Damages In Insurance Cases

Grand Prairie, Fort Worth, Arlington, Mansfield, Crowley, Benbrook, Burleson, Cresson, and other Tarrant County residents would naturally wonder what the value of their claim is when their insurance company violates the law in the way they treat one of their customers. In other words, what will it cost the insurance company.
The most common actual damages when an insurance company treats somebody wrong are the actual policy benefits themselves. In certain cases under the Insurance code, the amount of policy benefits wrongfully withheld is an element of damages caused by the insurance company’s conduct. This is often held to be the case as a matter of law. This was stated in the Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Company, decided in 1988. The Supreme Court in the Vail case rejected the insurance company arguement that damages for an unfair settlement practice had to be something more than the amounts due under the policy. The court held that damages for a wrongful refusal to pay are at least equal to the policy benefits, as a matter of law. The reasoning of the court was:
The fact that the Vails have a breach of contract action against Texas Farm does not preclude a cause of action under the Texas Deceptive Trade Practices Act and what is now Section 541 of the Texas Insurance Code. Both the DTPA and the Insurance Code provide that the statutory remedies are cumulative of other remedies. They said it was well settled that persons without insurance are allowed to recover based on false representations of coverage, and that an insurance company may be liable for damages to the insured for its refusal or failure to settle third-party claims. It would not be right to bar an insured person who has paid premiums and is entitled to protection under the policy of insurance from recovering damages when the insurance company wrongfully refuses to pay a valid claim. The court stated that “Such a result would be in contravention of the remedial purposes of the DTPA and the Insurance Code.”
One thing for any person, including an experienced Insurance Law Attorney to be aware of here is that sometimes the courts construe this language in the Vail case to not always include that policy benefits are damages as a matter of law. This was the result in the 1995 case, Twin City Fire Insurance Company v. Davis. The court held that policy benefits culd not serve as independent tort damages resulting from the insurance company’s breach of its duty of good faith and fair dealing, which were necessary to support exemplary damages. Other cases have also concluded that policy benefits are not necessarily damages as a matter of law. One of these cases is Seneca Resources Corporation v. Marsh & McLennan, Inc., a 1995, Texas Court of Appeals, Houston 1st District case. Another is, Beaston v. State Farm Life Insurance Company, a 1993, Austin Court of Appeals case.
The issue boils down to – making sure you have good legal representation when pursueing a claim against an insurance company for wrongfully denying a claim.