Republic Insurance Company and Southwest Adjusting Services, Inc., Petitioners v. Linda H. Stoker and John Stoker…

Summary

The Texas Supreme Court reversed the Court of Appeals, holding that Republic Insurance and Southwest Adjusting are not liable for bad‑faith liability because a reasonable basis for denial existed – the lack of coverage – even though they gave an incorrect reason for denial. The Court affirmed that a plaintiff must satisfy the first prong of the Aranda test and prove damages, which the Stokers failed to do. Justice Spector filed a concurring opinion disagreeing with the majority’s limitation on bad‑faith recovery.