Dallas Fort Worth Insurance Lawyer Blog
Claiming roof damage is not as simple as it may appear at first glance. A December 2024 opinion from the Eastern District of Texas, Tyler Division, discusses what the courts look at in roof damage claims wherein the insurance company claims the damage is pre-existing or caused for reasons other than hail damage and whether that denial is cause for a “bad faith” claim. The style of the opinion is Winterfield United Methodist Church v. Church Mutual Insurance Company.
The facts and legal history of the case can be gleamed from reading the opinion. This is a summary judgment decision.
Plaintiff argues that under Texas law, an insurer cannot investigate a claim in a manner calculated to construct a pretextual, “outcome oriented” basis to deny the claim. Plaintiff explains several ways that Defendant engaged in such conduct, including: (1) Defendant ordered its engineer to perform a second inspection even though the first inspection identified hail damage; (2) Defendant withheld the engineer report from Plaintiff for several weeks; (3) Defendant retained an engineer to “rubberstamp” its predetermined outcome without first inspecting the property himself even though its independent adjuster had already found covered damages; (4) Defendant intentionally minimized the adjuster’s findings of hail damage; (5) Defendant continued to send out its engineer to reinspect the property until the estimated damages fell below the deductible amount; and (6) Defendant withheld the underwriting file of the property from the independent adjuster and engineer.
In its reply, Defendant argues that it performed a reasonable investigation of the loss, relied on its engineering expert when assessing Plaintiff’s claim, and paid Plaintiff accordingly. Defendant submits that, contrary to Plaintiff’s assertions, it has never contested that some covered hail damage occurred at the property. That amount of damage, however, fell below the applicable deductibles, which Defendant contends was reasonably explained to Plaintiff. Furthermore, Defendant argues that there is no requirement in the law that required Defendant to send Plaintiff the engineer report, let alone obtain an engineer in the first place.
Under Texas Insurance Code § 541.060(a)(2) & (7), an insurer may be held liable for “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim” when “the insurer’s liability has become reasonably clear,” or “refusing to pay a claim without conducting a reasonable investigation with respect to the claim.” Both the Insurance Code and the DTPA provide private causes of action for violations of these insurance code provisions. Additionally, an insurer has a common law duty “to deal fairly and in good faith with its insured in the processing and payment of claims.” Together, these are generally referred to as statutory and common law “bad faith” claims.
Under both the common law and the Insurance Code, “an insurer violates its duty of good faith and fair dealing by denying or delaying payment of a claim if the insurer knew or should have known that it was reasonably clear that the claim was covered.” However, “insurance carriers maintain the right to deny
questionable claims without being subject to liability for an erroneous denial of the claim.” Evidence
which only shows a bona fide dispute as to coverage is insufficient to sustain a claim for bad faith.
The mere fact that the insurer relies on an expert’s report to deny a claim does not foreclose the possibility of bad faith. “An insurer cannot insulate itself from bad faith liability by investigating a claim in a manner calculated to construct a pretextual basis for denial.”
Here, the court is satisfied that Plaintiff has demonstrated that material fact issues exist which preclude summary judgment on Plaintiff’s statutory and common law bad faith claims. As was the case in First Christian, Defendant did not provide the underwriting report or independent adjuster report to Plaintiff or to its engineer during the adjustment of the claim. Although Defendant contends that it was not required to disclose the report to Plaintiff, let alone the engineer and adjuster, “whether it was required to make the disclosure is not the issue.” Id. “A jury could reasonably infer that only disclosing favorable
information about a claim when the insurer knows of potentially unfavorable information is evidence of bias.”
Because the court finds that a genuine issue of material fact exists on Plaintiff’s statutory and common law bad faith claims, the court will not parse through Plaintiff’s remaining alleged evidence of bad faith—such a task is better suited in the hands of the jury. Accordingly, Defendant’s motion for summary judgment on Plaintiff’s statutory and common law bad faith claims should be denied.