Arnold v. National County Mut. Fire Ins. Co.

Decision Date28 January 1987
Docket NumberNo. C-4674,C-4674
PartiesGlen ARNOLD, Petitioner, v. NATIONAL COUNTY MUTUAL FIRE INSURANCE COMPANY, Respondent.
CourtTexas Supreme Court
OPINION

RAY, Justice.

Glen Arnold appeals from a summary judgment granted defendant National County Mutual Insurance Company. The court of appeals, in an unpublished opinion, affirmed the trial court's judgment on the grounds that Arnold's common law and statutory causes of action, if valid, were barred by limitations. We reverse that part of the judgment denying the common law cause of action and remand the cause to the trial court.

This is a suit on an insurance contract. In June 1974, Arnold was severely injured when the motorcycle he was operating was struck by a car driven by an uninsured motorist. Arnold was insured by NCM under a policy that included "uninsured motorist" protection with a limit of $10,000. Arnold made timely demand for payments up to the limit and an independent insurance adjusting firm recommended, within six months following the date of the accident, that NCM pay the entire policy limit to Arnold. NCM refused to pay although it is not clear when it specifically denied the claim.

Arnold sued both the uninsured motorist and the insurance company in late June 1974. In December 1977, Arnold obtained a judgment against both defendants for approximately $17,975. NCM then paid Arnold the $10,000 policy limit. Arnold filed this suit on December 27, 1978, alleging various statutory causes of action and a common law cause of action for NCM's breach of its duty of good faith and fair dealing in its handling of his claim. The trial court granted summary judgment in favor of NCM on all of Arnold's causes of action.

Summary judgment evidence shows that NCM based its decision to deny the claim on the advice of its agent, who was the attorney handling the file. Even though the uninsured motorist admitted that the collision was his fault, NCM refused to negotiate a settlement. In his deposition the attorney handling the file admitted that he was inexperienced in insurance matters and based his recommendation on his perception that a jury would be prejudiced against motorcyclists, that Arnold was driving too fast under the existing conditions and that Arnold was intoxicated. The summary judgment evidence relied on by Arnold also showed that the defenses of speed and intoxication proferred by the attorney were very weak at best and ultimately intoxication was not pleaded. NCM failed to investigate the facts supporting the attorney's contentions. An issue of fact was raised as to NCM's reasonableness in failing to settle the claim and forcing Arnold to trial.

In order to decide if the court of appeals erred in upholding the summary judgment on limitations grounds, we must first resolve those points of error directed to the underlying causes of action.

STATUTORY CAUSES OF ACTION

The court of appeals did not err in upholding the trial court's rendition of summary judgment on Arnold's causes of action under the Deceptive Trade Practices Act (DTPA) and articles 21.21 and 21.21-2 of the Texas Insurance Code. His causes of action under the Texas Insurance Code, both independently and as pleaded through the DTPA, are barred by article 17.22 of the Texas Insurance Code which exempted county mutual insurance companies from articles 21.21 and 21.21-2 at the time this suit was brought. Jewell v. Mobile County Mutual Insurance Company, 566 S.W.2d 295 (Tex.1978).

Arnold also pleaded that NCM violated § 17.46(a) and (b)(5) and (12) of the DTPA "by representing that the policy would pay uninsured motorist benefits when certain prerequisites were fulfilled and when, in fact, no payment of those benefits was made after complete compliance by Plaintiff of the prerequisites until judgment after jury verdict." Arnold did not plead and there is no summary judgment evidence that NCM made any misrepresentations. Even if Arnold had stated a cause of action for misrepresentation, it was barred by limitations.

COMMON LAW CAUSE OF ACTION-DUTY OF GOOD FAITH AND FAIR DEALING

Arnold raises the issue of whether there is a duty on the part of insurers to deal fairly and in good faith with their insureds. We hold that such a duty of good faith and fair dealing exists. See, Zupanec, Cause of Action in Tort for Bad Faith Refusal of Insurer to Pay Claim of Insured § 2, in Vol. 1 Shepard's Causes of Action 205 (1983).

While this court has declined to impose an implied covenant of good faith and fair dealing in every contract, we have recognized that a duty of good faith and fair dealing may arise as a result of a special relationship between the parties governed or created by a contract. Manges v. Guerra, 673 S.W.2d 180, 183 (Tex.1984); See, English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983) (Spears, J., concurring).

In the insurance context a special relationship arises out of the parties' unequal bargaining power and the nature of insurance contracts which would allow unscrupulous insurers to take advantage of their insureds' misfortunes in bargaining for settlement or resolution of claims. In addition, without such a cause of action insurers can arbitrarily deny coverage and delay payment of a claim with no more penalty than interest on the amount owed. An insurance company has exclusive control over the evaluation, processing and denial of claims. For these reasons a duty...

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