Haun Mena explains what constitutes bad faith insurance practices in Houston and what consumers need to know.
What Is Bad Faith in Insurance in Houston?
There are two sets of laws for bad faith in insurance in Houston – statutory law and common law. An insurance company may be liable for bad faith under either body of law.
Houston Bad Faith Insurance – Statutory Law
Statutes are laws. In Texas, laws are passed by the Texas State Legislature – the House of Representatives and the Senate. The legislature passed a Texas bad faith insurance law; it is Texas Insurance Code Chapter 541 – Unfair Methods of Competition and Unfair or Deceptive Acts or Practices. The law applies in Houston and throughout Texas.
It defines what constitutes bad faith insurance practices. (See Tex. Ins. Code § 541.060-§ 541.061).
Houston Bad Faith Insurance – Common Law
In addition to the statutory law, there is common law for bad faith in Houston. The common law developed through court precedent.
The common law definition of bad faith law is broad: an act or failure to act that unreasonably denies or delays an insurance claim may amount to bad faith. Liability under the policy must be reasonably clear.
Common Examples of Bad Faith Insurance Practices in Houston
Has your insurance company done any of the following? You may be a victim of bad faith!
- Told you that you don’t have coverage or otherwise misrepresented insurance coverage.
- Failed to settle a claim in good faith when liability is clear.
- Failed to promptly explain denial of a claim or offer of a compromise settlement.
- Waited too long to affirm or deny coverage, or submit a reservation of rights.
- Refused first-party coverage because other coverage may be available, or third parties may be responsible.
- Enforced a full and final release of claim when only a partial payment has been made unless the claim is disputed.
- Refused to pay without doing a reasonable investigation.
- Required production of the claimant’s federal income tax returns, unless an allowed reason applies.
- Made untrue statements about an insurance policy or failed to state something necessary to avoid misleading.
- Misstated the law.
- Failed to disclose something required by law to be disclosed.
- Other conduct that amounts to failing to honor the policy reasonably.
When an insurance company receives a claim, it must investigate it diligently and promptly. They must honor the policy, and may not mislead the claimant to avoid paying. They must communicate clearly. If the insurance company fails in their duty, you may have a bad faith insurance claim.
Elements of a Bad Faith Insurance Claim
The elements of a bad faith insurance claim are:
- You have an insurance policy.
- A covered loss occurs.
- You follow the steps to make the claim.
- The insurer fails in their duty to pay their claim.
- Bad faith occurs on the part of the insurer regarding the claim.
Bad faith is more than just a mistake; it’s a dishonest and dishonorable practice to avoid honoring the insurance policy. The policyholder must do their part to submit the claim and any needed follow-up documentation. Then, if the claimant isn’t treated fairly, they may have a bad faith insurance lawsuit.
How to Recognize if Your Insurance Company Is Acting in Bad Faith
To recognize if your insurance company is acting in bad faith, review your insurance policy. Ask yourself:
Do you deserve a payment, or a higher payment, per the terms of your insurance policy?
Have you done everything needed to make your claim?
Is the insurance company being unfair, unreasonable, misleading, or non-communicative?
If the answer to these questions is yes, the insurance company may be acting in bad faith. Contact Haun Mena for a case consultation.
The Consequences of Bad Faith for Insurance Companies
Under Houston laws protecting policyholders from bad faith, the consequences may include:
- Damages – additional losses that occur because of not receiving payment
- Court Costs – to pursue legal action
- Attorney Fees – the cost of your legal counsel
- Injunction – a court order enjoining the act of bad faith or failure to act
- 3 Times Damages – if the bad faith occurred knowingly
If the trier of fact (judge or jury deciding the case) decides that the insurance company acted in bad faith, they may award up to three times actual damages.
The consequences of bad faith serve multiple purposes. They penalize the party acting in bad faith and give them an incentive to act differently in the future. In addition, the victim may be made whole for the losses they have incurred and for the expense of pursuing the bad faith insurance lawsuit.
Steps to Take if You Suspect Bad Faith Insurance
If you suspect bad faith insurance, you should:
- Keep records – Keep documentation received from the insurance company and a log of interactions.
- Communicate – Communicate in writing with the insurance company. Ask them to explain their position. Pursue internal appeals available to you.
- Investigate – Review your policy to determine coverage. Identify acts of bad faith.
- Promptly File Your Claim – There is a two-year period of limitation in Houston and throughout Texas.
- Comply with Notice Requirements – You must provide written notice at least 61 days before filing a lawsuit (§ 541.154).
- Understand Settlement Offers – If the defendant extends a settlement offer, it could affect your recovery. Ask your attorney for more information.
- Participate in Mediation – Mediation may be required by court motion.
- Involve an Attorney – At Haun Mena, we can begin representing you at any stage.
How an Attorney Can Help You Fight Bad Faith Insurance Claims
An attorney can evaluate the actions of the insurance company. They can present a clear demand for payment, and make sure you have submitted your claim correctly. By doing so, your attorney builds your case for bad faith consequences and can pursue your rights in court.
Talk to a Lawyer
Are you frustrated by how the insurance company is handling your case? Do you suspect bad faith?
At Haun Mena, we understand what constitutes bad faith insurance practices in Houston. Contact us for a consultation. Call or message us now.
