This past week the Texas Supreme Court issued 3 opinions, but no grants. One of the opinions is of particular interest.
In the USAA Texas Lloyds Co. v. Gail Menchaca case, the Court addressed whether an insured can recover policy benefits as actual damages caused by an insurer’s statutory violation absent a finding that the insured had a contractual right to the benefits under the insurance policy and the insurer “breached” that contractual right.
Both the trial court and the Court of Appeals found for the Plaintiff. The Supreme Court reversed the lower courts and held that due to confusing court precedent, the case is to be remanded for a new trial. The
In its holding for the Defendant, The Supreme Court clarified its prior holdings with for following rules: (1) The General Rule; (2) The Entitled-to-Benefits Rule; (3) The Benefits-Lost Rule; (4) The Independent-Injury Rule; and (5) The No-Recovery Rule.
In addressing all 5 of the above mentioned rules the court affirmed and clarified that:
Under the General Rule “an insured cannot recover policy benefits as damages for an insurer’s statutory violation if the policy does not provide the insured a right to receive those benefits.”
Under the Entitled-to-Benefits Rule “an insured who establishes a right to receive benefits under the policy can recover those benefits as actual damages under the Insurance Code if the insurer’s statutory violation causes the loss of the benefits.”
Under the Benefits-Lost Rule “an insured can recover benefits as actual damages under the Insurance Code even if the insured has no contractual right to those benefits if the insurer’s conduct caused the insured to lose that right.”
Under the Independent-Injury Rule “If an insurer’s statutory violation causes an injury independent of the insured’s right to recover policy benefits, the insured may recover damages for that injury even if the insured is not entitled to receive benefits under the policy. But if the policy does entitle the insured to benefits, the insurer’s statutory violation does not permit the insured to recover any actual damages beyond those policy benefits unless the violation causes an injury that is independent from the loss of the benefits.”
And finally under the No-Recovery Rule “an insured cannot recover any damages based on an insurer’s statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits”
Please check back with us each week for a new update!