If your insurance claim has been unfairly denied, delayed or underpaid, there is a chance this was the result of bad faith on the part of the insurance company. If it is, in Texas you could be eligible for treble damages (three times your actual damages).
Bad faith is a specific type of conduct, and not all denied, delayed or apparently underpaid claims are the result of bad faith. Generally, bad faith involves denying, delaying or underpaying a claim where the insured’s right to payment is reasonably clear and yet the action was taken with no reasonable basis. In other words, it is generally not bad faith when the insurer reasonably disagrees with you about what your policy covers.
The treble damages that are sometimes available in Texas are only available when the bad-faith act was “accompanied by malicious, intentional, fraudulent, or grossly negligent conduct” by the insurance company.
How do you know if your claim was denied as the result of bad faith?
There are basically two elements to prove in a bad faith claim:
- Benefits that are due under your policy have been withheld. (You had a valid claim and it was denied, delayed or underpaid.)
- The withholding of these benefits was unreasonable. This is evaluated based on the situation and circumstances under which the decision was made.
Why did the insurance company say your claim was denied? Was it merely a differing interpretation of the policy? If not, you may have an argument for bad faith.
There can also be statutory claims for bad faith. In these, you must show that the insurance company violated the statute when it took a negative action on your claim. This requires an understanding of what actions by insurance companies are statutorily prohibited.
For example, you may be able to show that the company misrepresented a material fact or provision in the policy, failed to make a reasonable explanation for why the claim was denied, or refused to pay without conducting a reasonable investigation.
If you have had your legitimate claim turned down, unduly delayed or underpaid, you could be entitled to recover a significant amount under Texas bad faith law. Contact an attorney who is experienced with bad faith claims and insurance law.