Opinion ID: 571470
Heading Depth: 1
Heading Rank: 2

Heading: extra-contractual damages

Text: 19 Because we disagree with the trial court's interpretation of exclusion (m), we reverse its awards of punitive and exemplary damages of all types. Assuming, without deciding, that a Texas common-law duty of good faith and fair dealing exists on the part of an excess carrier in a commercial context, Mid-American could not have breached such a duty, because its denial of the claim was reasonable. See Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987) (lack of reasonable basis or failure to determine whether there was reasonable basis for denial of claim under policy is an element of claim for breach of duty of good faith and fair dealing). 20 A carrier maintains the right to deny an invalid or questionable claim without becoming subject to liability for bad faith denial of the claim. Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 213 (Tex.1988); see also Plattenburg v. Allstate Ins. Co., 918 F.2d 562, 563 (5th Cir.1990). 21 Because Mid-American did not act in bad faith, and because it never became reasonably clear that Beaumont had a valid claim, we reverse the discretionary damage award under DTPA and the Insurance Code. See Tex.Ins.Code Ann. art. 21.21-2 § 2(d) (West 1981) (defining unfair claim settlement practices to include not attempting to settle claims in which liability has become reasonably clear); Tex.Bus. & Com.Code Ann. § 17.50(a)(4) (West 1987) (incorporating violation of Tex.Ins.Code art. 21.21 as a cause of action for damages). 22 The award for exemplary damages in tort is also reversed. The reasonableness of Mid-American's position precludes such recovery: if failing to pay was justifiable, it could not be negligent, malicious, or grossly negligent. 23 We need not decide whether expert testimony was admissible for issues such as whether Mid-American acted negligently, maliciously, or reasonably. The dispositive issue of the interpretation of exclusion (m) is decided by the Court on the basis of the written contract as a matter of law. See Pinehurst, 432 S.W.2d at 518. The exclusion obviates the need for fact-finding on other issues, as discussed above. 24 Finally, we reverse the attorneys' fee award also, because Beaumont has not prevailed on its claim or recovered a valid claim. See Tex.Civ.Prac. & Rem.Code Ann. § 38.001(8) (West 1986) (person may recover ... attorney's fees ... in addition to the amount of a valid [contractual] claim); Tex.Bus. & Com.Code Ann. § 17.50(d) (West 1987) (consumer who prevails shall be awarded ... attorneys' fees).