First Party Insurance

Mineral Wells insurance lawyers need to know the difference between first party claims and third party claims and how that relates to bad faith insurance claims.
The Texas common law duty of good faith and fair dealing extends protection to the insured, whether the insured obtained the insurance coverage directly or coverage was obtained some other way for the insured. The 1987, Texas Supreme Court, in the case, Arnold v. National County Mutual Fire Insurance Co. recognized a common law duty of good faith and fair dealing owed to an insured, which arises from the “special relationship” established by the insurance contract. In the 1988 case, Aranda v. Insurance Company of North America, the Texas Supreme Court extended this duty of good faith and fair dealing to a worker insured under a workers’ compensation policy purchased by his employer.
An injured third party claimant lacks standing to sue the negligent driver’s liability insurance company for breach of the duty of good faith and fair dealing. We know this from the 1994 Texas Supreme Court case, Allstate Insurance Company v. Watson.
In 1992, the Texarkana Court of Appeals in CNA Insurance v. Scheffey, held that an insurance company does not owe a duty of good faith and fair dealing to a third party beneficiary. Specifically, the court held that a workers’ compensation carrier did not owe a duty of good faith and fair dealing to a treating physician. Also worth noting is that in the case, Transportation Insurance Company v. Archer, the Fort Worth Court of Appeals held that a workers’ compensation carrier did not owe a duty of good faith and fair dealing to the employee’s spouse who was seeking mental anguish damages as a result of the insurance company’s breach of its duty owed to the employee.
The above contrasts with a 1992, El Paso Court of Appeals opinions wherein the court held that an insurance company does owe a duty of good faith and fair dealing to a third party beneficiary of an insurance policy. This case is styled, Hopkins v. Highlands Insurance Company. Also, a Houston Court of Appeals held in 1992, that a duty of good faith and fair dealing is owed by an HMO to health care providers, because of the special relationship between the two.
It is important to realize that the duty of good faith and fair dealing only applies in the context of first party claims. In other words, in claims where the insured is making the claim. An interesting twist to this is that an insurance company does not owe its insured a duty of good faith and fair dealing to investigate and defend claims against the insured. This was told to us in the 1996 Texas Supreme Court case, Maryland Insurance Company v. Coatings & Services, Inc.