Texas Watch

Supreme Court Issues Landmark Insurance Decision

Supreme Court Issues Landmark Insurance Decision

The Supreme Court of Texas, long known as a business-oriented court, recently decided a landmark insurance case that provides clarity for insurance companies and policyholders, removing any argument for the Blue Tarp Bills (HB 1774 & SB 10). 
In USAA Texas Lloyds Company v. Menchaca (No. 14-0721), the Court clarified its precedent, announcing five bright-line rules that “address the relationship between contract claims under an insurance policy and tort claims under the Insurance Code.” The Court set forth the “No-Recovery Rule,” which states, “[A]n insured cannot recover any damages based on an insurer’s statutory violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits.” The decision also describes how “the Insurance Code offers procedural protections against misconduct likely to lead to an improper denial of benefits.” The Blue Tarp Bills weaken protections against insurer misconduct instead, hurting Texas families, businesses, churches, and schools.
The state of the law is now settled. There is no need for HB 1774 or SB 10. Making the Legislature spend valuable time on these bills at this point of the session only detracts from issues of real importance and angers constituents who want their lawmakers to represent them, not the insurance industry.

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