Thompson v. Zurich American Insurance, 664 F.3d 62

Thompson sustained a torn meniscus in the course of his welding job, and Zurich hired SRS to handle the claim with Dr. Strizak performing a peer review finding the tear pre-existing and not compensable.
Zurich disputed Thompson's disability and the MRI-identified injuries as compensable, prompting administrative proceedings with the Texas Department of Insurance, Workers' Compensation Division (WCD).
Dr. Crosby, the neutral WCD-appointed physician, issued an evaluation that conflicted with Strizak on causation and suggested Thompson should not return to full duties, though noting degenerative changes.
After the Contested Case Hearing, the WCD ruled Thompson’s compensable injury extended to the meniscus tear and that he was disabled, leading Zurich to begin benefits and later to pay Thompson after administrative resolution.
Thompson filed state-law claims for common-law bad faith/fair dealing; defendants moved for summary judgment, which the district court granted, with Thompson appealing only the bad-faith aspect.
The district court concluded no material factual disputes supported a bad-faith claim given the circumstances and administrative process, and the Fifth Circuit affirmed the summary judgment.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether reliance on Strizak’s report was reasonable	Thompson argues Strizak biased and unreasonable.	Appellees contend Strizak’s report was a reasonable expert basis at the time.	Yes, reliance reasonable; no bad faith shown.
Whether Strizak’s basis was properly supported by records	Thompson asserts Strizak ignored Thompson’s records and bias.	Appellees assert Strizak had a documented medical basis even without all records.	Yes, basis supported; no material issue of fact.
Whether Strizak’s alleged bias creates bad faith	Thompson claims bias due to insurer engagement and practices.	Appellees contend record does not show predisposition to insurer-favorable conclusions.	No material bias shown; no bad faith.
Whether there was a continuing duty to investigate after initial denial	Thompson argues insurer should have pursued further investigation in light of new evidence.	Appellees relied on the administrative process and later paid after contrary evidence emerged.	Insurer had limited continuing duty; no bad faith found.
Whether Thompson met the standard for bad-faith denial under Texas law	Thompson asserts denial/delay lacked a reasonable basis and was known to be unsupported.	Appellees maintained a reasonable basis existed at the time, with post-denial developments considered.	No reasonable basis shown; however, the court still affirmed summary judgment for appellees on the bad-faith claim.

Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210 (Tex. 1988) (two-prong bad-faith standard: no reasonable basis and knowledge of lack)
Universe Life Ins. Co. v. Giles, 950 S.W.2d 48 (Tex. 1997) (shift to requirement that liability be reasonably clear)
Lyons v. Millers Cas. Ins. Co. of Tex., 866 S.W.2d 597 (Tex. 1993) (recognizes need for reasonable basis in denial/delay)
Stoker v. Republic Indem. Co., 903 S.W.2d 338 (Tex. 1995) (time-of-denial evaluation of reasonableness; objective standard)
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (insurer’s reliance on expert reports may be questioned if there is doubt)