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School District sues insurers for breach of contract damages

Business litigation often involves disputes with insurance companies over the payment of property loss and other casualty claims made by business entities. In North Carolina and elsewhere, these are generally breach of contract actions against the insurer for violating the terms of the insurance contract and not paying claimed losses. Such claims may also contain tort elements for bad faith against the insurer.

It is generally the law that an insurer owes a duty of good faith in performing the provisions of the insurance contract. The basic dispute, however, still starts with determining whether the insurance company has breached the contract of insurance. This often boils down to the interpretation and meaning of particular contractual provisions.

It’s common that the insured and the insurer will have conflicting interpretations of what is covered under the policy. This is a specialized area that requires a business litigation practitioner with experience in insurance cases. In one interesting recent case, a school district in Texas has sued its insurance companies for alleged breach of contract in not paying for damages that the school district sustained in the aftermath of the explosions at the West Fertilizer plant on April 17, 2013.

The school district had reported at least $53 million in damages to its buildings from the explosions. It’s unclear precisely how much the school district claims is owed by the insurance companies, but it appears that the insurers have made no payments to the school district up to now. It appears that the school district’s claim against Argonaut Insurance Co. is for the full $53 million but that the insurer is offering to pay only $30 million, which is $23 million less than the district’s demand.

This is not an unusual business dispute or breach of contract action, in North Carolina or other jurisdictions. The maneuvers of insurance companies, however, can be frustrating and confusing to claimants who simply want to get compensated a fair amount and move on. Insurance companies sometimes prolong the process of settling a claim painfully beyond reason, thus creating a situation ripe for a breach of contract action.

Source: wacotrib.com, "West ISD lawsuit alleges breach of contract against insurance carrier", Tommy Witherspoon, May 22, 2014

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School District sues insurers for breach of contract damages | Britton Law, P.A.