In Texas, insurance companies must treat those who purchase policies a certain way. Texas law calls it a duty of good faith a fair dealing. Experienced disability attorneys know this and make insurance companies honor their obligations under disability policies and under Texas law. Let’s look at a specific example found in the recent case of Hudspeth v. Enterprise Life Insurance Company.
The plaintiff there bought a new car together with a disability insurance policy through Enterprise Life Insurance Company that would make her car payments should she become disabled. Two months later, she was diagnosed with cancer and underwent surgery. Enterprise approved her claim and paid her car payment. The insurance company reminded the plaintiff that to retain future benefits, she had to file a continuing claim form signed by a physician “as soon as reasonably possible and in no event… later than one year from the time proof is otherwise required.”
She transferred from private health care to county-provided services and couldn’t secure an appointment with a county doctor for three months. Then the county doctor wouldn’t sign the continuing disability form without conducting further diagnostic tests. Another month passed before the plaintiff could see an oncologist for the first time, when a physician finally signed her continuing disability form.
A month earlier, Enterprise wrote the plaintiff a letter denying her continuing disability car payments because the insurance company had not received a continuing claim form for more than 50 days. The letter also instructed her to send any additional information that would cause the insurance company to reconsider its position.
Complying with the letter’s instructions, the plaintiff promptly mailed her completed continuing disability form to Enterprise in June 2006. Nevertheless, her claim was denied because, in the insurance company’s view, the policy had already been cancelled. The plaintiff’s car was repossessed in April 2007 for nonpayment of the note. The plaintiff sued, alleging that Enterprise’s denial of her June 2006 claim constituted a breach of its duty of good faith and fair dealing.
Court Rules That Enterprise Acted in Bad Faith
The Texas Court of Appeals in Houston determined that Enterprise had in fact violated the duty of good faith and fair dealing. The court recognized that insurance companies, like other entities, have a special relationship with the insured. This special relationship requires that Texas insurance companies go above and beyond what is required for ordinary contracts. The plaintiff proved that Enterprise had no reasonable basis for the denial or delay of payment. In fact, the policy provided that proof of continuing disability “must be furnished as soon as reasonably possible and in no event later than a year after proof is otherwise required.” Given this policy language, Enterprise had no reasonable basis for the denial or delay of the car payments. The court sent the case back to the trial court to consider what damages the plaintiff should receive.
Hudspeth v. Enterprise Life Ins. Co., 358 S.W.3d 373 (Tex. App.-Houston [1st Dist.] 2011, no pet.)