Is an insurance company legally liable for an accident that occurred when its policyholder followed claims investigation recommendations? The Texas Supreme Court recently answered this question, stating, “no”.

In Elephant Insurance Company, LLC v. Lorraine Kenyon, Ms. Kenyon was involved in a car accident and had pulled over to the side of the road.  She called her insurance company, Elephant Insurance, to report the claim.  While she was on the phone with the adjuster, her husband arrived at the scene.  The insurance adjuster made several suggestions about what would be needed to document the claim before it was submitted to the insurance company.  One suggestion made by the adjuster was to take photos of the scene and cars.  Thereafter, Mr. Kenyon began to take pictures of the scene and cars. While doing so, Mr Kenyon was struck and killed by another driver who was traveling by the accident.

Ms. Kenyon sued Elephant Insurance, claiming that when the adjuster told the Kenyons to document the claim and take pictures, the insurance company assumed a legal duty to be responsible for Mr. Kenyon being killed by another vehicle.  The theory was the insurance adjuster should have been trained to tell Mr. Kenyon how to safely take pictures and document the scene of the accident.

The trial court granted summary judgment in favor of Elephant Insurance, finding that Elephant Insurance did not assume any legal duty to Mr. Kenyon simply by saying he should take pictures.  The Court of Appeals found that because Elephant Insurance had a duty to investigate the claim under its policy and because it allowed/requested the Kenyons to document the claim, it undertook a responsibility for their investigation when Mr. Kenyon was documenting the accident for Elephant Insurance.

The Supreme Court reversed and rendered, holding that because the insurance adjuster did not tell the Keynons when or how to document the accident, it did not assume any responsibility for Mr. Kenyon deciding to document the scene in the manner he did.  In reaching this decision, the Court more broadly refused to create a new duty from an insurer to its policyholder, finding that “the risk of harm to a third party not involved in the accident who arrives on scene at some later point in time, like [Mr. Kenyon], is not reasonably foreseeable.” Or stated a little differently, “even if the insurer encourages the insured to ‘[g]o ahead and take pictures,’ there is no reason for an insurer to anticipate that the insured will do so in dangerous conditions or circumstances.”

In a concurring opinion, two Justices questioned what role, if any, Texas courts should play in creating new legal duties in highly regulated industries such as insurance.  Their opinion leaves open the possibility that the Court may at some point attempt to reconcile its two somewhat contradictory philosophies of deferring to the Legislature to create new laws and allowing the courts to define and create new legal duties and obligations.

If you should have any questions regarding corporations’ or persons’ legal liability for requesting activities be undertaken on their behalf, please contact the attorneys in our Austin or Dallas offices at info@gstexlaw.com.

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