Court Opinion

ID: 9676812
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:34:46.616308+00
Date Added: 2024-06-11T18:16:51.470246
License: Public Domain

OSBORN, Ghief Judge,
concurring.
I concur. In doing so I acknowledge that we are extending the rule announced in Arnold v. National County Mutual Fire Insurance Co., 725 S.W.2d 165 (Tex.1987) and Aranda v. Insurance Company of North America, 748 S.W.2d 210 (Tex.1988) beyond its application by the Texas Supreme Court. In each of those cases, the application of the duty of good faith and fair dealing related only to a failure of an insurance company in the processing and payment of claims. The basis for the imposing of such a duty exists in this case as much as it did in those two cases. There is a disparity of bargaining power and an exclusive control by the carrier in determining whether or not to provide coverage. The question is whether the duty should extend beyond the handling of claims and should it extend to providing coverage or, as in this case, limiting coverage after it had been initially extended.
The Court in Arnold noted that “without such a cause of action insurers can arbi*828trarily deny coverage_ 725 S.W.2d 165 at 167. Likewise, without such a duty, insurers can arbitrarily cancel coverage. In G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex.Comm.App.1929, holding approved) the Court concluded that the carrier had a duty as “viewed from the standpoint of the assured” to decide if a case should be settled. 15 S.W.2d 544 at 547. Although a carrier could not be expected to decide whether to cancel coverage based solely on the viewpoint of the assured, because no assured would ever want to be cancelled, at the same time the carrier should not be permitted to arbitrarily cancel coverage with no duty being owed to its assured.
In Unocal Corporation v. Superior Court and Harbor Insurance Corporation, 198 Cal.App.3d 1245, 244 Cal.Rptr. 540 (2nd Dist.1988), the court noted that the right of insurance companies to cancel policies is not absolute and that cancellation provisions in an insurance policy are subject to the covenant of good faith and fair dealing. That decision followed the earlier holding in Spindle v. Travelers Insurance Companies, 66 Cal.App.3d 951, 136 Cal.Rptr. 404 (2nd Dist.1977) where the court said:
We are unable to discern any logical basis for distinguishing between an insurer’s conduct in settling a claim made pursuant to the policy and that involved in an insurer’s cancelling a policy if bad-faith is the basis for the cancellation.
136 Cal.Rptr. 404 at 408.
I would hold that there is no duty to initially provide coverage and that a carrier may accept or reject a request for insurance on any standard it might choose. But, once that coverage is provided, it may not indiscriminately cancel that coverage during a policy period. Once a policy is issued, it must exercise a duty of good faith and fair dealing with regard to any decision it makes to terminate coverage before the coverage automatically expires. In this regard, I would recognize an absolute right to cancel for non-payment of premiums or a violation of policy provisions which place some duty upon the assured.