In Elephant Insurance Co., LLC v. Kenyanthe Texas Supreme Court reiterated the framework of an insurer’s common law obligations to policyholders under Texas law. Applying this framework to the facts of the case, the Court rejected an attempt to extend an insurer’s obligations under existing common law principles of tort. The Court also refused to recognize new common law obligations requiring insurers to protect or warn policyholders following car accidents.
The facts of Kenyan are simple. The insured “lost control of her car on a slippery road, hitting a guardrail” and rendering her vehicle unusable. After the accident, the policyholder made two phone calls. She first called her husband, who responded to the accident, then her car insurer. The insured asked the representative of the insurer’s call center if she should take photos of the accident. The representative said, “Yes, ma’am. Go ahead and take pictures. And – And we always recommend that you involve the police, but it’s up to you whether you call them or not.
At one point, the insured’s husband started taking pictures of the vehicle on the side of the road when “another driver lost control on the wet pavement” and hit the insured’s husband, mortally wounding him. Following the husband’s death, the insured sued her automobile insurer citing various theories of negligence. Each theory was based on the claimant’s position that the insurer’s representative “was negligent in ordering her to take unnecessary photos of a single-vehicle accident because the doing so greatly increased the risk of harm” to her husband.
The trial court granted the insurer’s motion for summary judgment regarding the insured’s negligence claims, finding that the insurer had no obligation under Texas law. The policyholder appealed the decision to the San Antonio Court of Appeals, which ultimately issued a bench opinion reversing the judgment of the court of first instance. An appeal to the Texas Supreme Court followed. The Court reversed and rendered judgment for the insurer.
- The Court declined the policyholder’s invitation to extend tort liability to insurers.
In reversing and rendering judgment for the insurer, the Court explained that the policyholder’s claims were based on duties not recognized by Texas law. The only common law duty recognized in the first-party context was the duty of good faith and fair dealing. But this obligation only applied to “matters of promptness and conduct” without scruples “in the investigation, processing and payment of claims”. Thus, the Court explained: “Neither the rationale animating the duty of good faith and fair treatment nor any precedent supports the extension of its scope to encompass post-accident advice concerning, ensuring or protecting the safety of a assured.
The Court then rejected the contention that Texas should recognize a new common law obligation advanced by the policyholder, namely that an insurer has a duty to warn and protect its policyholders from potential dangers at following an accident. In doing so, the Court used the Phillips factors, weighing “the risk, predictability, and likelihood of injury against the social utility of the actor’s conduct, the magnitude of the burden of guarding against injury, and the consequences of placing the burden on the defendant”. The focus of his analysis was also the consideration of “whether a party would generally have superior knowledge of the risk or a right to control the actor who caused the harm”.
Noting that the relevance Phillips factors did not justify the recognition of the new obligation put forward by the insured, the Court explained that “insurers generally have no control over third-party motorists” and the insurer in Kenyan was not even responsible for the presence of the husband. Furthermore, “the danger of being hit by a car while standing on the side of a road exists whatever activity is being undertaken at the time and however care one takes for one’s own security “.
Moreover, the Court pointed out that “the risk of harm to a third party not involved in the accident which arrives at the scene at a later time … is not reasonably foreseeable”. And even assuming it was, “it was just as predictable – if not more so – for someone in [the policyholder’s] Where [the husband’s] position, both of whom were in a better position to simultaneously assess their physical safety and act accordingly. Simply put, the insurer “had no obligation to warn of obvious dangers” because the policyholder and her husband “had superior knowledge of the conditions and the best possibility of avoiding harm”.
The Court concluded by rejecting the contention that the contours of a negligent business claim nevertheless created a duty of care under Texas law. The Court explained, “Texas law imposes no general requirement to become a Good Samaritan.” At the same time, however, Texas law recognizes “that a duty arises when the defendant agrees, whether gratuitously or for consideration, to perform services which he knows or ought to know are ‘necessary for the protection of the person or property of another” and either (1) the failure to exercise due diligence increases the risk of physical harm or (2) the harm results from the other’s reliance on the undertaking. But this exception did not apply in law. Nothing the insurer’s representative did was “’necessary’ to ‘protect’ the insureds or their property from ‘injury’”. In any event, the policyholder’s assertion that the insurer did not give “a security warning [was] an omission, not a commitment[,]and the husband “wasn’t leaning on anything prejudicial [the insurer’s representative] said (or did not say) with respect to the safety of persons or property.
Kenyan is clearly a victory for insurers. It provides ammunition for insurers to defeat excessive extra-contractual claims based on new theories of liability and facts. The Court’s opinion categorically rejects the idea that the common law duty of good faith and fair dealing is a “golden key” that opens the door to endless liability for insurers.
The decision is also a victory for the defendants in general. He reiterates that courts should not rubber stamp tort claims based on dubious or self-serving allegations that the defendant owed a common law duty to the plaintiff. Below Kenyan, courts are required to exercise restraint and weigh a myriad of factors before recognizing common law obligations. Indeed, the question of whether there is an obligation is a question of law which it is for the court to decide.
 644 SW3d 137 (Tex. 2022).
 ID. at 140.
 ID. at 141.
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 ID. at 152-53.
 ID. at 148-49.
 ID. at 148.
 ID. at 149.
 ID. at 149-51.
 ID. to 149 (cleaned).
 ID. at 149.
 ID. at 150.
 ID. at 150.
 ID. at 151-52.
 ID. at 151 (cleaned).
 ID. at 151.
 ID. at 152.
 ID. at 152.