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In Texas, insurance companies owe a wide range of duties to their policyholders aimed at ensuring claims are promptly adjusted and settled in a fair manner.

An insurance company that breaches these duties can be liable to the policyholder for additional damages, penalties, and attorney’s fees.

The reason insurance companies are so closely regulated is the inherent advantage they have over their insureds who are depending on coverage from the insurance company that they paid premiums for. 

In Texas, there are two separate bodies of law that penalize insurance companies for acting in bad faith. The first is a common law implied covenant of good faith that requires an insurance company to treat you honestly and fairly.

In addition, Chapter 541 of the Texas Insurance Code lays out in detail when an insurer engages in an unfair method of competition and unfair or deceptive acts or practices.

In addition, Chapter 542 details an insurer’s duties to pay claims in a timely manner.

If you believe your insurance company acted in bad faith, you should contact a Texas insurance attorney as soon as possible.

Proving a Bad Faith Claim in Texas

When proving a bad faith claim in Texas, it is important to understand that you have the burden of proof.

This means that you, with the help of your lawyer, must demonstrate how the facts of your case meet the requirements of a bad faith claim.

There are two ways that you can prove your bad faith claim: either as a common law bad faith claim or a statutory bad faith claim.

Common-Law Bad Faith Claim

To prove a common law bad faith claim, you must show that your insurance company denied or delayed your claim even though liability was reasonably clear.

The Texas Supreme Court recognized a common law claim for bad faith in 1983. English v. Fischer, 660 S.W.2d 521 (Tex. 1983). Since then, the Texas Supreme Court has upheld the common law claim for bad faith despite the passage of statutes prohibiting insurers from engaging in certain actions that give rise to specific penalties. 

Statutory Bad Faith Claim

To prove a statutory bad faith claim, you must prove that your insurance company violated Texas insurance code 541 or 542. 

Causes of Action You Can Bring Under Chapters 541 

There are several different causes of action you can bring against your insurance company under Chapter 541 of the Texas Insurance Code.

These claims can be brought against both your insurance company and insurance professionals, such as adjusters. 

  • Misrepresentation of a material fact or policy provision;
  • Failing to reach a settlement in good faith when liability is reasonably clear;
  • Failing to reasonably explain why a claim was denied;
  • Failing to affirm or deny coverage within a reasonable time; and
  • Refusing to pay a claim without conducting a reasonable investigation.

A Texas insurance lawyer can help you determine which of these causes of action is best suited to your case.

First-Party Bad Faith Claims

It is important to understand the type of bad faith claim that applies to your case. A Texas insurance attorney can help you figure out which type of claim you should file.

First-Party Bad Faith Claim

A first-party bad faith claim arises when you file a claim against your own insurance company after an accident or event. For example, you have a house fire and file a claim with your insurance company for the damage to your dwelling and personal property.

If your insurance company fails to settle your claim when it is clearly liable under the terms of the policy, you can file a first-party bad faith claim against your insurance company.

Damages

There are two major types of damages available in bad faith suits against an insurance company. These include actual damages and attorney fees and court costs. Actual damages refer to the financial harm you suffered as a result of your insurance company acting in bad faith.

It is also important to note that you can recover three times your actual damages if you can prove your insurance company knowingly violated chapter 541 of the Texas insurance code.

A Texas insurance attorney can help you determine the amount of damages you could recover.

What Should You Do If You Believe Your Insurance Company Has Acted in Bad Faith?

If you believe your insurance company has acted in bad faith, you should contact a Texas insurance lawyer today.

We at The Johns Law Firm will determine the appropriate avenue to prove your bad faith claim.

We will fight your insurance company and strive to get you the compensation you deserve.

Contact us today to schedule your free consultation.

Author Photo

Jeremiah Johns

Jeremiah N. Johns is a trial attorney who represents clients in insurance, maritime, personal injury, and litigation matters. Raised on a family farm in Southeast Georgia, at an early age he gained an appreciation for hard work and ingenuity. These values form the bedrock of his practice.​ Jeremiah holds an LL.M. in Admiralty from Tulane Law School and a J.D. from Syracuse University, where he graduated with honors. He also graduated magna cum laude with bachelor degrees in political science and economics from Georgia State University.