Dallas Fort Worth Insurance Lawyer Blog
Life insurance claim denials will bring up many issues to be discussed, based on the Facts of the case. Here is a January 2025 case that presented an issue the Courts have never seen before. The opinion is styled, Mark Howell and Leslie Howell vs. Southern Farm Bureau Life Insurance Company.
This is a case of first impression for the Court. This lawsuit arises out of SFBLIC’s denial of a life insurance claim. Wade Howell applied for a life insurance policy that named his parents, Plaintiffs Mark and Leslie Howell, as the beneficiaries. Pending before the Court are claims of breach of contract and a violation of Chapter 542 of the Texas Insurance Code.
The allegation by SFBLIC in this summary judgment opinion is that Wade made misrepresentations in his claim for life insurance and as a result of the misrepresentations SFBLIC says the policy is void.
Under Texas law, a defendant may move for leave to designate a person as a responsible third party under Texas Civil Practices & Remedies Code, Section 33.004(a). A responsible third party is someone that a party alleges “to have caused or contributed to causing in any way the harm for which recovery of damages is sought, whether by negligent act or omission, by any defective or unreasonably dangerous product, by other conduct or activity that violates an applicable legal standard, or by any combination of these.” The trial court “shall” grant leave to designate the named person as a responsible third party unless another party files an objection on or before the fifteenth day after service of the motion and the objecting party establishes that “the defendant did not plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirement of the Texas Rules of Civil Procedure.”
SFBLIC seeks to designate Wade Howell as a responsible third party “so that the jury will be permitted to allocate a percentage of responsibility to him to the extent that any of his alleged wrongful acts and/or omissions caused or contributed to any of Plaintiffs’ alleged damages.” Plaintiffs object to the motion, arguing that SFBLIC’s reliance on Texas Civil Practice and Remedies Code § 33.004 is misplaced and that SFBLIC failed to properly allege any duty that Wade allegedly owed them.
Plaintiffs argue that SFBLIC’s reliance on Texas Civil Practice and Remedies Code § 33.004 is misplaced because Plaintiffs’ action is based on breach of contract, not tort or the Texas Deceptive Trade Practices Act (“DTPA”). Under Texas Civil Practice and Remedies Code § 33.002(a), a party may designate a responsible third party applies for claims based in tort or brought under the DTPA. SFBLIC concedes that its motion for leave does not apply to Plaintiffs’ breach of contract claim. However, SFBLIC contends that Plaintiffs’ claim brought under the Texas Insurance Code is “based in tort.”
The Court finds that Plaintiffs’ live claim under Chapter 542 of the Texas Insurance Code is an action that sounds in tort for purposes of the proportionate fault provision of the Texas Civil Practice and Remedies Code. Although it is true that an insurance policy is a contract generally construed using the same rules that govern contract construction, an insurance policy “is a unique type of contract because an insurer generally ‘has exclusive control over the evaluation, processing, and denial of claims,’ and it can easily use that control to take advantage of its insured.” This “special relationship” has therefore justified the imposition of a common-law duty of good faith and fair dealing on the insurer in its dealings with the insured. As with this common-law duty, “the Texas Insurance Code supplements the parties’ contractual rights and obligations by imposing procedural requirements that govern the manner in which insurers review and resolve an insured’s claim for policy benefits.” “An insured’s claim for breach of an insurance contract is ‘distinct’ and ‘independent’ from claims that the insurer violated its extra-contractual common-law and statutory duties.” For this reason, plaintiffs whose insurance claims have been denied typically bring both a breach of contract and extra- contractual claims under the Texas Insurance Code. Thus, “a claim for breach of the policy is a ‘contract cause of action,’ while a common-law or statutory bad-faith claim ‘is a cause of action that sounds in tort.’”
As applied to Texas Civil Practice and Remedies Code § 33.004, “Texas courts apply Chapter 33 to fraud claims and to statutory tort claims that do not include a separate and conflicting legislative fault allocation scheme.” “Extra-contractual claims under the Texas Insurance Code, such as . . . claims of misrepresentation and failure to evaluate its insurance claim promptly, are often recognized as statutory tort claims.” The Texas Insurance Code does not contain a fault allocation scheme. Thus, courts have held that Texas Civil Practice and Remedies Code § 33.004 applies to claims brought under the Texas Insurance Code as a statutory tort claim. Accordingly, the Court concludes that Plaintiffs’ insurance claim sounds in tort.
However, even though the Court finds that Plaintiffs’ claim under the Texas Insurance Code falls within the scope of Chapter 33 of the Texas Civil Practice and Remedies Code as an action in tort, the Court does not believe that it applies in this case based on its reading of the statutory text. A responsible third party is someone that a party alleges “to have caused or contributed to causing in any way the harm for which recovery of damages is sought, whether by negligent act or omission, by any defective or unreasonably dangerous product, by other conduct or activity that violates an applicable legal standard, or by any combination of these.” Here, Plaintiffs seek recovery under Texas Insurance Code § 542.058, which states:
Except as otherwise provided, if an insurer, after receiving all items, statements, and forms reasonably requested and required under Section 542.055, delays payment of the claim for a period exceeding the period specified by other applicable statutes or, if other statutes do not specify a period, for more than 60 days, the insurer shall pay damages and other items as provided by Section 542.060.
The Court does not see how Wade Howell, who passed away by the time the insurer received all documents and information to process Plaintiffs’ claim, could “cause or contribute to causing” the harm for which § 542.058(a) seeks to provide a remedy. This section of the Texas Insurance Code is designed to provide damages to individuals whose claims were not promptly processed by the insurer. It was not Wade who delayed SFBLIC’s alleged delayed payment of Plaintiffs’ claims. By virtue of his death, which preceded the Plaintiffs’ request for payment of life insurance benefits, Wade could not have caused or contributed to causing the alleged delay in payment of Plaintiffs’ claims for death benefits under the policy. A dead person cannot cause or contribute to causing the harm for which § 542.058(a) seeks to provide a remedy. The alleged actions of Wade’s misrepresentation occurred while he was still alive, before any claim was made. Accordingly, Wade could not be a “responsible third party” under the definition provided in § 33.011(6).
For these reasons, the Court DENIES SFBLIC’s motion.