Pre-Suit Investigation

By:
Mark A. Ticer

I.
Pre-Suit Investigation

No doubt the investigation of the claim prior to filing a lawsuit is absolutely essential. Counsel must secure the necessary documents available to prosecute the case, share information with a clearinghouse on a particular carrier or adjuster, decide who to sue, research the applicable law, plan and select a favorable venue and a discovery plan, anticipate a removal to federal court, and most certainly interview and get to know your client. A breakdown in any of these areas may result in failure at the courthouse.

A thorough presuit investigation may also mean that the case is not worth pursuing for a variety of reasons including cases and statutes contrary to your position, no admissible evidence to substantiate a bad faith claim, or your client(s) is not a sympathetic Plaintiff. A thorough investigation will save you a lot of time, money, and heartache in the long run. Flying by the seat of your pants because you have failed to do your homework may lead to the inevitable adverse summary judgment order.

Presuit investigation is likewise essential; in many cases, the insurer is entitled to presuit notice. Of course, this may present an opportunity to resolve your cases prior to litigation. Since you need to know your case before sending notice under the Deceptive Trade Practices Act and Insurance Code, there is no excuse to wait until later.

A. Gathering Information from the Client and Others
As with any case, the story begins and ends with the plaintiff, your client. When a jury decides whether to award your client significant damages, it must not only see but understand why your client is deserving. Of course, the angrier the jury gets at the carrier or adjuster, the more likely your client will receive significant damages. Credibility is, therefore, essential. Counsel must thoroughly interview, investigate, and evaluate a client’s credibility. Even the simplest of matters which are not necessarily relevant may cause a jury not to believe the client or his case.

Consequently, counsel must have a history on a client such as his age, work record, health history, financial status, occupation, criminal background, marital and family background, prior claims and prior lawsuits history, and any other matter that might tangentially affect the case. The inquiry is intensely personal and unending. Notes of such matters should be logged and kept for reference prior to depositions, mediation, or any other public appearance touching upon the case. Matters such as manner of dress, mannerisms, demeanor, grooming habits, and unfortunately race and sexual preference are influential.

Counsel must also understand how the acts of an insurer and its agents affected the client. This focus provides assistance in settling on and pursuing a theme for the case from the outset. Trials should be like a good story only the trial should resonate with truth, not fiction or misleading innuendos. The information from the client allows counsel to assist in making the case simple with a non-complex theme. If there is a weakness in the ability of the client to tell his story, a plan to compensate or redirect the client’s case should be made prior to litigation.

Gathering information from the client also enables counsel to respond to discovery promptly rather than having to seek extensions from opposing counsel. It is certainly impressive to your opponents to provide substantive, non-evasive responses to discovery rather than pages of objections to hide a lack of preparedness. The message is obvious to the insurer, adjuster, defense counsel, or Plaintiff’s counsel who receives non-responsive discovery: the answering party is unprepared. If the unprepared party is Plaintiff, you may never be able to recover, or if you do, you will spend much unnecessary extra effort and time. If you have any kind of personal life, time is invaluable.

In this day and age of legal assistants, paralegals, and newly licensed associates, it is important for lead counsel who will be trying the case to meet personally with the client and evaluate the case. This should consist of the client preparing at lease a chronology detailing how he got to where he is now. This enables counsel to see what kind of witness the client will make, as well as his demeanor and nonverbal expressiveness. Good note-taking and a picture of the client will help counsel in preparing the case both before filing suit and in preparation for trial, including making sure the client makes the appropriate impression.

Ideally, witness statements should be secured before suit is filed to establish a witness version of a particular incident. When deposition time rolls around, counsel may use the statement to refresh the witness recollection and keep his story straight. Such statements, likewise, assist in building a case theme and keep the witness from changing his story as a result of subsequent events.

Perhaps the most significant aspect of presuit investigation is a review of the insurance policy(ies) on which the claim is based. A careful reading of the policy coupled with the carrier’s basis for its conduct enables the attorney to respond early on to motions to dismiss and summary judgment motions. This will include research not only case law but analysis on how such provisions are interpreted by Texas courts as well as other jurisdictions. Miller’s Standard Insurance Policies Annotated is an excellent resource tool for such insurance. Not understanding these issues before filing suit may result in pleadings constituting judicial admissions adverse to your client and/or a statement against interest when amended or supplemental pleadings are filed.

Finally, jury issues should be drafted before suit, not after. Before even filing suit, counsel needs to know what issues the jury will answer. Counsel can then organize and direct proof to satisfy the jury issues to be answered. Only then will the attorney understand the strengths and weaknesses of his case as well as how discovery should be directed and pursued.

B. Dealing with the Department of Insurance
One overlooked source of information is the Texas Department of Insurance. This governmental department can provide a wealth of information including complaints against insurance companies, which companies are authorized to do business in the State of Texas, the proper form to be used for various policies, the names of recording agents listed by an insurance company in the State, and, of course, registered agents for services of process for each company. Likewise, one can obtain various information on individual adjusters licensed in Texas.

Certainly, complaints against insurance companies are an excellent resource material for a bad faith case. The Department of Insurance logs such complaints by carrier. In obtaining the list of complainants along with their addresses and phone numbers, a plaintiff can contact each complainant by letter inquiring into the substance of any complaint which may be similar to that of the plaintiff. The cost of such pre-suit discovery is minimal in most cases.

Such complaints may be used in the case itself to prove such issues as knowingly under Article 21.21 the known or should have known requirements of Aranda, or establishing a plan, scheme, pattern, conspiracy, or custom. See Paramount Nat’l Life Ins. Co. v. Williams, 772 S.W.2d 255, 259 (Tex. Civ. App. — Houston [14th Dist.] 1989, writ denied). Certainly, other similar complaints add credibility to a client’s claim that the carrier’s claim is not isolated or a “mistake” and keeps your client from being the “Lone Ranger” or labeled as the only complainer.

Another fertile area of assistance provided by the Department of Insurance is determining which insurers are authorized to do business in Texas. For example, an unauthorized insurer is required to post a bond before it can appear in a Texas court. See Tex. Ins. Code Ann., art. 1.36 11 (Vernon Supp. 1998). Moreover, a policy issued by an unauthorized insurer is unenforceable by a carrier.

Tex. Ins. Code Ann., art. 1.14-1 8 (Vernon Supp. 1998).

Finally, any person, directly or indirectly, who assists in the procurement of such unauthorized insurance is liable to the insured on the policy as well. Id. Given these default provisions, such a determination is highly probative.

Along these same lines, the Department of Insurance can assist with regulations as to the form of insurance policies which are proper and lawful in Texas as well as what insurance clauses (exclusions) are permissible. For instance, Tex. Ins. Code Ann., art. 3.70-3 provides what policy provisions are permissible under accident and sickness policies. The Department of Insurance can provide guidance on whether a particular provision has been permitted,
For a small fee, the Department will also provide a list of all recording agents of an insurer in Texas.

This information is helpful in a variety of situations when the insured seeks to show the prevalence of the company in Texas. Under the old venue law, recording agents could qualify as representatives or agents under Tex. Civ. Prac. & Rem. Code Ann. 15.037 (Vernon Supp. 1995)(foreign corporations). See Hanover Ins. Co. v. Sanford, 457 S.W.2d 115 (Tex. Civ. App. — Beaumont 1970, no writ) and Home Indem. Co. v. Hicks, 488 S.W.2d 614 (Tex. Civ. App. — Beaumont 1972, writ dism’d w.o.j.).

Still another area of assistance which may be offered is complaints against specific claims representatives. Those who adjust claims in Texas must be licensed; as a result, any complaints made are logged and kept. Patterns and practices in claims handling may be found in such complaints. More importantly, if the adjuster was disciplined, such action may be admissible. Please keep in mind that an adjuster may be sued as well for violating Article 21.21 See Liberty Mutual Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482 (Tex. 1998).

The Department of Insurance is much like the library for a research paper. It can provide enormous information in pursuing a bad faith claim. A simple call to the Department of Insurance is all that is necessary to begin. The worst that can happen is that you get a “no” for an answer; on the other hand, the positive results in obtaining the information is worthy of inquiry.

C. Contacting the Insurance Agent
Yet another source of often substantive information is the insurance agent for the client or an agent who represents the carrier you are about to sue. The agent, of course, can provide policy information such as a copy of the policy or a sample thereof, the application filled out be the client, answer issues about notice, and possibly respond to any questions about representations that may have been made. The agent likewise might share his experiences with the type of policy involved and how the carrier has interpreted the policy.

The wisdom and reasonableness in contacting the agent may depend on whether the agent is a captive or independent. Caution in approaching any agent must be used, as the agent may report directly to the insurer.

The agent may also provide information to hang himself. Certainly, when the agent himself has misrepresented the policy or engaged in deceptive practices in the business of insurance, he is personally liable. See Tex. Ins. Code Ann., art. 21.21 2(a) and 16 (Vernon Supp. 1998); and Liberty Mutual Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d at 482.

Moreover, if you can substantiate that the agent violated the Deceptive Trade Practices Act or Insurance Code and the agent is a Texas resident, you may include the agent in the suit as well. This, of course, will in many circumstances, prevent the other Defendants from removing the case to federal court.

D. Dealing with the Fire Marshall
In a fire loss, the fire marshall can be helpful to determine if there was arson involved. Although the fire marshall is not required to provide reports which reveal an investigation of a pending arson claim under the Texas Open Records Act (Tex. Gov’t Code Ann. 552.108 (Vernon Supp., 1996)), he or his office may be able to assist with the reasonableness aspect of a carrier’s conduct. For instance, if the fire marshall believes that there was no arson or your client was not involved in setting the fire, it buttresses the bad faith claim if the carrier argues differently.

Moreover, a fire marshall testifying on behalf of your client is much like the police officer testifying in your client’s favor in a car accident case. People in uniform who hold positions of authority tend to be viewed more favorably than the average person or traditional expert in the eyes of the jury.

Regardless of whose side the fire marshall may be on, counsel must be aware of the officer’s opinions as well as what clues lead him or her to that position. Have they focused on a particular subject? Why do they believe it is arson? Has this type of fire occurred in the area before? Is this location or neighborhood a hotbed for arson? The list of questions goes on and on. You must talk to the fire marshall before filing suit in order to plan your litigation strategy.

E. Moriel Letters
Another tool for enhancing litigation strategy is a Moriel letter. If the insured or client suffers damages that are independent and quantitatively different from breach of contract, punitive damages are permitted. Transportation Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994). The carrier must have a subjective awareness of the extreme risk associated with its conduct. Id. at 21-23.

Given Moriel, it would now seem appropriate to write a letter to the carrier detailing specifics and illustrating graphically the harm that has been caused or will result if the carrier denies the claim, continues its denial, or delays payment. This may be especially true where medical treatment is involved.

F. Other Litigation Against the Carrier or Plaintiff
One of the absolute best sources for information is other litigation against the insurer both statewide and nationally. Whether the carrier has taken inconsistent positions, used the same experts over and over, engaged in abusive or obstructive discovery, or just litigating the same issues in another venue, the material can provide substantial evidence to support a bad faith claim. Networking with other attorneys may provide depositions of witnesses, claims personnel, and experts. Setting up a party to give inconsistent testimony will give the jury a reason to get aggravated and stick it to the offending party.

G. Experts
Experts should be consulted and retained. If you need expert testimony and no one will back up your case, it is only a matter of time before your opponent will exploit this weakness. Choosing the expert up front provides you first choice; it also sends the message to your opponent, you are ready to go.

H. Summary
These are but a few devices one should employ before filing suit. Of course, the better the preparation, the more credible the case and the more likely you will be steps ahead of the opposition. All the resources discussed are basically inexpensive and can supply necessary ingredients to a successful resolution of the claim or lawsuit.

RELATED CAUSES OF ACTION
By:
Mark A. Ticer

Related Causes Of Action

Part and parcel of any bad faith lawsuit is a claim for breach of contract. Other causes of action which also flow from such claims include fraud, negligence, and violations of Articles 21.21 and 21.55 of the Texas Insurance Code.^[1] Each of these causes of action must be considered in the context of any bad faith claim.

I.
BREACH OF CONTRACT

Almost every bad faith cause of action must include breach of contract claim. Indeed, a breach of contract claim is usually a prerequisite to any bad faith claim. Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 340 (Tex. 1995). However, there are exceptions to this rule. See Viles v. Security Nat. Ins. Co., 788 S.W.2d 566, 567 (Tex. 1990) (holding that a Plaintiff can recover for the insurers bad faith even where no breach of contract has occurred). This exception may also apply where there is no breach of contract but Plaintiff established the insurer and/or its agent misrepresented coverage. Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 98 (Tex. 1994).

In evaluating any breach of contract claim, one should read the policy! When contemplating such a claim, one must keep in mind that insurance polices are to be strictly construed against the drafter (insurer). National Union Fire Ins. Co. v. Hudson Energy Co., Inc., 811 S.W.2d 552, 555 (Tex. 1991); Truck Ins. Exchange v. Musick, 902 S.W.2d 68, 70 (Tex. Civ. App. — Fort Worth 1995, writ denied). Any ambiguity in an insurance policy is construed in favor of coverage. National Union Fire Ins. Co. v. Hudson Energy Co., Inc., 811 S.W.2d at 555. An ambiguity exists if the court is uncertain as to which of two meanings was intended. Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 155 (Tex. Civ. App. — Houston [1st Dist.] 1990, writ denied).

The Texas Supreme Court has recently expressed its willingness to find ambiguities even where previous court interpretations have found none. Balandaran v. Safeco Ins. Co., 972 S.W.2d 738, 741 (Tex. 1998). Other Supreme Court decisions have not been so favorable. National Union Fire Ins. Co. v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex. 1995).

When proceeding with a breach of contract claim, keep in mind it is the insurer’s burden to prove any exclusion relied upon. Tex. Ins. Code Ann., art. 21.58 (Vernon Supp. 1998); Sentry Ins. Co. v. R.J. Weber Co., Inc., 2 F.3d 554 (5th Cir. 1993). This provision is significant for tactical as well as practical reasons. The failure to meet the burden arguably means the claim is covered. In terms of a breach of contract claim, there is no extra-contractual liability where the insurer’s coverage interpretation of a policy is reasonable, if even erroneous. United States Fire Ins. Co. v. Williams, 955 S.W.2d 267, 268-269 (Tex. 1997).

The importance of sustaining a breach of contract action cannot be underestimated. Establishing a breach of contract can operate as a springboard to a bad faith claim. Summary judgments are certainly a viable method to satisfy a breach of contract claim. How often is it that the bad faith case gets resolved once the breach of contract is determined? It is indeed rare that the insurer will proceed with a trial once it has been hit with a breach of contract determination. In contrast, if you loose your contract claim, it is unlikely you will prevail on any bad faith recovery.

II.
FRAUD

A fraud cause of action is infrequently used in bad faith claims. The reasons may well be that the elements are far more difficult to meet. Those elements include: 1) a material representation; 2) that it was false; 3) the speaker knew it was false when it was made or it was made recklessly without knowledge or as a positive assertion; 4) the speaker made it with the intention that it should be acted upon; 5) the other party acted in reliance upon it; and 6) the other party suffered injury. Stone v. Lawyers Title Ins., 554 S.W.2d 183, 185 (Tex. 1977). Because of the scienter requirement in fraud claims, this cause of action is more difficult to prove. Consequently, experience indicates that other claims such as violations of Article 21.21 and the Deceptive Trade Practices Act, Tex. Bus. & Comm. Code Ann. 17.46 (Vernon Supp. 1998), are more often pled and prosecuted.

Fraud claims are certainly attractive in cases involving third party claims given some courts view that Article 21.21 does not apply to third party claims. See Allstate Ins. Co. v. Watson, 876 S.W.2d 145 (Tex. 1994). A fraud claim may likewise be useful where the party sued does not qualify as an entity engaged in the business of insurance pursuant to Article 21.21 or the Plaintiff cannot qualify as a consumer under the DTPA.

III.
NEGLIGENCE

Negligence claims in the context of insurance coverage matters and claims handling is often misunderstood and perhaps underutilized. There is no cause of action for negligent claim handling outside a Stowers claim. United States Automobile Assoc. v. Pennington, 810 S.W.2d 777, 783-784 (Tex. Civ. App. — San Antonio 1991, writ denied); Higginbotham v. State Farm Mutual Automobile Ins. Co., 103 F.3d 456, 459-460 (5th Cir. 1997). The standard is negligence in failing to settle a claim within policy limits. C.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544, 547 (Tex. Commn App. — 1929, holding approved).

In terms of a Stowers claim, the Texas Supreme Court has set out three criteria that must be met: 1) the claim against the insured is within the scope of coverage; 2) there is a demand within the policy limits; and 3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the exposure to an excess judgment. American Physicians Ins. Exchange v. Garcia, 876 S.W.2d 842, 849 (Tex. 1994). Stowers claims must be strictly construed. Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489, 490 (Tex. 1998). Negligence claims under Stowers are compounded by issues of stacked policies, self insured retentions, multiple policies, multiple insureds and claimants, etc.

A negligence claim may also arise where the insurer or more often the agent has failed to secure coverage either specifically requested or with an insolvent carrier. May v. United Services Assn, 884 S.W.2d 666, 669 (Tex. 1992); Zuniga v. Allstate Ins. Co., 693 S.W.2d 735, 739 (Tex. Civ. App. — San Antonio 1985, no writ); Higginbotham & Assoc., Inc. v. Green, 738 S.W.2d 45, 47 (Tex. Civ. App. — Texarkanna 1987, writ denied); See also Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 527-528 (Tex. 1998)(holding such a claim may give rise to a breach of contract).

In terms of negligence, consider the following facts: Insurance company requires an inspection of a home by its agent before it will write a homeowner’s policy; agent inspects the home and finds the home to be acceptable, not noting any damage to the home; sometime later, homeowner makes a hail damage claim to the home, but insurer denies on the basis of damage occurring prior to inception of the insurer’s policy. Can the insurer’s agent, and ultimately the insurer, be held to be negligent as a result of the prepolicy inspection? This perhaps might be one twist for a negligence cause of action in favor of the insured.

IV.
STATUTORY CLAIMS (ARTICLES 21.21 AND 21.55)

A. Article 21.21

In 1995, the Texas Legislature amended Article 21.21 and incorporated two areas (unfair claims settlement practices and misrepresentations) of regulations in the Texas Administrative Code (formerly Board Orders). This legislative accomplishment made it easier for an insured to sue an insurer without the necessity of incorporating board orders into statutes or using the Texas Supreme Court’s case of Vail v. Texas Farm Bureau Mut. Ins. Co., 754 S.W.2d 129 (Tex. 1988). Vail was frequently used to incorporate Texas Department of Insurance Board Orders into an Article 21.21 claim. However, the use of Vail as a device to expand Article 21.21 obligations was blocked in three cases, Garcia, 876, S.W.2d at 846-849, Allstate Ins. Co. v. Watson, 876 S.W.2d at 147-149, and Maryland Ins. Co. v. Head Industrial Coatings & Services, Inc., 938 S.W.2d 27 (Tex. 1996). In these cases, the Texas Supreme Court refused to permit Article 21.21 claims in the third party context, one by a claimant and two by an insured who had adverse judgment entered against them.

Although the commentators have spent a great deal of paper debating the viability of Article 21.21 in the third party context following these decisions, the Head case deals with the pre-1995 version of Article 21.21, not the statute in its present form. This difference is significant in permitting recovery under Article 21.21 in the third party context outside of a third party claimant. Subsequent decisions appear to bear out this distinction. See Keightley v. Republic Ins. Co., 946 S.W.2d 124 (Tex. Civ. App. — Austin 1997, no writ); Rocor Int’l v. National Union Fire Ins. Co., 1997 WL 730694(Tex. App. — San Antonio 1998, rehearing pending). See also State Farm Fire and Casualty Co. v. Gandy, 925 S.W.2d 696, 714 (Tex. 1996).

In the first party context, there is little controversy concerning the viability of Article 21.21. The most frequently used portions of the statute deals with unfair claims settlement practices which cover only first party claims and misrepresentations with no first party limitation language:

1. Unfair Settlement Practices.

1. Engaging in any of the following unfair settlement practices with respect to a claim by an insured or beneficiary:

1. misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;
2. failing to attempt, in good faith, to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear;
3. failing to attempt, in good faith, to effectuate a prompt, fair, and equitable settlement under one portion of a policy of a claim with respect to which the insurer’s liability has become reasonably clear in order to influence the claimant to settle an additional claim under another portion of the coverage, provided that this prohibition does not apply if payment under one portion of the coverage constitutes evidence of liability under another portion of the policy;
4. failing to provide promptly to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurers denial of a claim or for the offer of a compromise settlement of a claim;
5. failing within a reasonable time to:

1. affirm or deny coverage of a claim to a policyholder; or
2. submit a reservation of rights to a policyholder;

• refusing, failing, or unreasonably delaying an offer of settlement under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as may be specifically provided in the policy;
• undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, provided that this prohibition does not apply to a compromise settlement of a doubtful or disputed claim;
• refusing to pay a claim without conducting a reasonable investigation with respect to the claim;
• with respect to a Texas personal auto policy, delaying or refusing settlement of a claim solely because there is other insurance of a different type available to satisfy all or any part of the loss forming the basis of that claim; or
• requiring a claimant, as a condition of settling a claim, to produce the claimant’s federal income tax returns for examination or investigation by the person unless:

1. the claimant is ordered to produce those tax returns by a court;
2. the claim involves a fire loss; or
3. the claim involves lost profits or income.

• Paragraph (a) of this clause does not provide a cause of action to a third party asserting one or more claims against an insured covered under a liability insurance policy.
• Misrepresentations of Insurance Policy. Misrepresenting an insurance policy by:

1. making an untrue statement of material fact;
2. failing to state a material fact that is necessary to make other statements made not misleading, considering the circumstances under which the statements were made;
3. making a statement in such manner as to mislead a reasonably prudent person to a false conclusion of a material fact;
4. making a material misstatement of law; or
5. failing to disclose any matter required by law to be disclosed, including a failure to make disclosure in accordance with another provision of this code.

See Tex. Ins. Code Ann., art. 21.21 4(10) and (11)(Vernon Supp. 1998). Emphasis added.

Who can be sued under Article 21.21 has now been answered by the Texas Supreme Court. In Liberty Mutual Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482 (Tex. 1988), the Supreme Court held that the term “person” under Article 21.21 2(a) means any person engaged in the business of insurance, and not just entities engaged in the business of insurance. Id at 484-485. The all encompassing definition of “person” under 2(a) did not go unnoticed by the Court. Id. In Liberty Mutual Ins. v. Garrison Contractors, Inc., the issue was whether Robert Garrett, an employee-agent of Liberty Mutual Insurance could be held liable under Article 21.21 for conduct prohibited under Article 21.21. Id. at 486. In holding that Garrett could be liable within the statute, the Supreme Court held that the employee must be engaged in the business of insurance; clerks and janitors do not qualify. Id. However, the “business of insurance” is apparently broadly construed and may be whatever the Texas Department of Insurance says it is. Id. at 485.

The significance of Garrison Contractors cannot be underestimated. This decision effectively wipes out the insurer’s fraudulent joinder argument when the insurer removes to federal court on the basis that the joinder of an agent or adjuster by the Plaintiff in the original suit is fraudulent to defeat federal diversity jurisdiction. See Ayoub v. Baggett, 820 F.Supp. 298 (S.D. Tex. 1993). Liberty Contractors allows the joinder of all the responsible parties, not just insurers.

Some of the other significant decisions regarding Article 21.21 include the following:

1. A person suing under Article 21.21 need not qualify as a consumer even when incorporating the laundry list of the Deceptive Trade Practices Act, Tex. Bus. & Comm. Code Ann. 17.46(b)(Vernon Supp. 1998). Aetna Cas. and Surety Co. v. Marshall, 724 S.W.2d 770, 772 (Tex. 1987);
2. A third party claimant has no cause of action against an insurer under Article 21.21 for unfair claims settlement practices. Allstate Ins. Co. v. Watson, 876 S.W.2d at 146-148;
3. Neither reliance nor foreseeability are necessary elements of proof to sustain an Article 21.21 claim; however, the evidence must show that the alleged false, misleading, or deceptive act was a producing cause of Plaintiff’s damages. Hart v. Berko, Inc., 881 S.W.2d 502 (Tex. Civ. App. — El Paso 1994, writ denied). For claims incorporated under Article 21.21 by virtue of Tex. Bus. & Comm. Code Ann. 17.46(b) arising after the 1995 amendments, detrimental reliance must be demonstrated. Tex. Ins. Code Ann., art. 21.21 16(a)(Vernon Supp. 1998);
4. A mere breach of contract does not give rise to Insurance Code liability. Walker v. Federal Kemper Life Assurance Co., 828 S.W.2d 442, 454 (Tex. App. — San Antonio 1992, writ denied);
5. An insurer may be liable to an insured for its agents misrepresentations. Celtic Life Ins. Co. v. Coats, 885 S.W.2d at 98-99; and
6. In order to obtain mental anguish damages under Article 21.21, a finding of “knowing” conduct must be obtained. State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 434-436 (Tex. 1995).

B. Article 21.55
Tex. Ins. Code Ann., art. 21.55 is perhaps the most underused and misunderstood statute relating to insurance claims. Almost without exception, every suit on an insurance policy should include a claim under Article 21.55. The portion of the statute which provides the remedy is as follows:

Damages
Sec. 6. In all cases where a claim is made pursuant to a policy of insurance and the insurer liable therefor is not in compliance with the requirements of this article, such insurer shall be liable to pay the holder of the policy, or the beneficiary making a claim under the policy, in addition to the amount of the claim, 18 percent per annum of the amount of such claim as damages, together with reasonable attorney fees. If suit is filed, such attorneys fees shall be taxed as part of the costs in the case.

Tex. Ins. Comm. Ann., art. 21.556 (Vernon Supp. 1998).
There is no defense to this statute that the denial was in good faith or due to a bonafide dispute; in simplest terms, if you loose under the contract claim, you pay under Article 21.55. See Higginbotham v. State Farm Mutual Automobile Ins. Co., 103 F.3d at 461. A wrongful denial means additional damages.

V.
CONCLUSION

While bad faith claims do generate most of the excitement and exposure in an insurance lawsuit, other related causes of action should not go ignored and not utilized. Breach of contract actions are a springboard to successful bad faith resolutions. Fraud and negligence claims may also be successfully pursued regardless of the outcome of the other claims. Statutory claims under the Insurance Code are essential.

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^[1] Certainly the DTPA is useful in bad faith cases. However, given that one need not be a consumer to qualify for recovering under the Texas Insurance Code and Article 21.21’s incorporation of the laundry list under the DTPA, this paper focuses on Article 21.21 rather than the DTPA.