Dallas Fort Worth Insurance Lawyer Blog

Bad Faith – Delaying Or Denying Claim

February 13, 2019 | Mark S. Humphreys

As was stated in the 1997, Texas Supreme Court opinion, Universe Life Ins. Co. v. Giles, 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 its liability was reasonably clear. However, an insurance company may withhold UIM benefits until the insured’s legal entitlement is established.

Statutory liability may also be imposed on an insurer that delays payment of a claim under Texas Insurance Code, Section 542.051 and those sections following, if the insurer delays payment for more than 60 days from the date it received all the information reasonably requested and required, the insurer must pay the claim along with the statutory penalty. An insurer’s failure to comply with the requirements of this Prompt Payment of Claims section will result in imposition of statutory penalties, even if the delay in payment is in “good faith.” If an insurer promptly interpleads policy proceeds, it cannot be subjected to statutory penalties for delayed payment. However, in the 2007, Texas Supreme Court opinion, State Farm Life Ins. Co. v. Martinez, the court held an insurer may be liable for statutory penalties for interpleader filing after the prompt payment deadlines.

To recover the statutory penalties available under the Prompt Payment of Claims Act, an insured must first prove that the insurer is liable for the underlying claim. The insured must establish three elements: (1) a claim under an insurance policy; (2) that the insurer is liable for the claim; and (3) that the insurer has failed to follow one or more sections of the Prompt Payment of Claims Act with respect to the claim.

How To Get To Bad Faith Against An Insurance Company

February 10, 2019 | Mark S. Humphreys

The standard of bad faith was originally phrased in the negative under the 1988, Texas Supreme Court case, Aranda v. Insurance Co. of N. Am. Under that case, the first element of bad faith required an objective determination of whether a reasonable insurer under similar circumstances would have denied plaintiff’s claim. The second element balanced the right of the insurance company to investigate and pay compensable claims. This element was met by establishing that the insurance company actually knew there was no reasonable basis to deny the claim or that, based on its duty to investigate, the insurance company should have known that there was no reasonable basis for denial. Under the test, insurers maintained the right to deny invalid or questionable claims and would not be subject to liability for an erroneous denial of a claim.

The Texas Supreme Court, in the 1997 opinion, Universal Life Ins. Co. v. Giles, rephrased the standard in an attempt to ease the incompatibility between the no-evidence standard of review and the bad faith standard of liability. Pursuant to this decision, the insured must prove the insurer: (a) either denied or delayed payment of the claim; and (b) with respect to which the insurer’s liability has become reasonably clear.

An insurer’s liability is not reasonably clear, and liability must not be imposed under Texas Insurance Code, Section 541.001, unless the insured shows that: (1) the policy covers the claim; (2) the insured’s liability is reasonably clear; (3) the claimant has made a proper settlement demand within policy limits; and (4) the demand’s terms are such that an ordinarily prudent insurer would accept it. A proper settlement demand generally must clearly state a sum certain and propose to fully release the insured. These elements comprise the statutory liability standard against which to measure legal sufficiency. An insurer’s denial of a claim it was not obligated to pay might nevertheless be in bad faith if it’s conduct was extreme and produced damages unrelated to and independent of the policy claim. However, an insurer does not breach its duty merely by erroneously denying a claim. Evidence that only shows a bona fide dispute about the insurer’s liability on the contract does not rise to the level of bad faith.

Recourse For Insurance Companies Cheating

February 9, 2019 | Mark S. Humphreys

The Insurance Code sections and the Deceptive Trade Practices Act were adopted together in 1973, as part of a package to reform legislation, are interrelated, and incorporate each other.

Texas Insurance Code, Section 541.008 says the Insurance Code provisions are to be liberally construed and applied to promote its underlying purposes to define and prohibit unfair and deceptive insurance practices. This is affirmed in the 1988, Texas Supreme Court opinion, Vail v. Texas Farm Bur. Mut. Ins. Co.

The same court in the 1981 case, Cameron v. Terrell & Garrett, Inc., stated that the similar construction mandate in the DTPA requires that the statute be given “its most comprehensive application possible without doing any violence to its terms.” In the 1985, the Texas Supreme Court in Kennedy v. Sale, applied the same reasoning in insurance cases.

Insurance Misrepresentations

February 6, 2019 | Mark S. Humphreys

Insurance attorneys know that Section 541.051 broadly prohibits making any statement misrepresenting the terms of a policy, or the benefits, advantages, or dividends of a policy, making misrepresentations about the financial condition of an insurer, misrepresenting the true nature of any policy or class of policies, or making any misrepresentation to a policy holder for the purpose of inducing or intending to induce the policyholder to allow an existing policy holder to lapse, forfeit, or surrender his insurance. This provision is sometimes referred to as the “anti-twisting” provision, because the latter portion is aimed at preventing one insurer stealing away the insureds of another insurer by making misrepresentations.

Section 541.052 prohibits making any advertisement or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business that is untrue, deceptive, or misleading.

Section 541.061 prohibits misrepresenting an insurance policy by:

Responsibilities Of Insurance Agents

February 3, 2019 | Mark S. Humphreys

Here is a list of responsibilities that insurance agents can be held responsible for failing to perform or performing incorrectly.

A. From a 1948, El Paso Court of Appeals opinion styled, Burroughs v. Bunch, an insurance agent has a duty to procure the coverage entrusted to his care, or failing to do so, to immediately notify the insured of this fact. A more recent opinion from the Tyler Court of Appeals, Critchfield v. Smith, which was issued in 2004, says this duty to procure is two distinct duties: (1) the duty to use reasonable diligence in attempting to place the requested insurance, and (2) the duty to inform the client promptly if unable to do so.

B. From the 1992, Texas Supreme Court opinion styled, May v. United Services Association of American, requires that agents keep their insureds fully informed about the current status of a policy’s in force status.

How Are Insurance Agents Held Liable For Their Wrongs

February 2, 2019 | Mark S. Humphreys

In order to hold a person liable for his/her acts or omissions, the thing complained of must violate a duty which the law recognizes. This is easily understandable in the case of a collision resulting from running a stop sign. The law imposes a duty of drivers to stop at stop signs. So, when a driver violates that duty by running a stop sign, he or she is liable for the damages caused. So, too, with insurance agents.

Nationally there is a concept known as the “professional judgment rule” which holds that an agent in the business of selling insurance must act in a manner befitting a reasonable and prudent agent. Accordingly, agents who do not utilize their skills in this way are subject to claims for damages. Unfortunately, our Texas Supreme Court has rejected the “professional judgment rule” for use Texas. Instead, in Texas, agents have a general duty to use reasonable care, skill and diligence in procuring insurance. It even includes the duty of an agent to “keep his clients fully informed so that they can remain safely insured.” This is according to the 1977, Beaumont Court of Appeals opinion, Trinity Universal Ins. Co. V. Burnette. In the Burnette case the court upheld a jury finding that an insurance agent was negligent in failing to “thoroughly acquaint himself” with his client’s needs and in failing to produce the coverage for risks or perils the client faced.

On 1992, the Texas Supreme Court was faced with deciding if an insurance agent was negligent for failing to explore other health insurance coverage options beyond one with a tricky termination and deferral clause. This was the opinion styled, May v. United Services Association of America. In this case, the May wound up without coverage after buying the policy that the agent recommended. The lawsuit claimed that the agent failed to investigate alternative policies which were easily obtainable. This was factually true – the agent did not investigate any of the several other possible policies and instead settled on the first one he found. Nevertheless, the Texas Supreme Court found that the agent did not “mislead” the May about the limits of the policy selected. The May case dramatically changed the fact of insurance law in Texas. In essence, it appears the the Court now requires there to be an actual misrepresentation in order for the Plaintiff to succeed. However, the court did leave open the possibility that the Mays might have succeeded if they had an explicit agreement with the agent regarding what terms they required in the policy that the agent obtained. Had the agent violated such an agreement, he might have been found liable.

Uninsured Motorist Case And A Jury

January 30, 2019 | Mark S. Humphreys

Texas insurance lawyers will find this interesting.

A person finds early on when dealing with an insurance company that simply making complaints and contacting the Texas Department of Insurance is a waste of time and effort.

If you are an attorney representing someone injured in an automobile accident and the person who cause the wreck is uninsured and the person injured has uninsured motorist (UM) coverage with their auto insurance company and the company is refusing to compensate their customer, here is a sample opening statement when trying this case to a jury:

Underinsured Motorist Coverage And Standing To Sue

January 27, 2019 | Mark S. Humphreys

Here is a 2018, case with circumstances this insurance lawyer has not seen before. The case is out of the San Antonio Court of Appeals and is styled, Virginia Bretado v. Nationwide Mutual Insurance Company.

This case is an appeal from a motion for summary judgment granted in favor of Nationwide. Bretado was struck from behind by Paul Moryl. On the same day, Bretado filed a claim against Nationwide for underinsured motorist (UIM) benefits. Later, Bretado sued Moryl.

Nationwide denied the claim, stating the Moryl’s insurance was sufficient to satisfy Bretado’s damages.

Delay In Paying Insurance Claim – Uninsured Coverage

January 26, 2019 | Mark S. Humphreys

Insurance lawyers will often run across the situation at issue in the 2018, Dallas Court of Appeals opinion, George Bryant v. Progressive County Mutual Insurance Company and Kristen Winkler.

This is a uninsured motorist (UM) case wherein Bryant sued Progressive and the adjuster, Winkler, for the harm caused by the UM driver and numerous insurance code violations. The trial court severed the auto wreck from the bad faith insurance claims. In an UM case, Brant first had to prevail at trial, which he did. Bryant then continued his claims for insurance code violations. The trial court granted a motion for summary judgment in favor of Progressive and this appeal followed.

Bryant alleged numerous appeal points but the one discussed here is the issue regarding the Texas Prompt Payment of Claims Act (PPCA).

Renter’s Insurance Claims

January 23, 2019 | Mark S. Humphreys

Renter’s insurance claims are not really much different than a homeowners claim. But one distinction that sometimes appears is the language in a renter’s policy will often times shorten the statute of limitations. This is seen in the 2018, San Antonio Court of Appeals opinion styled, Terry Granger v. The Travelers Home And Marine Insurance Co.

This is a summary judgment case rendered in favor of Travelers and affirmed on this appeal. The relevant policy language reads:

9. Suit Against Us. No suit or action can be brought against us unless there has been full compliance with all of the terms under Section I of this policy. Action