If you're like most Texans, you probably pay out hundreds of dollars each year in insurance premiums. You do this to protect yourself from unanticipated costs or losses you know you wouldn't be able to afford. Typically, we have some (maybe even all) of the following types of insurance:
- Commercial Property
In short, insurance exists to protect our most expensive and precious possessions - our homes, cars, health, and even our families' livelihood. Which is why, when disaster strikes and you turn to your insurance company, it can seem like they hold all the cards. You may have just suffered a significant injury or loss, and your insurer decides whether or not to honor its contract with you. Sadly, insurers don't always play by the rules. All too often, they try to lowball claims, delay payment, or even discourage an insured from filing a claim in the first place, all in an effort to protect their bottom line. But when they do, Texas law says they are acting in bad faith. In such a situation, you need an experienced bad faith insurance litigation lawyer to level the playing field and help you obtain the coverage you're entitled to.
An Insurer's Duty to its Insured
There are three primary bases for an insurance company's duty to its insured.
- The first duty arises from the contract between insurer and insured. The simplest way to describe it is that the insurer has a duty to both indemnify and defend the insured. Which duty applies in a particular instance depends on whether a claim is a first-party claim or a third-party claim. In a first-party claim, you as the insured make a claim on your insurance company for damages you have sustained. Frequent examples of this type of claim that we see here in Texas are claims made for hurricane or hail damage to your home. In this case, your insurance contract requires your insurer to indemnify you for your loss. With a third-party claim, you as the insured have caused injury to a third person, who then makes a claim on your insurance company for their damages. A common example of this type of claim is an automobile accident in which you rear-ended another driver. Here, your insurance company has a duty to compensate the other driver for their damages, as well as to defend you in any lawsuit the other driver may bring.
- The second duty arises from the covenant of good faith and fair dealing that the law implies in each insurance contract. The law says that a special relationship exists between you and your insurance company because your insurer's superior knowledge, resources and bargaining power give it the opportunity to gain an unfair advantage over you in negotiations.
- The third duty arises from the Texas Insurance Code, chapters 541 and 542, which together impose a statutory scheme prohibiting insurers from engaging in unfair claim settlement practices and other unfair methods of competition.
There is one more kind of duty on insurers that applies specifically in third-party claim cases, which arises from something called the Stowers doctrine. This duty takes its name from a 1929 Texas case called G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm. App. 1929). In a nutshell, the Stowers duty requires an insurer to settle a third-party claim when that third party makes a settlement demand where:
- The claim is within the scope of coverage;
- The demand is within policy limits; and
- An ordinarily prudent insurer would accept the demand under all the circumstances, considering the insured's potential exposure to a judgment in excess of policy limits.
Examples of Insurer Bad Faith
- Knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to the coverage at issue;
- Failing to acknowledge with reasonable promptness pertinent communications relating to a claim arising under the insurer's policy;
- Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer's policies;
- Not attempting in good faith to effect a prompt, fair and equitable settlement of a claim submitted in which liability has become reasonably clear;
- Compelling a policyholder to initiate a suit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder;
- Failing to retain the information required by the statute; or
- Committing another act the [insurance] commissioner by rule determines constitutes an unfair claims settlement practice.
That's the statutory language, but what might insurer bad faith look like in practice? Here are some examples in plain English:
- Refusing to pay a valid claim;
- Denying a claim without giving a reason;
- Unreasonably delaying a claim payment;
- Refusing to investigate a claim, or unreasonably delaying an investigation;
- Refusing to provide appropriate documentation;
- Attempting to threaten or intimidate a policyholder;
- Refusing to negotiate after offering less than the claim is worth;
- Forcing a policyholder to file a lawsuit to recover a valid claim;
- Making unreasonable demands for documentation, or claiming to have never received submitted documents;
- Claiming that the policyholder failed to act within policy time limits; or
- Hiring and relying on investigators or experts who always side with the insurer and aren't truly independent.
What Damages are Available When an Insurer Acts in Bad Faith?
The damages you might be able to recover when an insurer acts in bad faith could include:
- The coverage you are entitled to under the insurance policy;
- Any actual damages you have suffered;
- Compensation for mental or emotional harm;
- Attorneys fees; and
- If the court finds that the insurer knowingly acted in bad faith, exemplary or punitive damages in the amount of three times your actual damages, under the Texas Insurance Code.
Consult an Experienced Bad Faith Litigation Lawyer
The determination in any individual case as to whether an insurer has acted in bad faith depends on an analysis of all the relevant facts and circumstances. Insurance companies employ legions of lawyers to protect their interests, which is why you need someone looking after you. It is my job to be your advocate and to reach a fair resolution of your claims whether that is through negotiation or litigation. Call my office at 903-944-7537, or contact me via my website contact form
for a free consultation about your case.