Insurance Company Refusing Claim

People in Grand Prairie, Fort Worth, Dallas, Arlington, Hurst, Euless, Bedford, Grapevine, and other places in the DFW metroplex would want to know why an insurance company refuses a claim and what the consequences are. The following case may give some insight.
This is a 1999, Fort Worth Court of Appeals case styled, “Mid-Century Insurance Company v. Foreman.” Here are some facts:
Joyce Foreman was involved in a car accident with anther driver, Karl Buehner. Foreman’s auto policy included $250,000 in underinsured motorist coverage. Foreman settled with Buehner’s insurance carrier for approximately $20,000. It is disputed whether or not Mr. Foreman spoke with the Mid-Century agent before the settlement. Because of extensive medical bills, the Foreman’s filed an uninsured motorist claim with Mid-Century. Fisher, a Mid-Century adjuster, mailed an acknowledgement and request for information. Fisher spoke with Mr. Foreman who told her that they had hired a lawyer. Fisher stopped all contact with the Foremans.
The Foremans sued Mid-Century to recover extra-contractual and contractual UIM damages. Based on a review of the Foreman’s medical records, Mid-Century denied the Foremans’ claim for failing to obtain consent before settling with State Farm and Buehner under the policy terms. Later, Mid-Century withdrew its denial based on the Texas Supreme Court opinion in Hernandez v. Gulf Group Lloyds, which held that a settlement without consent exclusion is unenforceable absent a showing that the insurer had been prejudiced by the insured’s failure to obtain consent.
The Foremans’ claim for UIM benefits was severed and tried separately from all extra-contractual causes of action. In the trial for UM benefits, the jury awarded $112,287.00 to Joyce and $12,500.00 to her husband. That judgment was not appealed.
The Foremans’ extra-contractual claims were then tried. The Foremans focused on Mid-Century’s denial of the claim. The jury found that Mid-Century caused the Foremans damages by committing deceptive acts, breached its duty of good faith and fair dealing, and knowingly failed to promptly pay the claim. The jury also found that Mid-Century’s conduct was knowing and intentional but was not grossly negligent. The jury awarded $150,000 to Foreman and $175,000 to her husband for mental anguish damages. A bifurcated proceeding was then held in which the jury awarded the Foremans an additional $125,000 each because Mid-Century “knowingly violated the DTPA.” These additional damages were not awarded to the Foremans because the Insurance Code provided a greater recovery. Mid-Century appealed.
The appeals court held that because there was no evidence that the insurance company acted “knowingly,” the judgment is reversed and a take nothing judgment in favor of the insurance company is rendered.
In its holding, the court said a culpable mental state is required to recover mental anguish damages under Section 541.060. “Knowingly” means actual awareness of the falsity, unfairness or deception of the act or practice made the basis for a claim for damages under Section 541.060. “Actual awareness” may be inferred where objective manifestations indicate that a person acted with actual awareness.
The Court stated that “actual awareness” does not mean merely that a person knows what he is doing, but it does mean that a person knows that what he is doing is false, deceptive or unfair. This is a more culpable mental state than gross negligence.
The court then said, in this case, there is no evidence that Mid-Century knew it was acting falsely, deceptively or unfairly towards the Foremans. Therefore, their mental anguish award cannot stand. The Foremans’ assertions based on unsupported inferences are no more than a mere scintilla of evidence and cannot support a jury’s finding.