Exploring the Battlefields of Statutory Claims Against Insurers

August 23, 2000

Excerpt
As the Texas Supreme Court steadily whittles away at common-law bad faith in Texas, resourceful policyholders are turning with increasing frequency to the greener pastures of statutory bad faith, particularly Article 21.21 and (more recently) Article 21.55 of the Texas Insurance Code.  Frequency, however, does not necessarily translate into effectiveness.  Policyholders with colorable claims under the Insurance Code regularly assert them in hopes of obtaining treble damages (Article 21.21) and/or an 18 percent penalty for delayed payment of a valid claim (Article 21.55).  However, policyholders often allege these claims vaguely, almost as footnotes to their “main” contractual claims, rather than identifying specific statutory grounds and strategically obtaining discovery to effectively support them at trial.

This article is not a one-stop compendium of wisdom on statutory bad faith claims in Texas.  Rather, its modest goal is to assist policyholders in asserting claims under Article 21.21 § 4(10) & (11) and Article 21.55 more effectively.  To that end, this Article introduces the specific bases for recovery under the major “laundry lists” of actionable claims contained in Article 21.21—Sections 4(10) and (11)—as well as the lesser-known, but rapidly emerging, “delay claim” remedy provided by Article 21.55.

After introducing each statute, this Article describes an “emerging topic” regarding each—a cutting-edge issue that is gaining the attention of savvy coverage attorneys across Texas, and beyond. With respect to Article 21.21, this Article discusses the emerging issue of the “independent injury” requirement: whether the mere denial of policy benefits may support a bad faith claim, or whether such a claim must be supported by an “independent injury,” distinct from the damages flowing from the carrier’s breach of contract.  And with respect to Article 21.55, this Article discusses the emerging topic of whether the statute—which only applies to first-party claims—applies to a policyholder’s claim for a defense under a commercial general liability (“CGL”) insurance policy.

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