Exemplary Damages In DTPA and Insurance Cases

Tarrant County lawyers need to be able to understand the case facts that will get them to exemplary damages. To know the difference between the threat of and the reality of getting them based on what transpired in the case.
Texas case law clearly allows for the recovery of exemplary damages in cases involving violations of the Texas Insurance Code and violations of the Texas Deceptive Trade Practices Act (DTPA). In 1994, the Texas Supreme Court issued an opinion in the case styled, Transportation Insurance Co. v. Moriel.
In Moriel, which was a “bad faith” case, the court held that the plaintiff must show that the insurance company had “no reasonable basis” to deny or delay payment of the claim and that the insurance company committed an act that was likely to cause serious injury beyond the injury associated with the underlying breach of the insurance contract. The court suggested that punitive damages could be recovered if the insurance company denied coverage for medical care knowing the insured would suffer serious injury, or denied disability coverage with the inherent extraordinary degree of hardship that would result.
The Moriel case has now been superseded by statute. In 1995, the Legislature codified the standards for recovering exemplary damages. Exemplary damages may be recovered only if the Plaintiff shows by clear and convincing evidence that the harm resulted from “fraud” or “malice.” This burden may be satisfied merely by evidence of bad faith or deceptive trade practice. The statute is found in the Texas Civil Practice & Remedies Code, Section 41.003. “Fraud” has to be other than constructive fraud per 41.001(6). “Malice” according to Section 41.001(7) means:
(A) A specific intent by the defendant to cause substantial injury to the claimant; or (B) An act or omission:
(i) which viewed objectively from the standpoint of the actor at the time of its occurrence involves an extreme degree of risk, considering the probability and magnitude of the potential harm to others; and (ii) of which the actor has actual, subjective awareness of the risk involved, but never the less proceeds with conscious indifference to the rights, safety, or welfare of others.
Statutory caps limit the amount of exemplary damages. The plaintiff may only recover the greater of: two times the amount of economic damages, plus an amount equal to any noneconomic damages, not to exceed $750,000; or $200,000, according to Section 41.008(b). These caps on recovery do not apply if the defendant committed one of the listed felonious acts listed in Section 41.008(c).
It is important to know that the defendant in an exemplary damages case is entitled to a bifurcated trial. This is found in Section 41.009.
The standards that a trier of fact are to consider are found in Section 41.011(a) and are:
(1) the nature of the wrong;
(2) the character of the conduct involved;
(3) the degree of culpability of the wrongdoer;
(4) the situation and sensibilities of the parties concerned;
(5) the extent to which such conduct offends a public sense of justice and propriety; and (6) the net worth of the defendant.
The evidence to support exemplary damages must be more than what is needed to show a breach of the duty of good faith and fair dealing.