An insurance company in Texas has a duty or responsibility to people who purchase insurance. When dealing with one its customers / insureds it has a duty to that person. This is referred to as the “duty of good faith and fair dealing”. When an insurance company violates its duty of good faith and fair dealing it is call “bad faith”.
There are laws in the Texas Insurance Code that set out acts that insurance companies cannot legally do. In addition to setting out prohibited acts and practices there are punishments the insurance companies face for violations of their duties to their insureds. The punishments will vary depending on the degree of culpability or wrong that is committed.
A 2008 case discussing some of the above is Texas Mutual Ins. Co. v. Ruttiger. This is a case that occurred in Galveston, Texas and was decided by a Houston Court of Appeals. The same law would apply whether it happened there, or in Dallas, Fort Worth, Arlington, Grand Prairie, Weatherford, or anywhere else in Texas.
Ruttiger is a case involving an on the job injury but the way the insurance company handled the claim is applicable to all insurance claims. In Ruttiger, the employee, Timothy Ruttiger, claimed an on the job injury that occurred when he stumbled after picking up a load of metal conduit. His employers insurance company claimed that Ruttiger actually got hurt the previous week-end playing softball. The issue was not only a question of where the injury occurred but the way in which the insurance company investigated the claim.
The insurance company always has a duty under the Texas Insurance Code, Section 541.060 to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim, and to do so within a reasonable time. This is to be done by conducting a reasonable investigation with respect to the claim. The jury found that Texas Mutual had failed in its duty.
The law mentioned above has to be applied to the facts of each case. An experienced Insurance Law Attorney knows how the facts in a case and the applicable laws are likely to be applied by the court. Putting the two together properly allows an attorney to give reliable advice to their client.