What is “bad faith” in the context of insurance? There is a lot of material on this subject. Here is a little to know about.
In the 1997, Texas Supreme Court opinion styled, Universe Life Ins. Co. v. Giles, adopted the standard that an insurer breaches its duty of good faith and fair dealing by “failing to attempt in good faith to effect a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.” The current statutory version of this is Texas Insurance Code, Section 541.060(a)(2)(A).
The statutory standard adopted in Giles takes the place of the common-law standard for unreasonably denying a claim or unreasonably delaying payment. The court’s analysis in Giles also supports adopting the statutory standard for failing to conduct a reasonable investigation. That standard is found at Texas Insurance Code, Section 541.060(a)(7), which prohibits “refusing to pay a claim without conducting a reasonable investigation with respect to the claim.”