Texas Bad Faith Insurance Claims
Have you had auto insurance, homeowners insurance, life insurance, commercial property insurance, or health insurance claim denied?
We buy insurance products to protect ourselves from some of life’s most profound losses. Damage to our valuable property or our health. The insurance relationship is based on trust. We faithfully pay our insurance premiums. In exchange for those premiums, we trust our insurance companies to be there and pay our claims when we most need them.
Sometimes insurance companies will breach that trust, refusing to pay legitimate claims when we most need them.
Texas Prompt Pay Act
Consumers often complain about delay tactics they see from their own insurance company when trying to get a claim paid. Under Texas law, insurance companies must meet strict deadlines in processing a claim. For example, within 15 days of written notice of a claim, the insurer must a) acknowledge receipt of the claim, b) begin an investigation of the claim, and c) request from their policyholder information they reasonably need to adjust the claim.
Most Texas policyholders are unaware of what the law requires insurance companies to do in response to a claim. The “Prompt Payment of Insurance Claims” statute in Chapter 542 of the Texas Insurance Code requires insurers to respond to, investigate, and accept or reject claims within particular time frames. An insurer who violates the act must pay the insured’s attorney fees as well as “damages” of 18% per year in addition to the amount owing on the claim.
Within 15 days of receiving all information it needs to resolve a claim, the insurer must send a written letter accepting or denying the claim. If it denies the claim, the insurer must provide the basis for the denial in writing. If an insurer delays more than 60 days after receiving the items, it needs to adjust the claim; it can be made to pay damages for the delay. Texas law entitles the insured damages under the policy, an 18 percent penalty on those damages for the delay of payment, plus reasonable attorneys fees.
What Is a Bad Faith Insurance Claim?
The contract between an insurance company and its insured creates a special relationship of trust. Insurance companies owe their insureds the duty of “good faith and fair dealing” when adjusting their claims. This is meant to deter the insurance company from using sharp practices to deny a claim. Some of the unfair insurance practices Texas law prohibits:
- Misrepresenting to the insured a material fact or policy provision that affects coverage;
- Failing to attempt in good faith the settlement of a claim when the insurer’s liability has become reasonably clear;
- Failing to promptly give the insured a reasonable explanation for the denial of a claim;
- Refusing to pay a claim without conducting a reasonable investigation.
When Do I need a Lawyer?
If an insurance company denies a claim in bad faith, it can be made to pay damages. Damages include the amount of the policy benefits denied, plus court costs and reasonable attorney fees. If the denial of the claim was committed knowingly, the insurance company could be made to pay treble damages (up to three times the amount of actual damages).
Threatening your insurer with a lawsuit right after a refusal can create the perception that you are an unhappy claimant. However, suppose you have followed your insurer’s standards throughout the claims procedure for a legitimate claim. In that case, it is in your best interest to immediately talk with expert bad-faith insurance lawyers. If an unscrupulous insurance company has victimized you or your business, have your case evaluated by a board-certified personal injury trial lawyer.