Opinion ID: 2391519
Heading Depth: 1
Heading Rank: 2

Heading: common law cause of action-duty of good faith and fair dealing

Text: 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 is imposed that [An] indemnity company is held to that degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business. G.A. Stowers Furniture Company v. American Indemnity Company, 15 S.W.2d 544, 548 (Tex.Comm'n App.1929, holding approved). A cause of action for breach of the duty of good faith and fair dealing is stated when it is alleged that there is no reasonable basis for denial of a claim or delay in payment or a failure on the part of the insurer to determine whether there is any reasonable basis for the denial or delay. Arnold pleaded and produced sufficient summary judgment proof to raise an issue of material fact that NCM had no reasonable basis for its refusal to pay his uninsured motorist claim and with actual knowledge of that, forced him to a trial on the accident before it would pay the claim.