Bad Faith Insurance Claims in Texas: What You Should Know

Under Section 541 of the Texas Insurance Code, an insurer breaches its duty of good faith and fair dealing when it denies a claim after its liability has become reasonably clear. Universal Life Ins. Co. v. Giles, 950 S.W.2d 48, 56 (Tex. 1997). But there is no bad faith conduct when a bona fide coverage dispute remains. State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997). “[W]hether an insurer has breached its duty of good faith and fair dealing is a fact issue.” State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42, 44 (Tex. 1998). What sort of behavior by an insurance company may constitute evidence of bad faith?  A recent opinion out of a federal court in San Antonio sheds some light on this issue.  

In Kahlig Auto Group v. Affiliated FM Insurance Group, the plaintiff owned several car dealerships in San Antonio that are covered by the defendant’s insurance policy.  The plaintiff claimed that tis properties were damaged by a hailstorm, and the insurer denied the claim, and the plaintiff filed suit for breach of contract and various violations of the Texas Insurance Code.  Judge David Ezra ruled on competing motions for summary judgment.  The insurer asked the Court to dismiss the plaintiff’s Section 541 claim.  

The Court found that Kahlig was likely responsible for much of the delay related to its claim because it was still determining whether the damages exceeded the deductible. But the Court agreed with the Plaintiff that some subsequent conduct over the course of AFM’s investigation established fact issues on the Section 541 claim. In April 2017, when one of plaintiff’s employees asked the insurance adjuster asked Martinez for more materials supporting his “high-level estimate” from May 2016, Martinez did not respond and instead closed the claim file. In March, 2018, when Kahlig had given a stronger indication that it would be pursuing some type of claim, the adjuster wrote an internal note “advis[ing] that no correspondence will be sent to the insured until the consultant’s report including lab test results is received and reviewed by the adjuster.”As such, the Court found some evidence supporting the bad faith claim and denied the insurer’s motion for summary judgment on this issue.  

Josh Borsellino has for years represented individuals against some of the largest companies in the country.  Josh is an insurance claim denial attorney, and he is actively seeking storm damage cases in Austin, San Antonio, Midland, Waco and San Angelo, and the surrounding areas.  If you have experienced unfair tactics by an insurance company after filing a storm damage claim, contact Josh at 817.908.9861 or email him here for a free and confidential consultation. 

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