Bad Faith Dispute: Texas Court Rules Against Oil Company in Coverage Suit Against Lloyd’s of London Underwriters

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In the instant action, which was removed to federal court in April, BPX asserted claims for breach of contract, bad faith and violations of the Texas Insurance Code against the underwriters. However, the court found that BPX failed to show that the commercial general liability policy required the underwriters to defend BJ Services and that the underlying settlement negotiations did not constitute a suit as defined by the policy to trigger the carriers’ duty to defend.

Furthermore, the court found that BPX has not shown that the underwriters acted in bad faith by denying coverage and refusing to pay the claim against BJ Services, noting that Texas courts do not recognize bad-faith claims in the third-party context.

In light of these findings, the court ruled that BPX was not entitled to any relief and the underwriters’ counsel stated that they were “pleased with the court’s well-reasoned opinion.” This case serves as a reminder of the importance of properly alleging and proving bad faith claims in insurance disputes.