Church’s word, without evidence, does not support a breach of faith in Texas


hail; weather; storm; ice; damage; insurance; coverage

By: Lorne G. Hiller, Katherine E. Morsman, and Marc J. Shrake

A Texas federal court did not take a church at its word that an insurer acted in bad faith, rejecting the church’s unsupported argument that the carrier sought to “manufacture a bona fide coverage dispute.” 

In Pollard Memorial United Methodist Church v. Church Mutual Insurance, Case No. 6:22-CV-00158, at *1 (E.D. Tx, October 31, 2023), Church Mutual’s adjuster investigated hail damage to church property and recommended payment of covered damages. The church demanded almost 20 times more than the recommendation. It sought payment for damages that the adjuster believed were not covered. In response, the insurer hired two engineers and relied on their opinions in apportioning the damage between covered and uncovered causes. 

The church sued for breach of the implied covenant of good faith and fair dealing, violation of Texas Insurance Code § 542, and violation of the Texas Deceptive Trade Practices Act (DTPA).   

On the insurance company’s motion for summary judgment, the court applied the Texas standards for “bad faith” claims. Extra-contractual tort claims under the Texas Insurance Code and the Texas DTPA require the same proof as a “bad faith” cause of action. To recover, the church had to show that the insurer had no reasonable basis to deny payment and knew, or should have known, that it lacked a reasonable basis. Higginbotham v. State Farm, 103 F.3d 456, 460 (5th Cir. 1997). 

The insurer submitted “unrebutted evidence in the summary-judgment record” that it based its denial on its adjuster’s investigation and the engineers’ reports, pointing to causes of loss not covered under the policy. In response, the insured church simply argued that an insurance company cannot “manufacture a bona fide coverage dispute by conducting an unreasonable investigation . . . to shield itself from bad faith liability.” The court rejected the church’s arguments because they were neither facts nor conclusions reasonably inferred from the summary judgment record.   

The engineers’ findings “constituted at least a reasonable basis – even if it ultimately proves to be unpersuasive to the factfinder in this case – for the insurer to deny plaintiff’s demand for a higher payment amount. . . .  Plaintiff brings no evidence that those investigations were biased and pretextual. And the court concludes that the experts’ qualifications and assignments do not support an inference of bad faith or unreasonableness, even if the factfinder might ultimately disagree with their conclusions.” In other words, the insurance company’s reliance on the experts’ findings and opinions eliminated all triable issues on “bad faith,” even if a factfinder were later to disagree with them. 

The court likened this set of facts to its prior ruling in Aspen Specialty Ins. v. Yin Invs. USA, 2021 WL 4666775 (E.D. Tex. Oct. 22, 2021), in which the court held that the insurance company’s reliance on its hail investigator’s findings after multiple property inspections “was prima facie reasonable due to the nature, value, and complexity of the claim and the investigator’s report.” 

Under this ruling, boilerplate allegations of bad faith will not go to a jury where there is a lack of record evidence creating a triable issue about the insurer’s investigative efforts.   

We will continue to monitor and report on developments in Texas insurance law.   

For more information, please contact Lorne Hiller at lorne.hiller@fmglaw.comKatherine Morsman at katherine.morsman@fmglaw.comMarc Shrake at, or your local FMG attorney.