Private Causes Of Action Against Texas Insurance Companies

Yesterdays blog discussed actions that can be taken by the Texas Department of Insurance when a person commits a deceptive act or practice under Chapter 541 of the Texas Insurance Code or Section 17.46, Business & Commerce Code. Here the discussion will be about a persons’ “private causes of action”.

Texas Insurance Code, Section 541.151, says that a person who sustains actual damages may sue the other person (insurance company or agent) who caused the damages. If the other persons’ actions are defined by Subchapter B to be an unfair or deceptive act or practice in the business of insurance or an unlawful deceptive trade practice in Section 17.46(b), Business & Commerce Code, then an action may be brought against that person.

A person who prevails is entitled to the amount of the actual damages suffered, plus court costs and reasonable and necessary attorney’s fees, according to Section 541.152. Plus, if the person committing the acts did so knowingly, then there may be an award in an amount up to three times the amount of actual damages.

To pursue an action against the person, company, or agent doing wrong, it would be necessary to seek the assistance of an experienced Insurance Law Attorney. This is because Section 541.154 requires a person seeking damages to provide a 60 day written notice of the claim. The notice must advise the person of, 1) the specific complaint, 2) the amount of actual damages including attorney’s fees. There are atleast two exceptions to this that rarely apply.

If the 60 day notice is not given as required by Section 541.154, Section 541.155 allows the lawsuit to be abated. Sometimes this abatement can be automatic and sometimes there is a hearing on the matter.

The person or entity that receives the notice required by Section 541.154 may make a settlement offer during the notice period. Further, the person receiving the notice can make a demand for mediation per Section 541.161. The appointment of a mediator and the mediation process would have to be in compliance with Section 154.023, Civil Practices and Remedies Code and Subchapters C and D of Chapter 154.

The contents of the settlement offer are governed by Texas Insurance Code, Section 541.157. The settlement offer must separately state, 1) the amount of money offered, and 2) an amount to compensate the claimant for reasonable attorney’s fees as of the date of the offer. The purpose here is to encourage settlement.

Per Section 541.158, the offer is considered rejected unless both parts of the offer are accepted within 30 days. The effect of rejecting the offer is set out in Section 541.159. It says that if the amount finally awarded the claimant is substantially the same as or less than the amount of damages found by the trier of fact, then the claimant cannot recover any excess amount or excess attorney’s fees.

The above is a prime example of why an experienced Insurance Law Attorney needs to be involved in the claim process against the insurance company or its agents who violate provisions of the Texas Insurance Code.