PJC Business

PJC 103.1

G OOD F AITH AND F AIR D EALING

announcing five rules that address the relationship between contract claims under an insurance policy and tort claims under the Insurance Code.” USAA Texas Lloyds Co. v. Menchaca , No. 14-0721, 2017 WL 1311752, 60 Tex. Sup. Ct. J. 672 (Apr. 7, 2017). Although withdrawn, in a later opinion, the court “unanimously reaffirm[ed] the legal principles and rules announced” therein. See USAA Texas Lloyds Co. v. Menchaca , 545 S.W.3d 479, 484 (Tex. 2018). This duty is nondelegable. Therefore, persons and entities providing claims handling services other than the insurer cannot be liable for breach of this common law duty. Natividad v. Alexsis, Inc. , 875 S.W.2d 695, 698 (Tex. 1994). However, in appropriate cases, the Texas Insurance Code provides a statutory claim against such parties for unfair insurance practices. See Liberty Mutual Insurance Co. v. Garrison Contractors, Inc. , 966 S.W.2d 482, 484–86 (Tex. 1998). Questions submitting statu tory liability are found at PJC 102.14–102.24. A liability insurer investigating and defending a claim brought against its insured by a third party owes no common-law duty of good faith and fair dealing to its insured in the investigation and payment of the claim; however, an insured may have a statutory claim against a liability insurer in this context. See PJC 102.18. See also Rocor Inter national, Inc. v. National Union Fire Insurance Co. , 77 S.W.3d 253, 260 (Tex. 2002). Source of instruction. In Arnold , the supreme court held that an insurer breaches its common-law duty by denying a claim without a reasonable basis or by failing to conduct a reasonable investigation. Arnold , 725 S.W.2d at 167. In Aranda v. Insurance Co. of North America , the supreme court “imposed the holding of Arnold onto the workers’ compensation system and held that an injured employee was entitled to assert a claim against a workers’ compensation carrier for breach of the duty of good faith and fair dealing.” Texas Mutual Insurance Co. v. Ruttiger , 381 S.W.3d 430, 446, 451 (Tex. 2012) (citing and overruling Aranda v. Insurance Co. of North America , 748 S.W.2d 210, 212–13 (Tex. 1988), because subsequent legislative changes to the Work ers’ Compensation Act “effectively eliminates the need for a judicially imposed cause of action outside the administrative processes and other remedies in the Act”). In Shel ton , the supreme court extended the duty to include an insurer’s unreasonable cancel lation of an insurance policy. Shelton , 889 S.W.2d at 283. PJC 103.1 submits each of these elements of the duty. In Universe Life Insurance Co. v. Giles , 950 S.W.2d 48 (Tex. 1997), the supreme court revised the common-law duty to track the statutory prohibition on unfair refusal to settle. Giles , 950 S.W.2d at 55–56; see Tex. Ins. Code §541.060(a)(2)(A) (formerly Tex. Ins. Code art. 21.21, §4(10)(a)(ii)). The first defi nition is taken from this statutory language and parallels PJC 102.18. By extension, the duty of good faith and fair dealing with respect to failing to conduct a reasonable investigation has been recast in the statutory language of Tex. Ins. Code §541.060(a)(7) (formerly Tex. Ins. Code art. 21.21, §4(10)(a)(viii)). This language also parallels the statutory submission in PJC 102.18. The third definition is based on Shelton and has no statutory counterpart.

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