INDEPENDENT INJURY RULE APPLIES TO EXTRA-CONTRACTUAL CLAIMS WITH PROFESSIONAL LIABILITY CARRIERS

In Aldous v. Lugo, 2014 WL 5879216 (N.D. Tex. November 12, 2014,) the federal district court denied in part and granted in part the Defendants’ motion to dismiss under Rule 12b6.  The dispute concerned the Defendants’ obligation to pay the Plaintiffs’ attorney fees under a professional liability policy.  (Lugo was Plaintiff’s insurance agent. Darwin National Assurance Company was the carrier.)  Plaintiffs were in a dispute with their former client to recover their attorneys’ fees. The former client sued them for legal malpractice.  Plaintiffs prevailed in their suit, but ended up in a dispute with Lugo and Darwin as to how their attorney fee reimbursement should be handled and that attorney fees already paid by Plaintiffs would be reimbursed.

Plaintiffs sued Darwin under the Texas Insurance Code for failing to meet their obligations under the Policy and for refusing to pay Plaintiffs’ expenses. The Court granted the dismissal of these claims because Plaintiffs’ extra-contractual claims did not allege an independent injury from the contractual benefits owed under the Policy.  These were mere breach of contract claims.  Plaintiffs’ DTPA claims against Darwin were also dismissed because “Plaintiffs must allege more than a mere breach of contract to maintain a DTPA claim.”  Plaintiffs were only seeking to recover the perceived benefit of the bargain under the Policy, and such does not support a claim for violation of the DTPA.  Finally, the Court granted the dismissal of the claims for breach of the duty of good faith and fair dealing “under these facts” because the common law duty of good faith and fair dealing only exists “with regards to first party claims.”  In this case, Plaintiffs seek to recover their attorney fees incurred from defending themselves in a third party malpractice action. “There is no common law duty for third-party claims.”  Plaintiffs’ remaining claims for breach of contract, Section 542 violations of the Texas Insurance Code and a declaratory judgment remain to be litigated.