Texas Supreme Court Evaluates Need to Investigate Homeowner Claims
Last week the Texas Supreme Court heard oral arguments in a case where to decide if insurance companies owe a duty to conduct a fair and reasonable investigation for policy-holder’s claims. In USAA v. Menchaca, the case went all the way to a jury verdict. The homeowners had a homeowner’s policy to protect their home from storm damage, like Hurricane Ike. But the contract does not state that USAA has to conduct a fair and reasonable investigation – it just says that USAA must investigate the loss. The duty to conduct a fair and reasonable investigation comes from the Texas Insurance Code.
The insurance code codifies legislative acts designed to protect policyholders from unfair treatment from their insurance company. Insurance companies cannot, for example, misrepresent coverages or damages to the policyholder. Insurance companies must also conduct a reasonable investigation and pay for covered damages when liability is reasonably clear. It is understood in the business that “tie goes to the homeowner.” There is another law in Texas that protects homeowners by requiring the insurance company to pay penalty interest and attorney fees if later it is determined that they owe more money than they paid on a claim.
But that is not what usually happens. For Menchaca, the jury found that USAA did not conduct a fair or reasonable investigation. But, the jury did not feel that USAA breached the contract as they did investigate the loss. So, the Supreme Court is deciding if any of the legislative safeguards for homeowners apply if there was not a breach of contract. In other words, is it enough just to start an investigation? If the contract does not prohibit misrepresentations (they never do), is it OK for an insurance company to mislead a homeowner on the nature of the damages and coverages available to pay the claim?
The sad thing is that most homeowners depend on their insurance company to help them through this process because they trust them and their expertise. Homeowners assume that the adjusters and people sent by the insurance company accurately determine the damages and their costs. In a lot of situations, that trust is misplaced. Hopefully, the Court will take this opportunity to strengthen our consumer protection laws, not weaken them.
When an insurance company fails to meet its obligations under the law, you may need help to get the right outcome. Our team of Beaumont Bad Faith Attorneys know the law and can help you fight for the full compensation you deserve. We have successfully helped our clients recover millions of dollars and are ready to provide the aggressive and passionate representation you need.