Bad Faith Insurance Claim Texas

Have you filed an insurance claim only to have your provider deny it or offer a low settlement? Insurance firms are responsible for interacting with policyholders in good faith. Unreasonably denied or delayed your claim.

• Failed to investigate properly
• Misrepresented your policy’s coverage

If your Texas insurer acted in bad faith, you may be able to file a bad-faith insurance claim lawsuit. This lets you seek compensation like:

• Money for your losses
• Punitive damages if the insurer’s conduct was really bad
• Your attorney’s fees

Don’t let insurance companies take advantage of you. Understanding bad faith claims and policyholder rights is crucial. This guide covers Texas insurance bad faith laws, the claims process, real cases, and more.

What Is Bad Faith Insurance and How Companies Can Act

Insurance companies have to act in good faith when dealing with policyholders. Bad faith insurance practices occur when they unfairly handle claims or fail to uphold their obligations. There are various ways an insurer can act in bad faith, such as:

Unreasonable Denial or Delay of Claims 

Unreasonable Denial or Delay of Claims One of the most common bad faith tactics is denying a legitimate claim without proper justification. Insurers may also drag out the claims process through unreasonable delays in investigating, requesting excessive documentation, or failing to provide status updates.

Failure to Conduct Proper Investigations

Failure to Conduct Proper Investigations Insurance companies must thoroughly investigate claims promptly. Bad faith can involve inadequate or cursory investigations that overlook key evidence or details supporting the claim.

Misrepresentation of Policy Terms

Misrepresentation of Policy Terms Misrepresenting the coverage provided under the policy constitutes bad faith. This includes giving misleading information about what is and isn’t covered and the claim filing requirements.

Low-balling Settlement Offers

Low-balling Settlement Offers Insurers may act in bad faith by making unreasonably low settlement offers that do not accurately reflect the true extent of damages or losses the policyholder suffers.

Failure to Communicate or Provide Explanations

Failure to Communicate or Provide Explanations Bad faith practices include an insurance company’s failure to adequately communicate with the policyholder throughout the claims process or provide reasonable explanations for their actions.

In Texas, insurance companies have engaged in these types of bad faith behaviors across various policy types like homeowners, auto, health, and disability insurance. Some egregious examples include:

• Denying roof damage claims after major hailstorms without proper inspections
• Unreasonably delaying payments to homeowners displaced by natural disasters
• Misrepresenting coverage limits for expensive medical procedures
• Making lowball offers for totaled vehicles far below their fair market value

Policyholders should be aware of telltale signs of insurer bad faith so they can take appropriate actions to protect their rights. Next, we’ll examine the legal framework governing bad-faith claims in Texas.

Texas Bad Faith Insurance Law

In Texas, several key laws define insurance companies’ duties and policyholders’ rights regarding bad faith practices. These laws provide crucial protections and potential remedies for consumers.

Texas Insurance Code

The Texas Insurance Code outlines regulations for the insurance industry operating in the state. Certain sections are particularly relevant to bad faith claims, such as:

• Prompt Payment of Claims (Chapter 542) – Requires insurers to pay claims promptly and allows policyholders to collect interest on delayed payments.
• Unfair Claim Settlement Practices (Chapter 541) – Prohibits deceptive insurance practices like misrepresenting policies and failing to conduct reasonable investigations.

Texas Deceptive Trade Practices-Consumer Protection Act

Texas Deceptive Trade Practices-Consumer Protection Act This statute (DTPA) prohibits false, misleading, or deceptive business practices that victimize consumers, including insurance policyholders. It allows individuals to sue for damages caused by deceptive insurance tactics.

Duties and Obligations Under Texas Law

Duties and Obligations Under Texas Law Based on these laws and court precedents, insurance companies operating in Texas have a duty of good faith and fair dealing. They must:

• Properly investigate and evaluate claims on time
• Provide reasonable explanations for claim denials
• Handle and pay valid claims promptly
• Not misrepresent coverages or policy provisions

Failure to uphold these duties can constitute bad faith, allowing policyholders to pursue remedies.

Remedies for Bad Faith Claims If an insurance company acted in bad faith, policyholders may be able to recover:

• Compensatory damages for any insured losses wrongfully denied
• Court costs and attorney fees
• Punitive damages potentially up to three times compensatory damages for malicious conduct

Texas Bad Faith Insurance Claims

If you believe your insurance company acted in bad faith, there are specific steps to take to pursue a claim. Building a strong case is crucial for a successful outcome.

Gathering Evidence and Documentation

Gathering Evidence and Documentation: The first step is collecting all relevant evidence and documentation related to your original insurance claim, such as:

Claim Correspondence and Records

• Letters, emails, and notes from communications with the insurer
• Claim filed paperwork and supporting documentation submitted
• Insurer’s claim decision letters stating reasons for denial or underpayment

Policy Documents and Coverage Details

• A complete copy of your policy documents
• Records highlighting the coverages you purchased
• Documentation of premium payments

Proof of Damages and Losses

• Repair estimates, invoices, and receipts
• Photos/videos of the damage
• Medical records for injury claims
• Proof of income/earnings for disability claims

Navigating the Claims Process With your evidence compiled, here are the typical stages for a bad faith claim:

Initial Complaint and Negotiation

Initial Complaint and Negotiation First, send a complaint letter to the insurer detailing their alleged bad faith actions. This provides an opportunity to resolve the dispute before legal action.

Demand Letter and Pre-Litigation Settlement

If the insurer is unwilling to reassess your claim appropriately, send a formal demand letter from an attorney outlining your case and a fair settlement amount.

Filing a Lawsuit If pre-litigation negotiations fail, you may need to file a bad faith lawsuit against the insurer in Texas civil court. Strict deadlines apply, so act promptly.

Choosing Legal Representation
Having the right lawyer is critical for bad-faith insurance cases. Look for:

• Experienced insurance litigation attorneys
• Offer contingency fee arrangements (no upfront costs)
• Proven track record with bad-faith insurance lawsuits in Texas

Your attorney will handle all legal procedural requirements and negotiations and potentially take your case to trial if the insurer refuses to settle reasonably.

Read More: Appraisal Clause Auto Insurance

Bad Faith Insurance in Texas: Know your rights

If you can prove that your insurance company engaged in bad faith practices, you may be entitled to recover several potential remedies and types of damages.

Compensatory Damages

Compensatory Damages The primary objective is to receive the compensation you were initially owed under your insurance policy. These are known as compensatory damages, which can include:

Economic Damages

• The policy benefits were improperly denied (e.g., cost of repairs, medical expenses)
• Additional out-of-pocket costs incurred due to the claim delay/denial
• Lost income/wages related to the incident

Non-Economic Damages

• Emotional distress and mental anguish caused
• Loss of enjoyment of life
• Inconvenience experienced

In essence, compensatory damages aim to make you whole again financially and compensate for personal hardships endured.

Punitive Damages

Punitive Damages In egregious cases where the insurance company’s conduct was malicious or fraudulent, punitive damages may also be awarded. These are intended to punish the insurer and deter future bad behavior.

• Punitive damages are limited by Texas law to the greater of two amounts: $200,000.
• Up to $750,000, double the amount of economic losses
• Three times the amount is awarded as compensation for bad activities.

Attorney Fees and Court Costs

Attorney Fees and Court Costs You can also recoup the costs of bringing the bad faith lawsuit itself, including:

• Attorney fees (or interest on those fees)
• Filing fees, court costs, and other legal expenses

This prevents further financial burden when forced to take legal action.

Policy Benefits and Reinstatement The court may additionally order the insurance company to re-evaluate and pay the claim according to the proper policy coverage terms. If your policy lapsed, it can potentially be reinstated as well.

Case Studies and Real-Life Examples of Successful Bad Faith Insurance Claims in Texas

To better illustrate how bad faith laws work, it’s helpful to look at some actual court cases in which Texas policyholders prevailed against uncooperative insurers. These cases highlight the types of actions that constitute bad faith and the remedies awarded.

Arnold v. National County Mutual Fire Insurance Company In this 1987 case, the Texas Supreme Court found National County committed bad faith by delaying payment and failing to investigate Arnold’s homeowner’s claim for foundation damage reasonably.

The court awarded Arnold:

• The full $63,000 policy benefit was wrongfully denied
• 18% interest on those benefits from the date initially due
• Attorney’s fees of over $100,000

This ruling established the precedent that an insurer’s delay in payment, despite eventual compliance, can constitute a bad faith breach of contract.

Lone Star Life Insurance Company v. Griffin Griffin sued his disability insurer, Lone Star Life, for handling claims in bad faith and misrepresenting policy terms. Evidence showed Lone Star knowingly provided misleading information to discourage him from filing legitimate claims.

In 2013, the court awarded Griffin:

• Over $13 million in compensatory damages for past and future policy benefits denied
• $45 million in punitive damages for Lone Star’s “plainly malicious” actions

The punitive damages sent a strong message discouraging deceptive bad faith practices by insurers.

Babin v. Allstate Insurance Company
After Hurricane Rita in 2005, Babin filed a claim with Allstate for damage to his home and rental properties. Allstate delayed payments for over ten months while making low settlement offers.

The court found Allstate’s delay unreasonable, awarding Babin:

• Over $40,000 in damages for underinsured property losses
• 18% interest on unpaid claim amounts
• Court costs and attorney’s fees

Cases like these demonstrate that Texas courts take bad faith very seriously. Insurers can face significant financial penalties beyond simply paying a claim.

Bad Faith Insurance Claim Settlement Amounts

Bad faith insurance claim settlement amounts can vary widely based on the specifics of the case, including the nature of the insurer’s conduct, the extent of the damages, and the jurisdiction. In some cases, settlement amounts can reach into the hundreds of thousands or even millions of dollars, particularly if punitive damages are awarded.

These settlements aim to compensate the policyholder not only for the original claim but also for the additional harm caused by the insurer’s bad faith actions, such as emotional distress or financial loss due to delayed or denied claims.

Third-Party Bad Faith in Texas

Third-party bad faith in Texas refers to situations where an insurance company unreasonably refuses to settle a claim brought against its policyholder by a third party, thereby exposing the policyholder to a judgment that exceeds their policy limits.

In Texas, an insurer may be held liable for third-party bad faith if it fails to settle within policy limits when it should have, potentially resulting in the policyholder suing the insurer for damages exceeding their coverage.

Bad Faith Insurance Attorney in Houston

A bad faith insurance attorney in Houston specializes in representing policyholders who believe their insurance company has acted in bad faith by wrongfully denying a claim, delaying payment, or offering an unfairly low settlement.

These attorneys can help navigate the complex legal landscape, negotiate with insurers, and, if necessary, pursue litigation to recover damages for the policyholder. Houston has several law firms experienced in handling bad faith insurance claims, particularly given Texas’s robust legal framework for protecting consumers.

Texas Consumer Assistance

Going through a bad faith insurance claim can be an incredibly frustrating and stressful experience. Fortunately, various resources and support services are available to help Texas policyholders understand their rights and options.

Several non-profit organizations focus on educating consumers and advocating for fair insurance practices:

Texas Watch is a consumer watchdog group that provides information on policyholder rights and bad faith issues and lobbies for insurance reform laws.

United Policyholders This national non-profit assists policyholders with the claim process and has specific resources for Texas residents dealing with bad faith.

Texas Office of Public Insurance Counsel is a state agency that advises insurance consumers and represents their interests.

Online Forums and Support Communities Connecting with others in similar situations can be invaluable. Some popular online support forums include:

Insurance Claims and Bad Faith Forum This message board allows policyholders to share experiences, get advice, and find attorneys specializing in bad faith cases.

Reddit r/InsuranceRants: A community where consumers can vent frustrations and receive crowd-sourced feedback about complex claims.

Conclusion

Dealing with a bad faith insurance claim in Texas can feel like an uphill battle, but knowing your rights and taking the proper steps is crucial. Always document everything, stick to your principles, and don’t let the insurance company take advantage.

If an insurer wrongfully denies, delays, or underpays a legitimate claim – that’s bad faith. By understanding Texas’ bad faith laws and remedies, you can protect yourself and have a path to recover the full benefits and compensation you deserve.

While legal action should be the last resort, don’t be afraid to confront bad faith practices through complaints, demand letters, and even litigation with the right attorney if necessary. Hiring experienced legal representation is worth the investment.

Remember, the insurance company must act in good faith—make them live up to their obligations to you as a policyholder. You can achieve a fair resolution and hold insurers accountable for any bad-faith misconduct with diligence and perseverance.

Frequently Asked Questions

What Are the Elements of Bad Faith Insurance Claims in Texas?

In Texas, the elements of a bad faith insurance claim typically include:

• Unreasonable Denial of Benefits: The insurance company unreasonably denies or delays payment of a valid claim.
• No Reasonable Basis: The insurer lacks a reasonable basis for denying the claim or failing to settle.
• Knowledge or Reckless Disregard: The insurer knew or recklessly disregarded the fact that there was no reasonable basis for denying the claim.

What Is Common Law Bad Faith in Texas?

Common law bad faith in Texas refers to the legal doctrine that allows policyholders to sue their insurance company for failing to act in good faith. This includes situations where the insurer unreasonably delays, denies, or underpays a legitimate claim without proper cause, violating the duty of good faith and fair dealing owed to the insured.

What Is the Statute of Limitations on Bad Faith Insurance in Texas?

The statute of limitations for filing a bad faith insurance claim in Texas is generally two years. This period typically begins from the date the bad faith action occurred or when the policyholder became aware of it.

Who Is Liable for Bad Faith?

In a bad faith insurance claim, the insurance company is liable for bad faith actions. This includes any actions where the insurer fails to uphold their obligations under the policy, such as denying a legitimate claim without a reasonable basis, delaying payment, or failing to properly investigate a claim.