Many people are familiar with how some insurance companies treat claims. Unfortunately, claims adjusters can be aggressive and uncooperative. Sadly, your claim could be undervalued or unfairly denied even after paying your insurance premiums faithfully for years.
However, the Texas Insurance Code legally requires insurance companies to take specific steps related to claims. Under Chapter 541.060 of the Texas Insurance Code (Unfair Settlement Practices), insurance companies must take the following steps when they receive a claim:
- Provide accurate information about insurance coverage and policy terms
- Process claims promptly without unreasonable or unnecessary delays
- Give a valid, reasonable explanation for denying a claim
- Attempt to settle valid claims in a fair manner
- Pay settlements without needless requests for more information
Failing to follow the above practices could show that the insurance company is acting in bad faith. Bad faith is generally defined as dishonest dealing. It can include but is not limited to disregard for fair dealing standards, untrustworthy performance of duties, and fraudulent intent.
Chapter 541 of the Texas Insurance Code prohibits bad faith insurance practices by Texas insurance companies.
Chapter 542 of the Code is the Unfair Claim Settlement Practices Act. The Act sets deadlines for insurance companies to investigate and settle claims. According to the Act, insurance companies must:
- Acknowledge a claim, begin an investigation, and request additional information within 15 days from receiving written notice of a claim
- Make a claim determination within 15 days after receiving any requested information (may be extended to 45 days in some cases)
- Pay accepted claims within five business days of agreeing to pay the claim
- Provide valid reasons why a claim is denied
- Make an insurance claim determination within 60 days in most cases
The law is clear. If insurance companies violate the deadlines, they can be responsible for the policyholder’s damages. Any violations of the Texas Insurance Code or failure to perform required duties could be acts of bad faith. These actions may give the policyholder a valid cause of action to file a bad-faith lawsuit.
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Examples of Bad Faith Insurance Practices
Bad faith insurance practices include any violations of the insurance company’s legal duties. It also includes behavior that is deceptive, unreasonable, or unfair. Examples of conduct that might justify a bad faith claim include, but are not limited to:
- Delaying a claim by requesting documents and information that is not needed to process the claim
- Failing to provide valid reasons for denying a claim
- Misrepresenting the terms of the insurance policy or insurance laws
- Failing to investigate a filed claim
- Intentionally undervaluing an insurance claim
- Delaying claims adjustment or payment of the claim
- Pressuring the claimant not to seek legal advice or to accept an unreasonable settlement offer
- Ignoring or failing to investigate specific aspects of the claim
- Using a biased third party to investigate and handle the claims process
- Changing the terms of the insurance policy after a claim is filed
- Failing to perform an adequate investigation of a claim
- Alleging fraud by the policyholder and/or claimant without reasonable justification
Under Texas law, bad faith claims may be filed based on a first-party claim or a third-party claim. The policyholder files first-party claims. For example, you file a claim against your collision insurance after an automobile accident.
A bad faith claim based on a third-party claim would involve a claim against your liability insurance. For example, another driver files a claim against you after a car crash. You could have a bad faith claim if your insurance provider unfairly fails to defend, settle, or indemnify you against the claim.
Is Every Insurance Denial Made in Bad Faith?
No. The insurance company can legally deny an insurance claim when it has grounds to do so. The company is not legally obligated to pay every claim filed by a policyholder or third party. Examples of situations in which the insurance company may have legal grounds to deny a claim include:
- The insurance policy does not cover the injury, damage, accident, or incident
- The claim involves an error
- There is a violation of state law
- You missed a filing deadline
- A procedure was not medically necessary
When an insurance company denies your claim, you can appeal. However, you must follow the appeals procedure and deadlines. If you believe your company denied the claim in bad faith, talk with a bad faith claim attorney as soon as possible.
What Damages Could I Recover for an Insurance Bad Faith Claim in Texas?
Damages that might be recovered by filing a bad faith insurance lawsuit include:
- The actual value or damages of the denied claim
- Attorneys’ fees and costs of the court action
- Other relief as the court deems just and proper
If the insurance company knowingly violated Chapter 541 of the Texas Insurance Code, you could receive three times the value of actual damages.
Schedule a Free Consultation with a Bad Faith Claim Lawyer
Do you have questions about a bad faith insurance claim? Contact a law firm to schedule a free consultation with an experienced personal injury lawyer. They can discuss your case and can help you hold the insurance company accountable for their bad faith practices.