Bad Faith Insurance Practices

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Bad Faith Insurance Practices in Midland

Insurance companies have a special duty to the policyholder to act in good faith and with fair dealing. This is a contractual duty that is created when the insurance premium is paid and the policy has been issued. If your insurance company knowingly or intentionally violates that special duty to you by denying your claim, they may have acted in bad faith. And if you believe that your insurance company has acted in bad faith, you can bring a lawsuit for breach of contract claim for violating the Texas Insurance Code.

Insurance companies also have a contractual duty to investigate insurance claims promptly and to keep the policyholder informed. In addition, they have a legal obligation to provide a reasonable explanation when a claim is denied. If your claim has been wrongfully denied, the attorneys at Zinda Law Group can evaluate your claim and determine if your insurance company has violated the insurance laws of Texas and acted in bad faith.

What is Bad Faith?

Your insurance company has a duty under Texas law to resolve your claim promptly – doing so with reasonableness and in good faith. If they fail or refuse to pay a valid claim, you have the right to bring a legal action for damages including the payment of attorney’s fees. Insurance companies commonly attempt to delay or deny the payment of benefits even though Texas law requires that they act in good faith and deal fairly with their policyholders. Under Texas law, insurance companies are required to do the following when handling your claim:

  • Promptly investigate a claim
  • Promptly pay any undisputed portions of a claim
  • Communicate with the policyholder regarding the status of their claim
  • Provide a reasonable explanation any time a claim is denied in whole or in part

Acts of Bad Faith

If an insurance company fails or refuses to do comply with any of the above, they may have acted in bad faith and breached their contractual duty. Texas courts have consistently held that a contractual relationship exists between an insurance company and its policyholders, and that requires an insurance company to act in good faith and with fair dealing. This means that an insurance company has the obligation to pay a claim when it becomes reasonably clear that the loss is a covered event. Insurance companies are also required to respond to a claim within certain time limits and when they fail to do so, they are in breach of their legal duty of good faith and fair dealing. Some examples of bad faith dealing include the following:

  • Failing to acknowledge receipt of a claim
  • Misrepresenting the policy coverage
  • Misrepresenting a material fact
  • Failing to disclose a material fact
  • Failing to settle claims promptly and reasonably
  • Engaging in unfair or deceptive trade practices
  • Making false statements
  • Failing to adopt and implement reasonable standards for prompt of claims
  • Refusing to conduct a reasonable investigation
  • Refusing to pay a claim without conducting an investigation into the claim
  • Failing to confirm or deny coverage within a reasonable time after proof of loss has been submitted
  • Failing to settle claims when liability is reasonably clear
  • Undervaluing a claim in an attempt to compel policyholders to seek out litigation and drag out the claims process
  • Failing to provide adequate and reasonable explanations for the basis of a claim denial