If you suffer a serious injury in an accident, you will need to go through the insurance claims process to reach a settlement for your medical bills and losses. Unfortunately, insurance companies can make it difficult for claimants to recover fair financial compensation. Some of them engage in bad faith insurance practices, or willfully mishandling a claim to avoid paying.

What Is Insurance Company Bad Faith?

Insurance companies in Texas have a legal obligation to handle the claims that they receive in good faith. There is an implied covenant of good faith and fair dealing. Texas Insurance Code Section 542.003 prohibits unfair claim settlement practices (also known as bad faith) by insurance providers. It lists several examples of unfair practices, which include not attempting in good faith to effect a prompt, fair and equitable settlement of a claim in which liability is reasonably clear.

What Is a Bad Faith Claim?

If an insurance company knowingly or intentionally commits an act that is contrary to its covenant of good faith and fair dealing, it can be held accountable. Unfair claim settlement practices are against the law in Texas. If you see signs of bad faith by an insurance company during your personal injury claim, you may have grounds to bring an additional lawsuit known as a bad faith claim against the insurer. This could result in financial compensation not only for your original claim but an additional amount to penalize the insurer, as well.

Common Examples of Insurance Bad Faith

Bad faith can take many forms in Texas. When you contact an insurance company to file a claim, someone with the title of insurance claims adjuster will be assigned to your case. Be wary of the adjuster and watch what you say over the phone; the adjuster’s mission is to save the insurance company as much money as possible. Do not agree to give a recorded statement and keep your answers to questions short.

If you encounter any of the following issues during your insurance claim, you may be a victim of bad faith:

  • Rejecting a valid insurance claim without reasonable cause or justification.
  • Refusing to pay the full and fair value of your claim based on the terms of the policy.
  • Offering substantially less than the amount ultimately recovered in a lawsuit.
  • Knowingly misrepresenting pertinent facts or policy provisions when you purchased coverage.
  • Failing to acknowledge your claim with reasonable promptness.
  • Failing to investigate your claim properly or in a timely manner.
  • Delaying the processing of your claim or your settlement payout.
  • Using threats or intimidation tactics against you during your claim.

Any act or omission that constitutes an unfair claim settlement practice under Texas law can be considered insurance bad faith. While your claim may be inherently complex, you should not face any major challenges from an insurance company that are not supported by the terms and provisions of an insurance policy or permitted under Texas’s insurance laws.

How to Respond to Insurance Bad Faith During a Claim

If you believe an insurance company is acting in bad faith during your claim, contact an attorney for assistance. An attorney can review your case to confirm whether the insurer is acting in bad faith. If so, your lawyer can request an internal review of your case. This is a review by someone else at the insurance company to push for a different outcome, such as a faster investigation or higher settlement offer.

If an internal review fails to achieve the outcome you deserve, you can file a complaint with the Texas Department of Insurance for a third-party (external) review. If the department believes the insurer has mishandled your claim, the insurer may be required to offer a fair and reasonable payout. Finally, your attorney can go up against the insurer in a personal injury trial in Texas to seek a just outcome, if necessary. A lawyer can also bring a bad faith lawsuit against the insurance company for additional compensation.