Offices and Directors of Mutual Insurance Companies owe Independent fiduciary duties to its policyholders / stakeholders. 

Insurance Companies owe the duties of good faith and fair dealing to its policyholders, which is not delegable. That is, in TX an insurance agent does not have an independent duty of good faith and fair to the insured, (Natividad, 875 SW2d 698). The duty of good faith and fair dealing is a non-delegable duty that applies only between the parties to the contract. “There is no need to extend the duty of good faith and fair dealing owed by insurance carriers to their insureds to include agents or contractors of the insurance carrier. Insurance carriers are liable for actions of their agents or contractors that breach the duty of good faith and fair dealing”.

The Texas Supreme Court has stated, the duty of loyalty requires an “extreme measure of candor, unselfishness, and good faith.” See International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex. 1963

Texas courts apply a presumption of unfairness to transactions between a fiduciary and a party to whom he owes a duty, thus reversing the ordinary burden of proof on the plaintiff. Fiduciaries are held to an irregularly high standard of behavior in civil law due to the nature of their duties. It is the peculiarly unequal position of the parties that results in the reversal of onus onto the fiduciary in most fiduciary relationships. In asserting a breach of fiduciary duty claim, the plaintiff need only establish a prima facie inference of the fiduciary obligations and the breach. The fiduciary concept then imposes a reverse onus that shifts the burden of proof onto the fiduciaries to disprove the beneficiaries’ allegations.

In other words, Officers and Directors may be sued for a breach of their fiduciary duty to the policyholder as a policyholder / stakeholder and the burden of proof is reversed on to the Director or Officer being sued, to prove that what he was not what the allegations allege. The defense of a business judgment rule does not apply to an allegation of fiduciary breach. These fiduciary duties of the Officer are in addition to the duty of good faith and fair dealing owed by the Insurance Company… to perhaps what is the same plaintiff. As many officers and directors are reimbursed by the insurance company they may (mis) manage, it is all the more important that competent and highly qualiified officers and directors oversee the insurance company.