Articles Posted in Bad Faith Insurance

Bad Faith Claims and proving them have their own set of rules.  These rules were discussed in a 2020 opinion from the Eastern District of Texas, Beaumont Division.  The opinion is styled, Mt. Javed Ventures, Ltd. v. Mt. Hawley Insurance Company.

This is a summary judgment opinion.  The legal history and the facts of the case can be read in the opinion.  This writing will focus on the law related to “bad faith claims.”

The Texas Supreme Court has stated in previous case opinions that under Texas law, “an insurer has a duty to deal fairly and in good faith with its insured in the process of payment of claims.”  This duty is breached if: “(1) there is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and (2) the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim.”  Whether an insurance company’s liability has become reasonably clear is a question of fact as cited in the 1997, Texas Supreme Court opinion, Universal Life Ins. Co. v. Giles.  However, evidence establishing only a bona fide coverage dispute does not demonstrate bad faith.  Evidence that shows a bona fide coverage dispute does not, standing alone, demonstrate bad faith.

Bad faith claims are a common source of litigation.  A 2020, opinion from the Southern District of Texas, Houston Division, discusses bad faith claims in the situations where an appraisal clause in the insurance contract allows for appraisal and that clause is invoked.  The case is styled, Braulio Reyna v. State Farm Lloyds.

Reyna was insured by a State Farm policy which covered loss to his home.  This homeowners policy contained an appraisal clause.  The home suffered storm damage during the policy period.  A claim was timely made.  State Farm had the home adjusted by one of its adjusters and made payment of the claim.  State Farm later paid more money on the claim based on a reevaluation.

Next, Reyna requested another investigation on the damages and State Farm sent an additional small amount.  Reyna then invoked the appraisal clause in the insurance contract and the appraisal resulted in a much higher estimate of damages which State Farm immediately paid.

The concurrent-cause doctrine is a source of much litigation as it relates to storm damage to roofs and structures.  This was the issue in a 2020, Western District of Texas, San Antonia Division, opinion styled, Ironwood Building II, LTD. and Principle Auto Management, LTD. v. Axis Surplus Insurance Company.

This is an opinion issued on competing motions for summary judgment.  The Court denied both motions.

The Plaintiffs suffered a hailstorm in 2016, and were paid money related to the damages by the insurance company who provided coverage at the time of the loss.  Only minor repairs were made and there were no leaks occurring on the property.  After this, Plaintiffs purchased another insurance policy with Axis.

Lawyers who handle bad faith insurance cases will usually tell you that it is not necessarily easy to explain but as it relates to “bad faith” you know it when you see it.This is discussed a little bit in a 2020 opinion from the Western District of Texas, San Antonio Division, case styled, Jorge A. Alvarez v. State Farm Lloyds.

This is a lawsuit wherein State Farm is sued for violations of the Texas Insurance Code among other things.

Alvarez claims he suffered damage to his clay tile roof caused by hail and wind storms on or about April 25, 2016.  This damage was noticed on February 27, 2018, and reported to State Farm.  An inspection was performed with experts for Alvarez being present.  The adjuster, Santos, did not identify any wind or hail damage to the roof.  He observed “many damaged clay tiles,” and noted that the “damage to the tile is not consistent with wind or hail.”  Santos determined that cracks on the tiles begin on the upper left corner of the tiles, and start at the nail fastener and then work down or down and across the tile.  He did not note any spatter on tile or exterior elevations but did note “mech damage to furnace caps that is not the result of hail.”  Santos showed Mrs. Alvarez photos to explain how he reached his conclusions.  He recommended that the Alvarezes “contact the tile manufacturer or distributor of the tile to address uniform damage to the tiles” based on the damage he observed.  Mrs. Alvarez “expressed understanding” but then had to leave before Santos could draft his letter describing the results of the inspection, so he left the letter at the front door when he finished writing it.

Well, Insurance Lawyers, here it is happening again.  Knowing the little ways to keep a lower dollar case out of Federal Court are just too simple for it to happen again and again.  This 2020, opinion is also from the Southern District, Houston Division, and is styled, Michael Dyll and Remi Dyll v. Palomar Specialty Insurance Company.

The Dylls sued Palomar in State Court and Palomar properly removed the case to Federal Court pursuant to 28 U.S.C., Section 1441(a).  A defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  The operative facts and pleadings are evaluated at the time of removal.

Federal Courts have jurisdiction when the parties are from different states and the amount in controversy exceeds $75,000.  The amount in controversy is ordinarily determined on the basis of the sum demanded in good faith in the initial pleading.  A demand is made in bad faith if its purpose is to defeat Federal jurisdiction.  The removing defendant must show by a preponderance of the evidence that the amount in controversy exceeds $75,000.  A Plaintiff must make a showing that his recovery will not exceed the amount stated in the complaint if the amount is less than $75,000.  To make such a showing of legal certainty, Texas plaintiffs must file a binding stipulation or affidavit with the original state petition.  A stipulation filed after removal is irrelevant to the court’s analysis.

Insurance lawyers should know ways that work to stay out of Federal Court.  Not knowing how to properly plead the case will result in the case being in Federal Court.  This is illustrated in a January 2020 opinion from the Southern District of Texas, Houston Division, styled, Mario Rodriguez v. Ocean Harbor Casualty Insurance Company.

Mario had filed suit in State Court based on a property claim dispute with Ocean Harbor.  Ocean Harbor removed the case to this Federal Court based on diversity jurisdiction.  Mario filed this motion to remand.

When a defendant removes a case to Federal Court the defendant has the burden of proving by a preponderance of the evidence that subject matter jurisdiction exists.  Operative facts and pleadings are evaluated as they exist at the time of removal.

Lawyers who handle insurance claims have to know the pleading requirements for alleging fraud when a lawsuit ends of in Federal Court.  Otherwise, the fraud allegations can be thrown out of Court.  This is illustrated in a February 2020 opinion from the Southern District of Texas, Houston Division.  The opinion is styled, Nancy Roberson v. Allstate Vehicle and Property Insurance Company.

This is a claim for roof damage alleged to have resulted from storms in Houston.  Roberson had filed two previous lawsuits which she had voluntarily dismissed.  In this third lawsuit, Allstate has moved for summary judgment and for a judgment on the pleadings.  This Court granted the motion for summary judgment in favor of Allstate.

Roberson’s common law fraud claim must satisfy Federal Rule of Civil Procedure 9(b).  This Rule requires a plaintiff to state the circumstances of an alleged fraud with particularity.  The elements of Texas common law fraud are (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.  Roberson must state the who, what, when, where, and how of the alleged fraud by pleading the time, place, and contents of the false representation, as well as the identity of the person making the misrepresentations and what that person obtained thereby.

Insurance cases in Federal Court require the pleadings to be substantive.  This is seen in a 2019, decision from the Southern District of Texas, Corpus Christi Division.  The decision is styled, Alvira Blue v. Allstate Vehicle and Property Insurance Company.

Allstate filed a motion with the Court requesting that Blue’s claims for misrepresentation under Texas Insurance Code, Section 541.060(a)(1), be dismissed.

This Court granted the motion and discussed.

Insurance lawyers know that if a jury is convinced of the wrong an insurance company has committed that there is a chance to recover a trebling of the actual damages in the case.  So how does that work?  This is discussed in a 2019, opinion from the Texas First Court of Appeals.  The opinion is styled, Certain Underwriters At Lloyd’s, London, Syndicate Numbers 2020, 1084, 2001, 457, 510, 2791, 2987, 3000, 1221, 5000 And Navigators Insurance Company UK v. Prime Natural Resources, Inc.

The facts of this case can be read by reading the opinion.  The case was tried to a jury and the jury found in favor of Prime.  The jury also awarded treble damages based on the conduct of the insurance companies.  The focus here is on how the Court dealt with the issue of treble damages.

As a result, Underwriters argues that even if Prime were entitled to recover additional Policy benefits, it is not entitled to additional damages under Chapter 541 of the Insurance Code.