The legal precedent on bad faith claims across the country reflects a variety of allegations against insurance companies regarding the improper handling of insurance claims. Improperly denying a claim, not paying enough and delaying payment are probably the allegations that first come to mind. There are, however, other allegations that have been asserted against insurers in the context of bad faith that might not come up as often as others. The Court of Appeals in Texas addressed, among other things, a claim of mental anguish against an insurance company in Texas Farmers Ins. Co. v. Cameron, 24 S.W.3d 386 (Tex. App. 2000).

In Cameron, the insureds, Alfred and Cloteal Cameron, were away when their home burned to the ground. They filed a claim with their carrier, Texas Farmers Insurance Company (“Farmers”). It was determined that the cause of the fire was arson. Farmers denied the claim, accusing the Camerons of making material misrepresentations when Farmers investigated it. The letter from Farmers to the Camerons denying the claim stated the following as the reason for denial:

…[A] good faith belief that the fire in question was caused intentionally by you or by persons instructed by you to set the fire.

The letter also accused the Camerons of making material misrepresentations when Farmers investigated the claim. The Camerons sued Farmers for breach of contract, breach of the duty of good faith and fair dealing, violations of the Deceptive Trade Practices Act (“DTPA”) and violations of the Texas Insurance Code. The insureds also asserted claims of mental anguish due to Farmers’ bad faith. The Court began its analysis of this issue by explaining as follows:

Mental anguish is defined as intense pain of body or mind or a high degree of mental suffering [citation omitted]. It is something more than mere worry, anxiety, vexation, or anger…It is more than disappointment, resentment, or embarrassment…To recover for mental anguish, the Camerons must prove such painful emotions as grief, severe disappointment, indignation, wounded pride, shame, despair, or public humiliation…A mental anguish damages award requires evidence of a high degree of mental pain and distress that is “more than mere worry, anxiety, vexation, embarrassment, or anger” [citation omitted].

The Appeals Court of Texas concluded that the evidence provided by Alfred Cameron was not legally sufficient to support the jury’s finding that he had suffered past mental anguish. The Texas Appellate Court’s ruling, however, was different as to Cloteal Cameron.

Cloteal testified that she was terrified at being accused of being an arsonist. When friends asked her whether the insurance company had made good on her loss, she had to tell them that it had not done so and then felt compelled to explain why. She felt humiliated and wondered what her friends thought of her. She came down with crying spells and took some time off from her work as a schoolteacher because she did not want the other teachers or children to see her condition. She had known her pastor for over twenty-five years. She started attending his church when she first moved to Dallas and joined him when he founded Red Sea Missionary Baptist Church about eighteen years earlier. She was a founding member of that church. Her church duties included handling between twenty-five and thirty thousand dollars of church funds. Yet Farmers’ insinuation of arson caused her to resign her positions of authority that she had held in the church. She could neither eat nor sleep, and she started taking prescription medication for insomnia. She lost over fifty pounds and became irritable around those who cared for her.

Cloteal offered the following to establish she suffered mental anguish as a result of Farmers’ bad faith during the three years between the fire and the trial:

Cloteal testified that she was “terrified” at the accusation. She felt devastated going to work. She walked the floor at night and could not sleep. She took prescription medication for her insomnia. She reduced dramatically her participation in church activities. This testimony, unlike Alfred’s, evidences a high degree of mental pain and distress, with specific detail of that degree. An award of mental anguish damages can survive a legal sufficiency challenge when a plaintiff has introduced direct evidence of the nature, duration, and severity of her mental anguish [citation omitted]. Such evidence can take the form of the claimants’ own testimony…

The Court found sufficient evidence to support the jury’s finding that Cloteal has suffered mental anguish caused by Farmers’ actions and accusations, which also supported a finding of bad faith against Farmers. Please consider that there are other facts and legal issues that were analyzed by the Court; those addressed in this post are only those that were specific to the issue of mental anguish. Please also keep in mind that this holding is specific to this Appellate Court in Texas; other jurisdictions may rule different on the same or similar issues.