How Much Is a Bad Faith Claim Worth in Texas

When you purchase insurance, you're entering into a contract with an insurance company that promises to protect you when unexpected losses occur. Unfortunately, not all insurers honor their commitments. Some resort to bad faith insurance practices, placing their profits above your well-being and your legitimate claim.

If you believe your insurance company acted in bad faith, you need to know what your claim might be worth and how to hold them accountable. The value of a bad-faith insurance claim in Texas can range from thousands to millions of dollars, depending on multiple factors specific to your case.

What Constitutes Bad Faith Insurance in Texas?

Bad faith insurance occurs when an insurer violates its duty of good faith and fair dealing by unfairly denying, delaying, or underpaying a valid claim. Texas law recognizes two distinct types of bad-faith claims: common-law and statutory bad faith.

Common Law Bad Faith

Common law bad faith arises from the implied covenant of good faith and fair dealing between insurers and policyholders. To prove a common law bad faith claim, you must demonstrate that your insurance company's actions were egregious and that they denied or delayed your claim even though liability was reasonably clear.

Statutory Bad Faith Claims

Statutory bad faith claims arise when an insurance company violates specific provisions outlined in the Texas Insurance Code, particularly Chapters 541 and 542. These statutes detail unfair or deceptive acts and establish strict deadlines for investigating claims, responding to policyholders, and paying claims promptly.

Common Bad Faith Insurance Practices

Recognizing bad faith insurance practices is the first step toward protecting your rights. Insurers may engage in various tactics to avoid paying valid claims.

Unreasonable Claim Denial

One of the most prevalent forms of bad faith involves denying a legitimate claim without proper justification. This includes:

• Denying claims without conducting a reasonable investigation
• Misinterpreting insurance policy language to exclude coverage
• Demanding excessive or irrelevant documentation
• Fabricating reasons to reject your valid claim

Unjustified Payment Delays

Insurance companies sometimes delay paying claims to pressure policyholders into accepting lower settlements. Signs of improper delay include:

• Excessive processing times that violate Texas Insurance Code deadlines
• Ignoring your communication attempts
• Repeatedly requesting the same information
• Failing to explain the reason for delays

Lowball Settlement Offers

When insurers fail to offer fair compensation for your losses, they may be acting in bad faith. Common bad faith tactics include:

• Offering settlements far below the claim value
• Ignoring significant aspects of your original claim
• Using intimidation to coerce you into accepting an inadequate insurance company's settlement offer
• Threatening policy cancellation or premium increases

Inadequate Claim Investigation

Insurance companies have a duty to thoroughly investigate each claim. Bad faith actions related to investigation failures include:

• Conducting incomplete or biased investigations
• Refusing to interview witnesses or consult necessary professionals
• Dismissing evidence that supports your claim
• Deliberately ignoring facts that establish the insurer's duty to pay

Misrepresenting Policy Terms

Some insurers engage in deceptive practices by:

• Providing misleading information about coverage limits
• Failing to disclose policy limits or exclusions
• Changing insurance policy terms without proper notice
• Misrepresenting the scope of your insurance contracts

Factors That Determine Bad Faith Insurance Claim Settlement Amounts

The value of a bad faith claim depends on several interconnected factors. Each case is unique, and settlement amounts can vary dramatically based on your specific circumstances.

Severity of Your Damages

Claims involving significant financial losses, severe injuries, or wrongful death are more likely to result in higher bad faith insurance settlement amounts. The original insurance claim amount serves as a baseline, but the total value often extends far beyond it when additional damages caused by the insurance company's conduct are factored in.

Strength of Your Evidence

Building a strong bad-faith insurance claim requires comprehensive documentation. Evidence that strengthens your case includes:

• Detailed records of all communication with your insurance company
• Medical records and bills related to your original claim
• Testimony from professionals in relevant fields
• Documentation of how the insurer's bad faith conduct affected you
• Proof of the insurance company's misconduct
• Records showing the insurer unreasonably denies or delays payments

Insurance Policy Limits and Contract Terms

Your insurance policy establishes the framework for your original claim. However, in bad-faith cases, recoverable damages often exceed policy limits. The specific language in your insurance contracts and how the insurance company fails to honor its contractual obligations will influence your claim's potential value.

Egregiousness of the Insurer's Conduct

The more severe the insurance company's actions, the greater the potential value of a bad faith claim. Courts consider whether an insurance company acted knowingly or intentionally in engaging in bad faith insurance practices. Particularly egregious insurer bad faith conduct can lead to substantial punitive damages designed to deter future misconduct.

Types of Damages Recoverable in a Bad Faith Claim

Texas law allows policyholders to recover multiple categories of damages when they successfully prove insurance bad faith.

Economic Damages

Economic damages compensate you for measurable financial losses caused by your original claim and the insurer's failure to deal fairly with you. These include:

• Medical expenses and ongoing treatment costs
• Lost wages and reduced earning capacity
• Property damage and replacement costs
• Business income losses
• Other quantifiable out-of-pocket expenses

Non-Economic Damages

Emotional distress and other non-financial harms resulting from bad faith insurance are compensable. These damages address:

• Pain and suffering from the insurance company's misconduct
• Emotional distress caused by claim denial or delay
• Mental anguish and anxiety
• Loss of enjoyment of life
• Damage to your reputation

Attorney Fees and Court Costs

Texas law allows you to recover attorney fees and court costs in bad faith cases. This provision ensures you can seek compensation without depleting your recovery to pay legal costs. You can obtain attorney fees by proving either that your insurance company breached its contract or violated specific provisions in the Texas Insurance Code.

Interest and Penalties

Depending on your claim type, you may be entitled to significant interest on damages. For non-weather-related claims, Texas law provides for 18% annual interest plus 5% pre-judgment interest while your lawsuit is pending. Weather-related claims receive 13.5% annual interest under amended provisions effective since 2017.

Punitive Damages (Treble Damages)

In cases where the insurance company acted knowingly or intentionally in bad faith, you may recover punitive damages (also called exemplary damages) up to three times your actual damages. These "treble damages" serve to deter future misconduct by insurers and hold insurers accountable for egregious behavior. While not awarded in every case and sometimes overturned on appeal, punitive damages can dramatically increase your total recovery in appropriate circumstances.

How to Protect Your Rights When Facing Bad Faith

If you suspect your insurance company is engaging in bad-faith insurance practices, take immediate action to protect your interests.

Document Everything

Maintain detailed records of:

• All written and verbal communication with your insurer
• Dates, times, and participants in every conversation
• Claim forms, denial letters, and correspondence
• Evidence supporting your valid claim
• How the denial or delay has affected you financially and emotionally

File an Internal Appeal

Most insurance policies require you to exhaust internal appeals before pursuing legal action. Submit a formal appeal with supporting documentation and follow your policy's procedures carefully.

File a Complaint with the Texas Department of Insurance

The Texas Department of Insurance oversees insurance companies and can intervene on your behalf. Filing a complaint is straightforward and can sometimes pressure insurers to negotiate effectively and provide fair treatment.

Consult with a Bad Faith Insurance Lawyer

An experienced bad faith insurance lawyer can evaluate whether you have grounds for a bad faith claim, help you gather evidence, and develop a strategy to hold insurers accountable. Legal representation significantly improves your chances of obtaining fair compensation and can prevent you from accepting an inadequate insurance company's settlement offer.

The Process of Pursuing a Bad Faith Insurance Claim

When you file a bad faith lawsuit, you'll need to prove that your insurance company violated its duties to you.

Establishing Your Case

To succeed in a bad faith claim, you must demonstrate:

• You had a valid claim under your insurance policy.
• The insurance company fails to fulfill its contractual obligations.
• The insurer's conduct was unreasonable under the circumstances.
• You suffered damages beyond your original claim due to bad faith actions.

The Investigation and Discovery Phase

Gathering evidence is critical to your case. Your attorney will:

• Review your insurance contracts and all related documentation
• Obtain internal documents from the insurance company
• Depose insurance adjusters and decision-makers
• Consult with professionals who can testify about industry standards
• Build a comprehensive case showing the insurer's failure to deal fairly

Negotiation and Settlement

Many bad-faith cases resolve through settlement negotiations. Your attorney will:

• Present evidence of the insurance company's misconduct
• Demonstrate the strength of your case
• Negotiate effectively to maximize your recovery
• Advise you on whether settlement offers represent adequate compensation

Trial

If negotiations fail, your case proceeds to trial, where you'll present evidence of bad faith insurance to a judge or jury. Success at trial can result in the award of punitive damages and send a strong message about the insurer's bad faith conduct.

Why You Need an Experienced Bad Faith Insurance Attorney

Complex legal procedures govern insurance bad faith claims in Texas. An experienced attorney provides invaluable assistance by:

• Evaluating whether you have a viable bad faith claim
• Identifying specific violations of contract law and the Texas Insurance Code
• Developing a strategy to prove the insurance company violates its duties
• Gathering evidence to support your case
• Handling all legal action on your behalf
• Ensuring you seek compensation for all available damages
• Protecting you from tactics insurers use to minimize their liability

Legal representation levels the playing field against powerful insurance companies with vast resources and teams of attorneys dedicated to minimizing payouts.

Omar Ochoa Law Firm: Your Advocates in Bad Faith Insurance Claims

At Omar Ochoa Law Firm, we have extensive experience handling bad faith insurance claims throughout Texas. When you work with us, you'll benefit from our thorough approach to investigating claims, our commitment to holding insurers accountable, and our determination to secure the fair compensation you deserve. We handle cases on a contingency fee basis — you pay nothing unless we win your case. If you believe you've been victimized by bad faith insurance practices, contact us today for a free consultation.