PJC Business

G OOD F AITH AND F AIR D EALING

PJC 103.1

PJC 103.1

Common-Law Duty of Good Faith and Fair Dealing— Question and Instruction on Insurance Claim Denial or Delay in Payment

QUESTION ______ Did Don Davis Insurance Company fail to comply with its duty of good faith and fair dealing to Paul Payne ? An insurer fails to comply with its duty of good faith and fair dealing by— Failing to attempt in good faith to effectuate a prompt, fair, and equitable set tlement of a claim when the insurer’s liability has become reasonably clear [ or ] Refusing to pay a claim without conducting a reasonable investigation of the claim [ or ] Canceling an insurance policy without a reasonable basis. Answer “Yes” or “No.” Answer: _______________ COMMENT When to use. PJC 103.1 may be used to submit a breach of the common-law duty of good faith and fair dealing by an insurer. Broad-form submission. PJC 103.1 is a broad-form question designed to be accompanied by one or more appropriate instructions. Tex. R. Civ. P. 277 requires that “the court shall, whenever feasible, submit the cause upon broad-form questions.” Tex. R. Civ. P. 277; see Thota v. Young , 366 S.W.3d 678, 689 (Tex. 2012) (rule 277’s use of “whenever feasible” mandates broad-form submission in any or every instance in which it is capable of being accomplished). For further discussion, see PJC 116.2 regarding broad-form issues and the Casteel doctrine. Source of duty. The supreme court has held, as a matter of law, that a special relationship exists between an insurer and the insured arising out of the parties’ unequal bargaining power and the exclusive control that the insurer exercises over the processing of claims and the canceling of insurance contracts. Union Bankers Insur ance Co. v. Shelton , 889 S.W.2d 278, 283 (Tex. 1994) (policy cancellation); Arnold v. National County Mutual Fire Insurance Co. , 725 S.W.2d 165, 167 (Tex. 1987) (claim denial). The supreme court has held that the duty does not extend past the rendition of a money judgment against an insurer. Mid-Century Insurance Co. of Texas v. Boyte , 80 S.W.3d 546, 548–49 (Tex. 2002). Most recently, the supreme court clarified the source and nature of an insurer’s good faith duty and sought “to clarify [its] precedent by

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