Bad Faith Insurance In Texas

The guy in Grand Prairie, Arlington, Weatherford, Fort Worth, Dallas, or any other place in Texas, wonders what he can do when his insurance company does him wrong. Usually when an insurance company does something that is wrong with one of their insured policyholders, that is called “bad faith” insurance.
Changes in insurance laws in recent years have made it more difficult to make bad faith claims against insurance companies. But this concept of bad faith is definitly not dead. The Texas Department of Insurance has a complaint department that does investigate improper conduct by insurance companies. That is the good news. The bad news is that they seldom do anything except in the most extreme cases where the wrongs are big and affecting thousands of people. What they often times end up telling individuals is that they should consult an experienced Insurance Law Attorney to further pursue complaints. It is not that they don’t care, it’s that they do not have the staff to be pursuing all the wrongs being committed.
A person should never give up when being wronged by one of these companies. The Texas Insurance Code has contained within it, statutes with a lot teeth for attorneys to use in making an insurance company pay for the wrongs it commits. Section 541.060, is titled “Unfair Settlement Practices” and lists several acts, or examples of inaction, that will subject an insurance company to civil liability to the person being wronged.
Section 542.051 thru 542.061, is known as the “Prompt Payment Statute” and also has lots of “teeth” to it.
When talking about bad faith it is sometimes difficult to convey that concept to prospective jurors and when it can be effectively conveyed, the Texas Supreme Court has a history of reversing judgements in favor of policyholders and ruling in favor of the insurance companies. Most cases do not end up going all the way to a trial, but the cases get resolved or settled based on what each side believes would happen if the case did go to trial. In this regard, a jury can appreciate a rule in the law books, the insurance company violated the rule, and the company needs to be held liable for violation of the rule.
Generally, bad faith claims fall intend categories such as:
1) There is a wrongful denial of coverage;
2) A claim where you can show the company intentionally or knowingly or wrongfully denied, delayed, or attempted to under pay the claim. The actual legal standard is, “knew or should have known.” This is discussed in the Texas Supreme Court case, The Universal Life Insurance Company v. Giles. Here, it was held that Universal Life breached its duty when they failed to settle a claim when they knew or should have known that the claim was covered.
3) There was a complete failure to conduct an investigation of the claim.
4) The carrier took a crazy position on liability or damages which either denied or delayed payment because you can show that there was no basis in fact for the original position. In the case, State Farm Lloyd’s v. Nicolau, the court found bad faith when State Farm Lloyd’s relied on an expert’s report and found evidence that the report was not objectively prepared and therefore State Farm Lloyd’s reliance upon it was unreasonable.
One of the better models to look at is the case, State Farm Fire & Casualty Co. v. Simmons. This 1997, Texas Supreme Court case had the court focused on whether State Farm Fire & Casualty fulfilled its duty to its insured by pursuing a thorough, systematic, objective, fair and honest investigation of the claim prior to denying the claim.
What should be obvious is that an experienced Insurance Law Attorney needs to consulted in cases where an insurance company is denying a claim. Bad faith cases are good cases for attorneys to be able to help their clients. And even where bad faith is hard to prove there are still the other statutory remedies that are available.