Transportation Insurance Co. v. Moriel

1. On a scale of 1 - 10, 1 being saintly and 10 being worthy of lengthy imprisonment, where would you put the behavior of Transportation Insurance Company in this case? 

2. Suppose the remedy for breach of an insurance contract were conventional expectation-based contract damages. What incentive would an insurance company have to pay claims fully and in a timely way? Are there factors other than contract damages that induce insurers faithfully to pay claims?

3. When might it be the case that an insurer would have no reasonable basis for refusing to pay a claim -- a predicate for extra contractual damages -- but not gross negligence, malicious or intentional misconduct of the sort that would give rise to possible punitive damages?

4. Moriel has to some extent been superseded (or codified) by statute. Here is Texas Civil Practice and Remedies Code section 41.003:

Sec. 41.003. STANDARDS FOR RECOVERY OF EXEMPLARY DAMAGES. (a) Except as provided by Subsection (c), exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from:

(1) fraud;

(2) malice; or

(3) gross negligence.

(b) The claimant must prove by clear and convincing evidence the elements of exemplary damages as provided by this section. This burden of proof may not be shifted to the defendant or satisfied by evidence of ordinary negligence, bad faith, or a deceptive trade practice.

The term gross negligence is defined in section 41.001(11) as follows:

"Gross negligence" means an act or omission:

(A) which when viewed objectively from the standpoint of the actor at the time of its occurrence involves an extreme degree of risk, considering the probability and magnitude of the potential harm to others; and

(B) of which the actor has actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious indifference to the rights, safety, or welfare of others.

Where do you suppose this language came from?

5. Given Moriel and the Texas statute, what should an attorney do who is approached by a client such as Moriel and says that the insurer's refusal to pay is causing the client unusual and significant harm or creating unusual and significant risk?

6. An interesting factoid about this case is that the Texas Supreme Court keeps citing Silberg, a California case, for how bad things have to be in order to get punitive damages. In fact, however, even though Silberg involved repossession of the insured's wheelchair because the insurer had not paid claims and two nervous breakdowns, the California court did not sustain punitive damages; rather it sent the case back for a new trial to see if punitive damages were appropriate. Bad legal research by Texas Supremes!

7. I will give a prize to the first student who can find a reported Texas case in which an award of punitive damages has been sustained for bad faith by an insurance company since the Moriel decision. 

8. Do you like the tone of the dissent? Do you agree that this notion of "overdeterrence" is illegitimate? What do you make of the dissent's use of statistical evidence?