Texas Supreme Court: Breach of Contract Not Required to Prevail on Statutory Bad Faith Claim

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The Supreme Court of Texas clarified long-standing confusion regarding whether damages for bad faith are recoverable in the absence of a breach of contract.

June 6, 2018
Bethany L. Barrese - Saxe Doernberger & Vita, P.C.

In USAA Texas Lloyds Company v. Menchaca, the Supreme Court of Texas clarified long-standing confusion regarding whether damages for bad faith are recoverable in the absence of a breach of contract under Texas law. The Menchaca case takes an in-depth dive into decades’ worth of Texas precedent and concludes that, under certain circumstances, an insured can recover policy benefits as damages for bad faith without finding that the insurer was in breach of contract.

The story of this case begins with Hurricane Ike in September 2008. Homeowner Gail Menchaca contacted her homeowner’s insurance company, USAA Texas Llloyds Company (“USAA”) to report that the storm had damaged her home. USAA sent an adjuster to investigate the claim, and USAA determined that although the policy covered some of the damage, no benefits would be paid under the policy because the repair estimate did not exceed the policy deductible. Five months later, at Ms. Menchaca’s request, another USAA adjuster inspected the property and reached the same conclusion.

Ms. Barrese may be contacted at blb@sdvlaw.com



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