Can You Sue an Insurance Company in Texas?

What happens when an insurance company fails to honor its obligations? Can you sue insurance companies? Absolutely. In this piece, we will be exploring the various circumstances under which suing an insurance company is acceptable and recommended.

If you are dealing with unreasonable claim denials, delays, or requests, the Omar Ochoa Law Firm can potentially help. We are a trusted litigation firm in Texas that has helped hundreds of clients hold insurance providers accountable. Call for a free consultation with a Texas insurance attorney today.

What Can You Sue Your Insurer For?

The law allows policyholders to take action against bad-acting insurance companies. However, you may not simply sue because you are not pleased with a certain result. There must be an actionable reason underlying your legal action.

Suing an Insurance Company for Denying Your Claim

You have the option to sue an insurance company for denying an insurance claim.

However, there are many valid reasons why insurance companies deny claims, including:

• The policyholder fails to pay premiums.
• The claimant claims coverage not listed in the insurance policy.
• The claimant was provided false information by an insurance agent when they first purchased their policy.
• The claimant provides false information during the insurance claims process.
• The claimant fails to report the incident to the local authorities in a timely manner.
• The claimant fails to inform the insurer of the incident promptly.
• The claimant turns out to be liable for the incident.
• The insurer contests the causes of the claimant's injuries or claims that they were pre-existing.
• The insurer disputes the extent of the claimant's injuries or the property damage involved.
• The claimant lacks evidence to prove someone else was liable for their injuries.

Starting January 1, 2026, Texas law will require insurance providers to furnish mandatory written explanations detailing the specific reasons for any claim denial, policy cancellation, or non-renewal. This enhanced transparency requirement strengthens policyholder protections and makes it easier to identify when an insurer denies a legitimate claim without proper justification.

Suing an Insurance Company for Negligence

It is possible to sue an insurance company for negligence as well as for gross negligence. Negligence occurs when one party breaches its duty of care to another and causes losses. Gross negligence is an aggravated form of negligence. It happens when a party's negligent actions demonstrate a disregard for the safety of others.

Examples of negligence and gross negligence on the part of an insurer include:

• Failure to provide agreed-upon coverage, or failure to inform the claimant of all policy options;
• Failure to adequately explain policy coverage or outright lying about coverage;
• Failure to perform contractual duties, such as communicating with the claimant and investigating the incident thoroughly;
• Failure to notify the claimant of the insurance company's approaching insolvency.
• Failure to inform the policyholder that their policy was soon to expire is another example of negligence that could be the basis of a lawsuit.

Suing an Insurance Company for Bad Faith

Another way to sue an insurance provider is to allege bad faith. Bad faith occurs when an insurance company engages in dishonest practices or fraud when dealing with claimants.

Examples of bad faith insurance in action include:

• Delay or denial of payments without a valid reason;
• Failure to respond to a valid claim;
• Conducting an inadequate and delayed investigation;
• Asking for more evidence when enough has already been presented;
• Overall uncooperative behavior at every stage.

To prove bad faith, you must demonstrate that the insurer acted unreasonably and knew or should have known its conduct was improper. Gathering evidence, such as communication records, policy documents, claim denial letters, and relevant documentation, is essential to demonstrate that the insurance company breached its contractual obligations or failed to investigate claims properly.

Suing an Insurance Company for Delayed Claims Processing

Insurance companies have to address valid claims from policyholders promptly. Under Chapter 542 of the Texas Insurance Code, insurers must acknowledge receipt of a claim within 15 days and either accept or deny the claim within 15 business days after receiving all necessary materials. When an insurance company denies or delays a claim without reasonable justification, policyholders may be entitled to recover damages, including the original claim amount, 18% annual interest, and attorney's fees.

Failure to meet these deadlines without a reasonable explanation can cause serious losses for a claimant, including lost wages, mounting medical bills, and emotional distress. Fortunately, claimants can use unreasonable delays as a basis for seeking damages for their losses and holding insurance companies accountable.

Steps to Take Before Suing an Insurance Company

When it's time to file suit against an insurance company, there are certain steps you should take to help ensure optimal results. In every case, it benefits claimants to seek guidance from an insurance attorney. Doing so gives a claimant the highest chance of success.

Review the Terms of Your Policy

Before taking any legal action, you want to first make sure you understand everything within the four corners of your insurance policy. What is covered? Are there any exclusions? Pay special attention to coverage denials and whether your policy limits meet the new 2026 minimum requirements for auto insurance in Texas, which increase to $50,000 per person for bodily injury, $100,000 per accident for bodily injury, and $40,000 for property damage. Without a thorough knowledge of your policy terms and insurance coverage, you are likely to waste time and money.

Gather Evidence

To be successful in your legal action against an insurance company, you must have evidence. Therefore, you must document the communications between you and your insurance company. This includes preserving all emails, letters, repair estimates, and notes from phone conversations. Create a detailed timeline showing when you submitted your claim correctly, what documentation you provided, how long the insurer took to respond, and any instances of delaying payments or requesting unnecessary additional information.

Attempt Dispute Resolution

Filing a lawsuit is not the only way to hold an insurance company accountable. There are alternatives to lawsuits that may make more sense in certain circumstances.

• Mediation is a way for two parties to reach an agreement on an issue. It is facilitated by a mediator who works to satisfy both sides, if possible. The final decision reached in a mediation session is made by both parties.
• Arbitration is also available to help settle insurance disputes. However, with arbitration, an arbitrator makes the final decision and not the parties, as is the case with mediation.

Many insurance disputes can be resolved by sending a demand letter to the insurer, clearly outlining your claim, the insurer's failures, and your legal options if they continue to act in bad faith. An experienced attorney can draft a compelling demand letter that often prompts the insurance company to reconsider their position.

What to Expect When Suing an Insurance Company

Suing an insurance company is a complex matter. You should hire an attorney as soon as possible before doing anything else. They will handle all of the complexities and navigate the process for you.

During the lawsuit, you can expect the following:

• Your attorney and the insurance company will carry out investigations.
• You will spend money on various costs associated with your lawsuit.
• You will sit for a deposition during which you must answer questions under oath.
• Failure to reach a settlement agreement will lead to a lawsuit.
• You will potentially have to testify as a witness.
• You will have to put your confidence and faith in your attorney, so choose who represents you carefully.
• You will participate in settlement and mediation conferences.
• You will have to make certain decisions and weigh factors relating to settlement offers.

The legal process can be daunting for those who attempt it alone. But with proper legal representation from an experienced insurance lawyer, your chances of recovering fair compensation for your denied claim are much higher. You also get the peace of mind that your claim complies with all essential rules and conditions, ensuring its validity.

How Does the Lawsuit Process Work?

There are several phases to the lawsuit process. It begins with filing a complaint with the appropriate court and notifying the insurance company of the lawsuit. Once this occurs, discovery will begin. Discovery is the process by which both sides of a lawsuit gather evidence for their respective cases.

• Filing the lawsuit: Your attorney must file the lawsuit with a court of competent jurisdiction. Filing in the wrong court will get the lawsuit thrown out. Additionally, the insurance company must be made aware of the lawsuit promptly.
• Pre-trial negotiations: The parties will likely engage in pre-trial negotiations in an attempt to reach a settlement and avoid trial. Avoiding trials saves time and money for both sides.
• The trial process: If a settlement is unreachable, the parties will go to trial if they have not opted for arbitration or mediation. During the trial, your attorney will present your case to a judge or jury. At any time, both sides could settle before a verdict is reached.
• Court decision and verdict: After hearing evidence from both sides, the judge or jury will render a verdict, which is binding on both parties but may be appealed.
• Appeals process: If you get an adverse verdict, you have the right to pursue an appeal. Keep in mind that appealing a verdict can lead to increased court costs.

The lawsuit process is complex and punishes errors. But with attorney representation, you never have to worry about the legalese. Your lawyer takes care of everything for you and fights to make sure you leave no compensation behind.

How Much Can You Sue an Insurance Company For?

There is no cap on how much you can seek from an insurance company in a lawsuit. However, it is important to know that the amount you seek will be based on a variety of factors, including the type of claim filed, the coverage limits listed in the policy, the losses you have suffered, and more.

Coverage Limits

The coverage limits of the policy act as a sort of cap on the amount of money an insurance company must pay. If you have damages that surpass the coverage levels of your policy, you may have to pursue other sources of compensation, such as the at-fault party.

Type of Policy and Damages

The type of policy you have will determine the types of damages you may claim. For example, your policy may allow for only certain types of damages, such as monetary damages, whereas another type of policy will allow monetary damages as well as non-monetary damages.

Bad-Faith Insurance Claims

If your lawsuit is based on bad faith insurance, you may be entitled to compensatory damages as well as punitive damages. Punitive damages punish bad behavior and are appropriate in bad-faith insurance claims.

Actual Damages

The amount of compensation you seek will reflect your actual damages. In other words, you can't claim compensation totals that exceed your actual damages.

Policyholder's Liability

In some instances, a policyholder's liability will factor into the compensation payout and may reduce the amount the plaintiff receives.

Legal Representation

A seasoned Texas insurance lawyer is likely to recover far more compensation than an inexperienced one. And those plaintiffs without attorneys can expect to receive compensation far below what they deserve if they receive any at all.

Get Legal Help from Omar Ochoa Law Firm

Insurance companies are supposed to cover losses when certain events occur. Sadly, many insurance providers fail to fulfill their duties, leaving claimants in precarious circumstances. When your car insurance company or other insurance provider refuses to pay what you're owed, or when an insurer offers lowball settlement offers that don't come close to covering your actual damages, you don't have to accept their decision.

The experienced insurance recovery lawyers at Omar Ochoa Law Firm can help you recover the policy payout you are entitled to. Contact us today for a free consultation!