Bald Assertions Insufficient to Hold Insurance Professionals Personally Liable for Claims-Handling Practices (TX)
While we do not ordinarily report on Texas litigation, occasionally we learn of decisions of particular import to insurance claim professionals.
In coverage litigation, insureds often attempt to recover more than damages for simple breach of contract. Most often, this comes in the form of a bald assertion of bad faith. At other times, however, insureds rely on state statutes that impose personal liability on insurance professionals. Fortunately, as they often do in bad faith cases, courts typically require something more than bald assertions to impose extra-contractual liability.
One example is the recent decision from the United States District Court for the Northern District of Texas. In Caruth v. Chubb Lloyd’s Co of Texas et al.., the insureds submitted an insurance claim for property damage. Chubb’s assigned adjuster retained a roofing company to investigate the loss and that company determined that the property damage was not the result of wind or hail. The insureds claimed that the adjuster’s handling of the claim led to an underpayment and a wrongful partial denial of coverage.
In the ensuing coverage action, the insureds relied on a Texas statute under which an individual adjuster may be held personally liable for how it adjusts a claim. According to the plaintiffs, personal liability was appropriate because the adjuster “failed to perform a proper and complete investigation of the claim;” represented that certain damages would be covered then failed to pay for such damage,” and retained the roofing company “because it was known that it would issue a report on which the claim for benefits would be denied.”
On these allegations, the court granted the insurer’s motion to dismiss. In doing so, the court reasoned that despite the allegations, the insureds failed to adequately describe the cause of their loss or specifically allege how the adjuster’s investigation was inadequate. According to the court, these conclusory statements were insufficient to state a cause of action for personal liability.
All insurance professionals should be cognizant of the possibility of a bad faith claim or even the imposition of personal liability. But the Caruth decision should provide some reassurance that bald assertions, without specific allegations of bad faith claim handling, fall short of the high burden necessary to impose extra-contractual remedies. Thanks to Michael Gauvin for his contribution to this post. Please email Brian Gibbons with any questions.