A federal judge in Texas found that an insured had not proven a tort independent of a claim underpayment which would entitle it to a finding of bad faith against the insurer. Instead, the court found the claimants had only shown underpayment. Cano v. State Farm Lloyds Ins. Co., et al., 276 F. Supp.3d 620 (N.D. Tex. 2017).
This dispute arose from a property damage claim. When the insureds were not satisfied with the initial payment, the insurer invoked appraisal and then paid the balance of an appraisal award which was higher than the initial estimate. The insureds still sued for breach of contract, bad faith, and Insurance Code violations on the basis that the insurer failed to include in its estimate and payment all covered damages and for its specific denial of coverage for damages that, as the appraisal award later showed, were actually covered by their policy. The homeowners contended that proof of an independent injury is necessary to prove bad faith only when a denied claim is not covered under an insurance policy, which was not the case here, and relied upon the Texas Supreme Court's holding in USAA Texas Lloyd's Co. v. Menchaca, 2017 WL 1311752 (Tex. Apr. 7, 2017).
The court disagreed. The court concluded that the insureds misinterpreted the case law and found no evidence of independent injury and granted summary judgment.
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