When people file an insurance claim, they expect the insurance company to pay in a fair and prompt manner. Under Texas law, insurance companies have a duty of good faith and fair dealing when processing claims, which means that they cannot refuse to compensate you for a claim that is covered under the policy at issue. Despite the fact that insurers must have a legitimate reason to deny a policyholder’s claim, insurance companies routinely try to underpay on claims or look for any reasons to deny coverage.
Texas public policy reflects the unfair advantage insurance companies have over their customers, given their sophistication, superior bargaining power, and resources. In Texas, there is both a common law cause of action for bad faith and a statutory claim when an insurance company wrongfully denies your claim.
If an insurance company wrongfully denies your insurance claim, contact The Krist Law Firm, P.C. today at to find out how we can help you.
First Party and Third Party Claims
When a policyholder files a claim against one’s own insurer, it is known as a first-party claim. A third party claim is made by someone else against an insured. With first party claims, there is an insurance contract between the policyholder and the insurance company. Generally, there is no such contract with respect to third party claims.
Unfair Settlement Practices
Texas has adopted a version of the Unfair Claim Settlement Practices Act (USCPA). Texas Insurance Code Chapters 541 and 542 prohibit unfair or deceptive insurance business practices, including wrongful denials.
Under Section 541.060 of the Texas Insurance Code, insurance companies are prohibited from engaging in the following unfair settlement practices with regard to first-party claims:
• Knowingly misrepresent to claimant a material fact or policy provision relating to coverage at issue
• Failure to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear
• Failure to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim or offer of a compromise settlement of a claim
• Refusal to pay a claim without conducting a reasonable investigation with respect to the claim
Thus, an insurer’s duty to attempt in good faith to settle a claim arises when the claim is covered by the policy and the insurer’s liability to the third party is reasonably clear.
If an insurance company refuses to settle a claim in good faith when its liability has become reasonably clear, you may be able to bring a claim for compensation against the insurance company for its wrongful denial. Wrongfully denying or delaying payment of a claim without having a legitimate reason also constitutes a breach of the duty of good faith and fair dealing, which can give rise to what is known as a bad faith claim.
When an insurance company wrongfully denies your claim, it may be held liable for violations of the Texas Insurance Code, the Deceptive Trade Practices Act, breach of the underlying insurance contract, or a separate tort action for bad faith depending on whether it is a first or third party claim.
Get Experienced Representation for Your Insurance Issues
If you have been injured in an accident and believe that your insurance claim has been wrongfully denied, contact The Krist Law Firm, P.C. to discuss your options. Our experienced Houston personal injury attorneys can help you determine what coverage exists, negotiate with the insurance company on your behalf, and fight for the compensation you deserve. We understand the kinds of tactics used by insurance companies to deny claims and have a proven track record of securing the maximum compensation available for our clients.
Contact us today at or by using our online form. We offer a free consultation and you won’t owe us anything unless you obtain compensation for your injuries.