Privity of Contract In Texas Insurance Law
The duty of good faith and fair dealing emanates from the special relationship between an insurer and its insured. See Natividad v. Alexsis, Inc., 875 S.W.2d 695, 697-98 (Tex. 1994).
The special relationship exists because the insured and the insurer are parties to a contract that is the result of unequal bargaining power. See id. at 698.
Without such a contract, there is no special relationship. See id.
Absent privity of contract with the insured, an insurance carrier's agents or contractors owe no such duty to the insured. See id.
The Dallas Court of Appeals has extended the rationale of Natividad to negligence claims against parties not in privity of contract with an insured. See Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 916-17 (Tex. App.-Dallas 1997, writ denied).
In Dear, the insured sued the independent adjuster, which the insurance company had hired, for improperly or negligently investigating its claims. See id. at 916.
The court found that the independent adjuster, having been hired by the insurer, had no relationship with the plaintiff and, therefore, did not owe the plaintiff a duty. See id. at 917.
Finding that the defendant was an independent adjuster, retained and paid by the insurer, which had never entered into a contract with the insured, and had performed its work solely in its role as an independent adjusting firm, the court determined it was an agent or independent contractor of the insurance company. See Dear, 947 S.W.2d at 917.