What Is The Time for Responding to a Defense Tender?
Insurers must acknowledge with reasonable promptness pertinent communications with respect to claims. 28 Tex. Admin. Code § 21.203 (2). For purposes of this regulation, Texas presumes 15 business days is reasonably prompt. 28 Tex. Admin. Code § 21.203 (2).
Insurers must affirm or deny coverage within a reasonable time. 28 Tex. Admin. Code § 21.203 (10). There are no regulations, statues or cases that further define “reasonable time.”
Does Reserving Rights Create a Conflict of Interest?
A reservation of rights creates a potential conflict of interest. Northern County Mut. Ins. Co. v. Davalos, 140 SW 3d 685, 689 (Tex. 2004).
Does a Reservation of Rights Create Additional Duties?
No cases found.
What Must Be Done If A Conflict of Interest Exists?
Where a conflict of interest exists, an insurer is required to pay for independent defense counsel of the insured’s choosing. Steel Erection Co. v. Travelers Indemnity Co., 392 S.W.2d 713, 716 (Tex. App. 1965).
Who Is Responsible for Fees of Independent Counsel?
The insurer. See above.
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
An insurer has no duty to solicit an offer within policy limits. Birmingham Fire Ins. Co. of Pennsylvania v. Am. Nat. Fire Ins. Co., 947 S.W.2d 592, 597 (Tex. App. 1997).
What Actions May Result in a Claim for Bad Faith?
An insurer has breached it’s a duty to deal fairly and in good faith with its insured may be liable under a tort theory of bad faith. Arnold v. Nat’l County Mut Fire Ins. Co., 725 S.W.2d 165, 167-168 (Tex. 1987). Bad faith can only be found when the insurer’s liability was “reasonably clear.” Universal Life Ins. Co. v. Giles, 950 S.W.2d 48, 55 (Tex. 1997).
An insured may pursue a bad faith private cause of action under the Deceptive Practices Trade Act. Tex. Bus. & Com. Code § 17.41, et seq. To establish bad faith on the part of the insurer under the statute, the insured must show: (1) the plaintiff is a consumer, (2) the defendant engaged in false, misleading, or deceptive acts, and (3) these acts constituted a producing cause of the consumer’s damages. Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex. 1995); Tex. Bus. & Com. Code § 17.50(a)(1).
An insured may pursue a private right of action unfair settlement practices by an insured including “failing to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.” Tex. Ins. Code § 21.21
An insured may bring suit against a liability insurer for negligent failure to settle within policy limits. G. A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544, 547 (Tex. 1929).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
No cases found.
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Punitive damages may only be awarded if the insured can show that the insurer’s conduct was “malicious, intentional, fraudulent or grossly negligent” and that actual damages recovered in the underlying action must be independent of the policy proceeds that would be recoverable for a covered claim. Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 18 (Tex. 1994).
Mere negligence on the part of the insurer will not support an award of trebled damage for a Deceptive Trade Practices Act violation. St. Paul Surplus Lines Ins. Co., Inc. v. Dal-Worth Tank Co., Inc., 974 S.W.2d 51, 54 (Tex. 1998).
Alternative Coverage Options
An insurer may bring an action for a declaratory judgment to determine whether it has a duty to defend the insured. Fid. & Guar. Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787, 788 (Tex. 1982).
An insurer is entitled to a declaration that it had no duty to indemnify the insured even though the underlying tort action against the insured was still pending and no declaration of liability had as yet been determined in the tort suit. Farmers Texas County Mutual Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997).
Relevant Statutes
Declaratory Judgment – Tex. Civ. Prac. & Rem. Code § 37.003(a).
“A court of record, within its respective jurisdiction has power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force and effect of a final judgment or decree.”
Deceptive Trade Practices Act – Tex. Bus. & Com. Code § 17.41, et seq.
Unfair Claims Settlement Practices Act – Tex. Ins. Code § 21.21.