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The Texas bad faith insurance claim

Insurance permeates many aspects of our lives. At a minimum, most Texans have health, house or renter, car and life insurance. Long-term care insurance pays for nursing home and similar care. Malpractice or professional liability insurance protects professionals against claims of negligent or reckless professional conduct. Most business owners need liability, property, business interruption coverage, and more depending on the unique needs of their companies.

Incredibly, these are only a small fraction of the kinds of insurance coverage available.

Reliance on insurer good faith

Considering the amount of money Texans pay toward their the insurance premiums and the important protections insurance companies promise in return, insured parties need to be able to count on their insurers to reasonably provide the services and financial support called for by insurance contracts when covered losses occur.

Historically, contract law evolved to imply a duty of good faith and fair dealing to every party to a valid agreement. The duty to deal in good faith was especially important in the insurance contract context because of the special type of relationship between insured and insurer, one in which the insurance company has so much more power and control than those it insures.

Texas bad faith insurance law

Nowadays, Texas statute spells out the insurance company's duty not to act in bad faith in dealings with insured customers. For example, an insurer may in bad faith unfairly deny coverage, underpay a claim or delay processing a claim to the detriment of the policy holder.

Specifically, the Texas Insurance Code makes it an unfair settlement practice in processing a claim to fail to try "in good faith to effectuate a prompt, fair, and equitable settlement" when the insurance company's "liability has become reasonably clear." Statute also requires that insurers reasonably investigate the facts surrounding claims before claims are denied.

Insurance litigation

When the insurance company denies a valid claim in bad faith in Texas, the insured party harmed by the denial may bring a bad faith insurance lawsuit.

Enlisting the help of an experienced insurance attorney early in the struggle with an insurer can be important. A consumer rights lawyer can investigate the situation and negotiate with the insurance company on behalf of the insured client in an attempt to reach a fair settlement.

Money damages

But if negotiation is not successful and the bad faith insurance claim proceeds to trial, it is possible for a successful plaintiff to recover compensatory damages - money for expenses incurred because of the unreasonable behavior of the insurer. In this context, compensatory damages can include not only financial losses but also damages for mental and emotional harm.

In addition, if the insurance company can be clearly shown to have behaved with either fraud or malice in its bad faith claim denial, the plaintiff policy holder may also receive exemplary damages, also called punitive damages - those meant to punish the insurer for its wrongful behavior. However, the Texas statute does cap the amount of punitive damages that may be assessed, except when the defendant insurer's behavior was bad enough to violate certain criminal laws.

Seek legal guidance

Any Texan in a struggle with his or her insurance company over coverage or a claim should speak with a knowledgeable insurance attorney for guidance and representation, and to understand the insured party's rights and potential legal remedies such as a possible bad faith insurance lawsuit.

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