Insurance companies in the United States are given the implied covenant of fair dealing and good faith in their duty of serving their clients. When insurance companies fail to live up to this covenant, then a bad-faith lawsuit can result.
In Houston recently, a bad faith insurance lawsuit resulted in the ruling that policyholders can collect interest on late claim payments even if the insurance company wasn’t acting in bad faith but merely delayed payments.
This is great news for policyholders but still begs the question – how do you know when an insurance company is acting in bad faith?
Here’s what you need to know about bad faith claims laws in Texas so you can understand when it may be happening to you.
Insurance Companies Are Held to High Standards
The standards for insurance companies are high in the United States. This is for some very key reasons including:
- A policyholder could face financial ruin if their insurance company delays, undervalues, or denies a claim
- Insurance companies typically have extensive experience in negotiating, a lot of financial resources, and teams of lawyers to use against policyholders, which makes for an imbalance of power in the relationship
What is a Bad Faith Insurance Claim?
When you purchase an insurance policy to help guard you against economic losses, you pay premiums in exchange for the insurance carrier to do their duty. This duty includes the duty of providing coverage and upholds the terms of the policy. It also means they will pay a valid claim that is covered by the policy.
It is unfortunate, then, that some insurance companies have acted in bad faith in certain cases, ultimately failing to hold up their end of the agreement between the company and the policyholder.
When an insurance company engages in the following practices, they are considered to be acting in bad faith:
- Making arbitrary demands of proof of loss
- Using unreasonable delays to avoid claim resolution
- Avoidance of claim payment through deliberate misinterpretation of their own policy
- Use of tactics considered abusive
- Failing to conduct a proper investigation for a claim
- Asking the policyholder to contribute to a settlement when they shouldn’t have to
These are examples of bad faith that are a breach of the implied fair dealing and good faith insurance companies are given and held to. If you experience them, then it can give rise to a lawsuit for bad faith insurance.
Damages for Bad Faith Insurance Claims
If you sue your insurance company due to a bad faith claim, then in Texas you can receive damages such as:
- Reimbursement for interest, court costs, and attorneys fees
- Punitive damages meant to punish the company for its bad behavior
- Up to three times to amount the company would have paid had they processed the claim properly, but you must be able to prove their violations were intentional or they were doing them knowingly
- Mental anguish in some situations
The good news is that if you believe you’ve been the victim of bad faith at the hands of your insurance company, in Texas you know have an easier path to making statutory claims with greater success.
Texas Insurance Code can provide you with substantial remedies in the face of bad faith insurance practices. So, don’t let your insurance take you for a ride – including taking longer to pay you than they should. You do have legal options.
About the Author:
Brandon Fulgham has an in-depth understanding of both Texas law and Texans themselves. Before practicing law here, he received his undergraduate degree from TCU and his law degree from South Texas College of Law in Houston. After graduation, he worked in District Attorneys’ offices as a prosecutor. Now, he uses that knowledge to anticipate opposing counsel’s arguments and protect the rights of people in and around Fort Worth. His work has been recognized by Expertise (Best Criminal Defense Lawyers in Forth Worth and Best DUI Lawyers in Fort Worth, both 2020), Fort Worth Magazine, and The National Trial Lawyers, just to name a few.