usually when an insurance company does something that is wrong with one of their insured policyholders, that is called “bad faith” insurance.

Changes in insurance laws in recent years have made it more difficult to make bad faith claims against insurance companies. But this concept of bad faith is definitly not dead. The Texas Department of Insurance has a complaint department that does investigate improper conduct by insurance companies. That is the good news. The bad news is that they seldom do anything except in the most extreme cases where the wrongs are big and affecting thousands of people. What they often times end up telling individuals is that they should consult an experienced Insurance Law Attorney to further pursue complaints. It is not that they don’t care, it’s that they do not have the staff to be pursuing all the wrongs being committed.

A person should never give up when being wronged by one of these companies. The Texas Insurance Code has contained within it, statutes with a lot teeth for attorneys to use in making an insurance company pay for the wrongs it commits. Section 541.060, is titled “Unfair Settlement Practices” and lists several acts, or examples of inaction, that will subject an insurance company to civil liability to the person being wronged.

What Is A Stowers Claim In Texas?

April 27, 2010 | Mark S. Humphreys

What does “Stowers” mean to someone in Grand Prairie, Arlington, Fort Worth, Dallas, Weatherford, or anywhere else in Texas? This is something very important to understand.

A Stowers claim is a claim that an insurance company has handled in an improper manner. Most incorrect claims handling by an insurance company can be called “bad faith”, and the Stowers claim is just a different and unique version of bad faith. This Stowers doctrine was first articulated in the case, Stowers Furniture Co. v. American Indemnity Co. This is an old case, decided in 1929, but is still good law. This case was decided by what is today, the Texas Supreme Court. In 1929, it was called the Texas Commission of Appeals. When an insurance company violates their duty under the Stowers doctrine, the insurance company can become liable for much more money than the insurance policy provides for in the insurance contract.

A Stowers action arises when the liability carrier fails to make a reasonable settlement within the policy limits, and subsequently, exposes their insured policyholder to a judgment in excess of the policy limits. This Stowers claim belongs to the insured policyholder, not the person sueing the policyholder. What usually happens when the Stowers duty is violated, is that the policyholder assigns the Stowers claim to whoever is sueing the policyholder.

Filing A Lawsuit Against An Insurance Company

April 12, 2010 | Mark S. Humphreys

When a couple in Grand Prairie, Arlington, Fort Worth, Dallas, or Weatherford, has to sue an insurance company, is there anything that they have to do first? The Texas legislature has enacted laws and the Supreme Court of Texas enforces these laws telling us what to do. The quick answer is; see an experienced Insurance Law Attorney. The longer answer follows.

Texas Insurance Code, Section 541.154(a) and (b), tells us that as a prerequisite to filing a suit seeking damages, the plaintiff must give written notice to the other person at least sixty days before filing suit. The notice must tell the other person the specific complaint, and the amount of actual damages and expenses, including attorney’s fees, incurred in asserting the claim. The best way for this to work is that once a person realizes that there is, or is going to be a problem, to write down everything that is happening. Try to remember back to all that has happened and write it down and gather any documents, such as letters, e-mails, faxes, the policy, etc., and get it organized to present to an attorney. Doing this while it is freshest in your memory is better than putting it off.

Texas Insurance Code, Section 541.154(c), tells us that notice is not required if the lawsuit must be filed sooner than the sixty day notice to avoid limitations, or if the claim is asserted as a counterclaim.