{"id":894684,"date":"2018-08-08T11:32:47","date_gmt":"2018-08-08T17:32:47","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894684"},"modified":"2018-08-08T11:35:15","modified_gmt":"2018-08-08T17:35:15","slug":"texas-supreme-court-issues-highly-anticipated-bad-faith-opinion","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/","title":{"rendered":"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion"},"content":{"rendered":"

Jamie L. Moore | Bradley Arant Boult Cummings LLP<\/a> | May 15, 2018<\/p>\n

One year after its initial decision in a significant bad faith case, the Texas Supreme Court has issued its much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca<\/em>. The case involved a homeowner whose post-Hurricane Ike property damage claim was denied by USAA Texas Lloyds Company (USAA). At trial, the jury found that USAA did not breach the policy, but that the company did violate the unfair settlement practices provisions of the Texas Insurance Code.<\/p>\n

Given that \u201csubstantial confusion\u201d existed in Texas courts regarding the relationship between contractual claims for breach of an insurance policy and statutory bad faith claims under the Texas Insurance Code, the Texas Supreme Court attempted to set clearer precedent in its original opinion in April 2017. However, the ruling was met with concern that it further muddied Texas insurance law and set negative precedent for insurers by reviving claims for treble damages under the Texas Insurance Code. In an unusual move, the Texas Supreme Court agreed to a rehearing.<\/p>\n

In the newly released opinion, which replaces the 2017 ruling, the court reiterates the five \u201cdistinct but interrelated rules that govern the relationship between contractual and extra-contractual claims in the insurance context\u201d it previously identified last year. Importantly, the court further clarifies the critical point for insurers that generally an insured cannot recover damages under the Texas Insurance Code without establishing a breach of the policy, and that exceptions to the general rule are narrow.<\/p>\n

The five rules developed by the Texas Supreme Court that should be applied by Texas courts to the interplay between contractual and Texas Insurance Code statutory claims are:<\/p>\n

    \n
  1. The General Rule:\u00a0<\/strong>An insured cannot recover policy benefits under a Texas Insurance Code violation if the insured does not have a right to those benefits under the policy. This rule derives from the fact that the Texas Insurance Code only allows an insured to recover actual damages \u201ccaused by\u201d the insurer\u2019s statutory violation.<\/li>\n
  2. The Entitled-to-Benefits Rule:\u00a0<\/strong>An insured who establishes a right to receive policy benefits can recover the benefits as \u201cactual damages\u201d under the Texas Insurance Code if the statutory violation causes the loss of benefits. The court refers to this rule as a \u201clogical corollary to the general rule.\u201d<\/li>\n
  3. The Benefits-Lost Rule:\u00a0<\/strong>An insured can recover benefits as actual damages under the Texas Insurance Code even if the insured has no right to those benefits under the policy if the insurer\u2019s conduct caused the insured to lose that contractual right. This principal is recognized where an insurer misrepresented a policy\u2019s coverage, waived its right to deny coverage or is estopped from doing so, or committed a violation that caused the insured to lose a contractual right to benefits that it otherwise would have had.<\/li>\n
  4. The Independent-Injury Rule:\u00a0<\/strong>This rule has two aspects:\n
      \n
    1. If an insurer\u2019s statutory violation causes an injury independent of the insured\u2019s right to recover policy benefits, the insured may recover damages for that injury even if the policy does not entitle the insured to receive benefits. However, when an insured seeks to recover damages that \u201care predicated on,\u201d \u201cflow from,\u201d or \u201cstem from\u201d policy benefits, the general rule applies and precludes recovery unless the policy entitles the insured to those benefits; and<\/li>\n
    2. An insurer\u2019s statutory violation does not permit the insured to recover any damages beyond policy benefits unless the violation causes an injury that is independent from the loss of benefits.<\/li>\n<\/ol>\n<\/li>\n
    3. The No-Recovery Rule:\u00a0<\/strong>An insured cannot recover any damages based on an insurer\u2019s Texas Insurance Code violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits. This rule is considered \u201cthe natural corollary to the first four rules.\u201d<\/li>\n<\/ol>\n

      The court also provided additional context and guidance for these rules. Ultimately, with respect to the claims at issue in this particular case, the court remanded the case to the trial court for a new trial consistent with its opinion.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Jamie L. Moore | Bradley Arant Boult Cummings LLP | May 15, 2018 One year after its initial decision in a significant bad faith case, the Texas Supreme Court has issued its much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca. The case involved a homeowner whose post-Hurricane Ike property damage claim was denied by USAA… Continue reading Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[140],"tags":[9895,140,155],"class_list":["post-894684","post","type-post","status-publish","format-standard","hentry","category-bad-faith","tag-advise-consult","tag-bad-faith","tag-texas","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nTexas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2018-08-08T17:32:47+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2018-08-08T17:35:15+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion\",\"datePublished\":\"2018-08-08T17:32:47+00:00\",\"dateModified\":\"2018-08-08T17:35:15+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\"},\"wordCount\":678,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise & Consult\",\"Bad Faith\",\"Texas\"],\"articleSection\":[\"Bad Faith\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\",\"name\":\"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2018-08-08T17:32:47+00:00\",\"dateModified\":\"2018-08-08T17:35:15+00:00\",\"description\":\"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise & Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.","description":"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/","og_locale":"en_US","og_type":"article","og_title":"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.","og_description":"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/","og_site_name":"Advise & Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2018-08-08T17:32:47+00:00","article_modified_time":"2018-08-08T17:35:15+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion","datePublished":"2018-08-08T17:32:47+00:00","dateModified":"2018-08-08T17:35:15+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/"},"wordCount":678,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["Advise & Consult","Bad Faith","Texas"],"articleSection":["Bad Faith"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/","name":"Texas Supreme Court Issues Highly Anticipated Bad Faith Opinion - Advise & Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2018-08-08T17:32:47+00:00","dateModified":"2018-08-08T17:35:15+00:00","description":"One year after its initial decision in a bad faith case, the Texas Supreme Court has issued a much-awaited opinion in\u00a0USAA Tex. Lloyds Co. v. Menchaca","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/texas-supreme-court-issues-highly-anticipated-bad-faith-opinion\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise & Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3KKo","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=894684"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894684\/revisions"}],"predecessor-version":[{"id":894687,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/894684\/revisions\/894687"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=894684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=894684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=894684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}