State Farm Lloyds v. Nicolau

In State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997), there was evidence from which a fact finder could logically infer that the expert's reports were not objectively prepared, that State Farm was aware of the expert's lack of objectivity, and that its reliance on the expert's reports was merely pretextual. Nicolau, 951 S.W.2d at 448-49 (substantial amount of expert's work, between 80% and 90%, was done for insurance companies, expert had general view that plumbing leaks are unlikely to cause foundation damage, expert's report was based on inadequate information due to unreasonable failure to examine leaking pipe and perform additional tests, accuracy of report was questioned by other experts, and some evidence showed State Farm knew expert report did not justify denying the claim at the time of its denial). Therefore, the court concluded there was some evidence that State Farm denied the claim without a reasonable basis, or without attempting to objectively determine whether its liability was reasonably clear. Id. at 448 (concluding there was some evidence to sustain the jury's bad faith finding under either formulation of the standard). The court also noted, however, that an insurer's mere awareness of an expert's general views and expertise is not, by itself, evidence of bad faith-such evidence may, however, be considered along with any other evidence in the record calling into question the expert's objectivity or reasonableness of his report. Id. at 449.