Texas Appellate Court Reverses Award of Extracontractual Damages Holding Evidence was Legally Insufficient to Support Jury’s Bad Faith Findings
State Farm Lloyds v. Webb, No. 09-15-00408-CV, 2017 WL 927848 (Tex. Ct. App. Mar. 9, 2017)
After State Farm denied his claim for damages he contended were caused by a plumbing leak, Dennis Webb sued State Farm for, among other things, breach of contract, breach of the common law duty of good faith and fair dealing, and unfair settlement practices. The suit proceeded to trial and a jury found that State Farm failed to comply with the terms of the policy, awarding Webb $15,000 in breach of contract damages. The jury also found that State Farm “knowingly engaged in an unfair or deceptive act or practice that caused damages to Webb by failing in good faith to effectuate a prompt, fair, and equitable settlement when liability had become reasonably clear, and by refusing to pay the claim without conducting a reasonable investigation” and awarded Webb $60,000 in extracontractual damages.
After entry of judgment, State Farm appealed, arguing that the evidence presented to the jury was legally and factually insufficient to support the award of extracontractual damages. In particular, State Farm argued that the damages award was not sustainable because Webb failed to produce evidence of an injury independent of the denial of insurance policy benefits as required under Texas law.
The appellate court agreed that Webb did not prove damages unrelated to and independent of the wrongful denial of his claim under the policy. The court explained that the record showed that Webb only sought to obtain the benefit of the policy, i.e. repair costs associated with the plumbing leak. Because Webb failed to demonstrate damages distinct from his breach of contract claim, the court held that Webb could not recover extracontractual damages. The court further held that because the evidence merely showed a bona fide dispute about State Farm’s liability on contract, “reasonable and fair-minded people” could not conclude that State Farm engaged in a deceptive act or practice. As such, the court found that the evidence was legally insufficient to support Webb’s bad faith claim and reversed the jury’s award of extracontractual damages.